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Item 1. Financial Statements

2022-02-04 compared with 2021-11-05 · 158 added, 221 removed, 538 unchanged (41% of the section changed)

4 unchanged sentences

CONSOLIDATED BALANCE SHEETS

September 26, 2021 and March 28, 2021

December 26, 2021 and March 28, 2021

(in thousands, except share and per share amounts)

September 26, 2021

December 26, 2021

March 28, 2021

19 unchanged sentences

CURRENT LIABILITIES

Accounts payable

$ 5,084  

Current maturities of long-term debt (Note Q)

$ 40,000  

Accounts payable

Accrued expenses and other current liabilities (Note L)

4 unchanged sentences

14,593  

Long-term debt, net of unamortized debt issuance costs of $ 2,823  

and $ 3,169 , respectively (Note Q)

Long-term debt, net of unamortized debt issuance costs of $ 2,651 and $ 3,169 , respectively (Note Q)

107,349  

11 unchanged sentences

9,369,235 and 9,369,015 shares issued;

and 4,115,154 and 4,114,934 shares outstanding at September 26, 2021 and March 28, 2021, respectively

and 4,115,154 and 4,114,934 shares outstanding at December 26, 2021 and March 28, 2021, respectively

Additional paid-in capital

7 unchanged sentences

22,292  

Treasury stock, at cost, 5,254,081 shares at September 26, 2021 and March 28, 2021

Treasury stock, at cost, 5,254,081 shares at December 26, 2021 and March 28, 2021

( 84,770 )  

9 unchanged sentences

CONSOLIDATED STATEMENTS OF EARNINGS

Thirteen and Twenty-six weeks ended September 26, 2021 and September 27, 2020

Thirteen and Thirty-nine weeks ended December 26, 2021 and December 27, 2020

(in thousands, except per share amounts)

Thirteen weeks ended

Twenty-six weeks ended

September 26,

September 27,

September 26,

September 27,

Thirty-nine weeks ended

License royalties

24 unchanged sentences

CONSOLIDATED STATEMENTS OF STOCKHOLDERS ’

Thirteen weeks ended September 26, 2021 and September 27, 2020

Thirteen weeks ended December 26, 2021 and December 27, 2020

(in thousands, except share amounts)

1 unchanged sentence

Stockholders’

Balance, June 27, 2021

Shares issued in connection with share-based compensation plans

Withholding tax on net share settlement of share-based compensation plans

Balance, September 26, 2021

Dividends on common stock

Share-based compensation

Balance, September 26, 2021

Balance, December 26, 2021

Treasury Stock, at Cost

Stockholders’

Balance, June 28, 2020

Shares issued in connection with share-based compensation plans

Withholding tax on net share settlement of share-based compensation plans

Balance, September 27, 2020

9,369,015  

$ 62,182  

$ ( 40,581 )  

5,254,081  

$ ( 84,770 )  

Dividends on common stock

( 1,440 )  

Share-based compensation

Balance, September 27, 2020

Balance, December 27, 2020

9,369,015  

$ 62,211  

$ ( 40,662 )  

5,254,081  

$ ( 84,770 )  

The accompanying notes are an integral part of these consolidated financial statements.

3 unchanged sentences

CONSOLIDATED STATEMENTS OF STOCKHOLDERS ’

Twenty-six weeks ended September 26, 2021 and September 27, 2020

Thirty-nine weeks ended December 26, 2021 and December 27, 2020

(in thousands, except share amounts)

2 unchanged sentences

Balance, March 28, 2021

9,369,015  

$ 62,240  

$ ( 40,042 )  

5,254,081  

$ ( 84,770 )  

Shares issued in connection with share-based compensation plans

1 unchanged sentence

Dividends on common stock

( 4,320 )  

Share-based compensation

Balance, September 26, 2021

11,438  

Balance, December 26, 2021

9,369,235  

$ 62,299  

$ ( 32,924 )  

5,254,081  

$ ( 84,770 )  

Treasury Stock, at Cost

6 unchanged sentences

Share-based compensation

Balance, September 27, 2020

Balance, December 27, 2020

The accompanying notes are an integral part of these consolidated financial statements.

