SOURCE: Einstein Noah Restaurant Group, Inc.

August 10, 2007 20:52 ET

Einstein Noah Restaurant Group Revises Supplemental Pro Forma Information for the Second Quarters and Year to Date Periods Ended July 4, 2006 and July 3, 2007, Respectively

LAKEWOOD, CO--(Marketwire - August 10, 2007) - Einstein Noah Restaurant Group, Inc. (NASDAQ: BAGL) revised its press release issued on August 9, 2007. The revised supplemental pro forma information, as presented below, revises interest expense for the second quarter and year to date periods ended July 4, 2006 and July 3, 2007 pro forma information included in the previous press release. The supplemental pro forma information assumes the secondary public offering and the amended credit facility were transacted on the day immediately preceding the second quarters and the fiscal years of 2006 and 2007, respectively. Specifically, the revisions are included in paragraph 6 on page 2 and the pro forma table on page 9. The complete text of the revised release follows.

Einstein Noah Restaurant Group Reports Solid Growth in Operating Income Driven By Comp Store Sales and Improving Restaurant Margins

Selected Second Quarter Highlights:

--  Comparable store sales growth at company-owned restaurants of 5.2% in
    the second quarter.  Eleventh consecutive quarter of positive comparable
    store sale growth.
--  Restaurant gross profit increased 7.6%to $18.9 million in the second
    quarter
--  Average unit volume for company-owned stores increased to $884,000 for
    trailing 12 months
--  Second quarter operating income increased 113% to $6.7 million.
--  Opened 1 new company-owned restaurant and 6 new licensed locations in
    the quarter
--  Successful completion of public offering and amended credit facility
    enabled substantial reduction in indebtedness and projected cash interest
    expense savings of approximately $11.7 million annually.
    

LAKEWOOD, CO -- Einstein Noah Restaurant Group, Inc. (NASDAQ: BAGL) today announced strong results for its second quarter and six-month period ended July 3, 2007. The Company posted strong profit growth driven by positive comparable store sales and higher restaurant operating margins.

"The first six months of 2007 have been eventful and productive for Einstein Noah's Restaurant Group," said Paul Murphy, president and CEO. "We changed our name to more accurately reflect and promote our core brands and we relocated our corporate headquarters into a more efficient, cost-effective facility with ample expansion potential. We also completed a public stock offering that generated more than $83 million in new capital to strengthen our balance sheet and position us for continued growth and improved earnings power. At the same time, we have continued to expand our business with two new company-owned and 10 new licensed restaurant locations opened year to date. I am also happy to report that we have signed a multi-unit development agreement with Philip Enterprises to franchise our Einstein Bros. Bagel restaurants in the Northwest Arkansas area, our second multi-unit development agreement for Einstein Bros. Bagels."

Second Quarter Business Review

Comparable store sales grew by 5.2% in the second quarter -- the Company's 11th consecutive quarter of sales growth in company-owned restaurants. This continued improvement was attributable to system-wide price increases, growth in product sales and a shift in product mix to higher priced items.

Total revenue in the second quarter was $101.1 million, up 3.2% from revenue of $98.0 million in the same quarter a year ago. Revenue from company-owned restaurant sales increased 2.9% to $94.1 million despite the planned closure of underperforming company-owned restaurants, which resulted in a net 16 fewer company-owned restaurants in the second quarter of 2007 versus the year-ago second quarter. Average unit volume in company-owned stores increased to $884,000 for the trailing twelve months.

Total operating expenses declined by 10.7% in the second quarter to $13.7 million from $15.3 million in the same quarter a year ago. This decline was attributable to a 53% decrease in depreciation and amortization expense, which fell to $2.6 million from $5.6 million in the comparable second quarter as a result of certain intangible assets becoming fully amortized and a large portion of fixed assets becoming fully depreciated in mid-2006. General and administrative expenses were up 11.6% to $10.9 million from $9.7 million. The majority of this increase was attributable to stock-based compensation expense. In addition, the Company incurred approximately $400,000 of one-time costs in the second quarter related to the amendment of the first lien credit facility and the relocation of its corporate headquarters.

