<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 21, 1997
EINSTEIN/NOAH BAGEL CORP.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-21097 84-1294908
- --------------------------------------------------------------------------------
(State or other (Commission (IRS Employer
jurisdiction of File No.) Identification No.)
incorporation)
14123 Denver West Parkway, P.O. Box 4086, Golden, Colorado 80401
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(303) 215-9300
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not applicable
- --------------------------------------------------------------------------------
(Former name or former address, if changes since last report)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On December 5, 1997, Einstein/Noah Bagel Corp. (the "Company")
acquired an approximately 77% interest in Einstein/Noah Bagel Partners, L.P.
("Bagel Partners"), formerly Noah's Pacific, L.L.C. ("Noah's"), the surviving
entity of the merger consummated on such date (the "Area Developer Merger") of
the Company's five area developers, Colonial Bagels, L.P. ("Colonial"), Great
Lakes Bagels, L.P., Gulfstream Bagels, L.P., Sunbelt Bagels, L.L.C. ("Sunbelt")
and Noah's (collectively, the "Area Developers"). Einstein/Noah Bagel
Partners, Inc., a California corporation and 100% owned subsidiary of the
Company, is the sole general partner of Bagel Partners. The remaining equity
interest in Bagel Partners is owned by area developer management and Bagel
Store Development Funding, L.L.C. ("Bagel Funding").
The Company acquired its interest in Bagel Partners pursuant to the
exercise of conversion and option rights under senior secured loan agreements
between the Company and each Area Developer, pursuant to which the Company had
committed to lend an aggregate of $359.6 million to the Area Developers
(collectively, the "Secured Loan Agreements"). The Secured Loan Agreements
permitted the Company to (a) convert the senior secured loans made by the
Company to each of the Area Developers into units ("Area Developer Units") in
such Area Developers (the "Conversion Rights") and (b) purchase additional Area
Developer Units pursuant to an option (the "Option Rights") to purchase such
units for an amount representing the aggregate amount of the Company's unfunded
secured loan commitment. The exercise of the Conversion Rights and the Option
Rights is referred to herein as the "Secured Loan Conversions." Immediately
prior to the Secured Loan Conversions, each Area Developer had agreed to amend
its Secured Loan Agreement to waive the applicable conversion moratorium period
and allow the immediate exercise by the Company of its Conversion Rights and
Option Rights. Pursuant to the Secured Loan Conversions, the Company converted
an aggregate of approximately $335.3 million of secured loans into Area
Developer Units pursuant to the Conversion Rights and purchased additional Area
Developer Units pursuant to the exercise of the Option Rights for approximately
$24.3 million. The Company used funds from its working capital to exercise the
Option Rights.
In connection with the waiver of the moratorium periods and the Secured
Loan Conversions, each Area Developer amended its limited partnership or limited
liability company agreement, as applicable, to modify the rights of Bagel
Funding pursuant to such agreements to require each Area Developer to redeem the
Area Developer Units owned by Bagel Funding in such Area Developer in certain
cases (collectively, the "Put Rights"). Prior to the amendments, Bagel Funding
was entitled to exercise the Put Rights in the event that (i) the Company
acquired a majority equity interest in an Area Developer upon exercise of the
Conversion Rights or Option Rights, (ii) Bagel Funding requested the
incorporation of the Area Developer and the public offering of the equity of the
Area Developer after the Conversion Rights and Option Rights expired unexercised
and the Company did not consent to such request, or (iii) Bagel Funding
requested the termination of the Area Developer's area development and franchise
agreements with the Company after the Conversion Rights and Option Rights
expired unexercised and the Company did not consent to such request. Upon
exercise, the Put Rights could be satisfied with cash, shares of common stock of
the Company, par value $.01 per share ("Common Stock"), shares of common stock
of Boston Chicken, Inc., majority owner of the Company ("Boston Chicken"), par
value $.01 per share ("BCI Common Stock"), or any combination thereof.
The Bagel Partners Partnership Agreement (which is filed as an exhibit
hereto and is incorporated herein by such reference) amends Bagel Funding's Put
Rights as follows: (i) the Put Rights are not exercisable until December 5,
1999, (ii) if at any time during the eighteen-month period commencing on
December 5, 1999 the Company does not consent to a public offering of Bagel
Partners equity or the termination of certain rights and obligations under
franchise or license agreements with the Company upon request by Bagel Funding,
then Bagel Funding may exercise the Put Rights, (iii) the exerciseability of
the Put Rights will be accelerated upon a Change in Control (as defined in the
Bagel Partners Partnership Agreement) of the Company in the event that the
Company does not consent to a public offering of Bagel Partners equity or the
termination of certain rights and obligations under franchise or license
agreements with the Company, (iv) the method of determining the valuation of
Bagel Partners for purposes of calculating the put price is a multiple of the
annualized average cash flow for the two fiscal quarters prior to the quarter
in which the Put Rights are exercised rather than a multiple of the annualized
average cash flow for the highest of the three prior fiscal quarters, (v) the
Bagel Funding unitholders will receive resale
<PAGE> 3
registration rights upon exercise of the Put Rights in the event that the
Company or Bagel Partners chooses to pay the purchase price of the Bagel
Partners units with shares of Common Stock of the Company, (vi) the right of
Bagel Partners or the Company to pay the purchase price of Bagel Partners units
with shares of BCI Common Stock is eliminated, and (vii) upon an exercise of
the Put Rights, Bagel Partners or the Company may purchase Bagel Funding's
Bagel Partners units.