3 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

Twenty-six weeks ended September 26, 2021 and September 27, 2020

Thirty-nine weeks ended December 26, 2021 and December 27, 2020

(in thousands)

September 26,

September 27,

Cash flows from operating activities:

1 unchanged sentence

Depreciation and amortization

Non-cash rental expense

Amortization of debt issuance costs

2 unchanged sentences

Deferred income taxes

Other non-cash items

Changes in operating assets and liabilities:

10 unchanged sentences

Dividends paid to stockholders

Payments of withholding tax on net share settlement of share-based compensation plans

Payments of withholding tax on net share settlement of share-based compensation plans

Repurchase of treasury stock

Net cash used in financing activities

Net increase in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents, beginning of period

1 unchanged sentence

Cash paid during the period for:

Income taxes paid

Non-cash financing activity:

4 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 26, 2021

December 26, 2021

NOTE A - BASIS OF PRESENTATION

4 unchanged sentences

“us”

or “our”) as of and for the thirteen and twenty-six week periods ended September 26, 2021 and September 27, 2020 have been prepared in accordance with accounting principles generally accepted in the United States of America.

or “our”) as of and for the thirteen and thirty-nine week periods ended December 26, 2021 and December 27, 2020 have been prepared in accordance with accounting principles generally accepted in the United States of America.

The unaudited financial statements include all adjustments (consisting of normal recurring adjustments) which, in the opinion of management, are necessary for a fair presentation of financial condition, results of operations and cash flows for the periods presented.

However, our results of operations are seasonal in nature, and the results of any interim period are not necessarily indicative of results for any other interim period or the full fiscal year.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to the requirements of the U.S.

Certain information and footnote disclosures normally included in financial statements in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to the requirements of the U.S.

Securities and Exchange Commission.

Management believes that the disclosures included in the accompanying consolidated interim financial statements and footnotes are adequate to make the information not misleading, but should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in Nathan’s Annual Report on Form 10 -K for the fiscal year ended March 28, 2021.

Our significant interim accounting policies include the recognition of advertising fund expense in proportion to advertising funds revenue.

Our significant interim accounting policies include the recognition of advertising fund expense in proportion to advertising fund revenue.

A summary of the Company’s significant accounting policies is identified in Note B of the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10 -K for the fiscal year ended March 28, 2021.

1 unchanged sentence

In March 2020, the World Health Organization declared the novel strain of coronavirus (COVID- 19 ), a global pandemic.

The COVID- 19 pandemic has had an impact on the Company’s business, financial condition, cash flows and results of operations for the thirteen and twenty-six weeks ended September 26, 2021 ( “fiscal 2022 period”) and continues into the third quarter of fiscal 2022.

The COVID- 19 pandemic has had an impact on the Company’s business, financial condition, cash flows and results of operations for the thirteen and thirty-nine weeks ended December 26, 2021 ( “fiscal 2022 period”) and continues into the fourth quarter of fiscal 2022.

Governmental restrictions and public perceptions of the risks associated with COVID- 19 have caused consumers to avoid or limit nonessential travel, gatherings in public places and other social interactions, which has adversely affected, and could continue to adversely affect, our business.

1 unchanged sentence

During the fiscal 2022 period, the number of COVID- 19 cases continued to stabilize with approved vaccines being more widely distributed and administered and, as a result, more regions continued to loosen restrictions, adhering to state and local guidelines.

We cannot predict the ultimate duration, scope and severity of the COVID- 19 pandemic or its ultimate impact on our business in the short or long-term, which may be impacted by variants of the COVID- 19 virus and the adoption rate of the COVID- 19 vaccines in the areas in which the Company operates.

Although the Company experienced higher revenues during the fiscal 2022 period as compared to the fiscal 2021 period, the COVID- 19 pandemic may have a material adverse impact on the Company’s business, results of operations and financial condition.

There continues to be uncertainty around the COVID- 19 pandemic as the Omicron variant of COVID- 19, which appears to be the most transmissible variant to date, has caused a recent increase in COVID- 19 cases globally.

We cannot predict the ultimate duration, scope and severity of the COVID- 19 pandemic or its ultimate impact on our business in the short or long-term, which may be impacted by the Delta variant, Omicron variant, and other variants that may emerge;

the efficacy of the COVID- 19 vaccines against the Delta variant, Omicron variant, and other variants that may emerge;

and the adoption rates of the COVID- 19 vaccines in the areas in which the Company operates.

NOTE B –

3 unchanged sentences

Simplifying the Accounting for Income Taxes, ”

which is intended to simplify various aspects related to accounting for income taxes.

which simplifies various aspects related to accounting for income taxes.

ASU 2019 - 12 removes certain exceptions to the general principles in Topic 740 and, also clarifies and amends existing guidance to improve consistent application.

