Nathan's Famous, Inc. Reports Year-End And Fourth Quarter Results
June 14 2019 - 8:30AM
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. |
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Fiscal quarter ended |
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Fiscal year ended |
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Mar. 31, 2019 |
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Mar. 25, 2018 |
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Mar. 31, 2019 |
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Mar. 25, 2018 |
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(14 weeks) |
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(13 weeks) |
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(53 weeks) |
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(52 weeks) |
Financial Highlights |
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Total revenues |
$ |
22,129,000 |
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$ |
19,906,000 |
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$ |
101,849,000 |
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$ |
104,201,000 |
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Income from operations (a) |
$ |
5,513,000 |
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|
$ |
4,546,000 |
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|
$ |
27,976,000 |
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|
$ |
27,100,000 |
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Net income |
$ |
2,492,000 |
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$ |
367,000 |
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$ |
21,493,000 |
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$ |
2,630,000 |
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Income per share: |
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Basic |
$ |
0.60 |
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$ |
0.09 |
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$ |
5.13 |
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$ |
0.63 |
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Diluted |
$ |
0.59 |
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$ |
0.09 |
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$ |
5.09 |
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$ |
0.62 |
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Weighted-average shares used in |
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computing income per share: |
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Basic |
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4,187,000 |
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4,185,000 |
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4,187,000 |
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4,181,000 |
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Diluted |
|
4,202,000 |
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4,228,000 |
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4,220,000 |
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4,221,000 |
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Select Segment
Information |
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Revenues |
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Branded product program |
$ |
13,652,000 |
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$ |
11,882,000 |
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$ |
57,960,000 |
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$ |
62,623,000 |
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Product licensing |
|
5,455,000 |
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5,627,000 |
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23,615,000 |
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23,020,000 |
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Restaurant operations |
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2,378,000 |
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2,397,000 |
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17,772,000 |
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18,558,000 |
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Corporate (d) |
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644,000 |
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- |
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2,502,000 |
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- |
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Total Revenues |
$ |
22,129,000 |
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|
$ |
19,906,000 |
|
|
$ |
101,849,000 |
|
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$ |
104,201,000 |
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Income from Operations (b) |
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Branded product program |
$ |
2,577,000 |
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$ |
1,581,000 |
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$ |
10,302,000 |
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$ |
9,469,000 |
|
Product licensing |
|
5,410,000 |
|
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|
5,581,000 |
|
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23,433,000 |
|
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22,838,000 |
|
Restaurant operations |
|
(335,000 |
) |
|
|
(479,000 |
) |
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|
2,398,000 |
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|
2,730,000 |
|
Corporate (c) |
|
(2,139,000 |
) |
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(2,137,000 |
) |
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|
(8,157,000 |
) |
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|
(7,937,000 |
) |
Income from operations (b) |
$ |
5,513,000 |
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|
$ |
4,546,000 |
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$ |
27,976,000 |
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$ |
27,100,000 |
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(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) |
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(53 weeks) |
|
(52 weeks) |
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EBITDA |
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Net income |
$ |
2,492,000 |
|
$ |
367,000 |
|
$ |
21,493,000 |
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|
$ |
2,630,000 |
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Interest expense |
|
2,841,000 |
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|
2,615,000 |
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|
10,792,000 |
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|
13,591,000 |
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Provision for income taxes |
|
587,000 |
|
|
861,000 |
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|
7,917,000 |
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|
1,482,000 |
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Depreciation and amortization |
|
250,000 |
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|
297,000 |
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|
1,212,000 |
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1,352,000 |
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EBITDA |
$ |
6,170,000 |
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$ |
4,140,000 |
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$ |
41,414,000 |
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$ |
19,055,000 |
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Adjusted EBITDA |
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EBITDA |
$ |
6,170,000 |
|
$ |
4,140,000 |
|
$ |
41,414,000 |
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|
$ |
19,055,000 |
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Gain on sale of property and
equipment |
|
-- |
|
|
-- |
|
|
(11,177,000 |
) |
|
|
-- |
|
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Loss on debt extinguishment |
|
-- |
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|
-- |
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|
-- |
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8,872,000 |
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Impairment charge long-lived
assets |
|
-- |
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|
790,000 |
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-- |
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790,000 |
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Stock-based compensation |
|
29,000 |
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|
100,000 |
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|
162,000 |
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|
398,000 |
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Adjusted EBITDA |
$ |
6,199,000 |
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$ |
5,030,000 |
|
$ |
30,399,000 |
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$ |
29,115,000 |
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COMPANY Ronald G. DeVos, Vice President -
Finance and CFO CONTACT: (516) 338-8500 ext.
229
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