SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
- - - - - - - - - - - - - -
FORM 10-Q
(Mark one)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
- ----- OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 11, 1998
OR
- ----- TRANSITION REPORT PURSUANT TO SECTION 13 OR l5(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission file number 0-19253
---------
Au Bon Pain Co., Inc.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-2723701
- --------------------------------- -------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
19 Fid Kennedy Avenue, Boston, MA 02210
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip code)
(617) 423-2100
---------------------------------------------------
(Registrant's telephone number, including area code)
------------------------------------------
(Former name, former address and former fiscal year,
if changed from last report)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 and 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------- -------
As of August 21, 1998, 10,398,030 shares and 1,572,907 shares of the
registrant's Class A and Class B Common Stock, respectively, $.0001 par value,
were outstanding.
AU BON PAIN CO., INC.
INDEX
FINANCIAL INFORMATION PAGE
--------------------- ----
PART I. ITEM 1. FINANCIAL STATEMENTS................................ 3
- ------
Consolidated Balance Sheets as of
July 11, 1998 and December 27, 1997................. 3
Consolidated Statements of Operations
for the twelve and twenty-eight weeks
ended July 11, 1998 and July 12, 1997............... 4
Consolidated Statements of Cash Flows
for the twenty-eight weeks ended
July 11, 1998 and July 12, 1997..................... 5
Notes to Consolidated Financial Statements.......... 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.......................................... 8
PART II. OTHER INFORMATION
- -------- -----------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS............................................. 13
ITEM 5. OTHER INFORMATION................................... 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.................... 14
2
Item 1. Financial Statements
AU BON PAIN CO., INC.
CONSOLIDATED BALANCE SHEETS
July 11, December 27,
1998 1997
---- ----
ASSETS (unaudited)
- ------
Current assets:
Cash and cash equivalents......................... $ 690,052 $ 853,025
Accounts receivable, net.......................... 6,698,686 9,427,190
Inventories....................................... 6,114,877 9,116,794
Prepaid expenses.................................. 2,919,413 775,036
Refundable income taxes........................... 595,916 595,916
Deferred income taxes............................. 600,040 600,040
------------ ------------
Total current assets.......................... 17,618,984 21,368,001
------------ ------------
Property and equipment, less accumulated
depreciation and amortization..................... 102,475,769 112,231,916
------------ ------------
Other assets:
Notes receivable.................................. 4,667,664 4,742,994
Intangible assets, net of accumulated amortization 30,689,925 31,360,459
Deferred financing costs.......................... 1,036,974 952,591
Deposits and other................................ 11,238,442 9,097,477
Deferred income taxes............................. 6,761,983 6,761,983
------------ ------------
Total other assets............................ 54,394,988 52,915,504
------------ ------------
Total assets.................................. $174,489,741 $186,515,421
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable.................................. $ 6,682,375 $ 7,070,881
Accrued expenses.................................. 12,711,853 13,917,058
Current maturities of long-term debt.............. 40 800 438,100
------------ ------------
Total current liabilities..................... 19,435,028 21,426,039
Long-term debt, less current maturities............. 34,236,294 42,526,752
Convertible Subordinated Notes...................... 30,000,000 30,000,000
------------ ------------
Total liabilities............................. 83,671,322 93,952,791
------------ ------------
Minority interest................................... 181,588 287,847
Stockholders' equity:
Common stock, $.0001 par value:
Preferred stock, $.0001 par value:
Class B, shares authorized 2,000,000;
issued and outstanding none
in 1998 and 1997, respectively
Class A, shares authorized 50,000,000; issued and
outstanding 10,398,030 and 10,187,042 in 1998
and 1997, respectively........................... 1,034 1,019
Class B, shares authorized 2,000,000; issued and
outstanding 1,572,907 and 1,610,038 in 1998 and
1997, respectively............................... 161 161
Additional paid-in capital......................... 69,576,876 68,485,661
Retained earnings.................................. 21,058,760 23,787,942
------------ ------------
Total stockholders' equity.................... 90,636,831 92,274,783
------------ ------------
Total liabilities and stockholders' equity.... $174,489,741 $186,515,421
============ ============
The accompanying notes are an integral part of the consolidated financial
statements.
