SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported) August 16, 2003
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New World Restaurant Group, Inc.
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(Exact Name of Registrant as Specified in its Charter)
Delaware 0-27148 13-3690261
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(State or Other (Commission (I.R.S. Employer
Jurisdiction of File Number) Identification
Incorporation) No.)
1687 Cole Boulevard
Golden, Colorado 80401
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(Address of Principal Executive Offices) (Zip Code)
(303) 568-8000
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(Registrant's Telephone Number, Including Area Code)
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(Former Name or Former Address, If Changed Since Last Report.)
ITEM 5. OTHER EVENTS AND REGULATION FD DISCLOSURE.
Reference is made to the New World Restaurant Group, Inc. (the
"Company")press release attached hereto as Exhibit 99.1, and incorporated by
reference herein (including, without limitation, the information set forth in
the cautionary statement contained in the press release), relating to the
unaudited financial results for the second quarter and first half of fiscal 2003
for the Company. Reference is also made to the New World Restaurant Group, Inc.
press release attached hereto as Exhibit 99.2, and incorporated by reference
herein, relating to the clarification of a statement concerning the previously
disclosed equity restructuring agreement in the press release attached hereto as
Exhibit 99.1.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) EXHIBITS.
EXHIBIT DESCRIPTION
99.1 Press Release issued August 16, 2003.
99.2 Press Release issued August 19, 2003.
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NEW WORLD RESTAURANT GROUP, INC.
BY: /S/ ANTHONY WEDO
------------------------------
Name: Anthony Wedo
Title: Chief Executive Officer
Date: August 20, 2003
3
Exhibit 99.1
NEW WORLD REPORTS RESULTS FOR SECOND QUARTER OF 2003
HAMILTON, N.J. (8/16/03)--New World Restaurant Group, Inc. (Pink Sheets:
NWCI.PK) announced unaudited financial results for the second quarter and first
half of fiscal 2003.
Total revenues decreased 3.8% to $97.7 million for the three months
ended July 1, 2003, from $101.6 million for the same period in 2002. The company
had a $2.4 million operating loss for the 2003 period, compared with income of
$2.5 million a year ago. Overall, New World reported a $13.1 million net loss
for the second quarter, compared to a loss of $84,000 for the same period of
2002. After deducting dividends and accretion on preferred stock, both of which
are non-cash charges, the net loss available to common shareholders was $22.9
million, or $0.21 per share. This compared to a net loss of $6.9 million, or
$0.09 per share, reported for the second quarter in 2002.
Results for the 2003 period do not reflect the benefits of the company's
recently announced restructuring of its debt and equity. In late June, New World
completed the recapitalization of its equity structure and in early July
completed an offering of $160 million of 13% senior secured notes due 2008.
Proceeds from that offering, together with cash on hand, were used to refinance
existing indebtedness, including senior secured increasing rate notes that had
matured on June 15, 2003. On an annualized basis, the refinancing will decrease
New World's cash interest payments by nearly $6.0 million to $20.8 million from
$26.4 million.
For the first six months of 2003, total revenues declined 3.1% to $193.0
million from $199.2 million in the corresponding 2002 period. New World's
operating loss for the 2003 period was $2.7 million, compared with income of
$1.0 million a year earlier. The net loss for the first six months of 2003 was
$20.9 million, an improvement of $6.6 million compared to the loss of $27.5
million in the same period the previous year. After deducting dividends and
accretion on preferred stock, the net loss available to common shareholders was
$35.3 million, or $0.34 per share, for the first six months of 2003, down from
$41.0 million, or $0.53 per share, a year ago.
EBITDA (earnings before interest, taxes, depreciation and amortization,
integration/reorganization provisions, other income, cumulative change in fair
value of derivatives, and other income) declined to $4.7 million during the
second quarter of 2003 from $10.8 million a year ago. For the first six months,
EBITDA was $11.6 million, down from $15.4 million in the 2002 period. Adjusted
EBITDA (which also excludes certain legal, financing and advisory fees;
acquisition and integration expenses; certain corporate expenses; certain other
charges; and unauthorized bonuses and certain compensation expense recorded
during the first quarter of 2002) was $8.2 million in the three months ended
July 1, 2003, compared with $12.7 million a year ago, and declined to $16.9
million from $24.6 million in the respective six-month periods. (See tables at
end of this press release for EBITDA reconciliations.)
