|Maura C. Tobias
413-543-2400, ext. 2814
WILBRAHAM, Mass.--(BUSINESS WIRE)--Aug. 4, 2005--Friendly IceCream Corporation (AMEX: FRN) today reported results for the secondquarter and six months ended July 3, 2005.
Second Quarter Results
Comparable restaurant sales increased 3.4% for company-operatedrestaurants and 5.4% for franchised restaurants for the quarter endedJuly 3, 2005 compared to the quarter ended June 27, 2004. Includingthe results of the current quarter, franchise-operated restaurantshave reported seventeen consecutive quarters of positive comparablerestaurant sales growth.
Total company revenues were $148.4 million in the second quarterof 2005, an increase of $0.9 million, or 0.6%, as compared to totalrevenues of $147.5 million for the second quarter of 2004. Restaurantrevenues decreased by $1.6 million, which was offset by a $1.9 millionincrease in foodservice revenues and a $0.6 million increase infranchise revenues.
The re-franchising of 20 company-operated restaurants over thelast fifteen months resulted in a $5.1 million decline in restaurantrevenues when compared to the same quarter in the prior year.
Net income for the three months ended July 3, 2005 was $2.5million, or $0.32 per share, compared to a net loss of $1.4 million,or $0.19 per share, reported for the three months ended June 27, 2004.Included in the 2004 second quarter results were $2.3 million inexpenses ($1.4 million after-tax or $0.18 per share) for debtretirement.
Six Month Results
Comparable restaurant sales increased 0.2% for company-operatedrestaurants and 3.5% for franchised restaurants for the six monthsended July 3, 2005 compared to the six months ended June 27, 2004.
For the six months ended July 3, 2005 total company revenues were$273.1 million as compared to total revenues of $278.3 million for thesix months ended June 27, 2004. Restaurant revenues decreased by $9.9million, which was partially offset by a $3.9 million increase infoodservice revenues and a $0.8 million increase in franchiserevenues.
The re-franchising of 37 company-operated restaurants over thelast eighteen months resulted in a $9.5 million decline in restaurantrevenues when compared to the same period in the prior year.Restaurant revenues were also impacted by an unfavorable shift in thetiming of the year-end holiday period. New Year's Day was included inthe prior year first quarter and is not included in the current year.The estimated impact on company-operated restaurants due to the timingof the holiday reduced the six month comparable sales increase by1.3%.
The net loss for the six months ended July 3, 2005 was $0.5million, or $0.06 per share, compared to a net loss of $6.7 million,or $0.88 per share, reported for the six months ended June 27, 2004.Included in the 2004 results were $8.2 million in expenses ($4.8million after-tax or $0.64 per share) for debt retirement andrestructuring costs, which were partially offset by a gain onlitigation settlement.
In the second quarter of 2005, Friendly's continued to pursue itskey strategic objectives to 1) enhance the dining experience, 2)expand through franchising and re-franchising and 3) grow highermargin revenues. Key business highlights for the quarter include:
Business Segment Results
In the second quarter of 2005, pre-tax income in the restaurantsegment was $8.1 million, or 7.2% of restaurant revenues, compared to$7.4 million, or 6.4% of restaurant revenues, in the second quarter of2004. The increase in pre-tax income was mainly the result of a 3.4%increase in comparable company-operated restaurant sales, reducedlabor and benefit costs due to the restructuring of the restaurantmanagement team, fewer free dessert promotions and lower expenses foradvertising and general liability insurance. Partially offsettingthese benefits were the re-franchising of twenty restaurants over thepast fifteen months along with increased expenses for pension, workerscompensation insurance, maintenance, supplies and occupancy.Friendly's continues to pursue its initiatives that are designed toenhance the Friendly's dining experience. In addition to therestructuring of the restaurant management team, other key restaurantinitiatives include 1) reduced spans of control for front-line andsecond-line supervisors, 2) a new recognition and reward program forservers and 3) an Internet-based guest feedback system.
Pre-tax income in the Company's foodservice segment was $3.4million in the second quarter of 2005 compared to $2.0 million in thesecond quarter of 2004. The increase in pre-tax income was mainly dueto increased product sales to franchised restaurants and lowercommodity costs. Case volume in the Company's retail supermarketbusiness increased 3.3% for the second quarter of 2005 when comparedto the second quarter of 2004.
