- Eighth consecutive quarter of improved operating cash flow -
GOLDEN, Colo., Nov. 2 /PRNewswire-FirstCall/ -- New World Restaurant
Group, Inc. (Pink Sheets: NWRG.PK) today reported continued improvements in
comparable store sales, total revenues, and cash flow from operations during
the third quarter of fiscal 2005.
Total revenues increased 4.0% to $94.8 million during the 13 weeks ended
Sept. 27, 2005, compared to $91.2 million in the third quarter of 2004. Retail
sales grew 3.7% to $87.9 million, or 92.8% of total revenues, from $84.8
million, or 93.0% of total revenues, for the year earlier quarter.
Comparable store sales in company-owned restaurants grew by 5.9% over the
corresponding quarter of 2004. The improvement reflected a 5.5% increase in
average check size and a 0.4% gain in transactions -- the second consecutive
quarter of year-over-year increases in transactions.
During the current quarter, the company's advertising and marketing
expenses increased 100% or $1.5 million over the comparable quarter in 2004.
Expenses in the 2005 quarter included a full campaign supporting the summer's
"Taste of the Tropics" promotion, as well as preproduction and initial media
launch for the new "Anything but Routine" breakfast campaign. Expenses in the
2004 comparable quarter represented preproduction costs and initial media for
advertising campaigns that predominately ran in the fourth quarter of 2004.
Additionally, the heat wave experienced throughout the summer resulted in an
increase of $0.4 million in utility costs compared to the comparable 2004
quarter. Due to these increased expenses, gross profit declined $0.4 million
to $15.9 million, or 16.7% of revenues, compared to $16.3 million, or 17.8% of
revenues, in the 2004 quarter. Positive performance in store level operations
offset the majority of these increased expenses.
General and administrative expenses increased 5.0% to $8.9 million, or
9.4% of revenues, compared to $8.4 million, or 9.3% of revenues, a year
earlier. The increase was primarily due to $0.3 million in bonuses payable to
corporate staff and management in connection with improved operating
performance. Depreciation and amortization expense, which is included in
income from operations, decreased 17.2% to $5.8 million, from $7.0 million in
the year earlier quarter. The decrease is partly due to a portion of New
World's asset base becoming fully depreciated, as well as a correction of an
overstatement in depreciation expense from the previous two quarters of
approximately $0.6 million.
Income from operations for the third quarter increased 68.3% to $885,000
from $526,000 a year earlier. In addition to the factors listed above, results
in the 2005 quarter reflected impairment charges of approximately $0.2 million
and an approximate $0.1 million loss on the sale, disposal or abandonment of
assets. Operating income in the 2004 quarter reflected $0.4 million in
impairment charges, partially offset by an approximate $0.1 million benefit
arising from a net gain on the sale of assets and an adjustment to integration
and reorganization costs.
New World's operations generated net cash from operations of $2.8 million
during the first nine months of 2005, compared to consuming cash of $418,000 a
year earlier. At the end of the third quarter, the company's cash and cash
equivalents increased approximately $5.0 million to $6.8 million, compared to
$1.9 million a year earlier. Net expenditures for capital equipment during the
first nine months of 2005 increased $0.2 million to $5.7 million, compared to
$5.5 million in the comparable 2004 period.
Commenting on the results, New World CEO Paul Murphy said: "We are very
pleased to report continued improvement in restaurant sales and operating
results, and especially the second consecutive quarter of increased retail
transactions. Moreover, comparable store sales have now shown year-over-year
increases for four straight quarters. The continued gains in customer traffic
in our company operated locations strongly indicate that our introduction of
new menu items and ongoing improvements in restaurant operations are proving
attractive to consumers in an intensely competitive climate. Our increases in
revenue and cash flow are primarily the result of this increase in retail
sales."
New World reported a net loss of $4.8 million or $0.49 per basic and
diluted share, in the third quarter of 2005, compared to a net loss of $5.0
million, or $0.50 per basic and diluted share, a year earlier. Included in the
net loss for the third fiscal 2005 period were the non-cash charges
aggregating $0.3 million associated with impairments and disposal of assets.
