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EXHIBIT 99.1
AFC ENTERPRISES, INC.
INDEX TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
PAGE
----
Pro Forma Consolidated Financial Statements (Unaudited):
Pro Forma Consolidated Balance Sheet as of October 3, 2004.......... P-4
Pro Forma Consolidated Statement of Operations for the
Year Ended December 28, 2003...................................... P-5
Pro Forma Consolidated Statement of Operations for the
Forty Week Period Ended October 3, 2004.......................... P-6
Notes to Pro Forma Consolidated Financial Statements................ P-7
P-1
AFC ENTERPRISES, INC.
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
On November 4, 2004, we closed the sale of our Cinnabon, Inc. ("CII")
subsidiary to Focus Brands Inc. for $21.0 million in cash. The transaction
includes the sale of certain franchise rights for Seattle's Best Coffee, which
were retained following the sale of Seattle Coffee to Starbucks Corporation in
July 2003. Cash proceeds from the sale, net of transaction-related costs, are
estimated at $18.3 million.
On December 28, 2004, we closed the sale of our Church's Chicken
("Church's") brand to an affiliate of Crescent Capital Investments, Inc. Under
the terms of the sale, as amended on the closing date, subject to customary
closing adjustments, we received $379.1 million in cash and a $7.0 million
subordinated note. Concurrent with the sale of Church's, we sold certain real
property to a Church's franchisee for $3.7 million in cash. The combined cash
proceeds of these two sales, net of transaction-related costs, are estimated at
$372.5 million.
The following unaudited pro forma consolidated financial statements
have been prepared to give effect to the sale of CII, the sale of Church's and
the sale of certain real property to a Church's franchisee.
Pursuant to the terms of our 2002 Credit Facility, as amended, we (i)
used $16.5 million of the proceeds from the sale of CII to pay down long-term
debt and (ii) transferred $125.5 million of the proceeds from the sale of
Church's into an account whereby $10.0 million of the amount was used to pay
down long-term debt with the remaining balance collateralizing our outstanding
indebtedness under the facility and other contingencies. Management is currently
considering AFC's options for restructuring its current outstanding
indebtedness.
Management and AFC's Board of Directors are also evaluating the most
appropriate use of the net proceeds from the CII and Church's sales, with the
goal of enhancing shareholder value.
The unaudited pro forma consolidated balance sheet has been prepared
assuming that the transactions described above were completed on October 3,
2004. The unaudited pro forma consolidated statements of operations have been
prepared assuming the transactions described above were completed on December
30, 2002 (the first day of fiscal year 2003).
P-2
The pro forma adjustments are based upon available information and
contain assumptions that management believes are reasonable under the
circumstances. The unaudited pro forma consolidated financial statements are
provided for informational purposes only and do not purport to be indicative of
AFC's financial condition or the results of operations that would actually have
been realized had such transactions been completed for the periods or as of the
dates presented or that may be realized in the future.
P-3
AFC ENTERPRISES,INC.