3
AU BON PAIN CO., INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
for the 12 weeks ended for the 28 weeks ended
---------------------- -----------------------
July 11, July 12, July 11, July 12,
1998 1997 1998 1997
----------- ----------- ------------ ------------
Revenues:
Restaurant sales.............. $53,942,016 $54,120,469 $123,661,755 $121,776,084
Franchise sales and other
revenues.................... 3,311,576 4,699,321 8,555,120 8,553,523
----------- ----------- ------------ ------------
57,253,592 58,819,790 132,216,875 130,329,607
Costs and expenses:
Cost of food and paper
products..................... 19,965,766 20,833,718 48,032,540 46,576,468
Restaurant operating expenses:
Labor..................... 15,302,104 15,079,213 34,739,946 33,546,079
Occupancy................. 6,918,325 7,167,680 13,983,396 14,393,646
Other..................... 6,320,271 6,578,102 14,036,827 14,139,453
----------- ----------- ------------ ------------
28,540,700 28,824,995 62,760,169 62,079,178
Depreciation and amortization. 3,934,950 3,919,262 9,202,750 8,998,339
General and administrative
expenses.................... 4,472,077 3,753,654 9,946,568 8,667,617
Non-recurring charge.......... -- -- 1,210,000 --
----------- ----------- ------------ ------------
56,913,493 57,331,629 131,152,027 126,321,602
----------- ----------- ------------ ------------
Operating income................ 340,099 1,488,161 1,064,848 4,008,005
Interest expense, net........... 1,407,935 1,608,072 3,534,676 3,743,236
Other expense, net.............. 78,440 229,513 216,005 500,624
Loss on sale of assets.......... -- -- 734,823 --
Minority interest............... 8,105 (31,986) 25,527 20,282
----------- ------------ ------------ ------------
Income (loss) before provision
for income taxes.............. (1,154,381) (317,438) (3,446,183) (256,137)
Provision (benefit) for income
taxes......................... (375,000) (151,833) (717,000) (102,455)
----------- ----------- ------------ ------------
Net income (loss)............... $ (779,381) $ (165,605) $ (2,729,183) $ (153,682)
=========== =========== ============ ============
Net income (loss) per
common share - basic.......... $ (0.07) $ (0.01) $ (0.23) $ (0.01)
=========== =========== ============ ============
Net income (loss) per
common share - diluted........ $ (0.07) $ (0.01) $ (0.23) $ (0.01)
=========== =========== ============ ===========
Weighted average number of
common and common equivalent
shares outstanding
- basic................... 11,903,632 11,758,178 11,867,016 11,751,454
=========== =========== ============ ============
Weighted average number of
common and common equivalent
shares outstanding
- diluted................. 11,903,632 11,758,178 11,867,016 11,751,454
=========== =========== ============ ============
The accompanying notes are an integral part of the consolidated financial
statements.
