Einstein Noah Restaurant Group Reports Third Quarter 2012 Financial Results

The Company uses company-owned comparable store sales, franchise and license sales and the resulting system-wide sales information internally in connection with restaurant development decisions, planning, and budgeting analyses. The Company believes comparable store sales information is useful in assessing consumer acceptance of our brands; facilitates an understanding of our financial performance and the overall direction and trends of sales and operating income; helps the Company appreciate the effectiveness of its advertising and marketing initiatives; and provides information that is relevant for comparison within the industry.

Comparable store sales percentages are non-GAAP financial measures, which should not be considered in isolation or as a substitute for other measures of performance prepared in accordance with GAAP, and may not be equivalent to comparable store sales as defined or used by other companies. The Company does not record franchise or license restaurant sales as revenues. However, royalty revenues are calculated based on a percentage of franchise and license restaurant sales, as reported by the franchisees or licensees.

EINSTEIN NOAH RESTAURANT GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except earnings per share and related share information)
				13 weeks ended								Increase/
				(in thousands)								(Decrease)
				September 27,				October 2,				2012
				2011				2012				vs. 2011
Revenues:
Company-owned restaurant sales				$	92,311			$	95,418			3.4	%
Manufacturing and commissary revenues					8,766				7,507			(14.4	%)
Franchise and license related revenues					2,455				2,569			4.6	%
Total revenues					103,532				105,494			1.9	%
Cost of sales (exclusive of depreciation and amortization shown separately below):
Company-owned restaurant costs
Cost of goods sold					27,693				26,676			(3.7	%)
Labor costs					27,329				27,906			2.1	%
Rent and related expenses					9,926				10,761			8.4	%
Other operating costs					10,145				10,649			5.0	%
Marketing costs					1,567				3,017			92.5	%
Total company-owned restaurant costs					76,660				79,009			3.1	%
Manufacturing and commissary costs					8,004				5,738			(28.3	%)
Total cost of sales					84,664				84,747			0.1	%
Gross margin:
Company-owned restaurant					15,651				16,409			4.8	%
Manufacturing and commissary					762				1,769			132.2	%
Franchise and license					2,455				2,569			4.6	%
Total gross margin					18,868				20,747			10.0	%
Operating expenses:
General and administrative expenses					8,610				9,091			5.6	%
Depreciation and amortization					4,836				5,014			3.7	%
Restructuring expenses					121				-			**
Strategic alternatives expense					-				250			**
Other operating expenses, net					47				60			27.7	%
Income from operations					5,254				6,332			20.5	%
Interest expense, net					772				744			(3.6	%)
Income before income taxes					4,482				5,588			24.7	%
Provision for income taxes					1,647				2,174			32.0	%
Net income				$	2,835			$	3,414			20.4	%
Net income – Basic				$	0.17			$	0.20			17.6	%
Net income – Diluted				$	0.17			$	0.20			17.6	%
Cash dividend declared per common share				$	0.125			$	0.125			0.0	%
Weighted average number of common shares outstanding:
Basic					16,785,934				16,961,298			1.0	%
Diluted					17,013,086				17,292,305			1.6	%
** Not meaningful

