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EXHIBIT 99.2
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INDEX TO FINANCIAL STATEMENTS
B.C.B.M. SOUTHWEST, L.P. (FORMERLY B.C. TEXAS, INC.)
Financial Statements:
Balance Sheets at July 12, 1998 and December 28, 1997................... F-3
Statements of Operations for the two quarters ended July 12, 1998 and
July 13, 1997.......................................................... F-4
Statements of Cash Flows for the two quarters ended July 12, 1998 and
July 13, 1997.......................................................... F-5
Notes to Financial Statements........................................... F-6
R&A FOOD SERVICES, L.P. (FORMERLY R&A FOOD SERVICES, INC.)
Financial Statements:
Balance Sheets at July 12, 1998 and December 28, 1997................... F-7
Statements of Operations for the two quarters ended July 12, 1998 and
July 13, 1997.......................................................... F-8
Statements of Cash Flows for the two quarters ended July 12, 1998 and
July 13, 1997.......................................................... F-9
Notes to Financial Statements........................................... F-10
FINEST FOODSERVICE, L.L.C.
Financial Statements:
Balance Sheets at July 12, 1998 and December 28, 1997................... F-11
Statements of Operations for the two quarters ended July 12, 1998 and
July 13, 1997.......................................................... F-12
Statements of Cash Flows for the two quarters ended July 12, 1998 and
July 13, 1997.......................................................... F-13
Notes to Financial Statements........................................... F-14
P&L FOOD SERVICES, L.L.C.
Financial Statements:
Balance Sheets at July 12, 1998 and December 28, 1997................... F-15
Statements of Operations for the two quarters ended July 12, 1998 and
July 13, 1997.......................................................... F-16
Statements of Cash Flows for the two quarters ended July 12, 1998 and
July 13, 1997.......................................................... F-17
Notes to Financial Statements........................................... F-18
BC BOSTON, L.P.
Financial Statements:
Balance Sheets at July 12, 1998 and December 28, 1997................... F-19
Statements of Operations for the two quarters ended July 12, 1998 and
July 13, 1997.......................................................... F-20
Statements of Cash Flows for the two quarters ended July 12, 1998 and
July 13, 1997.......................................................... F-21
Notes to Financial Statements........................................... F-22
BCE WEST, L.P.
Financial Statements:
Balance Sheets at July 12, 1998 and December 28, 1997................... F-23
Statements of Operations for the two quarters ended July 12, 1998 and
July 13, 1997.......................................................... F-24
Statements of Cash Flows for the two quarters ended July 12, 1998 and
July 13, 1997.......................................................... F-25
Notes to Financial Statements........................................... F-26
BC GOLDENGATE, L.L.C.
Financial Statements:
Balance Sheets at July 12, 1998 and December 28, 1997................... F-27
Statements of Operations for the two quarters ended July 12, 1998 and
July 13, 1997.......................................................... F-28
Statements of Cash Flows for the two quarters ended July 12, 1998 and
July 13, 1997.......................................................... F-29
Notes to Financial Statements........................................... F-30
BC TRI-STATES, L.L.C.
Financial Statements:
Balance Sheet at July 12, 1998 and December 28, 1997.................... F-31
Statement of Operations for the two quarters ended July 12, 1998 and
July 13, 1997.......................................................... F-32
Statement of Cash Flows for the two quarters ended July 12, 1998 and
July 13, 1997.......................................................... F-33
Notes to Financial Statements........................................... F-34
F-1
BC SUPERIOR, L.L.C.
Financial Statements:
Balance Sheets at July 12, 1998 and December 28, 1997................... F-35
Statements of Operations for the two quarters ended July 12, 1998 and
July 13, 1997.......................................................... F-36
Statements of Cash Flows for the two quarters ended July 12, 1998 and
July 13, 1997.......................................................... F-37
Notes to Financial Statements........................................... F-38
BC HEARTLAND, L.L.C.
Financial Statements:
Balance Sheets at July 12, 1998 and December 28, 1997................... F-39
Statements of Operations for the two quarters ended July 12, 1998 and
July 13, 1997.......................................................... F-40
Statements of Cash Flows for the two quarters ended July 12, 1998 and
July 13, 1997.......................................................... F-41
Notes to Financial Statements........................................... F-42
MARKET PARTNERS, L.L.C.
Financial Statements:
Statements of Assets and Liabilities at December 28, 1997 and July 12,
1998.................................................................. F-43
Schedule of Investments at December 28, 1997 and July 12, 1998......... F-44
Statements of Operations for the two quarters ended July 13, 1997 and
July 12, 1998......................................................... F-46
Statements of Changes in Net Assets for the two quarters ended July 13,
1997 and July 12, 1998................................................ F-47
Notes to Financial Statements.......................................... F-48
BC EQUITY FUNDING, L.L.C.
Financial Statements:
Statements of Assets and Liabilities at December 28, 1997 and July 12,
1998.................................................................. F-51
Schedule of Investments at December 28, 1997 and July 12, 1998......... F-52
Statements of Operations for the two quarters ended July 13, 1997 and
July 12, 1998......................................................... F-54
Statements of Changes in Net Assetss for the two quarters ended July
13, 1997 and July 12, 1998............................................ F-55
Notes to Financial Statements.......................................... F-56
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION OF BOSTON CHICKEN,
INC. GIVING EFFECT TO THE ACQUISITION OF MARKET PARTNERS, L.L.C., BC
EQUITY FUNDING, L.L.C. AND CERTAIN AREA DEVELOPERS OF BOSTON CHICKEN,
INC.
Unaudited Pro Forma Consolidated Statement of Operations for the two
quarters ended July 12, 1998.......................................... F-60
Unaudited Pro Forma Consolidated Balance Sheet as of July 12, 1998..... F-61
Notes to Unaudited Pro Forma Consolidated Financial Statements......... F-63
F-2
B.C.B.M. SOUTHWEST, L.P.
BALANCE SHEETS
AS OF JULY 12, 1998 AND DECEMBER 28, 1997
(UNAUDITED)
JULY 12, DECEMBER 28,
ASSETS 1998 1997
------ ----------- ------------
Current Assets:
Cash................................................ $ 467,655 $ 710,301
Inventories......................................... 1,300,574 1,471,343
Prepaid expenses and other current assets........... 24,508 170,053
----------- -----------
Total current assets.............................. 1,792,737 2,351,697
Property, Equipment and Other Related Assets, net..... 20,597,534 25,689,691
Other Assets.......................................... 317,477 317,477
----------- -----------
Total assets...................................... $22,707,748 $28,358,865
=========== ===========
LIABILITIES AND PARTNERS' DEFICIT
---------------------------------
Current Liabilities:
Accounts payable.................................... $ 1,610,827 $ 1,885,460
Accrued expenses.................................... 3,314,770 3,655,132
----------- -----------
Total current liabilities......................... 4,925,597 5,540,592
Convertible Debt...................................... 59,806,444 54,753,847
Other Liabilities..................................... 2,564,137 2,664,555
Commitments
Partners' deficit..................................... (44,588,430) (34,600,129)
----------- -----------
Total liabilities and partners' deficit........... $22,707,748 $28,358,865
=========== ===========
The accompanying notes to financial statements are an integral part of these
balance sheets.
X-0
X.X.X.X XXXXXXXXX, L.P.
STATEMENTS OF OPERATIONS
(UNAUDITED)
TWO QUARTERS ENDED
------------------------
JULY 12, JULY 13,
1998 1997
----------- -----------
Revenue.............................................. $34,704,041 $39,415,951
Costs and Expenses:
Store operations:
Food and paper................................... 12,618,592 15,138,075
Labor............................................ 9,562,626 10,389,790
Other controllable costs......................... 4,614,881 4,927,500
Rent, occupancy and related...................... 5,200,238 4,579,197
Contractual and discretionary marketing.......... 3,364,324 5,662,123
General and administrative........................... 4,787,114 4,473,753
Depreciation and amortization........................ 1,552,942 1,437,467
----------- -----------
Total costs and expenses....................... 41,700,717 46,607,905
----------- -----------
Loss from operations................................. (6,996,676) (7,191,954)
Other Income (Expense):
Interest expense................................... (3,008,169) (2,155,771)
Other income (expense)............................. 5,905 10,390
----------- -----------
Total other expense............................ (3,002,264) (2,145,381)
----------- -----------
Net Loss............................................. $(9,998,940) $(9,337,335)
=========== ===========
The accompanying notes to financial statements are an integral part of these
statements.
F-4
B.C.B.M. SOUTHWEST, L.P.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
TWO QUARTERS ENDED
--------------------------
JULY 12, JULY 13,
1998 1997
------------ ------------
Cash Flows from Operating Activities:
Net loss......................................... $ (9,998,940) $ (9,337,335)
Adjustments to reconcile net loss to net cash
used in
operating activities:
Depreciation and amortization.................. 1,552,942 1,437,467
Provision for asset impairment................. 2,329,663 --
Changes in assets and liabilities:
Inventories.................................. 170,769 22,487
Prepaid expenses and other current assets.... 145,545 (648,580)
Accounts payable and accrued expenses........ (550,160) (1,914,936)
Other assets and liabilities................. (89,779) 1,039,819
------------ ------------
Net cash used in operating activities...... (6,439,960) (9,401,078)
------------ ------------
Cash Flows from Investing Activities:
Purchase of property, equipment and other related
assets.......................................... (190,952) (8,427,821)
Sale of property, equipment and other related
assets.......................................... 1,335,669 --
------------ ------------
Net cash from (used in)investing
activities................................ 1,144,717 (8,427,821)
------------ ------------
Cash Flows from Financing Activities:
Proceeds from equity issuance.................... -- 4,433,115
Proceeds from convertible debt................... 25,978,393 40,551,370
Repayments of convertible debt................... (20,925,796) (28,973,741)
------------ ------------
Net cash provided by financing activities.. 5,052,597 16,010,744
------------ ------------
Increase (Decrease) in Cash........................ (242,646) (1,818,155)
Cash, beginning of year............................ 710,301 1,907,155
------------ ------------
Cash, end of period................................ $ 467,655 $ 89,000
============ ============
The accompanying notes to financial statements are an integral part of these
statements.
X-0
X.X.X.X. XXXXXXXXX, L.P.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The financial statements have been prepared by B.C.B.M. Southwest, L.P. the
("Partnership") and are unaudited. The financial statements and notes thereto
have been prepared in accordance with the instructions under Regulation S-X
for interim financial statements and, therefore, do not necessarily include
all information and footnotes required by generally accepted accounting
principles. In the opinion of management, all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows as of July 12, 1998 and for all
periods presented have been made. The statements are subject to audit
adjustment. A description of the Partnership's accounting policies and other
financial information are included in the audited financial statements.
2. ASSET IMPAIRMENT
For the two quarters ended July 12, 1998, as a result of declining store
performance, the Partnership recognized a $2.3 million asset impairment on
property, equipment and other related assets, which had a net book value of
$2.3 million. The asset impairment is classified in general and administrative
expenses in the accompanying statement of operations.
3. GOING CONCERN
The Partnership has experienced significant losses since its inception,
which has resulted in a capital deficiency as of July 12, 1998. Such losses
have been funded primarily by capital contributions and cash advances from
Boston Chicken, Inc. ("BCI") pursuant to a secured loan agreement.
Furthermore, the Partnership anticipates that it will continue to generate
cash flow deficits for the foreseeable future.
On July 15, 1998, BCI converted its loan in the Partnership into a majority
equity interest. In order to continue its operations, the Partnership will
require additional cash advances, which it expects to obtain through a loan
from BCI. BCI is currently attempting to restructure its outstanding publicly
traded convertible subordinated debt and to raise additional debt and/or
equity financing. There can be no assurance that BCI will be successful in
such restructuring efforts. Should BCI be unable to refinance its senior debt,
restructure its outstanding publicly traded convertible subordinated debt and
raise additional debt and/or equity, it may be unable to fund the
Partnership's cash flow deficits. As a result, the Partnership may be forced
to seek protection under applicable bankruptcy law. Consequently, there is
substantial doubt about the Partnership's ability to continue as a going
concern and to satisfy its obligations as they become due.
F-6
R & A FOODSERVICES, L.P.
BALANCE SHEETS
AS OF JULY 12, 1998 AND DECEMBER 28, 1997
(UNAUDITED)
JULY 12, DECEMBER 28,
1998 1997
------------ ------------
ASSETS
------
Current Assets:
Cash............................................... $ 907,252 $ 122,625
Inventories........................................ 1,780,682 2,100,741
Prepaid expenses and other current assets.......... 566,488 561,130
------------ ------------
Total current assets............................. 3,254,422 2,784,496
Property, Equipment and Other Related Assets, net.... 30,452,746 36,564,962
Other Assets......................................... 2,033,446 2,390,453
------------ ------------
Total assets..................................... $ 35,740,614 $ 41,739,911
============ ============
LIABILITIES AND PARTNERS' DEFICIT
---------------------------------
Current Liabilities:
Accounts payable................................... $ 2,470,204 $ 3,835,310
Accrued expenses................................... 5,690,527 10,838,076
------------ ------------
Total current liabilities........................ 8,160,731 14,673,386
Convertible Debt..................................... 102,635,735 93,219,935
Other Liabilities.................................... 6,945,377 1,898,638
Commitments
Partners' Deficit.................................... (82,001,229) (68,052,048)
------------ ------------
Total liabilities and partners' deficit.......... $ 35,740,614 $ 41,739,911
============ ============
F-7
R&A FOOD SERVICES, L.P.
