Friendly Ice Cream Corporation, owner and operater of restaurants and manufacturer of frozen desserts, posted net income of US$3m for the H1 ended 30 June 2002, up from US$1.8m year on year.
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Total revenues for the H1 2002 were US$287.5m, compared to US$277.5m year on year. Comparable restaurant sales increased 7.5% in the H1 2002. Exclusive of non-recurring gains, losses and write-downs, year-to-date income before taxes was US$4.5m in 2002 as compared to a loss before taxes of US$3.2m in 2001, an improvement of US$7.8m.
Net income for the Q2 2002 was US$4.6m, compared to US$5m for the Q2 1 July 2001. Exclusive of non-recurring gains, losses and write-downs, income before income taxes was up 60% to US$6.8m in the Q2 2002, compared to US$4.2m in 2001
Comparable Q2 restaurant sales increased 6.4%. Total Q2 revenues ended were US$156m compared to US$151.8m for the Q2 2001.
“Comparable sales and operating results in 2002 continue to show strong improvement as a result of strategic and marketing initiatives,” chairman and CEO Donald N. Smith said. “The current marketing campaign, `You & Me & Friendly’s’, continues to build on the strength of our brand. Management’s financial and corporate overhead restructurings, which were completed in fiscal 2001, contributed to improved performance this year.”
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In the Q2 2002, pre-tax income in the restaurant segment increased $1.1 million, or 10%, to $12.6 million, which represents 10.3% of restaurant revenues, up from $11.4 million, or 9.6% of restaurant revenues in the second quarter 2001. The increase in pre-tax income and margin percentages for the restaurant segment are the result of a 6.4% increase in comparable sales, improved management control, reduced overhead and the change in transfer pricing on sales from the Company’s foodservice segment to the restaurants. Partially offsetting these increases were higher costs for restaurant rent associated with the December 2001 sales/leaseback transaction.
Pre-tax income for the company’s foodservice segment in the Q2 2002 increased 4% to US$4.1m, which is 6.3% of foodservice revenues, compared to US$4m, or 6.2% of foodservice revenues, in the prior year quarter. The increase was mainly due to increased sales to franchisees and to retail supermarket customers, reduced overhead and favorable commodity prices. Partially offsetting these increases are higher retail selling expenses and the change in inter-company transfer pricing that resulted in a transfer of profit from the foodservice segment to the restaurant segment.
Pre-tax income in the franchise segment fell US$0.2m, or 13%, in the Q2 2002 to US$1.6m from US$1.9m in the prior year. The decrease is mainly due to US$0.9m in initial fees recorded in the Q2 2001 from the addition of 35 new franchise locations.
The reduction in initial fees was partially offset by increases in royalty revenue resulting from increases in comparable franchised restaurant sales and an increase in the number of operating franchise locations compared to the prior year. At the end of Q2 2002, there were 159 franchise restaurants as compared to 157 franchise restaurants at the end of Q2 2001.
Corporate expenses in the Q2 2002 fell by US$1.5m, or 12%, year on year due to lower interest expense resulting from reduced debt levels and due to overall reductions in staffing and related overhead expenses.
