Exhibit 99.1
Friendly Ice Cream Corporation Reports First Quarter 2005 Results
WILBRAHAM, Mass.--(BUSINESS WIRE)--May 2, 2005--Friendly Ice Cream
Corporation (AMEX: FRN) today reported results for the first quarter
ended April 3, 2005.
Total company revenues were $124.6 million in the first quarter of
2005 as compared to total revenues of $130.8 million for the first
quarter of 2004. Restaurant revenues declined by $8.3 million, which
was partially offset by a $2.0 million increase in foodservice
revenues and a $0.2 million increase in franchise revenues.
Comparable restaurant sales decreased 3.3% for company-operated
restaurants and increased 1.9% for franchised restaurants. Including
the results of the current quarter, franchise-operated restaurants
have reported sixteen consecutive quarters of positive comparable
restaurant sales growth. During the quarter, restaurant revenues
declined by $4.4 million compared to the same quarter in the prior
year due to the re-franchising of 34 company-operated restaurants over
the last fifteen months. Restaurant revenues were also impacted by an
unfavorable shift in the timing of the year-end holiday period. New
Year's Day was included in the prior year first quarter and is not
included in the current year. The estimated impact on company-operated
restaurants due to the timing of the holiday represented approximately
one-half of the 3.3% decline in first quarter comparable restaurant
sales.
The net loss for the three months ended April 3, 2005 was $3.0
million, or $0.39 per share, compared to a net loss of $5.2 million,
or $0.70 per share, reported for the three months ended March 28,
2004. Included in the 2004 first quarter results are $5.9 million in
expenses ($3.5 million after-tax or $0.46 per share) for debt
retirement and restructuring costs, which were partially offset by a
gain on litigation settlement.
Highlights
In the first quarter of 2005, Friendly's continued to pursue its
key strategic objectives to: enhance the dining experience, expand
through franchising and re-franchising and grow higher margin
revenues. Highlights in the quarter include:
-- The implementation of an Internet-based guest feedback system
which allows Friendly's to better address guest service issues
and make ongoing improvements to the Friendly's dining
experience. This implementation also resulted in a decrease in
G&A expenses.
-- The restructuring of the restaurant management team, resulting
in higher productivity, improved guest service, lower average
hourly rates and a decrease in labor and benefits.
-- The re-franchising of seven company-operated restaurants,
which resulted in a gain on franchise sales of restaurant
operations and properties of $1.3 million.
-- The addition of one new major supermarket chain, over 200
stores, to carry Friendly's decorated cakes, which are now
being sold in over 400 supermarkets.
Commenting on results, John L. Cutter, Chief Executive Officer and
President of Friendly Ice Cream Corporation stated, "In the first
quarter of 2005, we knew that we faced difficult comparisons versus
the prior year due to the unfavorable shift in the timing of the
year-end holiday period, but severe weather and record snowfall
significantly added to the restaurant comparable sales decline. Higher
dairy commodity costs did not ease until late in the first quarter and
we expect prices to continue to be favorable in the second quarter. We
added a major supermarket chain with over 200 stores to our decorated
cake initiative in the first quarter and sales results are exceeding
our expectations."
Mr. Cutter continued, "Looking forward, Friendly's is a strong
brand with a dominant market position in the Northeast. We believe we
have the strategic initiatives in place to support improved sales and
profitability growth. We also continue to enhance our operating and
marketing fundamentals with an exciting line-up of new products and
improved guest service initiatives. During the first quarter, we
completed two re-imaging projects. We plan to re-image an additional
twelve restaurants and open four new company-operated restaurants
during the remainder of 2005. In addition, we expect that our
franchisees will open fifteen new franchised restaurants in 2005."
Business Segment Results
In the first quarter of 2005, pre-tax income in the restaurant
segment was $2.1 million, or 2.2% of restaurant revenues, compared to
$5.3 million, or 5.1% of restaurant revenues, in the first quarter of
2004. The decrease in pre-tax income was mainly the result of a 3.3%
decline in comparable company-operated restaurant sales due to record
snowfall in New England and an unfavorable shift in the timing of the
year-end holiday period, the re-franchising of 34 company restaurants
over the past fifteen months and higher costs for snow removal,
maintenance, supplies and utilities. Friendly's continues to
aggressively pursue initiatives that are designed to enhance the
Friendly's dining experience. Several operational improvements have
been implemented and we are beginning to see positive results,
including a decrease in labor and benefits costs in the first quarter
due to the restructuring of the restaurant management team, resulting
in higher productivity, improved guest service and lower average
hourly rates. Other key restaurant initiatives include: reduced span
of control for front-line and second-line supervisors, a new
recognition and reward program for servers and an Internet-based guest
feedback system.
Pre-tax income in the Company's foodservice segment was $1.3
million in the first quarter of 2005 compared to $2.7 million in the
first quarter of 2004. The decrease in pre-tax income was mainly due
to higher commodity costs. Case volume in the Company's retail
supermarket business remained unchanged for the first quarter of 2005
when compared to the first quarter of 2004.
