Exhibit 99.1
Friendly Ice Cream Corporation Reports Fourth Quarter Results;
Commences Tender Offer for 10 1/2% Senior Notes Due 2007
WILBRAHAM, Mass.--(BUSINESS WIRE)--Feb. 19, 2004--Friendly Ice Cream
Corporation (AMEX: FRN) today reported net income for the three-months-ended
December 28, 2003 of $3.3 million, or $0.42 per share, compared to a net loss of
$0.7 million, or $0.9 per share, reported for the three-months-ended December
29, 2002.
Comparable systemwide restaurant sales increased 4.0% for the 2003 fourth
quarter as compared to the prior year (3.3% increase for company restaurants and
5.7% increase for franchise restaurants). Including results of the current
quarter, the Company has reported twelve consecutive quarters of positive
comparable systemwide restaurant sales. Total company revenues for the
three-months-ended December 28, 2003 were $135.1 million, an increase of 3.4%,
as compared to total revenues of $130.7 million for the three-months-ended
December 29, 2002.
Effective December 31, 2003, all benefits accrued under the Company's
noncontributory defined benefit pension plan have been frozen at the level
attained on that date. As a result, the Company recognized a one-time non-cash
pension curtailment gain of $8.1 million pre-tax ($4.8 after-tax or $0.62 per
share) equal to the unamortized balances as of December 31, 2003 from all plan
changes prior to that date. Simultaneously, the Company took a corresponding
charge to its stockholders' deficit of $9.1 million ($5.4 million after-tax)
offsetting the curtailment gain. This charge resulted from the accumulated
benefit obligation exceeding the fair value of the pension plan assets as of
December 31, 2003, the latest measurement date.
Net income for the fiscal year December 28, 2003 was $10.2 million, or $1.34
per share compared to net income of $6.2 million, or $0.82 per share, reported
for the year-ended December 29, 2002. As previously discussed, 2003 results
include a one-time non-cash pension curtailment gain of $8.1 million pre-tax
($4.8 after-tax or $0.62 per share). The Company reported a corresponding charge
to its stockholders' deficit of $9.1 million ($5.4 million after-tax) offsetting
the curtailment gain. Results for 2002 included 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 $9.4 million, or 1.6%, to $579.8 million
for the year-ended December 28, 2003 from $570.4 million for the same period in
2002. Year-to-date, comparable systemwide restaurant sales increased 3.1% (2.3%
increase for company restaurants and 5.3% increase for franchise restaurants).
Case volume in the Company's retail supermarket business increased 2.7% in 2003
when compared to the prior year.
"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. "Twelve 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. The recently completed re-franchising of ten company-operated
restaurants in Orlando to an existing franchisee, along with an agreement to
open up to 25 new restaurants, will help to expand franchise development and
growth in the state of Florida."
Cutter continued, "During the fourth quarter, we continued to refine the
look and capital efficiency of our Impact program by re-modeling eight company
restaurants. 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, we opened two new company restaurants and our
franchisees opened three new franchise restaurants. For the year, three new
company restaurants opened and our franchisees opened six new franchise
restaurants."
Business Segment Results
In the 2003 fourth quarter, pre-tax income in the restaurant segment was
$5.5 million, or 5.2% of restaurant revenues, compared to $6.8 million, or 6.6%
of restaurant revenues, in the fourth quarter 2002. The decrease in pre-tax
income was the result of an increase in restaurant labor and fringe benefit
costs and higher expenses for advertising, depreciation, employment recruitment
fees for field management positions and pre-opening costs associated with the
opening of two company restaurants during the quarter. Partially offsetting
these costs was a 3.3% improvement in comparable company restaurant sales, lower
maintenance costs and a decrease in general liability insurance claims.
Pre-tax income in the Company's foodservice segment was $3.5 million in the
fourth quarter of 2003 compared to $2.6 million in the fourth quarter 2002. The
increase was mainly due to increased sales to franchisees and to retail
supermarket customers. Retail case volume increased by 0.2% in the fourth
quarter.
Pre-tax income in the franchise segment increased in the fourth quarter to
$1.4 million from $1.2 million in the prior year. The increase is mainly due to
higher royalty revenue from increased comparable franchise restaurant sales of
5.7% for the quarter.
Corporate expenses of $12.4 million in the fourth quarter of 2003 increased
by $0.1 million, or 1%, as compared to the fourth quarter of 2002 primarily due
to higher employment recruitment costs, increased legal fees 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 depreciation expense and lower
interest expense resulting from reduced debt levels.
Tender Offer
On February 17, 2004, the Company announced that it has commenced a cash
tender offer for all $176.0 million outstanding principal amount of its 10 1/2%
Senior Notes due 2007. The Company intends to fund the tender offer through a
private offering of a new series of approximately $165.0 million of senior
notes, available cash and borrowings under its revolving credit facility. The
Company has obtained an amendment to its existing $30.0 million revolving credit
facility to increase the amount which may be borrowed under the revolver to
$45.0 million and to extend the term to June 2007. The tender offer and the
effectiveness of the amendment to the credit facility are subject to a number of
conditions including completion of the offering of the new senior notes.