STATEMENTS OF OPERATIONS
(UNAUDITED)
TWO QUARTERS ENDED
----------------------------
JULY 12, JULY 13,
1998 1997
------------- -------------
Revenue........................................... $ 54,871,580 $ 59,191,006
Costs and Expenses:
Store operations:
Food and paper................................ 19,634,622 22,551,192
Labor......................................... 14,415,054 15,397,031
Other controllable costs...................... 8,293,410 8,581,759
Rent, occupancy and related................... 7,296,511 7,491,111
Contractual and discretionary marketing....... 4,577,775 8,093,917
General and administrative........................ 7,163,096 5,703,981
Depreciation and amortization..................... 2,320,172 2,413,060
------------- -------------
Total costs and expenses.................... 63,700,640 70,232,051
------------- -------------
Loss from operations.............................. (8,829,060) (11,041,045)
Other Income (Expense):
Interest expense................................ (5,054,344) (4,083,578)
Other income (expense).......................... 44,132 11,891
------------- -------------
Total other expense......................... (5,010,212) (4,071,687)
------------- -------------
Net Loss.......................................... $ (13,839,272) $ (15,112,732)
============= =============
The accompanying notes to financial statements are an integral part of these
statements.
F-8
R & A FOODSERVICES, L.P.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
TWO QUARTERS ENDED
--------------------------
JULY 12, JULY 13,
1998 1997
------------ ------------
Cash Flows from Operating Activities:
Net loss......................................... $(13,839,272) $(15,112,732)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization.................. 2,320,172 2,413,060
Provision for asset impairment................. 2,987,423 --
Changes in assets and liabilities:
Inventories................................... 320,059 607,122
Prepaid expenses and other current assets..... 68,965 726,117
Accounts payable and accrued expenses......... 858,130 (2,055,560)
Other assets and liabilities.................. (1,499,509) 2,254,937
------------ ------------
Net cash used in operating activities........ (8,784,032) (11,167,056)
------------ ------------
Cash Flows from Investing Activities:
Purchase of property, equipment and other related
assets.......................................... (217,096) (3,553,598)
Proceeds from sale of assets..................... 443,702 11,885
------------ ------------
Net cash from (used in) investing activities. 226,606 (3,541,713)
------------ ------------
Cash Flows from Financing Activities:
Proceeds from equity issuances................... -- 3,324,837
Dividends........................................ (39,416) (543,057)
Proceeds from convertible debt................... 39,637,869 45,595,187
Repayments of convertible debt................... (30,256,400) (33,650,035)
------------ ------------
Net cash from financing activities........... 9,342,053 14,726,932
------------ ------------
Increase (Decrease) in Cash........................ 784,627 18,163
Cash, beginning of year............................ 122,625 1,664,778
------------ ------------
Cash, end of period................................ $ 907,252 $ 1,682,941
============ ============
The accompanying notes to financial statements are an integral part of these
statements.
F-9
R&A FOODSERVICES, L.P.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The financial statements have been prepared by R&A Foodservices, L.P. (the
"Partnership") and are unaudited. The financial statements and notes thereto
have been prepared in accordance with the instructions under Regulation S-X
for interim financial statements and, therefore, do not necessarily include
all information and footnotes required by generally accepted accounting
principles. In the opinion of management, all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows as of July 12, 1998 and for all
periods presented have been made. The statements are subject to audit
adjustment. A description of the Partnership's accounting policies and other
financial information are included in the audited financial statements.
2. ASSET IMPAIRMENT
For the two quarters ended July 12, 1998, as a result of declining store
performance, the Partnership recognized a $2.9 million asset impairment on
property, equipment and other related assets, which had a net book value of
$2.9 million. The asset impairment is classified in general and administrative
expenses in the accompanying statement of operations.
3. GOING CONCERN
The Partnership has experienced significant losses since its inception,
which has resulted in a capital deficiency as of July 12, 1998. Such losses
have been funded primarily by capital contributions and cash advances from
Boston Chicken, Inc. ("BCI") pursuant to a secured loan agreement.
Furthermore, the Partnership anticipates that it will continue to generate
cash flow deficits for the foreseeable future.
On July 15, 1998, BCI converted its loan in the Partnership into a majority
equity interest. In order to continue its operations, the Partnership will
require additional cash advances, which it expects to obtain through a loan
from BCI. BCI is currently attempting to restructure its outstanding publicly
traded convertible subordinated debt and to raise additional debt and/or
equity financing. There can be no assurance that BCI will be successful in
such restructuring efforts. Should BCI be unable to refinance its senior debt,
restructure its outstanding publicly traded convertible subordinated debt and
raise additional debt and/or equity, it may be unable to fund the
Partnership's cash flow deficits. As a result, the Partnership may be forced
to seek protection under applicable bankruptcy law. Consequently, there is
substantial doubt about the Partnership's ability to continue as a going
concern and to satisfy its obligations as they become due.
F-10
FINEST FOODSERVICE, L.L.C.
BALANCE SHEETS
AS OF JULY 12, 1998 AND DECEMBER 28, 1997
(UNAUDITED)
JULY 12, DECEMBER 28,
ASSETS 1998 1997
------ ----------- ------------
Current Assets:
Cash............................................... $ 209,970 $ --
Inventories........................................ 1,218,501 1,512,569
Prepaid expenses and other current assets.......... 36,133 340,827
----------- -----------
Total current assets............................. 1,464,604 1,853,396
Property, Equipment and Other Related Assets, net.... 10,476,906 19,699,916
Costs in Excess of Net Assets Acquired, net.......... 10,626,660 20,009,547
Other Assets, net.................................... 318,675 899,970
----------- -----------
Total assets..................................... $22,886,845 $42,462,829
=========== ===========
LIABILITIES AND MEMBERS' DEFICIT
--------------------------------
Current Liabilities:
Accounts payable................................... $ 354,663 $ 1,978,067
Accrued expenses................................... 3,872,721 9,313,599
----------- -----------
Total current liabilities........................ 4,227,384 11,291,666
Long-Term Debt....................................... 88,046,807 78,120,503
Other Liabilities.................................... 6,534,823 2,228,811
Commitments
Members' Deficit..................................... (75,922,169) (49,178,151)
----------- -----------
Total liabilities and members' deficit........... $22,886,845 $42,462,829
=========== ===========
The accompanying notes to financial statements are an integral part of these
balance sheets.
F-11
FINEST FOODSERVICE, L.L.C.
STATEMENTS OF OPERATIONS
(UNAUDITED)
TWO QUARTERS ENDED
--------------------------
JULY 12, JULY 13,
1998 1997
------------ ------------
Revenue ........................................... $ 29,180,040 $ 38,011,364
Costs and Expenses:
Store operations:
Food and paper................................. 10,922,903 15,467,548
Labor.......................................... 8,516,958 11,049,508
Other controllable costs....................... 4,616,119 5,472,666
Rent, occupancy and related.................... 7,142,440 7,199,866
Contractual and discretionary marketing........ 2,343,519 5,510,768
General and administrative......................... 15,429,316 6,602,392
Depreciation and amortization (excluding goodwill
amortization)..................................... 935,124 1,223,658
Goodwill amortization.............................. 762,551 911,924
------------ ------------
Total costs and expenses..................... 50,668,930 53,438,330
------------ ------------
Loss from operations............................... (21,488,890) (15,426,966)
Other Income (Expense):
Interest expense................................. (4,434,783) (2,788,078)
Other income (expense)........................... (207,270) (39,371)
------------ ------------
Total other expense.......................... (4,642,053) (2,827,449)
------------ ------------
Net Loss........................................... $(26,130,943) $(18,254,415)
============ ============
The accompanying notes to financial statements are an integral part of these
statements.
F-12
FINEST FOODSERVICE, L.L.C.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
TWO QUARTERS ENDED
--------------------------
JULY 12, JULY 13,
1998 1997
------------ ------------
Cash Flows from Operating Activities:
Net loss......................................... $(26,130,943) $(18,254,415)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization.................. 1,697,675 2,135,582
Provision for asset impairment................. 13,920,394 49,839
Changes in assets and liabilities:
Inventories.................................. 294,068 (40,391)
Prepaid expenses and other current assets.... 191,616 643,782
Accounts payable and accrued liabilities..... (730,393) (543,423)
Other assets and liabilities................. (1,526,712) 847,557
------------ ------------
Net cash used in operating activities...... (12,284,295) (15,161,469)
------------ ------------
Cash Flows from Investing Activities:
Purchases of property, equipment and other
related assets.................................. (120,650) (5,799,468)
Proceeds from sale of property and equipment..... 2,688,611 --
------------ ------------
Net cash provided by (used in) investing
activities................................ 2,567,961 (5,799,468)
------------ ------------
Cash Flows from Financing Activities:
Issuance of preferred units...................... -- 3,324,508
Proceeds from long-term debt..................... 25,753,604 41,590,107
Repayments on long-term debt..................... (15,827,300) (24,465,191)
------------ ------------
Net cash provided by financing activities.. 9,926,304 20,449,424
------------ ------------
Net Increase in Cash............................... 209,970 (511,513)
Cash, beginning of year............................ -- 638,513
------------ ------------
Cash, end of period................................ $ 209,970 $ 127,000
============ ============
The accompanying notes to financial statements are an integral part of these
statements.
F-13
FINEST FOODSERVICE, L.L.C.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The financial statements have been prepared by Finest Foodservice, L.L.C.
(the "Company") and are unaudited. The financial statements and notes thereto
have been prepared in accordance with the instructions under Regulation S-X
for interim financial statements and, therefore, do not necessarily include
all information and footnotes required by generally accepted accounting
principles. In the opinion of management, all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows as of July 12, 1998 and for all
periods presented have been made. The statements are subject to audit
adjustment. A description of the Company's accounting policies and other
financial information are included in the audited financial statements.
2. ASSET IMPAIRMENT
For the two quarters ended July 12, 1998, as a result of declining store
performance, the Company recognized a $13.9 million asset impairment on
property, equipment and other related assets and goodwill, which had a net
book value of $13.9 million. The asset impairment is classified in general and
administrative expenses in the accompanying statement of operations.
3. GOING CONCERN
The Partnership has experienced significant losses since its inception,
which has resulted in a capital deficiency as of July 12, 1998. Such losses
have been funded primarily by capital contributions and cash advances from
Boston Chicken, Inc. ("BCI") pursuant to a secured loan agreement.
Furthermore, the Partnership anticipates that it will continue to generate
cash flow deficits for the foreseeable future.
On July 15, 1998, BCI converted its loan in the Partnership into a majority
equity interest. In order to continue its operations, the Partnership will
require additional cash advances, which it expects to obtain through a loan
from BCI. BCI is currently attempting to restructure its outstanding publicly
traded convertible subordinated debt and to raise additional debt and/or
equity financing. There can be no assurance that BCI will be successful in
such restructuring efforts. Should BCI be unable to refinance its senior debt,
restructure its outstanding publicly traded convertible subordinated debt and
raise additional debt and/or equity, it may be unable to fund the
Partnership's cash flow deficits. As a result, the Partnership may be forced
to seek protection under applicable bankruptcy law. Consequently, there is
substantial doubt about the Partnership's ability to continue as a going
concern and to satisfy its obligations as they become due.
F-14
P&L FOODSERVICE, L.L.C.
BALANCE SHEETS
AS OF JULY 12, 1998 AND DECEMBER 28, 1997
(UNAUDITED)
JULY 12, DECEMBER
ASSETS 1998 28, 1997
------ ----------- -----------
Current Assets:
Cash................................................ $ 359,802 $ 389,568
Inventories......................................... 1,003,850 1,168,315
Prepaid expenses and other current assets........... 276,512 239,953
----------- -----------
Total current assets.............................. 1,640,164 1,797,836
Property, Equipment and Other Related Assets, net..... 20,590,343 28,074,145
Costs in Excess of Net Assets Acquired, net........... 1,389,830 1,694,389
Other Assets, net..................................... 366,326 366,326
----------- -----------
Total assets...................................... $23,986,663 $31,932,696
=========== ===========
LIABILITIES AND MEMBERS' DEFICIT
--------------------------------
Current Liabilities:
Accounts payable.................................... $ 703,247 $ 1,322,297
Accrued expenses.................................... 2,678,916 4,514,934
----------- -----------
Total current liabilities......................... 3,382,163 5,837,231
Debt.................................................. 52,034,099 49,674,999
Other Liabilities..................................... 3,019,961 528,466
Commitments...........................................
Members' Deficit...................................... (34,449,560) (24,108,000)
----------- -----------
Total liabilities and members' deficit............ $23,986,663 $31,932,696
=========== ===========
The accompanying notes to financial statements are an integral part of these
balance sheets.
F-15
P & L FOOD SERVICES, L.L.C.
STATEMENTS OF OPERATIONS
(UNAUDITED)
TWO QUARTERS ENDED
--------------------------
JULY 12, JULY 13,
1998 1997
------------ ------------
Revenue ........................................... $ 25,967,540 $ 29,292,248
Costs and Expenses:
Store operations:
Food and paper................................. 9,288,543 11,644,276
Labor.......................................... 7,418,500 7,983,071
Other controllable costs....................... 3,957,573 4,051,346
Rent, occupancy and related.................... 3,320,780 3,050,428
Contractual and discretionary marketing........ 2,055,723 4,302,991
General and administrative......................... 6,370,347 2,217,084
Depreciation and amortization (excluding goodwill
amortization)..................................... 1,305,832 1,303,355
Goodwill amortization.............................. 64,560 69,083
------------ ------------
Total costs and expenses..................... 33,781,858 34,621,634
------------ ------------
Loss from operations............................... (7,814,318) (5,329,386)
Other Income (Expense):
Interest expense................................. (2,687,440) (2,011,702)
Other income (expense)........................... 160,199 (16,284)
------------ ------------
Total other expense.......................... (2,527,241) (2,027,986)
------------ ------------
Net Loss........................................... $(10,341,559) $ (7,357,372)
============ ============
The accompanying notes to financial statements are an integral part of these
statements.
