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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
[ x ] Quarterly report pursuant Section to 13 or 15(d) of the Securities Act
of 1934 for the quarterly period ended JUNE 30, 1996.
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Act
of 1934 for the transition period from ____________ to ______________.
Commission File Number 1-3189
NATHAN'S FAMOUS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 11-3166443
(State or other jurisdiction of (IRS employer
incorporation or organization) identification number)
1400 OLD COUNTRY ROAD, WESTBURY, NEW YORK 11590
(Address of principal executive offices including zip code)
(516) 338-8500
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes /x/ No / /
At June 30, 1996, an aggregate of 4,722,216 shares of the registrant's common
stock, par value of $.01, were outstanding.
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NATHAN'S FAMOUS, INC. AND SUBSIDIARIES
INDEX
Page
Number
------
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (Unaudited)
Consolidated Balance Sheets - June 30, 1996 and
March 31, 1996 3
Consolidated Statements of Earnings - Thirteen Weeks
Ended June 30, 1996 and June 25, 1995 4
Consolidated Statements of Stockholders' Equity -
Thirteen Weeks Ended June 30, 1996 5
Consolidated Statements of Cash Flows - Thirteen Weeks
Ended June 30, 1996 and June 25, 1995 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
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PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
NATHAN'S FAMOUS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
June March
30, 1996 31, 1996
-------- --------
(Unaudited)
Current assets:
Cash and cash equivalents including restricted cash of
$280 and $280, respectively $ 682 $ 801
Marketable investment securities 6,040 6,128
Franchise and other receivables, net 1,166 1,108
Inventory 228 226
Prepaid income taxes 834 746
Prepaid expenses and other current assets 47 331
Deferred income taxes 571 571
-------- --------
Total current assets 9,568 9,911
Property and equipment, net 5,782 5,615
Intangible assets, net 11,929 12,025
Other assets, net 234 214
-------- --------
$ 27,513 $ 27,765
======== ========
Current liabilities:
Current installments of obligations under capital leases $ 21 $ 23
Accounts payable 366 1,003
Accrued expenses and other current liabilities 4,707 4,671
Deferred franchise fees 314 277
-------- --------
Total current liabilities 5,408 5,974
Obligations under capital leases, net of current installments 29 35
Deferred area development fees 131 200
Other liabilities 397 414
-------- --------
Total liabilities 5,965 6,623
-------- --------
Stockholders' equity:
Common stock, $.01 par value - 20,000,000 shares
authorized, 4,722,216 issued and outstanding 47 47
Additional paid-in-capital 32,272 32,261
Accumulated deficit (10,771) (11,166)
-------- --------
Total stockholders' equity 21,548 21,142
-------- --------
$ 27,513 $ 27,765
======== ========
See accompanying notes to consolidated financial statements.
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NATHAN'S FAMOUS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
THIRTEEN WEEKS ENDED JUNE 30, 1996 AND JUNE 25, 1995
(In thousands, except per share amounts)
(Unaudited)
1996 1995
------ ------
Sales $5,773 $5,375
Franchise fees and royalties 813 805
License royalties 254 358
Investment and other income 132 285
------ ------
Total revenues 6,972 6,823
------ ------
Costs and expenses:
Cost of restaurant sales 3,313 3,066
Restaurant operating expenses 1,665 1,544
Depreciation and amortization 261 421
Amortization of intangible assets 96 141
General and administrative 976 1,206
Interest expense 2 5
------ ------
Total costs and expenses 6,313 6,383
------ ------
Earnings before income taxes 659 440
Provision for income taxes 264 207
------ ------
Net earnings $ 395 $ 233
====== ======
Net earnings per common share $ 0.08 $ 0.05
====== ======
Weighted average number of common and
common equivalent shares outstanding 4,722 4,722
====== ======
See accompanying notes to consolidated financial statements.
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NATHAN'S FAMOUS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
THIRTEEN WEEKS ENDED JUNE 30, 1996
(In thousands, except share amounts)
(Unaudited)
Total
Additional Deferred Accum- Stock-
Common Common Paid in- Compen- ulated holders'
Shares Stock Capital sation Deficit Equity
--------- ----------- --------- -------- -------- --------
Balance, March
31, 1996 4,722,216 $ 47 $ 32,388 $ (127) $(11,166) $ 21,142
Amortization
of deferred
compensation
relating to
restricted stock 11 11
Net earnings 395 395
--------- ----------- --------- -------- -------- --------
Balance, June
30, 1996 4,722,216 $ 47 $ 32,388 $ (116) $(10,771) $ 21,548
========= =========== ========= ======== ======== ========
See accompanying notes to consolidated financial statements.
