Exhibit 99.1
Friendly Ice Cream Corporation Reports Third Quarter 2006 Results
WILBRAHAM, Mass.--(BUSINESS WIRE)--Nov. 8, 2006--Friendly Ice
Cream Corporation (AMEX: FRN) today reported financial results for the
third quarter and nine months ended October 1, 2006. Financial and
performance highlights include:
-- Net income in the third quarter was $2.0 million, or $0.24 per
share, compared to net income of $3.4 million, or $0.43 per
share, reported for the prior year. Income from continuing
operations was $2.0 million, or $0.24 per share, compared to
$2.4 million, or $0.30 per share, reported for the prior year.
Total revenues were $141.9 million, an increase of $0.8
million as compared to total revenues of $141.1 million for
the prior year. Comparable restaurant sales increased 1.7% for
company-operated restaurants and decreased 1.7% for franchised
restaurants.
-- Year-to-date, net income was $4.8 million, or $0.60 per share,
compared to $2.9 million, or $0.37 per share, reported for the
prior year. Income from continuing operations was $1.6
million, or $0.19 per share, compared to $2.5 million, or
$0.31 per share, reported for the prior year. Total revenues
were $409.1 million, an increase of $1.2 million as compared
to total revenues of $407.9 million for the prior year.
Comparable restaurant sales increased 1.4% for
company-operated restaurants and decreased 1.7% for franchised
restaurants.
-- One new franchise restaurant was opened during the third
quarter of 2006.
-- In the third quarter, two company-operated restaurants were
re-franchised, resulting in a gain on franchise sales of
restaurant operations and properties of $80 thousand.
-- Thirty-six company-operated restaurants were remodeled during
the third quarter.
-- A development agreement was reached with a new franchisee for
twelve Friendly's restaurants in the Raleigh-Durham, NC
market. This is a new market for Friendly's and the first
restaurant is scheduled to open in 2007.
Donald Smith, Chairman of the Board, said, "We are pleased that
restaurant comparable sales for company-operated restaurants appear to
have stabilized during the quarter. However, we need to do more to
successfully leverage the Friendly's brand and improve our operating
performance. I am convinced that the opportunity still exists to
further capitalize on our great brand by introducing exciting ice
cream and food products that improve the overall value and
affordability to families who buy our products and enjoy the
Friendly's restaurant experience."
Smith continued, "Friendly's senior management is conducting a
thorough review of every significant aspect of the Company and its
operations to identify initiatives that will take advantage of our
unique niche in the marketplace and at the same time improve our
financial performance. Our near-term priority is to stabilize and
improve profits in our company-operated restaurants. Additionally, we
intend to accelerate our franchising efforts by developing a new-store
prototype that results in acceptable returns to our franchisees. In
the long-term, we are focused and committed to positioning Friendly's
for operating success and increased shareholder value."
Third Quarter Results
The review of third quarter results includes references to
Adjusted EBITDA for each of the Company's business segments which are
non-GAAP financial measures. Please see the note below for an
explanation of the use of non-GAAP financial measures and the
supplemental disclosure attached to this press release for a
reconciliation of these measures to the most directly comparable GAAP
financial measure.
Restaurant revenues were $104.8 million in the third quarter of
2006, a decrease of $1.8 million, as compared to restaurant revenues
of $106.6 million for the prior year third quarter. Comparable
restaurant sales increased 1.7% which was more than offset by a $3.0
million decline in restaurant revenue from the re-franchising of 11
company-operated restaurants over the past 15 months. Adjusted
restaurant EBITDA was $10.8 million, or 10.3% of restaurant revenues,
in the third quarter of 2006 compared to $10.2 million, or 9.4% of
restaurant revenues, in the prior year. Cost of sales, as a percentage
of restaurant revenues, improved by 1.1% as compared to the prior year
due to increased menu prices, product re-formulations and flat
commodity costs. Labor and benefits, as a percentage of restaurant
revenues, decreased by 0.7% as a result of menu price increases and a
reduction in group insurance claims which offset higher crew level
wages and increased general manager bonus expense. Operating expenses
of $27.3 million were the same in both years. Also, general and
administrative expenses were unfavorable versus the prior year due to
increased field management costs.
