SOURCE: Noble Roman's, Inc.

August 13, 2012 17:00 ET

Noble Roman's Announces Second Quarter 2012 Earnings

INDIANAPOLIS, IN--(Marketwire - Aug 13, 2012) -  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 June 30, 2012. 

A summary of results for the three months ended June 30, 2012 compared to the same period in 2011 follows:

Total revenue was $1,893,590 compared to $1,880,490. 

Net income was $342,122, or $.02 per share, compared to $388,919, or $.02 per share. The slight drop in net income was primarily the result of interest expense being $101,485 more during this period in 2012 compared to 2011. The additional interest expense included $93,455 from expensing the unamortized loan closing cost from the origination of the old loan which was repaid and $29,760 to terminate the rate swap agreement related to the old loan. On May 15, 2012 the company obtained a new $5 million, 48-month term-loan and used the proceeds to repay existing bank indebtedness and borrowing from an officer of the company. This change lowered the effective rate on the company's debt from approximately 8% per annum to approximately 4.25%. Interest expense for future quarters will be approximately $61,000, or less as the new loan continues to amortize, compared to approximately $199,000 for the quarter just ended.

Net income before taxes was $566,520, or $.03 per share, compared to $644,016, or $.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.

Operating margin on total revenue was 40.4% compared to 39.4%. 

Upfront franchisee fees and commissions were $63,489 compared to $83,339. 

Royalties and fees less upfront fees were $1,703,925 compared to $1,648,463. This included an increase in royalties and fees from grocery store take-n-bake pizza of $106,086, or 40%, an increase in royalties and fees from non-traditional locations other than grocery stores of $41,344, or approximately 4%, and decrease in royalties and fees from traditional locations of $91,967, or 34%. 

A summary of results for the six months ended June 30, 2012 compared to the same period in 2011 follows:

Total revenue was $3,731,252 compared to $3,682,506. 

Net income was $707,201, or $.04 per share, compared to $756,933, or $.04 per share. The drop in net income was primarily the result of interest expense being $99,062 more during this period in 2012 compared to 2011, as discussed in the previous section above. Interest expense for the next six-month period will be approximately $120,000, or less as the new loan continues to amortize, compared to approximately $295,000 for the six-month period just ended.

Net income before taxes was $1,171,057, or $.06 per share, compared to $1,253,411, or $.06 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 approximately the next $25 million of net income.

Operating margin on total revenue was 39.4% for the six-month periods ended June 30, 2012 and 2011. 

Upfront franchisee fees and commissions were $147,667 compared to $145,963. 

Royalties and fees less upfront fees were $3,323,313 compared to $3,260,626. This included an increase in royalties and fees from grocery store take-n-bake pizza of $177,379, or 27%, an increase in royalties and fees from non-traditional locations other than grocery stores of $5,220, or less than 1%, and decrease in royalties and fees from traditional locations of $90,412, or 16%. 

Significant Achievements

On May 15, 2012, the Company entered into a Credit Agreement with BMO Harris Bank, N.A. for a term loan in the amount of $5,000,000 which is repayable in 48 equal monthly principal installments of $104,166.66 plus interest which commenced on June 15, 2012 with a final payment due on May 15, 2016. Interest on the unpaid principal balance shall bear interest at a rate per annum of LIBOR plus 4%. The proceeds from the term loan, net of certain fees and expenses associated with obtaining the term loan, were used to repay existing indebtedness to Wells Fargo Bank, N.A. and to an officer of the company. By refinancing its debt, the company reduced its effective interest rate on outstanding debt from approximately 8% to 4.25%. 

On July 19, 2012, the Company entered into an agreement with an existing independent franchisee for three stand-alone take-n-bake prototype locations. The three units called for under this agreement are to open in three western suburbs of Indianapolis. Initial site work for the first location is nearly complete and is currently expected to open within the next three months. On August 7, 2012, the company entered into another franchise agreement with another independent franchisee for another stand-alone take-n-bake prototype location to be located in a northern suburb of Indianapolis. Site location work of this location has already begun as well. 

In 2012, the company has signed franchise agreements for 27 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 over 1,650 locations.