F-16
P&L FOOD SERVICES, L.L.C.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
TWO QUARTERS ENDED
-------------------------
JULY 12, JULY 13,
1998 1997
------------ -----------
Cash Flows from Operating Activities:
Net loss.......................................... $(10,341,559) $(7,357,372)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization................... 1,370,392 1,372,438
Provision for asset impairment.................. 4,896,547 --
Changes in assets and liabilities:
Inventories................................... 164,465 (71,766)
Prepaid expenses and other current assets..... 765,314 696,441
Accounts payable and accrued expenses......... (728,891) (382,026)
Other assets and liabilities.................. (1,018,532) 1,244,171
------------ -----------
Net cash (used in) provided by operating
activities................................. (4,892,264) (4,498,114)
------------ -----------
Cash Flows from Investing Activities:
Purchase of property, equipment and other related
assets........................................... (174,785) (6,753,464)
Proceeds from sale of property, equipment and
other related assets............................. 1,197,410 895,797
------------ -----------
Net cash from (used in) investing
activities................................. 1,022,625 (5,857,667)
------------ -----------
Cash Flows from Financing Activities:
Proceeds from issuance of member units............ -- 5,541,396
Proceeds from debt................................ 18,262,771 26,616,403
Payments on debt.................................. (14,422,898) (21,154,223)
Dividends paid.................................... -- (277,069)
------------ -----------
Net cash provided by financing activities... 3,839,873 10,726,507
------------ -----------
Net (Decrease) Increase in Cash..................... (29,766) 370,726
Cash, beginning of period........................... 389,568 272,459
------------ -----------
Cash, end of period................................. $ 359,802 $ 643,185
============ ===========
The accompanying notes to financial statements are an integral part of these
statements.
F-17
P&L FOODSERVICE, L.L.C.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The financial statements have been prepared by P&L Foodservice, L.L.C. (the
"Company") and are unaudited. The financial statements and notes thereto have
been prepared in accordance with the instructions under Regulation S-X for
interim financial statements and, therefore, do not necessarily include all
information and footnotes required by generally accepted accounting
principles. In the opinion of management, all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows as of July 12, 1998 and for all
periods presented have been made. The statements are subject to audit
adjustment. A description of the Company's accounting policies and other
financial information are included in the audited financial statements.
2. ASSET IMPAIRMENT
For the two quarters ended July 12, 1998, as a result of declining store
performance, the Company recognized a $4.9 million asset impairment on
property, equipment and other related assets and goodwill, which had a net
book value of $4.9 million. The asset impairment is classified in general and
administrative expenses in the accompanying statement of operations.
3. GOING CONCERN
The Partnership has experienced significant losses since its inception,
which has resulted in a capital deficiency as of July 12, 1998. Such losses
have been funded primarily by capital contributions and cash advances from
Boston Chicken, Inc. ("BCI") pursuant to a secured loan agreement.
Furthermore, the Partnership anticipates that it will continue to generate
cash flow deficits for the foreseeable future.
On July 15, 1998, BCI converted its loan in the Partnership into a majority
equity interest. In order to continue its operations, the Partnership will
require additional cash advances, which it expects to obtain through a loan
from BCI. BCI is currently attempting to restructure its outstanding publicly
traded convertible subordinated debt and to raise additional debt and/or
equity financing. There can be no assurance that BCI will be successful in
such restructuring efforts. Should BCI be unable to refinance its senior debt,
restructure its outstanding publicly traded convertible subordinated debt and
raise additional debt and/or equity, it may be unable to fund the
Partnership's cash flow deficits. As a result, the Partnership may be forced
to seek protection under applicable bankruptcy law. Consequently, there is
substantial doubt about the Partnership's ability to continue as a going
concern and to satisfy its obligations as they become due.
F-18
BC BOSTON, L.P.
BALANCE SHEETS
AS OF JULY 12, 1998 AND DECEMBER 28, 1997
(UNAUDITED)
JULY 12, DECEMBER 28,
ASSETS 1998 1997
------ ------------ ------------
Current Assets:
Cash............................................... $ 10,933 $ --
Inventories........................................ 962,879 1,114,710
Prepaid expenses and other current assets.......... 128,889 264,052
------------ ------------
Total current assets............................. 1,102,701 1,378,762
Property, Equipment and Other Related Assets, net.... 16,619,411 20,725,955
Costs in Excess of Net Assets Acquired, net.......... 4,332,152 5,800,498
Other Assets, net.................................... 40,000 115,153
------------ ------------
Total assets..................................... $ 22,094,264 $ 28,020,368
============ ============
LIABILITIES AND PARTNERS' DEFICIT
---------------------------------
Current Liabilities:
Accounts payable................................... $ 995,233 $ 973,325
Accrued expenses................................... 1,961,716 2,958,278
------------ ------------
Total current liabilities........................ 2,956,949 $3,931,603
Long-Term Debt....................................... 51,262,151 46,687,421
Other Liabilities.................................... 2,270,430 739,920
Commitments
Partners' Deficit.................................... (34,395,266) (23,338,576)
------------ ------------
Total liabilities and partners' deficit.......... $ 22,094,264 $ 28,020,368
============ ============
The accompanying notes to financial statements are an integral part of these
balance sheets.
F-19
BC BOSTON, L.P.
STATEMENTS OF OPERATIONS
(UNAUDITED)
TWO QUARTERS ENDED
--------------------------
JULY 12, JULY 13,
1998 1997
------------ ------------
Revenue ........................................... $ 26,864,375 $ 32,224,598
Costs and Expenses:
Store operations:
Food and paper................................. 9,767,678 12,572,364
Labor.......................................... 7,322,138 8,613,610
Other controllable costs....................... 4,419,575 4,313,875
Rent, occupancy and related.................... 3,476,406 3,053,661
Contractual and discretionary marketing........ 2,179,639 4,992,773
General and administrative......................... 6,724,344 2,199,866
Depreciation and amortization (excluding goodwill
amortization)..................................... 1,173,495 1,412,512
Goodwill amortization.............................. 237,590 259,433
------------ ------------
Total costs and expenses..................... 35,300,865 37,418,094
------------ ------------
Loss from operations............................... (8,436,490) (5,193,496)
Other Income (Expense):
Interest expense................................. (2,567,334) (2,016,575)
Other income (expense)........................... (2,362) (6,245)
------------ ------------
Total other expense.......................... (2,569,696) (2,022,820)
------------ ------------
Net Loss........................................... $(11,006,186) $ (7,216,316)
============ ============
The accompanying notes to financial statements are an integral part of these
statements.
F-20
BC BOSTON, L.P.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
TWO QUARTERS ENDED
-------------------------
JULY 12, JULY 13,
1998 1997
------------ -----------
Cash Flows from Operating Activities:
Net loss.......................................... $(11,006,186) $(7,216,316)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization................... 1,411,085 1,671,946
Provision for asset impairment.................. 4,818,581 --
Changes in assets and liabilities:
Inventories................................... 151,831 (95,438)
Prepaid expenses and other current assets..... 135,163 948,939
Accounts payable and accrued expenses......... 348,936 (2,561,650)
Other assets and liabilities.................. 172,567 1,492,631
------------ -----------
Net cash used in operating activities....... (3,968,023) (5,759,888)
------------ -----------
Cash Flows from Investing Activities:
Purchase of property, equipment and other related
assets........................................... (595,774) (651,880)
------------ -----------
Net cash used in investing activities....... (595,774) (651,880)
------------ -----------
Cash Flows from Financing Activities:
Proceeds from long-term debt...................... 19,043,631 27,650,704
Payments on long-term debt........................ (14,468,901) (20,914,271)
Dividends paid.................................... -- (186,191)
------------ -----------
Net cash from financing activities.......... 4,574,730 6,550,242
------------ -----------
Increase (Decrease) in Cash......................... 10,933 138,474
Cash, beginning of year............................. -- 755,535
------------ -----------
Cash, end of period................................. $ 10,933 $ 894,009
============ ===========
The accompanying notes to financial statements are an integral part of these
statements.
F-21
BC BOSTON, L.P.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The financial statements have been prepared by BC Boston, L.P. (the
"Partnership") and are unaudited. The financial statements and notes thereto
have been prepared in accordance with the instructions under Regulation S-X
for interim financial statements and, therefore, do not necessarily include
all information and footnotes required by generally accepted accounting
principles. In the opinion of management, all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows as of July 12, 1998 and for all
periods presented have been made. The statements are subject to audit
adjustment. A description of the Partnership's accounting policies and other
financial information are included in the audited financial statements.
2. ASSET IMPAIRMENT
For the two quarters ended July 12, 1998, as a result of declining store
performance, the Partnership recognized a $4.8 million asset impairment on
property, equipment and other related assets and goodwill, which had a net
book value of $4.8 million. The asset impairment is classified in general and
administrative expenses in the accompanying statement of operations.
3. GOING CONCERN
The Partnership has experienced significant losses since its inception,
which has resulted in a capital deficiency as of July 12, 1998. Such losses
have been funded primarily by capital contributions and cash advances from
Boston Chicken, Inc. ("BCI") pursuant to a secured loan agreement.
Furthermore, the Partnership anticipates that it will continue to generate
cash flow deficits for the foreseeable future.
On July 15, 1998, BCI converted its loan in the Partnership into a majority
equity interest. In order to continue its operations, the Partnership will
require additional cash advances, which it expects to obtain through a loan
from BCI. BCI is currently attempting to restructure its outstanding publicly
traded convertible subordinated debt and to raise additional debt and/or
equity financing. There can be no assurance that BCI will be successful in
such restructuring efforts. Should BCI be unable to refinance its senior debt,
restructure its outstanding publicly traded convertible subordinated debt and
raise additional debt and/or equity, it may be unable to fund the
Partnership's cash flow deficits. As a result, the Partnership may be forced
to seek protection under applicable bankruptcy law. Consequently, there is
substantial doubt about the Partnership's ability to continue as a going
concern and to satisfy its obligations as they become due.
F-22
BCE WEST, L.P.
BALANCE SHEETS
AS OF JULY 12, 1998 AND DECEMBER 28, 1997
(UNAUDITED)
JULY 12, DECEMBER 28,
ASSETS 1998 1997
------ ------------ ------------
Current Assets:
Cash............................................... $ 240,101 $ 95,857
Inventories........................................ 794,926 912,061
Prepaid expenses and other current assets.......... 57,021 262,537
------------ ------------
Total current assets............................. 1,092,048 1,270,455
Property, Equipment and Other Related Assets, net.... 11,322,252 15,667,653
Costs in Excess of Net Assets Acquired, net.......... 2,151,981 2,975,629
Other Assets, net.................................... 120,000 213,300
------------ ------------
Total assets..................................... $ 14,686,281 $ 20,127,037
============ ============
LIABILITIES AND PARTNERS' DEFICIT
---------------------------------
Current Liabilities:
Accounts payable................................... $ 594,241 $ 233,322
Accrued expenses................................... 2,083,436 4,036,490
------------ ------------
Total current liabilities........................ 2,677,677 4,269,812
Debt................................................. 47,006,720 43,337,487
Other Liabilities.................................... 1,919,262 763,855
Commitments
Partners' Deficit.................................... (36,917,378) (28,244,117)
------------ ------------
Total liabilities and partners' deficit.......... $ 14,686,281 $ 20,127,037
============ ============
The accompanying notes to financial statements are an integral part of these
balance sheets.
F-23
BCE WEST, L.P.
STATEMENTS OF OPERATIONS
(UNAUDITED)
TWO QUARTERS ENDED
------------------------
JULY 12, JULY 13,
1998 1997
----------- -----------
Revenue ............................................. $20,722,098 $37,320,302
Costs and Expenses:
Store operations:
Food and paper.................................... 7,172,676 14,096,281
Labor............................................. 5,572,556 9,491,455
Other controllable costs.......................... 3,175,494 4,487,026
Rent, occupancy and related....................... 3,863,131 4,565,083
Contractual and discretionary marketing........... 1,697,519 5,955,656
General and administrative......................... 4,467,144 3,807,627
Depreciation and amortization (excluding goodwill
amortization)..................................... 954,963 1,561,800
Goodwill amortization.............................. 131,059 136,046
----------- -----------
Total costs and expenses......................... 27,034,542 44,100,974
----------- -----------
Loss from operations................................. (6,312,444) (6,780,672)
Other Income (Expense):
Interest expense................................... (2,373,161) (2,122,785)
Other income (expense)............................. 12,345 22,750
----------- -----------
Total other expense.............................. (2,360,816) (2,100,035)
----------- -----------
Net Loss............................................. $(8,673,260) $(8,880,707)
=========== ===========
The accompanying notes to financial statements are an integral part of these
statements.
F-24
BCE WEST, L.P.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
TWO QUARTERS ENDED
------------------------
JULY 12, JULY 13,
1998 1997
----------- -----------
Cash Flows from Operating Activities:
Net loss........................................... $(8,673,260) $(8,880,707)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization.................... 1,086,022 1,697,846
Provision for asset impairment................... 3,783,317 --
Changes in assets and liabilities:
Inventories.................................... 117,135 98,652
Prepaid expenses and other current assets...... 205,516 782,214
Accounts payable and accrued expenses.......... (458,103) (4,011,961)
Other assets and liabilities................... 28,744 2,295,880
----------- -----------
Net cash used in operating activities........ (3,910,629) (8,018,076)
----------- -----------
Cash Flows from Investing Activities:
Purchase of property, equipment and other related
assets............................................ (127,380) (5,057,313)
Proceeds from sale of property and equipment....... 513,020 13,182
----------- -----------
Net cash provided by (used in) investing
activities.................................. 385,640 (5,044,131)
----------- -----------
Cash Flows from Financing Activities:
Borrowings on debt................................. 20,595,822 35,661,634
Payments on debt................................... (16,926,589) (28,922,324)
Dividends paid..................................... -- (268,450)
Proceeds from issuance of preferred partnership
units............................................. -- 5,541,394
----------- -----------
Net cash provided by financing activities.... 3,669,233 12,012,254
----------- -----------
Net Decrease in Cash................................. 144,244 (1,049,953)
Cash, beginning of year.............................. 95,857 1,242,953
----------- -----------
Cash, end of period.................................. $ 240,101 $ 193,000
=========== ===========
The accompanying notes to financial statements are an integral part of these
statements.
F-25
BCE WEST, L.P.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The financial statements have been prepared by BCE West, L.P. (the
"Partnership") and are unaudited. The financial statements and notes thereto
have been prepared in accordance with the instructions under Regulation S-X
for interim financial statements and, therefore, do not necessarily include
all information and footnotes required by generally accepted accounting
principles. In the opinion of management, all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows as of July 12, 1998 and for all
periods presented have been made. The statements are subject to audit
adjustment. A description of the Partnership's accounting policies and other
financial information are included in the audited financial statements.
