FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
[ x ] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Act of 1934 for the quarterly period ended June 29, 1997.
[ ] 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 29, 1997, 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
<TABLE>
<CAPTION>
Page
Number
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (Unaudited)
Consolidated Balance Sheets - June 29, 1997 and
March 30, 1997 3
Consolidated Statements of Earnings - Thirteen Weeks
Ended June 29, 1997 and June 30, 1996 4
Consolidated Statements of Stockholders' Equity -
Thirteen Weeks Ended June 29, 1997 5
Consolidated Statements of Cash Flows - Thirteen Weeks
Ended June 29, 1997 and June 30, 1996 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 share amounts)
<TABLE>
<CAPTION>
June March
29, 1997 30, 1997
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents including restricted cash of
$280 and $280, respectively $ 241 $ 647
Marketable investment securities 7,850 7,640
Franchise and other receivables, net 1,351 1,039
Inventory 217 213
Prepaid income taxes --- ---
Prepaid expenses and other current assets 258 502
Deferred income taxes 415 415
----- -----
Total current assets 10,332 10,456
Property and equipment, net 5,916 5,480
Intangible assets, net 11,555 11,640
Other assets, net 192 218
----- -----
$27,995 $27,794
======= =======
Current liabilities:
Current installments of obligations under capital leases $ 17 $ 17
Accounts payable 568 754
Accrued expenses and other current liabilities 4,503 4,614
Deferred franchise fees 283 269
----- -----
Total current liabilities 5,371 5,654
Obligations under capital leases, net of current installments 18 21
Deferred area development fees --- ---
Other liabilities 144 143
----- -----
Total liabilities 5,533 5,818
----- -----
Stockholders' equity:
Common stock, $.01 par value - 20,000,000 shares
authorized, 4,722,216 issued and outstanding 47 47
Additional paid-in-capital 32,319 32,307
Accumulated deficit (9,904) (10,378)
------- -------
Total stockholders' equity 22,462 21,976
------- -------
$27,995 $27,794
======== =======
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 29, 1997 AND JUNE 30, 1996
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Sales $5,907 $5,773
Franchise fees and royalties 671 813
License royalties 405 254
Investment and other income 379 132
------ -----
Total revenues 7,362 6,972
------ -----
Costs and expenses:
Cost of sales 3,503 3,313
Restaurant operating expenses 1,613 1,665
Depreciation and amortization 252 261
Amortization of intangible assets 96 96
General and administrative 1,103 976
Interest expense 1 2
----- -----
Total costs and expenses 6,568 6,313
----- -----
Earnings before income taxes 794 659
Provision for income taxes 320 264
----- -----
Net earnings $ 474 $ 395
====== ======
Net earnings per common share $ 0.10 $ 0.08
====== ======
Weighted average number of common and
common equivalent shares outstanding 4,766 4,722
====== ======
See accompanying notes to consolidated financial statements.
</TABLE>
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NATHAN'S FAMOUS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
THIRTEEN WEEKS ENDED JUNE 29, 1997
(In thousands, except share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Total
Additional Deferred Accum- Stock-
Common Common Paid in- Compen- ulated holders'
Shares Stock Capital sation Deficit Equity
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<S> <C> <C> <C> <C> <C> <C>
Balance, March
30, 1997 4,722,216 $ 47 $ 32,388 $ ( 81) $(10,378) $21,976
Amortization
of deferred
compensation
relating to
restricted
stock 12 12
Net earnings 474 474
---------- -------- --------- --------- --------- -------
Balance, June
29, 1997 4,722,216 $ 47 $ 32,388 $ ( 69) $( 9,904) $22,462
========= ========== ========= ========= ========= ========
See accompanying notes to consolidated financial statements.