Additionally included in the third quarter of 2005 is a correction of an
overstatement in depreciation expense from the previous two quarters of
approximately $0.6 million. The fiscal 2004 quarter's net loss included non-
cash impairment charges, net gains from the sale of assets and adjustments of
integration and reorganization costs, also aggregating $0.3 million. The net
losses also reflected net interest expense of $5.8 million in the most recent
quarter and $5.7 million a year earlier.
For the year to date, total revenues increased 3.1% to $285.2 million from
$276.5 million in the first nine months of 2004. Comparable store sales rose
5.6%, which consisted of a 6.0% increase in the average check, partially
offset by a 0.3% decrease in transactions.
Gross profit margin for the nine months improved to 18.3% from 17.8% a
year earlier, while general and administrative expenses increased 6.3% to
$26.9 million, or 9.4% of total revenues, compared to $25.3 million, or 9.1%
of revenues, in the same period of 2004. Depreciation and amortization expense
decreased to $19.6 million for the first nine months of 2005 from $20.9
million a year earlier.
Income from operations for the first nine months of 2005 totaled $4.0
million, compared to $2.0 million in the year earlier period. Results in 2005
included $1.5 million in impairment charges and other related costs, and a
$0.3 million loss on the sale, disposal or abandonment of assets. Results for
the first nine months of 2004 included a $1.4 million loss on the sale,
disposal or abandonment of assets, and $0.4 million in impairment charges and
other related costs, partially offset by a $0.8 million benefit from the
reversal of a prior accrual for integration and reorganization costs.
After including net interest expense of $17.5 million, New World's net
loss for the first three quarters of 2005 was $13.3 million, or $1.35 per
basic and diluted share. This compared with a net loss of $15.2 million, or
$1.56 per share for the same period of 2004, which reflected $17.4 million in
net interest expense.
For information regarding Adjusted EBITDA, as defined in the company's
loan agreements, see the presentation, reconciliation and cautionary language
regarding non-GAAP financial measures included near the end of this release.
New World chief financial officer Richard P. Dutkiewicz said the company
continues to experience improvements in cash flow from operations, a key
performance indicator, with this measurement now increasing for eight
consecutive quarters. He believes such cash flow will be adequate to fund
operating costs. As noted earlier, the company has used $5.8 million of cash
to date in 2005 for new and remodeled restaurants and to meet interest
payments of $20.8 million on the $160 million notes. Historically, he noted,
New World's fourth quarter is the strongest quarter for generating cash due to
seasonality and gift card promotions.
Mr. Dutkiewicz added that the company is exploring the possibility of
refinancing its $160 Million Notes and AmSouth Revolver with Bear Stearns,
after market conditions led to a temporary suspension of such activities
earlier this year. "With market conditions appearing to have improved, we are
reviewing our options regarding the refinancing with Bear Stearns," he said.
"We believe that refinancing our debt at more favorable interest rates could
increase our letter of credit capacity, reduce interest expenditures and
provide additional flexibility for future store growth."
Mr. Murphy and Mr. Dutkiewicz will discuss New World's financial and
operating results for the third quarter of fiscal 2005 during a conference
call scheduled for 11:00 a.m. (EST) on November 3. To listen to the call, dial
877-381-6509 and give the operator the conference ID number, 1727053. A
telephone replay of the call will be available through midnight (EST) on
November 17, 2005. To access the replay, call 800-642-1687. Investors and
media also are invited to listen to a rebroadcast of the call on the company's
website, http://www.newworldrestaurantgroup.com. The replay of the call also
will be archived on the website.
New World is a leading company in the casual restaurant industry. The
company operates locations primarily under the Einstein Bros. and Noah's New
York Bagels brands and primarily franchises locations under the Manhattan
Bagel and Chesapeake Bagel Bakery brands. As of September 27, 2005, the
company's retail system consisted of 643 locations, including 439 company-
owned locations, as well as 137 franchised and 67 licensed locations in 34
states, and the District of Columbia. The company also operates a dough
production facility.
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," "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 improvement in period over period
comparable store sales and transaction counts is not necessarily indicative of
future results and is subject to shifting consumer preferences, economic
conditions, weather, and competition, among other factors; (ii) the ability to
improve margins may be affected by unexpected costs or expenses, among other
factors; (iii) the Company's ability to generate sufficient cash flow to fund
operating costs is dependent upon economic, financial, competitive and
legislative factors, among other factors, (iv) the Company's ability to
refinance its outstanding debt is dependent upon a variety of factors,
including financial market conditions, company results, availability of
favorable rates and terms and (v) the strength of historical fourth quarter
results is not necessarily indicative of future results and future results are
particularly subject to increasing utility and other costs, and the effects of
the weather, including the hurricanes in markets in which are stores are
located. There is no assurance that fourth quarter results will benefit from
seasonality and gift card promotions. These and other risks are more fully
discussed in the company's SEC filings.
