SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Date of Report (Date of earliest event reported) June 20, 1996
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(Exact Name of Company as Specified in its Charter) Manhattan
Bagel Company, Inc.
New Jersey 0-24388 22-2981539
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(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification
incorporation or Number)
organization)
246 Industrial Way West, Eatontown, New Jersey 07724
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(Address of principal executive office) (Zip Code)
Company's telephone number, including area code (908) 544-0155
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N/A
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Former Name or Former Address, if Changed Since Last Report)
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ITEM 5.OTHER EVENTS.
On June 20, 1996, Manhattan Bagel Company, Inc. issued the following
press release:
PRESS RELEASE
FOR IMMEDIATE RELEASE
MANHATTAN BAGEL TO RESTATE FIRST QUARTER; COMMENTS ON WEST COAST
SUBSIDIARY
NOTE: The Company has scheduled a conference call for June 21,
1996 at 9:00 a.m. E.S.T. Investors, analysts and editors are
invited to call 1-800-860-2442. Ask for Manhattan Bagel
conference call with Jack Grumet. Please call 10-15 minutes
prior to the scheduled time.
EATONTOWN, N.J. (06/20/96) -- Manhattan Bagel Company, Inc.
(NASDAQ: BGLS) announced today that, following the installation
of new management at its I&J West Coast subsidiary, it has
recently uncovered certain improper bookkeeping entries and
accounting practices at the Los Angeles subsidiary in the two
most recent quarters. The total amount involved is estimated at
approximately $350,000 on a pretax basis.
As a result, the Board of Directors has authorized a full
investigation into the accounting practices at the subsidiary,
which is ongoing, and has retained special counsel to assist in
the investigation.
Manhattan Bagel Company Chairman and Chief Executive
Officer, Jack Grumet, emphasized that the improprieties were
limited to the I&J subsidiary. The practices uncovered included
certain improperly recorded franchise fees, payments made for
purported public relations work, real estate finders fees, and
bonus and vacation pay, and inflated receivables and inventory.
The Company's independent auditors, Ernst & Young, LLP, have
advised that based on the findings to date, the Company will be
required to restate its first quarter 1996 Statement of
Operations. The restatement is expected to reduce total revenues
from $8,194,904 to approximately $8,104,904 and record additional
expenses of approximately $260,000. The improprieties occurring
prior to the 1996 first quarter were in amounts that were
immaterial to the financial statements for the period in which
they occurred and are included in the first quarter adjustments.
Based on these adjustments, the effect of the restatement will be
to reduce first quarter 1996 net income per share from $.12 to
$.09.
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The Company will continue to work closely with counsel and
its independent auditors in an effort to assure that all improper
accounting practices at the West Coast subsidiary are identified.
The Company also stated that an operational review
undertaken by the new West Coast management suggests that the
contribution to the Company's net income to be derived from the
Los Angeles store operations will not be at historical levels.
"The I&J subsidiary has, in recent months, been impacted by
increased competition," said Grumet. "Accordingly, we are
accelerating our program to improve these operations and
locations under the direction of a new management team. These
measures include the refurbishment of most of the West Coast
stores that we acquired in July of 1995 and January of 1996, as
well as increased advertising and promotional activities. We
believe that the West Coast operations will operate at a close to
break-even level for the remainder of 1996. Going forward, we
anticipate that the earnings of those operations will improve as
the benefits of the programs are realized.
"Although we do not minimize their impact, the issues
related to the West Coast operations do not, in our view, impair
the prospects for the Company's continued success," he continued.
"With the increase in the Company's franchise network and the
total number of store units, currently at 220, the contribution
of the 17 Company-owned I&J stores is less significant to the
Company as a whole. The Company is continuing to pursue many
opportunities to expand its business, including new master and
area franchisees, acquisitions, and additional alternative
distribution networks, including co-branding of the Company's
products with national or regional chain stores as stand-alone,
Company-owned or franchised stores and in-store kiosks and other
formats which offer the sales of the Company's products at
various third-party retail locations. We believe that the impact
of the loss of the West Coast contribution to the Company's net
income will be partially offset by the general expansion of the
Company's franchise and Company-owned store network and income
generated as a result of these opportunities, and that the
overall health of the Company and its prospects for the future
remain strong."
* * * *
The Company wishes to caution readers of this press release that
the foregoing discussion contains forward-looking statements that
involve risks and uncertainties that could cause actual results
to differ
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materially from those discussed. Such risks and uncertainties
include the following factors, among others:
The opening and success of Manhattan Bagel Company stores
will depend on various factors, including the availability of
suitable store sites and the negotiation of acceptable lease
terms for new locations, the ability of the Company to obtain
construction and other necessary permits in a timely manner, the
ability to meet construction schedules, the financial and other
capabilities of the Company's master franchisees, and general
economic and business conditions.
The Company's success is partially dependent on its ability
to attract, retain and contract with suitable franchisees and the
ability of these franchisees to open and operate their stores
successfully.
The Company's business may also be subject to changes in
consumer tastes, national, regional and local economic
conditions, demographic trends, and the type,
number and location of competing businesses.
Competition in the bagel industry is increasing
significantly with an increasing number of national, regional and
local stores, competing for franchisees and store locations as
well as customers.
* * * *
Manhattan Bagel, headquartered in Eatontown, NJ, has a total of
220 franchised and Company-owned stores operating in 15 states
and Canada. The Company also operates bagel dough and cream
cheese spread manufacturing plants in Eatontown and Moorestown,
NJ; Greenville, SC; and Los Angeles, CA. An additional plant is
expected to open in Calgary, Alberta, this month.
CONTACT: Manhattan Bagel Company, Inc.
Jack Grumet
908-544-0155
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
MANHATTAN BAGEL COMPANY, INC.
Date: June 24, 1996 By: /s/ Jack Grumet
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Jack Grumet
Chairman and Chief Executive Officer
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