In the third quarter of 2006, Foodservice revenues were $32.9
million, an increase of $2.1 million, as compared to $30.8 million for
the third quarter of 2005. Franchise restaurant product revenues
increased by $1.2 million due to increased revenue from additional
franchise restaurants that was in part offset by a decline in
franchise comparable sales. Sales to retail supermarket customers
increased by $0.9 million. An increase in retail supermarket case
volume of 14.4% was partially offset by increased trade spending and
sales allowances. Adjusted foodservice EBITDA increased by $1.0
million from the prior year to $5.3 million due to the increase in
sales and lower cream prices.
Franchise revenues were $4.2 million in the third quarter of 2006
as compared to $3.8 million in the prior year. The $0.4 million
increase in revenue was primarily due to an increase in initial
franchise fees and rental income from leased and sub-leased franchise
locations. Increased franchise royalties from the opening of six new
franchised restaurants and the re-franchising of 11 restaurants over
the past fifteen months were offset by the closing of five
under-performing restaurants and a 1.7% decline in comparable
franchise sales. Adjusted franchise EBITDA was $3.0 million as
compared to $2.7 million in the prior year.
Corporate expenses of $5.0 million in the third quarter of 2006
increased by $1.3 million as compared to the prior year primarily due
to increases in bonus and severance costs. These expenses were
partially offset by reduced legal fees and other professional
services.
As a result of the Company's intent to continue recording a full
valuation allowance on tax benefits until an appropriate level of
profitability can be sustained, the provision for income taxes was
based on an estimate of current taxes payable through the third
quarter of 2006. Accordingly, the income tax provision was $0.7
million for the three months ended October 1, 2006 as compared to $0.1
million for the three months ended October 2, 2005.
References to Non-GAAP Financial Measures
This press release includes references to the non-GAAP financial
measure "adjusted EBITDA." The Company defines "adjusted EBITDA" for a
given period as net income(loss) before (i) (provision for) benefit
from income taxes, (ii) interest expense, net, (iii) depreciation and
amortization, (iv) write-downs of property and equipment, (v) net
periodic pension cost and (vi) other non-cash items. The Company has
included information concerning adjusted EBITDA for the Company and
each of its business segments in this release 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. Adjusted EBITDA should not be considered as an alternative to,
or more meaningful than, earnings (loss) from continuing operations
before provision for income taxes or other traditional indications of
a company's operating performance.
Investor Conference Call
An investor conference call to review 2006 third quarter results
will be held on Thursday, November 9, 2006 at 10:00 A.M. Eastern Time.
The conference call will be broadcast live over the Internet and will
be hosted by Donald Smith, Chairman of the Board. 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 520 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 71-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 the anticipated impact of the Company's
key strategic objectives and initiatives. 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, and the Company's
ability to find a suitable replacement chief executive officer. 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)
(unaudited)
Quarter Ended Nine Months Ended
------------------- -------------------
Oct 1, Oct 2, Oct 1, Oct 2,
2006 2005 2006 2005
--------- --------- --------- ---------
Restaurant Revenues $104,840 $106,602 $305,387 $309,178
Foodservice Revenues 32,850 30,786 91,881 87,840
Franchise Revenues 4,194 3,753 11,821 10,879
--------- --------- --------- ---------
REVENUES 141,884 141,141 409,089 407,897
COSTS AND EXPENSES:
Cost of sales 53,221 53,537 153,545 155,011