The Company reported a net loss of $250,000, or $0.02 per basic and diluted share, in the second quarter as compared with a net loss of $1.5 million, or $0.15 per basic and diluted share, in the same quarter last year. On a pro-forma basis, assuming the stock offering and amendment of the first lien credit facility had occurred at the end of the first quarter and excluding one-time debt restructuring costs, the company would have earned $0.31 per share on a fully diluted basis.

Rick Dutkiewicz, chief financial officer, stated, "We are pleased with our year-to-date financial results, particularly the continued growth in comparable store sales and operating income as well as our pro forma results that reflect our capital structure on a go forward basis. Our successful secondary stock offering in the second quarter enabled us to pay off higher interest debt and amend our first lien credit facility with more favorable interest rates and covenants."

2007 Second Half Outlook

Murphy noted, "For the remainder of fiscal 2007, we anticipate opening an additional 9 to 13 company-owned restaurants, which would bring the full year total to 11 to 15 new restaurants. To date, we have opened 10 new licensed locations and anticipate an additional 30 locations for the remainder of the year. We also anticipate opening a total of 5 franchised restaurants between our Einstein Bros. Bagels and Manhattan Bagel Bakery brands."

"The increased capital expenditure limits in our amended first lien credit facility now allow us to upgrade an additional 11 restaurants in fiscal 2007. With this addition, we now plan to upgrade a total of 37 restaurants in fiscal 2007."

"For the last few months, we have been testing a line of pizza bagels in the Denver market. The success of this product from both a sales and gross margin standpoint has led us to commit to rolling out this product to the majority of the Einstein Bros. Bagel restaurants nationwide by the end of this fiscal year."

Conference Call

The Company will conduct a conference call and Webcast today at 2:30 p.m. Mountain Time (4:30 p.m. Eastern Time).

The call-in numbers for the conference call are 877-381-6509 for domestic toll free and 706-679-7388 for international. The conference ID number is 11538614. A telephone replay will be available through August 23, 2007, and may be accessed by calling 800-642-1687 for domestic toll free or 706-645-9291 for international. The conference ID number is 11538614.

To access a live Webcast of the call, please visit Einstein Noah's Website at www.einsteinnoah.com. A replay of the Webcast will be available on the Website through September 9, 2007.

About Einstein Noah Restaurant Group, Inc.

Einstein Noah Restaurant Group is the largest owner/operator, franchisor and licensor of bagel specialty restaurants in the United States. The Company has approximately 600 restaurants in 36 states and the District of Columbia under the Einstein Bros. Bagels, Noah's New York Bagels and Manhattan Bagel brand. Einstein Noah's product offerings include fresh bagels and other bakery items baked on-site, made-to-order breakfast and lunch sandwiches on a variety of bagels and breads, gourmet soups and salads, decadent desserts, premium coffees, and an assortment of snacks. The Company's manufacturing and commissary operations prepare and assemble consistent, high-quality ingredients that are delivered fresh to its restaurants. More information is available on the Company's website at www.einsteinnoah.com.

