Einstein Noah Restaurant Group Reports First Quarter 2013 Financial Results

  Einstein Noah Restaurant Group Reports First Quarter 2013 Financial Results

Company Rolls-Out New Transaction Driving Strategy with Everyday Value Combos

                      Reiterates Fiscal 2013 Guidelines

Business Wire

LAKEWOOD, Colo. -- May 2, 2013

Einstein Noah Restaurant Group, Inc. (NASDAQ: BAGL), 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, today
reported financial results for the first quarter ended April 2, 2013. The
Company also initiated a new strategy of driving transactions through everyday
value and reiterated its previously communicated guidelines for fiscal 2013.

Highlights for the First Quarter 2013 Compared to the First Quarter 2012:

  *System-wide comparable store sales decreased 0.6% reflecting
    macro-economic trends and the calendar shift in the Easter/Passover
    holidays.
  *Total revenues increased 1.2% to $106.1 million from $104.9 million.
  *Adjusted EBITDA was $10.4 million compared to $11.5 million (*) and
    reflected the upfront impact and investment of $2.5 million in support of
    the new everyday value strategy.
  *Net income was $2.4 million, or $0.14 per diluted share, which included
    $0.09 per diluted share for investments in the everyday value strategy,
    compared to $3.2 million, or $0.19 per diluted share, which included $0.02
    per diluted share for restructuring expenses.
  *On a system-wide basis, the Company opened 11 units compared to 5 units in
    the prior year quarter.

Jeff O’Neill, President and Chief Executive Officer, stated, “Our first
quarter reflects the impact of challenging macro-economic trends and the
holiday calendar shift, and most importantly, recognizes the upfront
investment and roll-out of our new everyday value strategy. We successfully
tested everyday value combos at breakfast and lunch last year and are
encouraged by the sequential improvement in transactions at our
Company-operated restaurants through the first quarter. Looking ahead, we
believe we can build on our recent momentum through fresh-baked bagels and
specialty beverages that provide our customers with both quality and value.”

O’Neill continued, “Over the past four quarters, we have opened 61 units
including twelve Company-operated restaurants since the third quarter of 2012.
Nine of those Company-operated restaurants opened in December and their
operational ramp-up impacted flow through in the first quarter and are
expected to normalize after the first 90 days. With respect to our
manufacturing business, we were encouraged by the substantial progress made by
our team in expanding profitability. We believe we are well on our way towards
achieving between $2.5 million and $5 million in savings this year through
packaging, supply contracts, and distribution center rationalization.”

First Quarter 2013 Financial Results

For the first quarter ended April 2, 2013, system-wide comparable store sales
decreased 0.6%, reflecting 3.1% growth in average check that was offset by a
decline in transactions. The change in average check also reflects the $2.5
million investment in everyday value reported by the Company.

Total revenues increased 1.2% to $106.1 million from $104.9 million, and
consisted of a 0.8% increase in Company-owned restaurant revenues, a 5.7%
increase in manufacturing and commissary revenues, and flat franchise and
license related revenues.

Restaurant gross margin decreased 290 basis points as a percentage of
restaurant sales from 19.4% to 16.5% reflecting the $2.5 million investment in
everyday value. Food costs held steady as a percentage of restaurant sales at
28.2%. Sales deleveraging impacted the semi-variable and fixed components of
restaurant level expenses.

Manufacturing revenues increased by $1.0 million, or 13.1%, while being
partially offset by a decrease of $0.5 million due to the closure of the
Company’s commissaries by the end of the first quarter of 2012. Manufacturing
gross margin as a percentage of manufacturing revenues increased from 18.4% to
27.3% and was driven by benefits from various ongoing cost initiatives,
coupled with the benefit of commissary closures of a year ago.

Overall, gross margin was $20.9 million in the first quarter of 2013 compared
to $22.7 million in the first quarter of 2012, and as a percentage of total
revenues, decreased 190 basis points to 19.7% from 21.6% in the year-ago
period.

