Noble Roman's Announces 2016 First Quarter Financial Summary
Updates Unit Development & Reiterates Strategic Direction
INDIANAPOLIS, IN - (Marketwired - May 12, 2016) - Noble Roman's, Inc. (OTCQB: NROM), the Indianapolis based franchisor and licensor of Noble Roman's Pizza and Tuscano's Italian Style Subs, today provided an update on unit development, reiterated the company's strategic direction and announced results for the first quarter of 2016.
Development & Strategic Direction
Thus far in 2016, the company has signed license agreements for 239 grocery locations to carry the company's deli take-n-bake program and opened 93 of them compared to signing 106 and opening 82 during the comparable period in 2015. The company also sold six new non-traditional franchise/license agreements and opened eight thus far this year compared to selling two and opening four in the comparable period in 2015.
As previously announced, the company continues to focus its growth strategy on three venues: (1) licensed grocery take-n-bake deli pizza programs, (2) non-traditional locations in host businesses such as entertainment facilities and convenience stores, and (3) franchised stand-alone restaurant locations. In discussing the strategic priority of each venue, Scott Mobley, President and CEO, previously stated, "The company's greatest opportunities for value generation in the longer run are different than where the largest short-term gains will likely be realized. In the short run, given that the company has already invested significant effort in it and is well positioned to extract value from it, I believe the grocery take-n-bake venue represents the potential opportunity for faster, significant growth. However, for a variety of reasons, I consider the stand-alone venue to have more significant and dependable long-term revenue growth potential. Although more mature and staid, with our efforts to update and modernize the approach in mind as prerequisite, I believe the non-traditional venue also offers significant potential for long term growth. Our objective is to continue to capture the faster growth opportunities in the grocery take-n-bake venue while at the same time positioning the company to capitalize on its strong, longer-term opportunities. Much progress has already been made towards these ends and will continue to be the company's focus during the remainder of 2016."
As previously announced, the company has expanded its presence in the grocery take-n-bake venue from 11 to 29 grocery distribution centers, which were in large part stocked and readied for operation towards the end of 2015. These new distributors represent thousands of additional retailers as potential new targets to sign up and implement the company's licensed deli pizza program. Additionally, the company completed the hiring of a broker network which the company implemented during the first quarter of 2016, and is currently training and developing. According to Scott Mobley, "Within the grocery venue, especially with some of the larger grocery distributors and supermarket retailers, broker representation is the industry expectation. In addition to satisfying this expectation, we are pushing our broker network on two additional objectives: (1) providing on-the-ground coverage of our licensed retailers to support their programs, and (2) providing contacts and sales ability to sign up new retailers to the company's program. We do not expect this to be an overnight process, as we are selling a full scale, made-fresh-daily program with several components rather than the usual carton-to-shelf products that occupy individual sku's. Though we believe the company's program has numerous selling advantages with retailers and end consumers as far as product quality and sales potential, it is out of the norm and requires substantial training and acclimation on the part of the brokers. While many of the brokers are already adding value to the process, those that do not will be replaced with other options in those specific territories."
In keeping with the strategic growth perspective outlined above, the company's non-traditional venue underwent a complete revamping and redesign during 2015 of the function and appearance of its pizza kiosk system. Recently completed in the current year of 2016, the actual production version of the redesigned kiosk made its début at the Western Petroleum Marketers Association expo in Las Vegas in February of 2016. Long lines at the company's booth and positive feedback from expo attendees demonstrated that it was well received. In addition to a complete redesign, the company has recently developed and introduced three tiers of program size and menu depth to accommodate the various opportunities, capabilities and objectives of potential franchisees and licensees. The company believes this will provide an excellent basis from which to promote new growth within the venue.
Throughout 2015 and continuing currently in 2016, in a major R&D effort, the company has been developing and testing a large array of new products, services, equipment, designs and systems in its stand-alone venue, many of which have been in test and have undergone further development. Working with these tests, and combining new potential avenues of enhancement, the company will be introducing an up-to-date prototype which it believes will further capitalize on the brand's name recognition, history and product strengths. Along with this, the company believes it is extremely important in 2016 to develop one or more of these prototype units to be company owned and operated, to serve as a show case for prospective franchisees and to serve as a catalyst for growth in the venue.
To make better use of and to increase available cash flow, to maintain a healthy degree of leverage, and to undertake the development of one or more company owned and operated stand alone units as described above, the company has undertaken efforts to restructure and refinance its current debt and to further decrease overhead cash requirements wherever possible. The company, both directly and indirectly, has sought and obtained proposals from a variety of financing sources and will endeavor to finalize arrangements soon.
