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SOURCE Noble Roman's, Inc.
Second Stand-Alone Take-n-Bake Location Opens in Fourth Quarter; Third Location Opens Subsequent to Year End with Eight More Locations Currently Under Development
INDIANAPOLIS, March 15, 2013 /PRNewswire/ -- Noble Roman's, Inc. (OTC/BB: NROM), the Indianapolis based franchisor and licensor of Noble Roman's Pizza and Tuscano's Italian Style Subs, today announced financial results for the fourth quarter and full-year ended December 31, 2012.
Net income from continuing operations was $1.1 million, or $0.06 per share, for 2012 compared to $1.5 million, or $0.08 per share, for 2011. This comparison is made somewhat confusing due to the items flowing through the Consolidated Statements of Operations related to the reserve for collections for the company's claims against the former Heyser case Plaintiffs, as discussed under Update on Litigation below. In 2011 there was $1.0 million income recognized by reducing the reserve for collectability against the former Plaintiffs in the Heyser case, and in 2012 there was only $400,000 in revenue recognized by reducing the reserve for collectability in the same case. In addition, on December 31, 2012, an expense was recorded for $500,000 to increase the reserve for collectability regarding the same case. For comparison purposes, removing all of the adjustments for the reserve for collectability against the former Heyser case Plaintiffs and showing the tax effect of those adjustments, the net income from continuing operations was $1.2 million, or $0.06 per share, in 2012, and $813,000, or $0.04, per share, in 2011.
"As reported previously, the Heyser case has been a major distraction but, fortunately, the claims against the company have all been dismissed and the former Plaintiffs have exhausted all of their appeal rights," commented Paul Mobley, Chairman and CEO of Noble Roman's, Inc. "The Court has ruled in the company's favor on its counterclaims against the former Plaintiffs/Counter-Defendants as to liability. Opposing counsel has continued to elongate the Court proceedings to no avail other than to cause the company continued time and expense. Each reporting period, since the suit began in 2008, the company has been required to make assessments as to the ultimate costs of this process and the capability of the company being able to collect on any judgments against them. This has required the company to make periodic reserve adjustments and those adjustments flow through the Consolidated Statements of Operations. We are hopeful this matter will soon be resolved and behind us."
Fourth Quarter 2012 Financial and Operational Highlights
"Our financials related to continuing operations improved during the fourth quarter," added Mr. Mobley. "However, these positive metrics are somewhat masked by the $420,000 income recorded as a reduction in the valuation allowance in the 2011 period with no such adjustment reflected in the fourth quarter 2012 and, in addition, a $500,000 expense was recorded in the fourth quarter 2012 to increase the reserve against collections related to this ongoing litigation with no such adjustment in 2011. Excluding these changes, for comparison purposes, the company would have reported a 19.2% increase in revenue and a 51.5% increase in operating income. Operationally, we continued to expand our take-n-bake offering in the fourth quarter, appearing at trade shows and driving interest in both the grocery-based model and our stand-alone franchises. This progress directly led to expansions of both models during the early part of 2013, with further growth expected as we move through the year."
Fiscal Year Ended December 31, 2012 Financial and Operational Highlights
The company has entered into agreements with seven different franchise groups for 11 stand-alone take-n-bake locations. The company uses the same high-quality pizza ingredients for its take-n-bake pizzas as with its standard pizza, with slight modifications to portioning for increased home baking performance. The company's stand-alone take-n-bake pizza program features the chain's popular traditional Hand-Tossed Style pizza, Deep-Dish Sicilian pizza and SuperThin pizza with a choice of three different sauces and numerous topping options and Noble Roman's famous breadsticks with spicy cheese sauce, all in a convenient cook-at-home format. Additional menu items include such items as fresh salads, cookie dough, cinnamon rounds, bake-able pasta and more.
"Existing and potential franchisees are embracing this fastest growing segment of the pizza industry with our high quality, great tasting pizza offerings adapted for the take-n-bake pizza market and recognize the economics of opening a smaller, more affordable and more efficient to operate facility," Mr. Mobley continued.
