Exhibit 99.1
Friendly Ice Cream Corporation Reports
Fourth Quarter and Full Year 2005 Results
WILBRAHAM, Mass.--(BUSINESS WIRE)--March 17, 2006--Friendly Ice
Cream Corporation (AMEX: FRN) today reported results for the fourth
quarter and fiscal year ended January 1, 2006.
Fourth Quarter Results
Total company revenues were $123.5 million in the fourth quarter
of 2005, a decrease of $16.1 million, or 11.5%, as compared to total
revenues of $139.5 million for the fourth quarter of 2004. The 2005
fourth quarter included 13 weeks of operations compared to 14 weeks
for the 2004 fourth quarter. The additional week contributed
approximately $10.7 million in total revenues in the fourth quarter of
2004.
Restaurant revenues were $91.6 million in the fourth quarter of
2005, a decrease of $14.2 million, or 13.4%, as compared to restaurant
revenues of $105.8 million for the fourth quarter of 2004. Restaurant
revenues declined by $9.0 million due to the additional week in the
2004 fourth quarter and by $5.3 million due to the re-franchising of
24 company-operated restaurants over the last fifteen months.
Comparable restaurant sales decreased 1.3% for company-operated
restaurants and 3.1% for franchised restaurants for the quarter ended
January 1, 2006 compared to the quarter ended January 2, 2005. Higher
gasoline prices during the first three weeks of September 2005 post
hurricane Katrina had a negative impact on restaurant revenues. This
negative sales trend continued through the month of October, while
sales for the months of November and December were relatively flat
when compared to the prior year.
Foodservice revenues were $28.2 million in the fourth quarter of
2005, a decrease of $2.1 million, or 7.0%, as compared to foodservice
revenues of $30.4 million for the fourth quarter of 2004. Franchise
revenues were $3.6 million in the fourth quarter of 2005, an increase
of $0.2 million, or 5.9%, as compared to franchise revenues of $3.4
million for the fourth quarter of 2004.
During the fourth quarter of 2005, the Company entered a
three-year cumulative loss position as contemplated by SFAS No. 109,
"Accounting for Income Taxes" and based on this and other factors,
recorded a non-cash charge of $22.2 million to income tax expense to
increase the deferred tax valuation allowance to $32.1 million. The
valuation allowance has no bearing on the Company's ability to use any
such tax benefits to offset taxes on tax returns in future years.
During 2005, the Company disposed of 14 company-owned restaurant
properties and held an additional 11 properties that were for sale as
of January 1, 2006. It was determined that the operating results of
these 25 restaurants and the net gain on disposals should be reported
separately as discontinued operations, with prior year results for
these restaurants similarly re-classified. The operating results of
these 25 restaurants were included in the restaurant business segment
in previously issued financial reports. The discontinued operations
loss was $0.2 million in the 2005 fourth quarter and $0.3 million in
the 2004 fourth quarter.
The net loss for the three months ended January 1, 2006 was $30.2
million, or $3.82 per share, compared to a net loss of $0.2 million,
or $.03 per share, reported for the three months ended January 2,
2005. As previously discussed, the fourth quarter 2005 net loss
included $22.2 million, or $2.80 per share, in additional non-cash tax
expense related to an increase in the deferred tax valuation
allowance. Fourth quarter 2004 results included an additional pension
settlement expense of $2.2 million pre-tax ($1.3 million after-tax or
$0.17 per share).
Full Year Results
For the full year ended January 1, 2006 total company revenues
were $531.3 million as compared to total revenues of $557.6 million
for the year ended January 2, 2005. Fiscal 2005 included 52 weeks of
operations compared to 53 weeks in the prior year. The estimated
impact of the additional week contributed approximately $10.7 million
in total revenues in fiscal 2004.
Restaurant revenues were $400.8 million in the year ended January
1, 2006, a decrease of $30.9 million, or 7.2%, as compared to
restaurant revenues of $431.8 million for the year ended January 2,
2005. Restaurant revenues declined by $9.0 million due to the
additional week in fiscal 2004 and by $20.3 million due to the
re-franchising of 42 company-operated restaurants over the last
twenty-four months. Comparable restaurant sales decreased 1.2% for
company-operated restaurants and increased 0.4% for franchised
restaurants for the twelve months ended January 1, 2006 compared to
the twelve months ended January 2, 2005. While the Company believes
that restaurant revenues were negatively affected by the post
hurricane Katrina economy, comparable restaurant sales 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.
