Nathan's Famous Q2 Revenues Up - Net Income Down

Nathan's Famous, Inc. (NASDAQ:NATH) reported results for the first quarter of its 2012 fiscal year that ended June 26, 2011.

For the fiscal quarter ended June 26, 2011:

• Net income was $1,596,000 or $0.31 per diluted share as compared to $1,660,000 or $0.29 per diluted share for the thirteen weeks ended June 27, 2010;
• Earnings before income taxes increased by 2.9% to $2,591,000 as compared to $2,517,000 for the thirteen weeks June 27, 2010;
• Non-GAAP earnings, which exclude the litigation expense items described below, were $1,666,000 or $0.32 per diluted share; and
• Revenues increased by 14.5% to $17,897,000, as compared to $15,626,000 during the thirteen weeks ended June 27, 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 29.2% to $10,140,000 during the thirteen weeks ended June 26, 2011 as compared to sales of $7,850,000 during the thirteen weeks ended June 27, 2010.
• Retail license royalties increased by 9.3% or $168,000 to $1,967,000 during the thirteen weeks ended June 26, 2011 as compared to $1,799,000 during the thirteen weeks ended June 27, 2010.
• Revenues from franchise operations increased by 14.3% or $180,000 to $1,435,000 during the thirteen weeks ended June 26, 2011 as compared to $1,255,000 during the thirteen weeks ended June 27, 2010. Fourteen new franchised units were opened during the thirteen weeks ended June 26, 2011, including our first restaurant in Alberta, Canada, third restaurant in Beijing, China, fourth restaurant in the Dominican Republic and fifteenth restaurant in Kuwait.
• Gross profit was 18.7% of sales as compared to 23.2% of sales during the thirteen weeks ended June 27, 2010 due primarily to unusually high beef costs.
• The effective tax rate of 38.4% is approximately 4.4% higher than for the thirteen weeks ended June 27, 2010 when we resolved uncertain tax positions, reversing $79,000 of prior period accruals.
• During the thirteen weeks ended June 26, 2011, we continued our stock repurchase programs, acquiring 31,569 shares at a total cost of approximately $573,000.

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 $67,000 or $0.01 per share, net of tax, during the thirteen weeks ended June 26, 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 269 units, comprised of 264 franchised units and five company-owned units (including one seasonal unit). 

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