Nathan’s Famous, Inc. Reports Third Quarter Results | 2022-02-04 | Press Releases

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Redeems $40 Million of its 6.625% Senior Secured Notes due 2025, and Increases its Quarterly Cash Dividend to $0.45 Per Share

JERICHO, N.Y., Feb. 04, 2022 (GLOBE NEWSWIRE) — Nathan’s Famous, Inc. (“Nathan’s”, the “Company”, “we”, “us” or “our”) (NASDAQ:NATH) today reported results for its third fiscal quarter ended December 26, 2021.

For the fiscal quarter ended December 26, 2021:

  • Revenues increased by 43.7% to $25,913,000 as compared to $18,030,000 during the thirteen weeks ended December 27, 2020;
  • Income from operations was $5,613,000 as compared to $4,403,000 during the thirteen weeks ended December 27, 2020;
  • Adjusted EBITDA1, a non-GAAP financial measure, was $5,907,000 as compared to $4,818,000 for the thirteen weeks ended December 27, 2020;
  • Income before provision for income taxes was $2,990,000 as compared to $1,851,000 for the thirteen weeks ended December 27, 2020;
  • Net income was $2,130,000 as compared to $1,359,000 for the thirteen weeks ended December 27, 2020; and
  • Earnings per diluted share was $0.52 per share as compared to $0.33 per share for the thirteen weeks ended December 27, 2020.

For the thirty-nine weeks ended December 26, 2021:

  • Revenues increased by 56.6% to $90,110,000 as compared to $57,555,000 during the thirty-nine weeks ended December 27, 2020;
  • Income from operations was $23,754,000 as compared to $20,081,000 during the thirty-nine weeks ended December 27, 2020;
  • Adjusted EBITDA1, a non-GAAP financial measure, was $24,739,000 as compared to $21,408,000 during the thirty-nine weeks ended December 27, 2020;
  • Income before provision for income taxes was $15,915,000 as compared to $12,470,000 during the thirty-nine weeks ended December 27, 2020;
  • Net income was $11,438,000 as compared to $9,014,000 during the thirty-nine weeks ended December 27, 2020; and
  • Earnings per diluted share was $2.78 per share as compared to $2.19 per share during the thirty-nine weeks ended December 27, 2020.

The Company also reported the following:

  • On January 26, 2022, the Company redeemed $40,000,000 in aggregate principal amount of its outstanding $150,000,000 6.625% Senior Secured Notes due 2025. As a result, the Company expects to reduce its future cash annual interest expense by $2,650,000.
  • During the fiscal 2022 period, the Board of Directors declared three quarterly cash dividends of $0.35 per share totaling $4,320,000.
  • Effective February 4, 2022, the Board of Directors increased the quarterly cash dividend by 29% and declared a quarterly cash dividend of $0.45 per share payable on March 4, 2022 to shareholders of record at the close of business on February 21, 2022.
  • License royalties were $24,218,000 during the thirty-nine weeks ended December 26, 2021, (“fiscal 2022 period”) as compared to $24,689,000 during the thirty-nine weeks ended December 27, 2020. During the fiscal 2022 period, royalties earned under the retail agreement, including the foodservice program, with John Morrell & Co., decreased 3% to $22,161,000, as compared to $22,743,000 of royalties earned during the thirty-nine weeks ended December 27, 2020.
  • In the Branded Product Program, which features the sale of Nathan’s hot dogs to the foodservice industry, income from operations increased by approximately $2,022,000 to $5,096,000 during the fiscal 2022 period, as compared to $3,074,000 for the thirty-nine weeks ended December 27, 2020. Sales were $51,960,000 during the fiscal 2022 period, compared to sales of $24,450,000 during the thirty-nine weeks ended December 27, 2020, while the volume of hot dogs sold by the Company increased 98%. Sales and income from operations for the Branded Product Program have increased as certain government mandated restrictions associated with the COVID-19 pandemic have eased with approved vaccines being more widely distributed and administered. Most of our Branded Product Program customers have reopened adhering to state and local guidelines, such as professional sports venues, amusement parks, shopping malls and movie theaters. Our average selling price, which is partially correlated to the beef markets, increased by approximately 7% compared to the prior year period.
  • Sales from Company-operated restaurants were $9,502,000 during the fiscal 2022 period compared to $6,247,000 during the thirty-nine weeks ended December 27, 2020. The increase was primarily due to an increase in our average check and an increase in customer traffic especially at our two Coney Island locations as a result of the easing of certain government mandated restrictions attributed to the public health measures taken to reduce exposure to the COVID-19 virus.
  • Revenues from franchise operations were $2,993,000 during the fiscal 2022 period, compared to $1,087,000 during the thirty-nine weeks ended December 27, 2020. Total royalties were $2,581,000 during the fiscal 2022 period as compared to $880,000 during the thirty-nine weeks ended December 27, 2020. Total franchise fee income was $412,000 during the fiscal 2022 period compared to $207,000 during the thirty-nine weeks ended December 27, 2020. The increase in franchise royalties during the fiscal 2022 period was primarily due to an increase in franchise restaurant sales of $25,544,000 to $40,910,000 as compared to $15,366,000 for the thirty-nine weeks ended December 27, 2020 as we continue to lap the significant impact of COVID-19.2 Fifteen new franchised outlets, thirty-two new branded menu program outlets and 164 ghost kitchens opened during the fiscal 2022 period.
  • During the fiscal 2022 period, we recorded Advertising Fund revenue and expense in the amount of $1,437,000 as compared to $1,082,000 during the thirty-nine weeks ended December 27, 2020.

