-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ir+RNODHWgxWiKiFZ0b5U4Bdk+eEpqZX1jtw3+/1Yyi5TyRnA8A/7jWuhX4eBN1e 1rZ/dpoeZGLGn157G9RULg== 0001157523-04-001615.txt : 20040219 0001157523-04-001615.hdr.sgml : 20040219 20040219083217 ACCESSION NUMBER: 0001157523-04-001615 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20040219 ITEM INFORMATION: ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20040219 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FRIENDLY ICE CREAM CORP CENTRAL INDEX KEY: 0000039135 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 042053130 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-13579 FILM NUMBER: 04614600 BUSINESS ADDRESS: STREET 1: 1855 BOSTON ROAD CITY: WILBRAHAM STATE: MA ZIP: 01095 BUSINESS PHONE: 4135432400 MAIL ADDRESS: STREET 1: 1855 BOSTON ROAD CITY: WILBRAHAM STATE: MA ZIP: 01095 8-K 1 a4576109.txt FRIENDLY'S 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): February 19, 2004 FRIENDLY ICE CREAM CORPORATION (Exact name of registrant as specified in its charter) Massachusetts 0-3930 04-2053130 (I.R.S. Employer (State of Incorporation) (Commission File Number) Identification No.) 1855 Boston Road Wilbraham, Massachusetts 01095 (Address, including zip code of registrant's principal executive offices) Registrant's telephone number, including area code: (413) 543-2400 Not Applicable (Former Name or Former Address, if Changed Since Last Report) ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (c) Exhibits: 99.1 February 19, 2004 Press Release by Friendly Ice Cream Corporation. Pursuant to SEC Release No. 33-8216, this press release is attached hereto as Exhibit 99.1 and is being furnished, not filed, under Item 12, Results of Operations and Financial Condition, to this Report on Form 8-K. ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION On February 19, 2004 Friendly Ice Cream issued a press release describing selected financial results of the Company for the quarter and the year ended December 28, 2003, included herewith as exhibit 99.1. SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FRIENDLY ICE CREAM CORPORATION By: /s/ PAUL V. HOAGLAND ----------------------- Name: Paul V. Hoagland Title: Executive Vice President of Administration and Chief Financial Officer Date: February 19, 2004 Exhibit Index 99.1 February 19, 2004 Press Release by Friendly Ice Cream Corporation EX-99.1 3 a4576109ex99.txt EXHIBIT 99.1 PRESS RELEASE Exhibit 99.1 Friendly Ice Cream Corporation Reports Fourth Quarter Results; Commences Tender Offer for 10 1/2% Senior Notes Due 2007 WILBRAHAM, Mass.--(BUSINESS WIRE)--Feb. 19, 2004--Friendly Ice Cream Corporation (AMEX: FRN) today reported net income for the three-months-ended December 28, 2003 of $3.3 million, or $0.42 per share, compared to a net loss of $0.7 million, or $0.9 per share, reported for the three-months-ended December 29, 2002. Comparable systemwide restaurant sales increased 4.0% for the 2003 fourth quarter as compared to the prior year (3.3% increase for company restaurants and 5.7% increase for franchise restaurants). Including results of the current quarter, the Company has reported twelve consecutive quarters of positive comparable systemwide restaurant sales. Total company revenues for the three-months-ended December 28, 2003 were $135.1 million, an increase of 3.4%, as compared to total revenues of $130.7 million for the three-months-ended December 29, 2002. Effective December 31, 2003, all benefits accrued under the Company's noncontributory defined benefit pension plan have been frozen at the level attained on that date. As a result, the Company recognized a one-time non-cash pension curtailment gain of $8.1 million pre-tax ($4.8 after-tax or $0.62 per share) equal to the unamortized balances as of December 31, 2003 from all plan changes prior to that date. Simultaneously, the Company took a corresponding charge to its stockholders' deficit of $9.1 million ($5.4 million after-tax) offsetting the curtailment gain. This charge resulted from the accumulated benefit obligation exceeding the fair value of the pension plan assets as of December 31, 2003, the latest measurement date. Net income for the fiscal year December 28, 2003 was $10.2 million, or $1.34 per share compared to net income of $6.2 million, or $0.82 per share, reported for the year-ended December 29, 2002. As previously discussed, 2003 results include a one-time non-cash pension curtailment gain of $8.1 million pre-tax ($4.8 after-tax or $0.62 per share). The Company reported a corresponding charge to its stockholders' deficit of $9.1 million ($5.4 million after-tax) offsetting the curtailment gain. Results for 2002 included the favorable impact of $0.4 million