Messrs. Scott A. Beck, Chairman of the Board of Directors of the
Company, Jeffrey L. Butler, President of the Company, W. Eric Carlborg, Chief
Financial Officer of the Company, Messrs. John H. Muehlstein, Jr. and Lloyd D.
Ruth, directors of the Company, David G. Stanchak, Chief Development Officer
and a director of the Company, and Lawrence Beck, Scott Beck's father, each own
a direct equity interest in Bagel Funding. In the aggregate, such interests
represent approximately 10.4% of the outstanding equity interest in Bagel
Funding. In addition, certain executive officers and directors of Boston
Chicken own direct or indirect equity interests in Bagel Funding. In the
aggregate, such interests, excluding interests owned by Scott Beck, represent
approximately 7.7% of the outstanding equity interest in Bagel Funding. In
addition, Lawrence Beck was a minority investor in Sunbelt and Colonial, and
Robert Schlacter, Senior Vice President-Operations Support, was a minority
investor in Colonial. Following the Secured Loan Conversion and the Area
Developer Merger, Bagel Funding owns an approximately 21% interest in Bagel
Partners and Messrs. Lawrence Beck and Schlacter own in the aggregate less than
a 1% interest in Bagel Partners.
The Company had previously entered into development and franchise
agreements with each of the Area Developers, pursuant to which the Area
Developers developed and operated Einstein Bros.(R) Bagels and Noah's New York
Bagels(R) stores. Pursuant to such agreements and the Secured Loan Agreements,
the Area Developers paid an aggregate of approximately $33.0 million in 1996 to
the Company in development, franchise, royalty, real estate, software
maintenance and miscellaneous fees, interest and deposits. Upon consummation
of the Area Developer Merger, the development agreements with each merging Area
Developer were terminated and Bagel Partners assumed the obligations under the
existing franchise agreements of each of the merging Area Developers.
The Company has entered into an amended and restated development
agreement (which is filed as an exhibit hereto and is incorporated herein by
such reference) (the "Development Agreement") with Bagel Partners, pursuant to
which Bagel Partners will develop approximately 175 stores in 1998 and each
year thereafter during the term of the development agreement. In addition, the
Development Agreement provides that the Company and Bagel Partners will enter
into a license agreement covering each store opened, which agreements will have
substantially the same terms as are currently provided in the Company's form of
franchise agreement.
The Company has also entered into a loan agreement (which is filed as
an exhibit hereto and is incorporated herein by such reference) (the "Loan
Agreement") with Bagel Partners, pursuant to which the Company has provided
Bagel Partners a secured loan of up to a maximum of $70 million. Such loan
will initially bear interest at the rate of interest announced by Bank of
America National Trust and Savings Association from time to time as its
reference rate (the "Prime Rate") plus 2.5%, payable currently, with a final
maturity on December 5, 2005.
The Company anticipates that, as of December 15, 1997, it will offer
employment with the Company to all of the employees of Bagel Partners.
Pursuant to a services agreement with Bagel Partners (the form of which is
filed as an exhibit hereto and is incorporated herein by such reference) (the
"Services Agreement"), the Company will provide to Bagel Partners the services
currently provided by such employees and any other employees that may be hired
by the Company for such purpose. Bagel Partners will reimburse the Company for
the cost of such employees (other than any grants of options to purchase Common
Stock). In addition, the Company intends to offer to all holders of options to
purchase Bagel Partners units, of which approximately 45,000,000 are
outstanding, the opportunity to receive options to purchase shares of Common
Stock at a ratio of one share of Common Stock for every 15 Bagel Partners units
subject to unit options. The Common Stock options are expected to be granted
under the Company's 1997 Stock Option Plan and will be contingent upon the
consent of each unit optionholder to the cancellation of such unit options. If
all outstanding options to purchase Bagel Partners units are exchanged for
options to purchase Common Stock, options to purchase an
<PAGE> 4
aggregate of approximately 3,000,000 shares of Common Stock will be granted and
will vest in accordance with the vesting schedules of the corresponding
canceled unit options.
ITEM 5. OTHER EVENTS
On November 21, 1997, the Company entered into a new credit facility
(the "Credit Facility") with Bank of America National Trust and Savings
Association, LaSalle National Bank and General Electric Capital Corporation
(collectively, the "Lenders"). The Credit Facility consists of a $30 million
secured term loan facility and a $40 million secured revolving credit facility.
The Credit Facility will be used for general corporate purposes, including the
funding of Bagel Partners.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Business Acquired.
The financial statements required by this item (and an index thereto)
are filed as Exhibit 99.1 hereto and are incorporated herein by such reference.
(b) Pro Forma Financial Information.
The pro forma financial information required by this item (and an
index thereto) is filed as Exhibit 99.2 hereto and is incorporated herein by
such reference.
(c) Exhibits.
See Exhibit Index appearing elsewhere herein, which is incorporated
herein by such reference.