2. ASSET IMPAIRMENT
For the two quarters ended July 12, 1998, as a result of declining store
performance, the Partnership recognized a $3.8 million asset impairment on
property, equipment and other related assets and goodwill, which had a net
book value of $3.8 million. The asset impairment is classified in general and
administrative expenses in the accompanying statement of operations.
3. GOING CONCERN
The Partnership has experienced significant losses since its inception,
which has resulted in a capital deficiency as of July 12, 1998. Such losses
have been funded primarily by capital contributions and cash advances from
Boston Chicken, Inc. ("BCI") pursuant to a secured loan agreement.
Furthermore, the Partnership anticipates that it will continue to generate
cash flow deficits for the foreseeable future.
On July 15, 1998, BCI converted its loan in the Partnership into a majority
equity interest. In order to continue its operations, the Partnership will
require additional cash advances, which it expects to obtain through a loan
from BCI. BCI is currently attempting to restructure its outstanding publicly
traded convertible subordinated debt and to raise additional debt and/or
equity financing. There can be no assurance that BCI will be successful in
such restructuring efforts. Should BCI be unable to refinance its senior debt,
restructure its outstanding publicly traded convertible subordinated debt and
raise additional debt and/or equity, it may be unable to fund the
Partnership's cash flow deficits. As a result, the Partnership may be forced
to seek protection under applicable bankruptcy law. Consequently, there is
substantial doubt about the Partnership's ability to continue as a going
concern and to satisfy its obligations as they become due.
F-26
BC GOLDENGATE, L.L.C.
BALANCE SHEETS
AS OF JULY 12, 1998 AND DECEMBER 28, 1997
(UNAUDITED)
JULY 12, DECEMBER 28,
ASSETS 1998 1997
------ ----------- ------------
Current Assets:
Cash............................................... $ 147,144 $ 171,029
Inventories........................................ 1,003,567 1,151,503
Prepaid expenses and other current assets.......... 84,647 381,984
----------- -----------
Total current assets............................. 1,235,358 1,704,516
Property, Equipment and Other Related Assets, net.... 11,773,521 24,188,945
Costs in Excess of Net Assets Acquired, net.......... 1,679,955 3,224,537
Other Assets, net.................................... 515,589 1,116,236
----------- -----------
Total assets..................................... $15,204,423 $30,234,234
=========== ===========
LIABILITIES AND MEMBERS' DEFICIT
--------------------------------
Current Liabilities:
Accounts payable................................... $ 1,029,403 $ 2,220,982
Accrued expenses................................... 2,232,529 3,669,478
----------- -----------
Total current liabilities........................ 3,261,932 5,890,460
Debt................................................. 57,477,008 49,992,626
Other Liabilities.................................... 3,209,952 1,866,076
Commitments
Members' Deficit..................................... (48,744,469) (27,514,928)
----------- -----------
Total liabilities and members' deficit........... $15,204,423 $30,234,234
=========== ===========
The accompanying notes to financial statements are an integral part of these
balance sheets.
F-27
BC GOLDENGATE, L.L.C.
STATEMENTS OF OPERATIONS
(UNAUDITED)
TWO QUARTERS ENDED
--------------------------
JULY 12, JULY 13,
1998 1997
------------ ------------
Revenue ........................................... $ 24,413,477 $ 33,397,442
Costs and Expenses:
Store operations:
Food and paper................................. 8,549,905 12,895,191
Labor.......................................... 6,980,554 8,469,269
Other controllable costs....................... 4,149,571 4,583,287
Rent, occupancy and related.................... 5,560,425 5,277,250
Contractual and discretionary marketing........ 2,753,849 6,115,187
General and administrative......................... 13,098,782 3,049,709
Depreciation and amortization (excluding goodwill
amortization)..................................... 1,170,236 1,610,180
Goodwill amortization.............................. 121,639 135,358
------------ ------------
Total costs and expenses..................... 42,384,961 42,135,431
------------ ------------
Loss from operations............................... (17,971,484) (8,737,989)
Other Income (Expense):
Interest expense................................. (2,771,216) (1,718,694)
Other income (expense)........................... 113,158 37,339
------------ ------------
Total other expense.......................... (2,658,058) (1,681,355)
------------ ------------
Net Loss........................................... $(20,629,542) $(10,419,344)
============ ============
The accompanying notes to financial statements are an integral part of these
statements.
F-28
BC GOLDENGATE, L.L.C.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
TWO QUARTERS ENDED
--------------------------
JULY 12, JULY 13,
1998 1997
------------ ------------
Cash Flows from Operating Activities:
Net loss......................................... $(20,629,542) $(10,419,344)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization.................. 1,291,875 1,745,538
Provision for asset impairment................. 11,025,507 --
Changes in assets and liabilities:
Inventories.................................. 147,936 40,264
Prepaid expenses and other current assets.... 297,337 1,702,265
Accounts payable and accrued expenses........ (895,181) (1,971,512)
Other assets and liabilities................. (221,529) 435,432
------------ ------------
Net cash used in operating activities...... (8,983,597) (8,467,357)
------------ ------------
Cash Flows from Investing Activities:
Purchase of property, equipment and other related
assets.......................................... (208,068) (5,682,741)
Proceeds from sale of equipment.................. 1,683,398 49,129
------------ ------------
Net cash from (used in) investing
activities................................ 1,475,330 (5,633,612)
------------ ------------
Cash Flows from Financing Activities:
Proceeds from issuance of members' units......... -- 4,433,115
Proceeds from debt............................... 21,544,675 37,725,313
Payment on debt.................................. (14,060,293) (28,060,861)
------------ ------------
Net cash provided by financing activities.. 7,484,382 14,097,567
------------ ------------
Increase (Decrease) in Cash........................ (23,885) (3,402)
Cash, beginning of period.......................... 171,029 1,029,504
------------ ------------
Cash, end of period................................ $ 147,144 $ 1,026,102
============ ============
The accompanying notes to financial statements are an integral part of these
statements.
F-29
BC GOLDENGATE, L.L.C.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The financial statements have been prepared by BC GoldenGate, L.L.C. (the
"Company") and are unaudited. The financial statements and notes thereto have
been prepared in accordance with the instructions under Regulation S-X for
interim financial statements and, therefore, do not necessarily include all
information and footnotes required by generally accepted accounting
principles. In the opinion of management, all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows as of July 12, 1998 and for all
periods presented have been made. The statements are subject to audit
adjustment. A description of the Company's accounting policies and other
financial information are included in the audited financial statements.
2. ASSET IMPAIRMENT
For the two quarters ended July 12, 1998, as a result of declining store
performance, the Company recognized a $11.0 million asset impairment on
property, equipment and other related assets and goodwill, which had a net
book value of $11.0 million. The asset impairment is classified in general and
administrative expenses in the accompanying statement of operations.
3. GOING CONCERN
The Partnership has experienced significant losses since its inception,
which has resulted in a capital deficiency as of July 12, 1998. Such losses
have been funded primarily by capital contributions and cash advances from
Boston Chicken, Inc. ("BCI") pursuant to a secured loan agreement.
Furthermore, the Partnership anticipates that it will continue to generate
cash flow deficits for the foreseeable future.
On July 15, 1998, BCI converted its loan in the Partnership into a majority
equity interest. In order to continue its operations, the Partnership will
require additional cash advances, which it expects to obtain through a loan
from BCI. BCI is currently attempting to restructure its outstanding publicly
traded convertible subordinated debt and to raise additional debt and/or
equity financing. There can be no assurance that BCI will be successful in
such restructuring efforts. Should BCI be unable to refinance its senior debt,
restructure its outstanding publicly traded convertible subordinated debt and
raise additional debt and/or equity, it may be unable to fund the
Partnership's cash flow deficits. As a result, the Partnership may be forced
to seek protection under applicable bankruptcy law. Consequently, there is
substantial doubt about the Partnership's ability to continue as a going
concern and to satisfy its obligations as they become due.
F-30
BC TRI-STATES, L.L.C.
BALANCE SHEET
AS OF JULY 12, 1998 AND DECEMBER 28, 1997
(UNAUDITED)
JULY 12, DECEMBER 28,
1998 1997
----------- ------------
ASSETS
------
Current assets:
Cash................................................ $ 2,323,592 $ 7,908
Inventories......................................... 269,174 344,660
Prepaid expenses and other current assets........... 3,021,863 116,319
----------- -----------
Total current assets.............................. 5,614,629 468,887
Property, Equipment and Other Related Assets, net..... 11,024,280 14,454,557
Costs in Excess of Net Assets Acquired, net........... 19,297,502 27,541,127
Other Assets, net..................................... 676,971 676,971
----------- -----------
Total assets...................................... $36,613,382 $43,141,542
=========== ===========
LIABILITIES AND MEMBERS' EQUITY (DEFICIT)
-----------------------------------------
Current liabilities:
Accounts payable.................................... $ 239,650 $ 1,123,617
Accrued expenses.................................... 6,546,410 1,690,200
----------- -----------
Total current liabilities......................... 6,786,060 2,813,817
Debt.................................................. 39,169,716 38,011,758
Other Liabilities..................................... 4,138,673 --
Commitments
Members' Equity (Deficit)............................. (13,481,067) 2,315,967
----------- -----------
Total liabilities and members' equity............. $36,613,382 $43,141,542
=========== ===========
The accompanying notes to financial statements are an integral part of these
balance sheets.
F-31
BC TRI-STATES, L.L.C.
STATEMENTS OF OPERATIONS
(UNAUDITED)
TWO QUARTERS ENDED
-------------------------
JULY 12, JULY 13,
1998 1997
------------ -----------
Revenue ............................................ $ 9,145,922 $ 3,551,734
Costs and Expenses:
Store operations:
Food and paper.................................. 3,282,105 1,306,367
Labor........................................... 2,514,659 968,948
Other controllable costs........................ 1,511,479 508,051
Rent, occupancy and related..................... 1,075,393 342,383
Contractual and discretionary marketing......... 710,911 296,880
General and administrative.......................... 11,806,282 1,093,185
Depreciation and amortization (excluding goodwill
amortization)...................................... 901,470 229,771
Goodwill amortization............................... 913,973 636,547
------------ -----------
Total costs and expenses...................... 22,716,272 5,382,132
------------ -----------
Loss from operations................................ (13,570,350) (1,830,398)
Other Income (Expense):
Interest expense.................................. (2,119,440) (712,060)
Other income (expense)............................ (107,243) 1,659
------------ -----------
Total other expense........................... (2,226,683) (710,401)
------------ -----------
Net Loss............................................ $(15,797,033) $(2,540,799)
============ ===========
The accompanying notes to financial statements are an integral part of these
statements.
F-32
BC TRI-STATES, L.L.C.
STATEMENTS OF CASH FLOW
(UNAUDITED)
TWO QUARTERS ENDED
-------------------------
JULY 12, JULY 13,
1998 1997
------------ -----------
Cash Flows from Operating Activities:
Net loss........................................... $(15,797,033) $(2,540,799)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization..................... 1,815,444 866,318
Provision for asset impairment ................... 10,025,543 --
Changes in assets and liabilities:
Inventories...................................... 75,486 (126,938)
Prepaid expenses and other current assets........ (2,905,544) (168,997)
Accounts payable and accrued expenses............ 4,616,393 642,509
Other assets and liabilities..................... 593,029 52,335
------------ -----------
Net cash used in operating activities........... (1,576,682) (1,275,572)
------------ -----------
Cash Flows from Investing Activities:
Purchase of property, equipment and other related
assets............................................ (265,591) (6,865,106)
------------ -----------
Net cash used in investing activities........... (265,591) (6,865,106)
------------ -----------
Cash Flows from Financing Activities:
Proceeds from issuance of member units............. -- 5,541,395
Proceeds from debt................................. 14,450,957 13,055,576
Payments on debt................................... (10,293,000) (7,337,126)
------------ -----------
Net cash provided by financing activities....... 4,157,957 11,259,845
------------ -----------
Net increase (decrease) in cash..................... 2,315,684 3,119,167
Cash, beginning of period........................... 7,908 --
------------ -----------
Cash, end of period................................. $ 2,323,592 $ 3,119,167
============ ===========
The accompanying notes to financial statements are an integral part of these
statements.
F-33
BC TRI-STATES, L.L.C.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The financial statements have been prepared by BC Tri-States, L.L.C. (the
"Company") and are unaudited. The financial statements and notes thereto have
been prepared in accordance with the instructions under Regulation S-X for
interim financial statements and, therefore, do not necessarily include all
information and footnotes required by generally accepted accounting
principles. In the opinion of management, all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows as of July 12, 1998 and for all
periods presented have been made. The statements are subject to audit
adjustment. A description of the Company's accounting policies and other
financial information are included in the audited financial statements.
2. ASSET IMPAIRMENT
For the two quarters ended July 12, 1998, as a result of declining store
performance, the Company recognized a $10.0 million asset impairment on
property, equipment and other related assets and goodwill, which had a net
book value of $10.0 million. The asset impairment is classified in general and
administrative expenses in the accompanying statement of operations.
3. GOING CONCERN
The Partnership has experienced significant losses since its inception,
which has resulted in a capital deficiency as of July 12,1998. Such losses
have been funded primarily by capital contributions and cash advances from
Boston Chicken, Inc. ("BCI") pursuant to a secured loan agreement.
Furthermore, the Partnership anticipates that it will continue to generate
cash flow deficits for the forseeable future.
On July 15, 1998, BCI converted its loan in the Partnership into a majority
equity interest. In order to continue its operations, the Partnership will
require additional cash advances, which it expects to obtain through a loan
from BCI. BCI is currently attempting to restructure its outstanding publicly
traded convertible subordinated debt and to raise additional debt and/or
equity financing. There can be no assurance that BCI will be successful in its
restructuring efforts. Should BCI be unable to refinance its senior debt,
restructure its outstanding publicly traded convertible subordinated debt and
raise additional debt and/or equity, it may be unable to fund the
Partnership's cash flow deficits. As a result, the Partnership may be forced
to seek protection under applicable bankruptcy law. Consequently, there is
substantial doubt about the Partnership's ability to continue as a going
concern and to satisfy its obligations as they become due.