16 unchanged sentences

NOTE D –

The Company’s disaggregated revenues for the thirteen and twenty-six weeks ended September 26, 2021 and September 27, 2020 are as follows (in thousands):

The Company’s disaggregated revenues for the thirteen and thirty-nine weeks ended December 26, 2021 and December 27, 2020 are as follows (in thousands):

Thirteen weeks ended

Twenty-six weeks ended

September 26,

September 27,

September 26,

September 27,

Thirty-nine weeks ended

Branded Products

22 unchanged sentences

Thirteen weeks ended

Twenty-six weeks ended

September 26,

September 27,

September 26,

September 27,

Thirty-nine weeks ended

United States

11 unchanged sentences

The following table provides information about contract receivables and liabilities (deferred franchise fees) from contracts with customers (in thousands):

September 26,

Receivables, which are included in “Accounts and other receivables, net”

Receivables, which are included in “Accounts and other receivables, net”

Deferred franchise fees (b)

2 unchanged sentences

Includes receivables related to “franchise fees and royalties”

Deferred franchise fees of $ 351 and $ 1,768  

as of September 26, 2021 and $ 237 and $ 1,536 as of March 28, 2021 are included in Deferred franchise fees – current and long term, respectively.

Deferred franchise fees of $ 359 and $ 1,663 as of December 26, 2021 and $ 237 and $ 1,536 as of March 28, 2021 are included in Deferred franchise fees – current and long term, respectively.

Significant changes in deferred franchise fees are as follows (in thousands):

Twenty-six weeks ended

September 26,

September 27,

Thirty-nine weeks ended

Deferred franchise fees at beginning of period

Additions to deferred revenue

$ 1,773  

$ 1,917  

Revenue recognized during the period

( 412 )  

New deferrals due to cash received and other

Deferred franchise fees at end of period

6 unchanged sentences

Represents franchise fees expected to be recognized for the remainder of the 2022 fiscal year, which includes international development fees expected to be recognized over the duration of one year or less.

Amount does not include $ 237 of franchise fee revenue recognized for the twenty-six weeks ended September 26, 2021.

Amount does not include $ 412 of franchise fee revenue recognized for the thirty-nine weeks ended December 26, 2021.

NOTE E –

3 unchanged sentences

Dilutive common shares used in the computation of diluted income per common share result from the assumed exercise of stock options and warrants, as determined using the treasury stock method.

The following chart provides a reconciliation of information used in calculating the per-share amounts for the thirteen and twenty-six week periods ended September 26, 2021 and September 27, 2020, respectively.

The following chart provides a reconciliation of information used in calculating the per-share amounts for the thirteen and thirty-nine week periods ended December 26, 2021 and December 27, 2020, respectively.

Thirteen weeks

7 unchanged sentences

$ 0.33  

Effect of dilutive employee stock options

Effect of dilutive employee stock options

Diluted calculation

3 unchanged sentences

$ 0.33  

Twenty-six weeks

Thirty- nine weeks

Number of Shares

6 unchanged sentences

$ 2.19  

Effect of dilutive employee stock options

Effect of dilutive employee stock options

Diluted calculation

3 unchanged sentences

$ 2.19  

Options to purchase 20,000 shares of common stock in the thirteen and twenty-six week periods ended September 26, 2021 were not included in the computation of diluted EPS because the exercise price exceeded the average market price of common shares during the period.

Options to purchase 10,000 shares of common stock in the thirteen and twenty-six week periods ended September 27, 2020 were not included in the computation of diluted EPS because the exercise price exceeded the average market price of common shares during the period.

Options to purchase 20,000 shares of common stock in the thirteen and thirty-nine week periods ended December 26, 2021, were not included in the computation of diluted EPS because the exercise price exceeded the average market price of common shares during the period.

Options to purchase 10,000 shares of common stock in the thirteen and thirty-nine week periods ended December 27, 2020, were not included in the computation of diluted EPS because the exercise price exceeded the average market price of common shares during the period.

NOTE F –

1 unchanged sentence

The Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents.

The Company did not have any cash equivalents at September 26, 2021 and March 28, 2021.

At September 26, 2021 and March 28, 2021, substantially all of the Company’s cash balances are in excess of Federal government insurance limits.

The Company did not have any cash equivalents at December 26, 2021 and March 28, 2021.

At December 26, 2021 and March 28, 2021, substantially all of the Company’s cash balances are in excess of Federal government insurance limits.

The Company does not believe that it is exposed to any significant risk on these balances.

6 unchanged sentences

The three levels are defined as follows:

● 

Level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for an identical asset or liability in an active market

●    Level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for an identical asset or liability in an active market

● 

Level 2 - inputs to the valuation methodology include quoted prices for a similar asset or liability in an active market or model-derived valuations in which all significant inputs are observable for substantially the full term of the asset or liability

● 

Level 3 - inputs to the valuation methodology are unobservable and significant to the fair value measurement of the asset or liability

The face value and fair value of long-term debt as of September 26, 2021 and March 28, 2021 were as follows (in thousands):

September 26, 2021

●  

 Level 3 - inputs to the valuation methodology are unobservable and significant to the fair value measurement of the asset or liability

The face value and fair value of long-term debt, including the current portion, as of December 26, 2021 and March 28, 2021 were as follows (in thousands):

December 26, 2021

March 28, 2021

Long-term debt

$ 150,000  

$ 153,212  

$ 150,000  

$ 154,420  

The Company estimates the fair value of its long-term debt based upon review of observable pricing in secondary markets as of the last trading day of the fiscal period.