EINSTEIN NOAH RESTAURANT GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
PERCENTAGE RELATIONSHIP TO TOTAL REVENUES
(unaudited)
			13 weeks ended
			(percent of total revenue)
			September 27,				October 2,
			2011				2012
Revenues:
Company-owned restaurant sales			89.2	%			90.5	%
Manufacturing and commissary revenues			8.4	%			7.1	%
Franchise and license related revenues			2.4	%			2.4	%
Total revenues			100.0	%			100.0	%
Cost of sales (exclusive of depreciation and amortization shown separately below):
Company-owned restaurant costs (1)
Cost of goods sold			30.0	%			27.9	%
Labor costs			29.6	%			29.2	%
Rent and related expenses			10.7	%			11.3	%
Other operating costs			11.0	%			11.2	%
Marketing costs			1.7	%			3.2	%
Total company-owned restaurant costs			83.0	%			82.8	%
Manufacturing and commissary costs (2)			91.3	%			76.4	%
Total cost of sales			81.8	%			80.3	%
Gross margin:
Company-owned restaurant (1)			17.0	%			17.2	%
Manufacturing and commissary (2)			8.7	%			23.6	%
Franchise and license			100.0	%			100.0	%
Total gross margin			18.2	%			19.7	%
Operating expenses:
General and administrative expenses			8.3	%			8.6	%
Depreciation and amortization			4.7	%			4.8	%
Restructuring expenses			0.1	%			0.0	%
Strategic alternatives expense			0.0	%			0.2	%
Other operating expenses, net			0.0	%			0.1	%
Income from operations			5.1	%			6.0	%
Interest expense, net			0.8	%			0.7	%
Income before income taxes			4.3	%			5.3	%
Provision for income taxes			1.6	%			2.1	%
Net income			2.7	%			3.2	%
(1) As a percentage of company-owned restaurant sales
(2) As a percentage of manufacturing and commissary revenues

EINSTEIN NOAH RESTAURANT GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except earnings per share and related share information)
			39 weeks ended									Increase/
			(in thousands)									(Decrease)
			September 27,					October 2,				2012
			2011					2012				vs. 2011
Revenues:
Company-owned restaurant sales			$	275,723				$	285,264			3.5	%
Manufacturing and commissary revenues				25,541					23,196			(9.2	%)
Franchise and license related revenues				7,191					7,900			9.9	%
Total revenues				308,455					316,360			2.6	%
Cost of sales (exclusive of depreciation and amortization shown separately below):
Company-owned restaurant costs
Cost of goods sold				81,971					80,048			(2.3	%)
Labor costs				81,514					82,982			1.8	%
Rent and related expenses				30,205					31,508			4.3	%
Other operating costs				29,485					30,152			2.3	%
Marketing costs				7,793					9,007			15.6	%
Total company-owned restaurant costs				230,968					233,697			1.2	%
Manufacturing and commissary costs				22,452					18,215			(18.9	%)
Total cost of sales				253,420					251,912			(0.6	%)
Gross margin:
Company-owned restaurant				44,755					51,567			15.2	%
Manufacturing and commissary				3,089					4,981			61.2	%
Franchise and license				7,191					7,900			9.9	%
Total gross margin				55,035					64,448			17.1	%
Operating expenses:
General and administrative expenses				27,314					30,206			10.6	%
Depreciation and amortization				13,984					14,792			5.8	%
Restructuring expenses				334					480			43.7	%
Strategic alternatives expense				-					685			**
Other operating (income) expenses, net				(776	)				319			(141.1	%)
Income from operations				14,179					17,966			26.7	%
Interest expense, net				2,507					2,322			(7.4	%)
Income before income taxes				11,672					15,644			34.0	%
Provision for income taxes				4,589					6,070			32.3	%
Net income			$	7,083				$	9,574			35.2	%
Net income – Basic			$	0.43				$	0.57			32.6	%
Net income – Diluted			$	0.42				$	0.56			33.3	%
Cash dividends declared per common share			$	0.250				$	0.375			50.0	%
Weighted average number of common shares outstanding:
Basic				16,588,907					16,915,756			2.0	%
Diluted				16,856,275					17,200,034			2.0	%
** Not meaningful

