Nathan's Famous, Inc. Reports Third Quarter Results

JERICHO, N.Y., Feb. 07, 2020 (GLOBE NEWSWIRE) -- Nathan's Famous, Inc. (NASDAQ:NATH) today reported results for the third quarter of its 2020 fiscal year that ended December 29, 2019.

For the fiscal quarter ended December 29, 2019:

  • Revenues were $21,376,000, as compared to $20,222,000 during the thirteen weeks ended December 23, 2018;
  • Income from operations was $3,863,000, as compared to $4,896,000 during the thirteen weeks ended December 23, 2018;
  • Adjusted EBITDA1, a non-GAAP financial measure, was $4,546,000, as compared to $5,485,000 for the thirteen weeks ended December 23, 2018;
  • Income before provision for income taxes was $1,573,000, as compared to $13,349,000 for the thirteen weeks ended December 23, 2018;
  • Income before provision for income taxes included a gain from the sale of real estate of $10,821,000 during the thirteen weeks ended December 23, 2018;
  • Net income was $1,213,000, as compared to $9,722,000 for the thirteen weeks ended December 23, 2018; and
  • Earnings per diluted share was $0.29 per share, as compared to $2.30 per share for the thirteen weeks ended December 23, 2018.

For the thirty-nine weeks ended December 29, 2019:

  • Revenues were $81,620,000, as compared to $79,720,000 during the thirty-nine weeks ended December 23, 2018;
  • Income from operations was $20,677,000, as compared to $22,463,000 during the thirty-nine weeks ended December 23, 2018;
  • Adjusted EBITDA1, a non-GAAP financial measure, was $22,840,000, as compared to $24,200,000 for the thirty-nine weeks ended December 23, 2018;
  • Income before provision for income taxes was $13,861,000, as compared to $26,331,000 for the thirty-nine weeks ended December 23, 2018;
  • Income before provision for income taxes included gains from sales of real estate of $11,177,000 during the thirty-nine weeks ended December 23, 2018;
  • Net income was $10,240,000, as compared to $19,001,000 for the thirty-nine weeks ended December 23, 2018; and
  • Earnings per diluted share was $2.43 per share, as compared to $4.50 per share for the thirty-nine weeks ended December 23, 2018.

__________________________
1
EBITDA and Adjusted EBITDA are non-GAAP financial measures. Please see the definitions of EBITDA and Adjusted EBITDA on page 5 of this release and the reconciliation of EBITDA and Adjusted EBITDA to net income in the table at the end of this release.

The Company also reported the following:

  • License royalties increased to $18,559,000 during the thirty-nine weeks ended December 29, 2019, (“fiscal 2020 period”), as compared to $18,160,000 during the thirty-nine weeks ended December 23, 2018. During the fiscal 2020 period, royalties earned under the retail agreement, including the foodservice program, from John Morrell & Co., increased 3.2% to $17,071,000, as compared to $16,536,000 of royalties earned during the thirty-nine weeks ended December 23, 2018.

  • In the Branded Product Program, which features the sale of Nathan’s hot dogs to the foodservice industry, income from operations declined by approximately $1,481,000 to $6,244,000 during the fiscal 2020 period, as compared to $7,725,000 for the thirty-nine weeks ended December 23, 2018. Sales were $45,989,000 during the fiscal 2020 period, compared to sales of $44,308,000 during the thirty-nine weeks ended December 23, 2018, while the volume of hot dogs sold by the Company increased 3.9%. However, the sales and volume results were partially impacted by winding down the new re-distributor’s temporary service to certain of our regular distributor customers. Our average selling price, which is partially correlated to the beef markets, increased by approximately 0.2% during the fiscal 2020 period compared to the thirty-nine weeks ended December 23, 2018.

  • Sales from Company-operated restaurants were $11,710,000 during the fiscal 2020 period compared to $12,140,000 during the thirty-nine weeks ended December 23, 2018. Sales at the four comparable Company-owned restaurants increased by $685,000 or 6.2% during the fiscal 2020 period. Sales were positively affected, especially at our two Coney Island locations, by favorable weather conditions during the fiscal 2020 period in addition to higher sales at our other traditional Company-owned restaurants.

