<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
For the Quarterly Period Ended February 26, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
Commission File Number
333-33751
ARCHIBALD CANDY CORPORATION
Incorporated in the IRS Employer Identification
State of Illinois No. 36-0743280
1137 West Jackson Boulevard
Chicago, Illinois 60607
(312) 243-2700
Indicate by check whether the registrant (1) has filed all reports required
to be filed by Section 13 or 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 filings
requirements for the past 90 days. Yes X No
-- --
As of April 11, 2000, the number of shares outstanding of the registrant's
Common Stock was 19,200 shares, all of which was held by Fannie May Holdings,
Inc.
<PAGE>
ARCHIBALD CANDY CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED FEBRUARY 26, 2000
INDEX
PART I - FINANCIAL INFORMATION:
<TABLE>
<CAPTION>
ITEM 1 - FINANCIAL STATEMENTS (UNAUDITED) PAGE NO.
<S> <C>
CONDENSED CONSOLIDATED BALANCE SHEETS 1
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 3
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 6
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANAYLSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 16
PART II - OTHER INFORMATION:
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 20
SIGNATURES 21
</TABLE>
<PAGE>
Archibald Candy Corporation
(A Wholly Owned Subsidiary of Fannie May Holdings, Inc.)
Condensed Consolidated Balance Sheets
As of February 26, 2000 and August 28, 1999
(In thousands)
<TABLE>
<CAPTION>
February 26, August 28,
2000 1999
------------ ----------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 6,497 $ 6,908
Accounts receivable, net 8,803 3,591
Inventories 37,512 38,554
Prepaid expenses and other current assets 4,250 3,048
-------- -------
Total current assets 57,062 52,101
Property, plant, and equipment, net 51,550 51,163
Goodwill and other intangibles, net 69,386 71,784
Deferred financing fees, net 10,111 9,071
Investment in joint venture 1,754 1,934
Other assets 2,476 2,234
-------- --------
Total assets $192,339 $188,287
======== ========
</TABLE>
See accompanying notes.
1
<PAGE>
Archibald Candy Corporation
(A Wholly Owned Subsidiary of Fannie May Holdings, Inc.)
Condensed Consolidated Balance Sheets
As of February 26, 2000 and August 28, 1999
(In thousands)
<TABLE>
<CAPTION>
February 26, August 28,
2000 1999
------------ ----------
(Unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 19,849 $ 14,994
Revolving line of credit -- 8,000
Accrued liabilities 8,833 8,069
Payroll and related liabilities 2,932 3,331
Current portion of capital lease obligations 246 230
--------- ---------
Total current liabilities 31,844 34,640
Due to affiliate 344 344
Long-term debt 170,000 170,000
Deferred rent 1,729 1,750
Capital lease obligations, less current portion 45 89
Shareholder's equity (deficit):
Common stock, $0.01 par value:
Authorized - 25,000 shares
Issued and outstanding - 19,200 shares -- --
Additional paid-in-capital 18,700 18,700
Accumulated deficit (30,326) (37,239)
Other comprehensive income 3 3
-------- ---------
Total shareholder's equity (deficit) (11,623) (18,536)
-------- ---------
Total liabilities and shareholder's equity (deficit) $192,339 $188,287
======== ========
</TABLE>
See accompanying notes.
2
<PAGE>
Archibald Candy Corporation
(A Wholly Owned Subsidiary of Fannie May Holdings, Inc.)
Condensed Consolidated Statements of Operations (Unaudited)
For the Three Months and Six Months Ended February 26, 2000
and February 27, 1999
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------------- -----------------------------
February 26, February 27, February 26, February 27,
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $100,943 $81,455 $155,376 $111,102
Cost of sales, excluding depreciation 35,105 27,900 56,112 40,310
Selling, general, and administrative expenses,
excluding depreciation and amortization 40,144 31,124 73,659 46,764
Depreciation and amortization expense 3,380 2,641 6,524 3,811
Amortization of goodwill and other intangibles 1,723 597 2,991 1,004
Share of loss in joint venture 10 -- 70 --
Management fees and other fees 128 89 261 258
-------- -------- --------- ---------
Operating income 20,453 19,104 15,759 18,955
Other (income) and expense:
Interest expense 4,966 3,400 9,620 5,992
Interest income (340) (227) (442) (352)
Other income and expense (63) (80) (390) (118)
-------- -------- --------- ---------
Income before income taxes 15,890 16,011 6,971 13,433
Provision for income taxes 37 187 58 197
-------- -------- --------- ---------
Net income $ 15,853 $15,824 $ 6,913 $ 13,236
======== ======== ========= =========
</TABLE>
See accompanying notes.
3
<PAGE>
Archibald Candy Corporation
(A Wholly Owned Subsidiary of Fannie May Holdings, Inc.)
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
For the Three Months and Six Months Ended February 26, 2000
and February 27, 1999
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------------ --------------------------------
February 26, February 27, February 26, February 27,
2000 1999 2000 1999
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net income $ 15,853 $ 15,824 $ 6,913 $ 13,236
Other comprehensive income:
Foreign currency translation adjustment (51) - - -
-------- -------- -------- --------
Comprehensive income $ 15,802 $ 15,824 $ 6,913 $ 13,236
======== ======== ======== ========
</TABLE>
See accompanying notes.
4
<PAGE>
Archibald Candy Corporation
(A Wholly Owned Subsidiary of Fannie May Holdings, Inc.)
