New World Coffee – Manhattan Bagel, Inc. (Nasdaq: NWCI) Friday (19 August) reported financial results for the second quarter and first half of fiscal 2001. Current year results include the operations of 463 company-owned Einstein Bros. and Noah’s NY Bagel stores and related production and support facilities from June 19, the date of New World’s acquisition of the assets of Einstein/Noah Bagel Corp. and its majority owned subsidiary, Einstein/Noah Bagel Partners, L.P.
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For comparative purposes, the Company also presented unaudited pro forma consolidated statements of operations for the six-month periods which, due to differing fiscal periods for the two companies, includes two additional weeks of Einstein/Noah operations in the year 2000 period. Pro-forma comparisons for the second quarter periods were not reported due to the incompatibility of the companies’ fiscal periods.
On a pro forma basis, total revenues for the six months ended July 3, 2001 were $205.3 million, compared with $221.8 million for the six months ended June 25, 2000, when results included two additional weeks of contributions from Einstein/Noah. In addition to the calendar difference, revenue comparisons were impacted by a decrease in Einstein’s store count to 463 at the end of the 2001 period from 539 at the end of the first quarter of 2000, due to store closings in connection with the Einstein reorganization. Pro-forma earnings before interest, taxes, depreciation and amortization, and one-time charges (EBITDA) for the fiscal 2001 period were $15.6 million, or 7.6% of revenues, compared with $15.5 million, or 7.0% of revenues for the fiscal 2000 period. The year-to-year improvement in the pro-forma EBITDA ratio is primarily a result of the decline in general and administrative expenses to 8.9% of revenues in the 2001 period from 9.4% in the 2000 period.
On an actual, reported basis, total revenues for the quarter ended July 3, 2001 rose 148.2% to $25.2 million from $10.2 million for the quarter ended June 25, 2000, due primarily to the addition of the Einstein Bros. and Noah’s NY Bagel brands. Retail sales increased 831.7% to $18.1 million, from $1.9 million for the comparable 2000 period. Manufacturing revenues decreased 12.1% to $5.7 million from $6.5 million in the 2000 period, primarily the result of the Company’s decision to outsource its low-margin distribution business which had previously been included in manufacturing revenues. Franchise related revenues declined 16.9% to $1.4 million from $1.7 million in the 2000 period, primarily reflecting a decision to terminate certain franchisees whose operations did not comply with the Company’s policies.
EBITDA increased 41.3% to $2.6 million, or 10.2% of revenues, from $1.8 million, or 17.9% of revenues, in the 2000 quarter.
The Company reported a net loss of $17.4 million for the fiscal 2001 quarter, compared to net income of $771,000 for the comparable 2000 period, primarily as a result of $15.4 million in non-cash charges principally related to the Einstein acquisition. No similar items were recorded in the 2000 quarter. After deducting $3.3 million for dividends and accretion on preferred stock, both of which are non-cash accounting adjustments, the Company reported a net loss available to common stockholders of $20.7 million, or $1.27 per common share, compared to net income of $771,000, or $.07 per share, in the 2000 quarter.
On an actual, reported basis, for the six-month period ended July 3, 2001, the Company’s total revenues increased 84.9% to $35.7 million from $19.3 million in the comparable 2000 period. Retail sales grew 588.0% to $21.8 million from $3.2 million for the comparable 2000 period. Manufacturing revenues decreased 14.1% to $10.9 million from $12.7 million a year ago. Franchise related revenues declined 11.8% to $3.1 million from $3.5 million in the 2000 period.
Six-month EBITDA increased 19.9% to $4.2 million, or 11.8% of revenues, from $3.5 million, or 18.2% of revenues, in the comparable 2000 period.
The Company’s loss for the six months ended July 3, 2001 was $17.9 million, compared to net income of $1.4 million for the comparable 2000 period, primarily as a result of $16.1 million in non-cash items principally related to the Einstein acquisition. Additionally, this year’s loss reflected a $166,000 provision for income taxes. The Company recorded no similar items or income tax provision in the first half of 2000. The net loss available to common shareholders for the first six months of fiscal 2001 was $24.5 million, or $1.52 per common share, after deducting $6.6 million in non-cash accounting adjustments for dividends and accretion on preferred stock. This compared with net income of $1.4 million, or $.12 per common share, in the 2000 period.
Commenting on the results, New World Chairman Ramin Kamfar said: “The acquisition of Einstein provides us with critical mass and positions us in a unique position as both the largest company in the retail bagel bakery field and as a leader in the ‘fast casual’ sandwich business. Our management team is focused on efforts to realize cost savings through consolidation of production, purchasing and distribution functions, and eliminating redundant overhead and administrative costs. While our results this past quarter are affected by unusual acquisition related items, we believe that starting in the next quarter investors should clearly see the strength of our operating results.”
Anthony Wedo, the Company’s Chief Executive Officer, who was named a member of New World’s Board of Directors yesterday, added: “We are focusing on three strategic initiatives which are (a) to grow our store revenue base and profitability, (b) to grow our brands by attracting well capitalized and experienced licensees and franchisees, and (c) to build upon our leadership position in the ‘Fast Casual’ segment of restaurant industry.”