pre-tax, or $0.03 per share, from the reduction of the Company's restructuring reserve. Total company revenues increased $9.4 million, or 1.6%, to $579.8 million for the year-ended December 28, 2003 from $570.4 million for the same period in 2002. Year-to-date, comparable systemwide restaurant sales increased 3.1% (2.3% increase for company restaurants and 5.3% increase for franchise restaurants). Case volume in the Company's retail supermarket business increased 2.7% in 2003 when compared to the prior year. "We are very pleased with the Company's continued revenue growth and profitability," stated John L. Cutter, Chief Executive Officer and President of Friendly Ice Cream. "Twelve consecutive quarters of positive comparable systemwide restaurant sales is the result of continued improvements to guest satisfaction and targeted marketing. Guest satisfaction, supported by training initiatives and management incentive programs, continues to be the top priority for Friendly's. The recently completed re-franchising of ten company-operated restaurants in Orlando to an existing franchisee, along with an agreement to open up to 25 new restaurants, will help to expand franchise development and growth in the state of Florida." Cutter continued, "During the fourth quarter, we continued to refine the look and capital efficiency of our Impact program by re-modeling eight company restaurants. The Impact program enhances the guest experience by improving the appearance of our restaurants and reinforces our 68-year ice cream heritage. Also during the quarter, we opened two new company restaurants and our franchisees opened three new franchise restaurants. For the year, three new company restaurants opened and our franchisees opened six new franchise restaurants." Business Segment Results In the 2003 fourth quarter, pre-tax income in the restaurant segment was $5.5 million, or 5.2% of restaurant revenues, compared to $6.8 million, or 6.6% of restaurant revenues, in the fourth quarter 2002. The decrease in pre-tax income was the result of an increase in restaurant labor and fringe benefit costs and higher expenses for advertising, depreciation, employment recruitment fees for field management positions and pre-opening costs associated with the opening of two company restaurants during the quarter. Partially offsetting these costs was a 3.3% improvement in comparable company restaurant sales, lower maintenance costs and a decrease in general liability insurance claims. Pre-tax income in the Company's foodservice segment was $3.5 million in the fourth quarter of 2003 compared to $2.6 million in the fourth quarter 2002. The increase was mainly due to increased sales to franchisees and to retail supermarket customers. Retail case volume increased by 0.2% in the fourth quarter. Pre-tax income in the franchise segment increased in the fourth quarter to $1.4 million from $1.2 million in the prior year. The increase is mainly due to higher royalty revenue from increased comparable franchise restaurant sales of 5.7% for the quarter. Corporate expenses of $12.4 million in the fourth quarter of 2003 increased by $0.1 million, or 1%, as compared to the fourth quarter of 2002 primarily due to higher employment recruitment costs, increased legal fees and a reduction in the benefit realized from the Company's pension plan when compared to the prior year. These increases were partially offset by depreciation expense and lower interest expense resulting from reduced debt levels. Tender Offer On February 17, 2004, the Company announced that it has commenced a cash tender offer for all $176.0 million outstanding principal amount of its 10 1/2% Senior Notes due 2007. The Company intends to fund the tender offer through a private offering of a new series of approximately $165.0 million of senior notes, available cash and borrowings under its revolving credit facility. The Company has obtained an amendment to its existing $30.0 million revolving credit facility to increase the amount which may be borrowed under the revolver to $45.0 million and to extend the term to June 2007. The tender offer and the effectiveness of the amendment to the credit facility are subject to a number of conditions including completion of the offering of the new senior notes. Franchising Agreement On January 15, 2004, the Company entered into an agreement with an existing franchisee, Central Florida Restaurants LLC, to grant certain limited exclusive rights to operate and develop Friendly's restaurants in designated areas within the Orlando, Florida market. The franchisee purchased certain equipment assets, lease and sublease rights and franchise rights in ten existing company operated restaurants. The agreement includes a commitment to open an additional ten restaurants over the next six years with an option for fifteen more restaurants in the following five years. Gross proceeds from the sale were approximately $3.2 million. The Company expects to record a gain on this transaction of approximately $0.7 million in the first quarter of 2004. The cash proceeds will be used to reduce debt, subject to the terms of the revolving credit facility. An investor conference call to review fourth quarter 2003 results will be held on Friday, March 5, 2004 at 2:00 P.