Condensed Consolidated Statements of Cash Flows (Unaudited)
For the Six Months Ended February 26, 2000 and February 27, 1999
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
------------------------------------
February 26, February 27,
2000 1999
------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 6,913 $ 13,236
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization 9,515 4,815
Share of loss in joint venture 70 -
Changes in operating assets and liabilities:
Accounts receivable, net (5,212) (5,676)
Inventories 1,042 5,397
Prepaid expenses and other current assets (1,202) (157)
Other assets (366) (275)
Accounts payable, accrued liabilities and deferred rent 4,834 1,912
-------- --------
Net cash provided by operating activities 15,594 19,252
INVESTING ACTIVITIES
Acquisition of Sweet Factory net of cash acquired - (28,002)
Purchase of property, plant, and equipment (6,312) (2,760)
-------- --------
Net cash used in investing activities (6,312) (30,762)
FINANCING ACTIVITIES
Net payments under revolving line of credit (8,000) -
Proceeds of long term debt - 30,000
Principal payments of capital lease obligations (60) (172)
Costs related to financing (1,633) (3,012)
-------- --------
Net cash provided by (used in) financing activities (9,693) 26,816
-------- --------
Net increase (decrease) in cash and cash equivalents (411) 15,306
Cash and cash equivalents beginning of period 6,908 13,081
-------- --------
Cash and cash equivalents end of period $ 6,497 $ 28,387
======== ========
SUPPLEMENTAL SCHEDULE OF CASH TRANSACTIONS
Interest paid $ 9,141 $ 6,348
======== ========
</TABLE>
See accompanying notes.
5
<PAGE>
Archibald Candy Corporation
(A Wholly Owned Subsidiary of Fannie May Holdings, Inc.)
Notes to Condensed Consolidated Financial Statements (Unaudited)
February 26, 2000
Note 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Archibald Candy Corporation (Archibald) and its subsidiaries (collectively,
the Company) are manufacturers and retailers of boxed chocolates and other
confectionery items. The Company sells its Fannie May, Fanny Farmer, Sweet
Factory and Laura Secord candies in over 700 Company-operated stores and in
approximately 9,300 third-party retail outlets as well as through quantity
order, mail order and fundraising programs in the United States and Canada.
The Company is a wholly-owned subsidiary of Fannie May Holdings, Inc.
The interim financial statements included herein have been prepared pursuant
to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules
and regulations, although the Company believes these disclosures are adequate
to make the information presented not misleading. In the opinion of
management, all adjustments necessary for fair presentation for the periods
presented have been reflected and are of a normal recurring nature. These
financial statements should be read in conjunction with the financial
statements and notes thereto for the year ended August 28, 1999, included in
the Company's Form 10-K. Certain amounts in the 1999 financial statements
have been reclassified to conform with the 2000 presentation.
Results of operations for the period from August 29, 1999 to February 26,
2000 are not necessarily indicative of the results that may be achieved for
the entire year.
Note 2. INVENTORIES
Inventories at February 26, 2000 and August 28, 1999 are comprised of the
following:
<TABLE>
<CAPTION>
February 26, August 28,
2000 1999
---------------- --------------
<S> <C> <C>
Raw materials......................................... $ 14,271 $ 13,557
Work in process....................................... 545 333
Finished goods........................................ 22,696 24,664
-------- --------
$ 37,512 $ 38,554
======== ========
</TABLE>
Note 3. LONG-TERM DEBT
Long-term debt at February 26, 2000 and August 28, 1999 is comprised of $170
million of 10.25% senior secured notes due July 1, 2004. For the three months
ended February 26, 2000, the Company did not meet the fixed charge coverage
ratio requirements of its Credit Facility, but has obtained a waiver of that
requirement from its lenders for such three-month period only.
Note 4. INCOME TAXES
The provision for income taxes differs from the amount of income tax expense
computed by applying the United States federal income tax rate due to the
benefit of the net operating losses that were not recognized in prior periods.
6
<PAGE>
Archibald Candy Corporation
(A Wholly Owned Subsidiary of Fannie May Holdings, Inc.)
Notes to Condensed Consolidated Financial Statements (Unaudited)
February 26, 2000
Note 5. ACQUISITIONS
On December 7, 1998, the Company acquired Sweet Factory Group, Inc. ("Sweet
Factory") for $25 million in cash and the assumption of approximately $10
million of debt. On June 8, 1999, Archibald's newly incorporated subsidiary,
Archibald Candy (Canada) Corporation, a Canadian company, acquired
substantially all of the assets of the Laura Secord retail business of Nestle
Canada, Inc. ("Nestle") for approximately $44 million (together the
"Acquisitions"). Both acquisitions were accounted for under the purchase
method. The allocation of the purchase prices are preliminary, pending final
fixed-asset and intangible valuations. The following summarizes the purchase
price allocation and cash paid:
<TABLE>
<S> <C>
Book value of assets acquired..................................... $44,164
Goodwill and other intangibles.................................... 42,561
Liabilities assumed............................................... (7,801)
-------
Cash paid......................................................... $78,924
=======
</TABLE>
Based on unaudited data, the following table presents selected financial
information for the Company and its subsidiaries on a pro forma basis for the
comparable period in the prior year:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
February 26, February 26,
2000 2000
--------------------- ----------------
<S> <C> <C>
Net sales......................................................... $103,903 $159,656
Net income........................................................ 19,981 13,162
</TABLE>
The pro forma results are not necessarily indicative of future operations or
the actual results that would have occurred had the acquisitions been made
August 31, 1998.
Note 6. GUARANTOR SUBSIDIARIES
The Company's obligations under its Senior Secured notes due 2004 are fully
and unconditionally guaranteed on a senior secured, joint and several basis
by each of the Company's subsidiaries (other than its inactive subsidiaries)
(collectively, the "Guarantor Subsidiaries"). The Company directly or
indirectly wholly owns each of the Guarantor Subsidiaries. None of the
Company's subsidiaries is subject to any restriction on its ability to pay
dividends or make distributions to the Company. The following condensed
consolidating financial information illustrates the composition of the
Company and the Guarantor Subsidiaries as and for certain dates and periods.
Separate financial statements of the respective Guarantor Subsidiaries have
not been provided because the Company's management determined that such
additional information would not be useful in assessing the financial
composition of the Guarantor Subsidiaries.
7
<PAGE>
Archibald Candy Corporation
(A Wholly Owned Subsidiary of Fannie May Holdings, Inc.)