In 2012, the company signed franchise/license agreements for 39 new non-traditional locations other than grocery stores including 12 locations with Huck's, a 110-unit convenience store chain located in five states. Management is in discussions with several other significant convenience store chains and has signed 12 more such agreements from January 1, 2013 through March 12, 2013. Since the company introduced take-n-bake pizza in grocery store chains in late 2009 through March 12, 2013, the company has signed agreements for approximately 1,500 grocery store locations to operate the take-n-bake pizza program and has opened the take-n-bake pizza program in approximately 1,075 of these locations.
At present, the company has distribution agreements with 11 primary distributors strategically located throughout the United States. The distribution agreements require the primary distributors to maintain adequate inventories of all products necessary to meet the needs of the company's franchisees and licensees for weekly deliveries to the franchisee/licensee locations plus the grocery store distributors in their respective territories. Each of the primary distributors purchases the products from the manufacturer, under payment terms agreed upon by the manufacturers and the distributors, and distributes the products to the franchisee/licensee at a price fixed by the distribution agreement, which is landed cost plus a contracted mark-up for distribution. Payment terms to the distributors are agreed upon between each franchisee/licensee and the respective distributor. In addition, the company has agreements with several grocery store distributors located in various parts of the country which agree to buy their products from one of the primary distributors and to distribute take-n-bake products to their grocery store customers.
"We enter 2013 with three platforms for continued growth, well positioned in the fastest growing segments of the pizza industry and supported by a well respected national brand," concluded Mr. Mobley. "We expect relatively rapid growth from our two take-n-bake models, expanding our presence in grocery stores around the country while adding stand-alone locations as well. The impacts of the 2008 lawsuit should continue to dissipate and, as a result, our statement of operations will be less clouded by items flowing through the statement of operations related to that lawsuit."
Balance Sheet Summary
Total current assets totaled approximately $3.7 million and current liabilities totaled approximately $1.8 million as of December 31, 2012 compared to total assets of approximately $3.4 million and current liabilities of $4.2 million as of December 31, 2011. This significant improvement came from the refinancing of all the company's debt on May 15, 2012 and the continued earnings. Total stockholders' equity as of December 31, 2012 was approximately $12.4 million compared to $11.7 million as of December 31, 2011.
The credit agreement entered into in May, 2012 has had the effect of reducing the interest rate the company pays on its debt to approximately 4.25% from approximately 8%, which is reflected in the decrease to the interest expense this quarter and positively affected net income compared to last year. This positive effect will continue in future periods as well.
Update on Litigation:
The company was a Defendant in a lawsuit styled Kari Heyser, Fred Eric Heyser and Meck Enterprises, LLC, et al v. Noble Roman's, Inc. et al, filed in Superior Court in Hamilton County, Indiana in June 2008 (Cause No. 29D01 0806 PL 739). The Plaintiffs' allegations of fraud against the company and certain of its officers were determined to be without merit and Plaintiffs have exhausted their rights of appeal. The separate claim by one of the Plaintiffs under the Indiana Franchise Act was settled. The company is no longer a Defendant in this case.
The company filed counterclaims for damages for breach of contract against the Plaintiffs. The company proceeded to trial against two of the Plaintiffs and obtained damage awards against each. In addition to direct and consequential damages in the Court's summary judgment Order, the Court determined that as a matter of law Noble Roman's is entitled to recover attorney fees associated with obtaining preliminary injunctions, fees resulting from the prosecution of Noble Roman's counterclaims, and fees for defending against the various claims made against the company. A hearing has been set for March 21, 2013 on the amount of attorney fees to be awarded. Sometime after the hearing on attorney fees, the Court is expected to issue an Order for a judgment amount to be awarded to the company against the two remaining Plaintiffs.
The company will be filing its Annual Report on Form 10-K today, March 15, 2013, and full financial tables are available in that document.
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.
FOR ADDITIONAL INFORMATION, CONTACT:
For Media Information: Scott Mobley, President 317/634-3377
For Investor Relations: Paul Mobley, Chairman & CEO 317/634-3377
or Brett Maas, Hayden IR, 646/536-7331 or email@example.com
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