Accordingly, the Company classifies its long-term debt as Level 2.

The Company estimates the fair value of its long-term debt, including the current portion, based upon review of observable pricing in secondary markets as of the last trading day of the fiscal period.

Accordingly, the Company classifies its long-term debt, including the current portion, as Level 2.

The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable approximate fair value due to the short-term maturity of the instruments.

1 unchanged sentence

that is, the assets and liabilities are not measured at fair value on an ongoing basis, but are subject to fair value adjustments in certain circumstances, such as when evidence of impairment exists.

At September 26, 2021, no fair value adjustment or material fair value measurements were required for non-financial assets or liabilities.

At December 26, 2021, no fair value adjustment or material fair value measurements were required for non-financial assets or liabilities.

NOTE H –

1 unchanged sentence

Accounts and other receivables, net, consist of the following (in thousands):

September 26,

Branded product sales

$ 10,458  

$ 6,480  

Franchise and license royalties

15,112  

11,997  

allowance for doubtful accounts

Accounts and other receivables, net

$ 14,817  

$ 11,652  

Accounts receivable are due within 30 days and are stated at amounts due from franchisees, virtual or “ghost”

Accounts receivable are due within 30 days and are stated at amounts due from franchisees, including virtual or “ghost”

kitchens, retail licensees and Branded Product Program customers, net of an allowance for doubtful accounts.

4 unchanged sentences

After the Company has used reasonable collection efforts, it writes off accounts receivable through a charge to the allowance for doubtful accounts.

Changes in the Company’s allowance for doubtful accounts for the twenty-six week period ended September 26, 2021 and the fiscal year ended March 28, 2021 are as follows (in thousands):

September 26,

Changes in the Company’s allowance for doubtful accounts for the thirty-nine week period ended December 26, 2021 and the fiscal year ended March 28, 2021 are as follows (in thousands):

March 28, 2021

Beginning balance

1 unchanged sentence

Write-offs and other

( 77 )  

Ending balance

2 unchanged sentences

Prepaid expenses and other current assets consist of the following (in thousands):

September 26,

Real estate taxes

Total prepaid expenses and other current assets

$ 1,325  

NOTE J - GOODWILL AND INTANGIBLE ASSET

NOTE J –

GOODWILL AND INTANGIBLE ASSETS

The Company has continued to monitor the economic uncertainty as a result of COVID- 19 and has determined that the impact of COVID- 19 was a triggering event that required the Company to perform a quantitative interim goodwill impairment test.

Based on the quantitative test performed, management determined that the Company’s goodwill has not been impaired as of September 26, 2021 and September 27, 2020, and as a result, no impairment charge was recorded for the thirteen and twenty-six week periods ended September 26, 2021 and September 27, 2020.

Based on the quantitative test performed, management determined that the Company’s goodwill has not been impaired as of December 26, 2021 and December 27, 2020, and as a result, no impairment charge was recorded for the thirteen and thirty-nine week periods ended December 26, 2021 and December 27, 2020.

The Company’s definite-lived intangible asset consists of trademarks, tradenames and other intellectual property in connection with its Arthur Treacher’s co-branding agreements.

2 unchanged sentences

The Company tested for recoverability of its definite-lived intangible asset based on the projected undiscounted cash flows to be derived from such co-branding agreements, which has a remaining useful life based upon the term of its agreements.

Based on the quantitative test performed, the Company determined that the definite-lived intangible asset was recoverable and no impairment charge was recorded for the thirteen and twenty-six week periods ended September 26, 2021 and September 27, 2020.

Based on the quantitative test performed, the Company determined that the definite-lived intangible asset was recoverable and no impairment charge was recorded for the thirteen and thirty-nine week periods ended December 26, 2021 and December 27, 2020.

NOTE K - LONG LIVED ASSETS

3 unchanged sentences

The Company generally considers a history of restaurant operating losses to be its primary indicator of potential impairment for individual restaurant locations.

As a result of the impact of the COVID- 19 pandemic on its business, the Company determined that sufficient indicators existed to trigger the performance of an interim impairment analysis as of September 26, 2021 and September 27, 2020.

The Company tests for recoverability based on the projected undiscounted cash flows to be derived from such assets.

3 unchanged sentences

Should the estimates and assumptions prove to be incorrect, the Company may be required to record impairments in future periods and such impairments could be material.