Foodservice revenues were $116.1 million in the year ended January
1, 2006, an increase of $3.5 million, or 3.0%, as compared to
foodservice revenues of $112.6 million for the year ended January 2,
2005. Franchise revenues were $14.5 million in the year ended January
1, 2006, an increase of $1.3 million, or 9.5%, as compared to
franchise revenues of $13.2 million for the year ended January 2.
For the full year, discontinued operations income was $0.3 million
in 2005 and discontinued operations loss was $0.6 million in 2004.
The net loss for the year ended January 1, 2006 was $27.3 million,
or $3.49 per share, compared to a net loss of $3.4 million, or $0.45
per share, reported for the year ended January 2, 2005. The net loss
for fiscal 2005 included $22.2 million, or $2.84 per share, in
additional non-cash tax valuation allowance. Results for fiscal 2004
included an additional pension settlement expense of $2.2 million
pretax ($1.3 million after-tax or $0.17 per share). Also, included in
the 2004 results were $8.2 million in expenses ($4.8 million after-tax
or $0.64 per share) for debt retirement and restructuring costs, which
were partially offset by a gain on litigation settlement.
Performance Highlights
In the fourth quarter of 2005, Friendly's continued to pursue its
key strategic objectives to 1) enhance the dining experience, 2)
expand through franchising and re-franchising and 3) grow higher
margin revenues. Key business highlights for the quarter include:
-- Ongoing improvements to the Friendly's dining experience based
on feedback from the new Internet-based guest feedback system.
-- The opening of one new company-operated restaurant and four
new franchised restaurants.
-- The re-franchising of five company-operated restaurants, which
resulted in a gain on franchise sales of restaurant operations
and properties of $137 thousand.
-- Continued growth in the number of supermarket chains that
carry Friendly's decorated cakes, which are now being sold in
approximately 650 supermarkets.
Business Segment Results
In the fourth quarter of 2005, pre-tax income in the restaurant
segment was $1.1 million, or 1.2% of restaurant revenues, compared to
$5.4 million, or 5.1% of restaurant revenues, in the fourth quarter of
2004. The decrease in pre-tax income was mainly the result of a 1.3%
decrease in comparable company-operated restaurant sales, the
additional week in the 2004 fourth quarter, the re-franchising of 24
restaurants over the past fifteen months along with increased expenses
for pension, other fringe benefits, maintenance and utilities.
Partially offsetting these increases were reduced labor and benefit
costs due to the restructuring of the restaurant management team,
favorable commodity costs, and lower expenses for outside guest
evaluation services and relocation.
Pre-tax income in the Company's foodservice segment was $0.1
million in the fourth quarter of 2005 compared to $2.4 million in the
fourth quarter of 2004. The decrease in pre-tax income was mainly due
to increased discounting and sales allowances in the retail
supermarket business and the additional week in the 2004 fourth
quarter. Partially offsetting these increased expenses were lower
commodity costs. Case volume in the Company's retail supermarket
business decreased 1.0% for the fourth quarter of 2005 when compared
to the fourth quarter of 2004 mainly due to the additional operating
week in 2004.
Pre-tax income in the franchise segment was $2.4 million in the
fourth quarter of 2005 and $2.4 million in the fourth quarter of 2004.
Pre-tax income was unchanged as the royalty revenue associated with
the 53rd week in 2004 was offset by the additional royalty revenue
from the opening of seven new franchised restaurants and the
re-franchising of 24 restaurants over the past fifteen months and
increased rental income from leased and sub-leased franchised
locations.
Corporate expenses of $11.6 million in the fourth quarter of 2005
decreased by $610 thousand as compared to the fourth quarter of 2004
primarily due to lower interest expense. Increased pension costs,
legal expenses and other professional fees in 2005 were mostly offset
by the additional expenses incurred in the 53rd week of 2004.
