Nathan's Famous, Inc. Reports Second Quarter Results

Rhea-AI Summary

Nathan's Famous, Inc. (NASDAQ:NATH) reported a decline in revenues and income for the second quarter of fiscal 2021 compared to the same period last year. Revenues were $21.8 million, down from $29.7 million, while net income slightly decreased to $3.7 million. Adjusted EBITDA was $8 million, a decline from $8.1 million. Despite the challenges, license royalties rose to $18.8 million, up from $14.1 million, driven by strong consumer demand during the pandemic. The Board declared a quarterly cash dividend of $0.35 per share, maintaining shareholder returns amidst financial struggles.

Positive

• License royalties increased to $18,791,000, up from $14,147,000, reflecting strong consumer demand.
• Declared a quarterly cash dividend of $0.35 per share, totaling $2,880,000.

Negative

• Revenues declined to $21,839,000 from $29,726,000 year-over-year.
• Net income decreased slightly to $3,655,000 from $3,658,000 year-over-year.
• Adjusted EBITDA fell to $8,040,000 from $8,123,000 year-over-year.
• Sales in the Branded Product Program dropped 57%, impacting income from operations.
• Company-operated restaurant sales decreased to $4,928,000 from $10,048,000 due to reduced customer traffic.

And Declares Quarterly Cash Dividend Of $.35 Per Share.

JERICHO, N.Y., Nov. 06, 2020 (GLOBE NEWSWIRE) -- Nathan's Famous, Inc. (NASDAQ:NATH) today reported results for the second quarter of its 2021 fiscal year that ended September 27, 2020.

For the fiscal quarter ended September 27, 2020:

• Revenues were $21,839,000 as compared to $29,726,000 during the thirteen weeks ended September 29, 2019;
• Income from operations was $7,584,000 as compared to $7,366,000 during the thirteen weeks ended September 29, 2019;
• Adjusted EBITDA¹, a non-GAAP financial measure, was $8,040,000 as compared to $8,123,000 for the thirteen weeks ended September 29, 2019;
• Income before provision for income taxes was $5,058,000 as compared to $5,103,000 for the thirteen weeks ended September 29, 2019;
• Net income was $3,655,000 as compared to $3,658,000 for the thirteen weeks ended September 29, 2019; and
• Earnings per diluted share was $0.89 per share, as compared to $0.87 per share for the thirteen weeks ended September 29, 2019.

For the twenty-six weeks ended September 27, 2020:

• Revenues were $39,525,000, as compared to $60,244,000 during the twenty-six weeks ended September 29, 2019;
• Income from operations was $15,678,000, as compared to $16,814,000 during the twenty-six weeks ended September 29, 2019;
• Adjusted EBITDA¹, a non-GAAP financial measure, was $16,590,000, as compared to $18,296,000 for the twenty-six weeks ended September 29, 2019;
• Income before provision for income taxes was $10,619,000, as compared to $12,288,000 for the twenty-six weeks ended September 29, 2019;
• Net income was $7,655,000, as compared to $9,027,000 for the twenty-six weeks ended September 29, 2019; and
• Earnings per diluted share was $1.86 per share, as compared to $2.14 per share for the twenty-six weeks ended September 29, 2019.

_____________________________

¹EBITDA 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. 

The Company also reported the following:

• License royalties increased to $18,791,000 during the twenty-six weeks ended September 27, 2020, (“fiscal 2021 period”), as compared to $14,147,000 during the twenty-six weeks ended September 29, 2019. During the fiscal 2021 period, royalties earned under the retail agreement, including the foodservice program, from John Morrell & Co., increased 33% to $17,460,000, as compared to $13,092,000 of royalties earned during the twenty-six weeks ended September 29, 2019. As consumers continue to shelter at home as a result of the COVID-19 pandemic, our licensing business continues to show strong consumer demand.
  
  
• In the Branded Product Program, which features the sale of Nathan’s hot dogs to the foodservice industry, income from operations declined by approximately $2,803,000 to $1,524,000 during the fiscal 2021 period, as compared to $4,327,000 for the twenty-six weeks ended September 29, 2019.  Sales were $14,447,000 during the fiscal 2021 period, compared to sales of $32,295,000 during the twenty-six weeks ended September 29, 2019, while the volume of hot dogs sold by the Company decreased 57%.  As a result of the COVID-19 pandemic, sales and income from operations for the Branded Product Program continue to be negatively impacted as many of our customers operate in venues that are either currently closed, such as movie theaters, or venues operating at reduced capacity, such as professional sports arenas, amusement parks, and shopping malls.
  
  
• Sales from Company-operated restaurants were $4,928,000 during the fiscal 2021 period compared to $10,048,000 during the twenty-six weeks ended September 29, 2019. The decrease was primarily due to a decline in customer traffic related to the impact of the COVID-19 pandemic. Additionally, as stipulated under government orders, our Company-operated restaurants with dining rooms are operating at reduced capacity and maintaining social distancing protocols.
  