Financial Results for First Quarter 2016 Compared to First Quarter 2015
Net income before income taxes was $570,000, or $.03 per share, compared to $585,000, or $.03 per share. Negatively affecting the net income before taxes in 2016 was a $37,000 loss on a restaurant discontinued which was a part of the operations that were discontinued in 2008 but the decision was made at the time to continue to operate this location until the lease expired. This loss represented the final expenses on the restaurant discontinued and will not have any expense in future quarters. The company will pay no income taxes on approximately the next $21 million in net income.
Net income was $350,000, or $.02 per share, compared to $347,000, or $.02 per share. As stated above, net income was negatively affected by the $37,000 loss on the restaurant discontinued.
Total revenue was $1.8 million for both the first quarter 2016 and 2015.
- Upfront franchisee fees and commissions were $56,000 compared to $66,000. This trend is expected to change in the remainder of 2016 as a result of the complete revamping of the appearance and function of the company's pizza kiosk system and, over time, as a result of development and testing new products, services and systems in the stand-alone venue, as previously discussed.
- Royalties and fees less upfront fees were approximately $1.7 million in both the first quarter of 2016 and 2015. The company expects these fees to increase through the year 2016 from the anticipated growth in the grocery take-n-bake venue as a result of going from 11 to 29 grocery store distribution centers in the latter part of 2015, as a result of the complete revamping of the appearance and function of the company's pizza kiosk system and, over time, as a result of the development and testing of new products, services and systems in the stand-alone venue.
- Royalties and fees from non-traditional franchises other than grocery stores were approximately $1.0 million in both the first quarter 2016 and 2015. These fees are expected to accelerate as 2016 progresses as a result of the complete revamping of the appearance and function of the company's pizza kiosk system.
- Royalties and fees from grocery store take-n-bake locations were $476,000 in the first quarter of 2016 compared to $402,000. As previously discussed, the growth in this venue is expected to accelerate as a result of going from 11 to 29 grocery store distribution centers in late 2015 and the addition of a broker network as they get experience through 2016.
- Royalties and fees from stand-alone locations were $123,000 with an average of 14 stores open for the quarter compared to $236,000 with an average of 22.5 stores open for the comparable quarter in 2015. The company is not anticipating major growth from this source of revenue in 2016, but the company is expecting to introduce an up-to-date stand-alone prototype which the company believes will further capitalize on the brand's name recognition, history and product strengths to provide a great opportunity for future growth.
- Royalties and fees from traditional locations were $60,000 compared to $65,000. This decrease was the result of two less franchised locations operating during the first quarter of 2016 compared to the comparable period last year, but was mostly offset by same store sales increases. A new franchised traditional location is scheduled to open the summer of 2016, and is anticipated to be a very high volume location.
- Operating margin was 37.2% in the first quarter of 2016 compared to 37.0%.
Balance Sheet Summary
Current assets were $4.1 million and current liabilities were $3.0 million as of March 31, 2016 compared to total current assets of $4.3 million and current liabilities of $1.4 million as of March 31, 2015. The majority of the company's outstanding debt is due in the first quarter of 2017, therefore it was reclassified from long-term debt at December 31, 2015 to short-term debt as of March 31, 2016. Total bank debt was $2.4 million as of March 31, 2016 compared to $2.9 million as of March 31, 2015. Total stockholders' equity as of March 31, 2016 was $15.2 million compared to $14.2 million as of March 31, 2015.
Recent Growth in the Grocery Take-n-Bake Venue
During 2015, the company signed licenses for 478 additional grocery store locations. During 2015, the company opened 404 locations of which 152 of those were in the fourth quarter. Thus far in 2016, the company has signed licenses for 239 additional grocery store locations and opened 93 locations.
Tactical Approach to the Company's Growth Strategy
The company's overall approach to pursuing its growth strategy can be summarized in the following four points:
- Expand revenue through three targeted growth venues: non-traditional franchises/licenses, grocery take-n-bake and stand-alone restaurants.
- Leveraging the results and continuing the process of recent testing, design and development in all three venues, especially the stand-alone and non-traditional venues.
- Aggressively communicating and marketing the company's advantages to its target markets through a variety of means, including but not limited to: direct phone solicitation, internet advertising, direct mail, one-on-one product demonstrations and selective trade shows.
- Maintaining an extremely disciplined focus on cost controls while undertaking the effort of expanding revenues.
Significant investment of time and effort has taken place to create competitive advantages through the company's products and systems. The quality of the company's products created through simple production processes and service systems, offered at a reasonable price point, is a strategic strength and a key driver of further growth potential. The company strives to design each ingredient and system to support the company's diverse, modularized menu offerings and to deliver superior results with the minimum possible labor within those objectives.
