-----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, E1gA27/foD9Qah6XK6A+6HYbeZHEYjlNpi220GC75p73u8QSGN0HR+gHP9Anu5be KejCO+owyZ+5H50uEC20lQ== 0001157523-04-003768.txt : 20040426 0001157523-04-003768.hdr.sgml : 20040426 20040426101846 ACCESSION NUMBER: 0001157523-04-003768 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20040426 ITEM INFORMATION: ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20040426 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: 04752966 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 a4623954.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 EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): April 26, 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 April 26, 2004 Press Release by Friendly Ice Cream Corporation. This press release is attached hereto as Exhibit 99.1 and is being furnished, not filed, pursuant to Item 12, Results of Operations and Financial Condition, to this Report on Form 8-K. ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION On April 26, 2004 Friendly Ice Cream issued a press release describing selected financial results of the Company for the quarter ended March 28, 2004, 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: April 26, 2004 Exhibit Index 99.1 April 26, 2004 Press Release by Friendly Ice Cream Corporation EX-99.1 2 a4623954ex99.txt EXHIBIT 99.1 PRESS RELEASE Exhibit 99.1 Friendly Ice Cream Corporation Reports First Quarter 2004 Results; Completes Private Offering of $175 Million Principal 8.375% Senior Notes Due 2012 WILBRAHAM, Mass.--(BUSINESS WIRE)--April 26, 2004--Friendly Ice Cream Corporation (AMEX: FRN) today reported a net loss for the three-months-ended March 28, 2004 of $5.1 million, or $0.68 per share, compared to a net loss of $1.5 million, or $0.20 per share, reported for the three-months-ended March 30, 2003. The 2004 first quarter results include $5.9 million in pre-tax expenses, $4.1 million after-tax or $0.55 per share, for debt retirement and restructuring costs, net of a gain on litigation settlement. Comparable restaurant sales increased 4.2% for company-operated restaurants and 6.5% for franchise restaurants. Including results of the current quarter, the Company has reported thirteen consecutive quarters of positive comparable restaurant sales. Total company revenues for the three-months-ended March 28, 2004 were $130.8 million, an increase of 1.6%, as compared to total revenues of $128.7 million for the three-months-ended March 30, 2003. During the quarter, restaurant revenues were negatively impacted by $2.9 million as a result of the re-franchising of seventeen company restaurants. "We are very pleased with the continued revenue growth in both our company and franchise restaurants," stated John L. Cutter, Chief Executive Officer and President of Friendly Ice Cream. "Thirteen consecutive quarters of positive comparable restaurant sales is the result of continued improvements to guest satisfaction and targeted marketing. We have recently initiated a program to reinforce proper labor scheduling techniques to insure that our revenue growth results in improved profitability." Cutter continued, "During the first quarter, we focused on refining the look and capital efficiency of our Impact re-modeling program. The Impact program enhances the guest experience by improving the appearance of our restaurants and reinforces our 68-year ice cream heritage. We plan to re-model four company restaurants during the second quarter with 40 to 50 re-models planned for the year. Also during the quarter, our franchisees opened two new franchise restaurants." Business Segment Results In the 2004 first quarter, pre-tax income in the restaurant segment was $5.5 million, or 5.3% of restaurant revenues, compared to $6.3 million, or 6.1% of restaurant revenues, in the first quarter 2003. The decrease in pre-tax income was mainly due to the re-franchising of seventeen company restaurants during the quarter. Also, restaurant labor and benefits increased due to training costs associated with the rollout of a new point of sale register system along with higher expenses for liability insurance, supplies and utilities. Partially offsetting these increased costs was a 4.2% improvement in comparable company restaurant sales. Pre-tax income in the Company's foodservice segment was $2.7 million in the first quarter of 2004 compared to $2.5 million in the first quarter 2002. The increase was mainly due to increased sales to franchisees. Case volume in the Company's retail supermarket business declined by 10.2% following an increase of 5.4% in