NEW WORLD RESTAURANT GROUP, INC.
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 27, 2005 AND DECEMBER 28, 2004
(in thousands, except share information)
(unaudited)
September 27, December 28,
2005 2004
ASSETS
Current assets:
Cash and cash equivalents $6,827 $9,752
Restricted cash 789 1,269
Franchise and other receivables, net
of allowance of $1,098 and $2,475 6,263 7,123
Inventories 5,205 4,941
Prepaid expenses and other current assets 2,500 1,643
Total current assets 21,584 24,728
Restricted cash long-term 901 2,526
Property, plant and equipment, net 33,685 41,855
Trademarks and other intangibles, net 69,825 77,219
Goodwill 4,875 4,875
Debt issuance costs and other assets 5,766 7,253
Total assets $136,636 $158,456
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $7,134 $8,243
Accrued expenses 28,460 34,836
Short term debt and current portion of
long-term debt 280 295
Current portion of obligations under
capital leases 16 16
Total current liabilities 35,890 43,390
Senior notes and other long-term debt 160,840 160,840
Obligations under capital leases 18 31
Other liabilities 8,593 9,678
Mandatorily redeemable, Series Z
Preferred Stock, $.001 par value,
$1,000 per share liquidation value;
2,000,000 shares authorized;
57,000 shares issued and outstanding 57,000 57,000
Total liabilities 262,341 270,939
Commitments and contingencies
Stockholders' deficit:
Common stock, $.001 par value;
15,000,000 shares
authorized; 9,868,623 and
9,848,713 shares issued and outstanding 10 10
Additional paid-in capital 175,818 175,797
Unamortized stock compensation (85) (137)
Accumulated deficit (301,448) (288,153)
Total stockholders' deficit (125,705) (112,483)
Total liabilities and stockholders' deficit $136,636 $158,456
NEW WORLD RESTAURANT GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THIRD QUARTER AND YEAR TO DATE
PERIODS ENDED SEPTEMBER 27, 2005 AND SEPTEMBER 28, 2004
(in thousands, except earnings per share and related share information)
(unaudited)
Third quarter ended: Year to date ended:
Sept 27, Sept 28, Sept 27, Sept 28,
2005 2004 2005 2004
Revenues:
Retail sales $87,937 $84,763 $265,912 $256,982
Manufacturing revenues 5,270 4,913 14,905 15,270
Franchise and license related
revenues 1,575 1,503 4,373 4,287
Total revenues 94,782 91,179 285,190 276,539
Cost of sales:
Retail costs 73,941 70,315 219,141 213,805
Manufacturing costs 4,980 4,603 13,880 13,623
Total cost of sales 78,921 74,918 233,021 227,428
Gross profit 15,861 16,261 52,169 49,111
Operating expenses:
General and administrative
expenses 8,868 8,442 26,857 25,260
Depreciation and amortization 5,798 7,005 19,583 20,882
Loss (gain) on sale, disposal
or abandonment of assets, net 104 (70) 269 1,395
Charges (adjustments) of
integration and reorganization
cost 1 (44) 6 (843)
Impairment charges and other
related costs 205 402 1,484 402
Income from operations 885 526 3,970 2,015
Other expense (income):
Interest expense, net 5,805 5,723 17,497 17,426
Other (106) (98) (232) (197)
Loss before income taxes (4,814) (5,099) (13,295) (15,214)
Provision (benefit) for state
income taxes - (147) - 92
Net loss $(4,814) $(4,952) $(13,295) $(15,306)
Net loss per common share -
Basic and Diluted $(0.49) $(0.50) $(1.35) $(1.56)
Weighted average number of
common shares outstanding:
Basic and Diluted 9,868,623 9,842,385 9,859,407 9,842,169
NEW WORLD RESTAURANT GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR TO DATE
PERIODS ENDED SEPTEMBER 27, 2005 AND SEPTEMBER 28, 2004
(in thousands)
(unaudited)
Sept 27, Sept 28,
2005 2004
OPERATING ACTIVITIES:
Net loss $(13,295) $(15,306)
Adjustments to reconcile net loss to
net cash provided by
(used in) operating activities:
Depreciation and amortization 19,583 20,882
Stock based compensation expense 52 51
Loss, net of gains, on disposal of assets 269 1,395
Impairment charges and other related costs 1,484 402
Charges (adjustments) of integration and
reorganization costs 6 (843)
Provision for (recovery of) losses
