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Einstein Noah Restaurant Group, Inc. (BAGL), a leader in the
quick-casual segment of the restaurant industry operating under the
Einstein Bros.(R) Bagels, Noah’s New York Bagels(R), and Manhattan Bagel(R)
brands, today announced that, in addition to continuing to explore a
possible business combination or sale of the Company, its Board of
Directors is considering a possible recapitalization of the Company,
which may include payment of a special dividend, as part of its
continuing review of strategic alternatives to maximize value to all
shareholders In anticipation of meetings with possible investors, the
Company is providing a financial outlook for the third quarter of 2012,
which ended on October 2, 2012.
The possible recapitalization of the Company may include a new Senior
Credit Facility consisting of a Term Loan and a Revolver. Credit Suisse
LLC has been engaged as the administrative agent for the Term Loan,
joint-lead arranger, and joint-bookrunner. KeyBanc Capital Markets Inc.
has been engaged as the administrative agent for the Revolver, will
serve as the syndication agent, and will act as joint-lead arranger and
joint-bookrunner.
As previously announced, Piper Jaffray continues to serve as the
Company’s financial advisor and Bryan Cave HRO continues to serve as the
Company’s legal advisor in connection with the strategic alternatives
review.
Jeff O’Neill, President and Chief Executive Officer, said, "We are
pleased with our achievements to date in executing our asset-light
expansion strategy, extending our positive comparable sales momentum to
six consecutive quarters, and cash flow improvements through our
comprehensive cost savings initiatives. We believe that our financial
discipline and cash flow generation capabilities support our ability to
access the capital markets on favorable terms."
Third Quarter 2012 Financial Outlook
The Company also provided a financial outlook for the third quarter
ended October 2, 2012. Although the Company is currently in the process
of preparing its financial statements for the third quarter and
completing its financial reporting process, it expects total revenues to
be approximately $105.5 million, including system-wide comparable store
sales of approximately +0.2%. Net income is expected to grow more than
20% when compared to the prior year, to approximately $3.4 million
including approximately $250,000 of pre-tax expenses related to the
strategic alternatives review process. This compares to total revenues
of $103.5 million, including system-wide comparable store sales of
+1.0%, and net income of $2.8 million, in the third quarter of 2011.
Adjusted EBITDA is expected to be approximately $11.7 million for the
third quarter of 2012, up 13.6% from $10.3 million for the third quarter
of 2011.
About Einstein Noah Restaurant Group
Einstein Noah Restaurant Group, Inc. is a leading company in the quick
casual restaurant industry that operates and licenses locations
primarily under the Einstein Bros.(R) and Noah’s New York Bagels(R) brands
and primarily franchises locations under the Manhattan Bagel(R) brand. The
Company’s retail system consists of over 790 restaurants in 39 states
and the District of Columbia. It also operates a dough production
facility. The Company’s stock is traded on the NASDAQ under the symbol
BAGL. Visit www.einsteinnoah.com
for additional information.
Forward Looking Statement Disclosure
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. All statements which are not historical
facts are intended to identify forward-looking statements. Words such as
"expects", "intends", "plans". "possible", "estimate", "believes" and
similar expressions are used to identify forward-looking statements. In
particular, statements about any potential declaration and payment of a
special cash dividend and consummation of a new senior credit facility
are forward-looking statements and may not occur. Forward-looking
statements are not guarantees of future results and 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 materially from the future
results, performance (financial or operating), or achievements expressed
or implied by such forward-looking statements. These risks and
uncertainties include, among others, (i) the ability of the Company to
refinance its current senior credit facility, (ii) the state of capital
markets, (iii) general economic conditions; (iv) the results for the
2012 third quarter are not necessarily indicative of future results; (v)
the Company’s ability to improve transactions and its long-term growth
are dependent upon consumer acceptance of its products and marketing
initiatives, general economic and market conditions, among other
factors; and (vi) the Company’s ability to build brand equity and create
long-term value for its shareholders is dependent upon the success of
our initiatives, financial results and the factors listed above, among
other factors. These and other risks are more fully discussed in the
Company’s SEC filings, including under the section heading "Risk
Factors" in our annual report on Form 10-K. Except as required by law,
the Company does not undertake to publicly update or revise any
forward-looking statements.