General and administrative expenses decreased to $10.2 million in the first
quarter of 2013 from $11.1 million in the first quarter of 2012, reflecting
lower variable incentive compensation expense.

Adjusted EBITDA was $10.4 million in the first quarter of 2013 compared to
$11.5 million in the first quarter of 2012 and reflected the impact of a $2.5
million investment in the everyday value strategy.

Interest expense was $1.7 million in the first quarter of 2013 compared to
$0.8 million in the first quarter of 2012, as a result of the higher level of
debt resulting from the recapitalization of the Company in the fourth quarter
of 2012.

Net income in the first quarter of 2013 was $2.4 million, or $0.14 per diluted
share, which included $0.09 per diluted share for the investment in everyday
value, compared to net income in the first quarter of 2012 of $3.2 million, or
$0.19 per diluted share, which included $0.02 per diluted share for
restructuring expenses.

* A reconciliation of the non-GAAP measure to the nearest GAAP measure can be
found in the accompanying tables below.

Restaurant Development

As of April 2, 2013, there were 822 Einstein Bros.® Bagels, Noah's New York
Bagels®, and Manhattan Bagel® branded restaurants in operation. During the
first quarter of 2013, the Company opened one company-owned restaurant and
ended the quarter with 461 Company-owned and operated restaurants, while
franchisees and licensees opened two and eight restaurants, respectively, and
ended the quarter with 99 and 262 restaurants, respectively.

Fiscal 2013 Guidelines

The Company’s guidelines remain unchanged for the 52-week fiscal year.

  *60 to 80 system-wide openings, including 15 to 20 Company-owned
    restaurants, 15 to 20 franchise restaurants, and 30 to 40 license
    restaurants.
  *Capital expenditures of $20 million to $22 million.
  *Cost of goods inflation of approximately 2% to 3%, which the Company
    expects to be fully offset through efficiency initiatives.
  *Pre-opening expense of $65,000 to $75,000 per new Company-owned
    restaurant.
  *Interest expense of $6.5 million to $7.0 million.
  *An annual effective tax rate not to exceed 39%; however, the Company
    expects to only pay minimal cash-taxes for the next several years due to
    the utilization of NOL carryforwards for income tax purposes.

Conference Call Today

The Company will host a conference call to discuss its first quarter 2013
financial results today at 3:00 p.m. Mountain Time (5:00 p.m. Eastern Time).
Hosting the call will be Jeff O’Neill, President and Chief Executive Officer,
and Manny Hilario, Chief Financial Officer.

The conference call will be webcast live from Einstein Noah’s website at
www.einsteinnoah.com and will be archived there as well.

The dial-in numbers for the conference call are 888-510-1765 for domestic
toll-free calls and 719-457-2085 for international. A telephone replay will be
available through May 9, 2013, and may be accessed by dialing 877-870-5176 for
domestic toll-free calls or 858-384-5517 for international. The conference ID
is 1152037.

During the conference call, the Company may discuss and answer questions
concerning business and financial developments and trends that have occurred
after quarter-end. The Company’s responses to questions, as well as other
matters discussed during the conference call, may contain or constitute
information that has not been previously disclosed.

About Einstein Noah Restaurant Group

Einstein Noah Restaurant Group, Inc. is a leading company in the quick casual
restaurant industry that operates franchises and licenses locations under the
Einstein Bros.®, Noah's New York Bagels® and Manhattan Bagel® brands. The
Company's retail system consists of over 815 restaurants in 40 states and the
District of Columbia. It also operates a dough production facility. The
Company's stock is traded on the NASDAQ under the symbol BAGL. Visit
www.einsteinnoah.com for additional information.