FORWARD LOOKING STATEMENTS
CERTAIN STATEMENTS IN THIS CURRENT REPORT ON FORM 8-K CONSTITUTE
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995 (THE "REFORM ACT"). SUCH FORWARD-LOOKING
STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES, AND OTHER FACTORS
THAT MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY,
BAGEL PARTNERS, EINSTEIN BROS. BAGELS STORES AND NOAH'S NEW YORK BAGELS STORES
TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS
EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. SUCH FACTORS INCLUDE,
AMONG OTHERS, THE FOLLOWING: COMPETITION; SUCCESS OF OPERATING INITIATIVES;
DEVELOPMENT AND OPERATING COSTS; ACHIEVEMENT OF DEVELOPMENT SCHEDULES;
ADVERTISING AND PROMOTIONAL EFFORTS; BRAND AWARENESS; ADVERSE PUBLICITY;
ACCEPTANCE OF NEW PRODUCT OFFERINGS; THE COMPANY'S RELATIONSHIP WITH, AND
BUSINESS OF BOSTON CHICKEN; AVAILABILITY, LOCATIONS AND TERMS OF SITES FOR
STORE DEVELOPMENT; CHANGES IN BUSINESS STRATEGY OR DEVELOPMENT PLANS;
AVAILABILITY AND TERMS OF CAPITAL; FOOD, LABOR AND EMPLOYEE BENEFIT COSTS;
CHANGES IN GOVERNMENT REGULATION; REGIONAL WEATHER CONDITIONS; AND OTHER
FACTORS REFERENCED IN THE COMPANY'S FILINGS WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE COMPANY CANNOT PREDICT WHICH FACTORS WOULD CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED BY THE FORWARD-LOOKING
STATEMENTS. READERS ARE URGED TO CONSIDER STATEMENTS THAT INCLUDE THE TERMS
"EXPECTS," "ANTICIPATES," "INTENDS" OR THE LIKE TO BE UNCERTAIN AND
FORWARD-LOOKING.
<PAGE> 5
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: March 17, 1998
EINSTEIN/NOAH BAGEL CORP.
By: /s/ Amy S. Powers
------------------------------------
Amy S. Powers
Vice President
<PAGE> 6
EINSTEIN/NOAH BAGEL CORP.
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
<S> <C>
2.1 Form of Secured Loan Agreement by and between the Company and each of Colonial Bagels, L.P.,
Great Lakes Bagels, L.P., Gulfstream Bagels, L.P., Sunbelt Bagels, L.L.C. and Noah's Pacific,
L.L.C. (previously filed)
10.1 Area Developer Merger Agreement and Plan of Merger dated as of December 5, 1997 among Colonial
Bagels, L.P., Great Lakes Bagels, L.P., Gulfstream Bagels, L.P., Sunbelt Bagels, L.L.C. and
Einstein/Noah Bagel Partners, L.P. (formerly Noah's Pacific, L.L.C.) (previously filed)
10.2 Partnership Agreement of Einstein/Noah Bagel Partners, L.P. (previously filed)
10.3 Loan Agreement dated as of December 5, 1997 by and between the Company and Einstein/Noah Bagel
Partners, L.P. (previously filed)
10.4 Amended and Restated Development Agreement dated as of December 5, 1997 by and between the Company
and Einstein/Noah Bagel Partners, L.P. (previously filed)
10.5 Form of Services Agreement by and among Einstein/Noah Bagel Partners, L.P. and Einstein/Noah
Bagel Corp. (previously filed)
10.6 Amended and Restated Secured Credit Agreement dated as of November 21, 1997 among the Company,
Bank of America National Trust and Savings Association, as Agent and Issuing Lender, General
Electric Capital Corporation, as Co-Agent, and the Lenders named therein. (previously filed)
23.1 Consent of Arthur Andersen LLP with respect to the Audited Financial Statements of Alamo
Bagels, L.P.
23.2 Consent of Arthur Andersen LLP with respect to the Audited Financial Statements of BCE West
Bagels, L.L.C.
23.3 Consent of Arthur Andersen LLP with respect to the Audited Financial Statements of Colonial
Bagels, L.P.
23.4 Consent of Arthur Andersen LLP with respect to the Audited Financial Statements of Finest
Bagels, L.L.C.
23.5 Consent of Arthur Andersen LLP with respect to the Audited Financial Statements of Great Lakes
Bagels, L.L.C.
23.6 Consent of Arthur Andersen LLP with respect to the Audited Financial Statements of Gulfstream
Bagels, L.P.
23.7 Consent of Arthur Andersen LLP with respect to the Audited Financial Statements of Liberty
Foods, L.L.C.
</TABLE>
<PAGE> 7
<TABLE>
<S> <C>
23.8 Consent of Arthur Andersen LLP with respect to the Audited Financial Statements of Mayfair
Bagels, L.L.C.
23.9 Consent of Arthur Andersen LLP with respect to the Audited Financial Statements of Noah's Bay
Area Bagels, L.L.C.
23.10 Consent of Arthur Andersen LLP with respect to the Audited Financial Statements of Noah's
Pacific, L.L.C.
23.11 Consent of Arthur Andersen LLP with respect to the Audited Financial Statements of Philly Rose,
L.P.
99.1 Financial Statements of Businesses Acquired (previously filed).
99.2 Pro Forma Financial Information.
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report on
the financial statements of Alamo Bagels, L.P. (and to all references to our
Firm) included in or made a part of this current report on Form 8-K/A.