Revolving Credit Facility
On March 15, 2006, the Company amended and restated its $35
million revolving credit facility as of December 30, 2005 to, among
other things, revise certain financial covenants (including leverage,
interest coverage, minimum EBITDA and the deletion of the tangible net
worth covenant) and permit certain transactions to be excluded from
the annual capital expenditures limit. As a result of the amendments,
the Company was in compliance with the covenants in the Credit
Facility as of January 1, 2006. In connection with the amendments to
the Facility, Bank of America and certain other lenders assigned their
interest in the Credit Facility to Wells Fargo Foothill. Subsequently,
Wells Fargo Foothill has assigned a portion of their interest in the
facility to TD Banknorth.
Investor Conference Call
An investor conference call to review 2005 fourth quarter and year
end results will be held on Monday, March 20, 2006 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 friendlys.com, or go to
streetevents.com. An online replay will be available approximately one
hour after the conclusion of the call.
About Friendly's
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 525 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 (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 the ability of the Company to utilize
its deferred tax asset in future years, expected number of re-imaging
projects and new company-operated and franchised restaurant openings
during 2005 and early 2006, and the anticipated impact of the
Company's key strategic objectives. 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 continue to develop and implement its franchising program,
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, unforeseen costs and expenses associated with
litigation, 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.
Friendly Ice Cream Corporation
------------------------------
Consolidated Statements of Operations
-------------------------------------
(In thousands, except per share and unit data)
Quarter Ended Year Ended
------------------- -------------------
Jan 1, Jan 2, Jan 1, Jan 2,
2006 2005 2006 2005
---------------------------------------
14 weeks 53 weeks
--------- ---------
Restaurant Revenues $ 91,643 $105,807 $400,821 $431,763
Foodservice Revenues 28,232 30,364 116,072 112,637
Franchise Revenues 3,575 3,377 14,454 13,199
-------- -------- -------- --------
REVENUES 123,450 139,548 531,347 557,599
COSTS AND EXPENSES:
Cost of sales 50,321 55,282 205,332 210,477
Labor and benefits 33,153 38,900 143,973 158,133
Operating expenses 26,398 25,222 105,809 104,681
General and administrative
expenses 10,507 10,501 38,746 40,006
Restructuring expenses - - - 2,627
Gain on litigation
settlement - - - (3,644)
Pension settlement expense - 2,204 - 2,204
Write-downs of property and
equipment 2,189 - 2,478 91
Depreciation and
amortization 5,997 6,140 23,435 22,592
Gain on franchise sales of
restaurant operations and
properties (137) (200) (2,658) (1,302)
Loss (gain) on disposals of
other property and
equipment, net 507 (448) 1,030 213
-------- -------- -------- --------
OPERATING (LOSS) INCOME (5,485) 1,947 13,202 21,521
OTHER EXPENSES:
Interest expense, net 5,196 5,627 20,924 22,295
Other (income) expense,
principally debt retirement
costs (113) - (130) 9,235
-------- -------- -------- --------
LOSS BEFORE (PROVISION FOR)
BENEFIT FROM INCOME TAXES (10,568) (3,680) (7,592) (10,009)
(Provision for) benefit from
income taxes (19,477) 3,752 (20,002) 7,145
-------- -------- -------- --------
(LOSS) INCOME FROM CONTINUING
OPERATIONS (30,045) 72 (27,594) (2,864)
(Loss) income from discontinued
operations (152) (304) 335 (553)
-------- -------- -------- --------
NET LOSS $(30,197) $ (232) $(27,259) $ (3,417)
======== ======== ======== ========
