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right to convert the loan which typically results in a controlling equity interest in the area
developer. As of December 25, 1994, The Company had secured loan commitments
aggregating approximately $332.5 million, of which approximately $201.3 million had
been advanced. The Company anticipates fully funding its commitments pursuant to its
loan agreements with these area developers, and anticipates increasing such loan com-
mitments and entering into additional loan commitments with other area developers in
targeted market areas. In connection with entering into new area development agree-
ments, the Company intends to sell Company-operated stores located in any such areas
to the respective area developer. The Company is currently negotiating such agreements
for a number of metropolitan areas, including Kansas City, Minneapolis, Omaha, New
York, and San Francisco/San Jose. The timing of such transactions will have signi¬cant
effect on the size and timing of the Company™s capital requirements.
In 1994, the Company sold 54 Company-operated stores to its area developers in
the Philadelphia, Detroit, Denver, Colorado Springs, Phoenix, Tucson, Las Vegas, Albu-
querque, Salt Lake City, Southern New Jersey, and Boston metropolitan areas. In addition
to opening stores to seed development in new markets and subsequently selling such
stores to the new area developer for such market, the Company purchases and resells
Boston Market stores in markets with multiple area developers in order to facilitate con-
solidation of such markets. In connection with these consolidation activities, the Company
has issued a total of 1,112,436 shares of common stock pursuant to its shelf registration
statement for the acquisition of 32 Boston Market stores and paid cash for 2 Boston Mar-
ket stores. Of the 34 stores purchased, 26 stores were subsequently sold. The Company
believes that all of the shares issued in connection with these consolidation activities have
been sold by the recipients pursuant to Rule 145 (d) under the Securities Act of 1933, as
amended. The aggregate proceeds from the sale of Company-operated stores to seed
new markets and from the sale of stores which were acquired to consolidate markets
156 Asset Analysis




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Asset Analysis




were approximately $62.3 million. There were no material gains recognized as a result of
these sales.
In March 1995, the Company entered into a secured loan agreement providing $20
million of convertible debt ¬nancing to Progressive Bagel Concepts, Inc. (“PBCI”). The
Company has agreed to increase the amount available to PBCI under the loan agree-
ment subject to PBCI™s ability to meet certain conditions.

Capital Resources
For the year ended December 25, 1994, the Company™s primary sources of capital
included $35.9 million generated from operating activities, $130.0 million from the issu-
ance of 41„ 2% convertible subordinated debentures maturing February 1, 2004 (the
“Debentures”), and $125.7 million from the sale of shares of common stock. The Deben-




Boston Chicken
tures are convertible at any time prior to maturity into shares of the Company™s common
stock at a conversion rate of $27.969 per share, subject to adjustment under certain con-
ditions. Beginning February 1, 1996, the Debentures may be reduced at the option of the
Company, provided that until February 1, 1997, the Debentures cannot be redeemed
unless the closing price of the Company™s common stock equals or exceeds $39.16 per
share for at least 20 out of 30 consecutive trading days. The Debentures are redeemable
initially at 103.6% of their principal amount and at declining prices thereafter, plus
accrued interest. Interest is payable semi-annually on February 1 and August 1 of each
year.
In 1994, the Company entered into a $75.9 million master lease agreement to pro-
vide equipment ¬nancing for stores owned by certain of its area developers and certain
Company-operated stores. The lease bears interest at LIBOR plus an applicable margin
and, including renewal terms, expires in December 1998. As of December 25, 1994, the
Company had utilized $66.1 million of the facility.
As of December 25, 1994, the Company had $25.3 million available in cash and
cash equivalents, $75.0 million available under its unsecured revolving credit facility, and
$8.9 million available under its master lease agreement.
The Company anticipates that it and its area developers will have need for additional
¬nancing during the 1995 ¬scal year. The timing of the Company™s capital requirements
will be affected by the number of Company-operated and franchise stores opened, oper-
ational results of stores, the number of real estate sites purchased by the Company for
Company use and for leasing by the Company to franchisees, and the amount and tim-
ing of borrowings under the loan agreements between the Company and certain of its
existing or future area developers and by PBCI. As the Company™s capital requirements
increase, the Company will seek additional funds from future public or private offerings
of debt or equity securities. There can be no assurance that the Company will be able to
raise such capital on satisfactory terms when needed.

