Exhibit 99.1
Friendly Ice Cream Corporation Reports Record Results;
52% Increase in Third Quarter 2003 Net Income
WILBRAHAM, Mass.--(BUSINESS WIRE)--Oct. 23, 2003--Friendly Ice
Cream Corporation (AMEX: FRN) today reported record net income for the
three-months-ended September 28, 2003 of $5.3 million, or $0.70 per
share, an increase of 52% when compared to the net income of $3.5
million, or $0.46 per share, reported for the three-months-ended
September 29, 2002.
Comparable systemwide restaurant sales increased 3.5% for the 2003
third quarter as compared to the prior year (2.9% increase for company
restaurants and 5.1% increase for franchise restaurants). This
increase marks the Company's eleventh consecutive quarter of positive
comparable systemwide restaurant sales growth. Total company revenues
for the three-months-ended September 28, 2003 were $160.4 million, an
increase of 1.3%, as compared to total revenues of $158.3 million for
the three-months-ended September 29, 2002.
Net income for the nine-months-ended September 28, 2003 was $6.9
million, or $0.91 per share compared to net income of $6.9 million, or
$0.91 per share, reported for the nine-months-ended September 29,
2002. Included in 2002 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.
Total company revenues increased $5.0 million, or 1.1%, to $444.7
million for the nine-months-ended September 28, 2003 from $439.7
million for the same period in 2002. Year-to-date, comparable
systemwide restaurant sales increased 2.8% (1.9% increase for company
restaurants and 4.9% increase for franchise restaurants).
"We are very pleased with the Company's continued revenue growth
and profitability," stated John L. Cutter, Chief Executive Officer and
President of Friendly Ice Cream. "Eleven consecutive quarters of
positive comparable systemwide restaurant sales is the result of
continued improvements to guest satisfaction and targeted marketing.
Guest satisfaction, supported by training initiatives and management
incentive programs, continues to be the top priority for Friendly's."
Cutter continued, "During the third quarter, we re-modeled two
restaurants as part of our Impact Re-model program. The Impact program
enhances the guest experience by improving the appearance of our
restaurants and reinforces our 68-year ice cream heritage. Also during
the quarter, our franchisees opened one new franchise restaurant.
Year-to-date, we opened one new company restaurant and our franchisees
opened three new franchise restaurants. We plan to open two new
company restaurants and our franchisees plan to open three new
franchise restaurants during the fourth quarter."
Business Segment Results
In the 2003 third quarter, pre-tax income in the restaurant
segment increased 23.4% to $13.7 million, or 10.7% of restaurant
revenues, from $11.1 million, or 8.9% of restaurant revenues, in the
third quarter 2002. The increase in pre-tax income was the result of a
2.9% improvement in comparable company restaurant sales, a 0.4%
reduction in restaurant cost of sales due in part to improved food
cost controls and lower restaurant operating expenses for maintenance
and advertising. Partially offsetting these items was an increase in
restaurant labor and fringe benefit costs.
Pre-tax income in the Company's foodservice segment was $4.8
million in the third quarter of 2003 compared to $4.6 million in the
third quarter 2002. The increase was mainly due to higher sales to
franchisees and efficiencies in the Company's manufacturing facilities
as a result of increased manufactured volumes of ice cream and related
products. Partially offsetting this increase was a 7.6% decrease in
case volume in the retail supermarket business. Retail case volume,
however, has increased by 3.6% year-to-date.
Pre-tax income in the franchise segment decreased slightly in the
2003 third quarter to $1.7 million from $1.8 million in the prior
year. The decrease is due to lower franchise rental income and fees.
Partially offsetting these decreases is higher royalty revenue from
increased comparable franchise restaurant sales of 5.1% for the
quarter.
Corporate expenses of $12.5 million in the third quarter of 2003
increased by $0.2 million, or 1%, as compared to the third quarter of
2002 primarily due to salary merit increases and a reduction in the
benefit realized from the Company's pension plan when compared to the
prior year. These increases were partially offset by lower
depreciation expense associated with certain purchased software at the
Company's headquarters and lower interest expense resulting from
reduced debt levels.