New World Coffee-Manhattan Bagel, Inc. is the largest company in the retail bagel bakery industry and a leading company in the “fast casual” sandwich industry. The Company operates stores primarily under the Einstein Bros., and Noah’s NY Bagel brands and primarily franchises stores under the Manhattan Bagel and Chesapeake Bagel Bakery brands. As of July 3, 2001 the Company’s retail system consisted of 499 company-owned stores and 303 franchised and licensed stores. The Company also operates four dough production facilities, two cream cheese production facilities and one coffee roasting plant. These products are currently distributed to New World’s company-operated stores, and sold to its franchised and licensed stores, as well as to supermarket and non-traditional outlets.
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,” “intend,” “expect,” “should,” “would” 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. The above factors are more fully discussed in the Company’s SEC filings. The pro forma results have been prepared for comparative purposes only and do not purport to be indicative of what operating results would have been had the acquisitions actually taken place on December 27, 1999, and may not be indicative of future operating results.
NEW WORLD COFFEE – MANHATTAN BAGEL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SECOND QUARTER ENDED JULY 3, 2001 AND JUNE 25, 2000
AND YEAR TO DATE PERIODS ENDED JULY 3, 2001 AND JUNE 25, 2000
UNAUDITED
(In thousands, except earnings per share and related share information)
Second Quarter Ended Year to Date Ended
July 3, June 25, July 3, June 25,
2001 2000 2001 2000
Revenues:
Manufacturing
revenues $ 5,734 $ 6,525 $ 10,884 $ 12,675
Franchise related
revenues 1,414 1,702 3,068 3,477
Retail sales 18,084 1,941 21,756 3,162
Total revenues 25,232 10,168 35,708 19,314
Cost of sales 19,955 6,759 27,322 12,619
General and
administrative
expenses 2,706 1,590 4,408 3,175
Depreciation and
amortization 1,538 587 2,324 1,159
Income before provision
for reorganization costs
and noncash charges 1,033 1,232 1,654 2,361
Provision for integration
and reorganization
costs 6,690 — 6,690 —
Noncash charge in
connection with
realization of assets 2,800 — 2,800 —
Income (loss) from
operations (8,457) 1,232 (7,836) 2,361
Interest expense, net 3,111 461 3,555 939
Gain from sale of
investments — — 241 —
Permanent impairment in
the value of
investments 5,000 — 5,000 —
Income (loss) before
income taxes and
minority interest (16,568) 771 (16,150) 1,422
Provision for income
taxes — — 166 —
Minority interest 855 — 1,578 —
Net (loss) income (17,423) 771 (17,894) 1,422
Dividends and accretion
on preferred stock 3,292 — 6,609 —
Net (loss) income available
to common
stockholders ($20,715) $771 ($24,503) $1,422
Net (loss) income per
common share
– Basic ($1.27) $ .07 ($1.52) $ .12
Net (loss) income per
common share
– Diluted ($1.27) $ .06 ($1.52) $ .12
Weighted average number of common shares outstanding:
Basic 16,327,804 11,746,579 16,112,320 11,566,678
Diluted 16,327,804 12,619,689 16,112,320 12,156,540
rather than,
NEW WORLD COFFEE – MANHATTAN BAGEL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIODS ENDED JULY 3, 2001 AND JUNE 25, 2000
UNAUDITED
(In thousands, except earnings per share and related share information)
Second Quarter Ended Year to Date Ended
July 3, June 25, July 3, June 25,
2001 2000 2001 2000
Revenues:
Manufacturing
revenues $ 5,734 $ 6,525 $ 10,884 $ 12,675
Franchise related
revenues 1,414 1,702 3,068 3,477
Retail sales 18,084 1,941 21,756 3,162
Total revenues 25,232 10,168 35,708 19,314
Cost of sales 19,955 6,759 27,322 12,619
General and
administrative
expenses 2,706 1,590 4,408 3,175
Depreciation and
amortization 1,538 587 2,324 1,159
Income from
operations 1,033 1,232 1,654 2,361
Interest expense, net 3,111 461 3,555 939
Gain from sale
of investments — — 241 —
Permanent impairment
in the value of
investments 5,000 — 5,000 —
Income before
reorganization
costs and noncash
charges (7,078) 771 (6,660) 1,422
Provision for
integration and
reorganization costs 6,690 — 6,690 —
Noncash charge in
connection with
realization of assets 2,800 — 2,800 —
Income before
income taxes
and minority
interest (16,568) 771 (16,150) 1,422
Provision for
income taxes — — 166 —
Minority interest 855 — 1,578 —
Net (loss) income (17,423) 771 (17,894) 1,422
Dividends and
accretion on
preferred stock 3,292 — 6,609 —
Net (loss) income
available to
common
stockholders ($20,715) $771 ($24,503) $1,422
Net (loss) income
per common share
– Basic ($1.27) $ .07 ($1.52) $ .12
Net (loss) income
per common
share – Diluted ($ 1.27) $ .06 ($1.52) $ .12
Weighted average
number of common
shares outstanding:
Basic. 16,327,804 11,746,579 16,112,320 11,566,678
Diluted 16,327,804 12,619,689 16,112,320 12,156,540
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