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NATHAN'S FAMOUS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THIRTEEN WEEKS ENDED JUNE 30, 1996 AND JUNE 25, 1995
(In thousands)
(Unaudited)
1996 1995
------- --------
Cash flows from operating activities:
Net earnings $ 395 $ 233
Adjustments to reconcile net earnings to
net cash provided by / (used in) operating activities:
Depreciation 261 410
Amortization of intangible assets 96 152
Provision for doubtful accounts 15 38
Other 11 12
Changes in assets and liabilities:
Marketable investment securities 88 (2,459)
Franchise and other receivables (73) (586)
Inventory (2) (95)
Prepaid income taxes (88) 385
Prepaid and other current assets 284 165
Deferred income taxes _ 51
Accounts payable and accrued expenses (601) (274)
Deferred franchise fees 37 85
Other assets (20) 36
Deferred area development fees (69) (52)
Other non current liabilities (16) (21)
------- -------
Net cash provided by / (used in) operating activities 318 (1,920)
------- -------
Cash flows from investing activities:
Purchase of property and equipment (429) (715)
Purchase of franchise restaurant -- (150)
------- -------
Net cash used in investing activities (429) (865)
------- -------
Cash flows from financing activities:
Principal repayment of obligations under capital leases (8) ( 5 )
------- -------
Net cash used in financing activities (8) (5)
------- -------
Net decrease in cash and cash equivalents (119) (2,790)
Cash and cash equivalents, beginning of period 801 4,086
------- -------
Cash and cash equivalents, end of period $ 682 $ 1,296
======= =======
Cash paid during the period for:
Interest $ 2 $ 6
Income taxes 31 31
See accompanying notes to consolidated financial statements.
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NATHAN'S FAMOUS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
NOTE A - BASIS OF PRESENTATION
The accompanying consolidated financial statements of Nathan's Famous, Inc. and
subsidiaries (the "Company") for the thirteen week periods ended June 30, 1996
and June 25, 1995 have been prepared in accordance with generally accepted
accounting principles. The unaudited financial statements include all
adjustments (consisting of normal recurring adjustments) which, in the opinion
of management, were necessary for a fair presentation of financial condition,
results of operations and cash flows for such periods presented. However, these
results are not necessarily indicative of results for any other interim period
or the full year.
Certain information and footnote disclosures normally included in financial
statements in accordance with generally accepted accounting principles have been
omitted pursuant to the requirements of the Securities and Exchange Commission.
Management believes that the disclosures included in the accompanying interim
financial statements and footnotes are adequate to make the information not
misleading, but should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's Annual Report on Form
10-K for the fiscal year ended March 31, 1996.
NOTE B - RECLASSIFICATIONS
Certain reclassifications of prior period balances have been made to conform to
the June 30, 1996 presentation.
NOTE C - EARNINGS PER SHARE
Weighted average common shares outstanding for the thirteen weeks ended June 30,
1996 and June 25, 1995 were 4,722,216. There were no common stock equivalents
for the thirteen weeks ended June 30, 1996 and June 25, 1995.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
Thirteen weeks ended June 30, 1996 compared to June 25, 1995
Revenues
Company-owned restaurant sales increased 7.4% or $398,000 to $5,773,000 for the
thirteen weeks ended June 30, 1996 ("first quarter fiscal 1997") from $5,375,000
for the thirteen weeks ended June 25, 1995 ("first quarter fiscal 1996"). Sales
from non comparable units were $444,000 higher during the first quarter fiscal
1997 than the first quarter fiscal 1996 due primarily to the units opened
subsequent to the first quarter fiscal 1996. Comparable unit sales (units
operating for 18 months or longer as of the beginning of the fiscal year),
declined by $46,000 or 1.0% in the first quarter fiscal 1997 versus the first
quarter fiscal 1996. The Company has recently renovated two of it's larger
restaurants and has experienced satisfactory sales increases thus far. Plans are
currently being developed to renovate and modernize the appearance and design of
certain other units. The Company has also implemented a more aggressive local
store marketing campaign and value pricing strategy in order to address the
sales softness. At June 30, 1996 and June 25, 1995, there were 25 and 27
Company-owned units, respectively.
Franchise fees and royalties increased by $8,000 or 1.0% to $813,000 in the
first quarter fiscal 1997 compared to $805,000 in the first quarter fiscal 1996.
Franchise royalties decreased by $39,000 or 5.8% to $623,000 in the first
quarter fiscal 1997 as compared to $662,000 in the first quarter fiscal 1996.
Franchise restaurant sales, upon which royalties are based, decreased to
$15,853,000 in the first quarter fiscal 1997 as compared to $16,937,000 in the
first quarter fiscal 1996 due primarily to lower comparable store sales. At June
30, 1996 there were 175 franchise restaurants as compared to 163 at June 25,
1995. Franchise fee income increased to $190,000 in the first quarter fiscal
1997 as compared to $143,000 in the first quarter fiscal 1996. During the first
quarter fiscal 1997, franchisees opened 7 new units versus the first quarter
fiscal 1996 in which 9 new units were opened. Higher franchise fees were earned
during the first quarter fiscal 1997 than during the first quarter fiscal 1996
due primarily to the higher recognition of fees associated with expired
development agreements.
