Friendly Ice Cream Corporation yesterday [Thursday] reported record net income for the twelve months ended 30 December 2001 of US$3.7m, or US$0.50 per share.
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Comparable restaurant revenues increased 6.5% for the Q4 of 2001 and 2.6% for the year. This was the company’s best quarterly comparable restaurant sales performance during 2001. For the FY, the net loss was US$10.8m, or US$1.45 per share. Exclusive of non-recurring gains and losses, the loss before benefit from income taxes was US$1m for fiscal 2001 as compared to a loss of US$10m in fiscal 2000, an improvement of US$9m or 90%.
The net loss for the Q4 of 2001 was US$0.5m, or US$0.07 per share. Net income for the fourth quarter 2000 was US$1.5m, or US$0.19 per share. Exclusive of non-recurring gains and losses, the loss before benefit from income taxes was US$2.1m for the Q4 of 2001 as compared to a loss of US$9m in the same quarter of 2000, an improvement of US$6.9m or 77%.
For the FY 2001 and 2000, total revenues were US$561.9m and US$598.9m, respectively. Total revenues for the Q4 2001 were US$133m as compared to US$134.1m for the Q4 2000. The strategic decision to close under-performing and unprofitable restaurants as well as re-franchising initiatives reduced both the year-to-date and the quarter restaurant revenues.
Friendly Ice Cream Corporation’s Chairman and CEO Donald N. Smith commented: “We are very pleased with the results seen in fiscal 2001. Comparable sales and operating results have continued to improve as a result of the Company’s strategic initiatives. The overall financial health of the Company also improved with the successful completion in December of our refinancing plan. Moving ahead in 2002, our number one objective will be to further advance recent gains in improved guest satisfaction.”
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By GlobalDataDuring the 2001 Q4, pre-tax income in the restaurant segment increased by US$6.8m to US$8m, or 7.7% of restaurant revenues, from US$1.2m, or 1.1% of restaurant revenues, for the Q4 2000. The increase in pre-tax income and margin percentages for the restaurant segment are the result of a 6.5% increase in comparable revenues, improved management control and the closure of under-performing restaurants. In addition, there has been an impact from the strategic change in transfer pricing from the Company’s foodservice segment to the restaurants resulting in a transfer of profit to the restaurant segment from the foodservice segment.
Pre-tax income for the Company’s foodservice segment declined US$2.6m in the 2001 Q4 to US$2.1m, or 3.6% of foodservice revenues, from US$4.7m, or 8.3% of foodservice revenues, in the prior year. The decline was mainly due to dairy commodity cost pressures and the strategic changes in inter-company transfer pricing as discussed above.
Pre-tax income in the franchise segment decreased by US$1.3m in the Q4 of 2001. The decrease was mainly due to fees and development rights that were recorded in the prior year. Partially offsetting the decrease in fees and developmental rights is an increase in the number of operating franchise locations versus the prior year. At the end of the 2001 Q4, there were 161 franchise locations as compared to 122 franchise locations at the end of the 2000 Q4.
Corporate expenses in the Q4 of 2001 decreased by US$4.1m as compared to the Q4 2000 due to lower interest expense resulting from reduced debt levels and due to overall reductions in staffing and related overhead expenses.
During fiscal 2001, the company reduced total debt, capital lease and finance obligations by US$56.8m to US$242m from the US$298.8m reported at the end of fiscal 2000. The reduction occurred as a result of the successful completion of a financial restructuring plan in December 2001 and from cash proceeds generated by franchise sales of restaurant operations and properties and by dispositions of other property and equipment. The refinancing also significantly extends the average life of the Company’s debt.
Following the completion of the refinancing, Standard & Poor’s raised its corporate credit rating on the Company to single – `B’ from single – `B’- minus and raised its senior unsecured debt rating to single – `B’ – minus from triple – `C’ – plus.
