Noble Roman's Announces Continued Growth, Profitability for Third Quarter 2012
First Stand-Alone Take-n-Bake Location Opens, Representing Additional Growth Engine
Grocery Take-n-Bake Program Expanding, Reaching 1,350 Grocery Licensees and 14 Distributors
INDIANAPOLIS, Nov. 8, 2012 /PRNewswire/ -- Noble Roman's, Inc. (OTC/BB: NROM), the Indianapolis based franchisor and licensor of Noble Roman's Pizza and Tuscano's Italian Style Subs, today announced results for the quarterly period ended September 30, 2012.
Third Quarter 2012 Financial and Operational Highlights
- Total revenue was $1.845 million, up 4.5% compared to $1.766 million in the year-ago period.
- Upfront franchisee fees and commissions were $163,356 compared to $39,527.
- Royalties and fees less upfront fees were $1.6 million compared to $1.6 million.
- Operating margin on total revenue was 39.4% compared to 36.3%.
- Net income was $401,573, or $0.02 per share, compared to $11,581, or $0.00 per share.
- Net income from continuing operations was $401,573 or $0.02 per share, compared to $327,603 or $0.02 per share.
- Net income before taxes was $664,965, or $0.03 per share, compared to $542,479, or $0.03 per share.
- The first stand-alone take-n-bake location opened in Greenwood, IN, a suburb of Indianapolis, on October 29, 2012; six more are already under agreement and in various stages of development, several of which are expected to open soon.
Nine Months Year-to-Date 2012 Financial and Operational Highlights
- Total revenue was $5.6 million, up 2.3% compared to $5.4 million in the same period last year.
- Upfront franchisee fees and commissions were $311,022 compared to $185,491.
- Royalties and fees less upfront fees were $4.9 million compared to $4.8 million.
- Operating margin on total revenue was 39.3% compared to 38.4% in the same period last year.
- Net income was $1.1 million, or $0.06 per share, compared to $768,518, or $0.04 per share.
- Net income from continuing operations was $1.1 million, or $0.06 per share compared to $1.1 million, or $0.06 per share, for the first nine months of last year.
- Net income before taxes was $1.8 million, or $0.09 per share, compared to $1.8 million, or $0.09 per share.
- In 2012, the company has signed franchise agreements for 34 new non-traditional locations other than grocery stores.
- In 2012, the company has signed supply agreements for 411 additional grocery store take-n-bake locations.
"We continue to successfully leverage the opportunities we see for increasing unit growth and revenue within our non-traditional venues, while adding additional growth engines through our Take-n-Bake initiative," said Paul Mobley, Chairman and CEO of Noble Roman's, Inc. "This success is reflected in our positive operating metrics and by the increase in franchise agreements we've signed for new, non-traditional locations other than grocery stores as well as for additional grocery store take-n-bake locations. In addition, subsequent to the quarter end, we opened our first stand-alone take-n-bake franchise that taps into this fast growing segment of the pizza industry with our high-quality, great tasting pizza offerings adapted for this market, and we already have six more take-n-bake locations under agreement and in various stages of development and construction."
Third Quarter 2012 Financial Results
Total revenue was $1.845 million up 4.5% compared to $1.766 million in the third quarter of 2011. Upfront franchisee fees and commissions were $163,356 compared to $39,527. Royalties and fees less upfront fees were $1.6 million compared to $1.6 million. This included an increase in royalties and fees from grocery store take-n-bake pizza of $24,607, an increase in royalties and fees from non-traditional locations other than grocery stores of $64,600 and a decrease in royalties and fees from traditional locations of $108,772.
Total operating income was $726,176, or 39.4% operating margin, compared to $641,444, or 36.3% operating margin in the year-ago period.
Net income was $401,573, or $0.02 per share, compared to $11,581, or $0.00 per share for the same period in 2011, which included a $316,022 loss from discontinued operations, net of tax benefit. Net income from continuing operations was $401,572 compared to $327,603 in 2011 or $0.02 per share in the same period in 2011. The increase in net income was primarily the result of the growth in total revenue in addition to the reduced interest expense as a result of the company's re-financing of its debt during the second quarter resulting in a lower effective interest rate. Net income before taxes was $664,965, or $0.03 per share, compared to $542,479, or $0.03 per share. Although the company provides for income tax expense in its financial statements, it is currently not paying any income tax as a result of its deferred tax credits and will not pay any income tax on the next $25 million of net income.
