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Item 1. Financial Statements

2024-08-08 compared with 2024-02-01 · 176 added, 244 removed, 268 unchanged (61% of the section changed)

3 unchanged sentences

CONSOLIDATED BALANCE SHEETS

June 30, 2024 and March 31, 2024

(in thousands, except share and per share amounts)

December 24, 2023

June 30, 2024

March 31, 2024

CURRENT ASSETS

Accounts and other receivables, net (Note H)

Prepaid expenses and other current assets (Note I)

Cash and cash equivalents (Note E)

Accounts and other receivables, net (Note G)

Prepaid expenses and other current assets (Note H)

Total current assets

Property and equipment, net of accumulated depreciation of $ 11,893 and $ 11,687 , respectively

Operating lease assets (Note R)

Intangible asset, net (Note J)

Operating lease assets (Note Q)

Intangible asset, net (Note I)

Deferred income taxes

2 unchanged sentences

Accounts payable

Accrued expenses and other current liabilities (Note L)

Current portion of operating lease liabilities (Note R)

Accrued expenses and other current liabilities (Note K)

Current portion of operating lease liabilities (Note Q)

Deferred franchise fees

Total current liabilities

Long-term debt, net of unamortized debt issuance costs of $ 507 and $ 952 , respectively (Note Q)

Operating lease liabilities (Note R)

Long-term debt, net of unamortized debt issuance costs of $ 369 and $ 438 , respectively (Note P)

Operating lease liabilities (Note Q)

Other liabilities

1 unchanged sentence

Total liabilities

COMMITMENTS AND CONTINGENCIES (Note S)

COMMITMENTS AND CONTINGENCIES (Note R)

STOCKHOLDERS’ DEFICIT

1 unchanged sentence

30,000,000 shares authorized;

9,374,130 and 9,369,235 shares issued;

and 4,084,615 and 4,079,720 shares outstanding at December 24, 2023 and March 26, 2023, respectively

9,374,130 shares issued;

and 4,084,615 shares outstanding at June 30, 2024 and March 31, 2024

Additional paid-in capital

1 unchanged sentence

Stockholders’ equity before treasury stock

Treasury stock, at cost, 5,289,515 shares at December 24, 2023 and March 26, 2023, respectively

Treasury stock, at cost, 5,289,515 shares at June 30, 2024 and March 31, 2024

Total stockholders’ deficit

4 unchanged sentences

CONSOLIDATED STATEMENTS OF EARNINGS

Thirteen weeks ended June 30, 2024 and June 25, 2023

(in thousands, except per share amounts)

Thirteen weeks ended

Thirty-nine weeks ended

June 30, 2024

June 25, 2023

Branded Products

Company-owned restaurants

License royalties

11 unchanged sentences

Interest expense

Loss on debt extinguishment (Note Q)

Interest income

Other income (expense), net

Interest and dividend income

Other income, net

Income before provision for income taxes

1 unchanged sentence

PER SHARE INFORMATION

Weighted average shares used in computing income per share:

Income per share:

Dividends declared per share

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

Nathan ’ s Famous, Inc.

and Subsidiaries

CONSOLIDATED STATEMENTS OF STOCKHOLDERS ’ DEFICIT

Thirteen weeks ended December 24, 2023 and December 25, 2022

(in thousands, except share amounts)

Treasury Stock, at Cost

Stockholders’

Balance, September 24, 2023

Shares issued in connection with share-based compensation plans

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

Dividends on common stock

Share-based compensation

Balance, December 24, 2023

Treasury Stock, at Cost

Stockholders’

Balance, September 25, 2022

Dividends on common stock

Share-based compensation

Balance, December 25, 2022

Weighted average shares used in computing net income per share:

Net income per share:

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

1 unchanged sentence

and Subsidiaries

CONSOLIDATED STATEMENTS OF STOCKHOLDERS ’ DEFICIT

Thirty-nine weeks ended December 24, 2023 and December 25, 2022

(in thousands, except share amounts)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS ’ DEFICIT

Thirteen weeks ended June 30, 2024 and June 25, 2023

(in thousands, except share and per share amounts)