ARTHUR ANDERSEN LLP
Denver, Colorado
March 16, 1998
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report on
the financial statements of BCE West Bagels, L.L.C. (and to all references to
our Firm) included in or made a part of this current report on Form 8-K/A.
ARTHUR ANDERSEN LLP
Denver, Colorado
March 16, 1998
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report on
the financial statements of Colonial Bagels, L.P. (and to all references to our
Firm) included in or made a part of this current report on Form 8-K/A.
ARTHUR ANDERSEN LLP
Denver, Colorado
March 16, 1998
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report on
the financial statements of Finest Bagels, L.L.C. (and to all references to our
Firm) included in or made a part of this current report on Form 8-K/A.
ARTHUR ANDERSEN LLP
Denver, Colorado
March 16, 1998
<PAGE> 1
EXHIBIT 23.5
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report on
the financial statements of Great Lakes Bagels, L.L.C. (and to all references
to our Firm) included in or made a part of this current report on Form 8-K/A.
ARTHUR ANDERSEN LLP
Denver, Colorado
March 16, 1998
<PAGE> 1
EXHIBIT 23.6
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report on
the financial statements of Gulfstream Bagels, L.P. (and to all references to
our Firm) included in or made a part of this current report on Form 8-K/A.
ARTHUR ANDERSEN LLP
Denver, Colorado
March 16, 1998
<PAGE> 1
EXHIBIT 23.7
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report on
the financial statements of Liberty Foods, L.L.C. (and to all references to our
Firm) included in or made a part of this current report on Form 8-K/A.
ARTHUR ANDERSEN LLP
Denver, Colorado
March 16, 1998
<PAGE> 1
EXHIBIT 23.8
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report on
the financial statements of Mayfair Bagels, L.L.C. (and to all references to our
Firm) included in or made a part of this current report on Form 8-K/A.
ARTHUR ANDERSEN LLP
Denver, Colorado
March 16, 1998
<PAGE> 1
EXHIBIT 23.9
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report on
the financial statements of Noah's Bay Area Bagels, L.L.C. (and to all
references to our Firm) included in or made a part of this current report on
Form 8-K/A.
ARTHUR ANDERSEN LLP
Denver, Colorado
March 16, 1998
<PAGE> 1
EXHIBIT 23.10
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report on
the financial statements of Noah's Pacific, L.L.C. (and to all references to our
Firm) included in or made a part of this current report on Form 8-K/A.
ARTHUR ANDERSEN LLP
Denver, Colorado
March 16, 1998
<PAGE> 1
EXHIBIT 23.11
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report on
the financial statements of Philly Rose, L.P. (and to all references to our
Firm) included in or made a part of this current report on Form 8-K/A.
ARTHUR ANDERSEN LLP
Denver, Colorado
March 16, 1998
<PAGE> 1
EXHIBIT 99.2
PRO FORMA FINANCIAL INFORMATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
Unaudited Pro Forma Consolidated Financial Information of
Einstein/Noah Bagel Corp.................................. F-2
Unaudited Pro Forma Consolidated Statement of Operations for
the fiscal year ended December 29, 1996................... F-3
Unaudited Pro Forma Consolidated Statement of Operations for
the three quarters ended October 5, 1997.................. F-4
Unaudited Pro Forma Consolidated Balance Sheet at October 5,
1997...................................................... F-5
Notes to Unaudited Pro Forma Consolidated Financial
Statements................................................ F-6
EINSTEIN/NOAH BAGEL PARTNERS, L.P.
Unaudited Pro Forma Consolidated Statement of Operations for
the fiscal year ended December 29, 1996................... F-7
Unaudited Pro Forma Consolidated Statement of Operations for
the three quarters ended October 5, 1997.................. F-8
Unaudited Pro Forma Consolidated Balance Sheet as of October
5, 1997................................................... F-9
Notes to Unaudited Pro Forma Financial Statements........... F-10
</TABLE>
F-1
<PAGE> 2
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION OF
EINSTEIN/NOAH BAGEL CORP. AND
EINSTEIN/NOAH BAGEL PARTNERS, L.P.
The pro forma consolidated financial information for Einstein/Noah Bagel
Corp. ("ENBC") gives effect to the conversion of its loans to a majority equity
interest in its area developers and the merger of the area developers into a
single entity (Einstein/Noah Bagel Partners, L.P.) after such conversions occur.
The pro forma consolidated financial statements of ENBC are based upon the
assumptions set forth in the accompanying notes to such statements. The pro
forma adjustments are based upon the available information and assumptions that
management believes are reasonable under the circumstances.
The pro forma financial information for Einstein/Noah Bagel Partners, L.P.
gives effect to the proposed merger of the five area developers of ENBC (and
their predecessors) into a single entity and assumes such merger occurs
subsequent to ENBC's conversion of its loans to a majority equity interest in
each of the area developers. These pro forma financial statements are based upon
the assumptions set forth in the accompanying notes to such statements. The pro
forma adjustments are based upon the available information and assumptions that
management believes are reasonable under the circumstances.
The pro forma operating results assume the above transactions occurred at
the beginning of each of the periods presented.
These pro forma financial statements should be read in conjunction with the
related historical financial statements and are not necessarily indicative of
the results that would have actually occurred had the transactions been
consummated on the dates or for the periods indicated or which may occur in the
future.