4
EBITDA is not intended to represent cash flow from operations in
accordance with GAAP and should not be used as an alternative to net income as
an indicator of operating performance or to cash flow as a measure of liquidity.
Rather, EBITDA is a basis upon which to assess financial performance. While
EBITDA is frequently used as a measure of operations and the ability to meet
debt service requirements, it is not necessarily comparable to other similarly
titled measures of other companies due to the potential inconsistencies in the
method of calculation.
Retail sales from company-owned Einstein Bros and Noah's New York Bagel
locations declined to $90.9 million during the three months ended July 1, 2003
from $94.4 million a year earlier, reflecting a 3.6% decrease in comparable
store sales. Year-to-date retail sales were $179.3 million, compared to $184.6
million in the first half of 2002. Comparable store sales were down 2.2% for the
half.
The company attributed the comparable-store decrease primarily to the
effects of the long period without major advertising from late 2002 through
April 2003. "Our efforts to conserve cash prior to the completion of the
refinancing led us to trim ad spending for the first six months of 2003 below
our budgeted figure, as well as to shift the media mix away from our highly
successful TV campaign of 2002," said Anthony Wedo, New World chairman and CEO.
"The pressures related to our all-encompassing efforts to rationalize our
financial structure caused us to put limited and inconsistent effort against our
marketing activities. With our liquidity issues resolved, we look forward to
accelerating our media spending during the second half of this year back to at
least budgeted levels while returning to our TV driven advertising campaign."
Manufacturing revenues, which are derived from sales of products to
franchisees, licensees and other third parties, decreased slightly to $5.8
million during the second quarter from $5.9 million a year earlier, and declined
to $11.2 million from $12.0 million in the corresponding six-month periods. The
company attributed the decline primarily to the effects of ongoing efforts to
eliminate under-performing franchisees, lower comparable store sales in the
franchise network, and price reductions ensuing from New World's decision to
pass on savings resulting from its consolidation of manufacturing facilities.
Franchise-related revenues decreased to $1.1 million during the second
quarter from $1.3 million in the comparable 2002 period, and declined to $2.5
million from $2.6 million in the respective six-month periods.
In addition to the reduction in revenues, operating results for the 2003
periods were adversely affected by costs associated with a transition in menu
item mix and controllable expenses in the company-owned Einstein and Noah's
locations, and the inability to leverage sales against those costs. Elaborating
on those cost increases, Wedo said, "New product initiatives play an important
role in our continuing efforts to focus our core brands growth on the lunch
day-part. Typically, new product launches initially entail significantly more
waste, as the main focus must be to insure ample product availability and
freshness while having no historical demand for production planning.
Additionally, lunch products require more costly packaging than breakfast items.
Concurrently, the learning curve associated with new product introductions cuts
into productivity of store-level employees."
5
Results for the second quarter were additionally impacted by significant
legal, financing and advisory fees related to the company's recapitalization and
refinancing. Those items, which are included in SG&A costs, amounted to $1.1
million in this year's second quarter, compared with $0.4 million in the 2002
period.
"As we previously stated, the recapitalization and refinancing was a
watershed event for New World," said Wedo. "These measures provide New World
with a far more rational capital structure that will allow our management team
to, at long last, fully focus on our plans to strengthen our existing
company-owned and franchised operations while growing our Einstein's brand."
In addition to ramping up advertising campaigns, Wedo said that
management will seek to improve operating results during the second half of 2003
through efforts designed to cut waste on recently introduced menu items and
reduce packaging costs associated with lunch products. Store operating margins
are also expected to get a lift during the second half as Einstein and Noah
reintroduce seasonal favorites like the Autumn Harvest offering of specialized
soups, muffins and bagels, as well as holiday gift baskets. "The company now has
several years of experience with these lines, therefore you tend to avoid the
waste and inefficiency that can come from new product offerings," Wedo
explained. "We also look for continued growth from the lunch menu's Panini
sandwiches and improved salads, both of which enjoyed solid sales during their
rollouts without the benefit of national advertising."
