Exhibit 99.1
Friendly Ice Cream Corporation Reports Second Quarter 2003 Results;
Tenth Consecutive Quarter of Positive Comparable Restaurant Sales
WILBRAHAM, Mass.--(BUSINESS WIRE)--July 24, 2003--Friendly Ice
Cream Corporation (AMEX: FRN) today reported net income for the
three-months-ended June 29, 2003 of $3.1 million, or $0.41 per share,
compared to net income of $3.8 million, or $0.49 per share, reported
for the three-months-ended June 30, 2002. Included in the 2002 second
quarter results was the favorable impact of $0.4 million pre-tax, or
$0.03 per share, from the reduction of the Company's restructuring
reserve.
Comparable restaurant sales increased 2.4% for the 2003 second
quarter as compared to the 2002 second quarter. This increase marks
the Company's tenth consecutive quarter of comparable restaurant sales
growth. Total revenues for the three-months-ended June 29, 2003 were
$155.6 million, an increase of 2.3%, when compared to total revenues
of $152.2 million for the three-months-ended June 30, 2002. Case
volume in the Company's retail supermarket business increased 15.6%
for the quarter when compared to the prior year.
Net income for the six-months-ended June 29, 2003 was $1.6
million, or $0.21 per share compared to net income of $3.4 million, or
$0.44 per share, reported for the six-months-ended June 30, 2002.
Total revenues increased $2.9 million, or 1.1%, to $284.3 million
for the six-months-ended June 29, 2003 from $281.4 million for the
same period in 2002. Year-to-date, comparable restaurant sales
increased 1.4% and case volume in the retail supermarket business
increased by 11.2%.
"We are pleased with the Company's continued revenue growth
despite the above average rainfall and unseasonably cool weather which
negatively impacted our ice cream snack business," stated John L.
Cutter, Chief Executive Officer and President of Friendly Ice Cream.
"Our food business in the lunch and dinner dayparts has remained
strong and drove the second quarter comparable restaurant sales
increase. Ten consecutive quarters of positive comparable restaurant
sales is the result of continued improvements to guest satisfaction,
targeted marketing and the strength of the Friendly's brand. Guest
satisfaction, supported by training initiatives and management
incentive programs, continues to be the top priority for Friendly's."
"During the second quarter, thirteen restaurants were re-modeled
as part of our Impact Re-model program. The Impact program improves
the appearance of our restaurants while reinforcing our 68-year ice
cream heritage. For the year, twenty-four restaurants have been
re-modeled. One new company restaurant was opened in the quarter and
we plan to open three new company restaurants in total for the year."
Business Segment Results
In the 2003 second quarter, pre-tax income in the restaurant
segment was $10.4 million, or 8.5% of restaurant revenues, compared to
$11.3 million, or 9.2% of restaurant revenues, in the second quarter
2002. Restaurant labor expense was higher than in the prior year due
to less than anticipated snack daypart sales, which decreased in the
current period due to cooler temperatures, and higher fringe benefit
costs. Results were also unfavorably impacted by increased advertising
costs. These higher costs were partially offset by a 2.4% increase in
restaurant comparable sales and a 0.4% reduction in restaurant cost of
sales due in part to improved food cost controls.
Pre-tax income in the Company's foodservice segment was $4.5
million in the second quarter of 2003 compared to $4.6 million in the
second quarter 2002. The slight decline was mainly due to an
unfavorable product mix resulting from less restaurant ice cream sales
versus the prior year. Partially offsetting this decline was a 15.6%
increase in case volume in the retail supermarket business.
Pre-tax income in the franchise segment increased $0.3 million in
the 2003 second quarter to $2.0 million from $1.7 million in the prior
year. The improvement is primarily due to higher royalty revenue from
increased comparable franchised restaurant sales.
Corporate expenses of $11.7 million in the second quarter of 2003
decreased by $0.1 million, or 1%, as compared to the second quarter of
2002 mainly due to lower depreciation expense associated with certain
purchased software at the Company's headquarters and lower interest
expense resulting from reduced debt levels. These decreases were
partially offset by a reduction in the benefit realized from the
Company's pension plan when compared to the prior year.
An investor conference call to review second quarter 2003 results
will be held on Friday, July 25, 2003 at 10:00 A.M. Eastern Time. The
conference call will be broadcast live over the Internet and will be
hosted by John Cutter, Chief Executive Officer and President. To
listen to the call, go to the Investor Relations section of the
Company's website located at www.friendlys.com, or go to
www.streetevents.com. An online replay will be available approximately
one hour after the conclusion of the call.
