News

Einstein Noah reports modest Q3 comps, revenue gain

November 3, 2011

Einstein Noah Restaurant Group Inc., operating under the Einstein Bros. Bagels, Noah's New York Bagels, and Manhattan Bagel brands, has reported financial results for the third quarter ended Sept. 27, 2011.

Selected Highlights for the quarter compared to Q3 2010 include:  

• Total revenues increased 2.1% to $103.5 million from $101.4 million.
• System-wide comparable store sales increased 1.0%.
• Adjusted EBITDA of $10.3 million compared to $10.9 million.
• Net income available to common stockholders of $2.8 million, or $0.17 per diluted share, compared to $3.6 million, or $0.21 per diluted share.

For the third quarter, system-wide comparable store sales increased 1.0 percent, reflecting strong growth in checks, a favorable mix shift and strength in catering sales. This was partially offset by lower comparable transactions as the company continued to roll over its free bagel promotion from last year.

Total revenues increased 2.1 percent to $103.5 million, up from $101.4 million reported during the same period last year. 

Manufacturing and commissary gross profit decreased to $0.8 million from $1.0 million in the third quarter of 2010. The decline in gross profit was primarily due to higher commodity costs and an unfavorable shift in product mix to third party customers.

Overall, gross profit was $18.9 million, or 18.2 percent of total revenues, in the third quarter of 2011 compared to $20.1 million, or 19.8 percent of total revenues, in the third quarter of 2010. General and administrative expenses decreased to $8.6 million from $9.2 million due to lower variable incentive compensation, recruiting and relocation expenses.

Adjusted EBITDA was $10.3 million in the third quarter of 2011 compared to $10.9 million in the third quarter of 2010. Income before income taxes decreased $1.3 million to $4.5 million from $5.8 million.

Restructuring expenses

During the third quarter of 2011, the company determined that it could streamline its supply chain and reduce costs by closing its five food commissaries. As a result, the company incurred $0.1 million in restructuring expenses including termination benefits for the employees at its Columbus, Ohio, commissary, which is expected to close by the end of the year. The closure of its remaining four commissaries should occur in the first quarter of 2012. The company estimates it will incur additional restructuring expenses between $1.0 million and $1.2 million, which will consist of employee termination benefits, lease contract terminations and other associated costs, and be equally split between 2011 and 2012.

For the year, the company now expects to open between 60 and 65 total restaurants (compared to between 75 and 90 total restaurants previously). The change to previously disclosed estimates relates primarily to campus license units which are expected to open after the holiday season to coincide with the return of students in January.

The company has secured 100 percent of its wheat and coffee needs for 2011, and 44 percent of its wheat and 70 percent of its coffee needs for 2012.

“Although higher food costs pressured margins, we effectively controlled the remainder of our expenses and are on track to deliver annualized savings of $3.0 million. Looking ahead, we continue to identify and evaluate ways to streamline our business model without impacting the customer experience, with a particular emphasis on distribution network costs and manufacturing opportunities," said Jeff O’Neill, president and CEO.

As a result of its third quarter, Einstein Noah Restaurant Group's board of directors has declared a quarterly cash dividend of $0.125 per share, payable on Jan. 15, 2012, to stockholders of record as of Dec. 1, 2011.

As of Nov. 3, 2011, Einstein Noah Restaurant Group Inc. had approximately 16.8 million shares of common stock outstanding.

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