Nathan's Famous, Inc. Reports Year-End And Fourth Quarter Results
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Nathan's Famous, Inc. Reports Year-End And Fourth Quarter Results

And Increases its Quarterly Cash Dividend to $0.35 Per Share

JERICHO, N.Y. - June 14, 2019 // GLOBE NEWSWIRE // - Nathan's Famous, Inc. (“Nathan’s”, the “Company”, “we”, “us” or “our”) (NASDAQ:NATH) today reported results for its fiscal year and fourth quarter ended March 31, 2019.

For the fifty-three week fiscal year ended March 31, 2019 (“fiscal 2019”):

  • Revenues were $101,849,000, as compared to $104,201,000 for the fifty-two week fiscal year ended March 25, 2018 (“fiscal 2018”);
  • Adjusted EBITDA1, a non-GAAP financial measure, was $30,399,000, as compared to $29,115,000 for fiscal 2018;
  • Income before provision for income taxes was $29,410,000, as compared to $4,112,000 for fiscal 2018;
  • Net income was $21,493,000, as compared to $2,630,000 for fiscal 2018;
  • Earnings per diluted share was $5.09, as compared to $0.62 per share for fiscal 2018; and
  • Excluding the gain from the sale of property and equipment, loss on debt extinguishment, impairment charge on long-lived assets and revaluation of deferred tax liabilities, net income would have been $13,325,000 or $3.16 per diluted share for fiscal 2019 as compared to net income of $8,601,000 or $2.04 per diluted share for fiscal 2018.

For the fourteen week fourth quarter ended March 31, 2019 (“fourth quarter fiscal 2019”):

  • Revenues were $22,129,000, as compared to $19,906,000 during the thirteen week quarter ended March 25, 2018 (“fourth quarter fiscal 2018”);
  • Adjusted EBITDA1, a non-GAAP financial measure, was $6,199,000, as compared to $5,030,000 for the fourth quarter fiscal 2018;
  • Income before provision for income taxes was $3,079,000, as compared to $1,228,000 for the fourth quarter fiscal 2018;
  • Net income was $2,492,000, as compared to $367,000 for the fourth quarter fiscal 2018; and
  • Earnings per diluted share were $0.59, as compared to $0.09 per share for the fourth quarter fiscal 2018.

The Company also reported the following:

  • The Board of Directors increased the quarterly cash dividend by 40% and effective June 14, 2019, the Board of Directors declared a quarterly cash dividend of $0.35 per share, payable on June 28, 2019 to shareholders of record at the close of business on June 24, 2019.
  • License royalties increased to $23,615,000 during fiscal 2019, as compared to $23,020,000 during fiscal 2018. During fiscal 2019, total royalties earned under the John Morrell & Co., agreement increased 2.1% to $21,271,000, as compared to $20,833,000 of royalties earned during fiscal 2018. Licensee sales and royalties, which are reported by our licensees, were not affected by the additional week in fiscal 2019.
  • In the Branded Product Program, which features the sale of Nathan’s hot dogs to the foodservice industry, income from operations increased by approximately $833,000 to $10,302,000 during fiscal 2019, as compared to $9,469,000 during fiscal 2018. Sales for the Branded Product Program were $57,960,000 during fiscal 2019, compared to sales of $62,623,000 during fiscal 2018, while the volume of hot dogs sold by the Company decreased 3.8%. Foodservice sales during the 53rd week of fiscal 2019 were $2,090,000. However, the sales and volume declines were mostly related to the use of a new re-distributor to temporarily service certain of our regular distributor customers. Excluding the effects of the re-distributors’ purchases in both years, we estimate that customer shipments, increased by approximately 3.6% during fiscal 2019. Our average selling price, which is partially correlated to the beef markets, decreased by approximately 3.5% in fiscal 2019 compared to fiscal 2018.
  • Sales from Company-operated restaurants were $13,601,000 during fiscal 2019, as compared to $14,085,000 during fiscal 2018. Sales were negatively affected, especially at our two Coney Island locations, by exceptionally unfavorable weather conditions in the Northeastern United States, during April and the summer. Sales from our Company-owned restaurants during the 53rd week of fiscal 2019 were approximately $142,000. Additionally, sales were lower than the fiscal 2018 period by $268,000 arising from the sale of our restaurant in Bay Ridge, Brooklyn, NY.
  • Revenues from franchise operations were $4,171,000 during fiscal 2019, as compared to $4,473,000 during fiscal 2018. Total royalties were $3,666,000 in the fiscal 2019 period as compared to $4,138,000 in the fiscal 2018 period. Total franchise fee income was $505,000 during fiscal 2019, as compared to $335,000 during fiscal 2018. Thirteen new franchised outlets opened during fiscal 2019, including five international locations, and four Branded Menu Program outlets.
  • During fiscal 2019, we recorded Advertising Fund revenue in the amount of $2,502,000 in connection with the adoption of Topic 606.
  • During fiscal 2019, Nathan’s sold its restaurant, including land, in Bay Ridge, Brooklyn, New York and its regional office building in Ft. Lauderdale, Florida recognizing gains, before transaction costs of $11,177,000, or $8,168,000 net of tax.
  • In November 2017, Nathan’s refinanced its then-outstanding $135.0 million 10.000% Senior Secured Notes due 2020 by issuing $150.0 million 6.625% Senior Secured Notes due 2025. In connection with the refinancing, the Company recorded a loss on extinguishment of debt of $8,872,000 or $5,266,000, net of tax. Nathan’s reduced its interest expense by approximately $2,799,000 during fiscal 2019 as compared to fiscal 2018.
  • Provision for income taxes for fiscal 2018 was reduced by $245,000 or $0.06 per diluted share resulting from the revaluation of its deferred tax liabilities resulting from the effects of the Tax Cuts and Jobs Act.
  • On March 22, 2019, we paid the $0.25 per share regular cash dividend that was declared by the Board of Directors effective February 1, 2019 to shareholders of record at the close of business on March 11, 2019.