Friendly Ice Cream Corporation is a vertically integrated
restaurant company serving signature sandwiches, entrees and ice cream
desserts in a friendly, family environment in over 540 company and
franchised restaurants throughout the Northeast. The company also
manufactures ice cream, which is distributed through more than 3,500
supermarkets and other retail locations. With a 68-year operating
history, Friendly's enjoys strong brand recognition and is currently
revitalizing its restaurants and introducing new products to grow its
customer base. Additional information on Friendly Ice Cream
Corporation can be found on the Company's website (www.friendlys.com).
-- Financial Statements to follow -
Friendly Ice Cream Corporation
------------------------------
Consolidated Statements of Operations
-------------------------------------
(In thousands, except per share and unit data)
(unaudited)
Quarter Ended Six Months Ended
----------------- -------------------
June 29, June 30, June 29, June 30,
2003 2002 2003 2002
---------------------------------------
Restaurant Revenues $123,002 $121,893 $226,170 $226,149
Foodservice Revenues 29,936 27,738 53,203 50,527
Franchise Revenues 2,710 2,550 4,965 4,679
--------- --------- --------- ---------
REVENUES 155,648 152,181 284,338 281,355
COSTS AND EXPENSES:
Cost of sales 55,179 52,952 101,156 98,992
Labor and benefits 43,796 42,243 81,924 80,161
Operating expenses 30,539 29,422 55,602 53,462
General and administrative
expenses 9,170 8,681 18,458 17,280
Reduction of restructuring
reserve - (400) - (400)
Write-downs of property and
equipment - 311 - 431
Depreciation and
amortization 5,746 6,387 11,373 13,073
Loss on sales of other
property and
equipment, net 835 129 1,408 641
--------- --------- --------- ---------
OPERATING INCOME 10,383 12,456 14,417 17,715
Interest expense, net 6,092 6,215 12,194 12,552
--------- --------- --------- ---------
INCOME BEFORE PROVISION FOR
INCOME TAXES 4,291 6,241 2,223 5,163
Provision for income taxes (1,201) (2,426) (622) (1,756)
--------- --------- --------- ---------
NET INCOME AND COMPREHENSIVE
INCOME $3,090 $3,815 $1,601 $3,407
========= ========= ========= =========
NET INCOME PER SHARE:
Basic $0.42 $0.52 $0.22 $0.46
========= ========= ========= =========
Diluted $0.41 $0.49 $0.21 $0.44
========= ========= ========= =========
WEIGHTED AVERAGE SHARES:
Basic 7,441 7,366 7,428 7,359
========= ========= ========= =========
Diluted 7,574 7,722 7,564 7,668
========= ========= ========= =========
NUMBER OF COMPANY UNITS:
Beginning of period 385 390 387 393
Openings 1 - 1 -
Closings (4) - (6) (3)
--------- --------- --------- ---------
End of period 382 390 382 390
========= ========= ========= =========
NUMBER OF FRANCHISED UNITS:
Beginning of period 164 166 162 167
Openings - 1 2 3
Closings (2) (2) (2) (5)
--------- --------- --------- ---------
End of period 162 165 162 165
========= ========= ========= =========
Friendly Ice Cream Corporation
------------------------------
Consolidated Statements of Operations
-------------------------------------
Percentage of Total Revenues
----------------------------
(unaudited)
Quarter Ended Six Months Ended
--------------- -----------------
June 29, June 30, June 29, June 30,
2003 2002 2003 2002
-----------------------------------
Restaurant Revenues 79.0 % 80.1 % 79.5 % 80.4 %
Foodservice Revenues 19.2 % 18.2 % 18.7 % 17.9 %
Franchise Revenues 1.8 % 1.7 % 1.8 % 1.7 %
------- ------- ------- -------
REVENUES 100.0 % 100.0 % 100.0 % 100.0 %
COSTS AND EXPENSES:
Cost of sales 35.5 % 34.8 % 35.6 % 35.2 %
Labor and benefits 28.1 % 27.8 % 28.8 % 28.5 %
Operating expenses 19.6 % 19.3 % 19.5 % 19.0 %
General and administrative
expenses 5.9 % 5.7 % 6.5 % 6.1 %
Reduction of restructuring
reserve - (0.3)% - (0.1)%
Write-downs of property and
equipment - 0.2 % - 0.2 %
Depreciation and amortization 3.7 % 4.2 % 4.0 % 4.6 %
Loss on sales of other property
and equipment, net 0.5 % 0.1 % 0.5 % 0.2 %
------- ------- ------- -------
OPERATING INCOME 6.7 % 8.2 % 5.1 % 6.3 %
Interest expense, net 3.9 % 4.1 % 4.3 % 4.5 %
------- ------- ------- -------
INCOME BEFORE PROVISION FOR
INCOME TAXES 2.8 % 4.1 % 0.8 % 1.8 %
Provision for income taxes (0.8)% (1.6)% (0.2)% (0.6)%
------- ------- ------- -------
NET INCOME AND COMPREHENSIVE
INCOME 2.0 % 2.5 % 0.6 % 1.2 %
======= ======= ======= =======
Friendly Ice Cream Corporation
------------------------------
Condensed Consolidated Balance Sheets
-------------------------------------
(In thousands)
