Nathan's Famous, Inc. Reports Third Quarter Results
- Increase in revenues for the third fiscal quarter
- Redemption of $20 million of Senior Secured Notes leading to reduced future cash interest expense
- Declaration of quarterly cash dividend of $0.50 per share
- Decrease in income from operations and net income for the third fiscal quarter
- Loss on debt extinguishment due to the redemption of Senior Secured Notes
Insights
The redemption of $20 million of 6.625% Senior Secured Notes by Nathan's Famous, Inc. indicates a strategic move to manage debt and reduce future cash interest expenses. The reported loss on debt extinguishment of $169,000, while not substantial, does reflect a one-time hit to earnings. However, the expected annual savings of $1.325 million in interest expenses should be considered a positive development for the company's financial health. This action suggests a proactive approach to balance sheet management and could be seen as a positive signal to investors about the company's commitment to reducing its leverage and improving its cost structure.
Additionally, the declaration of a quarterly cash dividend of $0.50 per share remains consistent with the previous payouts, reinforcing the company's commitment to shareholder returns. This consistency in dividend payments can be attractive to income-focused investors and may contribute to the stability of the stock price. However, given the decrease in net income and earnings per share compared to the same period in the previous year, investors might scrutinize the sustainability of such dividend payments in the long term.
The increase in revenues to $28,890,000 for the quarter and $109,619,000 for the thirty-nine weeks indicates a positive trend in Nathan's Famous' sales performance. However, the decline in income from operations and net income year-over-year suggests rising costs or operational challenges that are impacting profitability. Specifically, the 12% increase in the cost of beef and beef trimmings, as highlighted, is a significant factor in the reduced income from operations, reflecting broader market trends in commodity prices that could continue to affect margins.
The reported growth in the Branded Product Program, with a 2% increase in hot dog volume and an 8% increase in average selling price, demonstrates the company's ability to pass on some of the cost increases to consumers. Nevertheless, the weather-related decline in traffic at the Coney Island locations underscores the vulnerability of the restaurant segment to external factors. The modest increase in franchise royalties and the opening of seventeen franchised locations during the period are indicative of a strategic expansion that may mitigate some of the risks associated with company-owned restaurants.
The disclosed financial metrics, particularly Adjusted EBITDA, serve as a critical tool for analyzing Nathan's Famous' operational efficiency. The decrease in Adjusted EBITDA from $6,899,000 to $5,751,000 for the quarter and from $29,287,000 to $27,561,000 for the thirty-nine weeks, may raise concerns about the company's ability to maintain its earnings power in the face of economic headwinds. It is essential to note that Adjusted EBITDA is a non-GAAP measure that excludes certain items to provide a clearer picture of operating performance. Investors often use this metric to compare profitability across companies without the noise of non-operational factors.
Understanding these non-GAAP measures requires careful consideration, as they are not standardized and can vary between companies. The reconciliation of EBITDA and Adjusted EBITDA to net income is an important exercise to ensure transparency and comparability. The company's reliance on these measures indicates the importance of operational efficiency and cost management in driving profitability, especially in an environment where input costs such as beef prices are rising.
Redeemed
JERICHO, N.Y., Feb. 01, 2024 (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 24, 2023.
For the fiscal quarter ended December 24, 2023:
- Revenues were
$28,890,000 as compared to$26,154,000 during the thirteen weeks ended December 25, 2022; - Income from operations was
$5,137,000 as compared to$6,332,000 during the thirteen weeks ended December 25, 2022; - Adjusted EBITDA1, a non-GAAP financial measure, was
$5,751,000 as compared to$6,899,000 during the thirteen weeks ended December 25, 2022; - In connection with the redemption of
$20,000,000 in aggregate principal amount of our6.625% Senior Secured Notes due 2025 on December 19, 2023, the Company recorded a loss on debt extinguishment of$169,000 , or$118,000 , net of tax, or$0.03 per diluted share. As a result of the redemption, the Company expects to reduce its future cash interest expense by$1,325,000 per annum; - Income before provision for income taxes was
$3,735,000 as compared to$4,486,000 during the thirteen weeks ended December 25, 2022; - Net income was
$2,607,000 as compared to$3,263,000 during the thirteen weeks ended December 25, 2022; and - Earnings per diluted share was
$0.64 per share as compared to$0.79 per share during the thirteen weeks ended December 25, 2022.