Certain statements in this press release 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 "forecast," "estimate," "project," "plan to," "is designed to," "expectations," "intend," "indications," "expect," "should," "would," "believe," "target", "trend" 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 from the future results, performance (financial or operating), or achievements expressed or implied by such forward-looking statements. These factors include but are not limited to (i) the results for period over period revenue, gross profit, operating income, net income, depreciation and amortization, and comparable store sales are not necessarily indicative of future results and are subject to shifting consumer preferences, economic conditions, weather, and competition, among other factors; (ii) the results for the 2007 second quarter are not necessarily indicative of future results, which are subject to a variety of factors, including consumer preferences and the economy and increasing utility and other costs, and other seasonal effects; (iii) the estimated $11.7 million annual interest savings is dependent upon LIBOR and Prime rates remaining stable; (iv) the ability to upgrade restaurants is dependent on available capital, available space, store layouts, availability of contractors and materials, and the ability to obtain necessary permits and licenses; (v) the ability to develop and open new company-owned, licensed and franchise restaurants is dependent upon the availability of capital, the availability of desirable locations, reaching favorable lease terms, as well as the availability of contractors and materials, and ability to obtain necessary permits and licenses; (vi) the ability to roll-out the pizza bagel into new markets is dependent upon, among other factors, our ability to obtain and install the equipment required, obtain permits, if necessary, and train personnel; (vii) the ability to implement our growth initiatives is dependent on many factors including our ability to train personnel, the availability of products, our ability to develop new menu items and to produce those items in the restaurants, and the availability of capital and consumer acceptance. These and other risks are more fully discussed in the Company's SEC filings. These and other risks are more fully discussed in the Company's SEC filings.


                   EINSTEIN NOAH RESTAURANT GROUP, INC.
                        CONSOLIDATED BALANCE SHEETS
                  AS OF JANUARY 2, 2007 AND JULY 3, 2007
                 (in thousands, except share information)
                                (unaudited)


                                                   January 2,    July 3,
                                                      2007         2007
                                                  -----------  -----------
ASSETS
 Current assets:
  Cash and cash equivalents                       $     5,477  $     7,110
  Restricted cash                                       2,403        1,715
  Franchise and other receivables, net of
   allowance of $505 and $432, respectively             6,393        6,010
  Inventories                                           4,948        4,966
  Prepaid expenses and other current assets             4,529        4,780
       Assets held for sale                             1,144            -
                                                  -----------  -----------
        Total current assets                           24,894       24,581

 Restricted cash long-term                                284          278
 Property, plant and equipment, net                    33,889       38,733
 Trademarks and other intangibles, net                 63,806       63,806
 Goodwill                                               4,875        4,875
 Debt issuance costs and other assets, net              5,406        3,853
                                                  -----------  -----------
        Total assets                              $   133,154  $   136,126
                                                  ===========  ===========

LIABILITIES AND STOCKHOLDERS’ DEFICIT
  Current liabilities:
   Accounts payable                               $     3,347  $     4,834
   Accrued expenses                                    25,855       21,067
   Short term debt and current portion of
    long-term debt                                      3,605        1,180
   Current portion of obligations under capital
    leases                                                 76           77
                                                  -----------  -----------
        Total current liabilities                      32,883       27,158

  Senior notes and other long-term debt, net of
   discount                                           166,556       89,380
  Obligations under capital leases                        124           84
  Other liabilities                                     8,822        8,591
  Mandatorily redeemable, Series Z Preferred
   Stock, $.001 par value, $1,000 per share
   liquidation value; 57,000 shares
   authorized; 57,000 shares issued and
   outstanding                                         57,000       57,000
                                                  -----------  -----------

        Total liabilities                             265,385      182,213
                                                  -----------  -----------
  Commitments and contingencies (see Note 10)

  Stockholders’ deficit:
  Series A junior participating preferred stock,
   700,000 shares authorized; no shares issued
   and outstanding
  Common stock, $.001 par value; 25,000,000 shares
   authorized; 10,596,419 and 15,739,355 shares
   issued and outstanding                                  11           16
  Additional paid-in capital                          176,797      262,055
  Accumulated deficit                                (309,039)    (308,158)
                                                  -----------  -----------
        Total stockholders’ deficit                  (132,231)     (46,087)
                                                  -----------  -----------
         Total liabilities and stockholders’
          deficit                                 $   133,154  $   136,126
                                                  ===========  ===========




