Lakewood / CO. (enr) Einstein Noah Restaurant Group, a leader in the quick-casual segment of the restaurant industry operating under the Einstein Bros. Bagels, Noah´s New York Bagels and Manhattan Bagel brands, reported financial results for the second quarter ended June 28, 2011. Selected Highlights for the Second Quarter 2011 Compared to the Second Quarter 2010:
- Total revenues increased to 103,7 million USD from 103,5 million USD.
- System-wide comparable store sales were plus 0,2 percent, a sequential increase of 100 basis points from the first quarter of 2011.
- Adjusted Ebitda of 9,7 million USD compared to 11,7 million USD.
- Net income available to common stockholders of 3,1 million USD or 0,18 USD per diluted share, compared to 3,6 million USD or 0,21 USD per diluted share.
- Free cash flow of 5,5 million USD compared to 4,7 million USD.
Jeff O´Neill, Chief Executive Officer and President of Einstein Noah, stated, «We are pleased that our comparable sales trends improved sequentially in the second quarter and continued to gain momentum thus far in the third quarter. Inflation remained high in the quarter, causing increased pressure on cost of goods sold and operating expenses, which will be alleviated going forward by a June price increase. I am pleased with our overall labor management as well as marketing and general and administrative expenses. Additional pricing is planned for the third quarter to further defray inflationary pressures. We are also strengthening our financial condition through our implementation of a savings and efficiency program that we believe will drive at least 3,0 million USD of annualized savings from our business model upon completion».
O´Neill concluded: «For the balance of the year, our top-line strategy is centered on three key elements including, a line-up of unique, new premium sandwiches and the continuation of our successful lower calorie bagel thin sandwiches. In addition, given the successful test of our enhanced coffee platform with dedicated baristas, we plan to roll this program nationally across our system to compliment our delicious fresh baked food offerings. By successfully executing on our sales growth and cost saving efforts, we believe we are building a stronger foundation for our business going forward».
Second Quarter 2011 Financial Results
For the second quarter ended June 28, 2011, system-wide comparable store sales increased 0,2 percent, reflecting strong growth in check driven by moderate pricing, favourable mix shift and strength in catering sales offset by lower comparable transactions as the Company rolled over its Free Bagel Friday promotion last year. Total revenues increased to 103,7 million USD from 103,5 million USD.
Total costs at Company-owned restaurants increased 2,3 percent as a percentage of Company-owned restaurant sales resulting in a gross margin of 16,2 percent. The decrease of the Company´s gross margin from 18,5 percent was primarily due to higher commodity costs.
Manufacturing and commissary gross profit decreased from 1,2 million USD to 0,9 million USD in the second quarter of 2011. The decline in gross profit was due to higher commodity costs and an unfavourable shift in product mix to third party customers.
Overall, gross profit was 18,3 million USD or 17,7 percent of total revenues, in the second quarter of 2011 compared to 20,7 million USD or 20,0 percent of total revenues, in the second quarter of 2010.
General and administrative expenses fell to 8,6 million USD from 9,0 million USD due to lower legal expenses, lower travel expenses and lower recruiting fees.
Adjusted Ebitda was 9,7 million USD in the second quarter of 2011 compared to 11,7 million USD in the second quarter of 2010. Income before income taxes decreased 0,5 million USD to 5,2 million USD from 5,7 million USD.
New Units and Development
Restaurant openings during the second quarter of 2011 included seven Einstein Bros. restaurants, which consisted of two Company-owned restaurant, one franchise restaurant and four license restaurants. In addition, one Company-owned restaurant was relocated during the period.
2011 Outlook
The Company reiterated its outlook for 2011. The Company expects to open between 75 and 90 total restaurants, including ten to 14 new Company-owned restaurants, 20 to 26 new franchise restaurants and 45 to 50 license restaurants. The Company currently has 22 signed development agreements for Einstein Bros. Bagels franchises, which would yield an ending pipeline of 90 to 100 additional franchise locations.
Capital expenditures are projected between 25 million USD to 27 million USD for 2011, including the opening of the aforementioned Company-owned restaurants, the relocation of three to five Company-owned restaurants, along with the national roll-out of the enhanced coffee program, which is expected to be completed in 2011. The Company has revised the anticipated number of relocations for the balance of year and is extending leases reflecting its belief that there are other lower capital, higher margin alternatives that will keep the restaurants open and yield the same results or better than the relocated alternative.
In addition, commodity prices are expected to continue to escalate more rapidly in 2011 than in 2010. The Company has secured approximately 95 percent of its wheat needs for the remainder of 2011. The Company estimates a 2011 annual effective tax rate of 41 percent; however, the Company will continue to only pay minimal cash-taxes for the next several years.
