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Item 1. Financial Statements

2023-08-03 compared with 2023-02-02 · 156 added, 194 removed, 307 unchanged (53% of the section changed)

4 unchanged sentences

CONSOLIDATED BALANCE SHEETS

December 25, 2022 and March 27, 2022

June 25, 2023 and March 26, 2023

(in thousands, except share and per share amounts)

December 25, 2022

June 25, 2023

March 26, 2023

CURRENT ASSETS

Cash and cash equivalents (Note E)

Accounts and other receivables, net (Note G)

3 unchanged sentences

Operating lease assets (Note Q)

Intangible asset, net

Intangible asset, net (Note I)

Deferred income taxes

16 unchanged sentences

9,369,235 shares issued;

and 4,079,720 and 4,115,154 shares outstanding at December 25, 2022 and March 27, 2022, respectively

and 4,079,720 shares outstanding at June 25, 2023 and March 26, 2023.

Additional paid-in capital

2 unchanged sentences

equity before treasury stock

Treasury stock, at cost, 5,289,515 and 5,254,081 shares at December 25, 2022 and March 27, 2022, respectively

Treasury stock, at cost, 5,289,515 shares at June 25, 2023 and March 26, 2023.

Total stockholders’

5 unchanged sentences

CONSOLIDATED STATEMENTS OF EARNINGS

Thirteen and Thirty-nine weeks ended December 25, 2022 and December 26, 2021

Thirteen weeks ended June 25, 2023 and June 26, 2022

(in thousands, except per share amounts)

Thirteen weeks ended

Thirty-nine weeks ended

June 25, 2023

June 26, 2022

License royalties

12 unchanged sentences

Interest income

Other (expense) income, net

Other income, net

Income before provision for income taxes

9 unchanged sentences

CONSOLIDATED STATEMENTS OF STOCKHOLDERS ’

Thirteen weeks ended December 25, 2022 and December 26, 2021

(in thousands, except share amounts)

Treasury Stock, at Cost

Stockholders’

Balance, September 25, 2022

Dividends on common stock

Share-based compensation

Balance, December 25, 2022

Treasury Stock, at Cost

Stockholders’

Balance, September 26, 2021

Dividends on common stock

Share-based compensation

Balance, December 26, 2021

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

Nathan ’

s Famous, Inc.

and Subsidiaries

CONSOLIDATED STATEMENTS OF STOCKHOLDERS ’

Thirty-nine weeks ended December 25, 2022 and December 26, 2021

(in thousands, except share amounts)

Thirteen weeks ended June 25, 2023 and June 26, 2022

(in thousands, except share and per share amounts)

Treasury Stock, at Cost

1 unchanged sentence

Balance, March 26, 2023

Repurchase of common stock

Cumulative effect of adoption of ASU 2016-13 (Note B)

Dividends on common stock

Share-based compensation

Balance, December 25, 2022

Balance, June 25, 2023

Treasury Stock, at Cost

1 unchanged sentence

Balance, March 27, 2022

Shares issued in connection with share-based compensation plans

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

Repurchase of common stock

Dividends on common stock

Share-based compensation

Balance, December 26, 2021

Balance, June 26, 2022

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

3 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

Thirty-nine weeks ended December 25, 2022 and December 26, 2021

(in thousands)

Thirteen weeks ended June 25, 2023 and June 26, 2022

(in thousands, except per share amounts)

June 25, 2023

June 26, 2022

Cash flows from operating activities:

1 unchanged sentence

Depreciation and amortization

Loss on disposal of property and equipment

Amortization of debt issuance costs

Share-based compensation expense

Provision for doubtful accounts

Provision for uncollectible accounts

Deferred income taxes

8 unchanged sentences

Cash flows from investing activities:

Insurance proceeds for property and equipment

Purchase of property and equipment

2 unchanged sentences

Dividends paid to stockholders

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

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

Net increase (decrease) in cash

Cash, beginning of period

Cash, end of period

Cash paid during the period for:

Income taxes paid

Non-cash financing activity:

Noncash financing activity:

Dividends declared per share

See Note S for supplemental cash flow information.