F-34
BC SUPERIOR, L.L.C.
BALANCE SHEETS
AS OF JULY 12, 1998 AND DECEMBER 28, 1997
(UNAUDITED)
JULY 12, DECEMBER 28,
1998 1997
----------- ------------
ASSETS
------
Current Assets:
Cash................................................. $ 1,639,224 $ --
Inventories.......................................... 746,306 854,506
Prepaid expenses and other current assets............ -- 35,863
----------- -----------
Total current assets............................... 2,385,530 890,369
Property, Equipment and Other Related Assets, net...... 7,174,081 14,351,713
Costs in Excess of Net Assets Acquired, net............ 6,588,640 20,089,370
Other Assets........................................... 340,000 340,000
----------- -----------
Total assets....................................... $16,488,251 $35,671,452
=========== ===========
LIABILITIES AND MEMBERS' DEFICIT
--------------------------------
Current Liabilities:
Accounts payable.................................... $ 305,357 $ 1,205,004
Accrued expenses.................................... 4,134,914 15,629,784
----------- -----------
Total current liabilities......................... 4,440,271 16,834,788
Debt.................................................. 56,495,864 46,967,714
Other Liabilities..................................... 11,889,870 904,569
Commitments
Members' Deficit...................................... (56,337,754) (29,035,619)
----------- -----------
Total liabilities and members' equity (deficit)... $16,488,251 $35,671,452
=========== ===========
The accompanying notes to financial statements are an integral part of these
balance sheets.
F-35
BC SUPERIOR, L.L.C.
STATEMENTS OF OPERATIONS
(UNAUDITED)
TWO QUARTERS ENDED
--------------------------
JULY 12, JULY13,
1998 1997
------------ ------------
Revenue ........................................... $ 14,380,867 $ 22,900,067
Costs and Expenses:
Store operations:
Food and paper.................................. 5,451,095 9,012,684
Labor........................................... 4,898,237 6,973,493
Other controllable costs........................ 2,683,355 3,543,840
Rent, occupancy and related..................... 3,470,869 3,713,290
Contractual and discretionary marketing......... 1,003,234 3,635,577
General and administrative....................... 19,912,931 4,489,200
Depreciation and amortization (excluding goodwill
amortization)................................... 737,102 1,111,100
Goodwill amortization............................ 658,837 963,039
------------ ------------
Total costs and expenses....................... 38,815,660 33,442,223
------------ ------------
Loss from operations............................... (24,434,793) (10,542,156)
Other Income (Expense):
Interest expense................................. (2,872,146) (1,840,629)
Other income (expense)........................... 4,846 31,786
------------ ------------
Total other expense............................ (2,867,300) (1,808,843)
------------ ------------
Net Loss........................................... $(27,302,093) $(12,350,999)
============ ============
The accompanying notes to financial statements are an integral part of these
statements.
F-36
BC SUPERIOR, L.L.C.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
TWO QUARTERS ENDED
--------------------------
JULY 12, JULY 13,
1998 1997
------------ ------------
Cash Flows from Operating Activities:
Net loss.......................................... $(27,302,093) $(12,350,999)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization.................... 1,395,939 2,074,139
Provision for asset impairment................... 18,538,390 --
Changes in assets and liabilities:
Inventories..................................... 108,200 (227,273)
Prepaid expenses and other current assets....... 320,423 1,047,649
Accounts payable and accrued expenses........... 1,069,473 (1,376,464)
Other assets and liabilities.................... (2,807,122) 744,098
------------ ------------
Net cash used in operating activities.......... (8,676,790) (10,088,850)
------------ ------------
Cash Flows from Investing Activities:
Purchase of property, equipment and other related
assets........................................... (95,948) (6,945,058)
Proceeds from sale of assets...................... 501,874 2,444
------------ ------------
Net cash provided by (used in) investing
activities.................................... 405,926 (6,942,614)
------------ ------------
Cash Flows from Financing Activities:
Proceeds from issuance of preferred units......... -- 2,216,562
Proceeds from debt................................ 23,629,250 30,997,745
Payments on debt.................................. (13,719,162) (15,495,204)
------------ ------------
Net cash provided by financing activities...... 9,910,088 17,719,103
------------ ------------
Increase in Cash................................... 1,639,224 687,639
Cash, beginning of period.......................... -- 336,713
------------ ------------
Cash, end of period................................ $ 1,639,224 $ 1,024,352
============ ============
The accompanying notes to financial statements are an integral part of these
statements.
F-37
BC SUPERIOR, L.L.C.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The financial statements have been prepared by BC Superior, L.L.C. (the
"Company") and are unaudited. The financial statements and notes thereto have
been prepared in accordance with the instructions under Regulation S-X for
interim financial statements and, therefore, do not necessarily include all
information and footnotes required by generally accepted accounting
principles. In the opinion of management, all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows as of July 12, 1998 and for all
periods presented have been made. The statements are subject to audit
adjustment. A description of the Company's accounting policies and other
financial information are included in the audited financial statements.
2. ASSET IMPAIRMENT
For the two quarters ended July 12, 1998, as a result of declining store
performance, the Company recognized a $18.5 million asset impairment on
property, equipment and other related assets and goodwill, which had a net
book value of $18.5 million. The asset impairment is classified in general and
administrative expenses in the accompanying statement of operations.
3. GOING CONCERN
The Partnership has experienced significant losses since its inception,
which has resulted in a capital deficiency as of July 12,1998. Such losses
have been funded primarily by capital contributions and cash advances from
Boston Chicken, Inc. ("BCI") pursuant to a secured loan agreement.
Furthermore, the Partnership anticipates that it will continue to generate
cash flow deficits for the forseeable future.
On July 15, 1998, BCI converted its loan in the Partnership into a majority
equity interest. In order to continue its operations, the Partnership will
require additional cash advances, which it expects to obtain through a loan
from BCI. BCI is currently attempting to restructure its outstanding publicly
traded convertible subordinated debt and to raise additional debt and/or
equity financing. There can be no assurance that BCI will be successful in its
restructuring efforts. Should BCI be unable to refinance its senior debt,
restructure its outstanding publicly traded convertible subordinated debt and
raise additional debt and/or equity, it may be unable to fund the
Partnership's cash flow deficits. As a result, the Partnership may be forced
to seek protection under applicable bankruptcy law. Consequently, there is
substantial doubt about the Partnership's ability to continue as a going
concern and to satisfy its obligations as they become due.
F-38
BC HEARTLAND, L.L.C.
BALANCE SHEETS
AS OF JULY 12, 1998 AND DECEMBER 28, 1997
(UNAUDITED)
JULY 12, DECEMBER 28,
1998 1997
---------- ------------
ASSETS
------
Current assets:
Cash................................................. $ 126,514 $ 92,120
Inventories.......................................... 308,035 367,736
Prepaid expenses and other current assets............ 13,392 11,203
---------- ----------
Total current assets............................... 447,941 471,059
Property, Equipment and Other Related Assets, net...... 6,312,372 8,046,521
Other Assets, net...................................... 270,000 275,000
---------- ----------
Total assets....................................... $7,030,313 $8,792,580
========== ==========
LIABILITIES AND MEMBERS' DEFICIT
--------------------------------
Current liabilities:
Accounts payable..................................... $ 356,383 $ 222,451
Accrued expenses..................................... 845,042 994,655
---------- ----------
Total current liabilities.......................... 1,201,425 1,217,106
Debt................................................... 7,387,400 7,623,160
Other Liabilities...................................... 368,086 294,696
Commitments
Members' Deficit....................................... (1,926,598) (342,382)
---------- ----------
Total liabilities and members' deficit............. $7,030,313 $8,792,580
========== ==========
The accompanying notes to financial statements are an integral part of these
balance sheets.
F-39
BC HEARTLAND, L.L.C.
STATEMENTS OF OPERATIONS
(UNAUDITED)
TWO QUARTERS ENDED
------------------------
JULY 12, JULY 13,
1998 1997
----------- -----------
Revenue ............................................. $ 8,675,677 $ 7,529,548
Costs and Expenses:
Store operations:
Food and paper................................... 3,134,938 3,059,259
Labor............................................ 2,427,499 1,985,667
Other controllable costs......................... 1,220,398 981,671
Rent, occupancy and related...................... 1,353,547 1,075,680
Contractual and discretionary marketing.......... 672,618 763,924
General and administrative........................... 554,092 1,083,953
Depreciation and amortization (excluding goodwill am-
ortization)......................................... 506,979 131,126
----------- -----------
Total costs and expenses....................... 9,870,071 9,081,280
----------- -----------
Loss from operations................................. (1,194,394) (1,551,732)
Other Income (Expense):
Interest expense................................. (393,534) (111,042)
Other income (expense)........................... 3,712 456,871
----------- -----------
Total other expense............................ (389,822) 345,829
----------- -----------
Net Loss............................................. $(1,584,216) $(1,205,903)
=========== ===========
The accompanying notes to financial statements are an integral part of these
statements.
F-40
BC HEARTLAND, L.L.C.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
TWO QUARTERS ENDED
------------------------
JULY 12, JULY 13,
1998 1997
----------- -----------
Cash Flows from Operating Activities:
Net loss............................................ $(1,584,216) $(1,205,903)
Adjustments to reconcile net loss to net cash from
(used in) operating activities:
Depreciation and amortization...................... 506,980 131,127
Changes in assets and liabilities:
Inventories....................................... 59,701 (11,750)
Prepaid expenses and other current assets......... (2,189) (95,803)
Accounts payable and accrued expenses............. 70,764 7,431
Other assets and liabilities...................... (6,645) 164,559
----------- -----------
Net cash provided by (used in) operating
activities...................................... (955,605) (1,010,339)
----------- -----------
Cash Flows from Investing Activities:
Purchase of property, equipment and other related
assets............................................. (41,619) (3,680,776)
Proceeds from the sale of assets.................... 1,267,378 16,242
----------- -----------
Net cash from (used in) investing activities..... 1,225,759 (3,664,534)
----------- -----------
Cash Flows from Financing Activities:
Proceeds from issuance of member units.............. -- 3,553,433
Dividends paid...................................... -- (76,000)
Proceeds from debt.................................. 6,658,372 7,937,829
Payments on debt.................................... (6,894,132) (6,838,761)
----------- -----------
Net cash provided by (used in) financing
activities...................................... (235,760) 4,576,501
----------- -----------
Increase (Decrease) in Cash.......................... 34,394 (98,372)
Cash, beginning of period............................ 92,120 383,612
----------- -----------
Cash, end of period.................................. $ 126,514 $ 285,240
=========== ===========
The accompanying notes to financial statements are an integral part of these
statements.
F-41
BC HEARTLAND, L.L.C.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The financial statements have been prepared by BC Heartland, L.L.C. (the
"Company") and are unaudited. The financial statements and notes thereto have
been prepared in accordance with the instructions under Regulation S-X for
interim financial statements and, therefore, do not necessarily include all
information and footnotes required by generally accepted accounting
principles. In the opinion of management, all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows as of July 12, 1998 and for all
periods presented have been made. The statements are subject to audit
adjustment. A description of the Partnership's accounting policies and other
financial information are included in the audited financial statements.
2. GOING CONCERN
The Partnership has experienced significant losses since its inception,
which has resulted in a capital deficiency as of July 12, 1998. Such losses
have been funded primarily by capital contributions and cash advances from
Boston Chicken, Inc. ("BCI") pursuant to a secured loan agreement.
Furthermore, the Partnership anticipates that it will continue to generate
cash flow deficits for the foreseeable future.
On July 15, 1998, BCI converted its loan in the Partnership into a majority
equity interest. In order to continue its operations, the Partnership will
require additional cash advances, which it expects to obtain through a loan
from BCI. BCI is currently attempting to restructure its outstanding publicly
traded convertible subordinated debt and to raise additional debt and/or
equity financing. There can be no assurance that BCI will be successful in
such restructuring efforts. Should BCI be unable to refinance its senior debt,
restructure its outstanding publicly traded convertible subordinated debt and
raise additional debt and/or equity, it may be unable to fund the
Partnership's cash flow deficits. As a result, the Partnership may be forced
to seek protection under applicable bankruptcy law. Consequently, there is
substantial doubt about the Partnership's ability to continue as a going
concern and to satisfy its obligations as they become due.
F-42
MARKET PARTNERS, L.L.C.
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER JULY 12,
28, 1997 1998
----------- -----------
(UNAUDITED)
ASSETS
------
Current Assets:
Cash and cash equivalents............................ $ 494,200 $ 508,462
Interest receivable.................................. 2,841 934
----------- -----------
Total current assets............................... 497,041 509,396
Investments, at fair value (cost of $67,858,190 in
1997 and $67,876,812 in 1998)....................... 57,928,211 15,575,408
Organization costs, net of accumulated amortization
of $89,199 in 1997 and $112,252 in 1998............. 285,079 244,736
----------- -----------
Total assets....................................... $58,710,331 $16,329,540
=========== ===========
LIABILITIES
-----------
Accounts payable....................................... $ -- $ --
----------- -----------
Total liabilities.................................. -- --
----------- -----------
Net assets......................................... $58,710,331 $16,329,540
=========== ===========
The accompanying notes to financial statements are an integral part of these
statements.
F-43
MARKET PARTNERS, L.L.C.