</TABLE>
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NATHAN'S FAMOUS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THIRTEEN WEEKS ENDED JUNE 29, 1997 AND JUNE 30, 1996
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
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<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 474 $ 395
Adjustments to reconcile net earnings to
net cash provided by / (used in) operating activities:
Depreciation 252 261
Amortization of intangible assets 96 96
Provision for doubtful accounts 15 15
Other 12 11
Changes in assets and liabilities:
Marketable investment securities (210) 88
Franchise and other receivables (327) ( 73)
Inventory ( 4) ( 2)
Prepaid income taxes --- ( 88)
Prepaid and other current assets 244 284
Deferred income taxes --- ---
Accounts payable and accrued expenses (297) (601)
Deferred franchise fees 14 37
Other assets 26 (20)
Deferred area development fees --- (69)
Other non current liabilities 1 (16)
------ ------
Net cash provided by / (used in) operating activities 296 318
------ ------
Cash flows from investing activities:
Purchase of property and equipment (699) ( 429)
Purchase of franchise restaurant --- ---
------ ------
Net cash used in investing activities (699) ( 429)
------ ------
Cash flows from financing activities:
Principal repayment of obligations under capital leases (3) ( 8)
------ ------
Net cash used in financing activities (3) ( 8)
------ ------
Net decrease in cash and cash equivalents (406) ( 119)
Cash and cash equivalents, beginning of period 647 801
------- -------
Cash and cash equivalents, end of period $ 241 $ 682
========= =========
Cash paid during the period for:
Interest $ 1 $ 2
Income taxes 260 31
See accompanying notes to consolidated financial statements.
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NATHAN'S FAMOUS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 29, 1997
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 29,
1997 and June 30, 1996 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 30, 1997.
NOTE B - RECLASSIFICATIONS
Certain reclassifications of prior period balances have been made to
conform to the June 29, 1997 presentation.
NOTE C - EARNINGS PER SHARE
Weighted average common shares outstanding for the thirteen weeks ended
June 29, 1997 and June 30, 1996 were 4,765,552 and 4,722,216, respectively.
Common stock equivalents for the thirteen weeks ended June 29, 1997 and June 30,
1996 were 43,336 and 0 , respectively.
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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 29, 1997 compared to June 30, 1996
Revenues
Total sales increased 2.3% or $134,000 to $5,907,000 for the thirteen weeks
ended June 29, 1997 ("first quarter fiscal 1998") from $5,773,000 for the
thirteen weeks ended June 30, 1996 ("first quarter fiscal 1997"). Company-owned
restaurant sales increased 0.9% or $51,000 to $5,824,000 from $5,773,000.
Comparable unit sales (units operating for 18 months or longer as of the
beginning of the fiscal year), increased by $44,000 or 0.9% in the first quarter
fiscal 1998 versus the first quarter fiscal 1997. The Company continues to
emphasize the aggressive local store marketing activities and value pricing
strategies that were implemented last year. Additionally, the Company has
recently completed the renovation of its Yonkers, NY restaurant which is now
operated as a co- branded Nathan's / Pizza Hut / TCBY. Plans are currently being
developed to renovate and modernize the appearance and design of certain other
units. At June 29, 1997 and June 30, 1996, there were 24 and 25 Company-owned
units, respectively. Sales from the newly implemented Branded Product Program
were $83,000 for the first quarter fiscal 1998.
Franchise fees and royalties decreased by $142,000 or 17.5% to $671,000 in
the first quarter fiscal 1998 compared to $813,000 in the first quarter fiscal
1997. Franchise royalties decreased by $55,000 or 8.8% to $568,000 in the first
quarter fiscal 1998 as compared to $623,000 in the first quarter fiscal 1997.
Franchise restaurant sales, upon which royalties are based, decreased by
$1,892,000, to $13,961,000 in the first quarter fiscal 1998 as compared to
$15,853,000 in the first quarter fiscal 1997. At June 29, 1997 there were 150
franchised or licensed restaurants as compared to 175 at June 30, 1996. During
the first quarter fiscal 1997, the 53 Caldor units which were subsequently
closed generated sales and royalties of approximately $2,133,000 and $85,000,
respectively. Franchise fee income decreased to $103,000 in the first quarter
fiscal 1998 as compared to $190,000 in the first quarter fiscal 1997. During the
first quarter fiscal 1998, franchisees and licensees opened 9 new units versus
the first quarter fiscal 1997 in which 6 new units were opened. Higher franchise
fees were earned during the first quarter fiscal 1997 than during the first
quarter fiscal 1998 due primarily to the higher recognition of fees associated
with expired development agreements.
License royalties increased by $151,000 or 59.4% to $405,000 in the first
quarter fiscal 1998 as compared to $254,000 in the first quarter fiscal 1997.
