Nathan's Famous, Inc. Reports Second Quarter Results

JERICHO, N.Y., Nov. 2, 2018 /PRNewswire/ -- Nathan's Famous, Inc. (NASDAQ: NATH) today reported results for the second quarter of its 2019 fiscal year that ended September 23, 2018.

For the fiscal quarter ended September 23, 2018:

Revenues were $29,330,000, as compared to $31,471,000 during the thirteen weeks ended September 24, 2017;
Adjusted EBITDA, as subsequently defined, was $9,476,000, as compared to $9,257,000 for the thirteen weeks ended September 24, 2017;
Income before provision for income taxes was $6,463,000, as compared to $5,127,000 for the thirteen weeks ended September 24, 2017;
Net income was $4,484,000, as compared to $3,120,000 for the thirteen weeks ended September 24, 2017; and
Earnings per diluted share was $1.06 per share, as compared to $0.74 per share for the thirteen weeks ended September 24, 2017.

For the twenty-six weeks ended September 23, 2018:

Revenues were $59,498,000, as compared to $62,274,000 during the twenty-six weeks ended September 24, 2017;
Adjusted EBITDA, as subsequently defined, was $19,071,000, as compared to $18,230,000 for the twenty-six weeks ended September 24, 2017;
Income before provision for income taxes was $12,982,000, as compared to $9,970,000 for the twenty-six weeks ended September 24, 2017;
Net income was $9,279,000, as compared to $6,042,000 for the twenty-six weeks ended September 24, 2017; and
Earnings per diluted share was $2.19 per share, as compared to $1.43 per share for the twenty-six weeks ended September 24, 2017.

The Company also reported the following:

License royalties increased to $13,844,000 during the twenty-six weeks ended September 23, 2018, as compared to $13,165,000 during the twenty-six weeks ended September 24, 2018. During the twenty-six weeks ended September 23, 2018, total royalties earned under the John Morrell & Co., agreement increased 5.1% to $12,795,000, as compared to $12,173,000 of royalties earned during the twenty-six weeks ended September 24, 2017.

In the Branded Product Program, which features the sale of Nathan's hot dogs to the foodservice industry, income from operations increased by approximately $297,000 to $5,261,000 for the twenty-six weeks ended September 23, 2018, as compared to $4,964,000 for the twenty-six weeks ended September 24, 2017. Sales were $31,855,000 in the current period, compared to sales of $36,067,000 during the prior-year period, while the volume of hot dogs sold by the Company decreased 6.3%. 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 2.8% during the fiscal 2019 period. Our average selling price, which is partially correlated to the beef markets, decreased by approximately 7.2% compared to the year-earlier period.

Sales from Company-operated restaurants were $10,189,000 during the twenty-six weeks ended September 23, 2018, as compared to $10,555,000 during the twenty-six weeks ended September 24, 2017. Sales were negatively affected, especially at our two Coney Island locations, by exceptionally unfavorable weather conditions in the Northeastern United States, during April and August 2018.

Revenues from franchise operations were $2,343,000 during the twenty-six weeks ended September 23, 2018, as compared to $2,487,000 during the twenty-six weeks ended September 24, 2017. Total royalties were $2,101,000 in the fiscal 2019 period as compared to $2,330,000 in the fiscal 2018 period. Total franchise fee income was $242,000 during the twenty-six weeks ended September 23, 2018, as compared to $157,000 during the twenty-six weeks ended September 24, 2017. Nine new franchised outlets opened during the twenty-six weeks ended September 23, 2018, including two international locations, and four Branded Menu Program outlets.

During the twenty-six weeks ended September 23, 2018, we recorded Advertising Fund revenue and expense in the amount of $1,267,000 in connection with the adoption of ASC 606.

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. Nathan's lowered its interest expense by approximately $2,025,000 during the twenty-six weeks ended September 23, 2018 as compared to the twenty-six weeks ended September 24, 2017.

On September 21, 2018, we paid the $0.25 per share regular cash dividend that was declared by the Board of Directors effective August 3, 2018 to shareholders of record at the close of business on September 10, 2018.

Effective November 2, 2018, the Board of Directors declared its quarterly cash dividend of $0.25 per share payable on December 14, 2018 to shareholders of record at the close of business on December 3, 2018.

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 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.

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 fourteen 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 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; 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. 23, 2018		Sept. 24, 2017	Sept. 23, 2018		Sept. 24, 2017
Financial Highlights

Total revenues	$ 29,330,000		$ 31,471,000	$ 59,498,000		$ 62,274,000

Income from operations (a)	$ 8,480,000		$ 8,734,000	$ 17,567,000		$ 17,184,000

Net income	$ 4,484,000		$ 3,120,000	$ 9,279,000		$ 6,042,000

Income per share:
Basic	$ 1.07		$ 0.75	$ 2.22		$ 1.45
Diluted	$ 1.06		$ 0.74	$ 2.19		$ 1.43

Weighted-average shares used in
computing income per share:
Basic	4,188,000		4,179,000	4,187,000		4,178,000
Diluted	4,231,000		4,212,000	4,229,000		4,213,000
Select Segment Information Revenues
Branded product program	$15,410,000		$18,130,000	$31,855,000		$36,067,000
Product licensing	5,746,000		5,764,000	13,844,000		13,165,000
Restaurant operations	7,402,000		7,577,000	12,532,000		13,042,000
Corporate	772,000		-	1,267,000		-
Total Revenues	$29,330,000		$31,471,000	$59,498,000		$62,274,000
Income from operations (b) Branded product program Product licensing Restaurant operations Corporate (c) Income from operations (b)	$2,730,000 5,700,000 2,095,000 (2,045,000) $8,480,000		$2,692,000 5,719,000 2,335,000 (2,012,000) $8,734,000	$5,261,000 13,753,000 2,845,000 (4,292,000) $17,567,000		$4,964,000 13,075,000 3,230,000 (4,085,000) $17,184,000


(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. 23, 2018			Sept. 24, 2017	Sept. 23, 2018			Sept. 24, 2017
			(unaudited)				(unaudited)
EBITDA
Net Income	$ 4,484,000			$ 3,120,000	$ 9,279,000			$ 6,042,000

Interest Expense	2,651,000			3,663,000	5,301,000			7,326,000

Provision for income taxes	1,979,000			2,007,000	3,703,000			3,928,000

Depreciation and amortization	339,000			367,000	684,000			735,000

EBITDA	$ 9,453,000			$ 9,157,000	$ 18,967,000			$ 18,031,000



Adjusted EBITDA
EBITDA	$ 9,453,000			$ 9,157,000	$ 18,967,000			$ 18,031,000

Stock-based compensation	23,000			100,000	104,000			199,000

Adjusted EBITDA	$ 9,476,000			$ 9,257,000	$ 19,071,000			$ 18,230,000