For the thirty-nine weeks ended December 24, 2023:
- Revenues were
$109,619,000 as compared to$103,371,000 during the thirty-nine weeks ended December 25, 2022; - Income from operations was
$25,704,000 as compared to$28,026,000 during the thirty-nine weeks ended December 25, 2022; - Adjusted EBITDA1, a non-GAAP financial measure, was
$27,561,000 as compared to$29,287,000 during the thirty-nine weeks ended December 25, 2022; - Income before provision for income taxes was
$21,731,000 as compared to$22,451,000 during the thirty-nine weeks ended December 25, 2022; - Net income was
$15,706,000 as compared to$16,358,000 during the thirty-nine weeks ended December 25, 2022; and - Earnings per diluted share was
$3.84 per share as compared to$3.99 per share during the thirty-nine weeks ended December 25, 2022.
The Company also reported the following:
- License royalties were
$26,075,000 during the thirty-nine weeks ended December 24, 2023, (“fiscal 2024 period”) as compared to$26,064,000 during the thirty-nine weeks ended December 25, 2022. During the fiscal 2024 period, royalties earned under the retail agreement, including the foodservice program, from Smithfield Foods, Inc., were$23,582,000 as compared to$23,594,000 of royalties earned during the thirty-nine weeks ended December 25, 2022. - In the Branded Product Program, which features the sale of Nathan’s hot dogs to the foodservice industry, sales increased by approximately
$6,348,000 t o$68,210,000 during the fiscal 2024 period as compared to$61,862,000 during the thirty-nine weeks ended December 25, 2022. The volume of hot dogs sold by the Company increased by approximately2% . Our average selling price, which is partially correlated to the beef markets, increased by approximately8% compared to the prior year period. Income from operations decreased by approximately$1,234,000 t o$5,769,000 during the fiscal 2024 period as compared to$7,003,000 for the thirty-nine weeks ended December 25, 2022, due to a12% increase in the cost of beef and beef trimmings. - Sales from Company-owned restaurants were
$10,512,000 during the fiscal 2024 period compared to$10,673,000 during the thirty-nine weeks ended December 25, 2022. Sales were negatively impacted by reduced traffic at our Coney Island locations as a result of unfavorable weather conditions during the summer season. - Revenues from franchise operations were
$3,321,000 during the fiscal 2024 period as compared to$3,268,000 during the thirty-nine weeks ended December 25, 2022. Total royalties were$2,996,000 during the fiscal 2024 period as compared to$2,785,000 during the thirty-nine weeks ended December 25, 2022. The increase in franchise royalties during the fiscal 2024 period was primarily due to an increase in franchise restaurant sales of$2,766,000 t o$52,068,000 as compared to$49,302,000 for the thirty-nine weeks ended December 25, 2022.2 Total franchise fee income, including cancellation fees, was$325,000 during the fiscal 2024 period as compared to$483,000 during the thirty-nine weeks ended December 25, 2022. Seventeen franchised locations opened during the fiscal 2024 period. - During the fiscal 2024 period, we recorded Advertising Fund revenue of
$1,501,000 as compared to$1,504,000 during the thirty-nine weeks ended December 25, 2022. - During the fiscal 2024 period, the Board of Directors declared and paid three quarterly cash dividends of
$0.50 per share totaling$6,120,000. - Effective February 1, 2024, the Board of Directors declared its quarterly cash dividend of
$0.50 per share payable on March 1, 2024 to shareholders of record at the close of business on February 20, 2024.
