Nathan's Famous, Inc. Reports Third Quarter Results

JERICHO, N.Y. - Feb. 2, 2018 // PRNewswire // - Nathan's Famous, Inc. (NASDAQ:NATH) today reported results for the third quarter of its 2018 fiscal year that ended December 24, 2017.

For the fiscal quarter ended December 24, 2017:

  • Revenues increased to $22,083,000, as compared to $19,937,000 during the thirteen weeks ended December 25, 2016;
  • Income from operations increased to $5,370,000, as compared to $4,754,000 during the thirteen weeks ended December 25, 2016;
  • Adjusted EBITDA, as subsequently defined, increased to $5,855,000 as compared to $5,255,000 for the thirteen weeks ended December 25, 2016;
  • Excluding the loss on debt extinguishment and revaluation of deferred tax liabilities as described below, net income and earnings per diluted share, would have been $1,051,000 or $0.25 per share, as compared to $699,000 or $0.17 per share, as reported, for the thirteen weeks ended December 25, 2016;
  • In connection with our refinancing of the 10.000% Senior Secured Notes due 2020, we recorded a loss on debt extinguishment of $8,872,000, or $5,266,000, net of tax, or $1.25 per diluted share. We expect the new 6.6250% Senior Secured Notes due 2025 to lower our cash interest expense by $3,562,500 per annum;
  • Benefit for income taxes was increased by $436,000 or $0.10 per diluted share resulting from the revaluation of its deferred tax liabilities resulting from the effects of tax reform;
  • Net loss was $3,779,000, as compared to net income $699,000 for the thirteen weeks ended December 25, 2016; and
  • Loss per diluted share was $0.90 per share, as compared to earnings of $0.17 per share for the thirteen weeks ended December 25, 2016.

For the thirty-nine weeks ended December 24, 2017:

  • Revenues increased to $84,607,000, as compared to $77,366,000 during the thirty-nine weeks ended December 25, 2016;
  • Income from operations increased to $22,554,000, as compared to $21,609,000 during the thirty-nine weeks ended December 25, 2016;
  • Adjusted EBITDA, as subsequently defined, increased to $24,085,000 as compared to $23,231,000 for the thirty-nine weeks ended December 25, 2016;
  • Excluding the loss on debt extinguishment and revaluation of deferred tax liabilities as described below, net income and earnings per diluted share, would have been $7,093,000 or $1.68 per share, as compared to $6,756,000 or $1.61 per share, as reported, for the thirty-nine weeks ended December 25, 2016;
  • In connection with our refinancing of the 10.000% Senior Secured Notes due 2020, we recorded a loss on debt extinguishment of $8,872,000, or $5,266,000, net of tax, or $1.25 per diluted share. We expect the new 6.6250% Senior Secured Notes due 2025 to lower our cash interest expense by $3,562,500 per annum;
  • Provision for income taxes was reduced by $436,000 or $0.10 per diluted share resulting from the revaluation of its deferred tax liabilities resulting from the effects of tax reform;
  • Net income was $2,263,000, as compared to $6,756,000 for the thirty-nine weeks ended December 25, 2016; and
  • Earnings per diluted share was $0.54 per share, as compared to $1.61 per share for the thirty-nine weeks ended December 25, 2016.

The Company reported the following:

  • License royalties increased to $17,393,000 during the thirty-nine weeks ended December 24, 2017, as compared to $15,602,000 during the thirty-nine weeks ended December 25, 2016. During the thirty-nine weeks ended December 24, 2017, total royalties earned under the John Morrell & Co., agreement from the sale of hot dogs, increased 11.5% to $15,853,000, as compared to $14,214,000 during the thirty-nine weeks ended December 25, 2016.
  • In the Branded Product Program, featuring the sale of Nathan's hot dogs to the foodservice industry, sales increased by 14.4% to $50,741,000 during the thirty-nine weeks ended December 24, 2017, as compared to sales of $44,349,000 during the thirty-nine weeks ended December 25, 2016. During the period, the volume of hot dogs sold increased 10.9% and our average selling price increased by approximately 3.2%. Income from operations from the Branded Product Program declined by approximately $448,000 for the fiscal 2018 period as compared to the fiscal 2017 period, as a result of a significant increase in the cost of beef during May, June and July 2017. During this three month period, income from operations from the Branded Products Program declined by $1,343,000 as a direct result of the increase in the cost of beef, while income from operations increased by $895,000 during the remainder of the fiscal period.
  • Sales from Company-operated restaurants were $12,898,000 during the thirty-nine weeks ended December 24, 2017, compared to $13,449,000 during the thirty-nine weeks ended December 25, 2016. Sales were impacted by unfavorable weather conditions during the fiscal 2018 period, especially at our two locations in Coney Island that depend on beach traffic.
  • Revenues from franchise operations were $3,575,000 during the thirty-nine weeks ended December 24, 2017, compared to $3,752,000 during the thirty-nine weeks ended December 25, 2016. Total royalties were $3,293,000 in the fiscal 2018 period as compared to $3,386,000 in the fiscal 2017 period. Total franchise fee income was $282,000 during the thirty-nine weeks ended December 24, 2017 compared to $366,000 during the thirty-nine weeks ended December 25, 2016. Thirty-five new franchised outlets opened during the thirty-nine weeks ended December 24, 2017, including 13 international locations, and 17 Branded Menu Program outlets.
  • Nathan's recognized excess tax benefits of $194,000 and $659,000 during the fiscal 2018 and fiscal 2017 periods, respectively, as a result of the tax benefits associated with stock compensation. The impact of the tax benefits reduced Nathan's tax rate by 6.7% and 6.1%, respectively, and increased earnings per diluted share by $0.05 and $0.16, during the fiscal 2018 and fiscal 2017 periods, respectively.
  • On November 1, 2017, Nathan's issued $150.0 million 6.625% Senior Secured Notes due 2025 to fund the November 16, 2017 redemption of its $135.0 million 10.000% Senior Secured Notes due 2020. Nathan's incurred a loss on debt extinguishment associated with the refinancing of $8,872,000. The Company also incurred additional interest expense of approximately $562,500 from the time the 2025 Notes closed until the time the 2020 Notes were redeemed. The Company expects to reduce its future cash annual interest expense by $3,562,500 per annum.
  • On November 1, 2017, the Board of Directors declared the $5.00 per share special cash dividend that was paid on January 4, 2018 to shareholders of record at the close of business on December 22, 2017.

