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Nathan’s Famous profit falls 80% due to interest expense

A Nathan's hot dog on Thursday, May 7,

A Nathan's hot dog on Thursday, May 7, 2015. Credit: Steve Pfost

Nathan’s Famous saw its net income for the quarter ended Dec. 27 plummet by more than 80 percent from the year-earlier period, as its interest expenses rose sharply, the company said Friday.

The Jericho-based hot dog maker reported net income of $432,000 for the quarter, down from $2,241,000 for the same period in 2014.

The company reported interest expense of $3.7 million for the quarter, up from zero a year earlier. The expense stems from the company’s March 10 issuance of $105 million in senior secured notes, which it used to pay a special dividend of $25 per share, or about $116.1 million. The notes bear an interest rate of 10 percent, the company reported.

Quarterly revenue fell by 7.8 percent year-over-year, to $20.56 million. Earnings per diluted share were 10 cents, down from 49 cents a year earlier.

Income from operations, which excludes interest expense, interest income and other income, rose annually by 17.8 percent, to $4,435,000 for the quarter.

Sales excluding license royalties, franchise fees and franchise royalties fell by 8.9 percent year-over-year, to $15.76 million for the quarter, primarily due to an 8.4 percent decline in average sales prices, the company said. License royalties ticked up annually by 1.9 percent, to $3.6 million.

Nathan’s restaurant system included five company-owned locations and 262 franchises on Dec. 27, down from 305 franchises a year earlier.

The company’s stock fell nearly 15 percent to close at $46.24 Friday on the Nasdaq stock market.

In the past 12 months the shares have fallen about $30, or roughly 40 percent, a decline that is due in large part to the $25 per share special dividend. On March 30, Nathan’s stock fell almost $25 after the dividend became payable to shareholders.

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