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) loss on debt extinguishment, (ii) the loss on disposal of property and equipment and (iii) share-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 nineteen 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 disease epidemics such as the recent COVID-19 pandemic; increases in the cost of food and paper products; the impact of price increases on customer visits; the status of our licensing and supply agreements, including our licensing revenue and overall profitability being substantially dependent on our agreement with Smithfield Foods, Inc.; the impact of our debt service and repayment obligations under the 2025 Notes, including the effect on our ability to fund working capital, operations and make new investments; economic (including inflationary pressures like those currently being experienced); weather (including the impact on sales at our restaurants particularly during the summer months), and changes in the price of beef and 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 continued viability of Coney Island as a destination location for visitors; 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. 24, 2023 | Dec. 25, 2022 | Dec. 24, 2023 | Dec. 25, 2022 | ||||||||||||
| Financial Highlights | |||||||||||||||
| Total revenues | $ | 28,890,000 | $ | 26,154,000 | $ | 109,619,000 | $ | 103,371,000 | |||||||
| Income from operations (a) | $ | 5,137,000 | $ | 6,332,000 | $ | 25,704,000 | $ | 28,026,000 | |||||||
| Net income | $ | 2,607,000 | $ | 3,263,000 | $ | 15,706,000 | $ | 16,358,000 | |||||||
| Income per share: | |||||||||||||||
| Basic | $ | 0.64 | $ | 0.80 | $ | 3.85 | $ | 4.00 | |||||||
| Diluted | $ | 0.64 | $ | 0.79 | $ | 3.84 | $ | 3.99 | |||||||
| Weighted-average shares used in | |||||||||||||||
| computing income per share: | |||||||||||||||
| Basic | 4,080,000 | 4,080,000 | 4,080,000 | 4,092,000 | |||||||||||
| Diluted | 4,080,000 | 4,116,000 | 4,087,000 | 4,104,000 | |||||||||||
| Select Segment Information | |||||||||||||||
| Revenues | |||||||||||||||
| Branded product program | $ | 19,688,000 | $ | 16,661,000 | $ | 68,210,000 | $ | 61,862,000 | |||||||
| Product licensing | 6,078,000 | 6,337,000 | 26,075,000 | 26,064,000 | |||||||||||
| Restaurant operations | 2,616,000 | 2,655,000 | 13,833,000 | 13,941,000 | |||||||||||
| Corporate (b) | 508,000 | 501,000 | 1,501,000 | 1,504,000 | |||||||||||
| Total Revenues | $ | 28,890,000 | $ | 26,154,000 | $ | 109,619,000 | $ | 103,371,000 | |||||||
| Income from operations (c) | |||||||||||||||
| Branded product program | $ | 2,421,000 | $ | 2,451,000 | $ | 5,769,000 | $ | 7,003,000 | |||||||
| Product licensing | 6,033,000 | 6,292,000 | 25,939,000 | 25,928,000 | |||||||||||
| Restaurant operations | (308,000 | ) | (238,000 | ) | 2,000,000 | 1,879,000 | |||||||||
| Corporate (d) | (3,009,000 | ) | (2,173,000 | ) | (8,004,000 | ) | (6,784,000 | ) | |||||||
| Income from operations (c) | $ | 5,137,000 | $ | 6,332,000 | $ | 25,704,000 | $ | 28,026,000 | |||||||
| (a) | Excludes loss on debt extinguishment, interest expense, interest income, and other income (expense), net. | |
| (b) | Represents Advertising Fund revenue. | |
| (c) | Excludes loss on debt extinguishment, interest expense, interest income and other income (expense), 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, corporate 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 (unaudited) | |||||||||||||||
| Thirteen weeks ended | Thirty-nine weeks ended | ||||||||||||||
| Dec. 24, 2023 | Dec. 25, 2022 | Dec. 24, 2023 | Dec. 25, 2022 | ||||||||||||
| EBITDA | |||||||||||||||
| Net income | $ | 2,607,000 | $ | 3,263,000 | $ | 15,706,000 | $ | 16,358,000 | |||||||
| Interest expense | 1,392,000 | 1,944,000 | 4,219,000 | 5,831,000 | |||||||||||
| Provision for income taxes | 1,128,000 | 1,223,000 | 6,025,000 | 6,093,000 | |||||||||||
| Depreciation and amortization | 268,000 | 303,000 | 896,000 | 837,000 | |||||||||||
| EBITDA | $ | 5,395,000 | $ | 6,733,000 | $ | 26,846,000 | $ | 29,119,000 | |||||||
| Adjusted EBITDA | |||||||||||||||
| EBITDA | $ | 5,395,000 | $ | 6,733,000 | $ | 26,846,000 | $ | 29,119,000 | |||||||
| Loss on debt extinguishment | 169,000 | - | 169,000 | - | |||||||||||
| Loss on disposal of property and equipment | - | 101,000 | - | 87,000 | |||||||||||
| Share-based compensation | 187,000 | 65,000 | 546,000 | 81,000 | |||||||||||
| Adjusted EBITDA | $ | 5,751,000 | $ | 6,899,000 | $ | 27,561,000 | $ | 29,287,000 | |||||||
| FOR: | NATHAN'S FAMOUS, INC. | |
| COMPANY | Robert Steinberg, Vice President - Finance and CFO | |
| CONTACT: | (516) 338-8500 ext. 229 | |
FAQ
What were the revenues for the third fiscal quarter ended December 24, 2023?
What was the income from operations for the third fiscal quarter?
What was the net income for the third fiscal quarter?
What was the loss incurred due to the redemption of Senior Secured Notes?
What was the declared quarterly cash dividend per share?