On October 2, 2003, Moody's Investors Service confirmed all
ratings of Friendly Ice Cream Corporation and changed the company's
rating outlook to positive from stable. The revision in the outlook
was based on Moody's expectation that the company will continue the
recent pattern of operating progress and improvements in financial
flexibility.
An investor conference call to review third quarter 2003 results
will be held on Friday, October 24, 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 530 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).
Friendly Ice Cream Corporation
Consolidated Statements of Operations
(In thousands, except per share and unit data)
(unaudited)
Quarter Ended Nine Months Ended
Sep 28, Sep 29, Sep 28, Sep 29,
2003 2002 2003 2002
Restaurant Revenues $127,605 $124,885 $353,775 $351,034
Foodservice Revenues 30,174 30,766 83,377 81,293
Franchise Revenues 2,571 2,663 7,536 7,342
REVENUES 160,350 158,314 444,688 439,669
COSTS AND EXPENSES:
Cost of sales 56,561 57,079 157,717 156,071
Labor and benefits 45,402 43,457 127,326 123,618
Operating expenses 29,510 30,946 85,112 84,408
General and administrative
expenses 9,939 9,369 28,397 26,649
Reduction of restructuring
reserve - - - (400)
Write-downs of property and
equipment 26 - 26 431
Depreciation and amortization 5,391 6,097 16,764 19,170
Loss on franchise sales of
restaurant operations and
properties - 21 - 21
Loss (gain) on sales of other
property and equipment, net 91 (150) 1,499 491
OPERATING INCOME 13,430 11,495 27,847 29,210
Interest expense, net 6,048 6,212 18,242 18,764
INCOME BEFORE PROVISION FOR
INCOME TAXES 7,382 5,283 9,605 10,446
Provision for income taxes (2,067) (1,795) (2,689) (3,551)
NET INCOME AND COMPREHENSIVE
INCOME $5,315 $3,488 $6,916 $6,895
NET INCOME PER SHARE:
Basic $0.71 $0.47 $0.93 $0.94
Diluted $0.70 $0.46 $0.91 $0.91
WEIGHTED AVERAGE SHARES:
Basic 7,452 7,379 7,436 7,366
Diluted 7,606 7,607 7,577 7,574
NUMBER OF COMPANY UNITS:
Beginning of period 382 390 387 393
Openings - - 1 -
Closings (2) (1) (8) (4)
End of period 380 389 380 389
NUMBER OF FRANCHISED UNITS:
Beginning of period 162 165 162 167
Openings 1 1 3 4
Closings (2) (4) (4) (9)
End of period 161 162 161 162
Friendly Ice Cream Corporation
Consolidated Statements of Operations
Percentage of Total Revenues
(unaudited)
Quarter Nine Months
Ended Ended
Sep 28, Sep 29, Sep 28, Sep 29,
2003 2002 2003 2002
Restaurant Revenues 79.6 % 78.9 % 79.6 % 79.8 %
Foodservice Revenues 18.8 % 19.4 % 18.7 % 18.5 %
Franchise Revenues 1.6 % 1.7 % 1.7 % 1.7 %
REVENUES 100.0 % 100.0 % 100.0 % 100.0 %
COSTS AND EXPENSES:
Cost of sales 35.3 % 36.1 % 35.5 % 35.5 %
Labor and benefits 28.3 % 27.4 % 28.6 % 28.1 %
Operating expenses 18.4 % 19.5 % 19.1 % 19.2 %
General and administrative expenses 6.2 % 5.9 % 6.4 % 6.1 %
Reduction of restructuring reserve - - - (0.1)%
Write-downs of property and
equipment - - - 0.1 %
Depreciation and amortization 3.4 % 3.9 % 3.8 % 4.4 %
Loss on franchise sales of restaurant
operations and properties - - - -
Loss (gain) on sales of other