4
AU BON PAIN CO., INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
for the 28 weeks ended
------------------------------
July 11, July 12,
1998 1997
------------ --------
Cash flows from operations:
Net income (loss)............................ $(2,729,183) $ (153,681)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization..................... 9,202,750 8,998,339
Amortization of deferred financing costs.......... 385,764 263,165
Provision for losses on accounts receivable....... 30,550 29,189
Minority interest................................. 25,527 20,282
Deferred income taxes............................. - 19,123
Non-recurring charge.............................. 1,210,000 712,828
Loss on sale of assets............................ 734,823 --
Changes in operating assets and liabilities:
Accounts receivable............................... 789,426 (826,451)
Inventories....................................... 799,648 (291,804)
Prepaid expenses.................................. (2,334,592) (810,904)
Accounts payable.................................. (388,506) (1,464,985)
Accrued expenses.................................. (1,069,353) (3,268,907)
----------- -----------
Net cash provided by operating activities....... 6,656,854 3,226,194
----------- -----------
Cash flows from investing activities:
Additions to property and equipment............... (8,989,727) (8,017,600)
Proceeds from sale of assets...................... 12,693,917 --
Payments received on notes receivable............. 120,330 49,112
Increase in intangible assets..................... (93,641) (54,784)
Decrease/(increase) in deposits and other......... (2,299,982) 1,422,554
Increase in notes receivable...................... (45,000) --
----------- -----------
Net cash provided by (used in)
investing activities.......................... 1,385,897 (6,600,718)
------------ -----------
Cash flows from financing activities:
Exercise of employee stock options................ 874,311 22,641
Proceeds from long-term debt issuance net
of deferred financing costs..................... 43,396,342 36,658,341
Principal payments on long-term debt.............. (52,084,100) (34,758,933)
Proceeds from issuance of common stock............ 216,920 --
Deferred financing costs.......................... (477,411) (43,206)
Decrease in minority interest..................... (131,786) (203,021)
----------- -----------
Net cash provided by (used in) financing
activities.................................... (8,205,724) 1,675,822
----------- -----------
Net increase (decrease) in cash and cash
equivalents......................................... (162,973) (1,698,702)
----------- -----------
Cash and cash equivalents, at beginning of period..... 853,025 2,578,830
----------- -----------
Cash and cash equivalents, at end of period........... $ 690,052 $ 880,128
=========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
5
Notes to Consolidated Financial Statements
Note A - Basis of Presentation
The accompanying unaudited, consolidated financial statements of Au Bon
Pain Co., Inc. and Subsidiaries (the "Company") have been prepared in accordance
with instructions to Form 10-Q and, therefore, do not include all information
and footnotes normally included in financial statements prepared in conformity
with generally accepted accounting principles. They should be read in
conjunction with the financial statements of the Company for the fiscal year
ended December 27, 1997.
The accompanying financial statements are unaudited and include all
adjustments (consisting of normal recurring adjustments and accruals) that
management considers necessary for a fair presentation of its financial position
and results of operations for the interim periods, and are not necessarily
indicative of the results that may be expected for the entire year.
Note B - Earnings Per Share
The following table sets forth the computation of basic and diluted
earnings per share.
for the twelve weeks ended
--------------------------
July 11, July 12,
1998 1997
-------- --------
Net income (loss) used in net
income (loss) per common share
- basic................................ $ (779,381) $ (165,605)
=========== ===========
Net income (loss) used in net
income (loss) per common share
- diluted.............................. $ (779,381) $ (165,605)
=========== ===========
Weighted average number of shares
outstanding - basic.................... 11,903,632 11,758,178
Effect of dilutive securities:
Employee stock options............. -- --
Stock warrants..................... -- --
Weighted average number of shares
outstanding - diluted.............. 11,903,632 11,758,178
=========== ===========
Net income (loss) per common share
- basic................................ $ (.07) $ (.01)
=========== ===========
Net income (loss) per common share
- diluted.............................. $ (.07) $ (.01)
=========== ===========
Note C - Recent Accounting Pronouncements
In June 1997, the FASB issued SFAS No. 131 "Disclosure about Segments of an
Enterprise and Related Information", which changes the manner in which public
companies report information about their operating segments. SFAS No. 131, which
is based on the management
6
approach to segment reporting, establishes requirements to report selected
segment information quarterly and to report entity-wide disclosures about
products and services, major customers, and the geographic locations in which
the entity holds assets and reports revenue. Management is currently evaluating
the effects of this change on its reporting of segment information. The Company
will adopt SFAS No. 131 for its fiscal year ending December 26, 1998.
