Industry News | August 8, 2000

New World Posts 40% Rise in Second Quarter Earnings

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New World Coffee-Manhattan Bagel, Inc. (Nasdaq: NWCI) reported August 7 a 40.1% increase in earnings for this year's second quarter.

Net income for the 13 weeks ended June 25, 2000 rose to $770,592, or $0.07 per share, compared with $549,854, or $0.06 per share, during 1999's second quarter. Earnings before interest, income taxes, depreciation and amortization (EBITDA) grew 29.5% to $1,818,823, or 17.9% of revenues, from $1,404,685, or 14.4% of revenues, a year earlier.

Total revenues for the 13 weeks increased 3.9% to $10,167,759 from $9,788,140 in 1999's second quarter, as improvements in manufacturing and franchise revenues were partially offset by a decline in retail sales. Manufacturing revenues grew 6.1% to $6,524,522 from $6,152,254 in the 1999 quarter, while franchise-related revenues climbed 37.6% to $1,701,986 from $1,236,461. The increase in franchise revenues was due primarily to the addition of royalties from the Chesapeake Bagel Bakery brand, acquired in August 1999. Concurrently, New World's ongoing program to convert Company-owned stores into franchised locations contributed to a 19.1% decline in retail sales to $1,941,251 from $2,399,425 in the 1999 period.

For the 26 weeks ended June 25, 2000, New World's net income advanced 59.2% to $1,421,357, or $0.12 per share, from $892,737, or $0.09 per share in 1999's first half. Half-year EBITDA was up 36.4% to $3,519,681, or 18.2% of revenues, from $2,581,171, or 13.3% of revenues, in the 1999 period.

Total revenues for the half decreased 0.3% to $19,313,841 from $19,367,977 a year earlier. Manufacturing revenues increased 3.9% to $12,675,160 from $12,196,461 in the 1999 half and franchise-related revenues escalated 42.4% to $3,476,930 from $2,442,089. However, those increases for the 26 weeks were countered by a 33.1% drop in retail sales to $3,161,751 from $4,729,427 a year ago.

"The results for this year's second quarter further underscore our ability to continue to build profitability," said New World chairman and CEO Ramin Kamfar. "Net profit margins and EBITDA margins each improved over prior year levels during the quarter and half, and more than offset the effects of our investment in infrastructure to support our brands. Those infrastructure improvements were highlighted by the additions to our senior executive team of foodservice industry veterans Bill Rianhard as President/COO and Dave Ammons to the new post of Vice President-Marketing. Bill will be highly involved in our acquisition and new business development programs, and he and Dave will play pivotal roles in our accelerated efforts to grow sales and profits of the existing franchisees.

"We were also pleased to see the return during the second quarter to year-over-year revenue growth," said Rianhard. "This positive trend is expected to continue during the second half, as manufacturing revenues begin to benefit from initial conversions of Chesapeake locations from store-prepared dough to Manhattan Bagel franchises selling our award-winning product; conversions of the New York Bagel and Lots 'A Bagels stores acquired in late May and July to the Manhattan Bagel brand and product lines; openings of new Manhattan Bagel shops; the launch of the program to convert Manhattan Bagel franchises to the new proprietary premium coffees developed and produced at New World's roasting plant; and efforts by our Paragon Bakeries wholesale division to market specially formulated par-baked and frozen bagels to outside accounts."

On June 7, the Company issued 1,219,471 shares of Common Stock and 392,190 shares of Series C Convertible Preferred Stock as part of a private placement. Proceeds from this offering, net of related expenses, were $3,628,905.

New World Coffee-Manhattan Bagel, Inc. currently franchises, licenses or owns stores under its four brands in 28 states and Washington, D.C. The Company is vertically integrated in bagel dough and cream cheese manufacturing, and coffee roasting, with plants in New Jersey, California and Connecticut.