As a result of the Company’s analysis, no long-lived assets were deemed to be impaired as of September 26, 2021 and September 27, 2020, and, as a result, no impairment charge was recorded for the thirteen and twenty-six week periods ended September 26, 2021 and September 27, 2020.

As a result of the Company’s analysis, no long-lived assets were deemed to be impaired as of December 26, 2021 and December 27, 2020, and, as a result, no impairment charge was recorded for the thirteen and thirty-nine week periods ended December 26, 2021 and December 27, 2020.

NOTE L –

1 unchanged sentence

Accrued expenses and other current liabilities consist of the following (in thousands):         

September 26,

Payroll and other benefits

12 unchanged sentences

Other liabilities consist of the following (in thousands):

September 26,

Reserve for uncertain tax positions

1 unchanged sentence

NOTE M –

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (the “CARES Act”) was enacted into law which among other provisions increases the limitation on the allowed business interest expense deduction from 30 percent to 50 percent of adjusted taxable income for tax years beginning January 1, 2019 and 2020.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was enacted into law which among other provisions increases the limitation on the allowed business interest expense deduction from 30 percent to 50 percent of adjusted taxable income for tax years beginning January 1, 2019 and 2020.

Additionally, the CARES Act allows businesses to immediately expense the full cost of Qualified Improvement Property, retroactive to tax years beginning on or after January 1, 2018.

The income tax provisions for the twenty-six week periods ended September 26, 2021 and September 27, 2020 reflect effective tax rates of 28.0 % and 27.9 %, respectively.

The amount of unrecognized tax benefits at September 26, 2021 was $ 433,000 all of which would impact Nathan’s effective tax rate, if recognized.

As of September 26, 2021, Nathan’s had $ 293,000 of accrued interest and penalties in connection with unrecognized tax benefits.

The income tax provisions for the thirty-nine week periods ended December 26, 2021 and December 27, 2020 reflect effective tax rates of 28.1 % and 27.7 %, respectively.

The amount of unrecognized tax benefits at December 26, 2021 was $ 445,000 all of which would impact Nathan’s effective tax rate, if recognized.

As of December 26, 2021, Nathan’s had $ 307,000 of accrued interest and penalties in connection with unrecognized tax benefits.

NOTE N –

16 unchanged sentences

Thirteen weeks ended

Twenty-six weeks ended  

September 26, 2021

September 27, 2020

September 26, 2021

September 27, 2020

Thirty-nine weeks ended

Branded Product Program

$ 19,063  

$ 9,698  

$ 35,059  

$ 14,447  

Product licensing

18,340  

18,791  

Restaurant operations

1 unchanged sentence

Total revenues

$ 32,878  

$ 21,839  

$ 64,197  

$ 39,525  

Income from operations

Branded Product Program

$ 1,161  

$ 1,252  

$ 3,415  

$ 1,524  

Product licensing

18,249  

18,700  

Restaurant operations

( 138 )  

( 2,028 )  

( 1,753 )  

( 4,215 )  

Income from operations

$ 7,439  

$ 7,584  

$ 18,141  

$ 15,678  

Interest expense

( 2,651 )  

( 5,301 )  

Interest income

1 unchanged sentence

Income before provision for income taxes

$ 4,821  

$ 5,058  

$ 12,925  

$ 10,619  

Represents advertising fund revenue

1 unchanged sentence

SHARE-BASED COMPENSATION

Total share-based compensation during each of the thirteen week periods ended September 26, 2021 and September 27, 2020 was $ 29,000 .

Total share-based compensation during each of the twenty-six week periods ended September 26, 2021 and September 27, 2020 was $ 58,000 .

As of September 26, 2021, there was $ 126,000 of unamortized compensation expense related to share-based incentive awards.

We expects to recognize this expense over approximately twenty-three months, which represents the weighted average remaining requisite service periods for such awards.

Total share-based compensation during each of the thirteen -week periods ended December 26, 2021 and December 27, 2020 was $ 8,000 and $ 29,000 , respectively.

Total share-based compensation during each of the thirty-nine week periods ended December 26, 2021 and December 27, 2020 was $ 66,000 and $ 87,000 , respectively.

As of December 26, 2021, there was $ 122,000 of unamortized compensation expense related to share-based incentive awards.

We expect to recognize this expense over approximately twenty-two months, which represents the weighted average remaining requisite service periods for such awards.

The Company recognizes compensation cost for unvested stock-based incentive awards on a straight-line basis over the requisite service period.

Compensation cost charged to expense under all stock-based incentive awards is as follows (in thousands):

Thirteen weeks ended  

Twenty-six weeks ended  

September 26,

September 27,

September 26,

September 27,

Thirteen weeks ended

Thirty-nine weeks ended

Stock options

2 unchanged sentences

Stock options:

During the twenty-six week period ended September 26, 2021, the Company granted options to purchase 10,000 shares at an exercise price of $ 68.50 per share, all of which expire five years from the date of grant.