Pre-tax income in the franchise segment increased in the first
quarter of 2005 to $2.2 million from $2.0 million in the first quarter
of 2004. The improvement in pre-tax income is mainly due to increased
royalty revenue from comparable franchised restaurant sales growth of
1.9% and from the opening of eight new franchised restaurants and the
re-franchising of 34 restaurants over the past fifteen months.
Increased rental income from leased and sub-leased franchised
locations also contributed to the revenue growth in the first quarter
of 2005. Initial franchise fees declined in the first quarter of 2005
when compared to the prior year due to the re-franchising of 17
company-operated restaurants and the opening of two new locations
during the first quarter of 2004 versus seven re-franchising openings
during the first quarter of 2005.
Corporate expenses of $10.9 million in the first quarter of 2005
decreased by $1.4 million, or 12%, as compared to the first quarter of
2004 primarily due to the March 2004 reduction in force and lower
expenses for interest, recruitment, restaurant guest feedback service,
corporate bonus and legal fees.
Investor Conference Call
An investor conference call to review the first quarter of 2005
results will be held on Tuesday, May 3, 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 4,500
supermarkets and other retail locations. With a 70-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).
Forward Looking Statements
Statements contained in this release that are not historical facts
constitute "forward looking statements" as that term is defined in the
Private Securities Litigation Reform Act of 1995. These statements
include statements relating to trends in commodity prices, and the
expected number of re-imaging projects and new company-operated and
franchised restaurant openings during 2005, and the anticipated impact
of marketing, product and operational changes. All forward looking
statements are subject to risks and uncertainties which could cause
results to differ materially from those anticipated. These factors
include risks and uncertainties arising from accounting adjustments,
the Company's highly competitive business environment, exposure to
fluctuating commodity prices, risks associated with the foodservice
industry, the ability to retain and attract new employees, new or
changing government regulations, the Company's high geographic
concentration in the Northeast and its attendant weather patterns,
conditions needed to meet restaurant re-imaging and new opening
targets, the Company's ability to service its debt and other
obligations, the Company's ability to meet ongoing financial covenants
contained in the Company's debt instruments, loan agreements, leases
and other long-term commitments, and costs associated with improved
service and other similar initiatives. Other factors that may cause
actual results to differ from the forward looking statements contained
herein and that may affect the Company's prospects in general are
included in the Company's other filings with the Securities and
Exchange Commission. As a result the Company can provide no assurance
that its future results will not be materially different from those
projected. The Company expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any such
forward looking statement to reflect any change in its expectations or
any change in events, conditions or circumstances on which any such
statement is based.
-- Financial Statements to follow -
Friendly Ice Cream Corporation
Consolidated Statements of Operations
(In thousands, except per share and unit data)
(unaudited)
Quarter Ended
-------------------
Apr 3, Mar 28,
2005 2004
-------- ----------
(restated)
----------
Restaurant Revenues $96,092 $104,353
Foodservice Revenues 25,306 23,343
Franchise Revenues 3,250 3,058
-------- ----------
TOTAL REVENUES 124,648 130,754
COSTS AND EXPENSES:
Cost of sales 47,755 45,588
Labor and benefits 36,533 39,934
Operating expenses 24,521 25,131
General and administrative expenses 9,449 10,697
Restructuring expenses - 2,627
Gain on litigation settlement - (3,644)
Depreciation and amortization 6,324 5,717
Gain on franchise sales of restaurant
operations and properties (1,309) (906)
Loss on disposals of other property and equipment,
net 70 171
-------- ----------
OPERATING INCOME 1,305 5,439
OTHER EXPENSES:
Interest expense, net 5,298 6,064
Other expenses, principally debt retirement costs (12) 6,892
-------- ----------
LOSS BEFORE BENEFIT FROM INCOME TAXES (3,981) (7,517)
Benefit from income taxes 995 2,275
-------- ----------
NET LOSS AND COMPREHENSIVE LOSS $(2,986) $(5,242)
======== ==========
BASIC AND DILUTED NET LOSS PER SHARE $(0.39) $(0.70)
======== ==========
WEIGHTED AVERAGE BASIC AND DILUTED SHARES 7,717 7,520
======== ==========
NUMBER OF COMPANY UNITS:
Beginning of period 347 380
Refranchised closings (7) (17)
Closings (3) (1)
-------- ----------