Forward Looking Statement Disclosure

Certain statements in this press release, including statements under the
heading “Fiscal 2013 Guidelines”, constitute forward-looking statements or
statements which may be deemed or construed to be forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
The words “guideline,” “forecast,” “estimate,” “project,” “plan to,” “is
designed to,” “look forward,” “expects,” “prospects,” “intend,” “indications,”
“expect,” “should,” “would,” “believe,” “target,” “trend,” “contemplate,”
“anticipates” and similar expressions and all statements which are not
historical facts are intended to identify forward-looking statements. These
forward-looking statements involve and are subject to known and unknown risks,
uncertainties and other factors which could cause the Company's actual
results, performance (financial or operating), or achievements to differ
materially from the future results, performance (financial or operating), or
achievements expressed or implied by such forward-looking statements. These
unknown risks, uncertainties and other factors include but are not limited to
(i) the results for the 2013 first quarter and year over year revenue and
other financial results, comparable store sales, and margin performance are
not necessarily indicative of future results, and our expectations for 2013
results are subject to shifting consumer preferences, new product execution,
economic conditions, weather, competition, seasonal factors and cost
containment initiatives, among other factors; (ii) our ability to improve
transactions and our long-term growth are dependent upon consumer acceptance
of our products and marketing initiatives, general economic and market
conditions, among other factors; (iii) our ability to continue to improve
store level margins and contain costs are dependent upon successfully
executing plans for productivity improvements, labor efficiencies and food
cost management; (iv) the ability to develop and open new company-owned,
license and franchise restaurants and upgrade company-owned restaurants is
dependent upon the availability of capital, securing acceptable financing and
lease terms for desired locations, as well as the availability of contractors
and materials, and securing necessary permits and licenses; (v) our ability to
expand our development pipeline and ultimately expand our royalty stream is
dependent upon the factors listed in (iv), above, and our ability to attract
franchisees and licensees and negotiate favorable agreements; (vi) our ability
to obtain lower costs for agricultural commodities is dependent upon weather,
crop yield and production, the market, economic conditions, including market
and inflationary pressures; (vii) our ability to build brand equity and create
long-term value for our shareholders is dependent upon the success of our
initiatives, financial results and the factors listed above, among other
factors. These and other risks are more fully discussed in the Company's SEC
filings, including the Company’s Annual Report on Form 10-K for the fiscal
year ended January 1, 2013. Any forward-looking statements by the Company,
with respect to earnings guidance or otherwise, are intended to speak only as
of the date such statements are made. Except as required by applicable law,
including the securities laws of the United States and the rulesand
regulations of the Securities and Exchange Commission, the Company does not
undertake to publicly update any forward-looking statements in this news
release or with respect to matters described herein, whether as a result of
any new information, future events or otherwise.

Use of Non-GAAP Financial Information

In addition to the results reported in accordance with accounting principles
generally accepted in the United States of America (“GAAP”) included herein,
the Company has provided certain non-GAAP financial information: adjusted
earnings before interest, taxes, depreciation and amortization, restructuring
expenses, and other operating expenses/income (“Adjusted EBITDA”); and “Free
Cash Flow”, which the Company defines as net cash provided by operating
activities less net cash used in investing activities.Management believes
that the presentation of this non-GAAP financial information provides useful
information to investors because this information may allow investors to
better evaluate our ongoing business performance and certain components of our
results. In addition, the Company’s Board of Directors uses this non-GAAP
financial information to evaluate the performance of the Company and its
management team. This information should be considered in addition to the
results presented in accordance with GAAP, and should not be considered a
substitute for the GAAP results. We have reconciled the non-GAAP financial
information to the nearest GAAP measures.