The majority of this increase is a result of the Company's license arrangement
with SMG, Inc., for the sale of Nathan's frankfurters in supermarkets. Of the
total $151,000 increase, approximately $81,000 represents royalties earned from
higher sales to supermarkets and $60,000 represents amortization of the deferred
fee received from SMG, Inc. in conjunction with the renegotiation of their
contract commencing January 1, 1997.
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Investment and other income increased to $379,000 in the first quarter
fiscal 1998 from $132,000 in the first quarter fiscal 1997. Approximately
$128,000 of the increase is due primarily to increased earnings on the Company's
marketable investment securities as a result of the change in performance of the
financial markets. Additionally, the Company recognized a gain of approximately
$130,000 from the sale of an underperforming restaurant.
Costs and Expenses
Cost of sales increased by $190,000 from $3,313,000 in the first quarter
fiscal 1997 to $3,503,000 in the first quarter fiscal 1998. As a percentage of
restaurant sales, cost of restaurant sales increased to 58.9% in the first
quarter fiscal 1998 as compared to 57.4% in the first quarter fiscal 1997. This
increase is due primarily to higher labor and associated fringe benefit costs.
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 decreased by $52,000 from $1,665,000 in the
first quarter fiscal 1997 to $1,613,000 in the first quarter fiscal 1998. This
decrease can be attributed to the closure of two unprofitable restaurants in
June 1996. As a percentage of restaurant sales, restaurant operating expenses
were 28.8% in the first quarter fiscal 1997 as compared to 27.7% in the first
quarter fiscal 1998.
Depreciation and amortization decreased by $9,000 or 3.4% from $261,000 in
the first quarter fiscal 1997 to $252,000 in the first quarter fiscal 1998.
Amortization of intangibles of $96,000 remained constant in both fiscal years.
General and administrative expenses increased by $127,000 or 13.0% to
$1,103,000 in the first quarter fiscal 1998 as compared to $976,000 in the first
quarter fiscal 1997. Approximately $75,000 of the increase relates to the effect
of certain one-time benefits recognized in the first quarter fiscal 1997.
Income Tax Provision
In the first quarter fiscal 1998, the income tax provision was $320,000 or
40.3% of income before income taxes. In the first quarter fiscal 1997, the
income tax provision was $264,000 or 40.1% of income before income taxes.
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Liquidity and Capital Resources
Cash and cash equivalents at June 29, 1997 aggregated $241,000, decreasing
by $406,000 during the fiscal 1998 period. At June 29, 1997, marketable
investment securities totalled $7,850,000 and net working capital increased
slightly to $4,961,000 from March 30, 1997.
Cash provided by operations of $296,000 in the fiscal 1998 period is
primarily attributable to net income of $474,000, non-cash charges of $375,000,
including depreciation and amortization of $348,000, a decrease in prepaid and
other current assets of $244,000, a decrease in accounts payable and accrued
expenses of $297,000, an increase in marketable investment securities of
$210,000 and an increase in franchise and other receivables of $327,000.
Cash used in investing activities of $699,000 represents capital
acquisitions relating to the renovation of the Company-owned restaurant in
Yonkers, NY, construction of a new Company-owned unit which is expected to open
in August 1997 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 1998. 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 29, 1997.
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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 7, 1997 By: /s/ Wayne Norbitz
Wayne Norbitz
President and Chief Operating Officer
(Principal Executive Officer)
Date: August 7, 1997 By: /s/ Ronald G. DeVos
Ronald G. DeVos
Vice President - Finance
and Chief Financial Officer
(Principal Financial and Accounting Officer)
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-30-1997
<PERIOD-END> JUN-29-1997
<CASH> 241
<SECURITIES> 7850
<RECEIVABLES> 1947
<ALLOWANCES> 596
<INVENTORY> 217
<CURRENT-ASSETS> 10332
<PP&E> 12736
<DEPRECIATION> 6820
<TOTAL-ASSETS> 27995
<CURRENT-LIABILITIES> 5371
<BONDS> 0
0
0
<COMMON> 47
<OTHER-SE> 22415
<TOTAL-LIABILITY-AND-EQUITY> 27995
<SALES> 5907
<TOTAL-REVENUES> 7362
<CGS> 3503
<TOTAL-COSTS> 1961
<OTHER-EXPENSES> 1088
<LOSS-PROVISION> 15
<INTEREST-EXPENSE> 1
<INCOME-PRETAX> 794
<INCOME-TAX> 320
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</TABLE>
