Does anyone know why Nathan's management chooses not to hold a conference call to review earnings?
Yes I understand that there are no analysts with recommendations on the stock. However, I would guess there are a handful of independent analysts and countless individual investors who would be interested.
The lack of an earnings call makes me question management. Does anyone have opinions on Nathan's management?
Is the current team capable of consistent double-digit earnings growth?
Do they have any interest in building interest in the stock? My gut says very little...otherwise they would invest a few hours preparing and running a conference call each quarter.
and in case you don't know who lorber is, he's a major owner of ladenburg thalmann, the LI based (miami too) "investment bank"...here's some more recent news on that one:
My favorite filing this week comes from brokerage Ladenburg Thalmann (AMEX: LTS), which has seen millions in insider buying since the beginning of the year. I've been pretty bullish on the stock as a result.
But this 8-K is a head-scratcher. Quoting:
On October 2, 2007, Ladenburg Thalmann ... entered into a $72,000,000 temporary Subordinated Loan Agreement ... with Frost Gamma Investments Trust, an affiliate of Dr. Phillip Frost, the Chairman of the Board of Directors of the Company and the Company's principal shareholder. The Loan Agreement bears interest at the London Inter-Bank Offer Rate (LIBOR) plus 2%, payable monthly, and provides for a commitment fee of $420,000. [Emphasis added.]
Talk about odd. Surely, Ladenburg Thalmann has other sources of funding available. Why pad the pockets of Dr. Frost? It just feels creepy, like one of those before-the-bloodshed moments in a horror flick.
If the answer is that Frost Gamma Investments offered the best terms, at the best rate, then color me worried. Assuming they're using a one-month rate, LIBOR plus 2% is a bit above 7% at the moment. That's perfectly reasonable, but hardly cheap.
What's more, the loan, to "meet certain capital requirements in connection with underwriting transactions," must be repaid by Nov. 14. Hence the commitment fee.
Perhaps I'm missing something but I don't see how this helps anyone other than Dr. Frost. Care to comment, sir?
petrocelli and lorber are also big owners of united capital corp (AFP) another publicly traded entity with tons of cash on the balance sheet--this one has $140 million in cash. Agree that its puzzling to carry this amount of excess cash on the profitable and low capital intensive NATH. only way to get management/insiders to credit other shareholders with cash is to get a 13-d filing out there and rattle the cages of insiders...i own a bunch of shares and would like a special divvy before the democrats take back the government and repeal the good divvy tax treatment.
To your original question about managment having a quarterly conference calls.
I'm not sure if you're in the New York area, but the annual shareholders meeting was held on Sept. 12th in Westbury. If you are in the area, then I would suggest taking in next years meeting and ask some questions.
IMO you don't understand the guts of the "Branded Products" strategy. "Branded Products" is the term used to describe deals to have Nathan's hotdogs sold in Subway restaurants in WalMarts and KMarts and places such Aunte Anne's and Circle K ect. This is the ultimate proven low cost expansion plan. This is where the growth is coming from! I'm not impressed with franchise same store sales and closures, which is the only data available when looking at franchise performance. I visited a franchise in Las Vegas last year and got a cold hotdog that may have made me sick, and I saw a franchise close down in my SoCal mall about 7 years ago. Therefore, I'd rather see excess cash be used to buy back shares or support the "branded products" strategy. I think management knows what they are doing, and will eventually start a new buy back program. Only Uncle Sam wins with a dividend.
It's very helpful to see the information again to complement the discussion..thank you. After reading it again, I still have the same question.
Why isn't management growing this chain?
With the chain only growing by 2-20 stores a year net(openings - closings), it's not surprising growth from the restaurants isn't very impressive. CapEx is minimal under a franchise system. With a more aggressive growth plan, Nathan's could change the landscape.
The top line would improve simply by adding more stores. And as the company gets larger, they can start advertising nationally. This would increase traffic and same-store sales, while adding brand value which would also help grocery store sales.
The major assumption in the simple statements above is that we have a management team capable of faster growth including:
Identifying appropriate franchisees and store locations
Building the brand in local markets
Managing sales and distribution logistics
Nathan's has the cash to get started, but somehow management is content with little to no growth on the restaurant side. I appreciate others' optimism with grocery products, but there's opportunity to pull both levers. And my guess is success in one builds success in the other.
cont'd from 10q....