Franchising Agreement
On January 15, 2004, the Company entered into an agreement with an existing
franchisee, Central Florida Restaurants LLC, to grant certain limited exclusive
rights to operate and develop Friendly's restaurants in designated areas within
the Orlando, Florida market. The franchisee purchased certain equipment assets,
lease and sublease rights and franchise rights in ten existing company operated
restaurants. The agreement includes a commitment to open an additional ten
restaurants over the next six years with an option for fifteen more restaurants
in the following five years. Gross proceeds from the sale were approximately
$3.2 million. The Company expects to record a gain on this transaction of
approximately $0.7 million in the first quarter of 2004. The cash proceeds will
be used to reduce debt, subject to the terms of the revolving credit facility.
An investor conference call to review fourth quarter 2003 results will be
held on Friday, March 5, 2004 at 2:00 P.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 4,500 supermarkets and other retail locations. With a 68-year
operating history, Friendly's enjoys strong brand recognition and is currently
remodeling 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)
Quarter Ended Year Ended
----------------------- -------------------
Dec 28, Dec 29, Dec 28, Dec 29,
2003 2002 2003 2002
-------------------------------------------
(unaudited) (unaudited)
Restaurant revenues $105,983 $103,535 $459,758 $454,569
Foodservice revenues 26,813 25,038 110,190 106,331
Franchise revenues 2,286 2,130 9,822 9,472
----------- ----------- --------- ---------
REVENUES 135,082 130,703 579,770 570,372
COSTS AND EXPENSES:
Cost of sales 49,354 46,347 207,071 202,418
Labor and benefits 39,656 38,029 166,982 161,647
Operating expenses 25,538 26,649 108,322 108,829
General and
administrative expenses 10,932 10,585 41,657 39,462
Pension curtailment
gain (8,113) - (8,113) -
Reduction of
restructuring reserve - - - (400)
Write-downs of property
and equipment - 545 26 976
Depreciation and
amortization 5,775 5,351 22,539 24,521
Gain on franchise sales of
restaurant operations and
properties - (696) - (675)
Loss on dispositions of
other property
and equipment, net 545 87 2,044 578
----------- ----------- --------- ---------
OPERATING INCOME 11,395 3,806 39,242 33,016
Interest expense, net 5,915 6,106 24,157 24,870
----------- ----------- --------- ---------
INCOME (LOSS) BEFORE
(PROVISION FOR)
BENEFIT FROM INCOME TAXES 5,480 (2,300) 15,085 8,146
(Provision for) benefit
from income taxes (2,210) 1,592 (4,899) (1,959)
----------- ----------- --------- ---------
NET INCOME (LOSS) $3,270 $(708) $10,186 $6,187
=========== =========== ========= =========
NET INCOME (LOSS) PER SHARE:
Basic $0.44 $(0.09) $1.37 $0.84
=========== =========== ========= =========
Diluted $0.42 $(0.09) $1.34 $0.82
=========== =========== ========= =========
WEIGHTED AVERAGE SHARES:
Basic 7,476 7,390 7,447 7,372
=========== =========== ========= =========
Diluted 7,710 7,390 7,609 7,551
=========== =========== ========= =========
NUMBER OF COMPANY UNITS:
Beginning of period 380 389 387 393
Openings 2 - 3 -
Closings (2) (2) (10) (6)
----------- ----------- --------- ---------
End of period 380 387 380 387
=========== =========== ========= =========
NUMBER OF FRANCHISED UNITS:
Beginning of period 161 162 162 167
Openings 3 1 6 5
Closings (1) (1) (5) (10)
----------- ----------- --------- ---------
End of period 163 162 163 162
=========== =========== ========= =========
Friendly Ice Cream Corporation
Consolidated Statements of Operations
Percentage of Total Revenues
Quarter Ended Year Ended
----------------------- ---------------
Dec 28, Dec 29, Dec 28, Dec 29,
2003 2002 2003 2002
----------------------------------------
(unaudited) (unaudited)
Restaurant revenues 78.5 % 79.2 % 79.3 % 79.7 %
Foodservice revenues 19.8 % 19.2 % 19.0 % 18.6 %
Franchise revenues 1.7 % 1.6 % 1.7 % 1.7 %
----------- ----------- ------- -------
REVENUES 100.0 % 100.0 % 100.0 % 100.0 %
COSTS AND EXPENSES:
Cost of sales 36.5 % 35.5 % 35.7 % 35.5 %
Labor and benefits 29.4 % 29.1 % 28.8 % 28.3 %
Operating expenses 18.9 % 20.3 % 18.7 % 19.1 %
General and administrative
expenses 8.1 % 8.1 % 7.2 % 6.9 %
Pension curtailment gain (6.0)% - (1.4)% -
Reduction of restructuring
reserve - - - (0.1)%
Write-downs of property and
equipment - 0.4 % - 0.2 %
Depreciation and
amortization 4.3 % 4.1 % 3.9 % 4.3 %
Gain on franchise sales of
restaurant
operations and properties - (0.5)% - (0.1)%