During the thirty-nine week period ended December 26, 2021, the Company granted options to purchase 10,000 shares at an exercise price of $ 68.50 per share, all of which expire five years from the date of grant.

All such options vest ratably over a four -year period commencing August 10, 2021.

The weighted-average option fair values, as determined using the Black-Scholes option valuation model, and the assumptions used to estimate these values for stock options granted during the twenty-six week period ended September 26, 2021 are as follows:

The weighted-average option fair values, as determined using the Black-Scholes option valuation model, and the assumptions used to estimate these values for stock options granted during the thirty-nine week period ended December 26, 2021 are as follows:

Weighted-average option fair values

$ 13.04  

Expected life (years)

6 unchanged sentences

The expected option term is the number of years the Company estimates the options will be outstanding prior to exercise based on expected historical exercise patterns and employment termination behavior.

Transactions with respect to stock options for the twenty-six weeks ended September 26, 2021 are as follows :

Transactions with respect to stock options for the thirty-nine weeks ended December 26, 2021 are as follows:

Contractual Life

1 unchanged sentence

Options outstanding at March 28, 2021

10,000  

$ 89.90  

10,000  

$ 68.50  

Options outstanding at September 26, 2021

20,000  

$ 79.20  

Options exercisable at September 26, 2021

10,000  

$ 89.90  

Options outstanding at December 26, 2021

Options exercisable at December 26, 2021

Restricted stock:

Transactions with respect to restricted stock for the twenty-six weeks ended September 26, 2021 are as follows:

Transactions with respect to restricted stock for the thirty-nine weeks ended December 26, 2021 are as follows:

Unvested restricted stock at March 28, 2021

$ 89.90  

( 333 )  

$ 89.90  

Unvested restricted stock at September 26, 2021

Unvested restricted stock at December 26, 2021

NOTE P –

2 unchanged sentences

Effective August 6, 2021, the Board declared its second quarterly cash dividend of $ 0.35 per share for fiscal year 2022, aggregating $ 1,440,000 , which was paid on September 3, 2021 to stockholders of record as of the close of business on August 23, 2021.

Effective November 5, 2021 the Board declared its third quarterly cash dividend of $ 0.35 per share payable on December 3, 2021 to stockholders of record as of the close of business on November 22, 2021.

Effective November 5, 2021, the Board declared its third quarterly cash dividend of $ 0.35 per share for fiscal year 2022, aggregating $ 1,440,000 , which was paid on December 3, 2021 to stockholders of record as of the close of business on November 22, 2021.

Effective February 4, 2022, the Board authorized the increase of its regular dividend from $0.35 to $0.45 per quarter and declared its fourth quarterly cash dividend of $ 0.45 per share payable on March 4, 2022 to stockholders of record as of the close of business on February 21, 2022.

Our ability to pay future dividends is limited by the terms of the Indenture with U.S.

5 unchanged sentences

The 2019 Plan became effective as of July 1, 2020 ( the "Effective Date").

Following the Effective Date, (i) no additional stock awards were granted under the 2010 Stock Incentive Plan (the “2010 Plan”) and (ii) all outstanding stock awards previously granted under the 2010 Plan remained subject to the terms of the 2010 Plan.

Following the Effective Date, (i) no additional stock awards were granted under the 2010 Plan and (ii) all outstanding stock awards previously granted under the 2010 Plan remained subject to the terms of the 2010 Plan.

All awards granted on or after the Effective Date are subject to the terms of the 2019 Plan.

1 unchanged sentence

(a) 369,584 shares of common stock under the 2019 Plan which includes:

(i) shares that have been authorized but not issued pursuant to the 2010 Plan as of the Effective Date up to a maximum of an additional 208,584 shares and (ii) any shares subject to any outstanding options or restricted stock grants under any plan of the Company that were outstanding as of the Effective Date and that subsequently expire unexercised, or are otherwise forfeited, up to a maximum of an additional 11,000 shares.

As of September 26, 2021, there were up to 198,584 shares available to be issued for future option grants or up to 181,683 shares of restricted stock that may be granted under the 2019 Plan.

Stock Repurchase Programs

During the period from October 2001 through September 26, 2021, Nathan’s purchased 5,254,081 shares of common stock at a cost of $ 84,770,000 pursuant to various stock repurchase plans previously authorized by the Board.

During the twenty-six week period ended September 26, 2021, we did not repurchase any shares of common stock.

(i) shares that had been authorized but not issued pursuant to the 2010 Plan as of the Effective Date up to a maximum of an additional 208,584 shares and (ii) any shares subject to any outstanding options or restricted stock grants under any plan of the Company that were outstanding as of the Effective Date and that subsequently expired unexercised, or were otherwise forfeited, up to a maximum of an additional 11,000 shares.