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

2 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 25, 2022

June 25, 2023

NOTE A - BASIS OF PRESENTATION

4 unchanged sentences

“us”

or “our”) as of and for the thirteen and thirty-nine week periods ended December 25, 2022 and December 26, 2021 have been prepared in accordance with accounting principles generally accepted in the United States of America.

or “our”) as of and for the thirteen week periods ended June 25, 2023 and June 26, 2022 have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

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.

The Company uses a 52-53 week fiscal year ending on the Sunday closest to March 31.

The 2024 fiscal year will end on March 31, 2024 and will contain 53 weeks.

Certain information and footnote disclosures normally included in financial statements in accordance with GAAP have been omitted pursuant to the requirements of the U.S.

Securities and Exchange Commission (“SEC”).

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 26, 2023 as filed with the SEC on June 8, 2023.

Our significant interim accounting policies include the recognition of advertising fund expense in proportion to advertising funds revenue, and the recognition of income taxes using an estimated annual effective tax rate.

Our significant interim accounting policies include the recognition of advertising fund expense in proportion to advertising fund revenue, and the recognition of income taxes using an estimated annual effective tax rate.

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 26, 2023.

COVID-19 Pandemic and Inflation

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

The COVID-19 pandemic has had and may continue to have a significant impact on our business and results of operations.

During fiscal 2022, we experienced pandemic and inflationary pressures, most notably within our Restaurant Operations and Branded Products Program segments.

We experienced macroeconomic impacts arising from the long-term duration of the pandemic, including rising labor costs, increasing commodity prices, higher packaging costs and fuel prices, which contributed to a decline in consumer confidence and spending.

We expect this trend to continue for the remainder of fiscal 2023.

Our average cost of hot dogs for the thirty-nine week period ended December 25, 2022 was approximately 3 % higher than during the thirty-nine week period ended December 26, 2021.

Inflation has an impact on food, paper, utility, labor and benefits and other general and administrative expenses which can impact our results of operations.

In general, we have been able to offset cost increases resulting from inflation by increasing prices.

We may not be able to offset cost increases in the future.

The Company’s franchisees and Branded Menu Program operators also have experienced some disruptions and challenges as a result of the pandemic including workforce absences, as well as changes in the availability and cost of labor, including higher wages and overtime costs.

There is continued uncertainty due to the COVID-19 pandemic and supply chain disruptions and their impacts on the Company’s business.

We remain in regular contact with our major suppliers and to date we have not experienced significant disruptions in our supply chain.

The extent to which COVID-19 will continue to impact the Company will depend on future developments, which cannot be predicted, including the duration and severity of the COVID-19 pandemic, which may be impacted by new and evolving variants, the adoption rates of vaccines in the jurisdictions in which the Company operates, and further actions that may be taken to limit the public health and economic impact.

Such impacts may include non-cash asset impairments and difficulty collecting trade receivables, among other things.

NOTE B –

NEW ACCOUNTING STANDARD NOT YET ADOPTED

In June 2016, the FASB issued ASU 2016-13, “

ADOPTION OF NEW ACCOUNTING STANDARD

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, “

Financial Instruments –

1 unchanged sentence

Measurement of Credit Losses on Financial Instruments, ”

which significantly changes the impairment model for most financial instruments.

Current guidance requires the recognition of credit losses based on an incurred loss impairment methodology that reflects losses once the losses are probable.

Under the new standard, the Company will be required to use a current expected credit loss model (“CECL”) that will immediately recognize an estimate of credit losses that are expected to occur over the life of the consolidated financial instruments that are in the scope of this update, including trade receivables.

The CECL model uses a broader range of reasonable and supportable information in the development of credit loss estimates.

In November 2019, the FASB deferred the effective date for smaller reporting companies for annual reporting periods beginning after December 15, 2022.

This standard is required to take effect in Nathan’s first quarter (June 2023) of our fiscal year ending March 31, 2024.

The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements and related disclosures.

The Company does not believe that any other recently issued, but not yet effective accounting standards, when adopted, will have a material effect on the accompanying consolidated financial statements.