                   EINSTEIN NOAH RESTAURANT GROUP, INC.
                  CONSOLIDATED STATEMENTS OF OPERATIONS
          FOR THE SECOND QUARTER AND YEAR TO DATE PERIODS ENDED
                    JULY 4, 2006 AND JULY 3, 2007
  (in thousands, except earnings per share and related share information)
                                (unaudited)


                            Second quarter ended:     Year to date ended:
                            ----------------------  ----------------------
                              July 4,     July 3,     July 4,     July 3,
                               2006        2007        2006        2007
                            ----------  ----------  ----------  -----------
Revenues:
  Company-owned restaurant
   sales                    $   91,507  $   94,141  $  182,087  $   183,256
  Manufacturing and
   commissary revenues           5,196       5,682      10,469       11,500
  Franchise and license
   related revenues              1,253       1,232       2,476        2,554
                            ----------  ----------  ----------  -----------

Total revenues                  97,956     101,055     195,032      197,310

Cost of sales:
  Company-owned restaurant
   costs                        73,964      75,257     147,490      146,589
  Manufacturing and
   commissary costs              5,502       5,380      10,507       10,802
                            ----------  ----------  ----------  -----------

Total cost of sales             79,466      80,637     157,997      157,391
                            ----------  ----------  ----------  -----------

Gross profit                    18,490      20,418      37,035       39,919

Operating expenses:
  General and
   administrative expenses       9,727      10,855      20,288       21,587
  Depreciation and
   amortization                  5,594       2,623      11,598        5,042
  Loss (gain) on sale,
   disposal or abandonment
   of assets, net                   (8)         31          13          405
  Impairment charges and
   other related costs               7         166          83          185
                            ----------  ----------  ----------  -----------

Income from operations           3,170       6,743       5,053       12,700
Other expense:
  Interest expense, net          4,712       4,144       9,921        8,933
  Write-off of debt
   discount upon redemption
   of senior notes                   -         528           -          528
  Prepayment penalty upon
   redemption of senior
   notes                             -         240       4,800          240
  Write-off of debt
   issuance costs upon
   redemption of
   senior notes                      -       2,071       3,956        2,071
  Other                              -           -          10            -
                            ----------  ----------  ----------  -----------

Income (loss) before
 income taxes                   (1,542)       (240)    (13,634)         928
Provision for income taxes           -          10           -           47
                            ----------  ----------  ----------  -----------

Net income (loss)           $   (1,542) $     (250) $  (13,634) $       881
                            ==========  ==========  ==========  ===========

Net income (loss) per
 common share - Basic       $    (0.15) $    (0.02) $    (1.35) $      0.08
                            ==========  ==========  ==========  ===========
Net income (loss) per
 common share - Diluted     $    (0.15) $    (0.02) $    (1.35) $      0.07
                            ==========  ==========  ==========  ===========

Weighted average number of
 common shares outstanding:
    Basic                   10,171,236  11,775,597  10,118,154   11,190,612
                            ==========  ==========  ==========  ===========
    Diluted                 10,171,236  11,775,597  10,118,154   11,874,874
                            ==========  ==========  ==========  ===========





                   EINSTEIN NOAH RESTAURANT GROUP, INC.
                  CONSOLIDATED STATEMENTS OF CASH FLOWS
     FOR THE YEAR TO DATE PERIODS ENDED JULY 4, 2006 AND JULY 3, 2007
                              (in thousands)
                                (unaudited)


                                                    July 4,      July 3,
                                                      2006         2007
                                                  -----------  -----------
 OPERATING ACTIVITIES:
 Net income (loss)                                $   (13,634) $       881
 Adjustments to reconcile net loss to net cash
  provided by operating activities:
   Depreciation and amortization                       11,598        5,042
   Stock based compensation expense                       408        1,250
   Loss, net of gains, on disposal of assets               13          405
   Impairment charges and other related costs              83          185
   Provision for losses on accounts receivable,
    net                                                   132           25
   Amortization of debt issuance and debt
    discount costs                                        419          392
   Write-off of debt issuance costs                     3,956        2,071
   Write-off of debt discount                               -          528
   Paid-in-kind interest                                  643          904
   Changes in operating assets and liabilities:
     Franchise and other receivables                      433          358
     Accounts payable and accrued expenses                332       (1,225)
     Other assets and liabilities                        (105)      (2,500)
                                                  -----------  -----------