EINSTEIN NOAH RESTAURANT GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except earnings per share and related share information)
(unaudited)
			39 weeks ended
			(percent of total revenue)
			September 27,				October 2,
			2011				2012
Revenues:
Company-owned restaurant sales			89.4	%			90.2	%
Manufacturing and commissary revenues			8.3	%			7.3	%
Franchise and license related revenues			2.3	%			2.5	%
Total revenues			100.0	%			100.0	%
Cost of sales (exclusive of depreciation and amortization shown separately below):
Company-owned restaurant costs (1)
Cost of goods sold			29.7	%			28.1	%
Labor costs			29.6	%			29.1	%
Rent and related expenses			11.0	%			11.0	%
Other operating costs			10.7	%			10.6	%
Marketing costs			2.8	%			3.1	%
Total company-owned restaurant costs			83.8	%			81.9	%
Manufacturing and commissary costs (2)			87.9	%			78.5	%
Total cost of sales			82.2	%			79.6	%
Gross margin:
Company-owned restaurant			16.2	%			18.1	%
Manufacturing and commissary			12.1	%			21.5	%
Franchise and license			100.0	%			100.0	%
Total gross margin			17.8	%			20.4	%
Operating expenses:
General and administrative expenses			8.9	%			9.6	%
Depreciation and amortization			4.5	%			4.7	%
Restructuring expenses			0.1	%			0.2	%
Strategic alternatives expense			0.0	%			0.2	%
Other operating (income) expenses, net			(0.3	%)			0.1	%
Income from operations			4.6	%			5.6	%
Interest expense, net			0.8	%			0.7	%
Income before income taxes			3.8	%			4.9	%
Provision for income taxes			1.5	%			1.9	%
Net income			2.3	%			3.0	%
(1) As a percentage of Company-owned restaurant sales
(2) As a percentage of manufacturing revenues
* Not applicable
** Not meaningful

EINSTEIN NOAH RESTAURANT GROUP, INC.
SELECTED FINANCIAL INFORMATION
(in thousands)
Selected Consolidated Balance Sheet Information:			January 3, 2012					October 2, 2012
Cash and cash equivalents, end of period			$	8,652				$	12,668
Property, plant and equipment, net				59,017					58,841
Total assets				204,732					207,563
Total debt				74,200					68,575
Total liabilities				116,919					113,910
			39 weeks ended
Selected Consolidated Cash Flow Information:			September 27, 2011					October 2, 2012
Net cash provided by operating activities			$	25,429				$	31,376
Net cash used in investing activities				(11,955	)				(16,170	)
Net cash used in financing activities				(14,971	)				(11,190	)
Free cash flow (cash provided by operating
activities less cash used in investing activities)				13,474					15,206

Reconciliation of GAAP to Non-GAAP Measures:			13 weeks ended								39 weeks ended
			September 27,				October 2,				September 27,					October 2,
			2011				2012				2011					2012
			(in thousands)
Net income			$	2,835			$	3,414			$	7,083				$	9,574
Adjustments to net income:
Interest expense, net				772				744				2,507					2,322
Provision for income taxes				1,647				2,174				4,589					6,070
Depreciation and amortization				4,836				5,014				13,984					14,792
Restructuring expenses				121				-				334					480
Strategic alternative expenses				-				250				-					685
Other operating expense (income), net				47				60				(776	)				319
Adjusted EBITDA			$	10,258			$	11,656			$	27,721				$	34,242

EINSTEIN NOAH RESTAURANT GROUP, INC.
SELECTED FINANCIAL INFORMATION
				13 weeks ended October 2, 2012
				Company
				Owned				Franchised				Licensed				Total
Consolidated Total
Total beginning balance				448				95				240				783
Opened restaurants				2				1				17				20
Closed restaurants				(1	)			(1	)			(4	)			(6	)
Refranchising, Net				1				(1	)			-				-
Total ending balance				450				94				253				797
				Trailing 12 Months Activity
				Company
				Owned				Franchised				Licensed				Total
Consolidated Total
Beginning balance - September 27, 2011				431				94				233				758
Opened restaurants				11				11				30				52
Closed restaurants				(1	)			(2	)			(10	)			(13	)
Refranchising, Net				9				(9	)			-				-
Ending balance - October 2, 2012				450				94				253				797

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