Year-to-Date 2012 Financial Results
Total revenue was $5.6 million for the nine months ended September 30, 2012 compared to $5.4 million for the same period last year. Upfront franchisee fees and commissions were $311,022 compared to $185,491. Royalties and fees less upfront fees were $4.9 million compared to $4.8 million. This included an increase in royalties and fees from grocery store take-n-bake pizza of $171,986, an increase in royalties and fees from non-traditional locations other than grocery stores of $69,820 and a decrease in royalties and fees from traditional locations of $198,684.
Operating income was $2.2 million, or 39.3% operating margin, compared to $2.1 million, or 38.4% operating margin, in the same period last year.
Net income was $1.1 million, or $0.06 per share, compared to $768,518, or $0.04 per share in the same period in 2011, which included a $316,022 loss from discontinued operations, net of tax benefit. Net income from continuing operations was $1.1 million or $0.06 per share, compared to $1.1 million, or $0.06 per share, in the year-ago period. The increase in net income was primarily the result of the increase in total revenue partially offset by an increase in interest expense. The increase in interest expense was primarily the result of the company expensing $93,000 for the unamortized loan closing costs from the origination of the former bank loan at the time the loan was repaid and recording expense of $30,000 to terminate the former interest rate swap agreement related to the loan which was repaid, partially offset by the lower effective interest rate during the third quarter on the refinanced loan. Net income before taxes was $1.8 million, or $0.09 per share, compared to $1.8 million, or $0.09 per share, in the same period in 2011. Although the company provides for income tax expense in its financial statements, it is currently not paying any income tax as a result of its deferred tax credits and will not pay any income tax on approximately the next $25 million of net income.
Mr. Mobley concluded, "The credit agreement we entered into in May, 2012 has had the effect of reducing our interest rate on debt to approximately 4.25% from approximately 8%, which is reflected in the decrease to our interest expense this quarter and positively affected net income compared to last year."
The company has entered into agreements with three existing independent franchisees for seven stand-alone take-n-bake locations. The first stand-alone take-n-bake location opened in Greenwood, Indiana, a suburb of Indianapolis, on October 29, 2012 and the other six are under various stages of development. The company uses the same high-quality pizza ingredients for its take-n-bake pizzas as with its standard pizza, with slight modifications to portioning for increased home baking performance. The company's stand-alone take-n-bake pizza program features the chain's popular traditional Hand-Tossed Style pizza, Deep-Dish Sicilian pizza, SuperThin pizza and Noble Roman's famous breadsticks with spicy cheese sauce, all in a convenient cook-at-home format. Additional menu items include such items as fresh salads, cookie dough, cinnamon rounds, bake-able pasta and more.
In 2012, the company has signed franchise agreements for 34 new non-traditional locations other than grocery stores including 12 locations with Huck's, a 110-unit convenience store chain located in five states, plus an agreement with The Pantry, Inc., a convenience store chain of more than 1,650 locations. Management is in discussions with several other significant convenience store chains. In 2012, the company has signed supply agreements for 411 additional grocery store take-n-bake locations. Since the company introduced take-n-bake pizza in grocery store chains in late 2009 through November 6, 2012, the company has signed agreements for 1,350 grocery store locations to operate the take-n-bake pizza program and has opened the take-n-bake pizza program in approximately 1,010 of these locations. In addition, the company has 14 distributors under contract to distribute take-n-bake pizzas to grocery stores, a sequential increase of 2 compared to the 12 as of the end of the second quarter.
"Consumers continue to embrace the convenience of our Take-n-Bake offering, which allows busy families to enjoy a hot, great-tasting meal in the comfort of their home at an affordable price," Mr. Mobley continued. "Our take-n-bake offerings taste better and are ready more quickly than a delivery pizza, and this message is resonating with groceries, convenience stores and now, franchisees, as evidenced by the opening of our first stand-alone take-n-bake store. Take-n-bake is a fast growing segment of the pizza industry, and with Noble Roman's brand reputation and a growing network of locations consumers can visit to purchase a take-n-bake meal, we believe this initiative will provide an additional growth engine for the company."
