Nathan's Famous, Inc. Reports Second Quarter Results

JERICHO, N.Y. - Nov. 4, 2016 // PRNewswire // - Nathan's Famous, Inc. (NASDAQ: NATH) today reported results for the second quarter of its 2017 fiscal year that ended September 25, 2016.

For the fiscal quarter ended September 25, 2016:

  • Income from operations was $8,031,000, as compared to $8,426,000 during the thirteen weeks ended September 27, 2015;
  • Adjusted EBITDA, as subsequently defined, was $8,610,000 as compared to $9,006,000 for the thirteen weeks ended September 27, 2015;
  • Net income was $2,507,000, as compared to $2,847,000 for the thirteen weeks ended September 27, 2015;
  • Earnings per diluted share were $0.60 per share, as compared to $0.64 per share for the thirteen weeks ended September 27, 2015; and
  • Revenues were $28,013,000, as compared to $30,619,000 during the thirteen weeks ended September 27, 2015.

For the twenty-six weeks ended September 25, 2016:

  • Income from operations increased by 5.1% to $16,855,000, as compared to $16,042,000 during the twenty-six weeks ended September 27, 2015;
  • Adjusted EBITDA, as subsequently defined, increased by 4.2% to $17,976,000, as compared to $17,257,000 for the twenty-six weeks ended September 27, 2015;
  • Net income increased by 17.5% to $6,057,000, as compared to $5,157,000 for the twenty-six weeks ended September 27, 2015;
  • Earnings per diluted share were $1.44 per share, as compared to $1.14 per share for the twenty-six weeks ended September 27, 2015; and
  • Revenues were $57,429,000, as compared to $61,273,000 during the twenty-six weeks ended September 27, 2015.

The Company reported the following:

  • License royalties were $11,612,000 during the twenty-six weeks ended September 25, 2016, as compared to $11,792,000 during the twenty-six weeks ended September 27, 2015. During the twenty-six weeks ended September 25, 2016, total royalties earned under the John Morrell & Co., agreement were $10,714,000, as compared to $10,932,000 of royalties earned during the twenty-six weeks ended September 27, 2015.  During this period, the volume of products sold increased by 6.9%; however, a more competitive promotional environment this summer led to an 8.2% decrease in the average net selling price on which our royalty is calculated.
  • In the Branded Product Program, which features the sale of Nathan's hot dogs to the foodservice industry, sales were $31,481,000 during the twenty-six weeks ended September 25, 2016, as compared to sales of $33,595,000 during the twenty-six weeks ended September 27, 2015. Operating profits increased for the fiscal 2017 period by approximately $1.9 million over the fiscal 2016 period. During the period, the volume of products sold increased by 3.1% but our average selling price declined by approximately 9.2% due to the impact of lower beef markets on that portion of our business that is sold using formula pricing.
  • Sales from the Company-operated restaurants were $11,458,000 during the twenty-six weeks ended September 25, 2016 as compared to $12,842,000 during the twenty-six weeks ended September 27, 2015 driven primarily from lower sales at both Coney Island locations, due to unfavorable weather conditions during the fiscal 2017 period compared to the weather conditions during the fiscal 2016 period when we achieved record sales at both of these locations.
  • Revenues from franchise operations were $2,664,000 during the twenty-six weeks ended September 25, 2016, as compared to $2,617,000 during the twenty-six weeks ended September 27, 2015. Total franchise fee income was $262,000 during the twenty-six weeks ended September 25, 2016 as compared to $207,000 during the twenty-six weeks ended September 27, 2015, primarily due to higher international development fees. Twenty new franchised outlets opened during the twenty-six weeks ended September 25, 2016, including seven international locations, and 11 Branded Menu Program outlets.  Twenty-three new franchised outlets opened, during the twenty-six weeks ended September 27, 2015, including seven international locations, and 11 Branded Menu Program outlets.
  • Nathan's tax rate was reduced by 6.5 percentage points as a result of early adopting the provisions of Financial Accounting Standards Board ASU 2016-09, "Stock Compensation", which now reduces the Company's tax provision for the excess tax benefits associated with stock compensation instead of increasing Additional paid-in-capital, as was past practice.

