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Nathan's(NATH) - 2019 Q3 - Quarterly Report
NATHNathan's(NATH)2019-02-01 11:08

Sales Performance - Total sales decreased by 13.8% to 14,404,000forthethirteenweeksendedDecember23,2018,comparedto14,404,000 for the thirteen weeks ended December 23, 2018, compared to 16,705,000 for the same period in 2017[128] - Total sales decreased by 10.9% to 56,448,000forthethirty−nineweeksendedDecember23,2018,comparedto56,448,000 for the thirty-nine weeks ended December 23, 2018, compared to 63,327,000 for the same period in 2017[149] - Foodservice sales from the Branded Product Program decreased by 15.1% to 12,453,000forthethirdquarterfiscal2019,downfrom12,453,000 for the third quarter fiscal 2019, down from 14,674,000 in the third quarter fiscal 2018[128] - Foodservice sales from the Branded Product Program decreased by 12.7% to 44,308,000forthefiscal2019periodcomparedto44,308,000 for the fiscal 2019 period compared to 50,741,000 in fiscal 2018[149] Profitability - EBITDA for the thirteen weeks ended December 23, 2018, was 16,277,000,comparedtoalossof16,277,000, compared to a loss of 3,116,000 for the same period in 2017[127] - Adjusted EBITDA for the thirty-nine weeks ended December 23, 2018, was 35,377,000,comparedto35,377,000, compared to 24,085,000 for the same period in 2017[127] - Gross profit decreased to 15,182,000or26.915,182,000 or 26.9% of sales during the fiscal 2019 period, compared to 15,474,000 or 24.4% of sales during fiscal 2018[157] Costs and Expenses - Average selling prices decreased by approximately 4.3%, correlating with a 5.5% decrease in the cost of beef during the third quarter fiscal 2019 compared to the same period in 2018[128] - Cost of sales decreased by 13.8% to 41,266,000inthefiscal2019periodcomparedto41,266,000 in the fiscal 2019 period compared to 47,853,000 in fiscal 2018[157] - Restaurant operating expenses increased to 2,817,000infiscal2019from2,817,000 in fiscal 2019 from 2,769,000 in fiscal 2018, primarily due to higher home delivery costs, occupancy costs, and insurance[160] - General and administrative expenses rose by 290,000or2.9290,000 or 2.9% to 10,354,000 in fiscal 2019, attributed to higher marketing expenses and professional fees related to ASC 606[161] Franchise and Royalties - License royalties increased to 4,316,000inthethirdquarterfiscal2019,comparedto4,316,000 in the third quarter fiscal 2019, compared to 4,228,000 in the third quarter fiscal 2018[130] - Total royalties earned on sales of hot dogs from the license agreement with John Morrell & Co. were 3,741,000forthethirdquarterfiscal2019,upfrom3,741,000 for the third quarter fiscal 2019, up from 3,680,000 in the same period of 2018[130] - Franchise fees and royalties were 911,000inthethirdquarterfiscal2019,downfrom911,000 in the third quarter fiscal 2019, down from 1,088,000 in the third quarter fiscal 2018[131] - Traditional franchise royalties decreased to 638,000inthethirdquarterfiscal2019from638,000 in the third quarter fiscal 2019 from 704,000 in the third quarter fiscal 2018[131] - Comparable domestic franchise sales were 11,413,000inthethirdquarterfiscal2019,comparedto11,413,000 in the third quarter fiscal 2019, compared to 11,098,000 in the third quarter fiscal 2018[132] Cash Flow and Financing - Cash and cash equivalents increased by 15,493,000to15,493,000 to 72,832,000 as of December 23, 2018, compared to 57,339,000atMarch25,2018[174]−Cashprovidedbyoperationswas57,339,000 at March 25, 2018[174] - Cash provided by operations was 7,373,000 in fiscal 2019, primarily driven by net income of 19,001,000[182]−Cashprovidedbyinvestingactivitiestotaled19,001,000[182] - Cash provided by investing activities totaled 12,449,000, mainly from the sale of the Company-owned restaurant in Bay Ridge, Brooklyn, NY, generating 11,445,000[183]−Cashusedinfinancingactivitieswas11,445,000[183] - Cash used in financing activities was 4,329,000, primarily for dividend payments totaling 3,139,000[184]−TheCompanyrepurchased14,390sharesofcommonstockfor3,139,000[184] - The Company repurchased 14,390 shares of common stock for 1,000,000 during fiscal 2019, continuing its stock repurchase program[184] Tax and Interest - The income tax provision for the thirteen weeks ended December 23, 2018 was 3,627,000or27.23,627,000 or 27.2% of earnings before income taxes[147] - The effective tax rate for the thirty-nine week period ended December 23, 2018 was 27.8%, reflecting the impact of the Tax Cuts and Jobs Act[167] - Interest expense was 2,650,000 in the third quarter fiscal 2019, compared to 3,650,000inthethirdquarterfiscal2018[142]−Interestexpensedecreasedto3,650,000 in the third quarter fiscal 2018[142] - Interest expense decreased to 7,951,000 in fiscal 2019 from 10,976,000infiscal2018,reflectingareductionininterestratesfollowingtherefinancingofthe2020Notes[164]−Interestpaymentsof10,976,000 in fiscal 2018, reflecting a reduction in interest rates following the refinancing of the 2020 Notes[164] - Interest payments of 9,937,500 are required for the fiscal year ending March 31, 2019, and the same amount is expected for the fiscal year ending March 29, 2020[189] Market Conditions and Strategies - The market price for hot dogs during the fiscal 2019 period was approximately 8.7% lower than the fiscal 2018 period, reflecting volatility in commodity costs[206] - A short-term increase or decrease of 10.0% in the cost of food and paper products for the thirty-nine weeks ended December 23, 2018 would have impacted the cost of sales by approximately 3,656,000[208]−TheminimumhourlywageforfastfoodworkersinNewYorkCityincreasedto3,656,000[208] - The minimum hourly wage for fast food workers in New York City increased to 15.00 effective December 31, 2018, with further increases planned for the rest of New York State[195][196] - The company is developing strategies to mitigate the financial impact of increased labor costs and other operating expenses[197] - The company has not hedged against fluctuations in commodity prices, exposing it to market volatility for future purchases[208]