Note D - Subsequent Events
On August 12, 1998, Au Bon Pain Co., Inc. (the "Company"), ABP Holdings,
Inc., a Delaware corporation and wholly owned subsidiary of the Company (the
"Subsidiary"), and ABP Corporation, a Delaware corporation controlled by
Bruckmann, Rosser, Sherill & Co., Inc., a private equity investment firm based
in New York (the "Buyer"), entered into a Stock Purchase Agreement (the
"Agreement"), which contemplates (i) the transfer from the Company to the
Subsidiary of substantially all of the operating assets, store leases, contracts
and liabilities associated with the Company's bakery cafe food service business
concept generally known as Au Bon Pain (collectively, the "Au Bon Pain
Division") and (ii) the sale of all of the capital stock of the Subsidiary to
the Buyer (the "Sale"), whereby the Buyer will become the owner of the Au Bon
Pain Division. The Sale will become effective subject to the terms and
conditions of the Agreement, including, but not limited to, the approval of the
stockholders of the Company, consents of certain landlords, governmental
approvals, and consummation of financing pursuant to previously obtained
commitments from Buyer's lenders and investors, of which no assurance can be
given. In the event the Sale is consummated, the Company expects to record a
non-cash after-tax loss of approximately $20 million in connection with the
Sale. The description of the Agreement is qualified in its entirety by reference
to Form 8-K and the exhibits attached thereto, including the Agreement, filed
with the Commission on August 21, 1998. The purchase price payable to the
Company upon the effectiveness of the Sale shall be seventy-eight million
dollars ($78,000,000), subject to possible purchase price adjustments, as
described in the Agreement.
7
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following table sets forth the percentage relationship to total
revenues of certain items included in the Company's consolidated statements of
operations for the periods indicated:
For the For the
12 weeks ended 28 weeks ended
-------------------- ------------------
July 11, July 12, July 11, July 12,
1998 1997 1998 1997
-------- -------- -------- --------
Revenues:
Restaurant sales ............. 94.2% 92.0% 93.5% 93.4%
Franchise sales and
other revenues ............. 5.8 8.0 6.5 6.6
----- ----- ----- -----
100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Cost of food and
paper products ............. 34.9% 35.4% 36.3% 35.7%
Restaurant operating
expenses ................... 49.8 49.0 47.5 47.6
Depreciation and
amortization ............... 6.9 6.7 7.0 6.9
General and
administrative ............. 7.8 6.4 7.5 6.7
Non-recurring reserve ........ -- -- 0.9 --
----- ----- ----- -----
99.4 97.5 99.2 96.9
----- ----- ----- -----
Operating margin ............... 0.6 2.5 0.8 3.1
Interest expense, net .......... 2.5 2.7 2.7 2.9
Other expense, net ............. 0.1 0.4 0.2 0.4
Loss of sale on assets ......... -- -- 0.5 --
Minority interest .............. -- (0.1) -- --
----- ----- ----- -----
Income (loss) before
provision (benefit) for
income taxes ................. (2.0) (0.5) (2.6) (0.2)
Provision (benefit) for
income taxes ................. (0.6) (0.2) (0.5) (0.1)
----- ----- ----- -----
Net income (loss) .............. (1.4)% (0.3)% (2.1)% (0.1)%
===== ===== ===== =====
General
The Company's revenues are derived from restaurant sales and franchise
sales and other revenues. Franchise sales and other revenues include sales of
frozen dough products to franchisees and others, royalty income and franchise
fees. Certain expenses (cost of food and paper products, restaurant operating
expenses, and
8
depreciation and amortization) relate primarily to restaurant sales, while
general and administrative expenses relate to all areas of revenue generation.
The Company's fiscal year ends on the last Saturday in December. The
Company's fiscal year normally consists of 13 four-week periods, with the first,
second and third quarters ending 16 weeks, 28 weeks and 40 weeks, respectively,
into the fiscal year.