PRO FORMA BALANCE SHEET
AS OF OCTOBER 3, 2004
(IN MILLIONS)
ADJUSTMENTS
----------------------------------------------------------------
HISTORICAL HISTORICAL CINNABON HISTORICAL CHURCH'S PRO FORMA
AFC CINNABON PRO FORMA CHURCH'S PRO FORMA AFC
CONSOLIDATED BALANCE SHEET(1) ADJUSTMENTS(2) BALANCE SHEET(1) ADJUSTMENTS(2) BALANCE SHEET
------------ ---------------- -------------- ---------------- -------------- -------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ........ $ 12.5 $ -- $ 1.8(3) $ -- $ 247.0(3) $ 261.3
Accounts and current notes
receivable, net ................ 18.1 -- -- (6.5) -- 11.6
Prepaid income taxes ............. 18.1 -- -- -- -- 18.1
Assets of discontinued
operations ...................... 31.4 (31.4) -- -- -- --
Other current assets ............. 18.7 -- (0.6)(4) (4.8) 8.8(4) 22.1
-------- ------ ------- ------- -------- --------
Total current assets ........ 98.8 (31.4) 1.2 (11.3) 255.8 313.1
-------- ------ ------- ------- -------- --------
LONG-TERM ASSETS:
Property and equipment, net ...... 163.4 -- -- (112.1) -- 51.3
Goodwill ......................... 10.6 -- -- (1.0) -- 9.6
Trademarks and other
intangible assets, net ......... 61.1 -- -- (18.3) -- 42.8
Other long-term assets, net ...... 13.7 -- 13.5(4) (1.2) 112.9(4) 138.9
-------- ------ ------- ------- -------- --------
Total long-term assets ...... 248.8 -- 13.5 (132.6) 112.9 242.6
-------- ------ ------- ------- -------- --------
Total assets ................ $ 347.6 $(31.4) $ 14.7 $(143.9) $ 368.7 $ 555.7
======== ======= ======= ======= ======== ========
LIABILITIES AND SHAREHOLDERS'
EQUITY
CURRENT LIABILITIES:
Accounts payable (See Note 11) ... $ 38.7 $ -- $ -- $ (13.0) $ 97.9(6) $ 123.6
Accrued liabilities .............. 18.9 -- -- (6.7) -- 12.2
Current debt maturities .......... 9.6 -- -- -- -- 9.6
Liabilities of discontinued
operations (See Note 11) ........ 9.2 (9.2) -- (0.1) -- (0.1)
-------- ------ ------- ------- -------- --------
Total current liabilities ..... 76.4 (9.2) -- (19.8) 97.9 145.3
-------- ------ ------- ------- -------- --------
LONG-TERM LIABILITIES:
Long-term debt ................... 101.3 -- (16.5)(5) (1.5) (10.0)(5) 73.3
Deferred credits and other
long-term liabilities .......... 43.8 -- (3.8)(6) (10.9) (5.7)(6) 23.4
-------- ------ ------- ------- -------- --------
Total long-term liabilities ... 145.1 -- 20.3) (12.4) (15.7) 96.7
-------- ------ ------- ------- -------- --------
SHAREHOLDERS' EQUITY:
Common stock ..................... 0.3 -- -- -- -- 0.3
Capital in excess of par value ... 153.4 -- -- -- -- 153.4
Notes receivable from officers,
including accrued interest ...... (1.4) -- -- -- -- (1.4)
Accumulated losses ............... (26.2) (22.2) 35.0 (111.7) 286.5 161.4
-------- ------ ------- ------- -------- --------
Total shareholders' equity ..... 126.1 (22.2) 35.0 (111.7) 286.5 313.7
-------- ------ ------- ------- -------- --------
Total liabilities and
shareholders' equity ......... $ 347.6 $ (31.4) $ 14.7 $(143.9) $ 368.7 $ 555.7
======== ======= ======= ======= ======== ========
See accompanying notes to pro forma financial statements.
P-4
AFC ENTERPRISES, INC.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 28, 2003
(IN MILLIONS)
ADJUSTMENTS
----------------------------------------------
LESS: LESS: ADD: AFC
HISTORICAL HISTORICAL HISTORICAL OTHER PRO FORMA
AFC CINNABON CHURCH'S PRO FORMA STATEMENT OF
CONSOLIDATED CONSOLIDATED (7) CONSOLIDATED(7) ADJUSTMENTS OPERATIONS
------------ ---------------- -------------- ----------- ------------
REVENUES:
Sales by company-operated
restaurants ......................... $ 323.4 $ 31.1 $ 206.8 $ -- $ 85.5
Franchise revenues .................... 114.3 11.9 31.6 -- 70.8
Other revenues ........................ 21.6 5.7 10.3 -- 5.6
--------- -------- -------- ------ --------
Total revenues ..................... 459.3 48.7 248.7 -- 161.9
--------- -------- -------- ------ --------
EXPENSES:
Restaurant employee, occupancy and
other expenses ....................... 169.6 21.8 100.9 -- 46.9
Restaurant food, beverages and
packaging ........................... 94.9 6.9 61.3 -- 26.7
General and administrative expenses ... 107.3 14.2 26.7 -- 66.4
Depreciation and amortization ......... 23.0 2.0 10.3 -- 10.7
Other expenses ........................ 63.9 30.7 2.4 -- 30.8
--------- -------- -------- ------ --------
Total expenses ..................... 458.7 75.6 201.6 -- 181.5
--------- -------- -------- ------ --------
OPERATING PROFIT (LOSS) ................. 0.6 (26.9) 47.1 -- (19.6)
Interest expense, net ................. 7.1 0.1 1.5 (1.5)(8) 4.0
--------- -------- -------- ------ --------
(LOSS) INCOME FROM CONTINUING
OPERATIONS
BEFORE INCOME TAXES ................... (6.5) (27.0) 45.6 1.5 (23.6)
Income tax (benefit) expense .......... (0.5) (7.2) 17.1 0.6(9) (9.8)
--------- -------- -------- ------ --------
NET (LOSS) INCOME FROM CONTINUING
OPERATIONS ............................ $ (6.0) $ (19.8) $ 28.5 $ 0.9 $ (13.8)
========= ======== ======== ====== ========
BASIC EARNINGS (LOSS) PER SHARE (12):
Net (loss) income from continuing
operations ........................... $ (0.22) $ (0.50)
========= ========
DILUTED EARNINGS (LOSS) PER SHARE (12):
Net (loss) income from continuing
operations ........................... $ (0.22) $ (0.50)
========= ========
See accompanying notes to pro forma financial statements.
P-5
AFC ENTERPRISES, INC.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE FORTY WEEKS ENDED OCTOBER 3, 2004
(IN MILLIONS)
ADJUSTMENTS
-----------------------------------
LESS: ADD: AFC
HISTORICAL HISTORICAL OTHER PRO FORMA
AFC CHURCH'S PRO FORMA STATEMENT OF
CONSOLIDATED CONSOLIDATED(10) ADJUSTMENTS OPERATIONS
---------------- ---------------- ----------- -------------
REVENUES:
Sales by company-operated
restaurants ............................ $ 238.5 $ 168.2 $ -- $ 70.3
Franchise revenues ...................... 81.6 26.0 -- 55.6
Other revenues .......................... 11.8 7.9 -- 3.9
--------- ------- ------ --------
Total revenues ....................... 331.9 202.1 -- 129.8
--------- ------- ------ --------
EXPENSES:
Restaurant employee, occupancy and
other expenses ......................... 124.0 84.5 -- 39.5
Restaurant food, beverages
and packaging .......................... 74.0 52.1 -- 21.9
General and administrative expenses ..... 80.9 21.0 -- 59.9
Depreciation and amortization ........... 16.6 8.2 -- 8.4
Other expenses .......................... 3.8 0.5 -- 3.3
--------- ------- ------ --------
Total expenses ....................... 299.3 166.3 -- 133.0
--------- ------- ------ --------
OPERATING PROFIT (LOSS) ................... 32.6 35.8 -- (3.2)
Interest expense, net ................... 4.8 0.1 (1.0)(8) 3.7
--------- ------- ------ --------
(LOSS) INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES AND
MINORITY INTEREST ....................... 27.8 35.7 1.0 (6.9)
Income tax expense (benefit) ........... 9.1 13.4 0.4(9) (3.9)
Minority interest ....................... 0.1 -- 0.1
--------- ------- ------ --------
NET (LOSS) INCOME FROM
CONTINUING OPERATIONS ................... $ 18.6 $ 22.3 $ 0.6 $ (3.1)
========= ======= ====== ========
BASIC EARNINGS PER SHARE (12):
Net (loss) income from
continuing operations ................... $ 0.66 $ (0.11)
========= ========
DILUTED EARNINGS PER SHARE (12):
Net (loss) income from
continuing operations .................. $ 0.64 $ (0.11)
========= ========
See accompanying notes to pro forma financial statements.
AFC ENTERPRISES, INC.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
BASIS OF PRESENTATION. The pro forma consolidated balance sheet has been
prepared assuming that the CII and Church's dispositions and related use of
proceeds were completed on October 3, 2004. The pro forma statements of
operations have been prepared assuming that these transactions were completed on
December 30, 2002 (the first day of fiscal year 2003). The following notes
describe the adjustments made to the historical financial statements:
(1) To eliminate CII's and Church's historical balance sheets as of October
3, 2004.
(2) To record the pro forma sales of CII and Church's as of October 3,
2004, including the receipt of the net sale proceeds, the use of such
proceeds to pay down long-term debt, the recognition of a tax
receivable of $13.5 million resulting from the capital loss incurred on
the sale of CII and the recognition of $92.8 million of tax
liabilities, net of certain adjustments to deferred tax assets and
deferred tax liabilities, resulting from the sale of Church's.
As of October 3, 2004, our CII operations were classified as
discontinued operations and our Church's operations were classified as
a component of continuing operations.
(3) The components of our pro forma cash adjustments at October 3, 2004
include:
<Table>
<Caption>
(in millions) CII Church's
------------------------ -----------------------
Estimated net proceeds from sale $ 18.3 $ 372.5
Restricted cash -- (115.5)
Pay down of debt (16.5) (10.0)
------ -------
Pro forma adjustment $ 1.8 $ 247.0
====== =======
</Table>
(4) The pro forma adjustments to other current assets and other long-term
assets, net at October 3, 2004 include (i) amounts relating to deferred
income taxes recorded in the sale transactions, (ii) for Church's,
$9.6 million to other current assets and $105.9 million to other
long-term assets, net, representing monies deposited into a restricted
account in accordance with our 2002 Credit Facility, as amended, and
(iii) a $7.0 million note receivable arising from the Church's sale.
Management is currently considering AFC's options for restructuring its
current outstanding indebtedness.
P-7
(5) The pro forma decreases in long-term debt at October 3, 2004 include
payments to reduce our 2002 Credit Facility ($16.5 million from the net
proceeds of the CII sale and $10.0 million from the net proceeds of the
Church's sale), $0.7 million of Church's capital lease obligations
assumed by the buyer and $0.8 million of other debt.
(6) The $97.9 million Church's pro forma adjustment to accounts payable as
of October 3, 2004 is the current pro forma tax obligation arising from
the pro forma gain on sale of Church's.
The pro forma adjustment to deferred credits and other long-term
liabilities relates to deferred income tax liabilities recorded in the
sales transactions.
(7) To eliminate CII's and Church's historical operations and associated
net loss and income for the fiscal year ended December 28, 2003. The
effective tax rate for CII includes consideration of permanent tax
differences associated with the write-down of non-deductible goodwill
balances recorded in 2003.
(8) To reflect the reduction of interest expense in the statement of
operations resulting from (i) the pay down of AFC's long-term debt with
the proceeds received from the sale of CII and Church's, of $0.9 and
$0.6 for the year ended December 28, 2003 and for the forty weeks ended
October 3, 2004, respectively and (ii) the interest income on the note
receivable recorded as part of the purchase price from the sale of
Church's of $0.6 and $0.4 for the year ended December 28, 2003 and for
the forty weeks ended October 3, 2004, respectively. The pro forma
statement of operations does not include any assumed interest income
from the net cash proceeds of the CII and Church's sales.
(9) To adjust income tax expense in the statement of operations for the
impact of pro forma adjustments. A statutory rate of 37.6% was used.
(10) To eliminate Church's historical operations and net income for the
forty-week period ending October 3, 2004. Because CII's operations were
not reflected in continuing operations for this period, there were no
associated pro forma adjustments in this pro forma statement.
P-8
(11) The historical AFC consolidated amounts for accounts payable and
liabilities of discontinued operations as of October 3, 2004 have been
restated from amounts previously reported to eliminate a $13.7 million
dollar inter-company receivable at AFC and the corresponding
inter-company payable at CII. This adjustment had no net effect on
current liabilities or working capital. While management determined
that it was appropriate to make this adjustment in the pro forma
balance sheet (so that all CII balance sheet amounts are properly
eliminated in the pro forma schedule), management did not believe the
adjustment had a material impact on amounts previously reported.
(12) The number of shares used to calculate basic and diluted earnings
(loss) per share in the respective statement of operations were as
follows:
<Table>
<Caption>
(in millions) 12/28/03 10/3/04
--------------------- --------------------
Basic Shares 27.8 28.2
Diluted Shares 28.7 29.1
</Table>
P-9