INDIANAPOLIS, May 14, 2012 (GLOBE NEWSWIRE) -- Noble Roman's, Inc. (OTCBB:NROM), the Indianapolis based franchisor of Noble Roman's Pizza and Tuscano's Italian Style Subs, today announced results for the quarterly period ended March 31, 2012.
A summary of results for the three months ended March 31, 2012 compared to the same period in 2011 follows:
Total revenue was $1,837,662 compared to $1,802,017.
Net income was $365,079, or $.02 per share, compared to $368,012, or $.02 per share.
Net income before taxes was $604,537, or $.03 per share, compared to $609,393, or $.03 per share. Although the company provides for income tax expense on its Statement of Operations, 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 $27 million of net income.
Operating margin on total revenue was 38.1% compared to 39.3%. The slight shrinkage in margin was the result of adding sales expenses to pursue the company's strategy of seeking increases in future revenue. This increase was the addition of a sales executive and additional trade shows. This was done to pursue an increase in the number of non-traditional franchises, to accelerate growth in the number of grocery store take-n-bake locations and to increase the number of grocery store distributors carrying the take-n-bake products.
Upfront franchisee fees and commissions were $84,178 compared to $62,625.
Royalties and fees less upfront fees were $1,619,388 compared to $1,612,163. This included an increase in royalties and fees from grocery store take-n-bake pizza of $74,853, or 31%, a decrease in royalties and fees from non-traditional locations of $36,124, or approximately 3%, and an increase in royalties and fees from traditional locations of nearly 1%.
Subsequent Events:
The company is in the process of refinancing its debt with a $5 million term loan to be amortized over 48 months with the proceeds to be used to repay the existing note to Wells Fargo Bank in the amount of $3.4 million, to repay the note payable to officer of $1.3 million and to pay other costs related thereto. The new term loan transaction is scheduled to close on May 15, 2012. The new term loan will bear interest at an annual rate of LIBOR plus 4% compared to the annual interest rate on the Wells Fargo Bank loan of LIBOR plus 4.25%, which was scheduled to increase to LIBOR plus 7.25% on July 1, 2012, and the annual interest rate on the current note payable to an officer of the company of 8%. In addition, the existing interest rate swap contract, which the company entered into in February 2008 which fixed the rate on 50% of the principal balance of the Wells Fargo loan at an annual interest rate of 8.2%, has been recently terminated. This refinancing will significantly lower the company's effective interest rate on its outstanding debt.
Looking forward, the company is focused on revenue expansion through two primary growth vehicles:
Sales of Non-Traditional Franchises and Licenses. The company believes it has an opportunity for increasing unit growth and revenue within its non-traditional venues, particularly with convenience stores, travel plazas and entertainment facilities. The company's franchises in non-traditional locations are foodservice providers within a host business, and usually require a substantially lower investment compared to a stand-alone, traditional location. With an improving economy, the company has been experiencing renewed interest in its non-traditional franchises and is currently in discussions with many franchise prospects. The company has signed an agreement with Huck's, a 110-unit convenience store chain in 5 states for 10 initial locations in Indiana, Illinois and Kentucky, the first of which will open soon and the rest to follow shortly thereafter. Including Huck's, the company has signed agreements for 21 non-traditional locations so far this year, including, as previously announced, with The Pantry, Inc., a convenience store chain of over 1,650 locations, which will be opening its pilot location soon. The company believes it could experience significant growth in non-traditional franchises in 2012.
Licensing the Company's Take-N-Bake Program. Since the company introduced take-n-bake pizza in grocery store chains, through May 8, 2012 the company has signed agreements for 1,084 grocery store locations to operate the take-n-bake pizza program and has opened the take-n-bake pizza program in approximately 881 of those locations. The company is currently in discussions with numerous grocery store operators for additional take-n-bake locations. Since the beginning of 2012, the company has signed distribution agreements with two additional grocery store distributors and is currently near signing with four additional grocery store distributors and is in discussions with several others.
Update on Litigation:
The Court granted summary judgment in favor of the company and against all of the Plaintiffs in a long-running lawsuit styled Kari Heyser, Fred Eric Heyser, Meck Enterprises, LLC, et al vs. Noble Roman's, Inc., et al, filed in Superior Court Hamilton County, Indiana in June 2008. As a result, the plaintiff's allegations of fraud against the company and certain of its officers were determined to be without merit. 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, in excess of $5 million, against the Defendants. 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.