Results of Operations
Total revenues for the twelve weeks ended July 11, 1998 decreased 3% to
$57.2 million from $58.8 million for the comparable period of 1997, comprising
an 18.3% increase in total revenues at the Saint Louis Bread business unit and a
10.3% decrease in total revenues at the Au Bon Pain business unit. Total
revenues increased in the Saint Louis Bread/Panera Bread business unit to $18.6
million in the second quarter of 1998, driven principally by positive comparable
restaurant sales and incremental revenues from the seven and five company-owned
bakery cafes opened in 1997 and 1998 to-date, respectively. Comparable
restaurant sales at Saint Louis Bread Co./Panera Bread continued at a moderately
strong pace, increasing 2.9% in the second quarter of 1998 versus the comparable
period of 1997. This increase is on top of the 9.8% comparable restaurant sales
increase of the second quarter of 1997. In the Au Bon Pain business unit, total
revenues decreased to $38.7 million for the second quarter of 1998, reflecting
the closing of certain restaurants in 1997 and 1998 and the franchising of
eleven stores in the Philadelphia market in the third quarter of 1997.
Comparable restaurant sales for the Au Bon Pain business unit in the second
quarter of 1998 increased by .9%.
Operating income in the second quarter of 1998 decreased to $340,000,
versus $1,492,000 in the second quarter of 1997, as operating margin was .6% in
the second quarter of 1998 versus 2.5% in the comparable period of 1997. The 1.9
point year-over-year decline in margin was a result of increased food costs as a
percentage of total revenues, particularly butter and previously-contracted-for-
coffee, an increase in overall general and administrative expenses, including
increased expenses to support the company's 1998 projected growth, and lower
contribution in the second quarter of 1998 from the Au Bon Pain International
and Trade Channels business unit.
At the Saint Louis Bread Co./Panera Bread business unit, operating
margin decreased .8% in the second quarter of 1998 versus the comparable quarter
of 1997 due to increased general and administrative and other infrastructure
expenses to support the business unit's projected 63% systemwide unit growth in
1998 over 1997. Operating margin in the Au Bon Pain business unit in the second
quarter of 1998 was 3.1 points below that of the second quarter of 1997, as the
Au Bon Pain business unit results were significantly impacted by higher
percentage food costs, principally in the areas of
9
butter, coffee, and produce costs. In addition, the Au Bon Pain International
and Trade Channels business unit earnings decreased significantly versus the
comparable quarter of 1997, attributable to some sales softness in the Asian
markets and particularly strong fees in the second quarter of 1997.
During the second quarter of 1998, six Saint Louis Bread Co./Panera Bread
franchise area development agreements were signed, representing commitments for
the development of 66 bakery cafes and increasing the number of franchise
commitments to a total of 452 bakery cafes to be developed. Nine Saint Louis
Bread/Panera Bread bakery cafes were opened in the second quarter of 1998,
including three company-owned cafes and six franchise-operated cafes. For the Au
Bon Pain International and Trade Channels business unit, nine franchise-operated
units opened in the second quarter of 1998.
Net Income
The Company recorded a net loss in the second quarter of 1998 of $779,381
versus a net loss of $165,605 in the comparable 1997 period. Interest expense
decreased to $1,408,000 in the second quarter of 1998 versus $1,608,000 in the
comparable period in 1997 with other expense of $88,000 at July 11, 1998
compared to $198,000 at July 12, 1997.
Liquidity and Capital Resources
The Company's principal requirements for cash are capital expenditures for
constructing and equipping new bakery cafes, maintaining or remodeling existing
bakery cafes and working capital. To date, the Company has met its requirements
for capital with cash from operations, proceeds from the sale of equity and debt
securities and bank borrowings.
For the twenty-eight weeks ended July 11, 1998, operating activities
provided $6.7 million versus $3.2 million for the comparable period of 1997.