(“CECL”) which requires measurement and recognition of expected versus incurred losses for financial assets held.

The Company adopted ASU 2016-13 as of March 27, 2023 (the first day of fiscal 2024) under the modified retrospective method.

Accordingly, the consolidated financial statements have not been adjusted prior to the date of adoption.

Upon adoption, the Company recorded an increase to the allowance for credit losses of $ 252 and a cumulative effect adjustment to retained earnings of $ 187 , net of $ 65 of income taxes.

The Company does not believe that any recently issued, but not yet effective accounting standards, when adopted, will have a material effect on the accompanying consolidated financial statements.

NOTE C –

The Company’s disaggregated revenues for the thirteen and thirty-nine weeks ended December 25, 2022 and December 26, 2021 are as follows (in thousands):

The Company’s disaggregated revenues for the thirteen weeks ended June 25, 2023 and June 26, 2022 are as follows (in thousands):

Thirteen weeks ended

Thirty-nine weeks ended

June 25, 2023

June 26, 2022

Branded Products

1 unchanged sentence

License royalties

Franchise royalties

Franchise fees

4 unchanged sentences

Thirteen weeks ended

Thirty-nine weeks ended

June 25, 2023

June 26, 2022

United States

2 unchanged sentences

Contract balances

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

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

Deferred franchise fees (b)

Includes receivables related to “franchise fees and royalties”

Deferred franchise fees of $ 343 and $ 1,378 as of December 25, 2022 and $ 349 and $ 1,748 as of March 27, 2022 are included in Deferred franchise fees – current and long term, respectively.

The following table provides information about contract liabilities from contracts with customers (in thousands):

June 25, 2023

March 26, 2023

Deferred franchise fees (a)

Deferred revenues, which are included in

“Accrued expenses and other current liabilities”

Deferred franchise fees of $ 339 and $ 1,217 as of June 25, 2023 and $ 336 and $ 1,272 as of March 26, 2023 are included in Deferred franchise fees –

current and long term, respectively.

Includes $ 547 of deferred license royalties and $ 250 of deferred advertising fund revenue as of June 25, 2023 and $ 906 of deferred license royalties and $ 500 of deferred advertising fund revenue as of March 26, 2023.

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

Thirty-nine weeks ended

Thirteen weeks ended

June 25, 2023

June 26, 2022

Deferred franchise fees at beginning of period

2 unchanged sentences

Deferred franchise fees at end of period

Significant changes in deferred revenues are as follows (in thousands):

Thirteen weeks ended

June 25, 2023

June 26, 2022

Deferred revenues at beginning of period

Revenue recognized during the period

Deferred revenues at end of period

Anticipated future recognition of deferred franchise fees

2 unchanged sentences

Represents franchise fees expected to be recognized for the remainder of the 2024 fiscal year, which includes international development fees expected to be recognized over the duration of one year or less.

Amount does not include $ 483 of franchise fee revenue recognized for the thirty-nine weeks ended December 25, 2022.

We have applied the optional exemption, as provided for under ASC Topic 606, Revenues from Contracts with Customers , which allows us to not disclose the transaction price allocated to unsatisfied performance obligations when the transaction price is a sales-based royalty.

Amount does not include $ 95 of franchise fee revenue recognized for the thirteen weeks ended June 25, 2023.

We have applied the optional exemption, as provided for under Topic 606 “

Revenues from Contracts with Customers, ”

which allows us to not disclose the transaction price allocated to unsatisfied performance obligations when the transaction price is a sales-based royalty.

NOTE D –

INCOME PER SHARE                  

Basic income per common share is calculated by dividing income by the weighted-average number of common shares outstanding and excludes any dilutive effect of stock options.

INCOME PER SHARE

Basic income per common share is calculated by dividing income by the weighted average number of common shares outstanding and excludes any dilutive effect of share-based awards.

Diluted income per common share gives effect to all potentially dilutive common shares that were outstanding during the period.

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 thirty-nine week periods ended December 25, 2022 and December 26, 2021, respectively.