  • Revenues from franchise operations were $3,610,000 during the fiscal 2020 period, compared to $3,254,000 during the thirty-nine weeks ended December 23, 2018. Total royalties were $2,829,000 during the fiscal 2020 period as compared to $2,906,000 during the thirty-nine weeks ended December 23, 2018. Total franchise fee income was $781,000 during the fiscal 2020 period compared to $348,000 during the thirty-nine weeks ended December 23, 2018. We recognized $553,000 of forfeited fees in the fiscal 2020 period primarily from the termination of two Master Franchise Agreements and the closing of various domestic and international franchise locations. Fifteen new franchised outlets opened during the fiscal 2020 period.

  • During the fiscal 2020 period, we recorded Advertising Fund revenue of $1,752,000 and expense of $1,858,000.

  • During the fiscal 2020 period, the Board of Directors declared three quarterly cash dividends of $0.35 per share totaling $4,437,000.

  • Effective February 7, 2020, the Board of Directors declared its quarterly cash dividend of $0.35 per share payable on March 6, 2020 to shareholders of record at the close of business on February 24, 2020.

  • During the fiscal 2019 period, we sold a restaurant, including land, in Bay Ridge, Brooklyn, New York and our Florida office, recognizing gains of $11,177,000.

Certain Non-GAAP Financial Information:

In addition to disclosing results that are determined in accordance with Generally Accepted Accounting Principles in the United States of America ("US GAAP"), the Company is disclosing EBITDA, a non-GAAP financial measure which is defined as net income, excluding (i) interest expense; (ii) provision for income taxes and (iii) depreciation and amortization expense. The Company is also disclosing Adjusted EBITDA, a non-GAAP financial measure which is defined as EBITDA, excluding (i) share-based compensation and (ii) gain on disposal of property and equipment that the Company believes will impact the comparability of its results of operations.

The Company believes that EBITDA and Adjusted EBITDA are useful to investors to assist in assessing and understanding the Company's operating performance and underlying trends in the Company's business because EBITDA and Adjusted EBITDA are (i) among the measures used by management in evaluating performance and (ii) are frequently used by securities analysts, investors and other interested parties as a common performance measure.

EBITDA and Adjusted EBITDA are not recognized terms under US GAAP and should not be viewed as alternatives to net income or other measures of financial performance or liquidity in conformity with US GAAP. Additionally, our definitions of EBITDA and Adjusted EBITDA may differ from other companies. Analysis of results and outlook on a non-US GAAP basis should be used as a complement to, and in conjunction with, data presented in accordance with US GAAP. Please see the table at the end of this press release for a reconciliation of EBITDA and Adjusted EBITDA to net income.

About Nathan’s Famous
Nathan’s is a Russell 2000 Company that currently distributes its products in 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Guam, and 10 foreign countries through its restaurant system, foodservice sales programs and product licensing activities. Last year, over 700 million Nathan’s Famous hot dogs were sold. Nathan’s was ranked #22 on the Forbes 2014 list of the Best Small Companies in America and was listed as the Best Small Company in New York State in October 2013. For additional information about Nathan’s, please visit our website at www.nathansfamous.com.

Except for historical information contained in this news release, the matters discussed are forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended that involve risks and uncertainties. Words such as “anticipate”, “believe”, “estimate”, “expect”, “intend”, and similar expressions identify forward-looking statements, which are based on the current belief of the Company’s management, as well as assumptions made by and information currently available to the Company’s management. Among the factors that could cause actual results to differ materially include but are not limited to: the status of our licensing and supply agreements, including the impact of our supply agreement for hot dogs with John Morrell & Co.; the impact of our indebtedness, including the effect on our ability to fund working capital, operations and make new investments; economic; weather (including the impact on the supply of cattle and the impact on sales at our restaurants particularly during the summer months), and change in the price of beef trimmings; our ability to pass on the cost of any price increases in beef and beef trimmings; legislative and business conditions; the collectability of receivables; changes in consumer tastes; the ability to attract franchisees; the impact of the minimum wage legislation on labor costs in New York State or other changes in labor laws, including regulations which could render a franchisor as a “joint employee” or the impact of our new union contracts; our ability to attract competent restaurant and managerial personnel; the enforceability of international franchising agreements; the future effects of any food borne illness, such as bovine spongiform encephalopathy, BSE and e coli; and the risk factors reported from time to time in the Company’s SEC reports. The Company does not undertake any obligation to update such forward-looking statements.