Funds provided by operating activities were primarily the result of the sale of
assets and decreases in accounts receivable and inventories, offset by an
increase in prepaid expenses and decreases in accrued expenses. In 1997, cash
was generated by disposal of assets offset by decreases in accounts payable and
accrued expenses.
Total capital expenditures for the twenty-eight weeks ended July 11, 1998
of $9.0 million were related primarily to the construction of new Saint Louis
Bread bakery cafes and commissaries and the remodeling of existing Au Bon Pain
bakery cafes. The expenditures were funded principally by net cash from
operating activities and by use of the Company's revolving line of credit. Total
capital expenditures for the twenty-eight weeks ended July 12, 1997 were $8.0
million.
On July 24, 1996, the Company issued $15 million senior subordinated
debentures maturing in July, 2000. The debentures accrue
10
interest at varying fixed rates over the four-year term, ranging between 11.25%
and 14.0%. In connection with the private placement, warrants with an exercise
price of $5.62 per share were issued to purchase between 400,000 and 500,000
shares of the Company's Class A common stock, depending on the term during which
the debentures remain outstanding and certain future events. The net proceeds of
the financing were used to reduce the amount outstanding under the Company's
bank revolving line of credit. With the senior subordinated financing and the
Company's revolving line of credit, the Company's management believes it has the
capital resources necessary to meet its growth goals through 1998.
On March 23, 1998 the Company sold its Mexico, MO production facility and
its wholesale frozen dough business to Bunge Foods Corporation ("Bunge") for
approximately $13 million in cash. The net proceeds of the sale were used to
repay the $7.9 million outstanding for the Industrial Revenue Bond and to reduce
amounts outstanding under the revolving credit line. There were no gains or
losses associated with the early retirement of the Industrial Revenue Bond or
the partial repayment of the revolving credit line.
The Company has a $22.0 million unsecured revolving line of credit which
bears interest at the commercial bank's prime rate plus .25% to 2.25%, depending
upon certain financial tests performed quarterly. As of July 11, 1998, $17.5
million was outstanding under the line of credit and an additional $1.1 million
of the remaining availability was utilized by outstanding letters of credit
issued by the bank on behalf of the Company.
In 1998, the Company currently anticipates spending approximately $19.0
million for capital expenditures, principally for the opening of new bakery
cafes and the remodeling of existing units. The Company expects to fund these
expenditures principally through internally generated cash flow.
In June 1997, the FASB issued SFAS No. 131 "Disclosure about Segments of an
Enterprise and Related Information", which changes the manner in which public
companies report information about their operating segments. SFAS No. 131, which
is based on the management approach to segment reporting, establishes
requirements to report selected segment information quarterly and to report
entity-wide disclosures about products and services, major customers, and the
geographic locations in which the entity holds assets and reports revenue.
Management is currently evaluating the effects of this change on its reporting
of segment information. The Company will adopt SFAS No. 131 for its fiscal year
ending December 26, 1998.
Statements made or incorporated in this Form 10-Q include a number of
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
Forward-looking statements include, without limitation, statements containing
the words "estimates", "projects", "anticipates", "believes", "expects",
"intends", "future", and words of similar import which express management's
belief, expectations or
11
intentions regarding the Company's future performance. The forward-looking
statements involve known or unknown risks and uncertainties. The Company's
actual results could differ materially from those set forth in the
forward-looking statements. Additionally, the Company's operating results may be
affected by many factors, including but not limited to, variations in the number
and timing of bakery cafe openings and public acceptance of new bakery cafes,
competition and other factors that may affect retailers in general.