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 www.friendlys.com, or go to www.streetevents.com. An online replay will be available approximately one hour after the conclusion of the call. 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 530 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 68-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). Friendly Ice Cream Corporation Consolidated Statements of Operations (In thousands, except per share and unit data) Quarter Ended Year Ended ----------------------- ------------------- Dec 28, Dec 29, Dec 28, Dec 29, 2003 2002 2003 2002 ------------------------------------------- (unaudited) (unaudited) Restaurant revenues $105,983 $103,535 $459,758 $454,569 Foodservice revenues 26,813 25,038 110,190 106,331 Franchise revenues 2,286 2,130 9,822 9,472 ----------- ----------- --------- --------- REVENUES 135,082 130,703 579,770 570,372 COSTS AND EXPENSES: Cost of sales 49,354 46,347 207,071 202,418 Labor and benefits 39,656 38,029 166,982 161,647 Operating expenses 25,538 26,649 108,322 108,829 General and administrative expenses 10,932 10,585 41,657 39,462 Pension curtailment gain (8,113) - (8,113) - Reduction of restructuring reserve - - - (400) Write-downs of property and equipment - 545 26 976 Depreciation and amortization 5,775 5,351 22,539 24,521 Gain on franchise sales of restaurant operations and properties - (696) - (675) Loss on dispositions of other property and equipment, net 545 87 2,044 578 ----------- ----------- --------- --------- OPERATING INCOME 11,395 3,806 39,242 33,016 Interest expense, net 5,915 6,106 24,157 24,870 ----------- ----------- --------- --------- INCOME (LOSS) BEFORE (PROVISION FOR) BENEFIT FROM INCOME TAXES 5,480 (2,300) 15,085 8,146 (Provision for) benefit from income taxes (2,210) 1,592 (4,899) (1,959) ----------- ----------- --------- --------- NET INCOME (LOSS) $3,270 $(708) $10,186 $6,187 =========== =========== ========= ========= NET INCOME (LOSS) PER SHARE: Basic $0.44 $(0.09) $1.37 $0.84 =========== =========== ========= ========= Diluted $0.42 $(0.09) $1.34 $0.82 =========== =========== ========= ========= WEIGHTED AVERAGE SHARES: Basic 7,476 7,390 7,447 7,372 =========== =========== ========= ========= Diluted 7,710 7,390 7,609 7,551 =========== =========== ========= ========= NUMBER OF COMPANY UNITS: Beginning of period 380 389 387 393 Openings 2 - 3 - Closings (2) (2) (10) (6) ----------- ----------- --------- --------- End of period 380 387 380 387 =========== =========== ========= ========= NUMBER OF FRANCHISED UNITS: Beginning of period 161 162 162 167 Openings 3 1 6 5 Closings (1) (1) (5) (10) ----------- ----------- --------- --------- End of period 163 162 163 162 =========== =========== ========= ========= Friendly Ice Cream Corporation Consolidated Statements of Operations Percentage of Total Revenues Quarter Ended Year Ended ----------------------- --------------- Dec 28, Dec 29, Dec 28, Dec 29, 2003 2002 2003 2002 ---------------------------------------- (unaudited) (unaudited) Restaurant revenues 78.5 % 79.2 % 79.3 % 79.7 % Foodservice revenues 19.8 % 19.2 % 19.0 % 18.6 % Franchise revenues 1.7 % 1.6 % 1.7 % 1.7 % ----------- ----------- ------- ------- REVENUES 100.0 % 100.0 % 100.0 % 100.0 % COSTS AND EXPENSES: Cost of sales 36.5 % 35.5 % 35.7 % 35.5 % Labor and benefits 29.4 % 29.1 % 28.8 % 28.3 % Operating expenses 18.9 % 20.3 % 18.7 % 19.1 % General and administrative expenses 8.1 % 8.1 % 7.2 % 6.9 % Pension curtailment gain (6.0)% - (1.4)% - Reduction of restructuring reserve - - - (0.1)% Write-downs of property and equipment - 0.4 % - 0.2 % Depreciation and amortization 4.3 % 4.1 % 3.9 % 4.3 % Gain on franchise sales of restaurant operations and properties - (0.5)% - (0.1)% Loss on dispositions of other property and equipment, net 0.4 % 0.1 % 0.3 % 0.1 % ----------- ----------- ------- ------- OPERATING INCOME 8.4 % 2.9 % 6.8 % 5.8 % Interest expense, net 4.4 % 4.6 % 4.2 % 4.4 % ----------- ----------- ------- ------- INCOME (LOSS) BEFORE (PROVISION FOR) BENEFIT FROM INCOME TAXES 4.0 % (1.7)% 2.6 % 1.4 % (Provision for) benefit from income taxes (1.6)% 1.2 % (0.8)% (0.3)% ----------- ----------- ------- ------- NET INCOME (LOSS) 2.4 % (0.5)% 1.8 % 1.1 % =========== =========== ======= ======= Friendly Ice Cream Corporation Condensed Consolidated Balance Sheets (In thousands) December 28, December 29, 2003 2002 ------------- ------------- Assets Current Assets: Cash and cash equivalents $25,631 $34,341 Other current assets 35,910 38,964 ------------- ------------- Total Current Assets 61,541 73,305 Property and Equipment, net 167,109 158,373 Intangibles and Other Assets, net 23,802 25,520 ------------- ------------- $252,452 $257,198 ============= ============= Liabilities and Stockholders' Deficit Current Liabilities: Current maturities of debt, capital lease and finance obligations $2,038 $2,393 Other current liabilities 63,680 70,344 ------------- ------------- Total Current Liabilities 65,718 72,737 Deferred Income Taxes 1,289 1,533 Capital Lease and Finance Obligations 5,773 5,044 Long-Term Debt 227,937 231,830 Other Long-Term Liabilities 49,761 49,756 Stockholders' Deficit (98,026) (103,702) ------------- ------------- $252,452 $257,198 ============= ============= Friendly Ice Cream Corporation Selected Segment Reporting Information: (in thousands) For the Three Months Ended For the Year Ended --------------------------------------- December December December December 2003 2002 (1) 2003 2002 (1) ------------------ -------------------- Revenues before elimination of intersegment revenues: Restaurant $105,983 $103,535 $459,758 $454,569 Foodservice 57,002 53,971 240,313 233,978 Franchise 2,286 2,130 9,822 9,472 ------------------ -------------------- Total $165,271 $159,636 $709,893 $698,019 ================== ==================== Intersegment revenues: Foodservice $(30,189)$(28,933) $(130,123)$(127,647) ================== ==================== Revenues: Restaurant $105,983 $103,535 $459,758 $454,569 Foodservice 26,813 25,038 110,190 106,331 Franchise 2,286 2,130 9,822 9,472 ------------------ -------------------- Total $135,082 $130,703 $579,770 $570,372 ================== ==================== EBITDA (2): Restaurant (3) $9,528 $10,149 $51,319 $52,505 Foodservice (3) 4,358 3,406 18,378 17,809 Franchise (3) 1,431 1,242 6,763 6,240 Corporate (3) (5,547) (4,999) (20,566) (18,455) (Loss) gain on property and equipment, net, excluding write-downs of property and equipment (713) (96) (2,200) 14 Reversal of restructuring expenses - - - 400 Less pension benefit included in reporting segments (281) (512) (1,131) (2,718) ------------------ -------------------- Total $8,776 $9,190 $52,563 $55,795 ================== ==================== Interest expense, net $5,915 $6,106 $24,157 $24,870 ================== ==================== Depreciation and amortization: Restaurant $3,995 $3,355 $15,407 $15,361 Foodservice 846 789 3,099 3,258 Franchise 37 49 153 251 Corporate 897 1,158 3,880 5,651 ------------------ -------------------- Total $5,775 $5,351 $22,539 $24,521 ================== ==================== Other non cash expenses: Pension curtailment gain $(8,113) $- $(8,113) $- Pension benefit (281) (512) (1,131) (2,718) Write-downs of property and equipment - 545 26 976 ------------------ -------------------- Total $(8,394) $33 $(9,218) $(1,742) ================== ==================== Income (loss) before provision for income taxes: Restaurant (3) $5,533 $6,794 $35,912 $37,144 Foodservice (3) 3,512 2,617 15,279 14,551 Franchise (3) 1,394 1,193 6,610 5,989 Corporate (3) (12,359) (12,263) (48,603) (48,976) ------------------ -------------------- (1,920) (1,659) 9,198 8,708 (Loss) gain on property and equipment, net, excluding write-downs of property and equipment (713) (641) (2,226) (962) Pension curtailment gain 8,113 - 8,113 - Reversal of restructuring expenses - - - 400 ------------------ -------------------- Total $5,480 $(2,300) $15,085 $8,146 ================== ==================== (1) Certain amounts have been reclassified to conform with the current period presentation. (2) EBITDA represents net income before (i) benefit from income taxes, (ii) interest expense, net, (iii) depreciation and amortization, (iv) write-downs of property and equipment, (v) pension curtailment gain and net periodic pension benefit and (vi) other non-cash items. The Company has included information concerning EBITDA in this schedule and its Form 10-Q because the Company's management incentive plan pays bonuses based on achieving EBITDA targets and the Company 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. (3) Amounts are prior to gains (losses) on property and equipment CONTACT: Friendly Ice Cream Corporation Investors: Deborah Burns, 413-543-2400 Ext. 3317 or Media: Maura Tobias, 413-543-2400 Ext. 2814 -----END PRIVACY-ENHANCED MESSAGE-----