Nathan's(US:NATH)2021-11-05 10:04Financial Performance - Total revenues increased by 51% to $32,878,000 for the thirteen weeks ended September 26, 2021, compared to $21,839,000 for the same period in 2020[125] - EBITDA for the thirteen weeks ended September 26, 2021, was $7,742,000, compared to $8,011,000 for the same period in 2020[124] - Adjusted EBITDA for the thirteen weeks ended September 26, 2021, was $7,771,000, compared to $8,040,000 for the same period in 2020[124] - Total sales increased by 85% to $23,500,000 for Q2 fiscal 2022 compared to $12,692,000 for Q2 fiscal 2021[126] - Total revenues increased by 62% to $64,197,000 for the 26 weeks ended September 26, 2021 compared to $39,525,000 for the same period in fiscal 2021[145] - Franchise restaurant sales increased to $28,630,000 in the fiscal 2022 period from $9,188,000 in fiscal 2021[149] Cost and Expenses - Overall cost of sales increased by 103% to $20,131,000 in Q2 fiscal 2022 from $9,927,000 in Q2 fiscal 2021[133] - Cost of sales increased by 133% to $35,496,000 in fiscal 2022 compared to $15,224,000 in fiscal 2021, with gross profit at $7,329,000 or 17.1% of sales[153] - Cost of sales in the Branded Product Program rose by 154% to $30,619,000 in fiscal 2022, driven by a 140% increase in product volume sold[154] - Company-owned restaurants' cost of sales was $4,877,000 or 62.8% of restaurant sales in fiscal 2022, down from 64.6% in fiscal 2021, despite a 58% increase in sales[155] - General and administrative expenses rose by 25% to $3,269,000 in Q2 fiscal 2022 from $2,612,000 in Q2 fiscal 2021[138] - General and administrative expenses increased by $1,271,000 or 23% to $6,727,000 in fiscal 2022, primarily due to higher corporate payroll and incentive compensation[158] Strategic Initiatives - The Company’s strategic emphasis is on increasing distribution points across all business platforms, particularly through Licensing and Branded Product Programs[110] - The Company plans to invest strategically in a small number of new units as showcase locations for prospective franchisees[111] - Nathan's expects to continue investing in existing restaurants and support the growth of the Branded Product and Branded Menu Programs[177] Market Conditions and Challenges - The impact of COVID-19 on the Company’s business remains uncertain, affecting employee retention and product supply[115] - The Company’s profitability is substantially dependent on its agreement with John Morrell & Co.[105] - The average cost of hot dogs increased by approximately 6% between April 2021 and September 2021 compared to the same period in 2020[182] - The company anticipates ongoing price volatility for beef products and distribution costs due to supply chain challenges and inflationary pressures[184] - Significant increases in hot dog costs began in July 2021 due to supply chain challenges and increased consumer demand post-COVID-19[195] - Ongoing increases in labor, food, and operating expenses may require the company to reconsider its pricing strategy to offset reduced operating margins[188] - Changes in minimum wage and employment law have significantly impacted the financial results of the company and its franchisees in New York State[189] - The company has tools in place to minimize the financial impact of new legislation affecting fast food workers in New York City[187] Financial Position - Cash and cash equivalents increased by $5,692,000 to $86,756,000 at September 26, 2021, compared to $81,064,000 at March 28, 2021[165] - Cash provided by operations was $8,922,000 in fiscal 2022, attributed to net income of $9,308,000 and non-cash operating items[168] - Interest expense remained stable at $5,301,000 for both fiscal 2022 and fiscal 2021, reflecting accrued interest on the 2025 Notes[160] - As of September 26, 2021, Nathan's cash and cash equivalents totaled $86,756,000, with earnings on this cash expected to change by approximately $217,000 per annum for each 0.25% change in interest rates[192] - The company had $150,000,000 of 2025 Notes outstanding, with interest expense expected to change by approximately $375,000 per annum for each 0.25% change in interest rates[193] Franchise Operations - The restaurant system consisted of 224 franchised units and four Company-owned units as of September 26, 2021, compared to 214 franchised units and four Company-owned units as of September 27, 2020[109] - License royalties decreased by 7% to $7,658,000 in Q2 fiscal 2022 from $8,268,000 in Q2 fiscal 2021[128] - Franchise fees and royalties increased to $1,167,000 in Q2 fiscal 2022 compared to $476,000 in Q2 fiscal 2021[129] - Total franchise restaurant sales increased to $15,644,000 in Q2 fiscal 2022 from $6,969,000 in Q2 fiscal 2021[129]