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, the company's ability to close on the scheduled refinancing of its bank loan, changes in demand for the company's products or franchises, the success or failure of individual franchisees and changes in prices or supplies of food ingredients and labor. 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, | March 31, |
| 2011 | 2012 | |
| Current assets: | ||
| Cash | $ 233,296 | $ 179,775 |
| Accounts and note receivable - net | 884,811 | 1,023,487 |
| Inventories | 338,447 | 357,476 |
| Assets held for resale | 252,552 | 252,552 |
| Prepaid expenses | 278,718 | 336,913 |
| Deferred tax asset - current portion | 1,400,000 | 1,400,000 |
| Total current assets | 3,387,824 | 3,550,203 |
| Property and equipment: | ||
| Equipment | 1,147,109 | 1,150,733 |
| Leasehold improvements | 12,283 | 12,283 |
| 1,159,392 | 1,163,016 | |
| Less accumulated depreciation and amortization | 851,007 | 866,155 |
| Net property and equipment | 308,385 | 296,861 |
| Deferred tax asset (net of current portion) | 9,613,399 | 9,408,457 |
| Other assets including long-term portion of notes receivable | 3,914,523 | 4,058,368 |
| Total assets | $ 17,224,131 | $ 17,313,889 |
| Liabilities and Stockholders' Equity | ||
| Current liabilities: | ||
| Note payable to bank | $ 3,575,000 | $ 3,375,000 |
| Accounts payable and accrued expenses | 665,054 | 581,789 |
| Total current liabilities | 4,240,054 | 3,956,789 |
| Long-term obligations: | ||
| Note payable to officer | 1,255,821 | 1,255,821 |
| Total long-term liabilities | 1,255,821 | 1,255,821 |
| Stockholders' equity: | ||
| Common stock – no par value (25,000,000 shares authorized, 19,469,317 issued and outstanding as of December 31, 2011 and 19,489,317 as of March 31, 2012) | 23,239,976 | 23,272,873 |
| Preferred stock (5,000,000 shares authorized and 20,625 issued and outstanding as of December 31, 2011 and March 31, 2012) | 800,250 | 800,250 |
| Accumulated deficit | (12,311,970) | (11,971,844) |
| Total stockholders' equity | 11,728,256 | 12,101,279 |
| Total liabilities and stockholders' equity | $ 17,224,131 | $ 17,313,889 |
| Noble Roman's, Inc. and Subsidiaries | ||
| Condensed Consolidated Statements of Operations | ||
| (Unaudited) | ||
| Three Months Ended | ||
| March 31, | ||
| 2011 | 2012 | |
| Royalties and fees | $ 1,674,788 | $ 1,703,566 |
| Administrative fees and other | 8,377 | 7,247 |
| Restaurant revenue | 118,852 | 126,849 |
| Total revenue | 1,802,017 | 1,837,662 |
| Operating expenses: | ||
| Salaries and wages | 237,644 | 243,459 |
| Trade show expense | 90,000 | 120,997 |
| Travel expense | 46,885 | 48,915 |
| Other operating expenses | 178,942 | 178,201 |
| Restaurant expenses | 118,564 | 119,243 |
| Depreciation and amortization | 13,549 | 30,664 |
| General and administrative | 408,388 | 395,717 |
| Total expenses | 1,093,972 | 1,137,196 |
| Operating income | 708,045 | 700,466 |
| Interest and other expense | 98,652 | 95,929 |
| Income before income taxes | 609,393 | 604,537 |
| Income tax expense | 241,381 | 239,458 |
| Net income | 368,012 | 365,079 |
| Cumulative preferred dividends | 24,953 | 24,953 |
| Net income available to common stockholders | $ 343,059 | $ 340,126 |
| Earnings per share – basic: | ||
| Net income | $ 0.02 | $ 0.02 |
| Net income available to common stockholders | 0.02 | 0.02 |
| Weighted average number of common shares outstanding | 19,422,650 | 19,477,449 |
| Diluted earnings per share: | ||
| Net income | $ 0.02 | $ 0.02 |
| Weighted average number of common shares outstanding | 20,118,211 | 20,005,889 |