1 EBITDA and Adjusted EDITDA are non-GAAP financial measures. Please see the definitions of EBITDA and Adjusted EBITDA on page 3 of this release and the reconciliation of EBITDA and Adjusted EBITDA to net income in the table at the end of this release.

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) gain on sale of property and equipment; (ii) loss on debt extinguishment; (iii) impairment charge on long-lived assets and (iv) 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 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 sixteen 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 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.
               
  Fiscal quarter ended   Fiscal year ended
  Mar. 31, 2019   Mar. 25, 2018   Mar. 31, 2019   Mar. 25, 2018
  (14 weeks)   (13 weeks)   (53 weeks)   (52 weeks)
Financial Highlights              
               
Total revenues $ 22,129,000     $ 19,906,000     $ 101,849,000     $ 104,201,000  
                               
Income from operations (a) $ 5,513,000     $ 4,546,000     $ 27,976,000     $ 27,100,000  
                               
Net income $ 2,492,000     $ 367,000     $ 21,493,000     $ 2,630,000  
                               
Income per share:                              
Basic $ 0.60     $ 0.09     $ 5.13     $ 0.63  
Diluted $ 0.59     $ 0.09     $ 5.09     $ 0.62  
                               
Weighted-average shares used in                              
computing income per share:                              
Basic   4,187,000       4,185,000       4,187,000       4,181,000  
Diluted   4,202,000       4,228,000       4,220,000       4,221,000  
                               
Select Segment Information                              
                               
Revenues                              
Branded product program $ 13,652,000     $ 11,882,000     $ 57,960,000     $ 62,623,000  
Product licensing   5,455,000       5,627,000       23,615,000       23,020,000  
Restaurant operations   2,378,000       2,397,000       17,772,000       18,558,000  
Corporate (d)   644,000       -       2,502,000       -  
Total Revenues $ 22,129,000     $ 19,906,000     $ 101,849,000     $ 104,201,000  
                               
Income from Operations (b)                              
Branded product program $ 2,577,000     $ 1,581,000     $ 10,302,000     $ 9,469,000  
Product licensing   5,410,000       5,581,000       23,433,000       22,838,000  
Restaurant operations   (335,000 )     (479,000 )     2,398,000       2,730,000  
Corporate (c)   (2,139,000 )     (2,137,000 )     (8,157,000 )     (7,937,000 )
Income from operations (b) $ 5,513,000     $ 4,546,000     $ 27,976,000     $ 27,100,000  
                               

(a) Excludes gain on sale of property and equipment, interest expense, loss on debt extinguishment, impairment charge on long-lived assets, interest income, and other income, net.
(b) Excludes 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. 
(c) 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 expenses of the Advertising Fund. 
(d) Represents Advertising Fund revenue.

Nathan's Famous, Inc. and Subsidiaries

Reconciliation of Net Income to EBITDA and Adjusted EBITDA

  Fiscal quarter ended   Fiscal year ended
  Mar. 31, 2019   Mar. 25, 2018   Mar. 31, 2019   Mar. 25, 2018
  (14 weeks)   (13 weeks)   (53 weeks)   (52 weeks)
               
EBITDA              
Net income $ 2,492,000   $ 367,000   $ 21,493,000     $ 2,630,000
                         
Interest expense   2,841,000     2,615,000     10,792,000       13,591,000
                         
Provision for income taxes   587,000     861,000     7,917,000       1,482,000
                         
Depreciation and amortization   250,000     297,000     1,212,000       1,352,000
                         
EBITDA $ 6,170,000   $ 4,140,000   $ 41,414,000     $ 19,055,000
                         
                         
                         
Adjusted EBITDA                        
EBITDA $ 6,170,000   $ 4,140,000   $ 41,414,000     $ 19,055,000
                         
Gain on sale of property and equipment   --     --     (11,177,000 )     --
                         
Loss on debt extinguishment   --     --     --       8,872,000
                         
Impairment charge long-lived assets   --     790,000     --       790,000
                         
Stock-based compensation   29,000     100,000     162,000       398,000
                         
Adjusted EBITDA $ 6,199,000   $ 5,030,000   $ 30,399,000     $ 29,115,000
                         

Contact:

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

Source: Nathan's Famous Inc

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