Exhibit 99.1
Friendly Ice Cream Corporation Reports Strong Fourth Quarter and Full-Year 2006
Results
Positive Comparable Sales and Margin Improvement Drive Earnings
per Share of 61 Cents in 2006
WILBRAHAM, Mass.--(BUSINESS WIRE)--March 7, 2007--Friendly Ice
Cream Corporation (AMEX: FRN) today reported financial results for the
fourth quarter and year ended December 31, 2006. Financial and
performance highlights include:
-- Net income in the fourth quarter of 2006 was $0.1 million, or
$0.02 per share, compared to a net loss of $30.2 million, or
$3.82 per share, reported for the fourth quarter of 2005. The
net loss in the fourth quarter of 2005 included $22.2 million,
or $2.84 per share, in additional non-cash tax valuation
allowance. Total revenues were $122.4 million compared to
total revenues of $123.5 million for the prior year.
Comparable restaurant sales increased 1.8% for
company-operated restaurants and 0.5% for franchised
restaurants.
-- For the full-year, net income was $4.9 million in 2006, or
$0.61 per share, compared to a net loss of $27.3 million, or
$3.49 per share, reported for the prior year. The net loss in
fiscal 2005 included $22.2 million, or $2.84 per share, in
additional non-cash tax valuation allowance. Total revenues
were $531.5 million compared to total revenues of $531.3
million for the prior year. Comparable restaurant sales for
2006 increased 1.4% for company-operated restaurants and
decreased 0.9% for franchised restaurants.
-- Adjusted EBITDA was $10.2 million in the fourth quarter of
2006, an increase of $7.4 million, as compared to adjusted
EBITDA of $2.8 million in the fourth quarter of 2005. For the
year, adjusted EBITDA was $47.1 million as compared to
adjusted EBITDA of $39.4 million reported for fiscal 2005. An
explanation of the use of non-GAAP financial measures is
explained in the note below and in the supplemental disclosure
attached to this press release.
-- Two new franchise restaurants were opened during the fourth
quarter of 2006.
-- In the fourth quarter of 2006, two existing franchisees
exercised their purchase options on seven restaurants,
resulting in a gain on franchise sales of restaurant
operations and properties of $1.6 million.
-- Eight company-operated restaurants were remodeled during the
fourth quarter.
George Condos, President and CEO, said, "We are pleased with our
results and the positive momentum established this quarter. Since my
appointment as President and CEO in January 2007, I have had a
first-hand opportunity to review and observe many improvements and
initiatives being undertaken by the Company. I believe there are
opportunities to improve our performance, increase our bottom line and
build long-term shareholder value. We will continue to leverage the
value of the Friendly's brand by improving the quality of our menu and
overall guest experience and by creating a more contemporary
environment within our restaurants."
Fourth Quarter Results
Restaurant revenues were $90.6 million in the fourth quarter of
2006, a decrease of $1.0 million, as compared to restaurant revenues
of $91.6 million for the prior year fourth quarter. Comparable
restaurant sales increased 1.8%, or $1.2 million. Increases in
comparable sales occurred in all dayparts, with the largest growth
occurring during the dinner and afternoon snack periods. These
increases were offset by a $2.4 million decline in restaurant revenue
from 11 company-operated restaurants that were acquired by franchisees
over the past 15 months.
Adjusted restaurant EBITDA was $7.9 million, or 8.7% of restaurant
revenues, in the fourth quarter of 2006 compared to $5.5 million, or
6.0% of restaurant revenues, in the prior year. Cost of sales, as a
percentage of restaurant revenues, improved by 0.7% as compared to the
prior year due to increased menu prices and product re-formulations,
as overall commodity prices were slightly unfavorable. Labor and
benefits, as a percentage of restaurant revenues, decreased by 0.6% as
a result of menu price increases, improved labor productivity levels
and a reduction in health insurance costs. These reduced expenses
offset higher crew level wages, increased general manager bonus
expense and higher non-cash pension costs. Operating expenses of $23.3
million were $1.6 million lower than in the prior year fourth quarter
mainly due to favorable maintenance, utility and advertising costs.
In the fourth quarter of 2006, Foodservice revenues of $28.2
million were unchanged from the fourth quarter of 2005. Franchise
restaurant product revenues increased by $1.0 million due to a higher
average number of operating franchise restaurants during the quarter
and from the increase in franchise comparable sales of 0.5%. Sales to
retail supermarket customers decreased by $1.0 million primarily due
to a reduction in retail supermarket case volume of 14.6% which was
partially offset by favorable trade spending and sales allowances.
