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Nathan's Famous, Inc. Reports Second Quarter Results

JERICHO, N.Y., Nov. 3, 2017 /PRNewswire/ -- Nathan's Famous, Inc. (NASDAQ: NATH) today reported results for the second quarter of its 2018 fiscal year that ended September 24, 2017.

For the fiscal quarter ended September 24, 2017:

  • Revenues were $31,606,000, as compared to $28,013,000 during the thirteen weeks ended September 25, 2016;
  • Income from operations was $8,734,000, as compared to $8,031,000 during the thirteen weeks ended September 25, 2016;
  • Adjusted EBITDA, as subsequently defined, was $9,257,000 as compared to $8,610,000 for the thirteen weeks ended September 25, 2016;
  • Net income was $3,120,000, as compared to $2,507,000 for the thirteen weeks ended September 25, 2016;
  • Earnings per diluted share was $0.74 per share, as compared to $0.60 per share for the thirteen weeks ended September 25, 2016; and
  • Excluding the tax benefits of stock compensation as described below, net income and earnings per diluted share, would have been $3,004,000 or $0.71 per share, as compared to $2,507,000 or $0.60 per share, as reported, for the thirteen weeks ended September 25, 2016.

For the twenty-six weeks ended September 24, 2017:

  • Revenues were $62,524,000, as compared to $57,429,000 during the twenty-six weeks ended September 25, 2016;
  • Income from operations was $17,184,000, as compared to $16,855,000 during the twenty-six weeks ended September 25, 2016;
  • Adjusted EBITDA, as subsequently defined, was $18,230,000 as compared to $17,976,000 for the twenty-six weeks ended September 25, 2016;
  • Net income was $6,042,000, as compared to $6,057,000 for the twenty-six weeks ended September 25, 2016;
  • Earnings per diluted share was $1.43 per share, as compared to $1.44 per share for the twenty-six weeks ended September 25, 2016; and
  • Excluding the tax benefits of stock compensation as described below, net income and earnings per diluted share, would have been $5,848,000 or $1.39 per share, as compared to $5,436,000 or $1.29 per share for the twenty-six weeks ended September 25, 2016.

The Company reported the following:                                    

  • License royalties increased to $13,165,000 during the twenty-six weeks ended September 24, 2017, as compared to $11,612,000 during the twenty-six weeks ended September 25, 2016. During the twenty-six weeks ended September 24, 2017, total royalties earned under the John Morrell & Co., agreement from the sale of hot dogs, increased 13.6% to $12,173,000, as compared to $10,714,000 of royalties earned during the twenty-six weeks ended September 25, 2016.
  • In the Branded Product Program, featuring the sale of Nathan's hot dogs to the foodservice industry, sales increased by 14.6% to $36,067,000 during the twenty-six weeks ended September 24, 2017, compared to sales of $31,481,000 during the twenty-six weeks ended September 25, 2016. During the period, the volume of hot dogs sold increased 11.0% and our average selling price increased by approximately 3.3%. Income from operations from the Branded Product Program declined by approximately $485,000 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 and June 2017.
  • Sales from Company-operated restaurants were $10,805,000 during the twenty-six weeks ended September 24, 2017, compared to $11,458,000 during the twenty-six weeks ended September 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 $2,487,000 during the twenty-six weeks ended September 24, 2017, compared to $2,664,000 during the twenty-six weeks ended September 25, 2016. Total royalties were $2,330,000 in the fiscal 2018 period as compared to $2,402,000 in the fiscal 2017 period. Total franchise fee income was $157,000 during the twenty-six weeks ended September 24, 2017 compared to $262,000 during the twenty-six weeks ended September 25, 2016. Twenty-seven new franchised outlets opened during the twenty-six weeks ended September 24, 2017, including nine international locations, and 15 Branded Menu Program outlets.
  • Nathan's recognized excess tax benefits of $194,000 and $621,000 during the fiscal 2018 and fiscal 2017 periods, respectively, as a result of the tax benefits associated with the stock compensation guidance that the Company adopted in the fiscal 2017 period. The impact of the tax benefits reduced Nathan's tax rate by 1.9% and 6.4%, respectively, and increased earnings per diluted share by $0.04 and $0.15, 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 10.000% Senior Secured Notes due 2020. Nathan's will incur additional expenses in connection with the refinancing, including a 5% call premium of $6,750,000 along with expensing the unamortized debt issuance costs of up to approximately, $2,725,000 associated with the 2020 Notes. The Company also expects to incur additional interest expense of approximately $562,500 from the time the 2025 Notes close until the time the 2020 Notes are redeemed. The Company expects to reduce its future annual interest expense by approximately $3,562,500 per annum.
  • On November 1, 2017, the Board of Directors declared the $5.00 per share special cash dividend that is payable 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 for income taxes and (iii) depreciation and amortization expense. The Company has also provided Adjusted EBITDA excluding (i) 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 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; 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