The following summary reflects the franchise openings and closings, excluding the Miami Subs franchise system which was sold effective May 31, 2007, for the fiscal years ended March 25, 2007, March 26, 2006, March 27, 2005, March 28, 2004 and March 30, 2003:
March 25, 2007 March 26, 2006 March 27, 2005 March 28, 2004 March 30, 2003
Franchised restaurants operating at the beginning of the period 290 271 247 237 235
New franchised restaurants opened during the period 19 30 37 36 22
Franchised restaurants closed during the period (17 ) (11 ) (13 ) (26 ) (20 )
Franchised restaurants operating at the end of the period 292 290 271 247 237
Answer=Branded Products which has exploded to close to 50% of total revenue in recent years, while it appears to me that franchise fees/royalties are pretty much flat....see 10q excerpt....
Revenues from Continuing Operations
Total sales increased by $659,000 or 7.2% to $9,821,000 for the thirteen weeks ended June 24, 2007 ("fiscal 2008 period") as compared to $9,162,000 for the thirteen weeks ended June 25, 2006 ("fiscal 2007 period"). Sales from the Branded Product Program increased by 16.8% to $5,925,000 for the fiscal 2008 period as compared to sales of $5,073,000 in the fiscal 2007 period. This increase was primarily attributable to increased sales volume of 10.6%. Total Company-owned restaurant sales (representing six comparable Nathan?s restaurants) increased by 11.6% to $3,633,000 as compared to $3,254,000 during the fiscal 2007 period. During the fiscal 2008 period, sales to our television retailer were approximately $572,000 lower than the fiscal 2007 period. During the fiscal 2008 period, the television retailer reduced its number special food airings. As a result, Nathan?s did not run a ?Today?s Special Value? which ran during the first quarter fiscal 2007 and there was a change in the timing of the ?Try Me? specials. This year, shipments from the ?Try Me? specials are expected to occur in the second quarter fiscal 2008 as compared to the first quarter fiscal 2007.
Franchise fees and royalties increased by $150,000 or 13.4% to $1,270,000 in the fiscal 2008 period compared to $1,120,000 in the fiscal 2007 period. Franchise royalties were $1,072,000 in the fiscal 2008 period as compared to $1,003,000 in the fiscal 2007 period. Franchise restaurant sales decreased by $6,000 to $23,946,000 in the fiscal 2008 period as compared to $23,952,000 in the fiscal 2007 period. Comparable domestic franchise sales (consisting of 143 restaurants) increased by $394,000 or 2.0% to $20,499,000 in the fiscal 2008 period as compared to $20,105,000 in the fiscal 2007 period. During the fiscal 2008 period, we received $77,000 of royalties that were previously deemed to be uncollectible. At June 24, 2007, 298 domestic and international franchised or licensed units were operating as compared to 291 domestic and international franchised or licensed units at June 25, 2006. After giving effect to the sale of Miami Subs, royalty income from one domestic franchised location was deemed unrealizable during the thirteen weeks ended June 24, 2007, as compared to two domestic franchised locations during the thirteen weeks ended June 25, 2006. Domestic franchise fee income was $113,000 in the fiscal 2008 period as compared to $66,000 in the fiscal 2007 period. International franchise fee income was $85,000 in the fiscal 2008 period, as compared to $51,000 during the fiscal 2007 period. During the fiscal 2008 period, nine new franchised units opened, including two units in Kuwait and three frank and fry units. During the fiscal 2007 period, four new franchised units were opened including one in Japan.
I am new to Nathan's and simply cannot understood how the national growth opportunity is old news that doesn't work. If the only thing Nathan's has going for it is the brand, then where is all the cash coming from?
Over the past five years, sales have increased from $32m to $45m and there's been positive EBITDA in four of the past five years, ranging between $4m to $10m the past four years.
My understanding is the money is primarily coming from food sales to their franchises and direct sales from the six-company-owned stores. And although the grocery store branded products are increasing, they still only make up a small percentage of overall sales and profits.
So if my understanding is correct, how can Nathan's franchise growth be limited? Do people only like hotdogs in 22 states? What's the issue?
I remember mention in the annual report about success in China and other foreign markets, why not spend the cash to grow more aggressively overseas if domestic growth is saturated?
I agree with you in that I definetly don't want to see a sub-par investment. However, if they pay out a big one time dividend, Uncle Sam can take up to 40%. 3% may not be a good return , but -40% sucks. This is scary if you want to buy more shares, in that your at risk of being stung with the short term tax rate. I lived through this with ARDNA when they paid a special $20 dividend several years ago. They are now using their cash to buy back shares and its been much more rewarding to the shareholders. I have no problem with NATH buying back shares at the current price.