New World is a leading company in the quick casual sandwich industry,
the fastest-growing restaurant segment. 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 July 1, 2003, the company's retail system consisted of 462
company-operated locations, as well as 249 franchised, and 28 licensed locations
in 33 states. The company also operates dough production and coffee roasting
facilities.
####
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," "believe" 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.
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#####
CONTACTS: Media/Investors: Bill Parness, (732) 290-0121, or Marty Gitlin,
(914) 528-7702; parnespr@optonline.net
(TABLES TO FOLLOW)
7
NEW WORLD RESTAURANT GROUP, INC.
CONSOLIDATED BALANCE SHEETS
AS OF JULY 1, 2003 AND DECEMBER 31, 2002
(in thousands, except share information)
December 31,
July 1, 2003 2002
------------ -----------
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents ..................... $ 9,367 $ 10,705
Franchise and other receivables, net .......... 5,310 5,775
Current maturities of notes receivables ....... 86 194
Inventories ................................... 4,871 5,005
Prepaid expenses and other current assets ..... 9,526 3,180
--------- ---------
Total current assets ..................... 29,160 24,859
Property, plant and equipment, net ............... 74,364 81,254
Trademarks and other intangibles, net ............ 94,221 98,134
Goodwill, net .................................... 4,875 4,875
Debt issuance costs and other assets ............. 2,184 1,526
--------- ---------
Total Assets ............................. $ 204,804 $ 210,648
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts payable .............................. $ 9,886 $ 7,650
Accrued expenses .............................. 38,084 30,988
Short term debt and current portion of
long-term debt ............................. 154,246 150,872
Current portion of obligations under
capital leases ............................. 101 100
--------- ---------
Total current liabilities ................ 202,317 189,610
8
December 31,
July 1, 2003 2002
------------ -----------
(Unaudited)
Senior notes and other long-term debt ............ 10,998 11,011
Obligations under capital leases.................. 157 360
Derivative liability.............................. 2,026 2,847
Other liabilities................................. 10,535 10,560
--------- ---------
Total liabilities........................... 226,033 214,388
Series F Preferred Stock, $.001 par value;
116,000 shares authorized; 78,255 and
78,255 shares issued and outstanding............ 99,356 84,932
Stockholders' deficit:
Common stock, $.001 par value; 150,000,000
shares authorized; 51,016,857 and
51,016,857 shares issued and outstanding........ 51 51
Additional Paid-In capital........................ 89,975 86,607
Accumulated deficit............................... (210,611) (175,330)
--------- ---------
Total stockholders' deficit................. (120,585) (88,672)
--------- ---------
Total Liabilities and Stockholders' Deficit....... $ 204,804 $ 210,648
========= =========
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NEW WORLD RESTAURANT GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SECOND QUARTER ENDED JULY 1, 2003 AND JULY 2, 2002
AND YEAR TO DATE PERIODS ENDED JULY 1, 2003 AND JULY 2, 2002
(UNAUDITED)
(in thousands, except earnings per share and related share information)
Second Quarter Ended Year to Date Ended
--------------------------- ---------------------------
July 1, 2003 July 2, 2002 July 1, 2003 July 2, 2002
------------ ------------ ------------ ------------
Revenues:
Retail sales............................ $ 90,878 $ 94,384 $ 179,328 $ 184,568
Manufacturing revenues.................. 5,754 5,870 11,178 12,010
Franchise related revenues.............. 1,117 1,324 2,454 2,647
------------ ----------- ------------ ----------
Total revenues.......................... 97,749 101,578 192,960 199,225
Cost of sales........................... 83,639 81,461 162,676 161,131
General and administrative expenses..... 9,432 9,354 18,644 22,645
Depreciation and amortization........... 7,092 8,907 14,297 14,995
Provision (income) for integration
and reorganization cost.............. - (656) - (552)
------------ ----------- ------------ ----------
Income (loss) from operations........... (2,414) 2,512 (2,657) 1,006
Interest expense, net................... (9,975) (12,274) (18,271) (24,604)
Cumulative change in the fair value
of derivatives (expense)............. (727) 9,777 (70) (3,858)
