Nathan's(NATH) - 2024 Q4 - Annual Report

Revenue and Sales Performance - Total revenues increased by approximately 6% to $138,610,000 for fiscal 2024 compared to $130,785,000 for fiscal 2023[271]. - Foodservice sales from the Branded Product Program were $86,489,000 for fiscal 2024, up from $78,884,000 in fiscal 2023, with a 2% increase in hot dog volume sold[272]. - Average selling prices increased by approximately 7% in fiscal 2024 compared to fiscal 2023[272]. - Total Company-owned restaurant sales decreased by approximately $58,000 to $12,103,000 during fiscal 2024 due to reduced traffic from unfavorable summer weather[273]. - Franchise restaurant sales rose to $68,417,000 in fiscal 2024 from $63,739,000 in fiscal 2023, attributed to higher sales at airport locations, movie theaters, and shopping malls[275]. - Comparable domestic franchise sales increased to $54,031,000 in fiscal 2024 from $51,607,000 in fiscal 2023[275]. Royalties and Licensing - License royalties increased by approximately $126,000 to $33,581,000 in fiscal 2024 compared to $33,455,000 in fiscal 2023[274]. - Total royalties earned on hot dog sales from the licensing agreement with Smithfield Foods, Inc. increased to $30,068,000 for fiscal 2024, up from $29,998,000 in fiscal 2023[274]. - The increase in hot dog royalties was due to a 3% increase in average net selling price, offset by a 3% decrease in retail volume[274]. - Franchise fees and royalties increased by $64,000 to $4,356,000 in fiscal 2024 compared to $4,292,000 in fiscal 2023, with total royalties at $3,886,000 in fiscal 2024 versus $3,636,000 in fiscal 2023[275]. Costs and Expenses - Cost of sales increased by approximately 11% to $83,182,000 in fiscal 2024 from $75,172,000 in fiscal 2023, with gross profit at $15,410,000 compared to $15,873,000[278]. - General and administrative expenses rose by $1,551,000 to $15,612,000 in fiscal 2024 from $14,061,000 in fiscal 2023, primarily due to discretionary bonuses and higher professional fees[282]. - Inflationary pressures on labor and rising commodity prices, particularly for beef, have impacted consolidated results during fiscal 2024, with average hot dog costs approximately 10% higher than fiscal 2023[317][328]. - A short-term increase or decrease of 10% in the cost of food and paper products for the year ended March 31, 2024, would have increased or decreased the cost of sales by approximately $7,734,000[330]. Cash Flow and Financial Position - Net cash provided by operating activities was $20,002,000 in fiscal 2024, compared to $19,837,000 in fiscal 2023[301]. - Cash at March 31, 2024, was $21,027,000, a decrease of $8,834,000 from $29,861,000 at March 26, 2023[297]. - Adjusted EBITDA for fiscal 2024 was $34,843,000, down from $36,383,000 in fiscal 2023[296]. - At March 31, 2024, Nathan's cash balance was $21,027,000, with earnings on this cash potentially increasing or decreasing by approximately $53,000 per annum for each 0.25% change in interest rates[326]. - The company has $60,000,000 principal amount of 6.625% 2025 Notes outstanding, with interest expense on these borrowings increasing or decreasing by approximately $150,000 per annum for each 0.25% change in interest rates[327]. - The company expects to make interest payments of $3,975,000 during the fiscal year ending March 30, 2025[313]. Stock and Dividends - As of March 31, 2024, Nathan's has repurchased 1,101,884 shares at a cost of approximately $39,000,000 under the sixth stock repurchase plan, with 98,116 shares remaining to be repurchased[307]. - The company declared and paid four quarterly dividends of $0.50 per share during fiscal 2024, totaling $8,161,000[308]. - The total cash requirement for dividends for fiscal 2025 is projected to be approximately $8,169,000, assuming the same quarterly dividend rate[310]. - The company intends to continue its stock repurchase programs, funding these investments from operating cash flow[313]. Market and Competitive Environment - The franchise system consisted of 230 Nathan's franchised locations at March 31, 2024, including 116 Branded Menu locations[252]. - The company plans to expand market penetration through increased distribution points across all business platforms, focusing on Licensing and Branded Product Programs[253]. - Competitive pressure on labor rates has increased due to the minimum wage rise to $16.00 in New York City, impacting financial results and potentially leading to a decrease in franchisee margins[319][320]. - Inflationary pressures, including rising labor costs and commodity prices, have impacted results, with ongoing monitoring and mitigation measures in place[247]. Interest and Debt Management - Interest expense decreased by $2,387,000 to $5,355,000 in fiscal 2024 from $7,742,000 in fiscal 2023, due to partial redemptions of the 2025 Notes[285].