For the quarter ended September 30, 2008, the company reported net income of $304,809, or $.02 per share, on 19.2 million weighted average shares outstanding. This compares to net income of $693,655, or $.04 per share, on 18.2 million weighted average shares outstanding for the quarter ended September 30, 2007.
Noble Roman's, Inc. (OTC:NROM) (BULLETIN BOARD: NROM) , the Indianapolis based franchisor of Noble Roman's Pizza and Tuscano's Italian Style Subs, today announced earnings for the three-month and the nine-month periods ended September 30, 2008.
For the quarter ended September 30, 2008, the company reported net income of $304,809, or $.02 per share, on 19.2 million weighted average shares outstanding. This compares to net income of $693,655, or $.04 per share, on 18.2 million weighted average shares outstanding for the quarter ended September 30, 2007. Total revenues for the quarter ended September 30, 2008 were $2.2 million compared to $3.0 million for the corresponding quarter in 2007. The company's pre-tax income for the third quarter 2008 was $461,832 compared to $1,035,097 for the corresponding period in 2007. Although the company recognizes income tax expense on its financial statements, it will not pay any income taxes for the next several years, due to its available tax loss carry-forwards.
For the nine-month period ended September 30, 2008, the company reported a net income of $1,021,547, or $.05 per share, on 19.2 million weighted average shares outstanding. This compares to net income of $2,100,166, or $.12 per share, on 17.3 million weighted average shares outstanding for the nine-month period ended September 30, 2007. Total revenues for the nine-month period ended September 30, 2008 were $7.0 million compared to $8.9 million for the corresponding period in 2007. The company's pre-tax income for the nine-month period was $1,547,798 compared to $3,166,172 for the corresponding period in 2007.
The decreases in revenue and net income were largely a result of selling fewer franchises and area development agreements compared to 2007. The decline in franchise sales reflected the general economic environment and the tightening of credit markets whereas the decline in initial fees was the result of refocusing the growth strategy to take a more disciplined approach to area development agreements. Royalty and fee income from existing franchises, apart from new franchise, area development and other related fees, were $1,660,558 and $5,045,426, respectively, for the three-month and nine- month periods ended September 30, 2008. This compares to $1,828,364 and $4,944,645 for the corresponding periods in 2007.
With increasing indications of a very weak retail economy, and with the severe dislocations in the lending markets, the company believes that it has a unique opportunity for increasing unit growth and revenue within its non- traditional venues such as hospitals, military bases, universities, convenience stores, attractions, entertainment facilities, casinos, airports, travel plazas, office complexes and hotels. The company's franchises in non- traditional locations are foodservice providers within a host business, and usually require a minimal investment compared to a stand-alone franchise. Non-traditional franchises are often sold into pre-existing facilities as a service and/or revenue enhancer for the underlying business. Through focusing on non-traditional franchise expansion, the company will still seek to capitalize on other franchising opportunities as they present themselves.
To augment the company's sales opportunities within non-traditional venues, it recently developed the new Noble Roman's Bistro service system. As an addition to the current service systems offered in its Noble Roman's Pizza and Tuscano's Italian Style Subs concepts, the Bistro is designed to appeal to additional types of businesses and operational objectives with a fresh food display and serve-to-order serving system. Though sometimes presented or packaged differently, the vast majority of the menu selections are comprised of ingredients already utilized in Noble Roman's Pizza and Tuscano's Italian Style Subs, thereby leveraging the company's simple systems, distribution and purchasing power.
The Bistro incorporates all of the ingredient qualities which Noble Roman's Pizza has been known for and retains simplicity by using largely ready-to-use ingredients that require only final assembly and baking on site. It features the new SuperSlice pizza, one-fourth of a large pizza, along with hot entrees such as chicken parmesan, baked penne casseroles, breadsticks and calzones plus fresh salads and snacks. The Bistro is also available with an optional breakfast expansion menu featuring hot plate combos with scrambled eggs, bacon, sausage, breakfast potatoes, pancakes, French toast sticks, biscuits and gravy and biscuit sandwiches. Customers move along the food display counter and are served to order as they go.
With the intensified focus on non-traditional franchising, the company's requirements for overhead and operating cost will be substantially less. In addition, the company plans to discontinue operating restaurants, which will also substantially reduce the company's requirements for overhead and operating cost. However, the company does intend to continue operating the two locations that it uses for testing and demonstration purposes and intends to sell the excess restaurants to be operated as franchises. This change will allow for a more complete focus on selling and servicing franchises to take full advantage of the unique opportunity the company believes it has for increased unit growth in non-traditional. After making these changes, according to the company's plan, it is anticipated that the company will generate cash flow of approximately $3.6 million, before principal payments on debt of $1.5 million in 2009, and net income for 2009 of approximately $2.3 million, or $.12 per basic share.