Balance Sheet Summary
Cash and cash equivalents totaled approximately $162,768 as of September 30, 2012 compared to $233,296 as of December 31, 2011. Total stockholders' equity as of September 30, 2012 was approximately $12.9 million compared to $11.7 million as of December 31, 2011.
Update on Litigation:
The Court granted summary judgment in favor of the Company and against all of the Plaintiffs in a long-running lawsuit filed in Superior Court Hamilton County, Indiana in June 2008. Plaintiffs filed numerous motions and an appeal to the Indiana Court of Appeals, in an attempt to reverse the December 23, 2010 summary judgment. All of the motions failed and the Indiana Court of Appeals dismissed the appeal with prejudice. The fraud charges against the Company and certain of its officers are dismissed entirely and the Plaintiffs have no appeal rights remaining. The Company has also been granted partial summary judgment as to liability on the Company's counter claims against the Plaintiffs in excess of $5 million. The Court determined that the Plaintiffs/Counterclaim-Defendants were liable to the Company for direct damages and consequential damages, including future royalties for breach of their franchise agreements. In addition, the Court determined that, as a matter of law, the Company was entitled to recover attorney's fees associated with obtaining preliminary injunctions, fees resulting from the prosecution of the Company's counterclaims and fees for defending against the fraud claims. The amount of the award is to be determined at trial, which is proceeding currently.
The statements contained in this press release concerning the company's future revenues, profitability, financial resources, market demand and product development are forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) relating to the company that are based on the beliefs of the management of the company, as well as assumptions and estimates made by and information currently available to the company's management. The company's actual results in the future may differ materially from those projected in the forward-looking statements due to risks and uncertainties that exist in the company's operations and business environment, including, but not limited to, competitive factors and pricing pressures, non-renewal of franchise agreements, shifts in market demand, general economic conditions, changes in purchases of or demand for the company's products, licenses or franchises, the success or failure of individual franchisees and licensees, changes in prices or supplies of food ingredients and labor, and the success or failure of its recently developed stand-alone take-n-bake operation. Should one or more of these risks or uncertainties materialize, or should underlying assumptions or estimates prove incorrect, actual results may differ materially from those described herein as anticipated, believed, estimated, expected or intended. The company undertakes no obligations to update the information in this press release for subsequent events.
Noble Roman's, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited)
|
||
Assets |
December 31, |
September 30, |
Current assets: |
||
Cash |
$ 233,296 |
$ 162,768 |
Accounts and notes receivable - net |
884,811 |
1,212,115 |
Inventories |
338,447 |
424,136 |
Assets held for resale |
252,552 |
252,552 |
Prepaid expenses |
278,718 |
507,284 |
Deferred tax asset - current portion |
1,400,000 |
1,400,000 |
Total current assets |
3,387,824 |
3,958,855 |
Property and equipment: |
||
Equipment |
1,147,109 |
1,160,824 |
Leasehold improvements |
12,283 |
12,283 |
1,159,392 |
1,173,107 |
|
Less accumulated depreciation and amortization |
851,007 |
892,343 |
Net property and equipment |
308,385 |
280,764 |
Deferred tax asset (net of current portion) |
9,613,399 |
8,920,666 |