BASIC NET LOSS PER SHARE:
(Loss) income from continuing
operations $ (3.80) $ 0.01 $ (3.53) $ (0.38)
(Loss) income from
discontinued operations (0.02) (0.04) 0.04 (0.07)
-------- -------- -------- --------
Net loss $ (3.82) $ (0.03) $ (3.49) $ (0.45)
======== ======== ======== ========
DILUTED NET LOSS PER SHARE:
(Loss) income from continuing
operations $ (3.80) $ 0.01 $ (3.53) $ (0.38)
(Loss) income from
discontinued operations (0.02) (0.04) 0.04 (0.07)
-------- -------- -------- --------
Net loss $ (3.82) $ (0.03) $ (3.49) $ (0.45)
======== ======== ======== ========
WEIGHTED AVERAGE SHARES:
Basic 7,899 7,709 7,802 7,637
======== ======== ======== ========
Diluted 7,899 7,709 7,802 7,637
======== ======== ======== ========
NUMBER OF COMPANY UNITS:
Beginning of period 330 358 347 380
Openings 1 - 2 4
Refranchised closings (5) (9) (15) (27)
Closings (12) (2) (20) (10)
-------- -------- -------- --------
End of period 314 347 314 347
======== ======== ======== ========
NUMBER OF FRANCHISED UNITS:
Beginning of period 205 186 195 163
Refranchised openings 5 9 15 27
Openings 4 1 6 8
Closings (1) (1) (3) (3)
-------- -------- -------- --------
End of period 213 195 213 195
======== ======== ======== ========
Friendly Ice Cream Corporation
------------------------------
Consolidated Statements of Operations
-------------------------------------
Percentage of Total Revenues
----------------------------
Quarter Ended Year Ended
--------------- ---------------
Jan 1, Jan 2, Jan 1, Jan 2,
2006 2005 2006 2005
------- ------- ------- -------
14 53
weeks weeks
------- -------
Restaurant Revenues 74.2 % 75.8 % 75.4 % 77.4 %
Foodservice Revenues 22.9 % 21.8 % 21.9 % 20.2 %
Franchise Revenues 2.9 % 2.4 % 2.7 % 2.4 %
------- ------- ------- -------
REVENUES 100.0 % 100.0 % 100.0 % 100.0 %
COSTS AND EXPENSES:
Cost of sales 40.8 % 39.6 % 38.6 % 37.7 %
Labor and benefits 26.8 % 27.8 % 27.1 % 28.3 %
Operating expenses 21.4 % 18.1 % 19.9 % 18.8 %
General and administrative expenses 8.5 % 7.5 % 7.3 % 7.2 %
Restructuring expenses - - - 0.5 %
Gain on litigation settlement - - - (0.7)%
Pension settlement expense - 1.6 % - 0.4 %
Write-downs of property and
equipment 1.8 % - 0.5 % -
Depreciation and amortization 4.9 % 4.4 % 4.4 % 4.1 %
Gain on franchise sales of
restaurant operations and
properties (0.1)% (0.1)% (0.5)% (0.2)%
Loss (gain) on disposals of other
property and equipment, net 0.4 % (0.3)% 0.2 % -
------- ------- ------- -------
OPERATING (LOSS) INCOME (4.5)% 1.4 % 2.5 % 3.9 %
OTHER EXPENSES:
Interest expense, net 4.2 % 4.0 % 3.9 % 4.0 %
Other (income) expense, principally
debt retirement costs (0.1)% - - 1.7 %
------- ------- ------- -------
LOSS BEFORE (PROVISION FOR) BENEFIT
FROM INCOME TAXES (8.6)% (2.6)% (1.4)% (1.8)%
(Provision for) benefit from income
taxes (15.8)% 2.7 % (3.8)% 1.3 %
------- ------- ------- -------
(LOSS) INCOME FROM CONTINUING
OPERATIONS (24.4)% 0.1 % (5.2)% (0.5)%
(Loss) income from discontinued
operations (0.1)% (0.3)% 0.1 % (0.1)%
------- ------- ------- -------
NET LOSS (24.5)% (0.2)% (5.1)% (0.6)%
======= ======= ======= =======
Friendly Ice Cream Corporation
------------------------------
Condensed Consolidated Balance Sheets
-------------------------------------
(In thousands)
January 1, January 2,
2006 2005
--------- ---------
Assets
------
Current Assets:
Cash and cash equivalents $ 14,597 $ 13,405
Other current assets 37,451 44,511
--------- ---------
Total Current Assets 52,048 57,916
Deferred Income Taxes - 10,619
Property and Equipment, net 141,121 152,840
Intangibles and Other Assets, net 25,073 27,509
--------- ---------
$ 218,242 $ 248,884
========= =========
Liabilities and Stockholders' Deficit
-------------------------------------
Current Liabilities:
Current maturities of debt, capital lease and
finance obligations $ 2,845 $ 6,757