Loss from extinguishment of
Greenlight obligation................ - - - -
Permanent impairment in the value
of investment in debt securities..... - - - -
Other income............................ 321 53 570 104
------------ ----------- ------------ ----------
Income (loss) before income taxes ...... (12,795) 68 (20,427) (27,352)
10
Second Quarter Ended Year to Date Ended
--------------------------- ---------------------------
July 1, 2003 July 2, 2002 July 1, 2003 July 2, 2002
------------ ------------ ------------ ------------
Provision (benefit) for income
taxes ............................... 320 152 430 152
------------ ----------- ------------ -----------
Net loss................................ (13,115) (84) (20,857) (27,504)
Dividends and accretion on
preferred stock...................... (9,821) (6,817) (14,424) (13,529)
Net loss available to common
stockholders......................... $ (22,936) $ (6,901) $ (35,281) $ (41,033)
============ =========== ============ ===========
Net loss per common share - Basic
and Diluted.......................... $ (0.21) $ (0.09) $ (0.34) $ (0.53)
============ =========== ============ ===========
Weighted average number of common
shares outstanding: Basic and
Diluted.............................. 107,842,599 79,202,076 104,304,782 77,560,135
============ =========== ============ ===========
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SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET LOSS TO EBITDA
Second Quarter Ended Year to Date Ended
--------------------------- ----------------------------
July 1, 2003 July 2, 2002 July 1, 2003 July 2, 2002
------------ ------------ ------------ ------------
Net loss ........................ $ (13,115) $ (84) $ (20,857) $ (27,504)
Plus :
Provision for income taxes ... 320 152 430 152
Other income ................. (321) (53) (571) (104)
Cumulative change in the fair
value of derivatives (expense) 727 (9,777) 70 3,858
Interest expense, net ........ 9,975 12,274 18,271 24,604
Provision (income) for
integration and reorganization
cost ....................... - (656) - (552)
Depreciation and amortization. 7,092 8,907 14,297 14,995
--------- --------- ---------- ----------
EBITDA .......................... $ 4,678 $ 10,763 $ 11,640 $ 15,449
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RECONCILIATION OF EBITDA TO ADJUSTED EBITDA
Second Quarter Ended Year to Date Ended
--------------------------- ---------------------------
July 1, 2003 July 2, 2002 July 1, 2003 July 2, 2002
------------ ------------ ------------ ------------
EBITDA.............................. $ 4,678 $ 10,763 $ 11,640 $ 15,449
Plus :
Certain legal, financing and
advisory fees ................... 1,115 422 1,827 2,302
Acquisition and integration
expenses ........................ 132 821 431 1,766
Certain corporate expenses ...... 430 510 769 904
Unauthorized Bonuses ............ - - - 2,618
Certain compensation expense .... - - - 868
Certain other charges ........... 1,828 159 2,203 663
--------- --------- --------- ---------
Adjusted EBITDA..................... $ 8,183 $ 12,675 $ 16,870 $ 24,570
========= ========= ========= =========
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Exhibit 99.2
NEW WORLD CLARIFIES STATEMENT IN SECOND QUARTER PRESS RELEASE
HAMILTON, N.J. (8/19/03)--New World Restaurant Group, Inc. (Pink Sheets:
NWCI.PK) today clarified a statement regarding its previously disclosed equity
restructuring agreement that was included in the August 16th press release
announcing unaudited financial results for the second quarter and first half of
fiscal 2003.
The equity restructuring agreement, originally announced on June 27,
2003, has been approved by New World's Board of Directors and all of the holders
of New World's Series F preferred stock, but consummation is subject to
stockholder approval and other customary conditions. As correctly stated in the
August 16th release, the company completed the refinancing of its debt, after
closing on July 8 on an offering of $160 million of 13% senior secured notes due
2008.
New World is a leading company in the quick casual sandwich industry,
the fastest growing restaurant segment. 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 July 1, 2003, the company's retail system consisted of 462
company-operated locations, as well as 249 franchised, and 28 licensed locations
in 33 states. The company also operates dough production and coffee roasting
facilities.
####
CONTACTS: Media/Investors: Bill Parness, (732) 290-0121, or Marty Gitlin,
(914) 528-7702; parnespr@optonline.net
14