on accounts receivable, net (78) 266
Amortization of debt issuance and
debt discount costs 1,386 1,387
Changes in operating assets and liabilities:
Franchise and other receivables 938 (796)
Cash overdraft - 1,978
Accounts payable and accrued expenses (7,587) (10,279)
Other assets and liabilities 3 445
Net cash provided by (used in)
operating activities 2,761 (418)
INVESTING ACTIVITIES:
Purchase of property and equipment (5,775) (5,605)
Proceeds from the sale of equipment 97 134
Net cash used in investing activities (5,678) (5,471)
FINANCING ACTIVITIES:
Proceeds from line of credit 5,445 15,745
Repayments of line of credit (5,460) (16,745)
Repayment of other borrowings (14) (825)
Proceeds upon warrant exercise 21 1
Net cash used in financing activities (8) (1,824)
Net decrease in cash and cash equivalents (2,925) (7,713)
Cash and cash equivalents, beginning of period 9,752 9,575
Cash and cash equivalents, end of period $6,827 $1,862
Non-GAAP Financial Measures
Adjusted EBITDA is a typical non-GAAP measurement for companies that issue
public debt and a measure used by our lenders. Adjusted EBITDA, as defined in
the company's Indenture Agreement relating to the $160 Million Notes and the
revolving credit facility with AmSouth Bank (collectively referred to herein
as our loan agreements) represents earnings before interest, taxes,
depreciation and amortization, and is further adjusted by various items
including: (1) integration and reorganization charges and credits, (2)
cumulative change in fair value of derivatives, (3) gain/loss on the
investment, sale, disposal or exchange of assets, (4) impairment and other
related charges and (5) other income. Adjusted EBITDA may also be further
adjusted by certain legal, financing and advisory fees, acquisition and
integration expenses, and other charges. The loan agreements require that
Adjusted EBITDA be measured on a twelve month period ending on the last day of
each fiscal quarter and be greater than $33 million. The company presents
Adjusted EBITDA because it relates to a covenant contained in each of its loan
agreements which are material to the company, its financial condition and
liquidity. If the company does not comply with the Adjusted EBITDA covenant,
an Event of Default (as defined in the loan agreements) would occur and,
subject to the applicable notice and cure periods, the lenders could declare
all amounts outstanding immediately due and payable and pursue all available
remedies for payment of such amounts. As of September 27, 2005, the company
was in compliance with the Adjusted EBITDA covenant and does not anticipate
that the covenant will impact its ability to borrow under the AmSouth
revolving credit facility.
Data regarding Adjusted EBITDA is provided as additional information to
help the company's bondholders understand compliance with the Adjusted EBITDA
covenant. The company also believes Adjusted EBITDA is useful to its
bondholders as an indicator of earnings available to service debt. Adjusted
EBITDA is not a recognized term under GAAP and does not purport to be an
alternative to income (loss) from operations, an indicator of cash flow from
operations or a measure of liquidity. Because not all companies calculate
Adjusted EBITDA identically, this presentation may not be comparable to
similarly titled measures of other companies. The company believes Adjusted
EBITDA is a more meaningful indicator of earnings available to service debt
when certain charges (such as the gain or loss from the disposal of assets,
impairment of assets and cumulative change in the fair value of derivatives)
are excluded from income (loss) from continuing operations. Adjusted EBITDA is
not intended to be a measure of free cash flow for management's discretionary
use, as it does not consider certain cash requirements such as interest
expense, income taxes, debt service payments and cash costs arising from
integration and reorganization activities.