Condensed Consolidating Balance Sheet
As of February 26, 2000
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Archibald Candy Guarantor
Corporation Subsidiaries Eliminations Consolidated
---------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,400 $ 3,097 - $ 6,497
Accounts receivable, net 6,852 1,951 - 8,803
Inventories 28,214 9,348 (50) 37,512
Prepaid expenses and other current assets 1,239 3,011 - 4,250
------- -------- -------- --------
Total current assets 39,705 17,407 (50) 57,062
Property, plant and equipment, net 25,027 26,523 - 51,550
Other assets 74,906 8,821 - 83,727
Intercompany 26,182 (26,182) - -
Investment in subsidiaries 16,825 - (16,825) -
-------- -------- -------- --------
Total assets $182,645 $ 26,569 $(16,825) $192,339
======== ======== ======== ========
LIABILITIES AND SHAREHOLDER'S
EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 16,726 $ 3,123 $ - $ 19,849
Revolving line of credit - - - -
Other current liabilities 7,192 4,803 - 11,995
-------- ------- -------- --------
Total current liabilities 23,918 7,926 - 31,844
Long-term debt, less current portion 170,006 39 - 170,045
Other noncurrent liabilities 344 1,729 - 2,073
Total shareholder's equity (deficit) (11,623) 16,875 (16,875) (11,623)
-------- -------- -------- --------
Total liabilities and shareholder's
Equity (deficit) $182,645 $ 26,569 $(26,569) $192,339
========== ======== ======== ========
</TABLE>
8
<PAGE>
Archibald Candy Corporation
(A Wholly Owned Subsidiary of Fannie May Holdings, Inc.)
Condensed Consolidating Balance Sheet
As August 28, 1999
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Archibald Candy Guarantor
Corporation Subsidiaries Eliminations Consolidated
---------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,290 $ 4,618 $ - $ 6,908
Accounts receivable, net 939 2,652 - 3,591
Inventories 31,348 7,256 (50) 38,554
Prepaid expenses and other current assets 943 2,105 - 3,048
--------- --------- --------- ---------
Total current assets 35,520 16,631 (50) 52,101
Property, plant and equipment, net 22,808 28,355 - 51,163
Other assets 76,721 8,302 - 85,023
Intercompany 30,240 (30,240) - -
Investment in subsidiaries 15,962 - (15,962) -
--------- --------- --------- ---------
Total assets $ 181,251 $ 23,048 $ (16,012) $ 188,287
========= ========= ========= =========
LIABILITIES AND SHAREHOLDER'S
EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 14,593 $ 401 $ - $ 14,994
Revolving line of credit 8,000 - - 8,000
Other current liabilities 6,783 4,863 - 11,646
--------- --------- --------- ---------
Total current liabilities 29,376 5,264 - 34,640
Long-term debt, less current portion 170,020 69 - 170,089
Other noncurrent liabilities 344 1,750 - 2,094
Total shareholder's equity (deficit) (18,489) 15,965 (16,012) (18,536)
--------- --------- --------- ---------
Total liabilities and shareholder's equity (deficit) $ 181,251 $ 23,048 $ (16,012) $ 188,287
========= ========= ========= =========
</TABLE>
9
<PAGE>
Archibald Candy Corporation
(A Wholly Owned Subsidiary of Fannie May Holdings, Inc.)
Consolidating Statement of Operations for the
Three Months Ended February 26, 2000
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Archibald Candy Guarantor
Corporation Subsidiaries Eliminations Consolidated
--------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 60,764 $ 41,420 $ (1,241) $ 100,943
Cost of sales, excluding depreciation 21,205 15,332 (1,432) 35,105
Selling, general, and administrative expenses,
excluding depreciation and amortization 20,725 19,419 - 40,144
Depreciation and amortization expense 1,419 1,961 - 3,380
Amortization of goodwill and other intangibles 1,332 391 - 1,723
Share of loss in joint venture - 10 - 10
Management fees and other fees 128 - - 128
--------- --------- --------- ---------
Operating income 15,955 4,307 191 20,453
Other (income) expense:
Interest expense 4,635 222 109 4,966
Interest income (231) - (109) (340)
Other income and expenses (257) 3 191 (63)
Equity in income of subsidiaries (4,082) - 4,082 -
--------- --------- --------- ---------
Income (loss) before income taxes 15,890 4,082 (4,082) 15,890
Provision for income taxes 37 - - 37
--------- --------- --------- ---------
Net income (loss) $ 15,853 $ 4,082 $ (4,082) $ 15,853
========= ======= ======== =========
</TABLE>
10
<PAGE>
Archibald Candy Corporation
(A Wholly Owned Subsidiary of Fannie May Holdings, Inc.)
Consolidating Statement of Operations for the
Six Months Ended February 26, 2000
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Archibald Candy Guarantor
Corporation Subsidiaries Eliminations Consolidated
--------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 89,696 $ 66,921 $ (1,241) $ 155,376
Cost of sales, excluding depreciation 33,035 24,617 (1,540) 56,112
Selling, general, and administrative expenses,
excluding depreciation and amortization 36,867 36,792 - 73,659
Depreciation and amortization expense 2,722 3,802 - 6,524
Amortization of goodwill and other intangibles 2,451 540 - 2,991
Share of loss in joint venture - 70 - 70
Management fees and other fees 261 - - 261
--------- --------- --------- ---------
Operating income 14,360 1,100 299 15,759
Other (income) expense:
Interest expense 9,189 431 - 9,620
Interest income (442) - - (442)
Other income and expenses (447) (242) 299 (390)
Equity in income of subsidiaries (911) - 911 -
--------- --------- --------- ---------
Income (loss) before income taxes 6,971 911 (911) 6,971
Provision for income taxes 58 - - 58
--------- --------- --------- ---------
Net income (loss) $ 6,913 $ 911 $ (911) $ 6,913
========= ========= ========= =========
</TABLE>
11
<PAGE>
Archibald Candy Corporation
(A Wholly Owned Subsidiary of Fannie May Holdings, Inc.)