Nathan's Famous, Inc.
(unaudited)

 Thirteen weeks ended
 Thirty-nine weeks ended
 Dec. 29, 2019 Dec. 23, 2018 Dec. 29, 2019 Dec. 23, 2018
Financial Highlights       
        
Total revenues$21,376,000 $20,222,000 $81,620,000 $79,720,000
        
Income from operations (a)$3,863,000 $4,896,000 $20,677,000 $22,463,000
        
Net income$1,213,000 $9,722,000 $10,240,000 $19,001,000
        
Income per share:       
Basic$0.29 $2.32 $2.43 $4.54
Diluted$0.29 $2.30 $2.43 $4.50
        
Weighted-average shares used in       
computing income per share:       
Basic 4,225,000  4,187,000  4,219,000  4,187,000
Diluted 4,225,000  4,221,000  4,219,000  4,226,000
        
Select Segment Information       
        
Revenues       
Branded product program $13,694,000  $12,453,000  $45,989,000  $44,308,000
Product licensing 4,412,000  4,316,000  18,559,000  18,160,000
Restaurant operations 2,697,000  2,862,000  15,320,000  15,394,000
Corporate (b) 573,000  591,000  1,752,000  1,858,000
Total Revenues $21,376,000  $20,222,000  $81,620,000  $79,720,000
        
Income from operations (c)       
Branded product program $1,917,000  $2,464,000  $6,244,000  $7,725,000
Product licensing 4,367,000  4,270,000  18,423,000  18,023,000
Restaurant operations (599,000)  (112,000)  2,254,000  2,733,000
Corporate (d) (1,822,000)  (1,726,000)  (6,244,000)  (6,018,000)
Income from operations (c) $3,863,000  $4,896,000  $20,677,000  $22,463,000
  1. Excludes interest expense, interest income, gain on disposal of property and equipment and other income, net.
  2. Represents Advertising Fund revenue.
  3. Excludes interest expense, interest income, gain on disposal of property and equipment and other income, net which are managed centrally at the corporate level, and, accordingly, such items are not presented by segment since they are excluded from the measure of profitability reviewed by the Chief Operating Decision Maker.
  4. Consists principally of administrative expenses not allocated to the operating segments such as executive management, finance, information technology, legal, insurance, corporate office costs, incentive compensation, compliance costs, and the operating results of the advertising fund.

Nathan's Famous, Inc. and Subsidiaries

Reconciliation of Net Income to EBITDA and Adjusted EBITDA

 Thirteen weeks ended
Thirty-nine weeks ended
 Dec. 29, 2019 Dec. 23, 2018 Dec. 29, 2019 Dec. 23, 2018
        
 (unaudited) (unaudited)
EBITDA       
Net Income$1,213,000 $9,722,000 $10,240,000 $19,001,000
        
Interest Expense 2,650,000  2,650,000  7,951,000  7,951,000
        
Provision for income taxes 360,000  3,627,000  3,621,000  7,330,000
        
Depreciation and amortization 294,000  278,000  941,000  962,000
        
EBITDA$4,517,000 $16,277,000 $22,753,000 $35,244,000
        
        
        
Adjusted EBITDA       
EBITDA$4,517,000 $16,277,000 $22,753,000 $35,244,000
        
Gain on disposal of property & equipment -  (10,821,000)  -  (11,177,000)
        
Share-based compensation 29,000  29,000  87,000  133,000
        
Adjusted EBITDA$4,546,000 $5,485,000 $22,840,000 $24,200,000


COMPANYRonald G. DeVos, Vice President - Finance and CFO
CONTACT:(516) 338-8500 ext. 229
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