The following chart provides a reconciliation of information used in calculating the per-share amounts for the thirteen week periods ended June 25, 2023 and June 26, 2022, respectively.

Thirteen weeks

3 unchanged sentences

Basic calculation

Effect of dilutive employee stock options

Diluted calculation

Thirty-nine weeks

Number of Shares

(in thousands)

Basic calculation

Effect of dilutive employee stock options

Effect of dilutive share-based awards

Diluted calculation

Options to purchase 20,000 shares of common stock in the thirteen and thirty-nine week periods ended December 25, 2022 and 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 week period ended June 25, 2023 were excluded in the computation of diluted earnings per share 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 week period ended June 26, 2022 were excluded in the computation of diluted earnings per share because the exercise price exceeded the average market price of common shares during the period.

NOTE E –

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 December 25, 2022 and March 27, 2022.

The Company did not have any cash equivalents at June 25, 2023 and March 26, 2023.

The Company’s cash balances principally consist of cash in bank and money market accounts.

At December 25, 2022 and March 27, 2022, substantially all of the Company’s cash balances are in excess of Federal government insurance limits.

At June 25, 2023 and March 26, 2023, substantially all of the Company’s cash balances are in excess of Federal government insurance limits.

The Company has not experienced any losses in such accounts.

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 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 December 25, 2022 and March 27, 2022 were as follows (in thousands):

December 25, 2022

The face value and fair value of long-term debt as of June 25, 2023 and March 26, 2023 were as follows (in thousands):

June 25, 2023

March 26, 2023

2 unchanged sentences

Accordingly, the Company classifies its long-term debt 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.

The carrying amounts of cash, accounts receivable and accounts payable approximate fair value due to the short-term nature of those items.

Certain non-financial assets and liabilities are measured at fair value on a non-recurring basis;

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 December 25, 2022, no fair value adjustment or material fair value measurements were required for non-financial assets or liabilities.

At June 25, 2023, no fair value adjustment or material fair value measurements were required for non-financial assets or liabilities.

NOTE G –

ACCOUNTS AND OTHER RECEIVABLES, NET                  

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

1 unchanged sentence

Franchise and license royalties

allowance for doubtful accounts

allowance for credit losses

Accounts and other receivables, net

Accounts receivable are generally due within 30 days and are stated at amounts due from franchisees, including virtual kitchens, retail licensees and Branded Product Program customers, net of an allowance for doubtful accounts.

The recently adopted CECL guidance requires companies to use a current expected credit loss model that immediately recognizes an estimate of credit losses expected to occur over the life of the consolidated financial instruments, including trade receivables.

The Company is exposed to credit losses through its trade accounts receivable.

Trade accounts receivable are generally due within 30 days and are stated at amounts due from franchisees, including virtual kitchens, retail licensees and Branded Product Program customers, net of an allowance for credit losses.

Accounts that are outstanding longer than the contractual payment terms are generally considered past due.

The Company does not recognize franchise and license royalties that are not deemed to be realizable.

The Company individually reviews each past due account and determines its allowance for doubtful accounts by considering a number of factors, including the length of time accounts receivable are past due, the Company’s previous loss history, the customer’s current and expected future ability to pay its obligation to the Company, the condition of the general economy and the industry as a whole.

Based on management’s assessment, the Company provides for estimated uncollectible amounts through a charge to earnings.

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 thirty-nine week period ended December 25, 2022 and the fiscal year ended March 27, 2022 are as follows (in thousands):

Under the CECL guidance, the Company applied the credit loss methodology by pooling financial assets based on similar risk characteristics and delinquency status under an aging method at the measurement date.

The risk characteristics the Company generally reviews when analyzing its trade accounts receivable pools include the type of receivable (for example, franchise receivable versus license receivable), payment terms, the Company’s previous loss history, current and future economic conditions and the length of time accounts receivables are past due.

For those trade accounts receivable that no longer share similar risk characteristics with its pool and potential loss is evident, a specific reserve will be recorded.