Consolidating Statement of Operations for the Three Months
Ended February 27, 1999
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Archibald Candy Guarantor
Corporation Subsidiaries Eliminations Consolidated
-------------------- --------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Net sales $61,603 $19,852 $ $ 81,455
-
Cost of sales, excluding depreciation 20,668 7,232 - 27,900
Selling, general, and administrative expenses,
excluding depreciation and amortization 20,530 10,594 - 31,124
Depreciation and amortization expense 1,170 1,471 - 2,641
Amortization of goodwill and other intangibles 443 154 - 597
Management fees and other fees 89 - - 89
----------- ------------- ----------- ---------
Operating income 18,703 401 - 19,104
Other (income) expense:
Interest expense 3,340 60 - 3,400
Interest income (227) - - (227)
Other income and expenses (80) - - (80)
Equity in income of subsidiaries (184) 184 -
----------- ------------- ----------- ---------
Income (loss) before income taxes 15,854 341 (184) 16,011
Provision for income taxes 30 157 - 187
----------- ------------- ----------- ---------
Net income (loss) $15,824 $ 184 $ (184) $ 15,824
=========== ============= =========== =========
</TABLE>
12
<PAGE>
Archibald Candy Corporation
(A Wholly Owned Subsidiary of Fannie May Holdings, Inc.)
Consolidating Statement of Operations for the Six Months Ended
February 27, 1999
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Archibald Candy Guarantor
Corporation Subsidiaries Eliminations Consolidated
-------------------- --------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Net sales $ 91,250 $ 19,852 $ - $111,102
Cost of sales, excluding depreciation 33,078 7,232 - 40,310
Selling, general, and administrative expenses,
excluding depreciation and amortization 36,170 10,594 - 46,764
Depreciation and amortization expense 2,340 1,471 - 3,811
Amortization of goodwill and other intangibles 850 154 - 1,004
Management fees and other fees 258 - - 258
--------- -------- -------- --------
Operating income 18,554 401 - 18,955
Other (income) expense:
Interest expense 5,932 60 - 5,992
Interest income (352) - - (352)
Other income and expenses (118) - - (118)
Equity in income of subsidiaries (184) - 184 -
--------- -------- -------- --------
Income (loss) before income taxes 13,276 341 (184) 13,433
Provision for income taxes 40 157 - 197
--------- -------- -------- --------
Net income (loss) $ 13,236 $ 184 $ (184) $ 13,236
========= ======== ======== ========
</TABLE>
13
<PAGE>
Archibald Candy Corporation
(A Wholly Owned Subsidiary of Fannie May Holdings, Inc.)
Consolidating Statement of Cash Flows for the Six Months
Ended February 26, 2000 (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Archibald Candy Guarantor
Corporation Subsidiaries Eliminations Consolidated
-------------------- --------------- ---------------- ----------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 6,913 $ 911 $ (911) $6,913
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating
activities:
Depreciation and amortization 5,173 4,342 - 9,515
Equity in loss of subsidiaries (911) - 911 -
Share of loss in joint venture - 70 - 70
Changes in operating assets and liabilities:
Accounts receivables, net (5,913) 701 - (5,212)
Inventories 3,134 (2,092) - 1,042
Prepaid expenses and other current assets (296) (906) - (1,202)
Intercompany 4,058 (4,058) - -
Other assets (226) (140) - (366)
Accounts payable and accrued liabilities 2,553 2,281 - 4,834
----------- ----------- --------- -------
Net cash provided by operating activities 14,485 1,109 - 15,594
INVESTING ACTIVITIES
Purchase of property, plant, and equipment (4,705) (1,607) - (6,312)
----------- ----------- --------- -------
Net cash used in investing activities (4,705) (1,607) - (6,312)
FINANCING ACTIVITIES
Net payments under revolving line of credit (8,000) - - (8,000)
Principle payments of capital lease obligations (26) (34) - (60)
Costs related to financing (644) (989) - (1,633)
----------- ----------- --------- -------
Net cash used in financing activities (8,670) (1,023) - (9,693)
Net increase (decrease) in cash and cash equivalents 1,110 (1,521) - (411)
Cash and cash equivalents beginning of period 2,290 4,618 - 6,908
----------- ----------- --------- ---------
Cash and cash equivalents end of period $ 3,400 $ 3,097 $ - $ 6,497
=========== =========== ========= =========
</TABLE>
14
<PAGE>
Archibald Candy Corporation
(A Wholly Owned Subsidiary of Fannie May Holdings, Inc.)
Consolidating Statement of Cash Flows for the
Six Months Ended February 27, 1999
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Archibald Candy Guarantor
Corporation Subsidiaries Eliminations Consolidated
-------------------- --------------- ---------------- ----------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $13,236 $ 184 $ (184) $13,236
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating
activities:
Depreciation and amortization 3,190 1,625 - 4,815
Equity in loss of subsidiaries (184) - 184 -
Changes in operating assets and liabilities:
Accounts receivables, net (5,969) 293 - (5,676)
Inventories 4,528 869 - 5,397
Prepaid expenses and other current assets (598) 441 - (157)
Intercompany (10,991) 10,991 - -
Other assets (275) - - (275)
Accounts payable and accrued liabilities 2,583 (671) - 1,912
----------- ------------- ----------- ---------
Net cash provided by operating activities 5,520 13,732 - 19,252
INVESTING ACTIVITIES
Acquisition of Sweet Factory net of cash acquired - (28,002) - (28,002)
Investment in subsidiaries (18,000) 18,000 - -
Purchase of property, plant, and equipment (2,335) (425) - (2,760)
----------- ------------- ----------- ---------
Net cash used in investing activities (20,335) (10,427) - (30,762)
FINANCING ACTIVITIES
Principle payments of capital lease obligations (113) (59) - (172)
Proceeds of long-term debt 30,000 - - 30,000
Costs related to financing (3,012) - - (3,012)
----------- ------------- ----------- ---------
Net cash provided by (used in) financing activities 26,875 (59) - 26,816
Net increase in cash and cash equivalents 12,060 3,246 - 15,306
Cash and cash equivalents beginning of period 13,081 - - 13,081
----------- ------------- ----------- ---------
Cash and cash equivalents end of period $ 25,141 $ 3,246 $ - $ 28,387
=========== ============= =========== =========
</TABLE>
15
<PAGE>
Archibald Candy Corporation
(A Wholly Owned Subsidiary of Fannie May Holdings, Inc.)
