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, 2006 Oct 2,
2005 Oct 1, 2006 Oct 2, 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
Consolidated Statements of Operations Percentage of Total Revenues
(unaudited) � Quarter Ended Nine Months Ended Oct 1, 2006 Oct 2,
2005 Oct 1, 2006 Oct 2, 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, 2006 January
1, 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
Selected Segment Reporting Information (in thousands) � For the
Three Months Ended � For the Nine Months 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. 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.
-0- *T 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
========= ========= ========= ========= *T -0- *T Friendly Ice
Cream Corporation
----------------------------------------------------------------------
Consolidated Statements of Operations
----------------------------------------------------------------------
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 % ======= ======= ========= ======= *T
-0- *T 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 ========== =========== *T -0- *T Friendly Ice
Cream Corporation
----------------------------------------------------------------------
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. *T
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