Adjusted Foodservice EBITDA increased by $1.8 million from the prior
year to $2.7 million due to lower cream prices and distribution costs,
mainly as a result of product handling and warehousing efficiencies.
In December 2006, Central Florida Restaurants LLC, the Company's
franchisee in the Orlando, FL market, defaulted under its leases and
franchise agreements and surrendered 11 restaurants to the Company and
closed one restaurant. The Company is operating the 11 restaurants
while undertaking a workout with Central Florida, its lender and other
creditors.
Franchise revenues of $3.6 million in the fourth quarter of 2006
were unchanged from the fourth quarter of 2005. Comparable franchise
sales increased by 0.5%. Franchise royalties were flat versus the
prior year as increased royalties from the opening of four new
franchised restaurants and the 11 restaurants acquired by franchisees
over the past 15 months were offset by the closing of five
under-performing restaurants and the 11 Orlando, FL restaurants
acquired from Central Florida. Franchise fees and other franchise
income were also unchanged versus the prior year mainly due to the
forfeitures and penalties related to the eleven restaurants acquired
from franchisees. Adjusted franchise EBITDA was $2.0 million as
compared to $2.4 million in the prior year.
Corporate expenses of $4.8 million in the fourth quarter of 2006
were favorable by $0.9 million as compared to the fourth quarter of
2005 primarily due to decreases in legal fees, salaries and other
professional services. These reduced expenses were partially offset by
increased bonus expense.
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 fourth quarter results
will be held on Wednesday, March 7, 2007 at 10:00 A.M. Eastern Time.
The conference call will be broadcast live over the Internet and will
be hosted by George Condos, President and CEO. 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 514 company and
franchised restaurants throughout the Northeast. The Company also
manufactures ice cream, which is distributed through more than 4,000
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, benefits and
results from the Company's objectives and key initiatives. All forward
looking statements are subject to risks and uncertainties which could
cause results to differ materially from those anticipated. These
factors include 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 other similar matters, 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
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Consolidated Statements of Operations
- ----------------------------------------------------------------------
(In thousands, except per share and unit data)
(unaudited)
Quarter Ended Year Ended
------------------- -------------------
Dec 31, Jan 1, Dec 31, Jan 1,
2006 2006 2006 2006
--------- ------------------- ---------
Restaurant Revenues $ 90,612 $ 91,643 $395,999 $400,821
Foodservice Revenues 28,174 28,232 120,055 116,072
Franchise Revenues 3,580 3,575 15,401 14,454
--------- --------- --------- ---------
REVENUES 122,366 123,450 531,455 531,347
COSTS AND EXPENSES:
Cost of sales 47,283 50,321 200,828 205,332
Labor and benefits 32,221 33,153 141,148 143,973
Operating expenses 24,680 26,398 104,030 105,809
General and administrative
expenses 10,364 10,507 43,284 38,746
Write-downs of property and
equipment 197 2,189 719 2,478
Depreciation and
amortization 5,757 5,997 22,913 23,435
Gain on franchise sales of
restaurant operations and
properties (1,836) (137) (3,927) (2,658)
(Gain) loss on disposals of
other property and equipment,
net (108) 507 901 1,030
--------- --------- --------- ---------
OPERATING INCOME (LOSS) 3,808 (5,485) 21,559 13,202
Interest expense, net 4,863 5,213 20,491 20,924
Other income (5) (130) (334) (130)
--------- --------- --------- ---------
(LOSS) INCOME FROM CONTINUING
OPERATIONS BEFORE BENEFIT
FROM (PROVISION FOR) INCOME
