Nathan's(NATH)2024-11-07 12:02Revenue and Sales Performance - Total revenues increased by approximately 6% to $41,109,000 for the thirteen weeks ended September 29, 2024, compared to $38,744,000 for the same period in 2023[115] - Foodservice sales from the Branded Product Program increased by approximately 5% to $24,536,000 for the second quarter fiscal 2025, with a 4% increase in the volume of hot dogs sold[116] - Total Company-owned restaurant sales increased by approximately 3% to $5,348,000 during the second quarter fiscal 2025, influenced by higher sales at Coney Island locations[117] - Total revenues increased by approximately 6% to $85,876,000 for the 26 weeks ended September 29, 2024, compared to $80,729,000 for the same period in fiscal 2024[137] - Foodservice sales from the Branded Product Program increased by approximately 4% to $50,682,000 for the fiscal 2025 period compared to $48,522,000 in fiscal 2024[138] - Comparable domestic franchise sales decreased to $29,037,000 in fiscal 2025 from $29,388,000 in fiscal 2024, primarily due to lower traffic at international locations[141] Financial Metrics - EBITDA for the thirteen weeks ended September 29, 2024, was $9,787,000, compared to $9,592,000 for the same period in 2023[112] - Adjusted EBITDA for the thirteen weeks ended September 29, 2024, was $10,350,000, compared to $9,774,000 for the same period in 2023[112] - Overall cost of sales increased by approximately 5% to $51,270,000 in the fiscal 2025 period compared to $48,871,000 in fiscal 2024, with gross profit at $8,959,000 or 15%[144] - The effective income tax rate for Q2 fiscal 2025 was 25.5%, down from 27.4% in Q2 fiscal 2024, reflecting income tax expense of $2,069,000 on $8,099,000 of pre-tax income[134] - The effective income tax rate for fiscal 2025 was 26.7%, compared to 27.2% in fiscal 2024, with income tax expense of $5,576,000 on pre-tax income of $20,883,000[153] Costs and Expenses - Cost of sales in the Branded Product Program increased by 5% to $46,290,000 in fiscal 2025 from $44,010,000 in fiscal 2024, driven by a 2% increase in hot dog sales volume and a 3% rise in average cost per pound[145] - Company-owned restaurant sales cost was $4,980,000 or 52% of sales in fiscal 2025, down from $4,861,000 or 55% in fiscal 2024, with food and paper costs decreasing from 27.8% to 24.8%[145] - Restaurant operating expenses rose to $2,518,000 in fiscal 2025 from $2,383,000 in fiscal 2024, with a decrease in the percentage of sales from 26.9% to 26.4%[146] - General and administrative expenses decreased by approximately $60,000 or 1% to $7,227,000 in fiscal 2025 compared to $7,287,000 in fiscal 2024[148] Cash Flow and Financing - Cash and cash equivalents increased by $10,180,000 to $31,207,000 at September 29, 2024, compared to $21,027,000 at March 31, 2024[157] - Net cash provided by operating activities was $14,826,000 in fiscal 2025, up from $11,366,000 in fiscal 2024[162] - The Company entered into a five-year unsecured Credit Agreement and borrowed $60,000,000 to refinance existing debt[103] - The Company entered into a five-year unsecured Credit Agreement providing for a term loan facility of $60,000,000 and a revolving credit facility of up to $10,000,000[166] - The company made a voluntary principal prepayment of $8,000,000 on Term Loan borrowings under its Credit Agreement on October 10, 2024[175] Dividends and Shareholder Returns - The Company declared a third quarter fiscal 2025 dividend of $0.50 per common share, payable on December 6, 2024[171] - The Company expects total cash requirements for dividends for fiscal 2025 to be approximately $8,169,000[172] Market and Economic Conditions - Inflationary pressures impacted operations, particularly with higher commodity prices for beef and beef trimmings, which may continue throughout fiscal year 2025[104] - The average cost of hot dogs during fiscal 2025 was approximately 3% higher than during fiscal 2024, indicating inflationary pressures on commodity prices[180] - A short-term increase or decrease of 10% in the cost of food and paper products would have increased or decreased the cost of sales by approximately $4,741,000 for the period ended September 29, 2024[191] - The company expects continued volatility in oil and gas prices affecting distribution costs and utility costs in Company-owned restaurants[190] - Competitive pressure on labor rates due to minimum wage increases in New York State has significantly impacted financial results[181] - The company anticipates that rising labor costs, commodity prices, and other operating expenses could adversely affect operations[184] Licensing and Royalties - The primary growth drivers have been the Licensing and Branded Product Programs, which are the largest contributors to the Company's revenues and profits[100] - License royalties increased by approximately 14% to $9,491,000 in Q2 fiscal 2025 compared to $8,339,000 in Q2 fiscal 2024, driven by an 18% increase in retail volume[118] - Franchise fees and royalties decreased by approximately 9% to $1,174,000 in Q2 fiscal 2025 from $1,291,000 in Q2 fiscal 2024, with traditional franchise royalties at $807,000 compared to $858,000[119] - Total franchise fee income was $200,000 in the fiscal 2025 period compared to $238,000 in fiscal 2024, with domestic franchise fee income increasing to $58,000 from $55,000[142] - The company recognized $23,000 in forfeited fees in the fiscal 2025 period, compared to $63,000 in fiscal 2024, with twenty-one franchise locations opened in fiscal 2025[143] - Advertising fund revenue, after eliminating company contributions, was $988,000 during the fiscal 2025 period compared to $993,000 in fiscal 2024[143] Debt and Interest Rate Exposure - A hypothetical 100 bps increase in the interest rate on outstanding unsecured Term Loan borrowings would lead to an increase of approximately $600,000 in cash interest costs over the next twelve months[188] - As of September 29, 2024, the company's cash and cash equivalents totaled $31,207,000, with earnings on this cash expected to fluctuate by approximately $78,000 per annum for each 0.25% change in interest rates[187] - The company has not hedged against fluctuations in commodity prices, leaving future purchases subject to market changes[191]