Exhibit 99.1
Friendly Ice Cream Corporation Reports First Quarter 2007 Results
WILBRAHAM, Mass.--(BUSINESS WIRE)--May 11, 2007--Friendly Ice
Cream Corporation (AMEX: FRN) today announced financial results for
the first quarter ended April 1, 2007.
Highlights - First Quarter Results
-- Net revenues declined by $3.1 million, or 2.5%, to $122.6
million.
-- Comparable restaurant sales decreased 4.1% for
company-operated restaurants compared to a 4.8% increase in
the first quarter of 2006.
-- Comparable sales decreased 4.6% for franchised restaurants.
-- The net loss from continuing operations was $0.73 per share
versus $0.56 in the prior year first quarter.
-- Excluding net gains on property and equipment, adjusted EBITDA
declined by $0.9 million.
-- At the end of the quarter, cash and cash equivalents were
$21.9 million and during the quarter, there were no borrowings
against the revolving credit facility.
-- Friendly's opened one new company restaurant and franchisees
opened one new franchise restaurant during the quarter.
George M. Condos, President and Chief Executive Officer, said,
"Since joining the Company in January 2007, I have visited a number of
restaurants and have spoken to employees, franchisees and guests. My
observations from these visits have resulted in the development of
numerous initiatives to re-energize the Friendly's brand by improving
the quality of our menu and guest experience and by creating a more
contemporary environment within our restaurants. Beginning this month,
we will introduce the first of these initiatives which includes a new
line of cold beverages and a new service program to enhance our guest
experience."
Financial Results
The net loss in the first quarter of 2007 was $6.0 million, or
$0.73 per share, compared to a net loss of $1.8 million, or $0.23 per
share, reported for the first quarter of 2006. The net loss in the
first quarter of 2006 included $2.6 million, or $0.33 per share, in
net income from discontinued operations. Total revenues were $122.6
million compared to total revenues of $125.7 million for the prior
year. Comparable restaurant sales decreased 4.1% for company-operated
restaurants and 4.6% for franchised restaurants.
Adjusted EBITDA was $5.8 million in the first quarter of 2007
compared to adjusted EBITDA of $7.4 million in the first quarter of
2006. Excluding net gains on property and equipment, adjusted EBITDA
was $5.8 million compared to $6.7 million in the prior year first
quarter. 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.
Business Segments - First Quarter Results
Restaurant revenues were $93.2 million in the first quarter of
2007, a decrease of $2.1 million, as compared to restaurant revenues
of $95.3 million for the prior year first quarter. Comparable
restaurant sales decreased 4.1%, or $3.6 million, compared to an
increase of 4.8% in the first quarter of 2006. Colder weather in 2007,
especially at night, combined with more significant rain and snow
events, had a negative impact on restaurant sales. The closing of six
restaurants and the acquisition of six restaurants by franchisees
resulted in revenue declines of $0.8 million and $1.7 million,
respectively. These declines were offset by a $4.0 million increase in
restaurant revenue from the opening of three new restaurants and the
taking over operations of twelve formerly franchised restaurants over
the past 15 months.
Adjusted restaurant EBITDA was $5.7 million, or 6.1% of restaurant
revenues, in the first quarter of 2007 compared to $6.8 million, or
7.2% of restaurant revenues, in the prior year. Cost of sales, as a
percentage of restaurant revenues, increased by 0.3% as compared to
the prior year primarily due to increased commodity prices, as year
over year menu pricing was minimal. Labor and benefits, as a
percentage of restaurant revenues, decreased by 0.9% as a result of
lower general manager bonus expense and a slight reduction in workers
compensation insurance costs. Operating expenses of $24.3 million were
$1.4 million higher than in the prior year first quarter mainly due to
increased advertising costs, occupancy, utilities and supplies. These
costs were partially offset by a $0.5 million decline in field
overhead expenses due to a reduction in the number of field support
positions.
In the first quarter of 2007, Foodservice revenues decreased $1.0
million to $25.9 million from $26.9 million in the first quarter of
2006. Franchise restaurant product revenues decreased by $0.3 million
due to a lower average number of operating franchise restaurants
during the quarter and from the decrease in franchise comparable sales
of 4.6%. Sales to retail supermarket customers decreased by $0.7
million primarily due to a reduction in retail supermarket case volume
of 5.8% and increased trade spending and sales allowances. Adjusted
Foodservice EBITDA increased by $0.5 million from the prior year to
$3.2 million due to favorable cream prices and lower selling expenses.
