FRN Invesco Frontier Markets ETF

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. -0- *T 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. *T