SCHEDULE OF INVESTMENTS
AS OF DECEMBER 28, 1997
SHARES ISSUER COST FAIR VALUE
------ ------ ----------- -----------
(NOTE 2)
JUNIOR PREFERRED INVESTMENTS:
16,624,183 R&A Food Services, L.P................ $14,999,999 *
4,433,115 BC Boston, L.P........................ 4,000,001 *
11,082,788 BCE West, L.P......................... 9,999,999 *
5,178,433 BC Heartland, L.L.C................... 4,672,504 *
11,082,788 P&L Foods Services, L.L.C............. 9,999,999 *
6,649,673 BC Northwest, L.P..................... 5,999,996 *
4,433,115 BC GoldenGate, L.L.C.................. 4,000,001 *
3,324,837 Finest Foodservice, L.L.C............. 3,000,004 *
2,216,558 BC Superior, L.L.C.................... 1,999,996 *
BCBM Southwest, L.P. (formerly BC
4,433,115 Texas, Inc.).......................... 4,010,669 *
5,541,394 BC Tri-States, L.L.C.................. 5,013,298 *
----------- -----------
Total Junior Preferred Investments.... 67,696,466 $57,928,211
WARRANTS TO PURCHASE COMMON UNITS:
BC Great Lakes, L.L.C................. 41,378 --
Finest Foodservice, L.L.C............. 10,610 --
R&A Food Services, L.P................ 94 --
BC Northwest, L.P..................... 8,914 --
Platinum Rotisserie, L.L.C............ 15,304 --
P&L Food Services, L.L.C.............. 7,044 --
BC Boston, L.P........................ 1,883 --
BCE West, L.P......................... 5,903 --
BC Superior, L.L.C.................... 3,465 --
BC GoldenGate, L.L.C.................. 67,129 --
----------- -----------
Total Warrants to Purchase Common
Units................................. 161,724 --
----------- -----------
Total Investments..................... $67,858,190 $57,928,211
=========== ===========
The accompanying notes to financial statements are an integral part of this
schedule.
F-44
MARKET PARTNERS, L.L.C.
SCHEDULE OF INVESTMENTS
AS OF JULY 12, 1998
(UNAUDITED)
SHARES ISSUER COST FAIR VALUE
------ ------ ----------- -----------
(NOTE 2)
JUNIOR PREFERRED INVESTMENTS:
16,624,183 R&A Food Services, L.P................ $14,999,999 *
4,433,115 BC Boston, L.P........................ 4,000,001 *
11,082,788 BCE West, L.P......................... 9,999,999 *
5,178,433 BC Heartland, L.L.C................... 4,672,504 *
11,082,788 P&L Foods Services, L.L.C............. 9,999,999 *
6,649,673 BC Northwest, L.P..................... 5,999,996 *
4,433,115 BC GoldenGate, L.L.C.................. 4,000,001 *
3,324,837 Finest Foodservice, L.L.C............. 3,000,004 *
2,216,558 BC Superior, L.L.C.................... 1,999,996 *
BCBM Southwest, L.P. (formerly BC
4,433,115 Texas, Inc.).......................... 4,010,669 *
5,541,394 BC Tri-States, L.L.C.................. 5,013,298 *
----------- -----------
Total Junior Preferred Investments.... 67,696,466 $15,575,408
WARRANTS TO PURCHASE COMMON UNITS:
Finest Foodservice, L.L.C............. 10,610 --
R&A Food Services, L.P................ 94 --
BC Northwest, L.P..................... 8,914 --
Platinum Rotisserie, L.L.C............ 15,304 --
P&L Food Services, L.L.C.............. 7,044 --
BC Boston, L.P........................ 1,883 --
BCE West, L.P......................... 5,903 --
BC Superior, L.L.C.................... 3,465 --
BC GoldenGate, L.L.C.................. 67,129 --
----------- -----------
Total Warrants to Purchase Common
Units................................. 120,346 --
----------- -----------
Total Investments..................... $67,816,812 $15,575,408
=========== ===========
The accompanying notes to financial statements are an integral part of this
schedule.
F-45
MARKET PARTNERS, L.L.C.
STATEMENTS OF OPERATIONS
(UNAUDITED)
TWO QUARTERS ENDED
------------------------
JULY 13, JULY 12,
1997 1998
----------- ------------
Investment Income:
Dividend income.................................... $ 9,803,589 $ --
Interest income.................................... 84,251 17,434
----------- ------------
Total income..................................... 9,887,840 17,434
Expenses:
General and administrative......................... 105,923 45,422
----------- ------------
Investment income (loss), net........................ 9,781,917 (27,988)
Realized and Unrealized Gain (Loss) on Investments:
Realized gain on sale of investments............... 2,365,610 --
Unrealized appreciation (depreciation) on
investments....................................... -- (42,352,803)
----------- ------------
Net gain (loss) on investments................... 2,365,610 (42,352,803)
----------- ------------
Net Income (Loss).................................... $12,147,527 $(42,380,791)
=========== ============
Basic and Diluted Earnings (Loss) Per Unit........... $ 607,376 $ (1,384,993)
=========== ============
Weighted Average Number of Membership Units
Outstanding......................................... 20 30.6
=========== ============
The accompanying notes to financial statements are an integral part of these
statements.
F-46
MARKET PARTNERS, L.L.C.
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
TWO QUARTERS ENDED
-------------------------
JULY 13, JULY 12,
1997 1998
----------- ------------
Increase (decrease) in net assets from operations:
Investment income (loss), net..................... $ 9,781,917 $ (27,988)
Net realized gain on investments.................. 2,365,610 --
Unrealized appreciation (depreciation) on
investments...................................... -- (42,352,803)
----------- ------------
Net increase (decrease) in net assets from
operations..................................... 12,147,527 (42,380,791)
Distributions to members.......................... (11,770,460) --
Member contributions.............................. 38,249,985 --
----------- ------------
Total increase (decrease)....................... 38,627,052 (42,380,791)
Net assets, beginning of period................... 39,346,484 58,710,331
----------- ------------
Net assets, end of period......................... $77,973,536 $ 16,329,540
=========== ============
The accompanying notes to financial statements are an integral part of these
statements.
F-47
MARKET PARTNERS, L.L.C.
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
Market Partners, L.L.C. (the "Company"), a Delaware limited liability
company, was formed on July 18, 1996, primarily for the purpose of investing
in certain financed area developers ("FADs") of Boston Chicken, Inc. ("BCI").
BCI FADs operate Boston Market franchise stores that specialize in fresh,
convenient meals featuring home-style entrees, sandwiches, vegetables, salads
and other side dishes in the United States.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements have been prepared by the Company and are unaudited
except for the balance sheet at December 28, 1997 and notes related thereto.
The financial statements and notes thereto have been prepared in accordance
with the instructions under Regulation S-X for interim financial statements
and, therefore, do not necessarily include all information and footnotes
required by generally accepted accounting principles. In the opinion of the
Company, all adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the Company's financial position, results of
operations and changes in net assets as of July 12, 1998 and for all periods
presented have been made. The statements are subject to year-end audit
adjustment. A description of the Company's accounting policies and other
financial information is included in the audited financial statements for the
year ended December 28, 1997. The results of operations for the two quarters
ended July 12, 1998 are not necessarily indicative of the results expected for
the full year.
Investments
All investments held by the Company are in privately held businesses. The
investments are stated at estimated fair value. The fair value of the
preferred investments as of December 28, 1997 and July 12, 1998 was determined
in aggregate based upon the consideration to be received in the proposed
merger of the Company with BCI (See Note 5). The estimated market value of the
common stock at December 28, 1997 was determined based upon the market value
of BCI's common stock measured over a period of time prior to and after the
agreement in principle to acquire the Company was reached and publicly
announced. The estimated market value of the series A exchangeable preferred
stock at December 28, 1997 was determined based upon a discounted cash flow
analysis of the dividend and principle payments of the instrument. The
analysis utilized a discount rate equal to the yield of BCI's publicly-traded
debentures measured over a period of time prior to and after the agreement in
principle to acquire the Company was reached and publicly announced. The
estimated market value of BCI's common stock and the Series A exchangeable
preferred stock at July 12, 1998 used the same measurement assumptions using
the market value of BCI's common stock and publicly-traded debentures as of
July 12, 1998. The fair value of the warrants to purchase common units was
computed using the Black-Scholes option pricing model.
F-48
MARKET PARTNERS, L.L.C.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
3. INVESTMENTS
Dividends accrue on the preferred investments at the rate of 8% per annum on
the outstanding face amount of the preferred investments, payable semi-
annually in cash. The Company was paid only one of the semi-annual dividends
in 1997 and did not accrue the second dividend payment. The Company did not
accrue the dividend payment which was not paid during the first quarter of
1998. Unless all dividends on the preferred investments have been paid in
full, no other dividends can be declared or paid on the FAD's common equity
securities. In the event the FAD has not redeemed the preferred investments
prior to the expiration date of BCI's conversion and/or option rights under
the applicable FAD secured loan agreements ("Conversion Right") as of the date
of the initial investment in the preferred investments of the FAD (without
regard to any subsequent amendment thereof by the FAD and BCI), the dividends
rate will increase by 2% immediately, and by an additional 2% every six months
thereafter, to a maximum dividend rate of 20%.
In the event BCI exercises its Conversion Right, otherwise acquires a
controlling interest in such FAD, or acquires a certain percentage of Boston
Market stores owned by such FAD (each, a "Controlling Interest Acquisition"),
the Company has the right to require the FAD to repurchase the preferred
investment at its liquidation preference, plus a redemption premium equal to
4% of the liquidation preference, plus any accrued but unpaid dividends to the
date of redemption. The liquidation preference is equal to the face amount of
the preferred investment. Generally, the investments were purchased at a
discount equal to the cost of the warrants to purchase common units in the
FAD.
The preferred investments are redeemable at any time by the issuing FAD at
its liquidation preference, plus a redemption premium equal to 4% of the
liquidation preference, plus any accrued but unpaid dividends to the date of
redemption.
The preferred investments are junior to any BC Equity Funding, L.L.C.
preferred equity and any other existing preferred equity of a FAD with respect
to distribution rights and rights upon dissolution. In the event of
liquidation, the preferred investments have a liquidation preference over
common equity equal to their face amount.
The Company has purchased warrants from certain FADs entitling the Company
to purchase 7% of each FAD's common equity on a fully diluted basis,
exercisable only in the event of a Controlling Interest Acquisition of the
FAD. The exercise price of each warrant is equal to the weighted average
conversion/option exercise price per unit on the maximum amount of the
convertible loan commitment under such FAD's secured loan agreement with BCI
as of the date such FAD warrant was issued. The warrant may be exercised
within 10 business days after a Controlling Interest Acquisition of a FAD,
subject to BCI's Call Right described below. Each FAD warrant expires at the
same time as BCI's Conversion Right for such FAD expires, provided that all
FAD warrants terminate as provided below. BCI has the right to purchase the
FAD warrant at any time within two business days after the Company has
indicated its intention to exercise the FAD warrant in a particular FAD (the
"Call Right"), at a purchase price based on the FAD Value. The FAD Value is
equal to the product of (i) the FAD's earnings before interest, taxes,
depreciation and amortization ("EBITDA") for the preceding thirteen accounting
periods, and (ii) the greater of (A) eight, or (B) 50% of BCI's EBITDA
multiple. The product of the foregoing calculation is adjusted by (y)
subtracting the aggregate exercise price of the FAD warrant and any
indebtedness of the FAD (excluding the convertible loan to BCI), and (z)
adding any cash of the FAD. The FAD Value is payable in cash, or at BCI's
option, in registered shares of BCI.
F-49
MARKET PARTNERS, L.L.C.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. SUMMARY FINANCIAL INFORMATION
The following tables set forth certain combined financial information as of
the dates indicated provided to the Company by the Boston Market financed area
developers in which the Company holds equity investment (in thousands).
DECEMBER 29, DECEMBER 28,
1996 1997
------------ ------------
Balance sheet data:
Total gross assets............................. $588,029 $436,400
Total debt:
To Boston Chicken, Inc....................... 490,078 612,512
To third parties (including capital lease
obligations)................................ 16,040 10,167
Total other liabilities (including trade
payables)..................................... 86,303 97,478
Total stockholder/partner/member deficit....... (52,798) (347,180)
FISCAL YEAR ENDED
-------------------------
DECEMBER 29, DECEMBER 28,
1996 1997
------------ ------------
Statement of operations data:
Gross revenue................................... $721,945 $694,239
Income (loss) from continuing operations........ (130,764) (292,565)
5. MERGER
On July 15th, 1998, the Company closed an agreement with BCI that called for
BCI to acquire the Company through a merger of the Company into a wholly-owned
subsidiary of BCI in consideration for $66.6 million aggregate liquidation
preference of 10% Series A Exchangeable Preferred Stock of BCI (the "Preferred
Stock"), 1,946,000 shares of common stock of BCI and $5.6 million in cash, to
be allocated among the members. The 10% quarterly dividend on the Preferred
Stock is payable, at BCI's option, in either additional shares of Preferred
Stock or cash for a period of three years and is payable in cash thereafter.
The Preferred Stock is optionally redeemable by BCI at any time, in cash, at
redemption prices which start at 50% of the liquidation preference and
increase over time. The Preferred Stock is mandatorily redeemable in 2005 at a
price of 110% of the liquidation preference, which is equal to the face amount
of the security.
F-50
BC EQUITY FUNDING, L.L.C.
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 28, JULY 12,
ASSETS 1997 1998
------ ------------ -----------
(UNAUDITED)
Current Assets:
Cash and cash equivalents........................... $ 230,140 $ 236,947
Interest receivable................................. 969 423
----------- -----------
Total current assets.............................. 231,109 237,370
Investments, at fair value (cost of $72,096,820 in
1997 and in 1998).................................... 50,841,054 13,234,828
Organization costs, net of accumulated amortization of
$38,094 in 1997 and $43,301 in 1998.................. 42,874 33,762
----------- -----------
Total assets...................................... $51,115,037 $13,505,960
=========== ===========
LIABILITIES
-----------
Accounts payable...................................... $ -- $ --
Distributions payable................................. -- --
----------- -----------
Total liabilities................................. -- --
----------- -----------
Net assets........................................ $51,115,037 $13,505,960
=========== ===========
The accompanying notes to financial statements are an integral part of these
statements.
F-51
BC EQUITY FUNDING, L.L.C.