the first quarter of 2003. During the most recent quarter, the Company completed the process of converting the size of its retail supermarket ice cream container to 56-ounces from 64-ounces. Pre-tax income in the franchise segment increased in the first quarter to $2.0 million from $1.5 million in the prior year. The improvement is mainly due to increased royalty revenue from comparable sales growth of 6.5%, higher initial franchise fees from the re-franchising of seventeen restaurants and increased rental income from leased and sub-leased franchise locations. Corporate expenses of $12.3 million in the first quarter of 2004 increased by $0.3 million, or 3%, as compared to the first quarter of 2003 primarily due to higher costs for computer rentals and increased legal and professional fees. These increases were partially offset by lower depreciation expense. Debt Retirement Costs The Company recently completed the private offering of $175 million aggregate principal amount of 8.375% Senior Notes due 2012. The net proceeds from the offering, together with available cash and borrowings under the revolving credit facility, were used to purchase or to redeem the Company's 10.5% Senior Notes due December 1, 2007. In March 2004, $127.8 million of aggregate principal amount of 10.5% Senior Notes were purchased in a cash tender offer and in April 2004, the remaining $48.2 million of 10.5% Senior Notes were redeemed at 103.5% of the principal amount in accordance with the Senior Notes indenture. During the first quarter 2004, debt retirement costs of $6.9 million pre-tax were recorded: $5.1 million in premium and $1.8 million for the write-off of unamortized financing fees in connection with the cash tender offer. As a result of this transaction, the Company expects to reduce interest expense by approximately $3.8 million annually. Gain on Litigation Settlement Included in results for the three months-ended March 28, 2004, is a net pre-tax gain on litigation settlement of $3.6 million. In January 2004, a settlement was reached in a lawsuit filed by the Company against a former administrator of one of the Company's benefit plans. The settlement resulted in a one-time payment to the Company of approximately $3.8 million, which has been offset by an additional $0.2 million in legal and professional fees the Company incurred in 2004 as a result of the lawsuit. Restructuring Expenses During the 2004 first quarter, the Company recorded a pre-tax restructuring charge of approximately $2.6 million for severance and outplacement services associated with the elimination of approximately 20 permanent positions at corporate headquarters. The annual salaries and fringe benefits associated with these 20 positions is approximately $2.2 million. Investor Conference Call An investor conference call to review first quarter 2004 results will be held on Tuesday, April 27, 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 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 69-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) (Unaudited) Quarter Ended Mar 28, 2004 Mar 30, 2003 ------------ ------------ Restaurant Revenues $104,353 $103,168 Foodservice Revenues 23,343 23,267 Franchise Revenues 3,058 2,255 --------- --------- TOTAL REVENUES 130,754 128,690 COSTS AND EXPENSES: Cost of sales 45,588 45,977 Labor and benefits 39,934 38,128 Operating expenses 25,052 24,288 General and administrative expenses 10,697 10,063 Restructuring expenses 2,627 - Gain on litigation settlement (3,644) - Depreciation and amortization 5,606 5,627 Gain on franchise sales of restaurant operations and properties (906) - Loss on disposals of other property and equipment, net 171 573 --------- --------- OPERATING INCOME 5,629 4,034 OTHER EXPENSES: Interest expense, net 6,064 6,102 Other expenses, principally debt retirement costs 6,892 - --------- --------- LOSS BEFORE BENEFIT FROM INCOME TAXES (7,327) (2,068) Benefit from income taxes 2,198 579 --------- --------- NET LOSS AND COMPREHENSIVE LOSS $(5,129) $(1,489) ========= ========= BASIC AND DILUTED NET LOSS PER SHARE $(0.68) $(0.20) ========= ========= WEIGHTED AVERAGE BASIC AND DILUTED SHARES 7,520 7,415 ========= ========= NUMBER OF COMPANY UNITS: Beginning of period 380 387 Openings - - Refranchised closings (17) - Closings (1) (2) --------- --------- End of period 362 385 ========= ========= NUMBER OF FRANCHISED UNITS: Beginning of period 163 162 Openings 2 2 Refranchised openings 17 - Closings - - --------- --------- End of period 182 164 ========= ========= Friendly Ice Cream Corporation Consolidated Statements of