Labor and benefits 35,972 37,260 108,927 110,820
Operating expenses 28,535 28,522 79,350 79,411
General and administrative
expenses 10,374 8,262 32,920 28,239
Write-downs of property and
equipment 307 - 522 289
Depreciation and
amortization 5,636 5,655 17,156 17,438
(Gain) loss on franchise
sales of restaurant
operations and properties (80) 7 (2,091) (2,521)
Loss on disposals of other
property and equipment, net 534 181 1,009 523
--------- --------- --------- ---------
OPERATING INCOME 7,385 7,717 17,751 18,687
Interest expense, net 5,061 5,196 15,628 15,711
Other income (329) - (329) -
--------- --------- --------- ---------
INCOME FROM CONTINUING
OPERATIONS BEFORE PROVISION
FOR INCOME TAXES 2,653 2,521 2,452 2,976
Provision for income taxes (650) (101) (900) (525)
--------- --------- --------- ---------
INCOME FROM CONTINUING
OPERATIONS 2,003 2,420 1,552 2,451
(Loss) income from
discontinued operations, net
of income tax effect (32) 987 3,258 487
--------- --------- --------- ---------
NET INCOME $1,971 $3,407 $4,810 $2,938
========= ========= ========= =========
BASIC NET INCOME PER SHARE:
Income from continuing
operations $0.24 $0.31 $0.20 $0.32
Income from discontinued
operations - 0.12 0.41 0.06
--------- --------- --------- ---------
Net income $0.24 $0.43 $0.61 $0.38
========= ========= ========= =========
DILUTED NET INCOME PER SHARE:
Income from continuing
operations $0.24 $0.30 $0.19 $0.31
Income from discontinued
operations - 0.13 0.41 0.06
--------- --------- --------- ---------
Net income $0.24 $0.43 $0.60 $0.37
========= ========= ========= =========
WEIGHTED AVERAGE SHARES:
Basic 7,925 7,840 7,913 7,770
========= ========= ========= =========
Diluted 8,044 7,988 8,045 7,909
========= ========= ========= =========
NUMBER OF COMPANY UNITS:
Beginning of period 309 332 314 347
Openings - - 2 1
Refranchised closings (2) - (6) (10)
Closings - (2) (3) (8)
--------- --------- --------- ---------
End of period 307 330 307 330
========= ========= ========= =========
NUMBER OF FRANCHISED UNITS:
Beginning of period 217 205 213 195
Refranchised openings 2 - 6 10
Openings 1 - 2 2
Closings (3) - (4) (2)
--------- --------- --------- ---------
End of period 217 205 217 205
========= ========= ========= =========
Friendly Ice Cream Corporation
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Consolidated Statements of Operations
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Percentage of Total Revenues
- ----------------------------------------------------------------------
(unaudited)
Quarter Ended Nine Months Ended
--------------- -----------------
Oct 1, Oct 2, Oct 1, Oct 2,
2006 2005 2006 2005
------- ------- --------- -------
Restaurant Revenues 73.9 % 75.5 % 74.7 % 75.8 %
Foodservice Revenues 23.1 % 21.8 % 22.4 % 21.5 %
Franchise Revenues 3.0 % 2.7 % 2.9 % 2.7 %
------- ------- --------- -------
REVENUES 100.0 % 100.0 % 100.0 % 100.0 %
COSTS AND EXPENSES:
Cost of sales 37.5 % 37.9 % 37.5 % 38.0 %
Labor and benefits 25.4 % 26.4 % 26.6 % 27.2 %
Operating expenses 20.1 % 20.2 % 19.4 % 19.5 %
General and administrative
expenses 7.3 % 5.9 % 8.0 % 6.9 %
Write-downs of property and
equipment 0.2 % - 0.1 % -
Depreciation and amortization 4.0 % 4.0 % 4.2 % 4.3 %
(Gain) loss on franchise sales of
restaurant operations and
properties (0.1)% - (0.4)% (0.6)%
Loss on disposals of other property
and equipment, net 0.4 % 0.1 % 0.3 % 0.1 %
------- ------- --------- -------
OPERATING INCOME 5.2 % 5.5 % 4.3 % 4.6 %
Interest expense, net 3.6 % 3.7 % 3.8 % 3.9 %
Other income (0.2)% - (0.1)% -
------- ------- --------- -------
INCOME FROM CONTINUING
OPERATIONS BEFORE PROVISION FOR
INCOME TAXES 1.8 % 1.8 % 0.6 % 0.7 %
Provision for income taxes (0.4)% (0.1)% (0.2)% (0.1)%
------- ------- --------- -------
INCOME FROM CONTINUING
OPERATIONS 1.4 % 1.7 % 0.4 % 0.6 %
(Loss) income from discontinued
operations, net of income tax
effect - 0.7 % 0.8 % 0.1 %
------- ------- --------- -------
NET INCOME 1.4 % 2.4 % 1.2 % 0.7 %
======= ======= ========= =======
Friendly Ice Cream Corporation
- ----------------------------------------------------------------------