TAXES (1,050) (10,568) 1,402 (7,592)
Benefit from (provision for)
income taxes 983 (19,477) 83 (20,002)
--------- --------- --------- ---------
(LOSS) INCOME FROM CONTINUING
OPERATIONS (67) (30,045) 1,485 (27,594)
Income (loss) from
discontinued operations, net
of income tax effect 203 (152) 3,461 335
--------- --------- --------- ---------
NET INCOME (LOSS) $ 136 $(30,197) $ 4,946 $(27,259)
========= ========= ========= =========
BASIC NET (LOSS) INCOME PER
SHARE:
(Loss) income from
continuing operations $ (0.01) $ (3.80) $ 0.19 $ (3.53)
Income (loss) from
discontinued operations 0.03 (0.02) 0.44 0.04
--------- --------- --------- ---------
Net income (loss) $ 0.02 $ (3.82) $ 0.63 $ (3.49)
========= ========= ========= =========
DILUTED NET (LOSS) INCOME PER
SHARE:
(Loss) income from
continuing operations $ (0.01) $ (3.80) $ 0.18 $ (3.53)
Income (loss) from
discontinued operations 0.03 (0.02) 0.43 0.04
--------- --------- --------- ---------
Net income (loss) $ 0.02 $ (3.82) $ 0.61 $ (3.49)
========= ========= ========= =========
WEIGHTED AVERAGE SHARES:
Basic 8,019 7,899 7,939 7,802
========= ========= ========= =========
Diluted 8,160 7,899 8,084 7,802
========= ========= ========= =========
NUMBER OF COMPANY UNITS:
Beginning of period 307 330 314 347
Openings - 1 2 2
Restaurants Acquired by
Franchisees - (5) (6) (15)
Restaurants acquired from
Franchisees 11 - 11 -
Closings (2) (12) (5) (20)
--------- --------- --------- ---------
End of period 316 314 316 314
========= ========= ========= =========
NUMBER OF FRANCHISED UNITS:
Beginning of period 217 205 213 195
Restaurants Acquired by
Franchisees - 5 6 15
Restaurants acquired from
Franchisees (11) - (11) -
Openings 2 4 4 6
Closings (3) (1) (7) (3)
--------- --------- --------- ---------
End of period 205 213 205 213
========= ========= ========= =========
Friendly Ice Cream Corporation
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Consolidated Statements of Operations
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Percentage of Total Revenues
- ----------------------------------------------------------------------
(unaudited)
Quarter Ended Year Ended
--------------- ---------------
Dec 31, Jan 1, Dec 31, Jan 1,
2006 2006 2006 2006
------- ------- ------- -------
Restaurant Revenues 74.1 % 74.2 % 74.5 % 75.4 %
Foodservice Revenues 23.0 % 22.9 % 22.6 % 21.9 %
Franchise Revenues 2.9 % 2.9 % 2.9 % 2.7 %
------- ------- ------- -------
REVENUES 100.0 % 100.0 % 100.0 % 100.0 %
COSTS AND EXPENSES:
Cost of sales 38.6 % 40.8 % 37.8 % 38.6 %
Labor and benefits 26.3 % 26.8 % 26.5 % 27.1 %
Operating expenses 20.2 % 21.4 % 19.6 % 19.9 %
General and administrative expenses 8.5 % 8.5 % 8.1 % 7.3 %
Write-downs of property and
equipment 0.2 % 1.8 % 0.1 % 0.5 %
Depreciation and amortization 4.7 % 4.8 % 4.3 % 4.4 %
Gain on franchise sales of restaurant
operations and properties (1.5)% (0.1)% (0.7)% (0.5)%
(Gain) loss on disposals of other
property and equipment, net (0.1)% 0.4 % 0.2 % 0.2 %
------- ------- ------- -------
OPERATING INCOME (LOSS) 3.1 % (4.4)% 4.1 % 2.5 %
Interest expense, net 4.0 % 4.3 % 3.9 % 3.9 %
Other income - (0.1)% (0.1)% -
------- ------- ------- -------
(LOSS) INCOME FROM CONTINUING
OPERATIONS BEFORE BENEFIT FROM
(PROVISION FOR) INCOME TAXES (0.9)% (8.6)% 0.3 % (1.4)%
Benefit from (provision for) income
taxes 0.8 % (15.7)% - (3.8)%
------- ------- ------- -------
(LOSS) INCOME FROM CONTINUING
OPERATIONS (0.1)% (24.3)% 0.3 % (5.2)%
Income (loss) from discontinued
operations, net of income tax effect 0.2 % (0.1)% 0.6 % 0.1 %
------- ------- ------- -------
NET INCOME (LOSS) 0.1 % (24.4)% 0.9 % (5.1)%
======= ======= ======= =======
Friendly Ice Cream Corporation
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Condensed Consolidated Balance Sheets
- ----------------------------------------------------------------------
(In thousands)
(unaudited)
December 31, January 1,
2006 2006