Operations Percentage of Total Revenues (Unaudited) Quarter Ended Mar 28,2004 Mar 30,2003 ----------- ----------- Restaurant Revenues 79.8 % 80.2 % Foodservice Revenues 17.9 % 18.1 % Franchise Revenues 2.3 % 1.7 % ----------- ----------- TOTAL REVENUES 100.0 % 100.0 % COSTS AND EXPENSES: Cost of sales 34.9 % 35.7 % Labor and benefits 30.5 % 29.6 % Operating expenses 19.2 % 18.9 % General and administrative expenses 8.2 % 7.8 % Restructuring expenses 2.0 % - Gain on litigation settlement (2.8)% - Depreciation and amortization 4.3 % 4.4 % Gain on franchise sales of restaurant operations and properties (0.7)% - Loss on disposals of other property and equipment, net 0.1 % 0.5 % ----------- ----------- OPERATING INCOME 4.3 % 3.1 % OTHER EXPENSES: Interest expense, net 4.6 % 4.7 % Other expenses, principally debt retirement costs 5.3 % - ----------- ----------- LOSS BEFORE BENEFIT FROM INCOME TAXES (5.6)% (1.6)% Benefit from income taxes 1.7 % 0.4 % ----------- ----------- NET LOSS AND COMPREHENSIVE LOSS (3.9)% (1.2)% =========== =========== Friendly Ice Cream Corporation Condensed Consolidated Balance Sheets (In thousands) March 28,2004 Dec. 28,2003 ------------- ------------ (unaudited) Assets ------ Current Assets: Cash and cash equivalents $56,650 $25,631 Other current assets 45,834 35,910 -------------- -------------- Total Current Assets 102,484 61,541 Deferred Income Taxes 909 - Property and Equipment, net 164,322 167,109 Intangibles and Other Assets, net 28,158 23,802 -------------- -------------- $295,873 $252,452 ============== ============== Liabilities and Stockholders' Deficit ------------------------------------- Current Liabilities: Current maturities of debt, capital lease and finance obligations $50,618 $2,038 Other current liabilities 64,402 63,680 -------------- -------------- Total Current Liabilities 115,020 65,718 Deferred Income Taxes - 1,289 Capital Lease and Finance Obligations 7,428 5,773 Long-Term Debt 226,640 227,937 Other Long-Term Liabilities 49,363 49,761 Stockholders' Deficit (102,578) (98,026) -------------- -------------- $295,873 $252,452 ============== ============== Friendly Ice Cream Corporation Selected Segment Reporting Information (in Thousands) For the Three Months Ended -------------- ------------ March March 2004 2003 -------------- ------------ Revenues before elimination of intersegment revenues: Restaurant $104,353 $103,168 Foodservice 53,362 52,326 Franchise 3,058 2,255 --------------------------- Total $160,773 $157,749 =========================== Intersegment revenues: Foodservice $(30,019) $(29,059) =========================== Revenues: Restaurant $104,353 $103,168 Foodservice 23,343 23,267 Franchise 3,058 2,255 --------------------------- Total $130,754 $128,690 =========================== EBITDA (1): Restaurant (2) $9,333 $10,081 Foodservice (2) 3,532 3,189 Franchise (2) 2,091 1,561 Corporate (2) (5,412) (4,829) Gain (loss) on property and equipment, net 674 (341) Restructuring expenses (2,627) - Gain on litigation settlement 3,644 - Less pension benefit included in reporting segments (550) (286) --------------------------- Total $10,685 $9,375 =========================== Interest expense, net $6,064 $6,102 =========================== Other expenses, principally debt retirement costs $6,892 $ - =========================== Depreciation and amortization: Restaurant $3,851 $3,799 Foodservice 856 736 Franchise 47 39 Corporate 852 1,053 --------------------------- Total $5,606 $5,627 =========================== Net periodic pension benefit $(550) $(286) =========================== Income (loss) before benefit from income taxes (2): Restaurant $5,482 $6,282 Foodservice 2,676 2,453 Franchise 2,044 1,522 Corporate (12,328) (11,984) --------------------------- (2,126) (1,727) Gain (loss) on property and equipment, net 674 (341) Restructuring expenses (2,627) - Gain on litigation settlement 3,644 - Other expenses, principally debt retirement costs (6,892) - --------------------------- Total $(7,327) $(2,068) =========================== Certain amounts have been reclassified to conform with the current period presentation. (1) EBITDA represents net loss before (i) benefit from income taxes, (ii) other expenses, principally debt retirement costs, (iii) interest expense, net, (iv) depreciation and amortization, (v) 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 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. CONTACT: Friendly Ice Cream Corporation Investment Contact: Deborah Burns, 413-543-2400 x3317 or Media Contact: Maura Tobias, 413-543-2400 x2814 -----END PRIVACY-ENHANCED MESSAGE-----