Nathan's Famous, Inc. Reports Third Quarter Results

Nathan's Famous, Inc. (NASDAQ: NATH) reported results for the third quarter of its 2012 fiscal year that ended December 25, 2011.

For the fiscal quarter ended December 25, 2011:

• Non-GAAP earnings after tax, which exclude the litigation expense items described below, increased by 17.8% to $1,284,000 as compared to $1,090,000  for the thirteen weeks ended December 26, 2010;
• Non-GAAP earnings per share, which exclude the litigation expense items described below, increased by 25.0% to $0.25 per diluted share as compared to $0.20 per diluted share for the thirteen weeks ended December 26, 2010; and
• Revenues increased by 13.2% to $14,800,000, as compared to revenues of $13,079,000 during the thirteen weeks ended December 26, 2010.

For the thirty-nine weeks ended December 25, 2011:

• Net income was $5,076,000 or $0.98 per diluted share as compared to $1,658,000 or $0.30 per diluted share for the thirty-nine weeks ended December 26, 2010;
• Non-GAAP earnings after tax, which exclude the litigation expense items described below, increased by 6.5% to $5,292,000 as compared to $4,969,000 for the thirty-nine weeks ended December 26, 2010;
• Non-GAAP earnings per share, which exclude the litigation expense items described below, increased by 14.6% to $1.02 per diluted share as compared to $0.89 per diluted share for the thirty-nine weeks ended December 26, 2010; and
• Revenues increased by 15.2% to $51,815,000, as compared to revenues of $44,987,000 during the thirty-nine weeks ended December 26, 2010.

The Company also reported the following:

• Sales from the Branded Product Program, featuring the sale of Nathan's hot dogs to the foodservice industry, increased by 28.6% to $29,843,000 during the thirty-nine weeks ended December 25, 2011 as compared to sales of $23,199,000 during the thirty-nine weeks ended December 26, 2010.
• Sales and pre-tax profits from the five comparable company-owned restaurants were $11,218,000 and $2,207,000, respectively during the thirty-nine weeks ended December 25, 2011 as compared to $11,310,000 and $2,245,000, respectively during the thirty-nine weeks ended December 26, 2010.
• Gross profit was 20.7% of sales as compared to 24.4% of sales during the thirty-nine weeks ended December 26, 2010 due primarily to the impact of unusually high beef costs on our Branded Product Program.
• Retail license royalties increased by 9.1% or $442,000 to $5,307,000 during the thirty-nine weeks ended December 25, 2011 as compared to $4,865,000 during the thirty-nine weeks ended December 26, 2010.
• Revenues from franchise operations increased by 8.7% or $341,000 to $4,265,000 during the thirty-nine weeks ended December 25, 2011 as compared to $3,924,000 during the thirty-nine weeks ended December 26, 2010. Fifty-six new franchised units were opened during the thirty-nine weeks ended December 25, 2011, including two restaurants in Canada, two restaurants in China, one restaurant in the Dominican Republic and one restaurant in Kuwait.
• We have opened 40 Branded Menu Program units during the thirty-nine weeks ended December 25, 2011, including 29 locations within K-Mart. Our Branded Menu Program was created to provide qualified operators of existing locations with the ability to become a Nathan's franchisee, adding our signature products along with a limited-menu of other Nathan's products to their current operations.
• The effective tax rate of 38.7% is approximately 5.8% higher than for the thirty-nine weeks ended December 26, 2010 when we earned higher tax-exempt interest income and resolved uncertain tax positions, reversing $79,000 of prior period accruals.
• During the thirty-nine weeks ended December 26, 2010, we recorded a litigation accrual of $4,910,000, or $2,939,000, net of tax, as a result of the unfavorable SMG ruling, which at that time represented the minimum estimate of damages.
• During the thirty-nine weeks ended December 25, 2011, we continued our stock repurchase program, acquiring 137,249 shares at a total cost of approximately $2,573,000.
• As previously disclosed, on December 8, 2011, we launched a modified dutch tender offer to acquire up to 500,000 shares of common stock. We completed the offer in January 2012 by acquiring 598,989 shares, after electing to exercise our option to acquire an additional 2% of the outstanding stock at a cost of approximately $13,177,000 (or $22.00 per share), excluding fees and expenses. The results of this tender offer will be reflected in the consolidated financial statements during the thirteen weeks ending March 25, 2012.

As previously described with respect to our litigation with SMG, on April 7, 2011, the Court entered a stipulation and order which granted a stay of enforcement of the final judgment which is in the amount of approximately $4,910,000.

On March 4, 2011, Nathan's filed a notice of appeal seeking to appeal the final judgment. Throughout the duration of the appeal, Nathan's is required to deposit post-judgment interest on the damages awarded at 9% per annum into a security account. Nathan's has made these deposits and recorded interest expense of $335,000 or $200,000, net of tax, during the thirty-nine weeks ended December 25, 2011.

About Nathan's Famous

Nathan's products are currently distributed in 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Guam, the Cayman Islands and six foreign countries through its restaurant system, foodservice sales programs and product licensing activities. The Nathan's restaurant system currently consists of 302 units, comprised of 297 franchised units and five company-owned units (including one seasonal unit). 


Logos, product and company names mentioned are the property of their respective owners.

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