Other assets |
3,914,523 |
4,453,865 |
Total assets |
$ 17,224,131 |
$ 17,614,150 |
Liabilities and Stockholders' Equity |
||
Current liabilities: |
||
Current portion of long-term note payable to bank |
$ 3,575,000 |
1,250,000 |
Accounts payable and accrued expenses |
665,054 |
170,267 |
Total current liabilities |
4,240,054 |
1,420,267 |
Long-term obligations: |
||
Note payable to bank (net of current portion) |
- |
3,333,333 |
Note payable to officer |
1,255,821 |
- |
Total long-term liabilities |
1,255,821 |
3,333,333 |
Stockholders' equity: |
||
Common stock – no par value (25,000,000 shares authorized, 19,469,317 issued and outstanding as of December 31, 2011 and 19,516,589 as of September 30, 2012) |
23,239,976 |
23,337,814 |
Preferred stock (5,000,000 shares authorized and 20,625 issued and outstanding as of December 31, 2011 and September 30, 2012) |
800,250 |
800,250 |
Accumulated deficit |
(12,311,970) |
(11,277,514) |
Total stockholders' equity |
11,728,256 |
12,860,550 |
Total liabilities and stockholders' equity |
$ 17,224,131 |
$ 17,614,150 |
Noble Roman's, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (Unaudited)
|
||||
Three Months Ended |
Nine Months Ended |
|||
September 30, |
September 30, |
|||
2011 |
2012 |
2011 |
2012 |
|
Royalties and fees |
$1,623,943 |
1,728,207 |
$5,030,533 |
$ 5,199,187 |
Administrative fees and other |
3,107 |
5,202 |
22,502 |
17,944 |
Restaurant revenue |
138,601 |
111,259 |
395,122 |
358,788 |
Total revenue |
1,765,651 |
1,844,668 |
5,448,157 |
5,575,919 |
Operating expenses: |
||||
Salaries and wages |
251,790 |
250,216 |
736,929 |
747,199 |
Trade show expense |
77,112 |
128,357 |
260,359 |
372,481 |
Travel expense |
50,919 |
46,234 |
150,393 |
140,607 |
Other operating expenses |
165,286 |
170,488 |
520,516 |
520,697 |
Restaurant expenses |
137,508 |
100,514 |
385,975 |
332,789 |
Depreciation and amortization |
36,311 |
28,561 |
86,170 |
87,786 |
General and administrative |
405,281 |
394,122 |
1,217,099 |
1,182,508 |
Total expenses |
1,124,207 |
1,118,492 |
3,357,441 |
3,384,067 |
Operating income |
641,444 |
726,176 |
2,090,716 |
2,191,852 |
Interest and other expense |
98,965 |
61,211 |
294,823 |
355,831 |
Income before income taxes |
542,479 |
664,965 |
1,795,893 |
1,836,021 |
Income tax expense |
214,876 |
263,393 |
711,353 |
727,247 |
Net income from continuing operations |
327,603 |
401,572 |
1,084,540 |
1,108,774 |
Loss from discontinued operations net of tax benefit of $207,280 for 2011
|
(316,022) |
- |
(316,022) |
- |
Net income |
11,581 |
401,572 |
768,518 |
1,108,774 |
Cumulative preferred dividends |
24,682 |
24,682 |
74,047 |
74,318 |
Net income (loss) available to common stockholders |
$(13,101) |
$376,890 |
$ 694,471 |
$1,034,456 |
Earnings per share – basic: |
||||
Net income from continuing operations |
$ .02 |
$ .02 |
$ .06 |
$ .06 |
Net loss from discontinued operations |
(.02) |
- |
(.02) |
- |
Net income |
- |
.02 |
.04 |
.06 |
Net income (loss) available to common stockholders |
$ - |
$ .02 |
$ .04 |
$ .05 |
Weighted average number of common shares outstanding |
19,469,317 |
19,506,886 |
19,453,932 |
19,491,274 |
Diluted earnings per share: |
||||
Net income from continuing operations |
$ .02 |
$ .02 |
$ .05 |
$ .06 |
Net loss from discontinued operations |
(.02) |
- |
(.02) |
- |
Net income |
- |
.02 |
.04 |
.06 |
Net income available to common stockholders |
$ - |
$ .02 |
$ .03 |
$ .05 |
Weighted average number of common shares outstanding |
20,159,153 |
20,070,990 |
20,143,768 |
20,055,378 |
FOR ADDITIONAL INFORMATION, CONTACT:
For Media Information: Scott Mobley, President 317/634-3377
For Investor Relations: Paul Mobley, Chairman & CEO 317/634-3377
or Brett Maas, Hayden IR, 646/536-7331or [email protected]
SOURCE Noble Roman's, Inc.
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