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Einstein Noah Restaurant Group Inc. Provides Update On Strategic Alternatives

Stocks in this article: BAGL

Einstein Noah Restaurant Group, Inc. (NASDAQ: BAGL), a leader in the quick-casual segment of the restaurant industry operating under the Einstein Bros.® Bagels, Noah's New York Bagels®, and Manhattan Bagel® 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.

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