Other current liabilities 63,444 61,290
--------- ---------
Total Current Liabilities 66,289 68,047
Capital Lease and Finance Obligations 6,173 7,380
Long-Term Debt 224,894 225,752
Other Long-Term Liabilities 62,724 52,731
Stockholders' Deficit (141,838) (105,026)
--------- ---------
$ 218,242 $ 248,884
========= =========
Friendly Ice Cream Corporation
------------------------------
Selected Segment Reporting Information
--------------------------------------
(in thousands)
--------------
For the Three For the Year
Months Ended Ended
------------------- ---------------------
January January January January
1, 2, 1, 2,
2006 2005 2006 2005
-------- -------- --------- ---------
14 weeks 53 weeks
--------- ----------
Revenues before elimination of intersegment
revenues:
Restaurant $ 91,643 $105,807 $ 400,821 $ 431,763
Foodservice 56,139 63,120 238,099 245,484
Franchise 3,575 3,377 14,454 13,199
-------- -------- --------- ---------
Total $151,357 $172,304 $ 653,374 $ 690,446
======== ======== ========= =========
Intersegment revenues:
Foodservice $(27,907) $(32,756) $(122,027) $(132,847)
======== ======== ========= =========
Revenues:
Restaurant $ 91,643 $105,807 $ 400,821 $ 431,763
Foodservice 28,232 30,364 116,072 112,637
Franchise 3,575 3,377 14,454 13,199
-------- -------- --------- ---------
Total $123,450 $139,548 $ 531,347 $ 557,599
======== ======== ========= =========
EBITDA (1):
Restaurant (2) $ 5,398 $ 9,728 $ 35,034 $ 42,105
Foodservice (2) 838 3,257 11,563 12,983
Franchise (2) 2,425 2,475 10,274 9,384
Corporate (2) (5,581) (5,762) (19,366) (19,973)
(Loss) gain on property
and equipment, net (379) 593 1,610 892
Restructuring expenses - - (2,627)
Gain on litigation
settlement - - - 3,644
Net periodic pension
expense (benefit)
included in reporting
segments 71 (529) 286 (2,116)
-------- -------- --------- ---------
Total $ 2,772 $ 9,762 $ 39,401 $ 44,292
======== ======== ========= =========
Interest expense, net $ 5,196 $ 5,627 $ 20,924 $ 22,295
======== ======== ========= =========
Other (income) expense,
principally debt retirement
costs $ (113) $ - $ (130) $ 9,235
======== ======== ========= =========
Depreciation and
amortization:
Restaurant $ 4,326 $ 4,339 $ 16,845 $ 15,636
Foodservice 789 873 3,216 3,376
Franchise 55 103 172 286
Corporate 827 825 3,202 3,294
-------- -------- --------- ---------
Total $ 5,997 $ 6,140 $ 23,435 $ 22,592
======== ======== ========= =========
Other non-cash expense
(income):
Write-downs of property
and equipment $ 2,189 $ - $ 2,478 $ 91
Pension settlement
expense - 2,204 - 2,204
Net periodic pension
expense (benefit) 71 (529) 286 (2,116)
-------- -------- --------- ---------
Total $ 2,260 $ 1,675 $ 2,764 $ 179
======== ======== ========= =========
Income (loss) before income taxes (2):
Restaurant $ 1,072 $ 5,389 $ 18,189 $ 26,469
Foodservice 49 2,384 8,347 9,607
Franchise 2,370 2,372 10,102 9,098
Corporate (11,604) (12,214) (43,492) (45,562)
-------- -------- --------- ---------
(8,113) (2,069) (6,854) (388)
(Loss) gain on property
and equipment, net (2,568) 593 (868) 801
Restructuring expenses - - - (2,627)
Gain on litigation
settlement - - - 3,644
Pension settlement
expense - (2,204) - (2,204)
Other income (expense),
principally debt
retirement costs 113 - 130 (9,235)
-------- -------- --------- ---------
Total $(10,568) $ (3,680) $ (7,592) $ (10,009)
======== ======== ========= =========
(1) EBITDA represents net income (loss) before (i) provision for
(benefit from) income taxes, (ii) other (income) expense,
principally debt retirement costs, (iii) interest expense, net,
(iv) depreciation and amortization, (v) write-downs of property
and equipment, (vi) net periodic pension expense (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
Investment Contact:
Deborah Burns, 413-731-4124
or
Media Contact:
Maura Tobias, 413-731-4238