SCHEDULE OF INVESTMENTS
AS OF DECEMBER 28, 1997
SHARES ISSUER (NOTE 4) COST FAIR VALUE
---------- --------------- ----------- -----------
(NOTE 2)
PREFERRED INVESTMENTS, INCLUDING ACCRUED DIVIDENDS:
10,000 W.M.J. Texas, Inc........................ $11,636,255 *
10,000 R&A Food Services, Inc................... 13,083,909 *
10,000,000 Finest Holdings, Inc..................... 11,053,313 *
9,200,000 BC GoldenGate Holdings, Inc.............. 10,026,927 *
5,000,000 BC Boston Holdings, Inc.................. 6,339,026 *
3,500,000 BCE West Holdings, Inc................... 4,315,323 *
4,000,000 P&L Foods Holdings, Inc.................. 4,935,683 *
2,500,000 EFM Holdings, Inc. (a)................... 2,954,973 *
2,500,000 BC Northwest Holdings, Inc............... 3,049,271 *
----------- -----------
Total Preferred Investments................... 67,394,680 $50,841,054
WARRANTS TO PURCHASE COMMON STOCK OR UNITS:
BCBM Southwest, L.P. (formerly BC Texas,
158,000 Inc.)................................... 1,434,640 --
4,750,000 Finest Foodservice, L.L.C................ 1,805,000 --
3,750,000 BC GoldenGate, L.L.C..................... 1,462,500 --
----------- -----------
Total Warrants to Purchase Common Stock or
Units........................................ 4,702,140 --
----------- -----------
Total Investments............................. $72,096,820 $50,841,054
=========== ===========
--------
(a) Represents investment in BC Superior, L.L.C.
The accompanying notes to financial statements are an integral part of this
schedule.
F-52
BC EQUITY FUNDING, L.L.C.
SCHEDULE OF INVESTMENTS
AS OF JULY 12, 1998
(UNAUDITED)
SHARES ISSUER (NOTE 4) COST FAIR VALUE
---------- --------------- ----------- -----------
(NOTE 2)
PREFERRED INVESTMENTS, INCLUDING ACCRUED DIVIDENDS:
10,000 W.M.J. Texas, Inc........................ $11,636,255 *
10,000 R&A Food Services, Inc................... 13,083,909 *
10,000,000 Finest Holdings, Inc..................... 11,053,313 *
9,200,000 BC GoldenGate Holdings, Inc.............. 10,026,927 *
5,000,000 BC Boston Holdings, Inc.................. 6,339,026 *
3,500,000 BCE West Holdings, Inc................... 4,315,323 *
4,000,000 P&L Foods Holdings, Inc.................. 4,935,683 *
2,500,000 EFM Holdings, Inc. (a)................... 2,954,973 *
2,500,000 BC Northwest Holdings, Inc............... 3,049,271 *
----------- -----------
Total Preferred Investments................... 67,394,680 $13,234,828
WARRANTS TO PURCHASE COMMON STOCK OR UNITS:
BCBM Southwest, L.P. (formerly BC Texas,
158,000 Inc.)................................... 1,434,640 --
4,750,000 Finest Foodservice, L.L.C................ 1,805,000 --
3,750,000 BC GoldenGate, L.L.C..................... 1,462,500 --
----------- -----------
Total Warrants to Purchase Common Stock or
Units........................................ 4,702,140 --
----------- -----------
Total Investments............................. $72,096,820 $13,234,828
=========== ===========
--------
(a) Represents investment in BC Superior, L.L.C.
The accompanying notes to financial statements are an integral part of this
schedule.
F-53
BC EQUITY FUNDING, L.L.C.
STATEMENTS OF OPERATIONS
(UNAUDITED)
TWO QUARTERS ENDED
-----------------------
JULY 13, JULY 12,
1997 1998
---------- ------------
Investment Income:
Dividend income..................................... $3,562,622 $ --
Interest income..................................... 8,444 6,760
---------- ------------
Total income.......................................... 3,571,066 6,760
Expenses:
General and administrative.......................... 24,300 9,611
---------- ------------
Investment income (loss), net......................... 3,546,766 (2,851)
Unrealized Gain (Loss) on Investments:
Unrealized appreciation (depreciation) on
investments........................................ -- (37,606,226)
---------- ------------
Net gain (loss) on investments.................... -- (37,606,226)
---------- ------------
Net Income (Loss)..................................... $3,546,766 $(37,609,077)
========== ============
Basic and Diluted Earnings (Loss) per Unit............ $ 59,112 $ (626,818)
========== ============
Weighted Average Number of Membership Units
Outstanding.......................................... 60 60
========== ============
The accompanying notes to financial statements are an integral part of these
statements.
F-54
BC EQUITY FUNDING, L.L.C.
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
TWO QUARTERS ENDED
------------------------
JULY 13, JULY 12,
1997 1998
----------- ------------
Increase (decrease) in net assets from operations:
Investment income (loss), net...................... $ 3,546,766 $ (2,851)
Unrealized appreciation (depreciation) on
investments....................................... -- (37,606,226)
----------- ------------
Net increase in net assets from operations....... 3,546,766 (37,609,077)
----------- ------------
Total increase (decrease)........................ 3,546,766 (37,609,077)
Net assets, beginning of period.................... 76,617,695 51,115,037
----------- ------------
Net assets, end of period.......................... $80,164,461 $ 13,505,960
=========== ============
The accompanying notes to financial statements are an integral part of these
statements.
F-55
BC EQUITY FUNDING, L.L.C.
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
BC Equity Funding, L.L.C. (the "Company"), a Delaware limited liability
company, was formed on February 15, 1995 for the purpose of investing in
cumulative preferred stock or the partnership or limited liability company
equivalent thereof in certain financed area developers ("FADs") of Boston
Chicken, Inc. ("BCI") or investing in entities which invest in BCI FADs. BCI
FADs operate Boston Market franchise stores that specialize in fresh,
convenient meals featuring home-style entrees, sandwiches, vegetables, salads
and other side dishes in the United States.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements have been prepared by the Company and are unaudited
except for the balance sheet at December 28, 1997 and notes related thereto.
The financial statements and notes thereto have been prepared in accordance
with the instructions under Regulation S-X for interim financial statements
and, therefore, do not necessarily include all information and footnotes
required by generally accepted accounting principles. In the opinion of the
Company, all adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the Company's financial position, results of
operations and changes in net assets as of July 12, 1998 and for all periods
presented have been made. The statements are subject to year-end audit
adjustment. A description of the Company's accounting policies and other
financial information is included in the audited financial statements for the
year ended December 28, 1997. The results of operations for the two quarters
ended July 12, 1998 are not necessarily indicative of the results expected for
the full year.
Investments
All investments held by the Company are in privately held businesses. These
investments are stated at estimated fair value. The fair value of the
preferred investments as of December 28, 1997 and July 12, 1998 was determined
in aggregate based upon the consideration to be received in the proposed
merger of the Company with BCI (See Note 5.) The estimated market value of the
common stock at December 28, 1997 was determined based upon the market value
of BCI's common stock measured over a period of time prior to and after the
agreement in principle to acquire the Company was reached and publicly
announced. The estimated market value of the series A exchangeable preferred
stock at December 28, 1997 was determined based upon a discounted cash flow
analysis of the dividend and principle payments of the instrument. The
analysis utilized a discount rate equal to the yield of BCI's publicly-traded
debentures measured over a period of time prior to and after the agreement in
principle to acquire the Company was reached and publicly announced. The
estimated market value of BCI's common stock and the series A exchangeable
preferred stock at July 12, 1998 used the market value of BCI's common stock
and publicly-traded debentures as of July 12, 1998. Dividends declared but not
distributed are included in both the cost basis and fair value of investments.
The fair value of the warrants to purchase common stock or units was computed
using the Black-Scholes option pricing model.
F-56
BC EQUITY FUNDING, L.L.C.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
3. INVESTMENTS
Each preferred equity investment earns dividends (or is entitled to receive
preferential distributions, in the case of a partnership or a limited
liability company investment) at a per annum rate equal to 10% of its Adjusted
Issue Price. The Adjusted Issue Price of the preferred equity investment is
equal to the amount initially paid for the instrument, increased semiannually,
by the amount of dividends accrued but not paid during the period. Dividends
accrue, but are not paid currently, until the fifth anniversary of the issue
date. Thereafter, the preferred equity investments provide for current payment
of semi-annual cash dividends or distributions. Dividends were not accrued in
1998.
The preferred equity securities may be redeemed at the option of the FAD at
any time for the Adjusted Issue Price, plus a redemption premium initially
equal to 10% of the initial issue price, increased by 2% each year, up to a
maximum of 20% (the "Redemption Price"). In the event of liquidation, the
preferred equity interests will be entitled to a liquidation price equal to
the Redemption Price.
The Company has the right to require a FAD to redeem the preferred interest
at the Redemption Price in the event (i) BCI exercises any of its conversion
and/or option rights under such FAD's secured loan agreement with BCI, (ii)
there is a change in control of the FAD, (iii) sale of 30% of the FAD's
assets, or (iv) there is an uncured monetary default by the FAD under its
secured loan agreement with BCI.
In the event the FAD has not redeemed the preferred investment prior to the
date on which BCI's conversion and/or option rights under the FAD's secured
loan agreement with BCI expire unexercised, the Company will have the right to
require, subject to certain conditions, including BCI's prior consent, that
the FAD undertake a firm commitment underwritten public offering of equity of
the FAD. Any preferred interests held by the Company will be automatically
converted into shares of common equity determined by dividing the applicable
Redemption Price by the price per share of the common shares in the public
offering. In the event BCI does not consent to the FAD public offering, BCI
will be obligated to purchase the preferred investments at the Redemption
Price.
The Company holds warrants to purchase 158,000 shares of common stock of
BCBM Southwest, L.P. at $20 per unit; 4,750,000 common membership units of
Finest Foodservice, L.L.C. at $1.00 per unit; and 3,750,000 common membership
units of BC GoldenGate L.L.C. at $1.00 per unit. The warrants expire in
November 2003, June 2004 and July 2003, respectively.
F-57
BC EQUITY FUNDING, L.L.C.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. SUMMARY FINANCIAL INFORMATION
The following tables set forth certain combined financial information as of
the dates indicated provided to the Company by the Boston Market financed area
developers in which the Company holds equity investment (in thousands):
DECEMBER 29, DECEMBER 28,
1996 1997
------------ ------------
Balance sheet data:
Total gross assets............................. $382,324 $339,528
Total debt:
To Boston Chicken, Inc....................... 357,907 508,281
To third parties (including capital lease
obligations)................................ 2,768 1,984
Total other liabilities (including trade
payables)..................................... 69,154 89,791
Total stockholder/partner/member deficit....... (81,331) (315,483)
FISCAL YEAR ENDED
-------------------------
DECEMBER 29, DECEMBER 28,
1996 1997
------------ ------------
Statement of operations data:
Gross revenue................................. $531,367 $609,572
Income (loss) from continuing operations...... (108,599) (251,867)
5. MERGER
On July 15, 1998, the Company closed an agreement with BCI that called for
BCI to acquire the Company through a merger of the Company into a wholly-owned
subsidiary of BCI in consideration for $60.2 million aggregate liquidation
preference of 10% Series A Exchangeable Preferred Stock of BCI (the "Preferred
Stock"), 1,554,000 shares of common stock of BCI and $4.4 million in cash, to
be allocated among the members. The 10% quarterly dividend on the Preferred
Stock is payable, at BCI's option, in either additional shares of Preferred
Stock or cash for a period of three years and is payable in cash thereafter.
The Preferred Stock is optionally redeemable by BCI at any time, in cash, at
redemption prices which start at 50% of the liquidation preference and
increase over time. The Preferred Stock is mandatorily redeemable in 2005 at a
price of 110% of the liquidation preference, which is equal to the face amount
of the security.
F-58
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION OF
BOSTON CHICKEN, INC. GIVING EFFECT TO THE ACQUISITION OF
MARKET PARTNERS, L.L.C., BC EQUITY FUNDING, L.L.C. AND
CERTAIN AREA DEVELOPERS OF BOSTON CHICKEN, INC.
The pro forma consolidated financial information for Boston Chicken, Inc.
(the "Company") gives effect to the merger of Market Partners, L.L.C. ("Market
Partners") and BC Equity Funding, L.L.C. ("BC Equity Funding") into BCI
Acquisition Sub, L.L.C., a wholly-owned subsidiary of the Company and the
conversion of the Company's loans to the area developers of the Company which
have preferred equity investments from Market Partners and BC Equity Funding
and have waived the moratorium on their loan conversion (collectively, the
"Merger and loan conversions"). The pro forma consolidated financial
information does not reflect provisions of $110.2 million for additional asset
impairments or $4.2 million of debt issuance costs recorded in conjunction
with the conversions and the restructuring by the Company of certain
masterlease agreements effective July 15, 1998. The adjusted pro forma
consolidated financial information for the Company gives effect to the
conversion of the Company's loan to BC Great Lakes, L.L.C. ("BC Great Lakes"),
which loan was converted by the Company in March 1998. The pro forma
consolidated financial statements are based upon the assumptions set forth in
the accompanying notes to such statements. The pro forma balance sheet assumes
that transactions occurred as of July 12, 1998 and the pro forma results of
operation assumes the transactions occurred at the beginning of the period
presented. The 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 date or the period indicated or which may
occur in the future.
F-59
BOSTON CHICKEN, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
GIVING EFFECT TO THE ACQUISITION OF MARKET PARTNERS, L.L.C.,
BC EQUITY FUNDING, L.L.C.
AND CERTAIN AREA DEVELOPERS OF BOSTON CHICKEN, INC.