In December 2006 as a result of non-payment of rents and
royalties, the Company's franchisee in the Orlando market surrendered
11 restaurants to the Company and closed one restaurant. The Company
is currently operating these restaurants while looking for a new
franchisee to take over their operation.
Franchise revenues of $3.5 million in the first quarter of 2007
were unchanged from the first quarter of 2006. Comparable franchise
sales decreased by 4.6%. Franchise royalties decreased by $0.1 million
due to a lower average number of operating franchise restaurants
during the quarter combined with the decrease in comparable franchise
sales. Rental income increased by $0.1 million as compared to the
prior year due to increases in miscellaneous occupancy revenues that
were partially offset by the decrease in the number of operating
franchise restaurants. Adjusted franchise EBITDA was $2.1 million as
compared to $2.4 million in the prior year.
Corporate expenses of $5.5 million in the first quarter of 2007
were favorable by $0.2 million as compared to the first quarter of
2006 primarily due to lower severance, fringe benefit and bonus
expenses. These reduced expenses were partially offset by increased
legal fees and stock compensation costs.
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 2007 first quarter results
will be held on Friday, May 11, 2007 at 11:00 A.M. Eastern Time. The
conference call will be broadcast live over the Internet and will be
hosted by George M. Condos, President and Chief Executive Officer. 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 515 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 72-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
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(In thousands, except per share and unit data)
(unaudited)
Quarter Ended
-------------
April 1, 2007 April 2, 2006
------------- -------------
Restaurant Revenues $ 93,187 $ 95,276
Foodservice Revenues 25,944 26,894
Franchise Revenues 3,495 3,545
------------- -------------
REVENUES 122,626 125,715
COSTS AND EXPENSES:
Cost of sales 47,103 48,385
Labor and benefits 34,397 36,012
Operating expenses 25,012 23,999
General and administrative expenses 10,633 11,097
Write-downs of property and equipment 206 215
Depreciation and amortization 6,160 5,780
Gain on franchise sales of restaurant
operations and properties - (866)
Loss on disposals of other property and
equipment, net 35 109
------------- -------------
OPERATING (LOSS) INCOME (920) 984
Interest expense, net 4,924 5,420
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LOSS FROM CONTINUING OPERATIONS BEFORE
PROVISION FOR INCOME TAXES (5,844) (4,436)
Provision for income taxes (94) -
------------- -------------
LOSS FROM CONTINUING OPERATIONS (5,938) (4,436)
(Loss) income from discontinued
operations, net of income tax effect (14) 2,616
------------- -------------
NET LOSS $ (5,952) $ (1,820)
============= =============
BASIC AND DILUTED NET
INCOME (LOSS) PER SHARE:
Income (loss) from continuing operations $ (0.73) $ (0.56)
Income (loss) from discontinued
operations - 0.33
------------- -------------
Net income (loss) $ (0.73) $ (0.23)
============= =============
DILUTED NET INCOME (LOSS) PER SHARE:
Income (loss) from continuing operations $ (0.73) $ (0.56)
Income (loss) from discontinued
operations - 0.33
------------- -------------
Net income (loss) $ (0.73) $ (0.23)
============= =============
WEIGHTED AVERAGE SHARES:
Basic 8,122 7,901
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Diluted 8,122 7,901
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NUMBER OF COMPANY UNITS:
Beginning of period 316 314
Openings 1 1
Acquired from franchisees 1 -
Acquired by franchisees - (1)
Closings (1) (2)
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End of period 317 312
============= =============
NUMBER OF FRANCHISED UNITS:
Beginning of period 205 213
Openings 1 -
Acquired by franchisees - 1
Acquired from franchisees (1) -
Closings - -
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End of period 205 214
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Friendly Ice Cream Corporation
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Consolidated Statements of Operations
- ----------------------------------------------------------------------
(In thousands, except per share and unit data)
(unaudited)
Quarter Ended
-------------
April 1, 2007 April 2, 2006
------------- -------------
Restaurant Revenues 76.0% 75.8%
Foodservice Revenues 21.1% 21.4%
Franchise Revenues 2.9% 2.8%
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REVENUES 100.0% 100.0%
