Recapitalization being considered by Einstein board

by Eric Schroeder
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LAKEWOOD, COLO. — Einstein Noah Restaurant Group, Inc., which in May said it was exploring a possible business combination or sale of the company, said its board of directors now is considering a possible recapitalization of the company, which may include payment of a special dividend.

Einstein Noah said the possible recapitalization may include a new senior credit facility consisting of a term loan and a revolver.

“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,” said Jeff O’Neill, president and chief executive officer. “We believe that our financial discipline and cash flow generation capabilities support our ability to access the capital markets on favorable terms.”

The company also provided a financial outlook for the third quarter ended Oct. 2. Einstein Noah said it expects total revenues to be approximately $105.5 million, including system-wide comparable store sales growth of approximately 0.2%. Net income, meanwhile, is expected to increase more than 20% when compared with the prior year, to approximately $3.4 million, including approximately $250,000 of pre-tax expenses related to the strategic alternatives review process. This would compare with total revenues of $103.5 million, including system-wide comparable store sales growth 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 nearly 14% from $10.3 million for the third quarter of 2011.

Lakewood-based Einstein Noah Restaurant Group operates under the Einstein Bros. Bagels, Noah’s New York Bagels and Manhattan Bagel brands. As of Oct. 15, there were 790 total restaurants in operation under those three brands.

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