Nathan's Famous, Inc. Reports Second Quarter Results

Nathan's Famous, Inc. (NASDAQ:NATH) today reported results for the second quarter of its 2011 fiscal year that ended September 26, 2010.

For the quarter ended September 26, 2010:
  • Net income was $151,000 or $0.03 per share, as compared to $2,163,000 or $0.39 per share for the quarter ended September 27, 2009;
  • Non-GAAP earnings, which exclude the litigation expense items described below, were $2,155,000 or $0.38 per share; and
  • Revenues increased by 9.3% to $16,282,000, as compared to $14,896,000 during the quarter ended September 27, 2009.

For the twenty-six weeks ended September 26, 2010:
  • Net income was $1,811,000 or $0.32 per share, as compared to $3,726,000 or $0.65 per share for the twenty-six weeks ended September 27, 2009;
  • Non-GAAP earnings, which exclude the litigation expense items described below, were $3,879,000 or $0.68 per share; and
  • Revenues increased by 9.5% to $31,908,000, as compared to $29,129,000 during the twenty-six weeks ended September 27, 2009.

The trial in connection with Nathan’s litigation against its licensee, SMG, Inc.(“SMG”), was concluded on October 13, 2010. The primary issue at trial was whether Nathan’s is entitled to terminate its license agreement with SMG, and no determination on this issue has yet been made by the Court. The other issue at trial related to ancillary claims made by SMG regarding the manner in which Nathan’s had profited from the sale of its proprietary seasonings to SMG, on which the Court granted SMG’s motion for summary judgment. A hearing to determine the actual amount of damages relating to these seasoning claims is scheduled for November 22, 2010. Nathan’s estimates that the amount of damages will be between $2,914,000 and $6,068,000. Nathan’s is unable to determine the amount of damages within that range that the Court will award to SMG. Accordingly, and as previously reported, Nathan’s recorded a litigation accrual of $2,914,000 before tax, or $1,745,000 or $0.31 per share net of tax, as part of its results for the second quarter ended September 26, 2010. Nathan’s also incurred incremental legal expenses in connection with the SMG litigation of $325,000 and $283,000 during the thirteen and twenty-six week periods ended September 26, 2010.

Although the Court granted SMG’s motion for summary judgment on the seasoning claims, no formal judgment has yet been entered by the Court. Once formal judgment has been entered by the Court, Nathan’s will evaluate its available alternatives, including an appeal.

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 ("GAAP"), the Company has provided its Non-GAAP earnings and earnings per diluted share as adjusted for the litigation expenses that the Company believes impacts the comparability of its results of operations.

The Company believes that such non-GAAP financial information is useful to investors to assist in assessing and understanding the company's operating performance and underlying trends in the company's business because management considers the expense referred to above to be outside the company's normal operating results. This non-GAAP financial information is among the indicators management uses as a basis for evaluating the company's financial and operating performance.

The presentation of this additional non-GAAP financial information is not meant to be considered in isolation or as a substitute for, or alternative to, earnings and earnings per diluted share determined in accordance with GAAP. Analysis of results and outlook on a non-GAAP basis should be used as a complement to, and in conjunction with, data presented in accordance with GAAP.

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 four foreign countries through its restaurant system, foodservice sales programs and retail licensing activities. The Nathan’s restaurant system currently consists of 257 units, comprised of 252 franchised or licensed units and five company-owned units (including one seasonal unit). 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 are the following: the outcome of any appeals of the Court’s decision, the timing of any cash payment due under the judgment, and the tax impact of the judgment; the effect of business and economic conditions; the impact of competitive products and pricing; the ability to obtain an adequate supply of beef and other food products at competitive prices; capacity; the regulatory and trade environment; 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.

Financial Highlights
 
Thirteen weeks ended

Twenty-six weeks ended
Sept. 26, 2010 Sept. 27, 2009 Sept. 26, 2010 Sept.27, 2009
(unaudited) (unaudited)
 
 
Total revenues $ 16,282,000 $ 14,896,000 $ 31,908,000 $ 29,128,000
 
Net income $ 151,000 $ 2,163,000 $ 1,811,000 $ 3,726,000
 
Basic income per share
Net income $ 0.03 $ 0.40 $ 0.32 $ 0.68
 
Diluted income per share
Net income $ 0.03 $ 0.39 $ 0.32 $ 0.65
 
 
Weighted-average shares used in
computing income per share
 
Basic 5,573,000 5,420,000 5,584,000 5,516,000
Diluted 5,677,000 5,594,000 5,685,000 5,737,000
 

Nathan's Famous, Inc.

Reconciliation of GAAP and Non-GAAP Measures
 
          Thirteen weeks ended       Twenty-six weeks ended
Sept. 26, 2010       Sept. 27, 2009 Sept. 26, 2010       Sept.27, 2009
(unaudited) (unaudited)
 
 

NET INCOME
Net income $ 151,000 $ 2,163,000 $ 1,811,000 $ 3,726,000
 
 
Litigation accrual, (net of tax) 1,745,000 - 1,745,000 -
 
 
Legal expense (a), (net of tax) 259,000 65,000 323,000 153,000
 
 
Non-GAAP income $ 2,155,000 $ 2,228,000 $ 3,879,000 $ 3,879,000
 
 
 
 

 

DILUTED INCOME PER SHARE
Net income $ 0.03 $ 0.39 $ 0.32 $ 0.65
 
 
Litigation accrual, (net of tax) 0.31 - 0.31 -
 
 
Legal expense (a), (net of tax) 0.04 0.01 0.05 0.03
 
Non-GAAP income per share $ 0.38 $ 0.40 $ 0.68 $ 0.68
 
(a) Represents total legal expense incurred in connection with the SFG matter during the respective periods.

Copyright Business Wire 2010

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