INDIANAPOLIS, IN / ACCESSWIRE / May 15, 2019 / Noble Roman's, Inc. (OTCQB: NROM), the Indianapolis based franchisor and licensor of Noble Roman's Pizza and Craft Pizza & Pub, today announced results for the three-month period ended March 31, 2019 along with other strategic highlights for the company.
Net income was $476,000, or $.02 per share, for the three-months ended March 31, 2019 compared to $402,000, or $.02 per share, for the same period in 2018. Net income before income taxes was $627,000 for the first quarter 2019 compared to $539,000 for the same period in 2018. The net income before income taxes is significant as the company will not pay any taxes on the next approximately $15 million in otherwise taxable income. These results were achieved despite the highly unusual, extreme winter weather conditions this year in Indiana during the months of January and February, which significantly curtailed revenue and margins during those months. In addition, the results are after a $12,000 non-cash expense in the quarter ended March 31, 2019 as a result of the adoption of the new accounting rules regarding accounting for leases, which became effective January 1, 2019 for publicly reporting entities.
On the heels of an extremely successful opening of the company's first franchised Noble Roman's Craft Pizza & Pub location in Lafayette, Indiana, the franchisees, Patrick and Holly O'Neil, have just signed a franchise agreement to open a second location. This restaurant will be located in West Lafayette, Indiana, the home of Purdue University (Indiana's second largest university campus by enrollment). The first franchised location in Lafayette opened May 2, 2019 and has seen double the anticipated sales volume, averaging approximately $57,000 per week for the period since it opened. Site location efforts will begin immediately for the West Lafayette restaurant, with a projected opening tentatively planned for later this year.
The company also announced that it has now opened 13 non-traditional franchised locations thus far in 2019. The most recent opening occurred this week in Muncie, Indiana, the home of Ball State University. The twelfth non-traditional opening was in Machesney Park, Illinois (a suburb of Rockford, Illinois) and was notable because it became the seventh Noble Roman's Pizza location to be owned and operated by the Kelley Williamson Company. Established in 1926, the Kelley Williamson Company is consistently recognized as a leader in the convenience store industry. In addition to the seven Noble Roman's locations the Kelley Williamson Company operates now, they are preparing an eighth location for a Noble Roman's which is expected to open within the next 30 days. Beyond the non-traditional units already opened in 2019, the company has a number of additional units for which it has signed agreements that are yet to open, and a substantial pipeline of prospects for future franchise agreements.
Margin contribution from this venue was decreased $11,897 for non-cash expense related to the adoption of ASU 2016-02 accounting for lease which became effective after January 1, 2019 for publicly reporting companies.
Revenue from this venue increased to $1.4 million from $1.1 million despite the highly unusual, extreme weather conditions in Indiana during the months of January and February.
Cost of sales improved to 20.8% of revenue compared to 22.1% as the restaurants gained experience over time.
Salaries and wages and other operating costs increased to 67.7% from 56.0% as a result of the reduced sales in January and February due to the severe winter weather.
Gross margin contribution from this venue decreased to 11.5% from 21.9% largely as a result of the impact of severe winter weather in January and February. The impact of the weather can be seen in the monthly breakdown where gross margin contributions were 4.0% in January, then 10.8% in February and then back to 20.5% in March when the weather improved. In addition, the margin was impacted by the $12,000 non-cash expense from the impact of the accounting change regarding accounting for leases.
Total revenue from this venue grew to $1.6 million from $1.5 million; royalties and fees from non-traditional franchising grew to $1.3 from $1.1 million; and fees from grocery store take-n-bake decreased to $300,000 from $400,000. The decrease in fees from grocery stores reflects the company's decision to not focus on grocery stores at this time since management believes this venue tends to be more counter cyclical in nature.
Salaries and wages, trade show expense and other operating costs decreased to $495,000 from $649,000 primarily as a result of management's in-depth review and implementation of ways to minimize costs in this venue.
Gross margin contribution from this venue increased to $1.1 million from $900,000, an increase to 69% of revenue compared to 58%.
The following bullet points discuss other financial highlights from the quarter:
The company-owned non-traditional location had a margin contribution of $16,800, or 9.9% of its revenue. In the current quarter, the company has one company-owned non-traditional location in a hospital and does not intend to operate any additional locations. During the comparable period in 2018, the company was operating two additional non-traditional locations until they subsequently reached the end of their contract periods.
Operating income increased to $754,000 from $699,000 primarily as a result of the margin contribution on franchising non-traditional locations increasing to $1.1 million from $900,000 which was partially offset by the decrease in margin contribution from the company-owned Craft Pizza & Pub locations as a result of the highly unusual, severe winter weather conditions for Indiana during the months of January and February 2019.
Depreciation and amortization increased to $93,600 from $72,500 as a result of the third and fourth company-owned Craft Pizza & Pub opening in 2018.
General and administrative expenses increased to $416,000 from $382,000 as a result of an increase in audit and other professional expenses of $34,000.
Interest expense decreased to $127,000 from $160,000 primarily as a result of the continuing monthly payments of principal on the bank loans, and the conversion of $450,000 principal amounts of its subordinated convertible debt to common stock, partially offset by the increased interest rate on the company's variable rate loans on the bank debt.
With a new catalyst for growth and a combined focus on development in the non-traditional venue, the company believes it is potentially entering the most exciting expansion phase it has experienced in its 47-year history in the fast-growing pizza segment of the restaurant industry. Upon taking the mantle of CEO in late 2014, Scott Mobley utilized his 30 years of industry experience to guide an intensive, 24-month R&D effort to develop a fresh, modernized version of the company's traditional pizzeria model. All four members of the company's executive management team as well as senior staff, with over 150 years of combined experience, were involved in the development effort. Under the trade name Noble Roman's Craft Pizza & Pub, the company has challenged the competitive landscape with bold new dining rooms, very fast baking speeds, and a line-up of creatively delicious food, beer and wine. Noble Roman's Craft Pizza & Pub is simultaneously new and not new - modern and fresh with a hint of nostalgia. It represents what might be described as a radical improvement on both the traditional pizzeria model and the shortcomings of the fast-casual chain offerings. Now, in combination with steady growth in the company's large base of hundreds of franchised, non-traditional locations, the company could be positioned for accelerated new growth with Craft Pizza & Pub as its flagship.
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: resolution of a disagreement with the bank over the interpretation of certain financial covenants, competitive factors, pricing pressures, non-renewal of franchise agreements, shifts in market demand, the success of new franchise programs, including Noble Roman's Craft Pizza & Pub venue, the company's ability to successfully operate an increased number of company-owned restaurants, 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 dependence on continued involvement of current management. 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.
FOR ADDITIONAL INFORMATION, CONTACT:
For Media Information: Scott Mobley, President& CEO 317/634-3377
For Investor Relations: Paul Mobley, Executive Chairman 317/634-3377