COSTS AND EXPENSES:
Cost of sales 38.4% 38.5%
Labor and benefits 28.1% 28.6%
Operating expenses 20.4% 19.1%
General and administrative expenses 8.7% 8.8%
Write-downs of property and equipment 0.2% 0.2%
Depreciation and amortization 5.0% 4.6%
Gain on franchise sales of restaurant
operations and properties 0.0% -0.7%
Loss on disposals of other property and
equipment, net 0.0% 0.1%
------------- -------------
OPERATING (LOSS) INCOME -0.8% 0.8%
Interest expense, net 4.0% 4.3%
------------- -------------
LOSS FROM CONTINUING OPERATIONS BEFORE
PROVISION FOR INCOME TAXES -4.8% -3.5%
Provision for income taxes -0.1% 0.0%
------------- -------------
LOSS FROM CONTINUING OPERATIONS -4.9% -3.5%
(Loss) income from discontinued
operations, net of income tax effect 0.0% 2.1%
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NET LOSS -4.9% -1.4%
============= =============
Friendly Ice Cream Corporation
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Condensed Consolidated Balance Sheets
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(In thousands)
(unaudited)
April 01, December 31,
2007 2006
----------- ------------
Assets
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Current Assets:
Cash and cash equivalents $ 21,860 $ 25,077
Other current assets 32,882 33,034
----------- ------------
Total Current Assets 54,742 58,111
Property and Equipment, net 133,997 137,425
Intangibles and Other Assets, net 24,167 24,631
----------- ------------
$ 212,906 $ 220,167
=========== ============
Liabilities and Stockholders' Deficit
- ----------------------------------------------------------------------
Current Liabilities:
Current maturities of debt, capital lease
and finance obligations $ 3,175 $ 3,104
Other current liabilities 63,561 65,587
----------- ------------
Total Current Liabilities 66,736 68,691
Capital Lease and Finance Obligations 4,270 4,682
Long-Term Debt 222,236 222,650
Other Long-Term Liabilities 52,484 51,040
Stockholders' Deficit (132,820) (126,896)
----------- ------------
$ 212,906 $ 220,167
=========== ============
Friendly Ice Cream Corporation
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Selected Segment Reporting Information
- ----------------------------------------------------------------------
(in thousands)
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For the Three Months Ended
--------------------------
April 1, April 2,
2007 2006
------------- ------------
Revenues before elimination of intersegment
revenues:
Restaurant $ 93,187 $ 95,276
Foodservice 53,588 54,958
Franchise 3,495 3,545
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Total $ 150,270 $ 153,779
============= ============
Intersegment revenues:
Foodservice $ (27,644) $ (28,064)
============= ============
Revenues:
Restaurant $ 93,187 $ 95,276
Foodservice 25,944 26,894
Franchise 3,495 3,545
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Total $ 122,626 $ 125,715
============= ============
Adjusted EBITDA (1):
Restaurant (2) $ 5,728 $ 6,834
Foodservice (2) 3,175 2,668
Franchise (2) 2,116 2,418
Corporate (2) (5,539) (5,699)
Gain on property and equipment, net (34) 758
Less pension cost included in reporting
segments 337 470
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Total $ 5,783 $ 7,449
============= ============
Interest expense, net $ 4,924 $ 5,420
============= ============
Depreciation and amortization:
Restaurant $ 3,897 $ 4,143
Foodservice 1,274 736
Franchise 137 68
Corporate 852 833
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Total $ 6,160 $ 5,780
============= ============
Other non-cash expenses:
Net periodic pension cost $ 337 $ 470
Write-downs of property and equipment 206 215
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Total $ 543 $ 685
============= ============
Income (loss) from continuing operations
before
(provision for) benefit from income
taxes:
Restaurant $ 1,831 $ 2,691
Foodservice 1,901 1,932
Franchise 1,979 2,350
Corporate (11,315) (11,952)
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(5,604) (4,979)
(Loss) gain on property and equipment,
net (240) 543
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Total $ (5,844) $ (4,436)
============= ============
(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 adjusted EBITDA
in this schedule because the Company's incentive plan pays bonuses
based on achieving operating segment adjusted 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 operations or other
traditional indications of a company's operating performance.
(2) Amounts are prior to gain 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