FOR THE TWO QUARTERS ENDING JULY 12, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
BC EQUITY MARKET
BOSTON FUNDING, PARTNERS, TOTAL AREA PRO FORMA BC GREAT PRO FORMA
CHICKEN, INC. L.L.C. L.L.C. DEVELOPERS ADJUSTMENTS PRO FORMA LAKES, L.L.C. ADJUSTMENTS
------------- --------- --------- ---------- ----------- --------- ------------- -----------
Revenue:
Stores............ $ 374,512 $ -- $ -- $ 248,926 $ -- $ 623,438 $23,585 $ --
Royalties and
franchise related
fees.............. 4,687 -- -- -- -- 4,687 1,109 (1,109)(10)
Interest income... 3,221 -- -- -- -- 3,221 879 (879)(10)
--------- -------- -------- --------- -------- --------- ------- ------
Total revenue... 382,420 -- -- 248,926 -- 631,346 25,573 (1,988)
Costs and Expenses:
Store operations:
Food and paper.. 131,674 -- -- 89,823 -- 221,497 9,328 --
Labor........... 110,426 -- -- 69,629 -- 180,055 6,787 --
Other
controllable
costs........... 36,507 -- -- 38,642 -- 75,149 3,807 --
Rent, occupancy
and related..... 39,248 -- -- 41,760 (21,437)(1) 47,519 3,375 --
(12,052)(2)
Contractual and
discretionary
marketing....... 21,156 -- -- 21,359 -- 42,515 1,797 --
General and
administrative.... 120,865 10 45 90,313 (13,643)(1) 197,590 3,711 (3,219)(10)
Depreciation and
amortization
(excluding
goodwill
amortization)..... 29,550 -- -- 11,558 (3,171)(3) 41,772 1,209 (672)(3)
3,835 (2)
Goodwill
amortization...... 10,693 -- -- 2,890 2,080 (3) 15,663 360 57 (3)
Provision for
loan losses....... 212,000 -- -- -- (99,328)(4) 112,672 -- --
Losses of Boston
Chicken, Inc.'s
area developers... 93,337 -- -- -- (80,705)(5) 12,632 -- --
--------- -------- -------- --------- -------- --------- ------- ------
Total costs and
expenses........ 805,456 10 45 365,974 (224,421) 947,064 30,374 (3,834)
--------- -------- -------- --------- -------- --------- ------- ------
Loss from
Operations......... (423,036) (10) (45) (117,048) 224,421 (315,718) (4,801) 1,846
Other Income
(Expense):
Investment
income............ -- 7 17 -- -- 24 -- --
Interest expense,
net............... (30,692) -- -- (28,282) 27,966 (1) (38,611) (2,551) 2,553 (10)
(7,603)(6)
Loss on issuances
of subsidiary's
stock............. (17) -- -- -- -- (17) -- --
Other income
(expense), net.... (2,930) -- -- 27 -- (2,903) 38 --
Unrealized
depreciation on
investments....... -- (37,606) (42,353) -- 79,959 (12) -- -- --
--------- -------- -------- --------- -------- --------- ------- ------
Total other
income
(expense)....... (33,639) (37,599) (42,336) (28,255) 100,322 (41,507) (2,513) 2,553
--------- -------- -------- --------- -------- --------- ------- ------
Loss Before Income
Taxes and Minority
Interest........... (456,675) (37,609) (42,381) (145,303) 324,743 (357,225) (7,314) 4,399
Minority Interest
in Losses of
Subsidiaries....... 19,624 -- -- -- 8,557 (7) 28,181 -- 1,097 (11)
--------- -------- -------- --------- -------- --------- ------- ------
Net Loss........... (437,051) (37,609) (42,381) (145,303) 333,300 (329,044) (7,314) 5,496
Dividends on
Preferred Stock.... -- -- -- -- (6,419)(8) (6,419) -- --
--------- -------- -------- --------- -------- --------- ------- ------
Net Loss Applicable
to Common Stock.... $(437,051) $(37,609) $(42,381) $(145,303) $326,881 $(335,463) $(7,314) $5,496
========= ======== ======== ========= ======== ========= ======= ======
Basic Loss Per
Share.............. $ (6.09) $ (4.50)(8)
========= =========
Diluted Loss Per
Share.............. $ (6.09) $ (4.50)(8)
========= =========
Weighted Average
Number of Common
Shares Outstanding:
Basic............. 71,809 3,500 (9) 75,309
========= ======== =========
Diluted........... 71,809 3,500 (9) 75,309
========= ======== =========
ADJUSTED
PRO FORMA
----------
Revenue:
Stores............ $ 647,023
Royalties and
franchise related
fees.............. 4,687
Interest income... 3,221
----------
Total revenue... 654,931
Costs and Expenses:
Store operations:
Food and paper.. 230,825
Labor........... 186,842
Other
controllable
costs........... 78,956
Rent, occupancy
and related..... 50,894
Contractual and
discretionary
marketing....... 44,312
General and
administrative.... 198,082
Depreciation and
amortization
(excluding
goodwill
amortization)..... 42,309
Goodwill
amortization...... 16,080
Provision for
loan losses....... 112,672
Losses of Boston
Chicken, Inc.'s
area developers... 12,632
----------
Total costs and
expenses........ 973,604
----------
Loss from
Operations......... (318,673)
Other Income
(Expense):
Investment
income............ 24
Interest expense,
net............... (38,609)
Loss on issuances
of subsidiary's
stock............. (17)
Other income
(expense), net.... (2,865)
Unrealized
depreciation on
investments....... --
----------
Total other
income
(expense)....... (41,467)
----------
Loss Before Income
Taxes and Minority
Interest........... (360,140)
Minority Interest
in Losses of
Subsidiaries....... 29,278
----------
Net Loss........... (330,862)
Dividends on
Preferred Stock.... (6,419)
----------
Net Loss Applicable
to Common Stock.... $(337,281)
==========
Basic Loss Per
Share.............. $ (4.52)
==========
Diluted Loss Per
Share.............. $ (4.52)
==========
Weighted Average
Number of Common
Shares Outstanding:
Basic............. 75,309
==========
Diluted........... 75,309
==========
F-60
BOSTON CHICKEN, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
GIVING EFFECT TO ACQUISITION OF MARKET PARTNERS, L.L.C.,
BC EQUITY FUNDING, L.L.C. AND CERTAIN AREA DEVELOPERS
OF BOSTON CHICKEN, INC.
JULY 12, 1998
(IN THOUSANDS)
BC
BOSTON EQUITY MARKET
CHICKEN, FUNDING, PARTNERS, TOTAL AREA PRO FORMA
INC. L.L.C. L.L.C. DEVELOPERS ADJUSTMENTS PRO FORMA
---------- -------- --------- ---------- ----------- ----------
ASSETS
------
Current Assets:
Cash and cash
equivalents.......... $ 24,549 $ 237 $ 509 $ 1,562 $ (9,256)(9) $ 14,770
(2,831)(13)
Accounts receivable,
net.................. 5,922 -- -- 3,115 (2,786)(1) 6,251
Inventories........... 16,716 -- -- 9,388 -- 26,104
Prepaid expenses and
other current assets. 3,914 -- -- -- -- 3,914
Deferred income taxes. 2,353 -- -- -- -- 2,353
---------- ------- ------- -------- -------- ----------
Total Current
Assets............. 53,454 237 509 14,065 (14,873) 53,392
Property and Equipment,
net.................... 533,327 -- -- 146,343 (50,262)(13) 685,279
55,871 (2)
Investment in Boston
Chicken, Inc.
Area Developers........ -- 13,235 15,575 -- (28,810)(13) --
Notes Receivable, net... 232,139 -- -- -- (170,570)(13) 61,569
Deferred Financing
Costs, net............. 21,986 -- -- -- -- 21,986
Goodwill, net........... 694,862 -- -- 46,067 226,849 (13) 967,778
Other Assets, net....... 71,399 34 246 2,814 (25,243)(1) 48,970
(280)(9)
---------- ------- ------- -------- -------- ----------
Total Assets........ $1,607,167 $13,506 $16,330 $209,289 $ (7,318) $1,838,974
========== ======= ======= ======== ======== ==========
F-61
BOSTON CHICKEN, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
GIVING EFFECT TO THE ACQUISITION OF MARKET PARTNERS, L.L.C.,
BC EQUITY FUNDING, L.L.C. AND CERTAIN AREA DEVELOPERS
OF BOSTON CHICKEN, INC.
JULY 12, 1998 (CONTINUED)
(IN THOUSANDS)
BC
BOSTON EQUITY MARKET
CHICKEN, FUNDING, PARTNERS, TOTAL AREA PRO FORMA
INC. L.L.C. L.L.C. DEVELOPERS ADJUSTMENTS PRO FORMA
---------- -------- --------- ---------- ----------- ----------
LIABILITIES AND
STOCKHOLDERS'/PARTNERS'/
MEMBERS' EQUITY (DEFICIT)
-------------------------
Current Liabilities:
Accounts payable.................. $ 15,939 $ -- $ -- $ 12,436 $(11,270)(1) $ 17,105
Accrued expenses.................. 84,957 -- -- 48,270 (4,096)(1) 131,631
2,500 (13)
Other current liabilities......... 11,171 -- -- 925 (925)(13) 11,171
Short-term debt obligation........ -- -- -- -- 166,119 (2) 166,119
Senior secured revolver 48,000 -- -- -- -- 48,000
---------- ------- ------- -------- -------- ----------
Total Current Liabilities....... 160,067 -- -- 61,631 152,328 374,026
Deferred Franchise Revenue.......... 5,268 -- -- -- (3,265)(13) 2,003
Convertible Subordinated Debt--
Boston Chicken, Inc................ 417,020 -- -- -- -- 417,020
Convertible Subordinated Debt--
Einstein/Noah Bagel Corp........... 125,000 -- -- -- -- 125,000
Liquid Yield Option Notes........... 205,955 -- -- -- -- 205,955
Senior Term Loan--Einstein/Noah
Bagel Corp......................... 25,825 -- -- -- -- 25,825
Other long-term debt -- -- -- 566,372 (561,322)(13) 5,050
Other Noncurrent Liabilities........ 47,905 -- -- 11,879 10,000 (13) 58,446
(11,338)(1)
Deferred Income Taxes............... 2,353 -- -- -- -- 2,353
Mandatorily Redeemable Preferred
Stock.............................. -- -- -- -- 82,923 (9) 82,923
Minority Interests.................. 244,510 -- -- -- 16,255 (13) 260,765
Stockholders'/Partners'/Members'
Equity (Deficit):
Common stock...................... 723 -- -- -- 35 (9) 758
Additional paid-in capital........ 925,896 -- -- -- 16,557 (9) 942,453
Partners'/Members'
equity/(deficit)................. -- 13,506 16,330 (430,593) 430,593 (13) --
(29,836)(9)
Accumulated deficit............... (553,355) -- -- -- (110,248)(2) (663,603)
---------- ------- ------- -------- -------- ----------
Total Equity (Deficit).......... 373,264 13,506 16,330 (430,593) 307,101 279,608
---------- ------- ------- -------- -------- ----------
Total Liabilities and
Stockholders'/Partners'/Members'
Equity (Deficit)............... $1,607,167 $13,506 $16,330 $209,289 $ (7,318) $1,838,974
========== ======= ======= ======== ======== ==========
F-62
BOSTON CHICKEN, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
GIVING EFFECT TO THE ACQUISITION OF
MARKET PARTNERS, L.L.C., BC EQUITY FUNDING, L.L.C. AND
CERTAIN AREA DEVELOPERS OF BOSTON CHICKEN, INC.
1. To eliminate intercompany transactions between the Company, Market
Partners, BC Equity Funding, the Boston Chicken area developers, the Local
Advertising Fund and the National Marketing Fund.
2. To reverse rent expense previously recognized by the Boston Chicken area
developers due to the restructuring of the 1996 Facilities Master Lease
Program on July 15, 1998. Additionally, as a result of the restructuring
of the facility into a long term debt instrument, the assets have been
reflected in the accompanying balance sheet at fair market value which has
resulted in a corresponding adjustment to the depreciation and
amortization expense.
3. To amortize goodwill resulting from the conversions over a 35-year period
and adjust depreciation on assets acquired based upon their estimated fair
market value.
4. To reverse the provision for loan losses for the Boston Chicken area
developers whose loans are being converted. In lieu of such loan losses,
the pro forma financial statements will reflect the losses of the area
developers.
5. To eliminate the losses of the Boston Chicken area developers which had
been recognized by the Company. As a result of the loan conversions, in
lieu of recording the area developers' losses in a single line item on the
statement of operations, the Company has consolidated their results of
operations.
6. To record interest expense on the debt facility recorded in conjunction
with the restructuring of the 1996 Facilities Master Lease Program.
7. To allocate the portion of the Boston Chicken area developers' losses
applicable to the minority interests.
8. To record the dividend on and the accretion of the Series A exchangeable
preferred stock issued in the transactions. The net loss has been
increased by $3.4 million in the calculation of basic and diluted loss per
share for the two quarters ended July 12, 1998, as the result of the
accretion of the Series A exchangeable preferred stock to its redemption
value.
9. To record the issuance, at estimated market value, of the consideration
for the acquisition of Market Partners and BC Equity Funding and adjust
acquired assets to their estimated market value. The estimated value of
the common stock was based upon the market value of the Company's common
stock measured over a period of time prior to and after the agreement in
principle to acquire BC Equity Funding and Market Partners was reached and
publicly announced. The estimated market value of the Series A
exchangeable preferred stock was determined based upon a discounted cash
flow analysis of the dividend and principal payments of the instrument.
The analysis utilized a discount rate equal to the yield on the Company's
publicly-traded debentures measured over a period of time prior to and
after the agreement in principle to acquire BC Equity Funding and Market
Partners was reached and publicly announced.
10. To eliminate intercompany transactions between the Company and BC Great
Lakes.
11. To allocate the portion of BC Great Lakes' losses applicable to the
minority interests.
12. To eliminate the unrealized depreciation recognized on Market Partners'
and BC Equity Funding's investments. In lieu of recording the change in
the investments' market value, the Company either recognizes the
operations of the area developers in which Market Partners and BC Equity
Funding have preferred equity investments or, as a result of the loan
conversions, consolidates their results of operations.
13. To record the conversion of the outstanding balance of the convertible
secured loans and eliminations of the nonconvertible loans from the
Company to the area developers (reflected as $561.3 million of the balance
sheet of the area developers and reflected as $170.6 million on the
balance sheet of the Company), record acquired assets and liabilities at
their estimated fair market value, and recognize the minority interests in
the area developers. The fair value of the assets acquired is subject to
adjustment based upon final appraisals. Additionally, the $28.8 million
investment in the area developers by Market Partners and BC Equity Funding
is eliminated as the area developers are now accounted for on a
consolidated basis.
F-63