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 has provided EBITDA excluding (i) interest expense; (ii) provision for income taxes and (iii) depreciation and amortization expense. The Company has also provided Adjusted EBITDA excluding (i) stock-based compensation and (ii) amortization of bond premium on the Company's available-for sale investments 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 (loss) 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.

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 eleven foreign countries through its restaurant system, foodservice sales programs and product licensing activities. Last year, over 550 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 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 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 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 collectibility of receivables; changes in consumer tastes; the status of our licensing and supply agreements, including the impact of our supply agreement for hot dogs with John Morrell & Co.; the ability to attract franchisees; the impact of the new 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 contract; our ability to attract competent restaurant and managerial personnel; the enforceability of international franchising agreements; the impact of changes in the economic relationship between the United States and Russia; and 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.

Financial Highlights

             
   

Thirteen weeks ended

     

Twenty-six weeks ended

 
 

Sept. 25, 2016

 

Sept. 27, 2015

 

Sept. 25, 2016

 

Sept. 27, 2015

 
   

(unaudited)

     

(unaudited)

   
                 

Total revenues

$ 28,013,000

 

$   30,619,000

 

$57,429,000

 

$   61,273,000

 
                 

Income from operations (a)

$   8,031,000

 

$   8,426,000

 

$16,855,000

 

$   16,042,000

 
                 

Net income

$   2,507,000

 

$     2,847,000

 

$ 6,057,000

 

$     5,157,000

 
                 

Income per share:

               

   Basic

$          0.60

 

$              0.64

 

$        1.45

 

$              1.14

 

   Diluted

$          0.60

 

$              0.64

 

$        1.44

 

$              1.14

 
                 
                 

Weighted-average shares used in

               

   computing income per share:

               

   Basic

4,172,000

 

4,432,000

 

4,169,000

 

4,508,000

 

   Diluted

4,207,000

 

4,449,000

 

4,199,000

 

4,535,000

 
                 
                 
                                     

(a)    Excludes interest expense, interest income, and other income, net.

 

Nathan's Famous, Inc. and Subsidiaries

Reconciliation of Net Income to EBITDA and Adjusted EBITDA

               
   

Thirteen weeks ended

     

Twenty-six weeks ended

 
 

Sept. 25, 2016

 

Sept. 27, 2015

 

Sept. 25, 2016

 

Sept. 27, 2015

 
   

(unaudited)

     

(unaudited)

   

EBITDA

               

Net Income

$    2,507,000

 

$    2,847,000

 

$6,057,000

 

$   5,157,000

 
                 

Interest Expense

3,663,000

 

3,709,000

 

7,339,000

 

7,418,000

 
                 

Provision for income taxes

1,918,000

 

1,942,000

 

3,538,000

 

3,570,000

 
                 

Depreciation and amortization

349,000

 

333,000

 

696,000

 

672,000

 
                 

EBITDA

$    8,437,000

 

$    8,831,000

 

$17,630,000

 

$   16,817,000

 
                 
                 
                 

Adjusted EBITDA

               

EBITDA

$    8,437,000

 

$    8,831,000

 

$17,630,000

 

$   16,817,000

 
                 

Stock-based compensation

173,000

 

173,000

 

346,000

 

376,000

 
                 

Amortization of bond premium (b)

-

 

2,000

 

-

 

64,000

 
                 

Adjusted EBITDA

$    8,610,000

 

$    9,006,000

 

$17,976,000

 

$   17,257,000

 
                 
                                     

(b)   Represents the premiums paid on our purchase of available-for-sale securities.

SOURCE Nathan's Famous, Inc.

Contact:

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

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Nathan's hot dogs and crinkle cut french fries were first sold in Coney Island, New York.

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