F-2
<PAGE> 3
EINSTEIN/NOAH BAGEL CORP.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 29, 1996
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
UNAUDITED
PRO FORMA UNAUDITED
EINSTEIN/NOAH PRO FORMA
EINSTEIN/NOAH BAGEL PRO FORMA EINSTEIN/NOAH
BAGEL CORP. PARTNERS, L.P.* ADJUSTMENTS BAGEL CORP.
------------- ------------------- ----------- -------------
<S> <C> <C> <C> <C>
Revenue............................ $61,707 $105,164 $(24,951)(1) $141,920
Costs and Expenses:
Cost of products sold............ 11,546 42,050 53,596
Salaries and benefits............ 18,302 50,249 68,551
General and administrative....... 16,389 39,936 (6,350)(1) 49,975
Depreciation and amortization.... 5,431 11,835 2,330 (2) 19,596
------- -------- --------
Total costs and
expenses............... 51,668 144,070 191,718
------- -------- --------
Income (Loss) from Operations...... 10,039 (38,906) (49,798)
Other Income (Expense), net........ (4,332) 48 (4,284)
Minority Interest at 23%........... -- -- 8,937 (3) 8,937
------- -------- --------
Net Income (Loss).................. $ 5,707 $(38,858) $(45,145)
======= ======== ========
Net Income (Loss) per Common and
Equivalent Share................. $ 0.25 $ (2.33)
======= ========
Weighted Average Number of Common
and Equivalent Shares
Outstanding...................... 22,344 19,400
======= ========
</TABLE>
- ---------------
* The pro-forma Einstein/Noah Bagel Partners, L.P. statement of operations gives
effect to the merger of the area developers of ENBC into a single entity and
conversion of the loans from ENBC into a majority equity interest. See
unaudited pro forma consolidated statement of operations on page F-218.
F-3
<PAGE> 4
EINSTEIN/NOAH BAGEL CORP.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE QUARTERS ENDED OCTOBER 5, 1997
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
UNAUDITED
PRO FORMA UNAUDITED
EINSTEIN/NOAH PRO FORMA
EINSTEIN/NOAH BAGEL PRO FORMA EINSTEIN/NOAH
BAGEL CORP. PARTNERS,L.P.* ADJUSTMENTS BAGEL CORP.
------------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
Revenue.................................. $43,885 $223,187 $(40,769)(1) $226,303
Costs and Expenses:
Cost of products sold.................. 704 75,099 75,803
Salaries and benefits.................. 6,158 96,787 102,945
General and administrative............. 7,736 89,763 (12,896)(1) 84,603
Depreciation and amortization.......... 4,646 18,690 704 (2) 24,040
------- -------- --------
Total costs and expenses....... 19,244 280,339 287,391
------- -------- --------
Income (Loss) from Operations............ 24,641 (57,152) (61,088)
Other Income (Expense), net.............. (2,066) 88 (1,978)
Minority Interest at 23%................. -- -- 13,125 (3) 13,125
------- -------- --------
Income (Loss) Before Income Taxes........ 22,575 (57,064) (49,941)
Income Taxes............................. 6,919 -- (6,919)(5) --
------- -------- --------
Net Income (Loss)........................ $15,656 $(57,064) $(49,941)
======= ======== ========
Net Income (Loss) per Common and
Equivalent Share....................... $ 0.45 $ (1.55)
Weighted Average Number of Common and
Equivalent Shares Outstanding.......... 34,776 32,256
======= ========
</TABLE>
- ---------------
* The pro-forma Einstein/Noah Bagel Partners, L.P. statement of operations gives
effect to the merger of the area developers of ENBC into a single entity and
conversion of loans from ENBC into a majority equity interest. See unaudited
pro forma consolidated statement of operations on page F-219.
F-4
<PAGE> 5
EINSTEIN/NOAH BAGEL CORP.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
OCTOBER 5, 1997
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
UNAUDITED
PRO FORMA UNAUDITED
EINSTEIN/NOAH PRO FORMA
EINSTEIN/NOAH BAGEL PRO FORMA EINSTEIN/NOAH
BAGEL CORP. PARTNERS, L.P.* ADJUSTMENTS BAGEL CORP.