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 (benefit) for income taxes and (iii) depreciation and amortization expense. The Company has also provided Adjusted EBITDA excluding (i) loss on debt extinguishment and (ii) stock-based compensation 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 thirteen foreign countries through its restaurant system, foodservice sales programs and product licensing activities. Last year, over 600 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 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 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 minimum wage legislation on labor costs in New York State or other changes in labor laws, including court decisions 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; 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.

(unaudited)

 

Thirteen weeks ended

 

Thirty-nine weeks ended

 
 

Dec. 24, 2017

 

Dec. 25, 2016

 

Dec. 24, 2017

 

Dec. 25, 2016

 

Financial Highlights

               
                 

Total revenues

$    22,083,000

 

$   19,937,000

 

$   84,607,000

 

$   77,366,000

 
                 

Income from operations (a)

$      5,370,000

 

$     4,754,000

 

$   22,554,000

 

$   21,609,000

 
                 

Net (loss) income

$    (3,779,000)

 

$       699,000

 

$     2,263,000

 

$     6,756,000

 
                 

(Loss) income per share:

               

   Basic

$             (0.90)

 

$              0.17

 

$              0.54

 

$              1.62

 

   Diluted (b)

$             (0.90)

 

$              0.17

 

$              0.54

 

$              1.61

 
                 

Weighted-average shares used in

               

   computing income per share:

               

   Basic

4,185,000

 

4,175,000

 

4,180,000

 

4,171,000

 

   Diluted (b)

4,185,000

 

4,209,000

 

4,219,000

 

4,202,000

 

Select Segment Information

               
                 

Revenues

               

Branded product program

$14,674,000

 

$12,868,000

 

$50,741,000

 

$44,563,000

 

Product licensing

4,228,000

 

3,990,000

 

17,393,000

 

15,602,000

 

Restaurant operations

3,181,000

 

3,079,000

 

16,473,000

 

17,201,000

 

Corporate

-

 

-

 

-

 

-

 

   Total Revenues

$22,083,000

 

$19,937,000

 

$84,607,000

 

$77,366,000

 
                 

Income from operations (c)

               

Branded product program

$2,924,000

 

$2,886,000

 

$7,888,000

 

$8,336,000

 

Product licensing

4,182,000

 

3,944,000

 

17,257,000

 

15,465,000

 

Restaurant operations

(21,000)

 

48,000

 

3,209,000

 

4,083,000

 

Corporate (d)

(1,715,000)

 

(2,124,000)

 

(5,800,000)

 

(6,275,000)

 

   Income from operations (c)

$  5,370,000

 

$4,754,000

 

$22,554,000

 

$21,609,000

 
                 

 

(a)

Excludes loss on debt extinguishment, interest expense, interest income, and other income, net.

(b)

Options to purchase 47,000 shares of common stock were excluded from the computation of diluted earnings per share as the effect would have been anti-dilutive for the thirteen week period ended December 24, 2017.

(c)

Excludes loss on debt extinguishment, interest expense, interest income 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.

(d)

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 and compliance costs.

?

Nathan's Famous, Inc. and Subsidiaries

Reconciliation of Net Income to EBITDA and Adjusted EBITDA

 
 

Thirteen weeks ended

Thirty-nine weeks ended

 
 

Dec. 24, 2017

 

Dec. 25, 2016

 

Dec. 24, 2017

 

Dec. 25, 2016

 
 

(unaudited)

(unaudited)

 

EBITDA

             

Net (Loss) Income

$   (3,779,000)

 

$      699,000

 

$   2,263,000

 

$   6,756,000

 
               

Interest Expense

3,650,000

 

3,663,000

 

10,976,000

 

11,002,000

 
               

(Benefit) Provision for income taxes

(3,307,000)

 

448,000

 

621,000

 

3,986,000

 
                 

Depreciation and amortization

320,000

 

309,000

 

1,055,000

 

1,005,000

 
                 

EBITDA

$   (3,116,000)

 

$    5,119,000

 

$   14,915,000

 

$   22,749,000

 
                 
                 
                 

Adjusted EBITDA

               

EBITDA

$    (3,116,000)

 

$    5,119,000

 

$   14,915,000

 

$   22,749,000

 
                 

Loss on debt extinguishment

8,872,000

 

-

 

8,872,000

 

-

 
                 

Stock-based compensation

99,000

 

136,000

 

298,000

 

482,000

 
                 

Adjusted EBITDA

$    5,855,000

 

$    5,255,000

 

$   24,085,000

 

$   23,231,000

 
   

Contact:

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

Cision View original content:http://www.prnewswire.com/news-releases/nathans-famous-inc-reports-third-quarter-results-300592807.html

SOURCE Nathan's Famous, Inc.

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