  
• Revenues from franchise operations were $667,000 during the fiscal 2021 period, compared to $2,575,000 during the twenty-six weeks ended September 29, 2019. Total royalties were $519,000 during the fiscal 2021 period as compared to $2,027,000 during the twenty-six weeks ended September 29, 2019. Total franchise fee income was $148,000 during the fiscal 2021 period compared to $548,000 during the twenty-six weeks ended September 29, 2019. As a result of the COVID-19 pandemic, a number of our franchised locations have been temporarily closed due to their locations being in venues which are closed, such as movie theaters, or venues operating at reduced traffic, such as airport and highway travel plazas. Despite the challenging operating environment, 6 new franchised outlets opened during the fiscal 2021 period.
  
  
• During the fiscal 2021 period, we recorded Advertising Fund revenue and expense in the amount of $692,000.
  
  
• During the fiscal 2021 period, the Board of Directors declared two quarterly cash dividends of $0.35 per share totaling $2,880,000.
   
• Effective November 6, 2020, the Board of Directors declared its quarterly cash dividend of $0.35 per share payable on December 4, 2020 to shareholders of record at the close of business on November 23, 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) share-based compensation and (ii) loss on disposal of property and equipment 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 11 foreign countries through its restaurant system, foodservice sales programs and product licensing activities. Last year, over 700 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 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 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.
(unaudited)

	Thirteen weeks ended						Twenty-six weeks ended
	Sept. 27, 2020			Sept. 29, 2019			Sept. 27, 2020			Sept. 29, 2019
Financial Highlights
Total revenues	$	21,839,000		$	29,726,000		$	39,525,000		$	60,244,000
Income from operations (a)	$	7,584,000		$	7,366,000		$	15,678,000		$	16,814,000
Net income	$	3,655,000		$	3,658,000		$	7,655,000		$	9,027,000
Income per share:
Basic	$	0.89		$	0.87		$	1.86		$	2.14
Diluted	$	0.89		$	0.87		$	1.86		$	2.14
Weighted-average shares used in computing income per share:
Basic	4,115,000			4,227,000			4,118,000			4,216,000
Diluted	4,115,000			4,227,000			4,118,000			4,216,000
Select Segment Information Revenues
Branded product program	$	9,698,000		$	16,182,000		$	14,447,000		$	32,295,000
Product licensing	8,268,000			5,425,000			18,791,000			14,147,000
Restaurant operations	3,470,000			7,422,000			5,595,000			12,623,000
Corporate (b)	403,000			697,000			692,000			1,179,000
Total Revenues	$	21,839,000		$	29,726,000		$	39,525,000		$	60,244,000
Income from operations (c)
Branded product program	$	1,252,000		$	2,124,000		$	1,524,000		$	4,327,000
Product licensing	8,223,000			5,380,000			18,700,000			14,056,000
Restaurant operations	(138,000)			2,103,000			(1,031,000)			2,853,000
Corporate (d)	(1,753,000)			(2,241,000)			(3,515,000)			(4,422,000)
Income from operations (c)	$	7,584,000		$	7,366,000		$	15,678,000		$	16,814,000

(a)	Excludes interest expense, interest income, loss on disposal of property and equipment and other income, net.
(b)	Represents Advertising Fund revenue.
(c)	Excludes interest expense, interest income, loss on disposal of property and equipment 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 the operating results of the advertising fund.

Nathan's Famous, Inc. and Subsidiaries

Reconciliation of Net Income to EBITDA and Adjusted EBITDA

	Thirteen weeks ended						Twenty-six weeks ended
	Sept. 27, 2020			Sept. 29, 2019			Sept. 27, 2020			Sept. 29, 2019
	(unaudited)						(unaudited)
EBITDA
Net Income	$	3,655,000		$	3,658,000		$	7,655,000		$	9,027,000
Interest Expense	2,651,000			2,651,000			5,301,000			5,301,000
Provision for income taxes	1,403,000			1,445,000			2,964,000			3,261,000
Depreciation and amortization	302,000			337,000			612,000			647,000
EBITDA	$	8,011,000		$	8,091,000		$	16,532,000		$	18,236,000
Adjusted EBITDA
EBITDA	$	8,011,000		$	8,091,000		$	16,532,000		$	18,236,000
Share-based compensation	29,000			30,000			58,000			58,000
Loss on disposal of property & equipment	-			2,000			-			2,000
Adjusted EBITDA	$	8,040,000		$	8,123,000		$	16,590,000		$	18,296,000

COMPANY	Robert Steinberg, Vice President - Finance and CFO
CONTACT:	(516) 338-8500 ext. 229

FAQ

What were Nathan's Famous Q2 2021 revenue figures?

Nathan's Famous reported revenues of $21.8 million for the second quarter of fiscal 2021, a decrease from $29.7 million in Q2 2020.

How much did Nathan's Famous declare for its quarterly cash dividend?

Nathan's Famous declared a quarterly cash dividend of $0.35 per share.

What caused the decline in Nathan's Famous sales?

The decline in sales was primarily due to the COVID-19 pandemic, affecting customer traffic and operations.

How did Nathan's Famous' net income change in Q2 2021?

Net income for Nathan's Famous in Q2 2021 was $3.7 million, slightly down from $3.7 million in Q2 2020.

What was the impact of the pandemic on Nathan's Famous operations?

The COVID-19 pandemic led to decreased sales and operational challenges across various business segments, including reduced traffic at company-operated restaurants.