Condensed Consolidated Balance Sheets
- ----------------------------------------------------------------------
(In thousands)
(unaudited)
October 1, January 1,
2006 2006
---------- -----------
Assets
---------------------------------------------------------------------
Current Assets:
Cash and cash equivalents $28,030 $14,597
Other current assets 38,116 35,282
---------- -----------
Total Current Assets 66,146 49,879
Property and Equipment, net 136,974 143,290
Intangibles and Other Assets, net 20,103 25,073
---------- -----------
$223,223 $218,242
========== ===========
Liabilities and Stockholders' Deficit
---------------------------------------------------------------------
Current Liabilities:
Current maturities of debt, capital
lease and finance obligations $3,044 $2,845
Other current liabilities 67,714 63,444
---------- -----------
Total Current Liabilities 70,758 66,289
Capital Lease and Finance Obligations 5,052 6,173
Long-Term Debt 223,700 224,894
Other Long-Term Liabilities 60,311 62,724
Stockholders' Deficit (136,598) (141,838)
---------- -----------
$223,223 $218,242
========== ===========
Friendly Ice Cream Corporation
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Selected Segment Reporting Information
- ----------------------------------------------------------------------
(in thousands)
- ----------------------------------------------------------------------
For the Three Months For the Nine Months
Ended Ended
-----------------------------------------
October 1,October 2, October 1,October 2,
2006 2005 2006 2005
-------------------- --------------------
Revenues before elimination
of intersegment revenues:
Restaurant $104,840 $106,602 $305,387 $309,178
Foodservice 63,277 62,576 181,126 181,960
Franchise 4,194 3,753 11,821 10,879
-------------------- --------------------
Total $172,311 $172,931 $498,334 $502,017
==================== ====================
Intersegment revenues:
Foodservice $(30,427) $(31,790) $(89,245) $(94,120)
==================== ====================
Revenues:
Restaurant $104,840 $106,602 $305,387 $309,178
Foodservice 32,850 30,786 91,881 87,840
Franchise 4,194 3,753 11,821 10,879
-------------------- --------------------
Total $141,884 $141,141 $409,089 $407,897
==================== ====================
Adjusted EBITDA (1):
Restaurant (2) $10,793 $10,150 $29,557 $29,809
Foodservice (2) 5,344 4,344 13,529 10,725
Franchise (2) 2,960 2,736 8,267 7,848
Corporate (2) (4,986) (3,678) (16,678) (13,957)
(Loss) gain on property and
equipment, net (454) (180) 1,083 1,989
Less pension cost included
in reporting segments 388 72 1,166 215
-------------------- --------------------
Total $14,045 $13,444 $36,924 $36,629
==================== ====================
Interest expense, net $5,061 $5,196 $15,628 $15,711
==================== ====================
Depreciation and
amortization:
Restaurant $3,938 $4,058 $12,102 $12,519
Foodservice 705 800 2,161 2,427
Franchise 82 37 220 117
Corporate 911 760 2,673 2,375
-------------------- --------------------
Total $5,636 $5,655 $17,156 $17,438
==================== ====================
Other non-cash expense:
Net periodic pension cost $388 $72 $1,166 $215
Write-downs of property and
equipment 307 - 522 289
-------------------- --------------------
Total $695 $72 $1,688 $504
==================== ====================
Income (loss) before
provision for income taxes:
Restaurant $6,855 $6,092 $17,455 $17,290
Foodservice 4,639 3,544 11,368 8,298
Franchise 2,878 2,699 8,047 7,731
Corporate (10,958) (9,634) (34,979) (32,043)
-------------------- --------------------
3,414 2,701 1,891 1,276
(Loss) gain on property and
equipment, net (761) (180) 561 1,700
-------------------- --------------------
Total $2,653 $2,521 $2,452 $2,976
==================== ====================
(1) Adjusted EBITDA represents net income (loss) before (i) (provision
for) benefit from income taxes, (ii) interest expense, net, (iii)
depreciation and amortization, (iv) write-downs of property and
equipment, (v) net periodic pension cost 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