------------- --------------- ----------- -------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.................... $ 30,522 $ 2,102 $ 32,624
Accounts receivable.......................... 75 2,704 2,779
Due from affiliates.......................... 14,835 -- $ (14,835)(6) --
Inventory.................................... -- 10,987 10,987
Prepaid expenses and other current assets.... 237 1,676 1,913
Deferred income taxes........................ 300 -- 300
-------- -------- --------
Total current assets.................. 45,969 17,469 48,603
-------- -------- --------
Property and Equipment, net.................... 29,028 189,560 (10,000)(7) 206,288
(2,300)(8)
Notes Receivable:
Area developers.............................. 300,744 -- (300,744)(7) --
Other........................................ 3,437 4,590 8,027
Goodwill, net.................................. 65,263 158,465 52,859 (7) 285,226
(1,361)(8)
10,000 (4)
Trademarks, net................................ 22,064 -- 22,064
Recipes, net................................... 7,370 -- 7,370
Other Assets, net.............................. 14,172 12,134 (4,415)(8) 16,591
(5,300)(10)
-------- -------- --------
Total assets.......................... $488,047 $382,218 $594,169
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable............................. $ 3,483 $ 22,872 (7,835)(6) $ 18,520
Accrued expenses............................. 8,045 21,110 (7,000)(6) 24,155
2,000 (7)
Deferred franchise revenue................... 2,000 -- (2,000)(8) --
-------- -------- --------
Total current liabilities............. 13,528 43,982 42,675
-------- -------- --------
Convertible Subordinated Debentures............ 125,000 -- 125,000
Deferred Franchise Revenue..................... 6,076 -- (6,076)(8) --
Other Noncurrent Liabilities................... 296 751 1,047
Commitments and Contingencies
Minority Interest.............................. -- -- 77,600 (7) 77,600
Stockholders' Equity (Deficit):
Preferred Stock -- $.01 par value; 20,000,000
shares authorized; no shares issued and
outstanding................................ -- -- --
Common Stock -- $.01 par value; 200,000,000
shares authorized; 33,293,468 shares issued
and outstanding in October................. 333 -- 333
Additional paid-in capital................... 365,167 -- 10,000 (4) 375,167
Treasury Stock at cost....................... -- -- (5,300)(10) (5,300)
Partners' or members' equity................. -- 337,485 (337,485)(7) --
Accumulated deficit.......................... (22,353) -- (22,353)
-------- -------- --------
Total stockholders' equity............ 343,147 337,485 347,847
-------- -------- --------
Total liabilities and stockholders'
equity.............................. $488,047 $382,218 $594,169
======== ======== ========
</TABLE>
- ---------------
* The pro-forma Einstein/Noah Bagel Partners, L.P. balance sheet gives effect to
the merger of the area developers of ENBC into a single entity. See unaudited
pro forma consolidated balance sheet on page F-220.
F-5
<PAGE> 6
EINSTEIN/NOAH BAGEL CORP.
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
1. To eliminate interest, franchise and related fees charged by ENBC to the
area developers.
2. To record amortization of goodwill resulting from conversion of loans to
area developers into equity over 35 years, eliminate the amortization of
capitalized franchise area developer fees and adjust depreciation on assets
acquired based upon the assets' estimated fair market value.
3. To allocate the portion of Einstein/Noah Bagel Partners, L.P.'s losses
applicable to minority equity holders.
4. To record the exchange of area developer unit options into options for ENBC
common stock as determined based on the fair market value of the options on
the date of the exchange.
5. To adjust income tax expense as a result of the consolidated loss.
6. To eliminate current receivables/payables between ENBC and Einstein/Noah
Bagel Partners, L.P.
7. To record conversion of $300,744,000 of ENBC's loans to its area developers
into a majority equity interest, record minority interest, record acquired
assets (including goodwill) at estimated fair market value and record costs
related to the transaction. The adjustment to record the fair value of
assets acquired is based upon a preliminary estimate, and is subject to
change. The adjustment to goodwill consists of the elimination of
$158,465,000 of goodwill of Bagel Partners and the establishment of
$211,324,000 of goodwill resulting from the loan conversions.
8. To eliminate deferred franchise revenue from ENBC's liabilities and prepaid
franchise fees from Einstein/Noah Bagel Partners, L.P. assets.
9. In connection with the change in ENBC's business from a store franchisor to
a company-owned system, certain assets currently used in its franchising
capacity will no longer be utilized or realizable. The pro forma financial
statements do not include a charge of approximately $16,900,000 associated
with the conversion of area developer loans and unifying ENBC's field and
support center operations.
10. To record acquisition of shares of ENBC Common Stock held by area
developers.
F-6
<PAGE> 7
EINSTEIN/NOAH BAGEL PARTNERS, L.P.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS(2)
FOR THE FISCAL YEAR ENDED DECEMBER 29, 1996
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
COLONIAL GREAT LAKES GULFSTREAM NOAH'S ALAMO BCE WEST
BAGELS, L.P. BAGELS, L.L.C. BAGELS, L.P. PACIFIC, L.L.C. BAGELS, L.P. BAGELS, L.L.C.
------------ -------------- ------------ --------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Net Store Revenue................... $ 1,878 $11,374 $16,435 $12,226 $ 305 $22,951
Cost and Expenses:
Cost of products sold............. 772 4,318 6,383 5,601 131 9,915
Salaries and benefits............. 1,755 4,923 7,345 9,500 298 9,604
General and administrative........ 1,426 4,204 7,185 3,188 349 8,455
Depreciation and amortization..... 230 1,427 1,593 758 76 2,618
------- ------- ------- ------- ----- -------
Total costs and expenses... 4,183 14,872 22,506 19,047 854 30,592
------- ------- ------- ------- ----- -------
Loss from Operations................ (2,305) (3,498) (6,071) (6,821) (549) (7,641)
Other Income (Expense), net......... (65) (899) 735 (862) (16) (1,228)
------- ------- ------- ------- ----- -------
Net Loss............................ $(2,370) $(4,397) $(5,336) $(7,683) $(565) $(8,869)
======= ======= ======= ======= ===== =======
<CAPTION>
NOAH'S
FINEST LIBERTY MAYFAIR BAY AREA PHILLY
BAGELS, L.P. FOODS, L.L.C. BAGELS, L.L.C. BAGELS, L.L.C. ROSE, L.P.
