Einstein Noah Restaurant Group Reports Strong Growth in Earnings and Cash Flow for 2008
Date : 03/02/2009 @ 4:04PM
Source : Business Wire
Stock : Einstein Noah Restaurant Group (BAGL)
Quote : 5.13 0.89 (20.99%) @ 8:00PM
Einstein Noah Restaurant Group Reports Strong Growth in Earnings and Cash Flow for 2008
Einstein Noah Restaurant Group (NASDAQ: BAGL), a leader in the quick-casual segment of the restaurant industry operating primarily under the Einstein Bros.® Bagels, Noah's New York Bagels®, and Manhattan Bagel® brands, today reported financial results for the fourth quarter and full year ended December 30, 2008.
Selected Highlights for the Fourth Quarter 2008 Compared to the Fourth Quarter 2007:
Total revenue of $103.9 million vs. $105.2 million
System-wide comparable store sales decreased a modest 1.0%
Gross profit of $21.5 million in each of these quarters
Net income and diluted EPS of $5.8 million and $0.36, respectively, versus net income and diluted EPS of $6.8 million and $0.41. Fourth quarter 2008 results included $1.3 million in senior management transition costs, or approximately $0.08 per diluted share.
Generated $9.4 million of cash flow from operations in 2008 compared to $5.6 million in 2007.
Selected Highlights for 2008 Compared to 2007:
Total revenue growth of 2.6% to $413.5 million from $402.9 million
System-wide comparable store sales increased 1.4%
Gross profit of $81.8 million vs. $80.9 million
Net income and diluted EPS of $21.1 million and $1.29, respectively, versus net income and diluted EPS of $12.6 million and $0.88. 2008 results included $3.2 million in charges for senior management transition costs and California wage and hour settlements, or approximately $0.20 per diluted share.
Generated $43.1 million of cash flow from operations in 52-week period, resulting in an unrestricted cash balance of $24.2 million on December 30, 2008, compared to the 52 weeks ended January 1, 2008 where we generated $24.9 million in cash flow and had an unrestricted cash balance of $9.4 million.
Jeff O’Neill, chief executive officer and president of Einstein Noah, said, “Our performance is a testament to the strength of our loyal customer base. In the face of unprecedented economic challenges, we’ve been able to preserve our comparable store sales, continue to build efficiencies in our manufacturing and commissary operations, and lower our G&A costs significantly. Most importantly, in 2008 we generated free cash flow totaling $16.4 million, which further strengthens our liquidity position.”
O’Neill continued, “In 2009, our key objectives are to accelerate our marketing and merchandising efforts, continue to build on our strong and growing base of Franchise and License partners, and prudently manage our controllable costs. We are pleased with our unique strength and positioning in the Fast Casual Breakfast day part, and are confident that we can take additional market share from our competitors through our emphasis on exciting new products and value-oriented promotions. Overall, we look forward to continued progress in 2009 and are well underway toward building a ‘best in class’ organization.”
Fourth Quarter 2008 Financial Results
For the fourth quarter of 2008, system–wide comparable store sales, which include Company-owned, franchised, and licensed locations, decreased a modest 1.0%. Total revenues decreased 1.3% to $103.9 million from $105.2 million in the fourth quarter last year. The fourth quarter of 2008 had a benefit of $0.3 million from gift card breakage, compared to a benefit of approximately $1.3 million in the fourth quarter last year.
Company-owned restaurant sales fell 2.5% to $94.3 million from $96.7 million, including a 3.3% decrease in comparable store sales, of which approximately 1.2% was due to management deliberately reducing the hours of operation. Once again, our upgraded restaurants experienced stronger comparable store sales, and outperformed all other locations by 2.4%. Company-owned restaurant gross profit was $18.9 million in the fourth quarter of 2008, compared to $20.7 million in the same quarter last year.
Franchise and license locations continued a trend of strong positive comparable store sales in the fourth quarter of 2008, posting an 8.5% increase compared to the same quarter in the prior year. We also benefitted from a net increase of nine license locations in the quarter. The effect of the new locations and comparable store sales helped drive franchise and license related revenues up 11.1% to $1.9 million in the fourth quarter of 2008.
Manufacturing and commissary revenues increased 12.6% to $7.7 million in the fourth quarter of 2008, resulting in gross profit of $0.7 million, compared to a $0.9 million loss in the fourth quarter last year.
General and administrative expenses declined $0.9 million to $8.4 million in the fourth quarter of 2008 compared to $9.3 million in the fourth quarter in the prior year.
Net income was $5.8 million in the fourth quarter of 2008, or $0.36 per diluted share, compared to net income of $6.8 million, or $0.41 per diluted share, in the same quarter last year. The fourth quarter of 2008 results included $1.3 million in senior management transition costs.
2008 Financial Results
For the full year ended December 30, 2008, system-wide comparable store sales, which include Company-owned, franchised, and licensed locations, increased 1.4%. Total revenues increased 2.6% to $413.5 million from $402.9 million last year.
Company-owned restaurant sales grew 1.0% to $376.7 million from $373.0 million, with virtually flat comparable store sales, despite management deliberately reducing the hours of operation beginning in the second quarter of 2008. Company-owned restaurant gross profit was $73.5 million compared to $75.8 million in 2007.
Franchise and license related revenues increased 12.6% to $6.4 million in 2008, compared to $5.7 million last year. We benefitted from a net increase of 27 franchise and license locations, in addition to a strong comparable store sales increase of 8.6%. To date, we have signed seven development agreements for additional Einstein Bros. Bagels franchises which should ultimately result in a total of 49 additional franchise openings.
Manufacturing and commissary revenues increased 25.5% to $30.4 million, compared to $24.2 million last year. Manufacturing and commissary gross profit was $1.8 million, compared to a $0.6 million loss in 2007.
Net income was $21.1 million for 2008, or $1.29 per diluted share, compared to net income of $12.6 million, or $0.88 per diluted share, in 2007 and reflects one full year’s benefit of our recapitalization, which occurred in June 2007. The 2008 results included a $1.9 million charge related to two California wage and hour settlements, along with $1.3 million of senior management transition costs, which in aggregate was approximately $0.20 per diluted share.
2009 Update
Our primary focus in 2009 will be driving organic growth through consumer promotions, product innovations and additional locations. We plan to open six to eight Company-owned, six to eight franchised, and 30 to 35 licensed stores in 2009. We also intend to upgrade 45 Company-owned stores.
We have locked in over 90% of all major agricultural commodities at virtually flat prices compared to 2008, with an option to benefit from further reductions in pricing.
Rick Dutkiewicz, chief financial officer of Einstein Noah, added, “Our ‘asset light’ investment model generates strong cash on cash returns and provides for a substantial amount of free cash flow. We have over $24 million of unrestricted cash and remain in full compliance with our debt agreements. We will also continue to invest in our successful upgrade program to generate both top line sales growth as well as additional store margin dollars. By the end of 2009, approximately 50% of our Company-owned restaurants will have been constructed in the last four years or will have been upgraded. This demonstrates our commitment to enhancing the guest experience at all levels.”
Dutkiewicz concluded, “Our growth strategy and brand building efforts place greater emphasis on high-margin, capital efficient development, and our goal is to have approximately 50% of all locations operated by franchise and license partners by 2012. This expansion strategy is expected to drive significant cash flow for our shareholders, while providing greater stability to our core business in an otherwise volatile environment.”