Loss on dispositions of other
property
and equipment, net 0.4 % 0.1 % 0.3 % 0.1 %
----------- ----------- ------- -------
OPERATING INCOME 8.4 % 2.9 % 6.8 % 5.8 %
Interest expense, net 4.4 % 4.6 % 4.2 % 4.4 %
----------- ----------- ------- -------
INCOME (LOSS) BEFORE
(PROVISION FOR)
BENEFIT FROM INCOME TAXES 4.0 % (1.7)% 2.6 % 1.4 %
(Provision for) benefit from
income taxes (1.6)% 1.2 % (0.8)% (0.3)%
----------- ----------- ------- -------
NET INCOME (LOSS) 2.4 % (0.5)% 1.8 % 1.1 %
=========== =========== ======= =======
Friendly Ice Cream Corporation
Condensed Consolidated Balance Sheets
(In thousands)
December 28, December 29,
2003 2002
------------- -------------
Assets
Current Assets:
Cash and cash equivalents $25,631 $34,341
Other current assets 35,910 38,964
------------- -------------
Total Current Assets 61,541 73,305
Property and Equipment, net 167,109 158,373
Intangibles and Other Assets, net 23,802 25,520
------------- -------------
$252,452 $257,198
============= =============
Liabilities and Stockholders' Deficit
Current Liabilities:
Current maturities of debt, capital
lease and finance obligations $2,038 $2,393
Other current liabilities 63,680 70,344
------------- -------------
Total Current Liabilities 65,718 72,737
Deferred Income Taxes 1,289 1,533
Capital Lease and Finance Obligations 5,773 5,044
Long-Term Debt 227,937 231,830
Other Long-Term Liabilities 49,761 49,756
Stockholders' Deficit (98,026) (103,702)
------------- -------------
$252,452 $257,198
============= =============
Friendly Ice Cream Corporation
Selected Segment Reporting Information:
(in thousands)
For the Three
Months Ended For the Year Ended
---------------------------------------
December December December December
2003 2002 (1) 2003 2002 (1)
------------------ --------------------
Revenues before elimination of
intersegment revenues:
Restaurant $105,983 $103,535 $459,758 $454,569
Foodservice 57,002 53,971 240,313 233,978
Franchise 2,286 2,130 9,822 9,472
------------------ --------------------
Total $165,271 $159,636 $709,893 $698,019
================== ====================
Intersegment revenues:
Foodservice $(30,189)$(28,933) $(130,123)$(127,647)
================== ====================
Revenues:
Restaurant $105,983 $103,535 $459,758 $454,569
Foodservice 26,813 25,038 110,190 106,331
Franchise 2,286 2,130 9,822 9,472
------------------ --------------------
Total $135,082 $130,703 $579,770 $570,372
================== ====================
EBITDA (2):
Restaurant (3) $9,528 $10,149 $51,319 $52,505
Foodservice (3) 4,358 3,406 18,378 17,809
Franchise (3) 1,431 1,242 6,763 6,240
Corporate (3) (5,547) (4,999) (20,566) (18,455)
(Loss) gain on property and
equipment, net, excluding
write-downs of property
and equipment (713) (96) (2,200) 14
Reversal of restructuring
expenses - - - 400
Less pension benefit included
in reporting segments (281) (512) (1,131) (2,718)
------------------ --------------------
Total $8,776 $9,190 $52,563 $55,795
================== ====================
Interest expense, net $5,915 $6,106 $24,157 $24,870
================== ====================
Depreciation and amortization:
Restaurant $3,995 $3,355 $15,407 $15,361
Foodservice 846 789 3,099 3,258
Franchise 37 49 153 251
Corporate 897 1,158 3,880 5,651
------------------ --------------------
Total $5,775 $5,351 $22,539 $24,521
================== ====================
Other non cash expenses:
Pension curtailment gain $(8,113) $- $(8,113) $-
Pension benefit (281) (512) (1,131) (2,718)
Write-downs of property and
equipment - 545 26 976
------------------ --------------------
Total $(8,394) $33 $(9,218) $(1,742)
================== ====================
Income (loss) before provision
for income taxes:
Restaurant (3) $5,533 $6,794 $35,912 $37,144
Foodservice (3) 3,512 2,617 15,279 14,551
Franchise (3) 1,394 1,193 6,610 5,989
Corporate (3) (12,359) (12,263) (48,603) (48,976)
------------------ --------------------
(1,920) (1,659) 9,198 8,708
(Loss) gain on property and
equipment, net, excluding
write-downs of property
and equipment (713) (641) (2,226) (962)
Pension curtailment gain 8,113 - 8,113 -
Reversal of restructuring
expenses - - - 400
------------------ --------------------
Total $5,480 $(2,300) $15,085 $8,146
================== ====================
(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, (v) pension curtailment gain and
net periodic pension benefit and (vi) 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
Investors:
Deborah Burns, 413-543-2400 Ext. 3317
or
Media:
Maura Tobias, 413-543-2400 Ext. 2814