As of December 26, 2021, there were up to 198,584 shares available to be issued for future option grants or up to 181,683 shares of restricted stock to be granted under the 2019 Plan.

Stock Repurchase Program

During the period from October 2001 through December 26, 2021, Nathan’s purchased 5,254,081 shares of common stock at a cost of $ 84,770,000 pursuant to various stock repurchase plans previously authorized by the Board.

During the thirty-nine week period ended December 26, 2021, we did not repurchase any shares of common stock.

In 2016, the Board authorized increases to the sixth stock repurchase plan for the purchase of up to 1,200,000 shares of its common stock on behalf of the Company.

As of September 26, 2021, Nathan’s had repurchased 1,066,450 shares at a cost of $ 37,108,000 under the sixth stock repurchase plan.

At September 26, 2021 there were 133,550 shares remaining to be repurchased pursuant to the sixth stock repurchase plan.

As of December 26, 2021, Nathan’s had repurchased 1,066,450 shares at a cost of $ 37,108,000 under the sixth stock repurchase plan.

At December 26, 2021 there were 133,550 shares remaining to be repurchased pursuant to the sixth stock repurchase plan.

The plan does not have a set expiration date.

6 unchanged sentences

Long-term debt consists of the following (in thousands):

September 26,

6.625% Senior Secured Notes due 2025

3 unchanged sentences

( 2,651 )  

$ 147,349  

$ 146,831  

Current maturities of long-term debt

( 40,000 )  

Long-term debt, net

12 unchanged sentences

There are no financial maintenance covenants associated with the 2025 Notes.

As of September 26, 2021, Nathan’s was in compliance with all covenants associated with the 2025 Notes.

As of December 26, 2021, Nathan’s was in compliance with all covenants associated with the 2025 Notes.

The Indenture contains certain covenants limiting the Company’s ability and the ability of its restricted subsidiaries (as defined in the Indenture) to, subject to certain exceptions and qualifications:

34 unchanged sentences

On or after November 1, 2022

On December 15, 2021, the Company announced its intent to complete the partial redemption, in the principal amount of $ 40,000,000 , of the 2025 Notes, in accordance with the terms and conditions of the Indenture.

The redemption price of the redeemed notes was 101.656 % of the principal amount, plus accrued and unpaid interest from, and including November 1, 2021 to, but excluding, the redemption date of January 26, 2022.

On January 26, 2022, the Company redeemed $ 40,000,000 of the 2025 Notes by paying cash of $ 41,288,094 , inclusive of the redemption premium and accrued interest, and recognized a loss on early extinguishment of approximately $ 1,400,000 that primarily reflected the redemption premium and the write-off of a portion of previously recorded debt issuance costs.

In certain circumstances involving a change of control, the Company will be required to make an offer to repurchase all or, at the holder’s option, any part, of each holder’s 2025 Notes pursuant to the offer described below (the “Change of Control Offer”).

3 unchanged sentences

We have recorded the 2025 Notes at cost.

Effective June 1, 2020, the Board authorized the repurchase of up to $ 10,000,000 of the 2025 Notes by the Company (at a price equal to or less than par) from time to time.

There is no set time limit on the repurchases.

NOTE R –

1 unchanged sentence

Company as lessee

The components of the net lease cost for the thirteen and twenty-six week periods ended September 26, 2021 and September 27, 2020 were as follows (in thousands):

The components of the net lease cost for the thirteen and thirty-nine week periods ended December 26, 2021 and December 27, 2020 were as follows (in thousands):

Thirteen weeks ended

Twenty-six weeks ended

September 26,

September 27,

September 26,

September 27,

Thirty-nine weeks ended

Statement of Earnings

2 unchanged sentences

Sublease income, net

( 22 )  

( 21 )  

Total net lease cost (a)

$ 1,790  

$ 1,504  

The thirteen and twenty-six week periods ended September 26, 2021 and September 27, 2020 include $ 770 , net and $ 1,470 , net and $ 614 , net and $ 1,194 , net, respectively, recorded to “Restaurant Operating Expenses” for leases for Company-operated restaurants;

$ 167 and $ 341 , and $ 159 and $ 332 , respectively, recorded to “General and administrative expenses” for leases for corporate offices and equipment;

and $ 5 and $ 21 , and $ 22 and $ 22 , respectively, recorded to “Other income, net” for leased properties that are leased to franchisees.

Includes $ 243 , net and $ 502 , net for the thirteen week periods ended December 26, 2021 and December 27, 2020, respectively, and $ 1,713 , net and $ 1,696 , net for the thirty-nine week periods ended December 26, 2021 and December 27, 2020, respectively, recorded to “Restaurant Operating Expenses” for leases for Company-owned restaurants.