      Net cash provided by operating activities         4,278        8,316

 INVESTING ACTIVITIES:
 Purchase of property and equipment                    (5,400)     (12,404)
 Proceeds from the sale of equipment                      153        1,164
                                                  -----------  -----------

      Net cash used in investing activities            (5,247)     (11,240)

 FINANCING ACTIVITIES:
 Proceeds from secondary common stock offering              -       90,000
 Costs incurred with offering of our common stock           -       (6,417)
 Proceeds from line of credit                              24            -
 Repayments of line of credit                             (24)           -
 Payments under capital lease obligations                 (20)         (39)
 Repayment of notes payable                          (160,000)           -
 Borrowings under First Lien                           80,000       11,900
 Repayments under First Lien                             (475)        (475)
 Borrowing under Second Lien                           65,000            -
 Repayments under Second Lien                               -      (65,000)
 Borrowings under Subordinated Note                    24,375            -
 Repayments under Subordinated Note                         -      (25,000)
 Debt issuance costs                                   (4,916)        (842)
 Proceeds upon stock option and warrant exercises         187          430
                                                  -----------  -----------
     Net cash provided by financing activities          4,151        4,557

 Net increase in cash and cash equivalents              3,182        1,633
 Cash and cash equivalents, beginning of period         1,556        5,477
                                                  -----------  -----------
 Cash and cash equivalents, end of period         $     4,738  $     7,110
                                                  ===========  ===========

Use of Non-GAAP Financial Information

In addition to the results reported in accordance with U.S. generally accepted accounting principles ("GAAP") included in this release, the Company has provided certain non-GAAP financial information, which is Adjusted EBITDA (as described in more detail in the next section). 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 ongoing business performance and certain components of the Company's results. 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. The Company has reconciled the non-GAAP financial information included in this release to the nearest GAAP measure in context. See the "Calculation of Adjusted EBITDA" table below.

Adjusted EBITDA

Adjusted EBITDA is defined as recurring earnings before interest, taxes, depreciation and amortization and represents operating profit plus other charges set forth in the attached Calculation of Adjusted EBITDA. Adjusted EBITDA is not adjusted for all non-cash expenses or for working capital, capital expenditures or other investment requirements and, accordingly, is not necessarily indicative of amounts that may be available for discretionary uses. Thus, Adjusted EBITDA should not be considered in isolation or as a substitute for net earnings or cash provided by operating activities, each prepared in accordance with GAAP, when measuring Einstein Noah Restaurant Group, Inc.'s profitability or liquidity as more fully discussed in the Company's financial statements and filings with the Securities and Exchange Commission.

                                Second quarter ended   Year to date ended
                                 July 4,    July 3,    July 4,    July 3,
                                  2006       2007       2006       2007
                                ---------  ---------  ---------  ----------
Net income (loss)               $  (1,542) $    (250) $ (13,634) $      881
  Adjustments
     Legal costs associated
      with amended First Lien
      Term Loan                         -        191          -         191
     Interest expense, net          4,712      4,144      9,921       8,933
     Write-off of debt discount
      upon redemption of senior
      notes                             -        528          -         528
     Prepayment penalty upon
      redemption of senior
      notes                             -        240      4,800         240
     Write-off of debt issuance
      costs upon redemption of
      senior notes                      -      2,071      3,956       2,071
     Depreciation and
      amortization                  5,594      2,623     11,598       5,042
     Loss (gain) on sale,
      disposal or abandonment
      of assets, net                   (8)        31         13         405
     Impairment charges and
      other related costs               7        166         83         185
     Provision for income taxes         -         10          -          47
                                ---------  ---------  ---------  ----------
Consolidated adjusted EBITDA    $   8,763  $   9,754  $  16,737  $   18,523
                                =========  =========  =========  ==========