------------ ------------- -------------- -------------- ----------
<S> <C> <C> <C> <C> <C>
Net Store Revenue................... $16,238 $ 2,191 $ 2,632 $17,338 $ 1,596
Cost and Expenses:
Cost of products sold............. 5,317 994 1,070 6,915 634
Salaries and benefits............. 6,873 2,214 1,568 5,016 1,153
General and administrative........ 5,582 1,608 1,280 5,356 1,303
Depreciation and amortization..... 1,386 454 370 687 236
------- ------- ------- ------- -------
Total costs and expenses... 19,158 5,270 4,288 17,974 3,326
------- ------- ------- ------- -------
Loss from Operations................ (2,920) (3,079) (1,656) (636) (1,730)
Other Income (Expense), net......... (731) (101) (50) (385) (85)
------- ------- ------- ------- -------
Net Loss............................ $(3,651) $(3,180) $(1,706) $(1,021) $(1,815)
======= ======= ======= ======= =======
<CAPTION>
UNAUDITED
PRO FORMA
EINSTEIN/NOAH
PRO FORMA BAGEL
ADJUSTMENTS PARTNERS, L.P.
----------- --------------
<S> <C> <C>
Net Store Revenue................... $105,164
Cost and Expenses:
Cost of products sold............. 42,050
Salaries and benefits............. 50,249
General and administrative........ 39,936
Depreciation and amortization..... $ 2,000 (4) 11,835
--------
Total costs and expenses... 144,070
--------
Loss from Operations................ (38,906)
Other Income (Expense), net......... (1,750)(1) 48
5,485 (6)
--------
Net Loss............................ $(38,858)
========
</TABLE>
F-7
<PAGE> 8
EINSTEIN/NOAH BAGEL PARTNERS, L.P.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS(2)
FOR THE THREE QUARTERS ENDED OCTOBER 5, 1997
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
GREAT
COLONIAL LAKES GULFSTREAM NOAH'S SUNBELT ALAMO
BAGELS, L.P. BAGELS, L.P. BAGELS, L.P. PACIFIC, L.L.C. BAGELS, L.L.C. BAGELS, L.P.
------------ ------------ ------------ --------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net Store Revenue................ $ 17,387 $ 41,240 $30,026 $ 36,351 $27,061 $ 2,735
Costs and Expenses:
Cost of products sold.......... 6,328 13,430 9,556 11,622 8,806 1,038
Salaries and benefits.......... 9,088 16,647 12,738 18,352 10,459 1,581
General and administrative..... 7,442 13,086 10,765 14,374 8,868 1,378
Depreciation and
amortization................. 2,551 4,578 3,048 3,763 2,295 286
-------- -------- ------- -------- ------- -------
Total costs and
expenses............... 25,409 47,741 36,107 48,111 30,428 4,283
Loss from Operations............. (8,022) (6,501) (6,081) (11,760) (3,367) (1,548)
Other Income (Expense) net....... (1,729) (2,843) (1,983) (615) (1,760) (220)
-------- -------- ------- -------- ------- -------
Net Loss......................... $ (9,751) $ (9,344) $(8,064) $(12,375) $(5,127) $(1,768)
======== ======== ======= ======== ======= =======
<CAPTION>
NOAH'S
BCE WEST FINEST LIBERTY MAYFAIR BAY AREA PHILLY
BAGELS, L.L.C. BAGELS, L.P. FOODS, L.L.C. BAGELS, L.P. BAGELS, L.L.C. ROSE, L.P.
-------------- ------------ ------------- ------------ -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net Store Revenue................ $11,631 $17,292 $ 2,475 $ 7,511 $24,509 $ 4,969
Costs and Expenses:
Cost of products sold.......... 4,040 5,407 1,049 2,662 9,310 1,851
Salaries and benefits.......... 3,996 7,573 2,107 3,798 7,702 2,746
General and administrative..... 3,997 5,619 1,328 2,999 10,676 2,231
Depreciation and
amortization................. 1,257 1,685 552 813 1,371 741
------- ------- ------- ------- ------- -------
Total costs and
expenses............... 13,290 20,284 5,036 10,272 29,059 7,569
Loss from Operations............. (1,659) (2,992) (2,561) (2,761) (4,550) (2,600)
Other Income (Expense) net....... (1,058) (1,182) (284) 106 (3,612) (439)
------- ------- ------- ------- ------- -------
Net Loss......................... $(2,717) $(4,174) $(2,845) $(2,655) $(8,162) $(3,039)
======= ======= ======= ======= ======= =======
<CAPTION>
UNAUDITED
PRO FORMA
EINSTEIN/NOAH
PRO FORMA BAGEL
ADJUSTMENTS PARTNERS, L.P.
