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After market close yesterday, AFC Enterprises, Inc. (Nasdaq: AFCEE), franchisor and operator of Popeyes Chicken & Biscuits, Church's Chicken, Cinnabon and the franchisor of Seattle's Best Coffee in Hawaii, on military bases and internationally, announced that the Nasdaq Listing Qualifications Panel has notified the company that its common stock will be delisted from the Nasdaq National Market as of the opening of business on Monday, August 18, 2003.
In order to maintain listing on the Nasdaq exchange, companies are required to file financial statements with the SEC within a certain time period. The Panel, which had extended AFC’s listing after missing a June deadline for filing financial statements, determined it could no longer extend exceptions for filing requirements due to the length of time already passed.
At the end of March, AFC announced major problems in its accounting under former auditor Arthur Anderson. A complete reaudit was commenced, delaying year end 2002 financial reporting, requiring a reaudit of 2000 and 2001, and preventing any quarterly financial reporting for fiscal 2003. As a result of the delay in filing statements, Nasdaq notified the company that it faced delisting. AFC applied for and was granted an extension to maintain its Nasdaq listing in June requiring all filings be up to date by July 16. AFC notified the Panel it would not meet the revised deadline on July 15. The Panel briefly extended listing while awaiting a report from the AFC audit committee due August 8.
In the August 8 report to the Nasdaq Panel, the audit committee of the board of directors of AFC said its investigation determined there was no intentional manipulation of financial statements on behalf of the company nor was there any indication of fraud, wrongdoing, or intentional misconduct. Instead, the committee sited a lack of internal controls and accounting procedures and lack of internal technical accounting expertise as reasons for the flawed statements. The committee recommends changes to improve accounting functions, some of which have already been implemented by AFC.
The company gave no indication of when its restatements, 2002 annual report, or fiscal 2003 quarterly financials would be completed, reiterating its diligent work to do so
AFC said the delinquent statement filing prevented its stock from being listed on the OTC Bulletin Board and would likely be quoted on the National Quotation Service Bureau ("Pink Sheets") for unsolicited trading.
The company may reapply for Nasdaq National Market listing based on continued listing standards providing it does so before October 17, having all filings up to date and filed within regular guidelines. The company also must show further progress in its investigation and efforts to correct inadequacies in its accounting procedures.
AFC shares closed at $15.51 on Thursday and dropped almost 17% in the first 30 minutes of trading on Friday.