The following table reconciles our net income and earnings per share as reported under GAAP in the United States with those financial measures as adjusted by the items detailed below and presented in the accompanying news release and associated teleconference. These calculations are not prepared in accordance with GAAP and should not be viewed as alternatives to GAAP. We believe that the supplemental presentation of these calculations provides meaningful non-GAAP financial measures to help investors understand and compare business trends among different reporting periods on a consistent basis. These calculations set forth the pro forma effects of how our secondary public stock offering and our amendment of the First Lien Term Loan facility would have affected our consolidated statements of operations if the transactions had been consummated on the last day of the period prior to the beginning of the quarters and the year to date periods ended July 4, 2006 and July 3, 2007. As a result of these transactions, we were able to pay off our higher interest rate debt.


                           Second quarter ended   Year to date period ended
                             July 4,     July 3,     July 4,     July 3,
                              2006        2007        2006        2007
                           ----------  ----------  ----------  -----------
Net income (loss)          $   (1,542) $     (250) $  (13,634) $       881
  Add
     Legal costs associated
      with amended First
      Lien Term Loan                -         191           -          191
     Interest expense, net      4,712       4,144       9,921        8,933
     Write-off of debt
      discount upon
      redemption of senior
      notes                         -         528           -          528
     Prepayment penalty
      upon redemption of
      senior notes                  -         240       4,800          240
     Write-off of debt
      issuance costs upon
      redemption of senior
      notes                         -       2,071       3,956        2,071
     Interest Income               64         112         113          211
Less
     Interest expense under
      amended $90 Million
      First Lien Term Loan
      at 6.96% for 2006 and
      7.39% for 2007            1,566       1,663       3,132        3,326
     Other interest expense        76          15         156           32
     Unused Line Fee of
      $13.3 million at
      0.50%                        17          17          33           33
     Amortization of debt
      issuance costs              120         120         241          241
     Letter of Credit Fee
      of $6.7 million at
      2.50%                        42          42          84           84
                           ----------  ----------  ----------  -----------
Pro forma pre-tax income   $    1,413  $    5,180  $    1,510  $     9,339
                           ==========  ==========  ==========  ===========

Common shares outstanding
 as of April 4, 2006,
 April 3, 2007, January 3,
 2006, and January 2, 2007  10,065,072  10,612,227  10,065,072   10,596,419
Shares issued in secondary
 public offering             5,000,000   5,000,000   5,000,000    5,000,000
Common stock issued upon
 stock option exercise          45,151     127,128      45,151      142,936
                            ----------  ----------  ----------  -----------
Pro-forma weighted average
 number of common shares
 outstanding as of
 July 4, 2006 and July 3,
 2007 - Basic               15,110,223  15,739,355  15,110,223   15,739,355
Dilutive effect of stock
 options                       435,912     821,551     418,168      684,262
                            ----------  ----------  ----------  -----------
Pro-forma weighted average
 number of common shares
 outstanding as of
 July 4, 2006 and July 3,
 2007 - Diluted             15,546,135  16,560,906  15,528,391   16,423,617
                            ==========  ==========  ==========  ===========

Pro-forma EPS - Basic       $     0.09  $     0.33  $     0.10  $      0.59
                            ==========  ==========  ==========  ===========

Pro-forma EPS - Diluted     $     0.09  $     0.31  $     0.10  $      0.57
                            ==========  ==========  ==========  ===========

Contact Information

  • Contacts:
    Jay Pfeiffer
    Pfeiffer High Investor Relations, Inc.
    303-393-7044
    Email Contact

    Rick Dutkiewicz
    Chief Financial Officer
    303-568-8004
    Email Contact