License royalties decreased by $104,000 or 29.1% to $254,000 in the first
quarter fiscal 1997 as compared to $358,000 in the first quarter fiscal 1996.
The majority of this decrease results from the Company no longer amortizing the
deferred fee received from SMG, Inc., in connection with their license agreement
for the sale of Nathan's frankfurters in supermarkets. The amortization period
concluded in February 1996.
Investment and other income decreased to $132,000 in the first quarter fiscal
1997 from $285,000 in the first quarter fiscal 1996 due primarily to decreased
earnings on the Company's marketable investment securities as a result of the
change in performance of the financial markets.
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Costs and Expenses
Cost of restaurant sales increased by $247,000 from $3,066,000 in the first
quarter fiscal 1996 to $3,313,000 in the first quarter fiscal 1997. As a
percentage of restaurant sales, cost of restaurant sales increased to 57.4% in
the first quarter fiscal 1997 as compared to 57.0% in the first quarter fiscal
1996. This increase is due primarily to the impact on food costs as a result of
the expanded value pricing strategies employed during the first quarter fiscal
1997. The Company continues to take steps to offset this margin erosion which
has become necessary to remain competitive in the current marketplace.
Restaurant operating expenses increased by $121,000 from $1,544,000 in the first
quarter fiscal 1996 to $1,665,000 in the first quarter fiscal 1997.This increase
can be attributable to the number of operating weeks and type of Company-owned
units operating during the first quarter fiscal 1997 as compared to the first
quarter fiscal 1996. As a percentage of restaurant sales, restaurant operating
expenses were 28.7% in the first quarter fiscal 1996 as compared to 28.8% in the
first quarter fiscal 1997. In June 1996, the Company closed two unprofitable
restaurants.
Depreciation and amortization decreased by $160,000 or 38.0% from $421,000 in
the first quarter fiscal 1996 to $261,000 in the first quarter fiscal 1997.
Amortization of intangibles, debt issuance and pre-opening costs decreased by
$45,000 or 31.9% from $141,000 in the first quarter fiscal 1996 to $96,000 in
the first quarter fiscal 1997. These decreases are primarily attributable to the
reduced depreciation and amortization expense resulting from the implementation
of Financial Accounting Standards Board Statement No. 121 during the fourth
quarter of fiscal 1996.
General and administrative expenses decreased by $230,000 or 19.1% to $976,000
in the first quarter fiscal 1997 as compared to $1,206,000 in the first quarter
fiscal 1996. This decrease partially results from corporate staff reductions
made during fiscal 1996 and the first quarter fiscal 1997. Additionally, certain
one-time benefits and timing differences further lowered general and
administrative expenses for the first quarter fiscal 1997. As a percentage of
total revenues, general & administrative costs for the first quarter fiscal 1997
was 14.0% as compared to 17.7% in the first quarter fiscal 1996.
Income Tax Provision
In the first quarter fiscal 1997, the income tax provision was $264,000 or 40.1%
of income before income taxes. In the first quarter fiscal 1996, the income tax
provision was $207,000 or 47.0% of income before income taxes.
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LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents at June 30, 1996 aggregated $682,000, decreasing by
$119,000 during the fiscal 1997 period. At June 30, 1996, marketable investment
securities totalled $6,040,000 and net working capital increased slightly to
$4,160,000 from March 31, 1996.
Cash provided by operations of $318,000 in the fiscal 1997 period is primarily
attributable to net income of $395,000, non-cash charges of $383,000, including
depreciation and amortization of $357,000, decrease in prepaid and other current
assets of $284,000, decrease in accounts payable and accrued expenses of
$601,000, increase in franchise and other receivables of $73,000 and decrease in
deferred area development fees of $69,000.
Cash used in investing activities of $429,000 represents property and equipment
purchases relating to the construction of a new Company-owned unit which opened
in July 1996, and other fixed asset additions.
Management believes that available cash, marketable investment securities, and
internally generated funds should provide sufficient capital for its planned
operations and expansion program through fiscal 1997. The Company also maintains
a $5,000,000 uncommitted bank line of credit. The Company has not borrowed any
funds to date under this line of credit.
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PART II. OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None.
(b) No reports on Form 8-K were filed during the quarter ended June 30,
1996.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NATHAN'S FAMOUS, INC.
Date: August 12, 1996 By: /s/ Wayne Norbitz
--------------------
Wayne Norbitz
President and Chief Operating Officer
(Principal Executive Officer)
Date: August 12, 1996 By: /s/ Ronald G. DeVos
----------------------
Ronald G. DeVos
Vice President - Finance
and Chief Financial Officer
(Principal Financial and Accounting Officer)
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1,000
3-MOS
MAR-30-1997
APR-01-1996
JUN-30-1996
682
6,040
1,746
580
228
9,568
11,591
5,809
27,513
5,408
0
0
0
47
21,501
27,513
5,773
6,972
3,313
2,022
961
15
2
659
264
395
0
0
0
395
.08
0