----------- --------------
<S> <C> <C>
Net Store Revenue................ $223,187
Costs and Expenses:
Cost of products sold.......... 75,099
Salaries and benefits.......... 96,787
General and administrative..... 7,000 (3) 89,763
Depreciation and
amortization................. (4,250)(4) 18,690
--------
Total costs and
expenses............... 280,339
Loss from Operations............. (57,152)
Other Income (Expense) net....... (593)(1) 88
16,300 (6)
--------
Net Loss......................... $(57,064)
========
</TABLE>
F-8
<PAGE> 9
EINSTEIN/NOAH BAGEL PARTNERS, L.P.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
OCTOBER 5, 1997
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
GREAT
COLONIAL LAKES GULFSTREAM NOAH'S SUNBELT PRO FORMA
BAGELS, L.P. BAGELS, L.P. BAGELS, L.P. PACIFIC, L.L.C. BAGELS, L.L.C. ADJUSTMENTS
------------ ------------ ------------ --------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash
equivalents............ $ 296 $ 764 $ 39 $ 650 $ 353
Accounts receivable....... 172 400 358 1,603 171
Inventory................. 1,139 2,944 2,021 3,196 1,687
Prepaid expenses and other
current assets......... 134 419 440 502 181
------- -------- ------- ------- -------
Total current
assets.......... 1,741 4,527 2,858 5,951 2,392
------- -------- ------- ------- -------
Property and Equipment,
net....................... 28,021 54,479 46,058 60,271 30,731 (30,000)(4)
Notes Receivable............ 1,010 950 1,060 660 910
Goodwill, net............... 17,830 41,023 28,925 3,301 28,386 30,000 (4)
9,000 (3)
Other Assets, net........... 2,172 3,314 3,225 1,436 1,987
------- -------- ------- ------- -------
Total assets...... $50,774 $104,293 $82,126 $71,619 $64,406
======= ======== ======= ======= =======
LIABILITIES AND PARTNERS' OR MEMBERS' EQUITY
Current Liabilities:
Accounts payable.......... $ 2,222 $ 6,246 $ 5,492 $ 5,449 $ 3,463
Accrued expenses.......... 970 4,084 2,760 3,327 969 9,000 (3)
------- -------- ------- ------- -------
Total current
liabilities..... 3,192 10,330 8,252 8,776 4,432
------- -------- ------- ------- -------
Convertible Debt............ 42,486 78,695 59,749 71,225 48,589 (300,744)(5)
Other Noncurrent
Liabilities............... 98 38 582 33 --
Partners' or Members'
Equity.................... 4,998 15,230 13,543 (8,415) 11,385 300,744 (5)
------- -------- ------- ------- -------
Total liabilities
and partners'
and members'
equity.......... $50,774 $104,293 $82,126 $71,619 $64,406
======= ======== ======= ======= =======
<CAPTION>
UNAUDITED
PRO FORMA
EINSTEIN/NOAH
BAGEL
PARTNERS, L.P.
--------------
<S> <C>
ASSETS
Current Assets:
Cash and cash
equivalents............ $ 2,102
Accounts receivable....... 2,704
Inventory................. 10,987
Prepaid expenses and other
current assets......... 1,676
--------
Total current
assets.......... 17,469
--------
Property and Equipment,
net....................... 189,560
Notes Receivable............ 4,590
Goodwill, net............... 158,465
Other Assets, net........... 12,134
--------
Total assets...... $382,218
========
LIABILITIES AND PARTNERS' OR
Current Liabilities:
Accounts payable.......... $ 22,872
Accrued expenses.......... 21,110
--------
Total current
liabilities..... 43,982
--------
Convertible Debt............ --
Other Noncurrent
Liabilities............... 751
Partners' or Members'
Equity.................... 337,485
--------
Total liabilities
and partners'
and members'
equity.......... $382,218
========
</TABLE>
F-9
<PAGE> 10
EINSTEIN/NOAH BAGEL PARTNERS, L.P.
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
1. To eliminate gain on sale of assets between area developers:
1996 -- sale of assets from Gulfstream Bagels, L.P. to Great Lakes Bagels,
L.L.C.
1997 -- sale of assets from Mayfair Bagels, L.L.C. to Gulfstream Bagels, L.P.
2. Consolidated Statements of Operations reflect operations for the fiscal year
ended December 29, 1996 and the three quarters ended October 5, 1997, except
for those area developers which had partial periods of operations due to
inception during the period or merger during the period as noted below:
1996 -- Date of Inception
Alamo Bagels, L.P. -- October 11, 1996
Liberty Foods, L.L.C. -- April 17, 1996
Mayfair Bagels, L.L.C. -- April 1, 1996
Noah's Bay Area Bagels, L.L.C. -- July 15, 1996
Philly Rose, L.P. -- April 18, 1996
Colonial Bagels, L.P. -- June 5, 1996
Great Lakes Bagels, L.L.C. -- June 16, 1996
Gulfstream Bagels, L.P. -- March 25, 1996
Noah's Pacific, L.L.C. -- June 17, 1996
1997 -- Date of Inception
Sunbelt Bagels, L.L.C. -- March 24, 1997
1997 -- Effective Date of Merger
Alamo Bagels, L.P. -- April 20, 1997
BCE West Bagels, L.L.C. -- April 20, 1997
Finest Bagels, L.P. -- July 13, 1997
Liberty Foods, L.L.C. -- April 20, 1997
Mayfair Bagels, L.P. -- July 13, 1997
Noah's Bay Area Bagels, L.L.C. -- July 13, 1997
Philly Rose, L.P. -- June 15, 1997
3. To record costs associated with the area developer merger and settlement of
costs incurred but not previously charged to area developers under existing
contractual obligations.
4. To record the revaluation of property and equipment to fair market value. The
valuation is a preliminary estimate, and is subject to change.
5. To reflect the conversion of ENBC loans to the area developers into equity.
6. To eliminate interest expense associated with the converted ENBC loans.
F-10