Twenty-six weeks ended


Sept. 24, 2017


Sept. 25, 2016


Sept. 24, 2017


Sept. 25, 2016

Financial Highlights












Total revenues

$    31,606,000


$   28,013,000


$   62,524,000


$      57,429,000









Income from operations (a)

$      8,734,000


$      8,031,000


$   17,184,000


$      16,855,000









Net income

$      3,120,000


$      2,507,000


$     6,042,000


$        6,057,000









Income per share:








   Basic

$               0.75


$                0.60


$              1.45


$                  1.45

   Diluted

$               0.74


$                0.60


$              1.43


$                  1.44









Weighted-average shares used in








   computing income per share:








   Basic

4,179,000


4,172,000


4,178,000


4,169,000

   Diluted

4,212,000


4,207,000


4,213,000


4,199,000









Select Segment Information
















Revenues








Branded product program

$18,130,000


$15,277,000


$36,067,000


$31,696,000

Product licensing

5,764,000


4,788,000


13,165,000


11,612,000

Restaurant operations

7,712,000


7,948,000


13,292,000


14,121,000

Corporate

-


-


-


-

   Total Revenues

$31,606,000


$28,013,000


$62,524,000


$57,429,000

















Income from operations (b)








Branded product program

$2,692,000


$2,496,000


$4,964,000


$5,449,000

Product licensing

5,719,000


4,743,000


13,075,000


11,521,000

Restaurant operations

2,335,000


2,602,000


3,230,000


4,035,000

Corporate (c)

(2,012,000)


(1,810,000)


(4,085,000)


(4,150,000)

     Income from operations (b)

$8,734,000


$8,031,000


$17,184,000


$16,855,000


 

(a)   

Excludes interest expense, 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 and compliance costs.


 

 

Nathan's Famous, Inc. and Subsidiaries

Reconciliation of Net Income to EBITDA and Adjusted EBITDA











Thirteen weeks ended




Twenty-six weeks ended



Sept. 24, 2017


Sept. 25, 2016


Sept. 24, 2017


Sept. 25, 2016




(unaudited)




(unaudited)



EBITDA









Net Income

$    3,120,000


$    2,507,000


$   6,042,000


$   6,057,000











Interest Expense

3,663,000


3,663,000


7,326,000


7,339,000











Provision for income taxes

2,007,000


1,918,000


3,928,000


3,538,000











Depreciation and amortization

367,000


349,000


735,000


696,000











EBITDA

$    9,157,000


$    8,437,000


$   18,031,000


$   17,630,000





























Adjusted EBITDA









EBITDA

$    9,157,000


$    8,437,000


$   18,031,000


$   17,630,000











Stock-based compensation

100,000


173,000


199,000


346,000











Adjusted EBITDA

$    9,257,000


$    8,610,000


$   18,230,000


$   17,976,000






























 

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

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SOURCE Nathan's Famous, Inc.