New World Coffee-Manhattan Bagel, Inc. (Nasdaq: NWCI) today reported an 89.4% increase in third quarter earnings before an income tax benefit and an extraordinary item.
Income for the 13 weeks ended September 24, 2000 rose to $1,163,198 or $.10 per share, before an income tax benefit. This compared with the $614,314, or $.06 per share, earned in 1999’s third quarter before an extraordinary item. After applying a net operating loss tax benefit of $1,966,178, New World recorded net income of $3,129,376, or $.12 per share, for the 2000 quarter. This benefit was partially offset by a $1,709,333 dividend issued to preferred stockholders in connection with the beneficial conversion of warrants issued in August 2000. With that, net income available to Common Stockholders amounted to $1,420,043. In the 1999 period, the Company recorded a $240,023 net gain from early extinguishment of debt, resulting in net income of $854,337, or $.08 per share. Earnings before interest, income taxes, depreciation and amortization (EBITDA) climbed 42.1% to $2,290,332, or 16.9% of revenues, from $1,611,431, or 15.8% of revenues, a year ago.
Total revenues for the quarter advanced 32.9% to $13,562,154 from $10,202,649 in the comparable 1999 period as manufacturing revenues, retail sales and franchise-related revenues each improved. Manufacturing revenues increased 12.6% to $7,030,233 from $6,241,681 in the comparable 1999 period. Retail sales increased 109.2% to $4,433,486 from $2,119,763 a year earlier, primarily due to the addition of Company-owned stores through acquisitions. Franchise-related revenues increased 14.0% to $2,098,435 from $1,841,205, primarily as a result of the addition of royalties from the Chesapeake Bagel Bakery in August of 1999.
For the first nine months of 2000, New World’s income increased 71.5% to $2,584,555, or $.22 per share, from $1,507,051 or $.15 per share, for the comparable 1999 period. Including the third quarter tax benefit, the Company reported net income of $4,550,733, or $.24 per share, for the 2000 period. This compared with net income of $1,747,074, or $.17 per share, in the first three quarters of 1999, which included the aforementioned gain from early extinguishment of debt. Net income available to common stockholders was $2,841,400 for the first nine months of 2000 after including the special third quarter dividend. Nine-month EBITDA was up 38.6% to $5,810,013, or 17.7% of revenues, from $4,192,602, or 14.2% of revenues, in the 1999 period.
Total revenues increased 11.2% to $32,875,995 for the year to date period ended September 24, 2000 from $29,570,626 in the comparable 1999 period. Manufacturing revenues increased 6.8% to $19,705,393 from $18,438,142 a year earlier, while retail sales increased 10.9% to $7,595,237 from $6,849,190, and franchise- related revenues increased 30.2% to $5,575,365 from $4,283,294.
Commenting on the Company’s performance, New World Chairman and CEO Ramin Kamfar said: “We were very pleased with our earnings for the third quarter, as well as with the ongoing improvement in EBITDA as a percent of revenues. Since acquiring Manhattan Bagel Company in November 1998, we have reported year-over-year earnings increases for seven consecutive quarters. We believe this record of ongoing EBITDA and bottom line improvements underscores the validity of our business model as the only fully integrated company in the retail bagel industry.”
William Rianhard, President and COO, added: “Activity during the quarter was highlighted by the conversion of the 23 recently acquired New York Bagel and Lots ‘A Bagels stores in Kansas, Oklahoma and Colorado to the Manhattan Bagel brand, as well as initial conversions of certain Chesapeake Bagel franchised locations to the Manhattan Bagel format. Manufacturing revenues will continue to build as these and other stores switch from store-prepared dough to our award-winning product. At the same time, a growing number of existing Manhattan Bagel franchisees have converted to the new proprietary premium coffees developed and produced at New World’s roasting plant, further enhancing our manufacturing base. On the product development front, in early October, we rolled out a new lineup of specialty breakfast sandwiches under the ‘Rise Above The Morning Rush’ banner. Customer response to date has been very encouraging.”
New World Coffee-Manhattan Bagel, Inc. currently franchises, licenses or owns stores under its four brands in 26 states and Washington, D.C. The company is vertically integrated with plants in New Jersey, California and Connecticut.
