NexCen Brands Inc. has reported unaudited financial results for the fourth quarter and audited financial results for the full year ended Dec. 31, 2009. NexCen Brands Inc. is a strategic brand management company with a focus on franchising. It owns a portfolio of franchise brands that includes two retail franchise concepts and five quick-service restaurant franchise concepts: Great American Cookies, MaggieMoo's, Marble Slab Creamery, Pretzelmaker and Pretzel Time. The brands are managed by NexCen Franchise Management Inc., a subsidiary of NexCen Brands.
Revenues in the fourth quarter of 2009 were down 17 percent to $10.6 million from $12.6 million in the same period last year. The decrease is primarily due to current economic conditions, including continued weak credit markets for franchisees and softness in consumer spending and retail traffic. Additionally, total revenues in this period reflect the elimination of approximately $0.2 million of royalty revenue as a result of the TAF licensing transaction for Australia and New Zealand whereby the company received a one-time, non-refundable payment of $6.2 million in August 2009 in lieu of recurring royalties.
For the year, revenues were down 4 percent to $45.1 million from $47.0 million last year. The decrease in revenues is primarily the result of reduced royalty revenues related to lower year-over-year store count, reduced consumer spending as well as a decline in TAF revenue due to the TAF licensing transaction. This was partly offset by the additional revenues from the Great American Cookies brand and manufacturing facility acquired on Jan. 29, 2008.
The net loss for the quarter narrowed to $543,000 compared with $16.3 million in the same period last year. For the year, the net loss narrowed by 98.9 percent at $2.8 million vs. $255.8 million last year.
The company's outstanding debt balance was $138.2 million at Dec. 31, 2009, compared to $137.9 million at Sept. 30, 2009 and $142.3 million at Dec. 31, 2008. The company used $5.0 million of the net proceeds from the TAF licensing transaction (discussed above) to pay down a portion of its debt in August 2009.
Total franchised locations were 1,713 stores at Dec. 31, 2009 vs. 1,826 stores at Dec. 31, 2008. The net decrease of 113 stores, or 6 percent, reflects closures, initiated either by the franchisee or the company, of underperforming and non-compliant stores.
The company executed franchise agreements for 71 new franchise units during the fourth quarter of 2009, versus franchise agreements for 65 new franchise units in the third quarter of 2009.
"We are pleased with the milestones we reached in 2009 in our efforts to improve and stabilize the business," said Kenneth J. Hall, CEO of NexCen Brands, in a news release. "As we closed out the year, we recorded our fourth consecutive quarter of operating income and positive cash flow from operations; we right-sized our expense structure; we remediated all material weaknesses in internal controls; and we made investments in our business for future organic revenue growth.
"I believe that we have demonstrated that our multi-concept, vertically-integrated franchise model is sound, even in a challenging economic environment. We recognize, however, that the company's current debt and capital structure does not support the company's long-term growth, viability and shareholder value. Addressing this issue continues to be our priority for the near future."
Debt structure
As of Dec. 31, 2009, the company has classified all of the debt outstanding under its credit facility with BTMU Capital Corp. as a current liability. As previously reported, the company is in the process of evaluating alternatives to its debt and capital structure. NexCen has retained an investment bank to assist it with identifying and evaluating various strategic alternatives, and the company continues to be in discussions with its lender as the company needs the lender's consent to proceed with any strategic transaction or debt restructuring.
"We have made significant progress in our turnaround strategy, refining our business to one that generates positive cash flow and operating profits," Hall said. "At the same time, we are exploring alternatives to our current capital and debt structure with the goal of maximizing long-term value for all of the company's stakeholders. Importantly, we also remain focused on growing and enhancing our franchise business. We are committed to prudently managing our business, maintaining a lean operational structure and driving further improvements in our operating profit over time."
Conference call
A replay of the company's conference call will be available through April 2, by dialing 1-866-281-6782, access code: 154227. The broadcast will be archived on the company's Web site through the 'Investor Relations' link at until April 26.
