Sbarro, Inc. Announces Results of Operations for the Year Ended December 31, 2006
Sbarro, Inc. Announces Results of
Operations for the Year Ended December 31, 2006
Melville, New York – April 2, 2007 - Sbarro, Inc. (the "Company") announced today results of operations for the year ended December 31, 2006. Revenues were $354.4 million for the year ended December 31, 2006 as compared to $348.7 million for the year ended January 1, 2006. Same-store sales growth was 4.4% for the year ended December 31, 2006. Net Income was $9.9 million, for the year ended December 31, 2006 as compared to $1.4 million for the year ended January 1, 2006.
EBITDA was $55.1 million for the year ended December 31, 2006 as compared to $49.1 million for the year ended January 1, 2006. Included as an expense in EBITDA was $2.8 million and $0.7 million for 2006 and 2005, respectively related to a long term incentive plan for our Chief Executive Officer.
EBITDA as calculated in accordance with the terms of the bank credit agreement was $60.3 million for December 31, 2006 as compared to $52.1 million for the year ended January 1, 2006. Attached hereto as Exhibit A is a reconciliation of net income for the year ended December 31, 2006 to EBITDA and EBITDA as calculated in accordance with our bank credit agreement for the same period, as these are considered non-GAAP measures.
Peter Beaudrault, Chairman of the Board of Sbarro commented, "We are pleased with the continuing improvements in both revenues and EBITDA that our team has achieved in 2006. We look forward to continuing to improve these trends as the team continues to capitalize on the improvements made system wide over the last three years."
On January 31, 2007, MidOcean SBR Acquisition Corp., an indirect subsidiary of MidOcean SBR Holdings, LLC ("Holdings"), an affiliate of MidOcean Partners III, L.P., and certain of its affiliates ("MidOcean") merged with and into the Company (the "Merger") in exchange for consideration of $450 million in cash, subject to certain adjustments. Upon consummation of the Merger, all of the outstanding common stock of the Company became owned by Sbarro Holdings LLC, a subsidiary of Holdings.
In addition, the former shareholders received a distribution of the cash on hand in excess of (i) $11 million, plus (ii) all amounts required to be paid in connection with the special event bonuses.
Upon consummation of the Merger, the Company transferred interests in certain non-core assets to a newly formed company owned by certain of our former shareholders. There was no additional consideration given for the transfer of these assets as they were treated as a dividend. The assets and related costs the interests in 401 Broadhollow Realty Corp. and 401 Broadhollow Fitness Center Corp., which own the corporate headquarters of the Company, the fitness center and the assets of the Sbarro Café located at the corporate headquarters; a parcel of undeveloped real property located in East Northport, New York; the interests in Boulder Creek Ventures LLC and Boulder Creek Holdings, LLC, which own a 40% interest in a joint venture that operates 15 steakhouses under "Boulder Creek" and other names; and the interest in Two Mex-SS, LLC, which owns a 50% interest in a joint venture that operates two tex-mex restaurants under the "Baja Grill" name.
Certain statements in this press release are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward looking statements may be identified by the words "believe," "expect," "anticipate," "project," "plan," "estimate," "will," or "intend" and similar expressions. These forward-lookingstatements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance, achievements or transactions of Sbarro and its affiliates or industry results to be materially different from any future results, performance, achievements or transactions expressed or implied by such forward-looking statements. Such risks, uncertainties and other factors relate to, among others, unanticipated operating costs and effects of general and local economic and real estate conditions. Additional information or factors which could impact Sbarro's forward-looking statements contained herein are included in Sbarro's filings with the Securities and Exchange Commission. You should not place undue reliance on these forward-looking statements, which speak only as if the date of this communication. The companies assume no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.
About the Company
Based in Melville, New York, we believe we are the world's leading Italian quick service restaurants concept and the largest shopping mall-focused restaurants concept in the world. We have approximately 984 restaurants in 36 countries. Sbarro restaurants feature a menu of popular Italian food, including pizza, a selection of pasta dishes and other hot and cold Italian entrees, salads, sandwiches, drinks and desserts. Additional information is available at http://www.sbarro.com/
Financial schedules to follow
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Anthony J. Puglisi
Vice President – Finance
and Chief Financial Officer
(631) 715-4100
Sbarro, Inc.
2006 EBITDA Reconciliation
(unaudited)
EBITDA represents earnings before interest income, interest expense, taxes, depreciation and amortization. EBITDA should not be considered in isolation from, or as a substitute for, net income, cash flow from operations or other cash flow statement data prepared in accordance with United States generally accepted accounting principles "GAAP" or as a measure of a company's profitability or liquidity. Rather, we believe that EBITDA provides relevant and useful information for analysts and investors in our 10.375% Notes in that EBITDA is one of the factors in the calculation of our compliance with the ratios in the indenture under which our 10.375% Notes are issued. Our calculation of EBITDA may not be comparable to a similarly titled measure reported by other companies, since all companies do not calculate this non-GAAP measure in the same manner. Our EBITDA calculations are not intended to represent cash provided by (used in) operating activities since they do not include interest and taxes and changes in operating assets and liabilities, nor are they intended to represent a net increase in cash since they do not include cash provided by (used in) investing and financing activities.
The following table reconciles our net income for the year ended December 31, 2006 to EBITDA and EBITDA as defined in the Credit Agreement for the same period which we believe
Interest Expense 30,783
Interest Income (2,733)
Income Taxes 644
Depreciation and amortization 16,561
EBITDA $55,113
EBITDA relating to withdrawn assets
or eliminated expenses(1) 3,734
Asset impairment, restaurant closings
and store pre-opening costs(2) 1,428
EBITDA in accordance with the bank
credit agreement $60,275
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(1) "Eliminated expenses" refers to certain costs and expenses related to our former shareholders including salaries, bonuses, benefits, payroll taxes and travel and entertainment and an accrual for a special incentive award that was reversed in 2007 as it was terminated in connection with the Merger.
(2) Adjustment to exclude asset impairment charges and restaurant closing costs of $883,000, pre-opening costs of $442,000 and the net negative EBITDA for four underperforming restaurants closed in 2006 of $103,000.
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