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) 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 eighteen foreign countries through its restaurant system, foodservice sales programs and product licensing activities. 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 impact of the COVID-19 pandemic; 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 changes in the price of beef trimmings; our ability to pass on the cost of any price increases in beef and beef trimmings, or labor costs; 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 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.

1 EBITDA and Adjusted EBITDA 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.

2 Franchise restaurant sales are not revenues of the Company and are not included in the Company’s Consolidated Financial Statements.

Nathan’s Famous, Inc. and Subsidiaries
(unaudited)
Thirteen weeks ended Thirty-nine weeks ended
Dec. 26, 2021 Dec. 27, 2020 Dec. 26, 2021 Dec. 27, 2020
Financial Highlights
Total revenues $25,913,000 $18,030,000 $90,110,000 $57,555,000
Income from operations (a) $5,613,000 $4,403,000 $23,754,000 $20,081,000
Net income $2,130,000 $1,359,000 $11,438,000 $9,014,000
Income per share:
Basic $0.52 $0.33 $2.78 $2.19
Diluted $0.52 $0.33 $2.78 $2.19
Weighted-average shares used in
computing income per share:
Basic 4,115,000 4,115,000 4,115,000 4,117,000
Diluted 4,115,000 4,115,000 4,115,000 4,117,000
Select Segment Information
Revenues
Branded product program $16,901,000 $10,003,000 $51,960,000 $24,450,000
Product licensing 5,878,000 5,898,000 24,218,000 24,689,000
Restaurant operations 2,655,000 1,739,000 12,495,000 7,334,000
Corporate (b) 479,000 390,000 1,437,000 1,082,000
Total Revenues $25,913,000 $18,030,000 $90,110,000 $57,555,000
Income from operations (c)
Branded product program $1,681,000 $1,550,000 $5,096,000 $3,074,000
Product licensing 5,832,000 5,852,000 24,081,000 24,552,000
Restaurant operations (69,000) (1,162,000) 623,000 (2,193,000)
Corporate (d) (1,831,000) (1,837,000) (6,046,000) (5,352,000)
Income from operations (c) $5,613,000 $4,403,000 $23,754,000 $20,081,000

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

(b) Represents Advertising Fund revenue.

(c) 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.

(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, compliance costs and Advertising Fund expense.

Nathan’s Famous, Inc. and Subsidiaries
Reconciliation of Net Income to EBITDA and Adjusted EBITDA
(unaudited)
Thirteen weeks ended Thirty-nine weeks ended
Dec. 26, 2021 Dec. 27, 2020 Dec. 26, 2021 Dec. 27, 2020
EBITDA
Net Income $ 2,130,000 $ 1,359,000 $ 11,438,000 $ 9,014,000
Interest Expense 2,650,000 2,650,000 7,951,000 7,951,000
Provision for income taxes 860,000 492,000 4,477,000 3,456,000
Depreciation and amortization 259,000 288,000 807,000 900,000
EBITDA $ 5,899,000 $ 4,789,000 $ 24,673,000 $ 21,321,000
Adjusted EBITDA
EBITDA $ 5,899,000 $ 4,789,000 $ 24,673,000 $ 21,321,000
Share-based compensation 8,000 29,000 66,000 87,000
Adjusted EBITDA $ 5,907,000 $ 4,818,000 $ 24,739,000 $ 21,408,000
COMPANY Robert Steinberg, Vice President – Finance and CFO
CONTACT: (516) 338-8500 ext. 229





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