Includes $ 192 and $ 160 for the thirteen week periods ended December 26, 2021 and December 27, 2020, respectively, and $ 533 and $ 492 for the thirty-nine week periods ended December 26, 2021 and December 27, 2020, respectively, recorded to “General and administrative expenses”

for leases for corporate offices and equipment.

Also includes $ 41 and $ 9 for the thirteen week periods ended December 26, 2021 and December 27, 2020, respectively, and $ 62 and $ 31 for the thirty-nine week periods ended December 26, 2021 and December 27, 2020, respectively, recorded to “Other income, net”

for leased properties that are leased to franchisees.

Cash paid for amounts included in the measurement of lease liabilities were as follows (in thousands):

Thirteen weeks ended

Twenty-six weeks ended

September 26,

September 27,

September 26,

September 27,

Thirty-nine weeks ended

Operating cash flows from operating leases

The weighted average remaining lease term and weighted-average discount rate for operating leases as of September 26, 2021 

The weighted average remaining lease term and weighted average discount rate for operating leases as of December 26, 2021 

were as follows:

Weighted average remaining lease term (years):

Operating leases

Weighted average discount rate:

Future lease commitments to be paid and received by the Company as of September 26, 2021 were as follows (in thousands):

Operating leases

Future lease commitments to be paid and received by the Company as of December 26, 2021 were as follows (in thousands):

Operating Leases

Total lease commitments

$ 11,535  

$ 10,600  

Amount representing interest

Present value of lease liabilities (b)

$ 8,713  

Represents future lease commitments to be paid and received by the Company for the remainder of the 2022 fiscal year.

Amount does not include $ 1,222  

of lease commitments paid and received by the Company for the twenty-six week period ended September 26, 2021.

of lease commitments paid and received by the Company for the thirty-nine week period ended December 26, 2021.

The present value of minimum operating lease payments of $ 1,848 and $ 6,680  

1 unchanged sentence

Company as lessor

The components of net lease income for the thirteen week and twenty-six week periods ended September 26, 2021 and September 27, 2020 were as follows (in thousands):

The components of lease income for the thirteen and thirty-nine week periods ended December 26, 2021 and December 27, 2020 were as follows (in thousands):

Thirteen weeks ended

Twenty-six weeks ended

September 26,

September 27,

September 26,

September 27,

Thirty-nine weeks ended

December 26, 2021

December 27, 2020

December 26, 2021

December 27, 2020

Operating lease income, net

2 unchanged sentences

On February 27, 2017, a wholly-owned subsidiary of the Company executed a Guaranty of Lease (the “Brooklyn Guaranty”) in connection with its re-franchising of a restaurant located in Brooklyn, New York.

The Company is obligated to make payments under the Brooklyn Guaranty in the event of a default by the tenant/franchisee.

The Brooklyn Guaranty has an initial term of 10 years and one 5 -year renewal option and is limited to 24 months of rent for the first three years of the term.

For the remainder of the term, the Brooklyn Guaranty is limited to 12 months of rent plus reasonable costs of collection and attorney’s fees.

As of September 26, 2021, Nathan’s has recorded a liability of $ 113,000 in connection with the Brooklyn Guaranty which does not include potential percentage rent, real estate tax increases, attorney’s fees and other costs as these amounts are not reasonably determinable at this time.

Nathan’s has received a personal guaranty from the franchisee for all obligations under the Brooklyn Guaranty.

The Company was obligated to make payments under the Brooklyn Guaranty in the event of a default by the tenant/franchisee.

The Brooklyn Guaranty had an initial term of 10 years and one 5 -year option and was limited to 24 months of rent for the first three years of the term.

For the remainder of the term, the Brooklyn Guaranty was limited to 12 months of rent plus reasonable costs of collection and attorney’s fees.

The Company entered into a termination of lease agreement effective January 15, 2022 ( the “Termination Date”).

As consideration for all outstanding amounts due and payable under the Brooklyn Guaranty, the Company agreed to pay a termination fee in the amount of $ 75,000 , of which the Company agreed to pay 50 % or $ 37,500 and the tenant/franchisee agreed to pay 50 % or $ 37,500 .

The Company paid its share of the termination fee in January 2022.

Contingencies

5 unchanged sentences

SUBSEQUENT EVENTS

The Company evaluated subsequent events through the date the Consolidated Financial Statements were issued and filed with the U.S.

The Company evaluated subsequent events through the date the consolidated interim financial statements were issued and filed with the U.S.

Securities and Exchange Commission.

There were no subsequent events that require recognition or disclosure.

There were no other subsequent events that require recognition or disclosure.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements