UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The unaudited pro forma condensed consolidated financial statements below
are based on the financial statements of Archibald Candy and the consolidated
financial statements of Sweet Factory included elsewhere in this Prospectus.
The unaudited pro forma condensed consolidated statements of income for the
year ended August 29, 1998 and the three-month period ended November 28, 1998
are based on the financial statements of Archibald Candy and adjusted to give
effect to the Acquisition as if it had occurred on August 31, 1997. During
the periods presented, neither Archibald Candy's nor Sweet Factory's
statements of operations included any amounts related to discontinued
operations. Archibald Candy operates using a fiscal year ending the last
Saturday in August. Prior to the Acquisition, Sweet Factory operated using a
fiscal year ending the Saturday closest to December 31st. Adjustments for the
Transactions are based upon historical financial information of Archibald
Candy and Sweet Factory and certain assumptions that the Company's management
believes are reasonable. The Acquisition will be accounted for under the
purchase method of accounting. Under this method, the purchase price will be
allocated to the assets and liabilities acquired based on preliminary
estimates of fair value. The actual fair value may vary from the preliminary
estimates. The pro forma financial data does not necessarily reflect the
results of operations or the financial position of Archibald Candy that
actually would have resulted had the Transactions occurred at the date
indicated, or project the results of operations or financial position of the
Company for any future date or period.
The unaudited pro forma condensed consolidated financial data below should
be read together with the financial statements of Archibald Candy and the
consolidated financial statements of Sweet Factory, and the accompanying notes,
included elsewhere in this Prospectus.
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF NOVEMBER 28, 1998
(DOLLARS IN THOUSANDS)
PRO FORMA
SWEET ADJUSTMENTS PRO FORMA
ARCHIBALD FACTORY (SEE NOTE 1) CONSOLIDATED
---------- --------- ----------- ------------
ASSETS
Current assets:
Cash and cash equivalents.................................... $ 7,443 $ 1,357 $ (2,000)(a) $ 6,800
Accounts receivable, net..................................... 6,552 568 -- 7,120
Inventories.................................................. 26,818 6,083 -- 32,901
Other current assets......................................... 896 2,881 -- 3,777
---------- --------- ----------- ---------
Total current assets........................................... 41,709 10,889 (2,000) 50,598
Property, plant, and equipment, net.......................... 20,754 28,507 (3,162)(b) 46,099
Goodwill, other intangibles, and deferred financing fees..... 34,870 1,729 4,000 (c) 40,599
Other assets................................................. 2,895 3,015 -- 5,910
---------- --------- ----------- ---------
Total assets................................................... $ 100,228 $ 44,140 $ (1,162) $ 143,206
---------- --------- ----------- ---------
---------- --------- ----------- ---------
LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT)
Current Liabilities:
Accounts payable............................................. $ 6,659 $ 5,185 $ -- $ 11,844
Accrued liabilities.......................................... 10,400 1,963 3,670 (d) 16,033
Notes payable................................................ -- 10,437 (10,437)(e) --
Current portion of long-term debt and capital lease
obligations................................................ 59 213 -- 272
---------- --------- ----------- ---------
Total current liabilities...................................... 17,118 17,798 (6,767) 28,149
Due to affiliate............................................. 604 -- -- 604
Long-term debt, less current portion......................... 100,000 -- 30,000 (f) 130,000
Capital lease obligations, less current portion.............. 38 104 -- 142
Deferred rent................................................ -- 1,843 -- 1,843
Shareholder's equity (deficit):................................ (17,532) 24,395 (24,395)(g) (17,532)
---------- --------- ----------- ---------
Total liabilities and shareholder's equity (deficit)........... $ 100,228 $ 44,140 $ (1,162) $ 143,206
---------- --------- ----------- ---------
---------- --------- ----------- ---------
See accompanying notes to pro forma condensed consolidated financial statements.
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED AUGUST 29, 1998
(DOLLARS IN THOUSANDS)
PRO FORMA
SWEET ADJUSTMENTS PRO FORMA
ARCHIBALD FACTORY (SEE NOTE 2) CONSOLIDATED
---------- --------- ----------- ------------
Net sales...................................................... $ 126,742 $ 77,659 $ -- $ 204,401
Cost of sales.................................................. 43,978 27,425 -- 71,403
Selling, general, and administrative expenses.................. 63,992 45,538 (2,681)(a) 106,849
Depreciation and amortization expense.......................... 6,233 6,752 (21)(b) 12,964
---------- --------- ----------- ----------
Operating income (loss)........................................ 12,539 (2,056) 2,702 13,185
Other (income) & expense:
Interest expense............................................... 10,346 844 2,298 (c) 13,488
Interest income................................................ (1,194) (31) 100 (d) (1,125)
Other income & expense......................................... (192) -- -- (192)
---------- --------- ----------- ----------
Income (loss) before income taxes and extraordinary item....... 3,579 (2,869) 304 1,014
Provision (benefit) for income taxes........................... 276 (1,099) 24 (e) (799)
---------- --------- ----------- ----------
Net income (loss).............................................. $ 3,303 $ (1,770) $ 280 $ 1,813
---------- --------- ----------- ----------
---------- --------- ----------- ----------
Other Data:
EBITDA......................................................... $ 18,964 $ 4,696 $ 2,681 $ 26,341
---------- --------- ----------- ----------
---------- --------- ----------- ----------
See accompanying notes to pro forma condensed consolidated financial statements.