February 26, 2000
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENTS
Some information included in the report may constitute forward-looking
statements that involve a number of risks and uncertainties. From time to
time, information provided by the Company or statements made by its employees
may contain other forward-looking statements. Factors that could cause actual
results to differ materially from the forward-looking statements include, but
are not limited to: general economic conditions including inflation, interest
rate fluctuations, trade restrictions, and general debt levels; competitive
factors including price pressures, technological development, and products
offered by competitors; inventory risks due to changes in market demand or
business strategies; and changes in effective tax rates. Readers are
cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date made. The Company undertakes no obligation to
publicly update or revise any forward-looking statements, whether as a result
of new information, future events, or otherwise.
OVERVIEW
The Company is a manufacturer and marketer of quality boxed chocolates and
other confectionery items. The Company manufactures a variety of candies and
operates confectionery retail chains under the Fannie May, Fanny Farmer,
Sweet Factory and Laura Secord brand names. As of February 26, 2000, the
Company's products were sold through 719 Company-operated stores and
approximately 9,300 third-party retail outlets in 40 states in the United
States and 9 provinces in Canada. The Company also sells Fannie May and Fanny
Farmer branded products through a variety of non-retail programs, including
its quantity order, mail order and fundraising programs.
Historically, Company-operated retail stores has represented the most
significant distribution channel for our products and accounted for $122.5
million, or 78.8%, of net sales in the six months ended February 26, 2000.
Third-party retail and non-retail businesses collectively accounted for $32.9
million, or 21.2%, of net sales during the six months ended February 26, 2000.
Costs of sales include costs associated with the Company's manufactured
products and costs associated with product purchased from third parties and
resold by the Company. The principal elements of manufactured product costs
are raw materials, labor and manufacturing overhead. Raw materials consist
primarily of chocolate, nutmeats, sweeteners and dairy products, the overall
cost of which has remained relatively stable despite susceptibility to
fluctuations for specific items. Labor costs consist primarily of hourly
wages, benefits and incentives based on achieving operating efficiencies.
Manufacturing overhead generally includes employee fringe benefits,
utilities, rents and manufacturing supplies. Historically, the Company
generally has been able to raise prices of Fannie May and Fanny Farmer
products equal to or in excess of any increases in cost of sales; however,
there can be no assurance that the Company will be able to continue to do so
in the future.
Selling, general and administrative costs include, but are not limited to:
(1) Company-operated retail store operating costs, such as wages, rent and
utilities, (2) expenses associated with third-party retail and non-retail
sales, which include, among other things, catalog expenses and direct wages
and (3) general overhead expenses, which consist primarily of non-allocable
wages, professional fees and administrative and management overhead.
16
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED FEBRUARY 26, 2000 COMPARED TO THE THREE MONTHS ENDED
FEBRUARY 27, 1999.
NET SALES. Consolidated net sales for the three months ended February 26,
2000 were $100.9 million, an increase of $19.4 million, or 23.8%, from $81.5
million for the three months ended February 27, 1999. This increase was due
to the acquisition of Sweet Factory, $1.4 million and Laura Secord, $20.2
million. Same store sales for Sweet Factory were down 0.2% during the quarter
but reflect an improving trend, same store sales for Laura Secord were up
3.4% during the quarter. With respect to the Company's historical Fannie May
and Fanny Farmer businesses, sales for the three months ended February 26,
2000 were $60.8 million, down $0.8 million from $61.6 million for the three
months ended February 27, 1999. Same store sales increased 5.6% offset by a
decline in sales through the Company's third party retail and other
distribution channels of $3.8 million, primarily due to weakness in sales to
the Company's card and gift business customers under a program launched in
fiscal 1999 which received heavy initial promotional support, which support
was not repeated during the current fiscal year. Consolidated
Company-Operated Retail sales were $82.9 million for the three months ended
February 26, 2000, an increase of $21.5 million, or 35.0%, from $61.4 million
for the three months ended February 27, 1999. The Company's newly acquired
businesses, Sweet Factory and Laura Secord, accounted for the increase. There
were 719 Company-operated retail stores at February 26, 2000 compared to 571
stores at February 27, 1999.
GROSS PROFIT. Consolidated gross profit for the three months ended February
26, 2000 was $65.8 million, an increase of $12.2 million, or 22.8%, from
$53.6 million for the three months ended February 27, 1999. The Sweet Factory
and Laura Secord businesses accounted for substantially all of the increase.
Consolidated gross profit as a percentage of net sales decreased to 65.2% for
the three months ended February 26, 2000 from 65.8% for the three months
ended February 27, 1999. This decrease in consolidated gross profit percent
was primarily due to the slightly lower margins attendant to the Laura Secord
business and a decline in margins in the historical Fannie May/Fanny Farmer
business reflecting changes in product mix. Gross profit (without giving
effect to the Sweet Factory and Laura Secord acquisitions) for the three
months ended February 26, 2000 was $39.6 million, a decrease of $1.3 million,
or 3.2%, from $40.9 million for the three months ended February 27, 1999.
Gross profit as a percentage of net sales (without giving effect to the Sweet
Factory and Laura Secord acquisitions) was 65.1% for the three months ended
February 26, 2000 as compared to 66.4% for the three months ended February
27, 1999.
SELLING, GENERAL AND ADMINISTRATIVE. Consolidated selling, general and
administrative ("SG&A") expenses for the three months ended February 26, 2000
were $40.1 million, an increase of $9.0 million, or 28.9%, from $31.1 million
for the three months ended February 27, 1999. SG&A expenses related to the
Company's newly acquired Sweet Factory and Laura Secord businesses accounted
for substantially all of this increase. As these businesses generate
substantially all of their revenues from Company operated retail stores which
incur higher support costs than the Company's third party retail and other
distribution channels, SG&A expense, as a percentage of sales increased to
39.7% during the three months ended February 26, 2000 from 38.2% for the
three months ended February 27, 1999.