Pre-tax income in the franchise segment increased in the secondquarter of 2005 to $2.8 million from $2.2 million in the secondquarter of 2004. The improvement in pre-tax income is mainly due toincreased royalty revenue from comparable franchised restaurant salesgrowth of 5.4% and from the opening of eight new franchisedrestaurants and the re-franchising of 20 restaurants over the pastfifteen months. Increased rental income from leased and sub-leasedfranchised locations also contributed to the revenue growth in thesecond quarter of 2005.
Corporate expenses of $11.4 million in the second quarter of 2005increased by $0.5 million as compared to the second quarter of 2004primarily due to increases in corporate bonus, pension expense andother professional fees.
John L. Cutter, Chief Executive Officer and President of FriendlyIce Cream Corporation stated, "We are pleased with the results of thesecond quarter with positive comparable restaurant sales in bothcompany and franchise restaurants and increased case volume in ourretail supermarket business. In the first half of the year, we openedone new company restaurant and our franchisees opened two newfranchise restaurants. For the year, we currently plan to open a totalof four new company restaurants. In the second quarter, we completedfive re-imaging projects and we plan to complete at least fourteenre-imaging projects by year-end. We are also pleased with the growthin the number of supermarkets that carry our decorated ice creamcakes, which are currently being sold in over 500 supermarketlocations. Due to timing delays in development, our franchiseescurrently plan to open a total of ten new restaurants during 2005. Ourprevious guidance had been for fifteen new franchised restaurants tobe opened in 2005."
Investor Conference Call
An investor conference call to review the second quarter of 2005results will be held on Friday, August 5, at 10:00 A.M. Eastern Time.The conference call will be broadcast live over the Internet and willbe hosted by John Cutter, Chief Executive Officer and President. Tolisten to the call, go to the Investor Relations section of theCompany's website located at friendlys.com, or go to streetevents.com.An online replay will be available approximately one hour after theconclusion of the call.
Friendly Ice Cream Corporation is a vertically integratedrestaurant company serving signature sandwiches, entrees and ice creamdesserts in a friendly, family environment in 530 company andfranchised restaurants throughout the Northeast. The company alsomanufactures ice cream, which is distributed through more than 4,500supermarkets and other retail locations. With a 70-year operatinghistory, Friendly's enjoys strong brand recognition and is currentlyremodeling its restaurants and introducing new products to grow itscustomer base. Additional information on Friendly Ice CreamCorporation can be found on the Company's website (friendlys.com).
Forward Looking Statements
Statements contained in this release that are not historical factsconstitute "forward looking statements" as that term is defined in thePrivate Securities Litigation Reform Act of 1995. These statementsinclude statements relating to trends in commodity prices, and theexpected number of re-imaging projects and new company-operated andfranchised restaurant openings during 2005, and the anticipated impactof marketing, product and operational changes, growth of the Company'sbusiness and continued achievement of the Company's strategicobjectives. All forward looking statements are subject to risks anduncertainties which could cause results to differ materially fromthose anticipated. These factors include risks and uncertaintiesarising from accounting adjustments, the Company's highly competitivebusiness environment, exposure to fluctuating commodity prices, risksassociated with the foodservice industry, the ability to retain andattract new employees, new or changing government regulations, theCompany's high geographic concentration in the Northeast and itsattendant weather patterns, conditions needed to meet restaurantre-imaging and new opening targets, the Company's ability to serviceits debt and other obligations, the Company's ability to meet ongoingfinancial covenants contained in the Company's debt instruments, loanagreements, leases and other long-term commitments, and costsassociated with improved service and other similar initiatives. Otherfactors that may cause actual results to differ from the forwardlooking statements contained herein and that may affect the Company'sprospects in general are included in the Company's other filings withthe Securities and Exchange Commission. As a result the Company canprovide no assurance that its future results will not be materiallydifferent from those projected. The Company expressly disclaims anyobligation or undertaking to release publicly any updates or revisionsto any such forward looking statement to reflect any change in itsexpectations or any change in events, conditions or circumstances onwhich any such statement is based.
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