June 29, Dec. 29,
2003 2002
------------ ---------
(unaudited)
Assets
------
Current Assets:
Cash and cash equivalents $30,747 $34,341
Other current assets 42,395 38,964
------------ ---------
Total Current Assets 73,142 73,305
Property and Equipment, net 162,892 158,373
Intangibles and Other Assets, net 24,633 25,520
------------ ---------
$260,667 $257,198
============ =========
Liabilities and Stockholders' Deficit
-------------------------------------
Current Liabilities:
Current maturities of debt, capital
lease and finance obligations $1,840 $2,393
Other current liabilities 72,879 70,344
------------ ---------
Total Current Liabilities 74,719 72,737
Deferred Income Taxes 1,886 1,533
Capital Lease and Finance Obligations 4,743 5,044
Long-Term Debt 231,284 231,830
Other Long-Term Liabilities 49,819 49,756
Stockholders' Deficit (101,784) (103,702)
------------ ---------
$260,667 $257,198
============ =========
Friendly Ice Cream Corporation
------------------------------
Selected Segment Reporting
Information:
--------------------------
(in thousands)
--------------
For the For the
Three Months Ended Six Months Ended
-------------------------------------
June June June June
2003 2002(1) 2003 2002(1)
------------------ ------------------
Revenues before elimination of
intersegment revenues:
Restaurant $123,002 $121,893 $226,170 $226,149
Foodservice 64,633 61,964 116,959 113,676
Franchise 2,710 2,550 4,965 4,679
------------------ ------------------
Total $190,345 $186,407 $348,094 $344,504
================== ==================
Intersegment revenues:
Foodservice $(34,697)$(34,226) $(63,756)$(63,149)
================== ==================
Revenues:
Restaurant $123,002 $121,893 $226,170 $226,149
Foodservice 29,936 27,738 53,203 50,527
Franchise 2,710 2,550 4,965 4,679
------------------ ------------------
Total $155,648 $152,181 $284,338 $281,355
================== ==================
EBITDA (2):
Restaurant (3) $14,402 $15,163 $24,483 $27,268
Foodservice (3) 5,258 5,398 8,447 8,964
Franchise (3) 2,002 1,755 3,563 3,136
Corporate (3) (4,587) (3,981) (9,351) (8,383)
(Loss) gain on property and
equipment, net, excluding
write-downs of property
and equipment (882) 482 (1,223) (33)
Reduction of restructure
reserve - 400 - 400
------------------ ------------------
Total $16,193 $19,217 $25,919 $31,352
================== ==================
Interest expense, net $6,092 $6,215 $12,194 $12,552
================== ==================
Depreciation and amortization:
Restaurant $3,965 $3,889 $7,765 $7,986
Foodservice 746 828 1,482 1,671
Franchise 38 66 77 139
Corporate 997 1,604 2,049 3,277
------------------ ------------------
Total $5,746 $6,387 $11,373 $13,073
================== ==================
Other non cash expenses:
Corporate $64 $63 $129 $133
Write-downs of property and
equipment - 311 - 431
------------------ ------------------
Total $64 $374 $129 $564
================== ==================
Income (loss) before benefit
from income taxes:
Restaurant (3) $10,437 $11,274 $16,718 $19,282
Foodservice (3) 4,512 4,570 6,965 7,293
Franchise (3) 1,964 1,689 3,486 2,997
Corporate (3) (11,740) (11,863) (23,723) (24,345)
------------------ ------------------
5,173 5,670 3,446 5,227
(Loss) gain on property and
equipment, net, excluding
write-downs of property
and equipment (882) 171 (1,223) (464)
Reduction of restructure
reserve - 400 - 400
------------------ ------------------
Total $4,291 $6,241 $2,223 $5,163
================== ==================
(1) Certain amounts have been reclassified to conform with the current
period presentation.
(2) EBITDA represents net income before (i) benefit from income taxes,
(ii) interest expense, net, (iii) depreciation and amortization, (iv)
write-downs of property and equipment and (v) other non-cash items.
The Company has included information concerning EBITDA in this
schedule and its Form 10-Q because the Company's management incentive
plan pays bonuses based on achieving EBITDA targets and the Company
believes that such information is used by certain investors as one
measure of a company's historical ability to service debt. EBITDA
should not be considered as an alternative to, or more meaningful
than, earnings (loss) from operations or other traditional indications
of a company's operating performance.
(3) Amounts are prior to gains (losses) on property and equipment
CONTACT: Friendly Ice Cream Corporation
Investment Contact:
Deborah Burns, 413-543-2400 x3317
or
Media Contact:
Maura Tobias, 413-543-2400 x2814