For pooled trade account receivables, the Company develops its allowance for credit losses by applying a historical loss rate to each pool based on historical account write-off trends.

The Company believes that the past five years provide a reasonable representation of the Company’s operations and performance through various business cycles, both favorable and unfavorable.

The allowance for credit losses is then adjusted for current macroeconomic factors, including the effects of COVID-19 and inflation and reasonable and supportable forecasts of future economic conditions.

The Company provides for expected credit losses through a charge to earnings.

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

Changes in the Company’s allowance for credit losses for the thirteen week period ended June 25, 2023 and the fiscal year ended March 26, 2023 are as follows (in thousands):

Beginning balance

Cumulative effect of adoption of ASU 2016-13

Bad debt expense

6 unchanged sentences

Total prepaid expenses and other current assets

NOTE I –

INTANGIBLE ASSET

NOTE I - INTANGIBLE ASSET

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

Based upon review of the current Arthur Treacher’s co-branding agreements, the Company determined that the remaining useful lives of these agreements is six years concluding in fiscal year 2028, and the intangible asset is subject to annual amortization.

Based upon review of the current Arthur Treacher’s co-branding agreements, the Company determined that the remaining useful lives of these agreements is five years concluding in fiscal year 2028, and the intangible asset is subject to annual amortization.

The Company performs an annual impairment test, or more frequently if events or changes in circumstances indicate that the intangible asset may be impaired.

2 unchanged sentences

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

There have been no significant events or changes in circumstances during the thirteen and thirty-nine week periods ended December 25, 2022 that would indicate that the carrying amount of the Company’s intangible asset may be impaired as of December 25, 2022.

There have been no significant events or changes in circumstances during the thirteen weeks ended June 25, 2023 that would indicate that the carrying amount of the Company’s intangible asset may be impaired as of June 25, 2023.

NOTE J - LONG LIVED ASSETS

8 unchanged sentences

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

There have been no significant events or changes in circumstances during the thirteen and thirty-nine week periods ended December 25, 2022 that would indicate that the carrying amount of the Company’s long-lived assets may be impaired as of December 25, 2022.

There have been no significant events or changes in circumstances during the thirteen weeks ended June 25, 2023 that would indicate that the carrying amount of the Company’s long-lived assets may be impaired as of June 25, 2023.

NOTE K –

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

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

Dividend payable

Payroll and other benefits

2 unchanged sentences

Deferred revenue

Construction costs

Professional fees

3 unchanged sentences

NOTE L –

The effective income tax rates for the thirteen weeks ended December 25, 2022 and December 26, 2021 were 27.3 % and 28.8 %, respectively.

The effective income tax rate for the thirteen weeks ended December 25, 2022 reflected $ 1,223 of income tax expense recorded on $ 4,486 of pre-tax income.

The effective income tax rate for the thirteen weeks ended December 26, 2021 reflected $ 860 of income tax expense recorded on $ 2,990 of pre-tax income.

The effective income tax rates for the thirty-nine weeks ended December 25, 2022 and December 26, 2021 were 27.1 % and 28.1 %, respectively.

The effective income tax rate for the thirty-nine weeks ended December 25, 2022 reflected $ 6,093 of income tax expense recorded on $ 22,451 of pre-tax income.

The effective income tax rate for the thirty-nine weeks ended December 26, 2021 reflected $ 4,477 of income tax expense recorded on $ 15,915 of pre-tax income.

The effective income tax rates for the thirteen and thirty-nine weeks ended December 25, 2022 and December 26, 2021 were higher than the United States statutory income tax rate primarily due to state and local taxes.

The amount of unrecognized tax benefits included in Other Liabilities at December 25, 2022 and March 27, 2022 was $ 437 and $ 403 , respectively, all of which would impact the Company’s effective tax rate, if recognized.

As of December 25, 2022 and March 27, 2022, the Company had approximately $ 315 and $ 271 , respectively, accrued for the payment of interest and penalties in connection with unrecognized tax benefits.

On August 16, 2022, the United States enacted the Inflation Reduction Act.