Use of Non-GAAP Financial Information
In addition to the financial outlook reported in accordance with
accounting principles generally accepted in the United States of America
("GAAP") included in this filing, the Company has provided certain
non-GAAP financial information, including earnings before interest,
taxes, depreciation, amortization, restructuring expenses and other
operating expenses/(income) ("adjusted EBITDA"). Management believes
that the presentation of this non-GAAP financial information provides
useful information to investors because this information may allow
investors to better evaluate ongoing business performance and certain
components of the Company’s results. In addition, the Company’s Board of
Directors uses this non-GAAP financial information to evaluate the
performance of the Company and the management team. The Company has
reconciled the non-GAAP financial information to the nearest GAAP
measure.
The Company includes in this document information on system-wide
comparable store sales percentages. System-wide comparable store sales
percentages refer to changes in sales of our restaurants, whether
operated by the company or by franchisees and licensees, in operation
for six fiscal quarters including those restaurants temporarily closed
for an immaterial amount of time. Some of the reasons restaurants may be
temporarily closed include remodeling, road construction, rebuilding
related to site-specific catastrophes and natural disasters. Franchise
and license comparable store sales percentages are based on sales of
franchised and licensed restaurants, as reported by franchisees and
licensees. Management reviews the increase or decrease in comparable
sales to assess business trends. Comparable store sales exclude closed
locations. When we intend to relocate a restaurant, we consider that
restaurant to be temporarily closed for up to twelve months after it
ceases operations. If a suitable relocation site has not been identified
by the end of twelve months, we consider the restaurant to be
permanently closed. Until that time, we include the restaurant in our
open store count, but exclude its sales from our comparable store sales.
As of October 2, 2012, there are five stores that we intend to relocate,
and are thus considered to be temporarily closed.
The Company uses company-owned comparable store sales, franchise and
license sales and the resulting system-wide sales information internally
in connection with restaurant development decisions, planning, and
budgeting analyses. The Company believes comparable store sales
information is useful in assessing consumer acceptance of our brands;
facilitates an understanding of our financial performance and the
overall direction and trends of sales and operating income; helps the
Company appreciate the effectiveness of its advertising and marketing
initiatives; and provides information that is relevant for comparison
within the industry.
Comparable store sales percentages are non-GAAP financial measures,
which should not be considered in isolation or as a substitute for other
measures of performance prepared in accordance with GAAP, and may not be
equivalent to comparable store sales as defined or used by other
companies. The Company does not record franchise or license restaurant
sales as revenues. However, royalty revenues are calculated based on a
percentage of franchise and license restaurant sales, as reported by the
franchisees or licensees.
EINSTEIN NOAH RESTAURANT GROUP, INC.
RECONCILIATION OF PRELIMINARY NET INCOME (UNAUDITED) TO ADJUSTED
EBITDA
(in thousands)
13 weeks ended
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September 27, October 2,
2011 2012
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Net income (preliminary, unaudited) $ 2,835 $ 3,400
Adjustments to net income:
Interest expense, net 772 750
Provision for income taxes 1,647 2,200
Depreciation and amortization 4,836 5,000
Restructuring expenses 121 -
Strategic alternative expenses - 250
Other operating expense (income), net 47 50
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Adjusted EBITDA $ 10,258 $ 11,650
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SOURCE: Einstein Noah Restaurant Group, Inc.
Investor Relations:
Raphael Gross, 203-682-8253
rgross@icrinc.com
or
Media Relations:
Liz Brady DiTrapano, 646-277-1226
lbrady@icrinc.com
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