The following tables reconcile Adjusted EBITDA to net loss and cash flows
used in operating activities, respectively:
First quarter ended: Second quarter ended:
Reconciliation of Net Loss to Mar 29, Mar 30, Jun 28, Jun 29,
Adjusted EBITDA: 2005 2004 2005 2004
Net loss $(4,198) $(4,130) $(4,283) $(6,224)
Adjustments as defined in the
loan agreements:
Interest expense, net 5,919 5,799 5,773 5,904
Taxes - 55 - 184
Depreciation and amortization 6,708 6,819 7,077 7,058
Loss (gain) on sale, disposal or
abandonment of assets, net 4 (6) 161 1,472
Charges (adjustments) of
integration and reorganization
cost 5 (760) - (39)
Impairment charges and other related
costs 97 - 1,182 -
Other expense (income) (57) (64) (69) (36)
Certain legal, financing and
advisory fees - 75 526 688
Certain corporate expenses - 225 - -
Certain other charges - 25 700 -
Adjusted EBITDA $8,478 $8,038 $11,067 $9,007
Third quarter ended: Year to date:
Reconciliation of Net Loss to Sept 27, Sept 28, Sept 27, Sept 28,
Adjusted EBITDA: 2005 2004 2005 2004
Net loss $(4,814) $(4,952) $(13,295) $(15,306)
Adjustments as defined in the
loan agreements:
Interest expense, net 5,805 5,723 17,497 17,426
Taxes - (147) - 92
Depreciation and amortization 5,798 7,005 19,583 20,882
Loss (gain) on sale, disposal or
abandonment of assets, net 104 (70) 269 1,396
Charges (adjustments) of
integration and reorganization
cost 1 (44) 6 (843)
Impairment charges and other
related costs 205 402 1,484 402
Other expense (income) (106) (98) (232) (198)
Certain legal, financing and
advisory fees 99 494 625 1,257
Certain corporate expenses - 174 - 399
Certain other charges 25 - 725 25
Adjusted EBITDA $7,117 $8,487 $26,662 $25,532
First quarter ended: Second quarter ended:
Reconciliation of Net Cash Mar 29, Mar 30, Jun 28, Jun 29,
Used in Operating Activities 2005 2004 2005 2004
to Adjusted EBITDA:
Net cash generated by (used in)
operating activities $(6,288) $(4,175) $14,353 $9,610
Adjustments as defined in the
loan agreements:
Changes in operating assets and
liabilities 9,292 6,560 (9,784) (6,768)
Reduction in (provision for)
losses on accts receivable 91 - 47 (94)
Amortization of debt issue costs (462) (462) (462) (446)
Stock based compensation expense (17) - (17) (35)
Interest expense, net 5,919 5,799 5,773 5,904
Other income (57) (64) (69) (36)
Provision (benefit) for state
income taxes - 55 - 184
Certain legal, financing and
advisory fees - 75 526 688
Certain corporate expenses - 225 -
Certain other charges - 25 700 -
Adjusted EBITDA $8,478 $8,038 $11,067 $9,007
Third quarter ended: Year to date:
Reconciliation of Net Cash Sept 27, Sept 28, Sept 27, Sept 28,
Used in Operating Activities 2005 2004 2005 2004
to Adjusted EBITDA:
Net cash generated by (used in)
operating activities $(5,304) $(5,853) $2,761 $(418)
Adjustments as defined in the
loan agreements:
Changes in operating assets
and liabilities 7,138 8,860 6,646 8,652
Reduction in (provision for)
losses on accts receivable (60) (172) 78 (266)
Amortization of debt issue costs (462) (479) (1,386) (1,387)
Stock based compensation expense (18) (16) (52) (51)
Interest expense, net 5,805 5,723 17,497 17,426
Other income (106) (97) (232) (197)
Provision (benefit) for state
income taxes - (147) - 92
Certain legal, financing and
advisory fees 99 494 625 1,257
Certain corporate expenses - 174 - 399
Certain other charges 25 - 725 25
Adjusted EBITDA $7,117 $8,487 $26,662 $25,532
SOURCE New World Restaurant Group, Inc.
11/02/2005
CONTACT: Media-Investors: Bill Parness, +1-732-290-0121, or Marty
Gitlin, +1-914-528-7702, both of Parness & Associates, Parnespr@optonline.net,
for New World Restaurant Group, Inc.
Web site: http://www.newworldrestaurantgroup.com
(NWRG)
11/02/2005 16:20 EST http://www.prnewswire.com