EBITDA. Consolidated earnings before interest, income taxes, depreciation and
the amortization ("EBITDA") was $25.6 million for the three months ended
February 26, 2000, an increase of $3.2 million, or 14.3%, from $22.4 million
for the three months ended February 27, 1999. The Sweet Factory and Laura
Secord businesses contributed $4.6 million of increased EBITDA for the
quarter. As a percentage of total net sales, consolidated EBITDA was 25.4%
for the three months ended February 26, 2000 as compared to 27.5% for the
three months ended February 27, 1999. EBITDA (without giving effect to the
Sweet Factory and Laura Secord acquisitions) was $19.0 million for the three
months ended February 26, 2000, a decrease of $1.4 million, or 6.9%, from
$20.4 million for the three months ended February 27, 1999. This decrease is
due to the lower sales and gross profit margins discussed above.
NET INCOME. Consolidated net income for the three months ended February 26,
2000 was $15.9 million, an increase $0.1 million, or 0.6%, from $15.8 million
for the three months ended February 27, 1999. The increased EBITDA of $3.2
million was offset by additional interest expense and depreciation and
amortization expense primarily related to the Company's Sweet Factory and
Laura Secord acquisitions.
17
<PAGE>
SIX MONTHS ENDED FEBRUARY 26, 2000 COMPARED TO THE SIX MONTHS ENDED
FEBRUARY 27, 1999.
NET SALES. Consolidated net sales for the six months ended February 26, 2000
were $155.4 million, an increase of $44.3 million, or 39.9%, from $111.1
million for the six months ended February 27, 1999. This increase was due to
the acquisitions of Sweet Factory, $17.2 million and Laura Secord, $29.9
million. Same store sales for Sweet Factory were down 0.9% year-to-date while
Laura Secord same store sales were up 2.3%, both representing an improving
trend. Net sales (excluding the effect of the acquisitions) for the six
months ended February 26, 2000 were $88.5 million, a decrease of $2.8 million
from net sales of $91.3 million for the six months ended February 27, 1999.
During the six months ended February 26, 2000, same store sales for the
Company's Fannie May and Fanny Farmer retail stores increased 4.4%. This
increase in sales was more than offset by a decline in sales to third-party
retailers and other distribution channels to $28.9 million during the six
months ended February 26, 2000, from $33.5 million for the six months ended
February 27, 1999, a decrease of $4.6 million, or 13.7%. This decrease is
primarily due to lower sales to the Company's card and gift business
customers under a program initiated during fiscal 1999 as discussed above.
GROSS PROFIT. Consolidated gross profit for the six months ended February 26,
2000 was $99.3 million, an increase of $28.5 million, or 40.3%, from $70.8
million for the six months ended February 27, 1999. The Sweet Factory and
Laura Secord Acquisitions accounted for substantially all of this increase.
Gross profit (without giving effect to the acquisitions) for the six months
ended February 26, 2000 was $56.7 million, a decrease of $1.5 million, or
2.6%, from $58.2 million for the six months ended February 27, 1999. This
decline reflects the net sales decline discussed above and a decline in gross
profit margins due primarily to changes in product mix. Gross profit as a
percentage of net sales (without giving effect to the acquisitions) decreased
to 63.2% for the six months ended February 26, 2000 from 63.7% for the six
months ended February 27, 1999.
SELLING, GENERAL AND ADMINISTRATIVE. Consolidated SG&A expenses were $73.7
million for the six months ended February 26, 2000, an increase of $26.9
million, or 57.5%, from $46.8 million for the six months ended February 27,
1999. The Sweet Factory and Laura Secord acquisitions accounted for $26.2
million, or substantially all of the increase. As these businesses generate
substantially all of their revenues from Company operated retail stores which
incur higher support costs than the Company's third party retail and other
distribution channels, SG&A expense as a percentage of sales increased to
47.4% during the six months ended February 26, 2000 from 42.1% for the six
months ended February 27, 1999. In addition to the effect of the
acquisitions, the increase in SG&A expenses was primarily due to increased
costs associated with Company-operated retail stores.
EBITDA. Consolidated EBITDA was $25.7 million for the six months ended
February 26, 2000, an increase of $1.8 million, or 7.5%, from $23.9 million
for the six months ended February 27, 1999. The Sweet Factory and Laura
Secord acquisitions generated approximately $3.6 million of increased EBITDA
during the six months ended February 26, 2000. As a percentage of total net
sales, EBITDA was 16.5% for the six months ended February 26, 2000 as
compared to 21.5% for the six months ended February 27, 1999. EBITDA (without
giving effect to the acquisitions) was $20.0 million for the six months ended
February 26, 2000, a decrease of $1.9 million, or 8.7%, from $21.9 million
for the six months ended February 27, 1999 due to the lower sales and margins
discussed above. EBITDA as a percentage of net sales (without giving effect
to the acquisitions) was 22.6% for the six months ended February 26, 2000 as
compared to 24.0% for the six months ended February 27, 1999.
NET INCOME. Consolidated net income for the six months ended February 26,
2000 was $6.9 million, a decrease of $6.3 million, or 47.7%, from $13.2
million for the six months ended February 27, 1999. The increased EBITDA of
$1.8 million was offset by additional interest expense and depreciation and
amortization primarily related to the Company's Sweet Factory and Laura
Secord acquisitions.
LIQUIDITY AND CAPITAL RESOURCES. Net cash provided by operating activities
was $15.6 million for the six months ended February 26, 2000 compared to
$19.3 million for the six months ended February 27, 1999. Net income was $6.9
million for the six months ended February 26, 2000 compared to $13.2 million
for the six months ended February 27, 1999. Net income included non-cash
depreciation and amortization charges of $9.5 million and interest expense of
$9.6 million for the six months ended February 26, 2000 and $4.8 million and
$6.0 million, respectively, for the six months ended February 27, 1999.
18
<PAGE>
Net cash used in investing activities was $6.3 million of the six months
ended February 26, 2000 as compared to $30.8 million for the six months ended
February 27, 1999. The decrease reflects the purchase of Sweet Factory in
December 1998 for $28.0 million in cash outlays, partially offset by higher
capital expenditures during the current period.