------------ -----------
Assets
- ----------------------------------------------------------------------
Current Assets:
Cash and cash equivalents $ 25,077 $ 14,597
Other current assets 33,034 35,058
------------ -----------
Total Current Assets 58,111 49,655
Property and Equipment, net 137,425 143,514
Intangibles and Other Assets, net 24,631 25,073
------------ -----------
$ 220,167 $ 218,242
============ ===========
Liabilities and Stockholders' Deficit
- ----------------------------------------------------------------------
Current Liabilities:
Current maturities of debt, capital lease
and finance obligations $ 3,104 $ 2,845
Other current liabilities 65,587 63,444
------------ -----------
Total Current Liabilities 68,691 66,289
Capital Lease and Finance Obligations 4,682 6,173
Long-Term Debt 222,650 224,894
Other Long-Term Liabilities 51,040 62,724
Stockholders' Deficit (126,896) (141,838)
------------ -----------
$ 220,167 $ 218,242
============ ===========
Friendly Ice Cream Corporation
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Selected Segment Reporting Information
- ----------------------------------------------------------------------
(in thousands)
- ----------------------------------------------------------------------
For the Three
Months Ended For the Year Ended
------------------- ---------------------
December January December
31, 1, 31, January 1,
2006 2006 2006 2006
--------- --------- ---------- ----------
Revenues before elimination
of intersegment revenues:
Restaurant $ 90,612 $ 91,643 $ 395,999 $ 400,821
Foodservice 54,656 56,139 235,782 238,099
Franchise 3,580 3,575 15,401 14,454
--------- --------- ---------- ----------
Total $148,848 $151,357 $ 647,182 $ 653,374
========= ========= ========== ==========
Intersegment revenues:
Foodservice $(26,482) $(27,907) $(115,727) $(122,027)
========= ========= ========== ==========
Revenues:
Restaurant $ 90,612 $ 91,643 $ 395,999 $ 400,821
Foodservice 28,174 28,232 120,055 116,072
Franchise 3,580 3,575 15,401 14,454
--------- --------- ---------- ----------
Total $122,366 $123,450 $ 531,455 $ 531,347
========= ========= ========== ==========
EBITDA (1):
Restaurant (2) $ 7,870 $ 5,468 $ 37,427 $ 35,277
Foodservice (2) 2,653 838 16,182 11,563
Franchise (2) 2,047 2,426 10,314 10,274
Corporate (2) (4,793) (5,652) (21,471) (19,609)
Gain (loss) on property
and equipment, net 1,990 (379) 3,073 1,610
Net periodic pension
expense included in
reporting segments 389 71 1,555 286
--------- --------- ---------- ----------
Total $ 10,156 $ 2,772 $ 47,080 $ 39,401
========= ========= ========== ==========
Interest expense, net $ 4,863 $ 5,213 $ 20,491 $ 20,924
========= ========= ========== ==========
Other income, principally
debt retirement costs $ - $ (130) $ - $ (130)
========= ========= ========== ==========
Depreciation and
amortization:
Restaurant $ 4,119 $ 4,326 $ 16,221 $ 16,845
Foodservice 721 789 2,882 3,216
Franchise 105 55 325 172
Corporate 812 827 3,485 3,202
--------- --------- ---------- ----------
Total $ 5,757 $ 5,997 $ 22,913 $ 23,435
========= ========= ========== ==========
Other non-cash expense:
Write-downs of property
and equipment $ 197 $ 2,189 $ 719 $ 2,478
Net periodic pension
expense 389 71 1,555 286
--------- --------- ---------- ----------
Total $ 586 $ 2,260 $ 2,274 $ 2,764
========= ========= ========== ==========
Income (loss) before income
taxes (2):
Restaurant $ 3,751 $ 1,142 $ 21,206 $ 18,432
Foodservice 1,932 49 13,300 8,347
Franchise 1,942 2,371 9,989 10,102
Corporate (10,468) (11,692) (45,447) (43,735)
--------- --------- ---------- ----------
(2,843) (8,130) (952) (6,854)
Gain (loss) on property
and equipment, net 1,793 (2,568) 2,354 (868)
Other income, principally
debt retirement costs - 130 - 130
--------- --------- ---------- ----------
Total $ (1,050) $(10,568) $ 1,402 $ (7,592)
========= ========= ========== ==========
(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