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 July 03, 2012. Highlights compared to Q2/2011:
- Total revenues increased 2,2 percent to 106,0 million USD from 103,7 million USD, reflecting a 3,0 percent increase in Company-owned restaurant sales, while manufacturing and commissary revenues decreased 7,2 percent due to recent commissary closures.
- System-wide comparable store sales increased plus 1,3 percent, the fifth consecutive quarter of positive trends.
- Net income was 3,0 million USD or 0,17 USD per diluted share, which included 0,02 USD per diluted share for charges related to the strategic alternatives review process, compared to 3,1 million USD or 0,18 USD per diluted share, which included gains of 0,03 USD per diluted share for the sale of two restaurants and the receipt of insurance proceeds.
- Outstanding indebtedness was reduced by 1,9 million USD since April 03, 2012 to 70,5 million USD.
- Adjusted Ebitda increased 13,7 percent to 11,0 million USD.
Jeff O´Neill, President and Chief Executive Officer: «In addition to extending our track record of generating positive system-wide comparable store sales to five consecutive quarters, we also realized a 150 basis point improvement in store margins and a 13,7 percent increase in adjusted Ebitda in the second quarter. Our comparable store sales increase was driven through a combination of favourable product mix, pricing and expanded catering sales, while the sequential improvement in traffic trends reflected the support for our new Smart Choices menu and expanded specialty beverage program. In addition, we are currently conducting a regional test focused on traffic building initiatives and, based on the positive response, have plans to roll this program through the balance of the year».
O´Neill concluded: «As announced last quarter, our Board of Directors is reviewing strategic alternatives to maximize value for all stockholders and we have no further update to provide at this time. Our Company priorities of executing on our asset-light expansion strategy, de-levering our balance sheet, paying a quarterly dividend, building on our comparable sales momentum and realizing operational improvements through our comprehensive cost savings program have not changed. In fact, we are pleased to have already made substantial progress on these action items and expect continued focus will further strengthen our business model».
Second Quarter 2012 Financial Results
For the second quarter ended July 03, 2012, system-wide comparable store sales increased plus 1,3 percent, reflecting plus 3,9 percent growth in average check that was driven primarily by product mix, pricing and an increase in catering sales and partially offset by lower comparable transactions. Total revenues increased 2,2 percent to 106,0 million USD from 103,7 million USD, reflecting a 3,0 percent increase in Company-owned restaurant sales, while manufacturing and commissary revenues decreased 7,2 percent due to recent commissary closures.
Restaurant gross margin as a percentage of company-owned restaurant sales increased 150 basis points to 17,7 percent from 16,2 percent and was due primarily to operational efficiencies in food costs and to a lesser extent, overall sales leveraging and higher pricing.
Manufacturing and commissary gross margin as a percentage of manufacturing and commissary revenues increased from 12,0 percent to 22,9 percent and was due to benefits from various cost initiatives related to the efficiency program, but particularly, the closure of all five commissaries by the end of the first quarter of this year.
Overall, gross margin was 21,1 million USD in the second quarter of 2012 compared to 18,3 million USD in the second quarter of 2011 and as a percentage of total revenues, increased to 19,9 percent from 17,7 percent in the year-ago period.
General and administrative expenses increased to 10,0 million USD in the second quarter of 2012 from 8,6 million USD in the second quarter of 2011 and was primarily due to higher variable incentive compensation.
Strategic alternatives expenses were 0,4 million USD in the second quarter of 2012 for which there was no comparable expense in the second quarter of 2011.
Adjusted Ebitda rose 13,7 percent to 11,0 million USD in the second quarter of 2012 compared to 9,7 million USD in the second quarter of 2011.
Income from operations decreased by 0,4 million USD to 5,6 million USD in the second quarter of 2012. In the second quarter of 2011, the Company recorded a gain of 0,9 million USD on the sale of two restaurants to a franchisee and the receipt of insurance proceeds related to a fire at one Company-owned restaurant.
Net income was 3,0 million USD or 0,17 USD per diluted share, which included 0,02 USD per diluted share for charges related to the strategic alternatives review process. This compares to net income of 3,1 million USD or 0,18 USD per diluted share, in the second quarter of 2011, which included a gain of 0,03 USD per diluted share related to the sale of two restaurants to a franchisee and the receipt of insurance proceeds related to a fire at one Company-owned restaurant.
Restaurant Development
As of July 03, 2012, there were 783 Einstein Bros. Bagels, Noah´s New York Bagels and Manhattan Bagel branded restaurants in operation. During the second quarter of 2012, the Company added ten restaurants to its operations and ended the quarter with 448 Company-owned and operated restaurants, while franchisees and licensees ended the period with 95 and 240 restaurants, respectively.
Fiscal Year 2012 Guidelines
The Company is providing the following updated guidelines for the 52-week period and as noted.
- 60 to 80 system-wide openings, including eight to twelve Company-owned restaurants, twelve to 14 franchise restaurants and 40 to 54 license restaurants.
- Capital expenditures of 24 million USD to 26 million USD.
- Commodity inflation of two to three percent.
- The Company has secured price protection on approximately 90 percent and 100 percent of its wheat and coffee requirements, respectively.
- General and administrative expenses of ten million USD to eleven million USD per quarter, which includes incentive compensation expenditures.
- An annual effective tax rate of approximately 39 percent; however, the Company will continue to only pay minimal cash-taxes for the next several years.