Updating the previously announced lawsuit styled Kari Heyser et al, versus Noble Roman's, Inc., et al, the defendants filed a motion to dismiss the lawsuit in lieu of an answer to the complaint. As a result, the plaintiffs sought leave from the court to file an amended complaint, which the court granted allowing the plaintiffs until October 29, 2008 to complete the filing. Subsequently, the plaintiffs filed a motion for extension of time, which the court granted, to file the amended complaint until November 15, 2008. The company believes that it has strong and meritorious legal and factual defenses to these claims and will vigorously defend its interests in this case.
The company has filed a counter-claim for damages against all ten plaintiffs and a preliminary injunction and a permanent injunction against nine of the plaintiffs. In addition, the company filed a motion for preliminary injunction against nine of the Plaintiffs, all of which are former franchisees. The preliminary injunction was granted by the court on October 7, 2008. Nine plaintiffs were ordered to comply within seven days for the majority of actions required by the injunction, and within 14 days for the remainder. None of the plaintiffs has fully complied with the court's order and the company believes that several have only minimally complied. The company is in the process of filing a motion to require full compliance, to require the plaintiffs to show cause why they should not be held in contempt and for attorney's fees as sanctions.
Noble Roman's, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
Assets December 31, September 30,
2007 2008
Current assets:
Cash $832,207 $ 1,515,046
Accounts and notes receivable (net of
allowances of $106,712 as of December 31,
2007 and September 30, 2008) 1,770,994 2,275,089
Inventories 310,362 365,500
Assets held for resale 643,915 2,106,615
Prepaid expenses 175,022 405,673
Current portion of long-term notes receivable 133,736 -
Deferred tax asset - current portion 1,971,875 1,050,500
Total current assets 5,838,111 7,718,423
Property and equipment:
Equipment 1,289,795 1,410,146
Leasehold improvements 107,729 110,527
1,397,524 1,520,673
Less accumulated depreciation and
amortization 755,987 835,311
Net property and equipment 641,537 685,362
Deferred tax asset (net of current portion) 9,106,008 9,501,132
Other assets including long-term portion of
notes receivable net of valuation allowances
of $550,000 as of December 31, 2007 and
September 30, 2008 1,883,644 2,157,434
Total assets $ 17,469,300 $ 20,062,351
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $532,263 $216,021
Current portion of long-term note payable 1,500,000 1,500,000
Total current liabilities 2,032,263 1,716,021
Long-term obligations:
Note payable to bank (net of current
portion) 4,125,000 6,000,000
Total long-term liabilities 4,125,000 6,000,000
Stockholders' equity:
Common stock - no par value (25,000,000
shares authorized, 19,187,449 issued and
outstanding as of December 31, 2007 and
19,212,499 issued and outstanding as of
September 30, 2008) 22,905,617 22,967,908
Preferred stock (5,000,000 shares
authorized and 20,625 issued
and outstanding as of December 31, 2007
and September 30, 2008) 800,250 800,250
Accumulated deficit (12,393,830) (11,421,828)
Total stockholders' equity 11,312,037 12,346,330
Total liabilities and
stockholders' equity $ 17,469,300 $ 20,062,351
Noble Roman's, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2007 2008 2007 2008
Royalties and fees $2,679,313 $1,825,168 $8,051,953 $5,760,253
Administrative fees and other 18,581 10,880 55,567 44,752
Restaurant revenue 261,428 375,907 787,288 1,179,427
Total revenue 2,959,322 2,211,955 8,894,808 6,984,432
Operating expenses:
Salaries and wages 422,161 344,763 1,221,773 1,074,862
Trade show expense 138,197 121,814 412,030 366,598
Travel expense 172,328 109,940 374,089 332,572
Sales commissions 108,988 12,022 466,567 56,135
Other operating expenses 253,909 225,253 701,255 697,784
Restaurant expenses 240,311 363,638 729,743 1,127,858
Depreciation and amortization 24,359 21,060 70,066 70,265
General and administrative 400,735 400,955 1,249,151 1,243,807
Operating income 1,198,334 612,510 3,670,134 2,014,551
Interest and other expense 163,237 150,678 503,962 466,753
Income before income
taxes 1,035,097 461,832 3,166,172 1,547,798
Income tax expense 341,442 157,023 1,066,006 526,251
Net income 693,655 304,809 2,100,166 1,021,547
Cumulative preferred
dividends 34,864 16,455 110,481 49,545
Net income available
to common stockholders $658,791 $288,354 $1,989,685 $972,002
Earnings per share - basic:
Net income $.04 $.02 $.12 $.05
Net income available to
common stockholders $.04 $.02 $.12 $.05
Weighted average number of
common shares outstanding 18,208,358 19,212,499 17,301,043 19,203,647
Diluted earnings per share:
Net income $.03 $.02 $.10 $.05
Weighted average number of
common shares outstanding 21,100,540 19,937,218 20,193,225 19,928,366