The Company has not completed its assessment of the impact of the Year 2000
issue. It is management's belief that the primary financial systems are Year
2000 compatible. Those systems are being tested for compliance during 1998. Many
secondary systems associated with the Company's retail operations will require
modifications. It is the Company's belief that existing internal Company
resources will be adequate to reprogram these Year 2000 modifications. It is
expected that the most significant Year 2000 system issue for the Company is
with POS systems used by the Au Bon Pain concept. The Company is in negotiation
with several vendors to replace the exiting POS systems with new
state-of-the-art systems. The new systems are expected to be leased at a net
incremental cost of approximately $400,000 annually for both the Au Bon Pain and
Saint Louis Bread concepts. The incremental cost of the new system is expected
to be substantially offset by labor efficiency savings associated with the new
POS system.
12
PART II. OTHER INFORMATION
- -------- -----------------
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Stockholders on June 25, 1998, to
consider and vote upon the following matters:
1. To elect two (2) members of the Board of Directors, each for a
three-year term ending at the Company's 2001 Annual Meeting
(the "Directors Proposal"); and
2. To ratify the action of the Board of Directors reappointing
Coopers & Lybrand LLP (now known as PricewaterhouseCoopers
LLP) as auditors for the Company for the fiscal year ending
December 26, 1998 (the "Auditors Proposal");
With respect to the Directors Proposal, each of the following Nominees
received the following votes in favor, and withheld, from his nomination:
Nominee For Withheld
------- --- --------
George E. Kane 11,830,151 295,742
Henry J. Nasella 11,866,817 259,076
Accordingly, Messrs. Kane and Nasella were elected as members of the Board
of Directors, each to serve a three-year term expiring at the Company's 2001
Annual Meeting and until his successor has been duly elected and qualified.
With respect to the Auditors Proposal, 12,097,072 votes were cast for the
proposal, 11,288 votes were cast against the proposal, and there were 17,533
abstentions on the proposal. Accordingly, the Auditors Proposal was approved.
Item 5. OTHER INFORMATION
On August 12, 1998, Au Bon Pain Co., Inc. (the "Company"), ABP Holdings,
Inc., a Delaware corporation and wholly owned subsidiary of the Company (the
"Subsidiary"), and ABP Corporation, a Delaware corporation controlled by
Bruckmann, Rosser, Sherill & Co., Inc., a private equity investment firm based
in New York (the "Buyer"), entered into a Stock Purchase Agreement (the
"Agreement"), which contemplates (i) the transfer from the Company to the
Subsidiary of substantially all of the operating assets, store leases, contracts
and liabilities associated with the Company's bakery cafe food service business
concept generally known as Au Bon Pain (collectively, the "Au Bon Pain
Division") and (ii) the sale of all of the capital stock of the Subsidiary to
the Buyer (the "Sale"), whereby the Buyer will become the owner of the Au Bon
Pain Division. The Sale will become effective subject to the terms and
conditions of the Agreement, including, but not limited to, the approval of the
stockholders of the Company, consents of certain landlords, governmental
approvals, and
13
consummation of financing pursuant to previously obtained commitments from
Buyer's lenders and investors, of which no assurance can be given. In the event
the Sale is consummated, the Company expects to record a non-cash after-tax loss
of approximately $20 million in connection with the Sale. The description of the
Agreement is qualified in its entirety by reference to Form 8-K and the exhibits
attached thereto, including the Agreement, filed with the Commission on August
21, 1998. The purchase price payable to the Company upon the effectiveness of
the Sale shall be seventy-eight million dollars ($78,000,000), subject to
possible purchase price adjustments, as described in the Agreement.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 - Financial Data Schedule.
(b) Exhibit 10 - Executive Employment Agreement between the Company and
Sam Yong dated June 16, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AU BON PAIN CO., INC.
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(Registrant)
Dated: August 25, 1998 By: /S/ LOUIS I. KANE
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Louis I. Kane
Co-Chairman
Dated: August 25, 1998 By: /S/ RONALD M. SHAICH
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Ronald M. Shaich
Co-Chairman and
Chief Executive Officer
Dated: August 25, 1998 By: /S/ ANTHONY J. CARROLL
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Anthony J. Carroll
Senior Vice President and
Chief Financial Officer
15