Among other provisions, this new law imposes a 1% excise tax on stock buybacks made after December 31, 2022, with certain exceptions including stock repurchases of less than $1,000 within a tax year.

We are not expecting this new law to have a material effect on our consolidated financial statements.

The income tax provisions for the thirteen week periods ended June 25, 2023 and June 26, 2022 reflect effective tax rates of 27.1 % and 27.8 %, respectively.

The effective income tax rate for the thirteen weeks ended June 25, 2023 reflected $ 2,744 of income tax expense recorded on $ 10,132 of pre-tax income.

The effective income tax rate for the thirteen weeks ended June 26, 2022 reflected $ 2,743 of income tax expense recorded on $ 9,880 of pre-tax income.

The effective tax rates are higher than the United States Federal statutory rates primarily due to state and local taxes.

The amount of unrecognized tax benefits included in Other liabilities at June 25, 2023 and March 26, 2023 was $ 446 and $ 432 , respectively, all of which would impact the Company’s effective rate, if recognized.

As of June 25, 2023 and March 26, 2023, the Company had approximately $ 321 and $ 305 , respectively, accrued for the payment of interest and penalties in connection with unrecognized tax benefits.

NOTE M –

1 unchanged sentence

Nathan’s considers itself to be a brand marketer of the Nathan’s Famous signature products to the foodservice industry pursuant to its various business structures.

Nathan’s sells its products directly to consumers through its restaurant operations segment consisting of Company-owned and franchised restaurants, including virtual kitchens, to distributors that resell our products to the foodservice industry through the Branded Product Program and by third party manufacturers pursuant to license agreements that sell our products to club stores and grocery stores nationwide.

The Company’s Chief Executive Officer has been identified as the Chief Operating Decision Maker (“CODM”) who evaluates performance and allocates resources for the Branded Product Program, Product Licensing and Restaurant Operations segments based upon a number of factors, the primary profit measure being income from operations.

3 unchanged sentences

Product licensing –

This segment derives revenue, primarily in the form of royalties, from licensing a broad variety of Nathan’s Famous branded products, including our hot dogs, sausage and corned beef products, frozen French fries and additional products through retail grocery channels and club stores throughout the United States.

This segment derives revenue, primarily in the form of royalties, from licensing a broad variety of Nathan’s Famous branded products, including our hot dogs, sausages, frozen crinkle-cut French fries and additional products through retail supermarkets, grocery channels and club stores throughout the United States.

Restaurant operations –

2 unchanged sentences

Income from operations attributable to Corporate consists principally of administrative expenses not allocated to the operating segments such as executive management, finance, information technology, legal, insurance, corporate office costs, corporate incentive compensation and compliance costs, and expenses of the Advertising Fund.

Interest expense, interest income, and other (expense) income, net, are managed centrally at the corporate level, and, accordingly, such items are not presented by segment since they are excluded from the measure of profitability reviewed by the CODM.

Interest expense, interest income, and other income, net, are managed centrally at the corporate level, and, accordingly, such items are not presented by segment since they are excluded from the measure of profitability reviewed by the CODM.

Operating segment information is as follows (in thousands):

Thirteen weeks ended

Thirty-nine weeks ended

June 25, 2023

June 26, 2022

Branded Product Program

10 unchanged sentences

Interest income

Other (expense) income, net

Other income, net

Income before provision for income taxes

2 unchanged sentences

SHARE-BASED COMPENSATION

Total share-based compensation during each of the thirteen and thirty-nine week periods ended December 25, 2022 and December 26, 2021 was $ 65 and $ 8 , and $ 81 and $ 66 , respectively.

As of December 25, 2022, there was $ 3,409 of unamortized compensation expense related to share-based incentive awards.

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

During the thirty-nine week period ended December 25, 2022, the Company granted 50,000 restricted stock units at a fair value of $ 67.59 per unit representing the closing price on the date of grant, which will be fully vested five years from the date of grant.

The restricted stock units vest ratably over a five-year period as follows:

10,000 restricted stock units on December 8, 2023;

10,000 restricted stock units on December 8, 2024;

10,000 restricted stock units on December 8, 2025;

10,000 restricted stock units on December 8, 2026;

and 10,000 restricted stock units on December 8, 2027.