In 2012, the company has signed supply agreements for 267 additional grocery store take-n-bake locations. Since the company introduced take-n-bake pizza in grocery store chains in late 2009 through August 8, 2012, the company has signed agreements for 1,206 grocery store locations to operate the take-n-bake pizza program and has opened the take-n-bake pizza program in approximately 945 of these locations. 

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. 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.

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,
 2011
    June 30,
2012
 
Current assets:                
  Cash   $ 233,296     $ 240,763  
  Accounts and notes receivable - net     884,811       1,125,052  
  Inventories     338,447       411,649  
  Assets held for resale     252,552       252,552  
  Prepaid expenses     278,718       401,951  
  Deferred tax asset - current portion     1,400,000       1,400,000  
    Total current assets     3,387,824       3,831,967  
                 
Property and equipment:                
  Equipment     1,147,109       1,155,906  
  Leasehold improvements     12,283       12,283  
      1,159,392       1,168,189  
  Less accumulated depreciation and amortization     851,007       879,249  
    Net property and equipment     308,385       288,940  
Deferred tax asset (net of current portion)     9,613,399       9,184,058  
Other assets     3,914,523       4,283,492  
        Total assets   $ 17,224,131     $ 17,588,457  
                 
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       248,209  
      Total current liabilities     4,240,054       1,498,209  
                 
Long-term obligations:                
  Note payable to bank (net of current portion)     -       3,645,833  
  Note payable to officer     1,255,821       -  
      Total long-term liabilities     1,255,821       3,645,833  
                 
                 
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 June 30, 2012)    

23,239,976
     

23,298,570
 
  Preferred stock (5,000,000 shares authorized and 20,625 issued and outstanding as of December 31, 2011 and June 30, 2012)    
800,250
     
800,250
 
  Accumulated deficit     (12,311,970 )     (11,654,405 )
      Total stockholders' equity     11,728,256       12,444,415  
        Total liabilities and stockholders' equity   $ 17,224,131     $ 17,588,457  
                 
 
Noble Roman's, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
 
    Three Months Ended June 30,   Six Months Ended June 30,
    2011   2012   2011   2012
Royalties and fees   $ 1,731,802   $ 1,767,414   $ 3,406,589   $ 3,470,980
Administrative fees and other     11,018     5,496     19,395     12,743
Restaurant revenue     137,670     120,680     256,522     247,529
    Total revenue     1,880,490     1,893,590     3,682,506     3,731,252
                         
Operating expenses:                        
  Salaries and wages     247,497     253,524     485,140     496,983
  Trade show expense     93,247     123,127     183,247     244,124
  Travel expense     52,589     45,459     99,474     94,374
  Other operating expenses     176,290     172,008     355,230     350,209
  Restaurant expenses     129,903     113,029     248,467     232,272
Depreciation and amortization     36,311     28,561     49,860     59,225
General and administrative     403,430     392,670     811,818     788,387
    Total expenses     1,139,267     1,128,378     2,233,236     2,265,574
    Operating income     741,223     765,212     1,449,270     1,465,678
                         
Interest and other expense     97,207     198,692     195,859     294,621
    Income before income taxes     644,016     566,520     1,253,411     1,171,057
                         
Income tax expense     255,097     224,398     496,478     463,856
    Net income     388,919     342,122     756,933     707,201
                         
    Cumulative preferred dividends     24,411     24,683     49,364     49,636
                         
    Net income available to common stockholders   $
364,508
  $
317,439
  $
707,569
  $
657,565
                         
                         
Earnings per share - basic:                        
  Net income   $ .02   $ .02   $ .04   $ .04
  Net income available to common stockholders   $ .02   $ .02   $ .04   $ .03
Weighted average number of common shares outstanding    
19,469,317
   
19,489,317
   
19,446,113
   
19,483,383
                         
                         
Diluted earnings per share:                        
  Net income   $ .02   $ .02   $ .04   $ .04
  Net income available to common stockholders   $
.02
  $
.02
  $
.04
  $
.03
Weighted average number of common shares outstanding    
20,183,876
   
20,041,048
   
20,160,672
   
20,035,114
                         

Contact Information

  • For Media Information:
    Scott Mobley
    President
    317/634-3377

    For Investor Relations:
    Paul Mobley
    Chairman & CEO
    317/634-3377