End of period 337 362
======== ==========
NUMBER OF FRANCHISED UNITS:
Beginning of period 195 163
Openings - 2
Refranchised openings 7 17
Closings (1) -
-------- ----------
End of period 201 182
======== ==========
Friendly Ice Cream Corporation
Consolidated Statements of Operations
Percentage of Total Revenues
(unaudited)
Quarter Ended
------------------
Apr 3, Mar 28,
2005 2004
------- ----------
(restated)
----------
Restaurant Revenues 77.1 % 79.8 %
Foodservice Revenues 20.3 % 17.9 %
Franchise Revenues 2.6 % 2.3 %
------- ----------
TOTAL REVENUES 100.0 % 100.0 %
COSTS AND EXPENSES:
Cost of sales 38.3 % 34.9 %
Labor and benefits 29.3 % 30.5 %
Operating expenses 19.7 % 19.2 %
General and administrative expenses 7.6 % 8.2 %
Restructuring expenses - 2.0 %
Gain on litigation settlement - (2.8)%
Depreciation and amortization 5.1 % 4.4 %
Gain on franchise sales of restaurant
operations and properties (1.1)% (0.7)%
Loss on disposals of other property and equipment,
net 0.1 % 0.1 %
------- ----------
OPERATING INCOME 1.0 % 4.2 %
OTHER EXPENSES:
Interest expense, net 4.2 % 4.6 %
Other expenses, principally debt retirement costs - 5.3 %
------- ----------
LOSS BEFORE
BENEFIT FROM INCOME TAXES (3.2)% (5.7)%
Benefit from income taxes 0.8 % 1.7 %
------- ----------
NET LOSS AND COMPREHENSIVE LOSS (2.4)% (4.0)%
======= ==========
Friendly Ice Cream Corporation
Condensed Consolidated Balance Sheets
(In thousands)
April 3, January 2,
2005 2005
------------ -----------
(unaudited)
Assets
----------
Current Assets:
Cash and cash equivalents $11,150 $13,405
Other current assets 41,217 40,939
------------ -----------
Total Current Assets 52,367 54,344
Deferred Income Taxes 11,622 10,619
Property and Equipment, net 152,499 156,412
Intangibles and Other Assets, net 27,085 27,509
------------ -----------
$243,573 $248,884
============ ===========
Liabilities and Stockholders' Deficit
-----------------------------------------
Current Liabilities:
Current maturities of debt, capital
lease and finance obligations $2,699 $6,757
Other current liabilities 63,972 61,290
------------ -----------
Total Current Liabilities 66,671 68,047
Capital Lease and Finance Obligations 6,997 7,380
Long-Term Debt 225,410 225,752
Other Long-Term Liabilities 52,382 52,731
Stockholders' Deficit (107,887) (105,026)
------------ -----------
$243,573 $248,884
============ ===========
Friendly Ice Cream Corporation
Selected Segment Reporting Information
(in thousands)
` For the Three Months Ended
--------------------------
April 3, March 28,
2005 2004
-----------------------
(restated)
------------
Revenues before elimination of intersegment
revenues:
Restaurant $96,092 $104,353
Foodservice 54,163 53,362
Franchise 3,250 3,058
-----------------------
Total $153,505 $160,773
=======================
Intersegment revenues:
Foodservice $(28,857) $(30,019)
=======================
Revenues:
Restaurant $96,092 $104,353
Foodservice 25,306 23,343
Franchise 3,250 3,058
-----------------------
Total $124,648 $130,754
=======================
EBITDA (1):
Restaurant (2) $6,769 $9,254
Foodservice (2) 2,148 3,532
Franchise (2) 2,266 2,091
Corporate (2) (4,787) (5,412)
Gain on property and equipment, net 1,233 674
Restructuring expenses - (2,627)
Gain on litigation settlement - 3,644
Less pension benefit included in
reporting segments (56) (550)
-----------------------
Total $7,573 $10,606
=======================
Interest expense, net $5,298 $6,064
=======================
Other expenses, principally debt
retirement costs $(12) $6,892
=======================
Depreciation and amortization:
Restaurant $4,643 $3,966
Foodservice 823 852
Franchise 40 47
Corporate 818 852
-----------------------
Total $6,324 $5,717
=======================
Net periodic pension benefit $(56) $(550)
=======================
Income (loss) before benefit from income taxes:
Restaurant $2,126 $5,288
Foodservice 1,325 2,680
Franchise 2,226 2,044
Corporate (10,903) (12,328)
-----------------------
(5,226) (2,316)
Gain on property and equipment, net 1,233 674
Restructuring expenses - (2,627)
Gain on litigation settlement - 3,644
Other expenses, principally debt
retirement costs 12 (6,892)
-----------------------
Total $(3,981) $(7,517)
=======================
(1) EBITDA represents net loss before (i) benefit from income taxes,
(ii) other expenses, principally debt retirement costs, (iii)
interest expense, net, (iv) depreciation and amortization, (v) net
periodic pension benefit and (vi) other non-cash items. The
Company has included information concerning EBITDA in this
schedule because the Company's incentive plan pays bonuses based
on achieving EBITDA targets and the Company's management 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.
(2) Amounts are prior to gain (loss) on property and equipment, net.
CONTACT: Friendly Ice Cream Corporation
Investors:
Deborah Burns, 413-543-2400 x3317
or
Media:
Maura Tobias, 413-543-2400 x2814