As of February 26, 2000, the Company had $24.4 million available for
borrowings under a $25 million revolving credit facility (the "Credit
Facility") which matures on April 15, 2001. For the three months ended
February 26, 2000, the Company did not meet the fixed charge coverage ratio
requirements of its Credit Facility, but has obtained a waiver of that
requirement from its lenders for such three-month period only. As of February
26, 2000, the Company had outstanding $170 million of 10.25% senior secured
notes due July 1, 2004.
The Company believes that available cash flow, together with cash on the
Company's balance sheet and available borrowings under the Credit Facility,
will provide sufficient funds to meet the Company's debt service obligations,
projected capital expenditures and working capital requirements for the
foreseeable future.
19
<PAGE>
Archibald Candy Corporation
(A Wholly Owned Subsidiary of Fannie May Holdings, Inc.)
February 26, 2000
PART II - OTHER INFORMATION
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBIT 4.23 - Waiver to Amended and Restated Credit Agreement dated as of
July 2, 1997 among the Company, the lenders signatory thereto and Bank One,
NA, as Agent dated March 23, 2000.
EXHIBIT 4.24 - Waiver to Credit Agreement dated as of July 30, 1999 among
Archibald Candy (Canada) Corporation and Bank One Canada dated March 23,
2000.
EXHIBIT 27.1 - Financial data schedule.
(b) No reports were filed on Form 8-K for the quarter ended February 26, 2000.
20
<PAGE>
Archibald Candy Corporation
(A Wholly Owned Subsidiary of Fannie May Holdings, Inc.)
February 26, 2000
SIGNATURE
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.
ARCHIBALD CANDY CORPORATION
DATE: APRIL 11, 2000 BY: /s/ THOMAS G. KASVIN
--------------------------
THOMAS G. KASVIN
VICE PRESIDENT & CHIEF
FINANCIAL OFFICER
<PAGE>
EXHIBIT 4.23
WAIVER
TO
AMENDED AND RESTATED CREDIT AGREEMENT
This WAIVER to AMENDED AND RESTATED CREDIT AGREEMENT ("Waiver") is made
as of March 23, 2000 by and among Archibald Candy Corporation (the
"Borrower"), the financial institutions (the "Lenders") party to the "Credit
Agreement" (defined below), and Bank One, NA, having its principal office in
Chicago, Illinois, formerly known as The First National Bank of Chicago, as
Agent. Defined terms used herein and not otherwise defined herein shall have
the meaning given to them in the Credit Agreement.
WITNESSETH
WHEREAS, the Borrower, the Lenders and the Agent are parties to that
certain Amended and Restated Credit Agreement, dated as of July 2, 1997 (as
the same may be amended, restated, supplemented or otherwise modified from
time to time, the "Credit Agreement");
WHEREAS, the Borrower has requested that the Lenders and the Agent
provide a limited waiver under the Credit Agreement with respect to the
financial covenant set forth in SECTION 6.4(B);
WHEREAS, the Lenders and the Agent are willing to provide such a limited
waiver on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises set forth above, the
terms and conditions contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the Borrower, the Agent and the Lenders have entered into this Waiver.
1. LIMITED WAIVER. Effective as of the date hereof, as expressly limited
hereby and subject to the satisfaction of the condition precedent set forth
in SECTION 2 below, the Lenders and the Agent hereby agree to waive the
requirements, as existed immediately prior to the effectiveness of this
Waiver, of SECTION 6.4(B) of the Credit Agreement with respect to the fiscal
quarter ended February 26, 2000.
2. CONDITIONS OF EFFECTIVENESS. This Waiver shall become effective and
be deemed effective as of the date hereof, if, and only if, the Agent shall
have received four (4) duly executed originals of this Waiver from the
Borrower and the Lenders.
3. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The Borrower hereby
represents and warrants as follows:
(a) The Credit Agreement as previously executed constitutes the
legal, valid and binding obligation of the Borrower and is enforceable
against the Borrower in accordance with its terms.
(b) Upon the effectiveness of this Waiver, the Borrower hereby (i)
represents that no Default or Unmatured Default exists, (ii) reaffirms all
covenants, representations and warranties made in the Credit Agreement, and
(iii) agrees that all such covenants, representations and warranties shall be
deemed to have been remade as of the effective date of this Waiver.
4. EFFECT ON THE CREDIT AGREEMENT.
(a) Upon the effectiveness of SECTION 1 hereof, on and after the date
hereof, each reference in the Credit Agreement to "this Agreement,"
"hereunder," "hereof," "herein" or words of like import shall mean and be a
reference to the Credit Agreement, as amended previously and as modified by
waiver hereby.
<PAGE>
(b) Except as specifically modified by waiver above, the Credit
Agreement and all other documents, instruments and agreements executed and/or
delivered in connection therewith shall remain in full force and effect, and
are hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this Waiver shall
neither, except as expressly provided herein, operate as a waiver of any
right, power or remedy of the Lenders or the Agent, nor constitute a waiver
of any provision of the Credit Agreement or any other documents, instruments
and agreements executed and/or delivered in connection therewith.
5. COSTS AND EXPENSES. The Borrower agrees to pay all reasonable costs,
fees and out-of-pocket expenses (including attorneys' fees and expenses
charged to the Agent) incurred by the Agent and the Lenders in connection
with the preparation, arrangement, execution and enforcement of this Waiver.
6. GOVERNING LAW. THIS WAIVER SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (WITHOUT REGARD TO THE CONFLICTS OF LAWS
PROVISIONS) OF THE STATE OF ILLINOIS.
7. HEADINGS. Section headings in this Waiver are included herein for
convenience of reference only and shall not constitute a part of this Waiver
for any other purpose.
8. COUNTERPARTS. This Waiver may be executed by one or more of the
parties to the Waiver on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
9. NO STRICT CONSTRUCTION. The parties hereto have participated jointly
in the negotiation and drafting of this Waiver. In the event an ambiguity or
question of intent or interpretation arises, this Waiver shall be construed
as if drafted jointly by the parties hereto and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Waiver.
IN WITNESS WHEREOF, this Waiver has been duly executed as of the day
and year first above written.