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):

Total share-based compensation expense during the thirteen week periods ended June 25, 2023 and June 26, 2022 was $ 177 and $ 8 , respectively.

Total share-based compensation expense is included in general and administrative expenses in our accompanying Consolidated Statements of Earnings.

As of June 25, 2023, there was $ 3,055 of unamortized compensation expense related to share-based awards.

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

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

Compensation expense recognized under all share-based awards is as follows (in thousands):

Thirteen weeks ended

Thirty-nine weeks ended

June 25, 2023

June 26, 2022

Stock options

2 unchanged sentences

Stock options

There were no new share-based awards granted during the thirty-nine week period ended December 25, 2022.

Transactions with respect to stock options for the thirty-nine weeks ended December 25, 2022 are as follows:

There were no new share-based awards granted during the thirteen week period ended June 25, 2023.

Transactions with respect to stock options for the thirteen weeks ended June 25, 2023 are as follows:

Contractual Life

1 unchanged sentence

Options outstanding at March 26, 2023

Options outstanding at December 25, 2022

Options exercisable at December 25, 2022

Options outstanding at June 25, 2023

Options exercisable at June 25, 2023

Restricted stock units

Transactions with respect to restricted stock units for the thirty-nine weeks ended December 25, 2022 are as follows:

Transactions with respect to restricted stock units for the thirteen weeks ended June 25, 2023 are as follows:

Unvested restricted stock units at March 26, 2023

Unvested restricted stock units at December 25, 2022

Unvested restricted stock units at June 25, 2023

NOTE O –

1 unchanged sentence

Effective June 8, 2023, the Company’s Board of Directors (the “Board”) declared its first quarterly cash dividend of $ 0.50 per share for fiscal 2024, which was paid on June 28, 2023 to stockholders of record as of the close of business on June 20, 2023.

Effective August 5, 2022, the Board declared its second quarterly cash dividend of $ 0.45 per share for fiscal 2023, which was paid on September 2, 2022 to stockholders of record as of the close of business on August 22, 2022.

Effective November 3, 2022, the Board declared its third quarterly cash dividend of $ 0.45 per share for fiscal 2023 which was paid on December 2, 2022 to stockholders of record as of the close of business on November 21, 2022.

Effective February 2, 2023, the Board authorized the increase of its regular dividend from $0.45 to $0.50 per quarter and declared its fourth quarterly cash dividend of $ 0.50 per share payable on March 3, 2023 to stockholders of record as of the close of business on February 21, 2023.

Effective August 3, 2023, the Board declared its second quarterly cash dividend of $ 0.50 per share for fiscal 2024 payable on September 1, 2023 to stockholders of record as of the close of business on August 21, 2023.

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

Bank National Association, as trustee and collateral trustee.

Bank Trust Company, National Association, as trustee and collateral trustee.

In addition to the terms of the Indenture, the declaration and payment of any cash dividends in the future are subject to final determination of the Board and will be dependent upon our earnings and financial requirements.

Stock Repurchase Program

Stock Repurchase Programs

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 December 25, 2022, Nathan’s had repurchased 1,101,884 shares at a cost of $ 39,000 under the sixth stock repurchase plan.

At December 25, 2022 there were 98,116 shares remaining to be repurchased pursuant to the sixth stock repurchase plan.

As of June 25, 2023, Nathan’s had repurchased 1,101,884 shares at a cost of $ 39,000 under the sixth stock repurchase plan.

At June 25, 2023 there were 98,116 shares remaining to be repurchased pursuant to the sixth stock repurchase plan.

The plan does not have a set expiration date.

1 unchanged sentence

There is no set time limit on the repurchases.

On June 14, 2022, the Board approved a 10b5-1 Plan (the “10b5-1 Plan”) which expired on September 13, 2022.

During the thirty-nine week period ended December 25, 2022, the Company repurchased in open market transactions 35,434 shares of the Company’s common stock at an average share price of $ 53.39 for a total cost of $ 1,892 under the 10b5-1 Plan.

