Lakewood / CO. (enr) Einstein Noah Restaurant Group, 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, announced that it has completed a multiyear period of deleveraging its balance sheet and will now re-allocate its available cash flows to growth priorities and returning cash flows to shareholders. Jeff O´Neill, Chief Executive Officer and President of Einstein Noah:
«The capital efficiency of our franchise first growth model, coupled with the expectation that our cash taxes will be immaterial over the next several years allows us the flexibility to accelerate our growth plans and return capital to our shareholders. This total-return strategy positions Einstein Noah to reward shareholders in a variety of ways over the long run as we execute our plan.
The Company has entered into a new senior 125 million USD credit facility with a syndicate of banks. The new senior credit facility has a five-year term expiring December 20, 2015 and a commitment of up to 125 million USD, including a term loan of up to 75 million USD and a revolving credit facility of up to 50 million USD. The loans will bear interest at a combination of LIBOR, plus an applicable margin ranging from 2,5 percent to 3,0 percent and or Prime, plus an applicable margin ranging from 1,5 percent to 2,0 percent.
In addition, the new facility provides flexibility for the Company to make share repurchases and pay dividends to shareholders. We are extremely pleased to have secured this new credit facility, which extends the maturity of our long-term debt. Through these efforts, we have demonstrated our ability to further improve our liquidity, increase our financial flexibility, and strengthen our capital structure as we pursue a sustainable growth strategy in 2011 and beyond. We appreciate the efforts of our banking syndicate in partnering with us on this new agreement».
The Board of Directors declared an initial quarterly cash dividend on its Common Stock in the amount of 0,125 USD per share, payable on April 15, 2011 to shareholders of record as of March 01, 2011. The Board of Directors also announced the authorization of up to 20 million USD in share repurchases of the Company´s common stock. The Company may repurchase shares in the open market or in privately negotiated transactions at the discretion of management subject to its assessment of market conditions and other economic factors. This authorization expires in two years.
As part of the Company´s commitment to investing for growth, the Board of Directors also approved the expansion of the capital expenditure budget from a projected 17 million USD to 19 million USD in 2010 to a projected 28 million USD to 30 million USD in 2011. This capital expenditure budget includes the opening of ten to 14 new corporate stores and the relocation of an additional ten to 14 stores, along with the continued roll-out of the new coffee program. Nelson Heumann, Chairman of the Board and Managing Member of Greenlight Capital LLC:
«Since Greenlight Capital LLC and its affiliates became shareholders of the Company in 2003, the majority of available cash flows have been dedicated to de-leveraging the capital structure. At the end of 2003, the Company had approximately 220 million USD of debt and preferred stock, a shareholder deficit of 95 million USD supported by 23 million USD of annual Ebitda. As of September 28, 2010, these metrics had improved to only 93 million USD of debt and preferred stock, shareholder equity of positive 73 million USD and 44 million USD of trailing Ebitda.
The Board of Directors believes that the Company has a sustainable amount of debt along with strong cash flows, which provides for the commencement of a quarterly dividend, the flexibility for future share repurchases, as well as continued investment in our accelerated growth».
On December 20, 2010 the Company pre-paid the outstanding balance of 85,6 million USD on the prior credit facility and redeemed the remaining 3,6 million USD of the Series Z preferred stock with proceeds from the new facility. In conjunction with this pre-payment, during the fourth quarter of 2010, the Company will record a non-recurring, non-cash write-off of approximately 900’000 USD in unamortized debt issuance costs. The Company´s capital structure has been simplified to include only the new bank facility and common stock.