The company attempts to carefully select both its third-party manufacturers and distributors allowing for the production of proprietary products and services with efficient suppliers who can keep costs low compared to some of the company's competitors, especially those in the non-traditional venue that own, operate and distribute systems all within their own corporate structure.
With the company's strong product and system development comes communicating those advantages and conveying the high quality of products to prospective franchisees and licensees through various marketing efforts. The company utilizes a variety of strategies to accomplish this and has found that conducting live demonstrations of its systems and products at selected demonstrations, trade shows and food shows across the country allows it to demonstrate advantages that can otherwise be difficult for potential prospects to visualize. There is sometimes no substitute for tasting the company's products to fully understand the quality and taste performance. These trade shows are carefully selected based on existing relationships and prior experience as well as the potential for fruitful lead generation, and allow the opportunity to demonstrate the superior quality and taste of the company's products to a broad base of prospects at one time.
The company has chosen to substantially increase the scope and detail provided in the quarterly press release, which is also available on the investor relations section of the company's corporate website, www.nobleromans.com. Additionally, the company's Executive Chairman and Chief Financial Officer, Paul Mobley, will be accepting teleconference appointments for any interested shareholder or potential investor to schedule a personal, one-on-one question and answer session. Interested parties wishing to establish such an appointment may contact Mr. Mobley by e-mail at email@example.com.
The statements contained in this press release concerning the company's future revenues, profitability, financial resources, market demand and product development are forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) relating to the company that are based on the beliefs of the management of the company, as well as assumptions and estimates made by and information currently available to the company's management. The company's actual results in the future may differ materially from those projected in the forward-looking statements due to risks and uncertainties that exist in the company's operations and business environment, including, but not limited to, competitive factors and pricing pressures, non-renewal of franchise agreements the ability to refinance its debt prior to March 31, 2017, shifts in market demand, the success of new franchise programs with limited operating history including the stand-alone take-n-bake locations, general economic conditions, changes in purchases of or demand for the company's products, licenses or franchises, the success or failure of individual franchisees and licensees, changes in prices or supplies of food ingredients and labor, and dependence on continued involvement of current management. Should one or more of these risks or uncertainties materialize, or should underlying assumptions or estimates prove incorrect, actual results may differ materially from those described herein as anticipated, believed, estimated, expected or intended. The company undertakes no obligations to update the information in this press release for subsequent events.
|Noble Roman's, Inc. and Subsidiaries|
|Condensed Consolidated Balance Sheets|
|Assets||December 31, 2015||March 31,
|Accounts receivable - net||2,007,751||1,723,613|
|Deferred tax asset - current portion||925,000||925,000|
|Total current assets||4,253,010||4,113,442|
|Property and equipment:|
|Less accumulated depreciation and amortization||1,092,785||1,108,809|
|Net property and equipment||372,123||359,924|
|Deferred tax asset (net of current portion)||8,158,523||7,938,701|
|Other assets including long-term portion of receivables - net||5,681,272||6,433,835|
|Liabilities and Stockholders' Equity|
|Current portion of term loans payable to bank||$||601,081||$||1,858,247|
|Notes payable to officers||-||160,000|
|Revolving line of credit||-||500,000|
|Accounts payable and accrued expenses||847,418||487,989|
|Total current liabilities||1,448,499||3,006,236|
|Term loans payable to bank - net of current portion||1,366,454||-|
|Notes payable to officers||175,000||-|
|Notes payable to Kingsway America||600,000||600,000|
|Total long-term liabilities||2,141,454||600,000|
|Common stock - no par value (25,000,000 shares authorized, 20,775,921 issued and outstanding as of December 31, 2015 and 20,783,032 issued and outstanding as of March 31, 2016)||
|Total stockholders' equity||14,874,975||15,239,666|
|Total liabilities and stockholders' equity||$||18,464,928||$||18,845,902|
|Noble Roman's, Inc. and Subsidiaries|
|Condensed Consolidated Statements of Operations|
|Three months ended
|Royalties and fees||$||1,772,571||$||1,716,311|
|Administrative fees and other||11,749||11,074|
|Salaries and wages||279,518||251,308|
|Trade show expense||126,115||128,436|
|Other operating expenses||207,627||195,313|
|Depreciation and amortization||26,354||29,412|
|General and administrative||402,158||405,809|
|Loss on restaurant discontinued||46,341||36,776|
|Income before income taxes||584,941||569,621|
|Income tax expense||237,493||219,822|
|Earnings per share - basic:|
|Weighted average number of common shares outstanding||20,098,087||20,778,422|
|Diluted earnings per share:|
|Weighted average number of common shares outstanding||21,877,128||20,835,847|
SOURCE Noble Roman's, Inc.
President & CEO
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