Seasonality
Historically, the Company has experienced lower average store revenue in the months of
November, December, January, and February as a result of the holiday season and
inclement weather. The Company™s business in general, as well as the revenue of Com-
pany-operated stores, may be affected by a variety of other factors, including, but not
limited to, general economic trends, competition, marketing programs, and special or
unusual events. Such effects, however, may not be apparent in the Company™s operating
results during a period of signi¬cant expansion.
157
Asset Analysis




4-31 Part 2 Business Analysis and Valuation Tools




CONSOLIDATED BALANCE SHEETS


1994 1993
Assets
Current assets
Cash $25,304 $ 4,537
Accounts receivable, net 6,540 2,076
Due from af¬liates 6,462 3,126
Notes receivable 16,906 1,512
Prepaid expenses & other current assets 2,282 1,843
Deferred income taxes 1,835
Boston Chicken




Total current assets 59,329 13,094
Property & equipment, net 163,314 51,331
Notes receivable 185,594 44,204
Deferred ¬nancing costs 8,346 358
Other assets 10,399 1,077
Total assets $426,982 $110,064

Liabilities & Stockholders™ Equity
Current liabilities
Accounts payable $15,188 $6,216
Accrued expenses 6,587 1,835
Deferred franchise revenue 5,505 2,255
Total current liabilities 27,280 10,306
Deferred franchise revenue 5,815 3,139
Convertible subordinated debt 130,000
Other noncurrent liabilities 1,061 1,713
Deferred income taxes 3,011

Stockholders™ Equity
Common stock 447 347
Additional paid-in capital 252,298 103,662
Retained earnings (de¬cit) 7,070 (9,103)
259,815 94,906
Total liabilities and stockholders™ equity $426,982 $110,064
158 Asset Analysis




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Asset Analysis




CONSOLIDATED STATEMENTS OF OPERATIONS


1994 1993 1992
Revenue
Royalties & franchise-related fees $55,235 $12,681 $2,627
Company-operated stores 40,916 29,849 5,656
Total revenues 96,151 42,530 8,283
Costs and expenses
Cost of products sold 15,876 11,287 2,241
Salaries and bene¬ts 22,637 15,437 7,110




Boston Chicken
General and administrative 27,930 13,879 5,241
Provision for relocation 5,097 ” ”
Total costs and expenses 71,540 41,603 14,592
Income (loss) from operations 24,611 927 (6,309)
Other income (expense)
Interest income (expense), net (4,235) (440) 270
Other income, net 74 160 189
Total other income (expense) (4,161) (280) 459
Income (loss) before income taxes 20,450 647 (5,850)
Income taxes 4,277 ” ”
Net income (loss) $16,173 $ 647 $(5,850)
Net income (loss) per share common and
equivalent share $0.38 $0.06 $ (0.21)
Number of shares 42,861 32,667 28,495
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Asset Analysis




4-33 Part 2 Business Analysis and Valuation Tools




CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)


Fiscal Years Ended
Dec. 25, Dec. 26, Dec. 27,
1994 1993 1992
Cash from operating activities
Net income (loss) $ 16,173 $ 1,647 $ (5,850)
Adjustments to reconcile income (loss) to net cash
provided by (used in) operating activities
Depreciation and amortization 6,074 1,970 260
Boston Chicken




Deferred income taxes 4,277
Vesting of common stock for services rendered 39
Gain on disposal of assets (368) (150) (29)
Changes in assets and liabilities
Accounts receivable and due from af¬liates (7,800) (4,343) (689)
Accounts payable and accrued expenses 13,724 6,247 1,102
Deferred franchise revenue 5,926 3,236 1,223
Other assets and liabilities (2,088) (561) 332
Net cash from (used in) operations 35,198 8,046 (3,612)
Cash from investing activities
Purchase of plant, property & equipment (163,622) (49,151) (8,453)
Proceeds from sale of assets 62,342 6,161 385
Acquisition of other assets (12,790) (1,093) (273)
Issuance of notes receivable (225,282) (45,690) (773)
Repayment of notes receivable 68,498 747 ”
Net cash used in investing activities (270,854) (89,026) (9,114)
Cash from ¬nancing activities
Proceeds from issue common stock 125,703 66,150 19,843
Proceeds from convertible subordinate notes 130,000 9,658
Borrowings under credit facility 96,130 32,275
Repayments under credit facility (96,130) (32,275)
Payment of capital lease obligation ” ” (300)
Net cash from ¬nancing activities 255,703 75,808 19,543
Net increase (decrease) in cash 20,767 (5,172) 6,817
Cash, beginning of year 4,537 9,709 2,892
Cash, end of year $ 25,304 $ 4,537 $ 9,709
Supplemental cash ¬‚ow information
Interest paid $ 3,395 $ 226 $ 29
Noncash transactions
Conversion of convt. subord. notes into common stock $ ” $ 10,072 $ ”
Issuance of common stock for assets $ 19,931 $ ” $ ”


The accompanying notes to the consolidated financial statements are an integral part of these statements.
160 Asset Analysis




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Asset Analysis




OTHER INFORMATION


1994 1993 1992 1991
Store Information
Company operated 41 38 19 5
Finance area developers 314 78 3 0
Non¬nanced area developers 179 101 61 29
Total 534 217 83 34

Systematic store revenue 383.7 152.1 42.7 20.8




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