property and equipment, net - (0.1)% 0.3 % 0.1 %
OPERATING INCOME 8.4 % 7.3 % 6.3 % 6.6 %
Interest expense, net 3.8 % 4.0 % 4.1 % 4.2 %
INCOME BEFORE PROVISION FOR
INCOME TAXES 4.6 % 3.3 % 2.2 % 2.4 %
Provision for income taxes (1.3)% (1.1)% (0.6)% (0.8)%
NET INCOME AND COMPREHENSIVE INCOME 3.3 % 2.2 % 1.6 % 1.6 %
Friendly Ice Cream Corporation
Condensed Consolidated Balance Sheets
(In thousands)
September 28, December 29,
2003 2002
(unaudited)
Assets
Current Assets:
Cash and cash equivalents $31,551 $34,341
Other current assets 38,446 38,964
Total Current Assets 69,997 73,305
Property and Equipment, net 163,518 158,373
Intangibles and Other Assets, net 24,132 25,520
$257,647 $257,198
Liabilities and Stockholders' Deficit
Current Liabilities:
Current maturities of debt, capital
lease and finance obligations $1,852 $2,393
Other current liabilities 65,750 70,344
Total Current Liabilities 67,602 72,737
Deferred Income Taxes 3,856 1,533
Capital Lease and Finance Obligations 5,135 5,044
Long-Term Debt 228,258 231,830
Other Long-Term Liabilities 49,170 49,756
Stockholders' Deficit (96,374) (103,702)
$257,647 $257,198
Friendly Ice Cream Corporation
Selected Segment Reporting Information:
(in thousands)
For the Three For the Nine
Months Ended Months Ended
September September September September
2003 2002 (1) 2003 2002 (1)
Revenues before elimination
of intersegment revenues:
Restaurant $127,605 $124,885 $353,775 $351,034
Foodservice 66,352 66,331 183,311 180,007
Franchise 2,571 2,663 7,536 7,342
Total $196,528 $193,879 $544,622 $538,383
Intersegment revenues:
Foodservice $(36,178) $(35,565) $(99,934) $(98,714)
Revenues:
Restaurant $127,605 $124,885 $353,775 $351,034
Foodservice 30,174 30,766 83,377 81,293
Franchise 2,571 2,663 7,536 7,342
Total $160,350 $158,314 $444,688 $439,669
EBITDA (2):
Restaurant (3) $17,308 $15,088 $41,791 $42,356
Foodservice (3) 5,573 5,439 14,020 14,403
Franchise (3) 1,769 1,862 5,332 4,998
Corporate (3) (5,484) (4,771) (14,836) (13,154)
(Loss) gain on property and
equipment, net, excluding
write-downs of property
and equipment (265) 143 (1,487) 110
Reduction of restructure
reserve - - - 400
Total $18,901 $17,761 $44,820 $49,113
Interest expense, net $6,048 $6,212 $18,242 $18,764
Depreciation and amortization:
Restaurant $3,648 $4,019 $11,412 $12,006
Foodservice 770 798 2,253 2,469
Franchise 39 63 116 202
Corporate 934 1,217 2,983 4,493
Total $5,391 $6,097 $16,764 $19,170
Other non-cash expenses:
Corporate $54 $169 $183 $302
Write-downs of property and
equipment 26 - 26 431
Total $80 $169 $209 $733
Income (loss) before benefit
from income taxes:
Restaurant (3) $13,660 $11,069 $30,379 $30,350
Foodservice (3) 4,803 4,641 11,767 11,934
Franchise (3) 1,730 1,799 5,216 4,796
Corporate (3) (12,520) (12,369) (36,244) (36,713)
7,673 5,140 11,118 10,367
(Loss) gain on property and
equipment, net, excluding
write-downs of property
and equipment (291) 143 (1,513) (321)
Reduction of restructure
reserve - - - 400
Total $7,382 $5,283 $9,605 $10,446
(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