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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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