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE-MONTH PERIOD ENDED NOVEMBER 28, 1998
(DOLLARS IN THOUSANDS)
PRO FORMA
SWEET ADJUSTMENTS PRO FORMA
ARCHIBALD FACTORY (SEE NOTE 2) CONSOLIDATED
----------- --------- ----------- ------------
Net sales....................................................... $ 29,648 $ 16,719 $ -- $ 46,367
Cost of sales................................................... 12,410 9,333 -- 21,743
Selling, general, and administrative expenses................... 15,810 8,093 (670)(a) 23,233
Depreciation and amortization expense........................... 1,577 1,753 (12)(b) 3,318
----------- --------- ----------- ----------
Operating income (loss)......................................... (149) (2,460) 682 (1,927)
Other (income) and expense:
Interest expense................................................ 2,592 224 575 (c) 3,391
Interest income................................................. (126) (4) 25 (d) (105)
Other income and expense........................................ (37) -- -- (37)
----------- --------- ----------- ----------
Income (loss) before income taxes............................... (2,578) (2,680) 82 (5,176)
Provision (benefit) for income taxes............................ 10 (967) 7 (e) (950)
----------- --------- ----------- ----------
Net income (loss)............................................... $ (2,588) $ (1,713) $ 75 $ (4,226)
----------- --------- ----------- ----------
----------- --------- ----------- ----------
Other Data:
EBITDA.......................................................... $ 1,465 $ (707) $ 670 $ 1,428
----------- --------- ----------- ----------
----------- --------- ----------- ----------
See accompanying notes to pro forma condensed consolidated financial statements.
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NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
NOTE 1: UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET ADJUSTMENTS
(a) Adjustment to cash and cash equivalents as follows:
Proceeds from issuance of the Outstanding Notes.............................. $ 30,000
Sweet Factory purchase price................................................. (28,000)
Payment of estimated fees and expenses of the Transactions................... (4,000)
---------
$ (2,000)
---------
---------
(b) Adjustment to property, plant, and equipment for excess of net assets
acquired over purchase price................................................. $ (3,162)
---------
---------
(c) Adjustment to deferred financing fees for the financing fees incurred in
connection with the Transactions............................................. $ 4,000
---------
---------
(d) Adjustments to accrued liabilities for estimated severance, lease
termination, moving and other costs in connection with the consolidation of
Sweet Factory's operations with those of Archibald Candy's................... $ 3,670
---------
---------
(e) Adjustment to notes payable for the repayment of Sweet Factory's debt........ $ (10,437)
---------
---------
(f) Adjustment to long-term debt for issuance of the Outstanding Notes........... $ 30,000
---------
---------
(g) Adjustments to shareholder's equity (deficit) as follows:
Elimination of Sweet Factory Preferred and Common Stock...................... $ (20)
Elimination of Sweet Factory paid-in-capital................................. (27,369)
Elimination of Sweet Factory accumulated deficit............................. 2,708
Elimination of Sweet Factory notes due from officers......................... 286
---------
$ (24,395)
---------
---------
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NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 2: UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
ADJUSTMENTS
FISCAL YEAR THREE MONTH
ENDED PERIOD ENDED
AUGUST 29, 1998 NOVEMBER 28, 1998
--------------- -------------------
(DOLLARS IN THOUSANDS)
(a) Adjustments to selling, general, and administrative expenses as
follows:
Reduction in salaries and payroll expenses related to the
consolidation of Sweet Factory's operations with Archibald
Candy's............................................................. $ (1,909) $ (477)
Reduction in facility leases expenses due to elimination of San Diego
facilities.......................................................... (307) (77)
Reduction in general and administrative expenses due to the
consolidation of the Sweet Factory facilities into Archibald
Candy's............................................................. (465) (116)
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$ (2,681) $ (670)
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(b) Adjustments to depreciation and amortization expense as follows:
Amortization of deferred financing fees as a result of the
Transactions........................................................ $ 585 $ 146
Reduction of depreciation expense for purchase accounting adjustment
to property, plant and equipment.................................... (606) (158)
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$ (21) $ (12)
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(c) Adjustments to interest expense as follows:
Interest expense incurred on the Exchange Notes....................... $ 3,075 $ 769
Elimination of Sweet Factory working capital line interest expense.... (777) (194)
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$ 2,298 $ 575
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(d) Adjustment to interest income for cash outlay......................... $ 100 $ 25
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(e) Adjustment to provision for income taxes as a result of all pro forma
adjustments......................................................... $ 24 $ 7
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