NOTE P –

7 unchanged sentences

Company as lessee

The components of the net lease cost for the thirteen and thirty-nine week periods ended December 25, 2022 and December 26, 2021 were as follows (in thousands):

The components of the net lease cost for the thirteen week periods ended June 25, 2023 and June 26, 2022 were as follows (in thousands):

Thirteen weeks ended

Thirty-nine weeks ended

June 25, 2023

June 26, 2022

Operating lease cost

2 unchanged sentences

Total net lease cost

The following table presents the components of the net lease cost on the Consolidated Statement of Earnings for the thirteen and thirty-nine week periods ended December 25, 2022 and December 26, 2021 (in thousands):

The components of the net lease cost on the Consolidated Statement of Earnings for the thirteen week periods ended June 25, 2023 and June 26, 2022 were as follows (in thousands):

Thirteen weeks ended

Thirty-nine weeks ended

June 25, 2023

June 26, 2022

Restaurant operating expenses

2 unchanged sentences

Total net lease cost

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

Cash paid for amounts included in the measurement of lease liabilities for the thirteen week periods ended June 25, 2023 and June 26, 2022 were as follows (in thousands):

Thirteen weeks ended

Thirty-nine weeks ended

June 25, 2023

June 26, 2022

Operating cash flows from operating leases

The weighted average remaining lease term and weighted average discount rate for operating leases as of December 25, 2022 were as follows:

The weighted average remaining lease term and weighted average discount rate for operating leases as of June 25, 2023 were as follows:

Weighted average remaining lease term (years):

Weighted average discount rate:

Future lease commitments to be paid and received by the Company as of December 25, 2022 were as follows (in thousands):

Future lease commitments to be paid and received by the Company as of June 25, 2023 were as follows (in thousands):

Operating Leases

3 unchanged sentences

Represents future lease commitments to be paid and received by the Company for the remainder of the 2024 fiscal year.

Amount does not include $ 1,216  

of lease commitments paid and received by the Company for the thirty-nine week period ended December 25, 2022.

The present value of minimum operating lease payments of $ 1,827 and $ 5,583  

are included in “Current portion of operating lease liabilities” and “Long-term operating lease liabilities,” respectively on the Consolidated Balance Sheet.

Amount does not include $ 459 of lease commitments paid and received by the Company for the thirteen week period ended June 25, 2023.

The present value of minimum operating lease payments of $ 1,743 and $ 5,058 are included in “Current portion of operating lease liabilities”

and “Long-term operating lease liabilities,”

respectively, on the Consolidated Balance Sheet.

Company as lessor

The components of lease income for the thirteen and thirty-nine week periods ended December 25, 2022 and December 26, 2021 were as follows (in thousands):

The components of lease income for the thirteen week periods ended June 25, 2023 and June 26, 2022 were as follows (in thousands):

Thirteen weeks ended

Thirty-nine weeks ended

June 25, 2023

June 26, 2022

Operating lease income, net

NOTE R –

COMMITMENTS AND CONTINGENCIES

On December 8, 2022, the Company amended its employment agreement with its Executive Chairman of the Board, Howard M.

Under the amendment, the term of the employment agreement was extended from December 31, 2022 to December 31, 2027.

In addition, Mr.

Lorber received a grant of 50,000 restricted stock units subject to vesting as provided in a Restricted Stock Unit Award Agreement between Mr.

Lorber and the Company.

Contingencies

NOTE R - COMMITMENTS AND CONTINGENCIES

Legal Proceedings

The Company and its subsidiaries are from time to time involved in ordinary and routine litigation.

3 unchanged sentences

NOTE S –

SUPPLEMENTAL CASH FLOW INFORMATION

Noncash financing activities

Dividends declared but not yet paid of $ 2,040 are included in Accrued expenses and other current liabilities on the Consolidated Balance Sheet at June 25, 2023.

NOTE T –

SUBSEQUENT EVENTS

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

There were no subsequent events that require recognition or disclosure.

There were no subsequent events that required 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