The Company includes in this report information on system-wide comparable
store sales percentages. System-wide comparable store sales percentages refer
to changes in sales of our restaurants, whether operated by the company or by
franchisees and licensees, in operation for six fiscal quarters including
those restaurants temporarily closed for an immaterial amount of time. Some of
the reasons restaurants may be temporarily closed include remodeling,
relocations, road construction, rebuilding related to site-specific
catastrophes and natural disasters. Franchise and license comparable store
sales percentages are based on sales offranchised and licensed restaurants,
as reported by franchisees and licensees. Management reviews the increase or
decrease in comparable store sales to assess business trends. Comparable store
sales exclude permanently closed locations. When the Company intends to
relocate a restaurant, it considers that restaurant to be temporarily closed
for up to twelve months after it ceases operations. If a suitable relocation
site has not been identified by the end of twelve months, the Company
considers the restaurant to be permanently closed. Until that time, the
Company includes the restaurant in its open store count, but excludes its
sales from our comparable store sales. As of April 2, 2013, there are seven
stores that the Company intends to relocate, and are thus considered to be
temporarily closed.

The Company uses company-owned 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 system-wide 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 us appreciate the effectiveness of our 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)
(unaudited)
                                                                
                                                                   Increase/
                                      13 weeks ended                (Decrease)
                                      April 3,       April 2,       2013
                                      2012           2013           vs. 2012
Revenues:
Company-owned restaurant sales        $ 93,447       $ 94,226       0.8     %
Manufacturing and commissary            8,450          8,928        5.7     %
revenues
Franchise and license related          2,976         2,969        (0.2    %)
revenues
Total revenues                          104,873        106,123      1.2     %
                                                                            
Cost of sales (exclusive of
depreciation and amortization shown
separately below):
Company-owned restaurant costs
Cost of goods sold                      26,365         26,570       0.8     %
Labor costs                             26,836         28,680       6.9     %
Rent and related expenses               10,268         10,832       5.5     %
Other operating costs                   9,321          10,140       8.8     %
Marketing costs                        2,494         2,486        (0.3    %)
Total company-owned restaurant          75,284         78,708       4.5     %
costs
                                                                            
Manufacturing and commissary costs     6,896         6,490        (5.9    %)
Total cost of sales                     82,180         85,198       3.7     %
                                                                            
Gross margin:
Company-owned restaurant                18,163         15,518       (14.6   %)
Manufacturing and commissary            1,554          2,438        56.9    %
Franchise and license                  2,976         2,969        (0.2    %)
Total gross margin                      22,693         20,925       (7.8    %)
                                                                            
Operating expenses:
General and administrative expenses     11,080         10,208       (7.9    %)
Depreciation and amortization           4,767          4,940        3.6     %
Pre-opening expenses                    64             287          **
Restructuring expenses                  554            -            (100.0  %)
Other operating expenses, net          184           126          (31.5   %)
Income from operations                  6,044          5,364        (11.3   %)
                                                                            
Interest expense, net                  800           1,743        117.9   %
Income before income taxes              5,244          3,621        (30.9   %)
Provision for income taxes             2,040         1,260        (38.2   %)
Net income                            $ 3,204        $ 2,361        (26.3   %)
                                                                            
Net income – Basic                    $ 0.19         $ 0.14         (26.3   %)
Net income – Diluted                  $ 0.19         $ 0.14         (26.3   %)
Cash dividend declared per common     $ 0.125        $ 0.125        0.0     %
share
                                                                            
Weighted average number of common
shares outstanding:
Basic                                   16,850,776     16,992,803   0.8     %
Diluted                                 17,125,409     17,391,666   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)
                                                    April 3,         April 2,
                                                    2012             2013
                                                                     
Revenues:
Company-owned restaurant sales                      89.1    %        88.8    %
Manufacturing and commissary revenues               8.1     %        8.4     %
Franchise and license related revenues              2.8     %        2.8     %
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                                  28.2    %        28.2    %
Labor costs                                         28.7    %        30.4    %
Rent and related expenses                           11.0    %        11.5    %
Other operating costs                               10.0    %        10.8    %
Marketing costs                                     2.7     %        2.6     %
Total company-owned restaurant costs                80.6    %        83.5    %
                                                                     
Manufacturing and commissary costs (2)              81.6    %        72.7    %
Total cost of sales                                 78.4    %        80.3    %
                                                                     
Gross margin:
Company-owned restaurant (1)                        19.4    %        16.5    %
Manufacturing and commissary (2)                    18.4    %        27.3    %
Franchise and license                               100.0   %        100.0   %
Total gross margin                                  21.6    %        19.7    %
                                                                     
Operating expenses:
General and administrative expenses                 10.6    %        9.6     %
Depreciation and amortization                       4.5     %        4.6     %
Pre-opening expenses                                0.0     %        0.3     %
Restructuring expenses                              0.5     %        0.0     %
Other operating expenses, net                       0.2     %        0.1     %
Income from operations                              5.8     %        5.1     %
                                                                     
Interest expense, net                               0.8     %        1.7     %
Income before income taxes                          5.0     %        3.4     %
Provision for income taxes                          1.9     %        1.2     %
Net income                                          3.1     %        2.2     %
                                                                     
(1) As a percentage of company-owned restaurant sales
(2) As a percentage of manufacturing and commissary revenues


EINSTEIN NOAH RESTAURANT GROUP, INC.
SELECTED FINANCIAL INFORMATION
(in thousands)
(unaudited)
                                                          
                                                               
Selected Consolidated Balance Sheet        January 1, 2013     April 2, 2013
Information:
Cash and cash equivalents, end of          $   17,432          $   7,466
period
Property, plant and equipment, net             63,013              61,480
Total assets                                   213,613             202,128
Total debt                                     136,700             130,750
Total liabilities                              186,106             171,974
                                                               
                                                               
                                                               
                                           13 weeks ended
Selected Consolidated Cash Flow            April 3, 2012       April 2, 2013
Information:
Net cash provided by operating             $   11,382          $   1,379
activities
Net cash used in investing activities          (6,760   )          (4,812   )
Net cash used in financing activities          (3,673   )          (6,533   )
Free cash flow (cash provided by
operating
activities less cash used in investing         4,622               (3,433   )
activities)
                                                               
                                                               
                                                               
Reconciliation of GAAP to Non-GAAP         13 weeks ended
Measures:
                                           April 3,            April 2,
                                           2012                2013
                                           (in thousands)
Net income                                 $   3,204           $   2,361
Adjustments to net income:
Interest expense, net                          800                 1,743
Provision for income taxes                     2,040               1,260
Depreciation and amortization                  4,767               4,940
Restructuring expenses                         554                 -
Other operating expense (income), net         184               126      
Adjusted EBITDA                            $   11,549         $   10,430   
                                                                            

EINSTEIN NOAH RESTAURANT GROUP, INC.
OTHER SELECTED INFORMATION
                                                               
                             Thirteen weeks ended April 2, 2013
                             Company
                             Owned         Franchised   Licensed   Total
Consolidated Total
Beginning Balance -          461           97           258          816
January 2, 2013
Opened restaurants           1             2            8            11
Closed restaurants           (1     )      -            (4     )     (5    )
Refranchising, Net           -            -           -           -     
Ending balance - April       461          99          262         822   
2, 2013
                                                                     
                                                                     
                             Trailing 12 Months Activity
                             Company
                             Owned         Franchised   Licensed     Total
Consolidated Total
Beginning balance -          447           91           239          777
April 3, 2012
Opened restaurants           15            12           34           61
Closed restaurants           (2     )      (3    )      (11    )     (16   )
Refranchising, Net           1            (1    )      -           -     
Ending balance - April       461          99          262         822   
2, 2013
                                                                     

Contact:

ICR
Investor Relations:
Raphael Gross, 203-682-8253
raphael.gross@icrinc.com
or
Media Relations:
Liz Brady DiTrapano, 646-277-1226
liz.ditrapano@icrinc.com
 
Press spacebar to pause and continue. Press esc to stop.