ARCHIBALD CANDY CORPORATION
By: /s/ THOMAS G. KASVIN
--------------------
Name: Thomas G. Kasvin
Title: Vice President & Chief
Financial Officer
BANK ONE, NA, HAVING ITS PRINCIPAL OFFICE IN
CHICAGO, ILLINOIS, formerly known as The First
National Bank of Chicago
By: /s/ KEVIN GILLEN
------------------------
Name: Kevin Gillen
Title: Vice President
FLEET BUSINESS CREDIT CORPORATION,
formerly known as Sanwa Business
Credit Corporation
By: /s/ DONALD A. MASTRO
--------------------------
Name: Donald A. Mastro
Title: Vice President
<PAGE>
EXHIBIT 4.24
WAIVER
TO
CREDIT AGREEMENT
This WAIVER to CREDIT AGREEMENT ("Waiver") is made as of March 23, 2000
by and among Archibald Candy (Canada) Corporation (the "Borrower") and Bank
One Canada (the "Lender"). Defined terms used herein and not otherwise
defined herein shall have the meaning given to them in the Credit Agreement.
WITNESSETH
WHEREAS, the Borrower and the Lender are parties to that certain Credit
Agreement, dated as of July 30, 1999 (as the same may be amended, restated,
supplemented or otherwise modified from time to time, the "Credit Agreement");
WHEREAS, the Borrower has requested that the Lender provide a limited
waiver under the Credit Agreement with respect to the covenant set forth in
SECTION 8.3 that references SECTION 6.4(B) of the Credit Agreement, dated as
of July 2, 1997, among Archibald Candy Corporation, the institutions from
time to time party thereto, and Bank One, NA, as Agent (the "US Credit
Agreement");
WHEREAS, the Lender is willing to provide such a limited waiver on the
terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises set forth above, the
terms and conditions contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the Borrower and the Lender have entered into this Waiver.
1. LIMITED WAIVER. Effective as of the date hereof, as expressly limited
hereby and subject to the satisfaction of the condition precedent set forth
in SECTION 2 below, the Lender hereby agrees to waive the requirements, as
existed immediately prior to the effectiveness of this Waiver, of SECTION 8.3
of the Credit Agreement with respect to the fiscal quarter ended February 26,
2000; PROVIDED, HOWEVER, that such waiver shall only apply to SECTION 8.3 as
it references SECTION 6.4(B) of the US Credit Agreement.
2. CONDITIONS OF EFFECTIVENESS. This Waiver shall become effective and
be deemed effective as of the date hereof, if, and only if, the Lender shall
have received a duly executed original of this Waiver from the Borrower.
3. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The Borrower hereby
represents and warrants as follows:
(a) The Credit Agreement as previously executed constitutes the
legal, valid and binding obligation of the Borrower and is enforceable
against the Borrower in accordance with its terms.
(b) Upon the effectiveness of this Waiver, the Borrower hereby (i)
represents that no Default or Unmatured Default exists, (ii)
reaffirms all covenants, representations and warranties made in
the Credit Agreement, and (iii) agrees that all such covenants,
representations and warranties shall be deemed to have been
remade as of the effective date of this Waiver.
<PAGE>
4. EFFECT ON THE CREDIT AGREEMENT.
(a) Upon the effectiveness of SECTION 1 hereof, on and after the date
hereof, each reference in the Credit Agreement to "this Agreement,"
"hereunder," "hereof," "herein" or words of like import shall mean and be a
reference to the Credit Agreement, as amended previously and as modified by
waiver hereby.
(b) Except as specifically modified by waiver above, the Credit
Agreement and all other documents, instruments and agreements executed and/or
delivered in connection therewith shall remain in full force and effect, and
are hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this Waiver shall
neither, except as expressly provided herein, operate as a waiver of any
right, power or remedy of the Lender, nor constitute a waiver of any
provision of the Credit Agreement or any other documents, instruments and
agreements executed and/or delivered in connection therewith.
5. COSTS AND EXPENSES. The Borrower agrees to pay all reasonable costs,
fees and out-of-pocket expenses (including attorneys' fees and expenses
charged to the Lender) incurred by the Lender in connection with the
preparation, arrangement, execution and enforcement of this Waiver.
6. GOVERNING LAW. THIS WAIVER SHALL BE GOVERNED BY AND INTERPRETED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE PROVINCE OF ONTARIO AND THE LAWS OF
CANADA APPLICABLE THEREIN.
7. HEADINGS. Section headings in this Waiver are included herein for
convenience of reference only and shall not constitute a part of this Waiver for
any other purpose.
8. COUNTERPARTS. This Waiver may be executed by one or more of the parties
to the Waiver on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
9. NO STRICT CONSTRUCTION. The parties hereto have participated jointly
in the negotiation and drafting of this Waiver. In the event an ambiguity or
question of intent or interpretation arises, this Waiver shall be construed
as if drafted jointly by the parties hereto and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Waiver.
IN WITNESS WHEREOF, this Waiver has been duly executed as of the day and
year first above written.
ARCHIBALD CANDY (CANADA) CORPORATION
By: /s/ THOMAS G. KASVIN
-------------------------------
Name: Thomas G. Kasvin
Title: Vice President & Chief
Financial Officer
BANK ONE CANADA
By: /s/ MICHAEL BAUER
-------------------------------
Name: Michael Bauer
Title: Vice President
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-26-2000
<PERIOD-START> AUG-29-1999
<PERIOD-END> FEB-26-2000
<CASH> 6,497
<SECURITIES> 0
<RECEIVABLES> 9,010
<ALLOWANCES> (207)
<INVENTORY> 37,512
<CURRENT-ASSETS> 57,062
<PP&E> 100,005
<DEPRECIATION> (48,455)
<TOTAL-ASSETS> 192,339
<CURRENT-LIABILITIES> 31,844
<BONDS> 170,000
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 192,339
<SALES> 155,376
<TOTAL-REVENUES> 155,376
<CGS> 56,112
<TOTAL-COSTS> 83,505
<OTHER-EXPENSES> (390)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,178
<INCOME-PRETAX> 6,971
<INCOME-TAX> 58
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,913
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