Treasury Stock, at Cost

1 unchanged sentence

Balance, March 31, 2024

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

Shares issued in connection with share-based compensation plans

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

Dividends on common stock

Dividends on common stock ($ 0.50 per share)

Share-based compensation

Balance, December 24, 2023

Balance, June 30, 2024

Treasury Stock, at Cost

1 unchanged sentence

Balance, March 26, 2023

Repurchase of common stock

Dividends on common stock

Cumulative effect of adoption of ASU 2016-13

Dividends on common stock ($ 0.50 per share)

Share-based compensation

Balance, December 25, 2022

Balance, June 25, 2023

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

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

Thirty-nine weeks ended December 24, 2023 and December 25, 2022

(in thousands)

December 24, 2023

December 25, 2022

Thirteen weeks ended June 30, 2024 and June 25, 2023

(in thousands, except per share amounts)

June 30, 2024

June 25, 2023

Cash flows from operating activities:

1 unchanged sentence

Depreciation and amortization

Loss on debt extinguishment

Loss on disposal of property and equipment

Amortization of debt issuance costs

Share-based compensation expense

Provision for uncollectible accounts

Provision for expected credit losses

Deferred income taxes

8 unchanged sentences

Cash flows from investing activities:

Insurance proceeds for property and equipment

Purchase of property and equipment

Net cash used in investing activities

Cash flows from financing activities:

Cash payments for extinguishment of debt

Dividends paid to stockholders

Repurchase of treasury stock

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

Net cash used in financing activities

Net (decrease) increase in cash and cash equivalents

Net increase in cash and cash equivalents

Cash and cash equivalents, beginning of period

1 unchanged sentence

Cash paid during the period for:

Non-cash 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 24, 2023

June 30, 2024

(in thousands, except per share amounts)

NOTE A - BASIS OF PRESENTATION

The accompanying consolidated financial statements of Nathan's Famous, Inc.

and subsidiaries (collectively “Nathan’s,” the “Company,” “we,” “us” or “our”) as of and for the thirteen and thirty-nine week periods ended December 24, 2023 and December 25, 2022 have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

and subsidiaries (collectively “Nathan’s,” the “Company,” “we,” “us” or “our”) as of and for the thirteen week periods ended June 30, 2024 and June 25, 2023 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.

2 unchanged sentences

The 2025 fiscal year will end on March 30, 2025 and will contain 52 weeks.

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

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”).

2 unchanged sentences

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 31, 2024.

NOTE B – ADOPTION OF NEW ACCOUNTING STANDARD

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, “ Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments, ” (“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.

NOTE C – NEW ACCOUNTING STANDARDS NOT YET ADOPTED

NOTE B – NEW ACCOUNTING STANDARDS NOT YET ADOPTED

In November 2023, the FASB issued ASU 2023-07, “ Segment Reporting (Topic 280):

3 unchanged sentences

The guidance is effective for fiscal years beginning December 15, 2023, and interim periods within fiscal years beginning December 15, 2024.

For us, annual reporting requirements will be effective for our fiscal year 2025 beginning on April 1, 2024 and interim reporting requirements will be effective beginning with our fourth quarter of fiscal year 2025.

For the Company, annual reporting requirements will be effective for our fiscal year 2025 beginning on April 1, 2024 and interim reporting requirements will be effective beginning with our fourth quarter of fiscal year 2025.

Early adoption is permitted.

Entities are required to adopt this guidance on a retrospective basis.

We are currently evaluating the impact that the new guidance will have on our consolidated financial statements.

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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 D – REVENUES

The Company’s disaggregated revenues for the thirteen and thirty-nine weeks ended December 24, 2023 and December 25, 2022 are as follows (in thousands):

NOTE C – REVENUES

The Company’s disaggregated revenues for the thirteen weeks ended June 30, 2024 and June 25, 2023 are as follows (in thousands):

Thirteen weeks ended

Thirty-nine weeks ended

December 24, 2023

December 25, 2022

December 24, 2023

December 25, 2022

June 30, 2024

June 25, 2023

Branded Products

3 unchanged sentences

Franchise fees

Total franchise fees and royalties

Advertising fund revenue

2 unchanged sentences

Thirteen weeks ended

Thirty-nine weeks ended

December 24, 2023

December 25, 2022

December 24, 2023

December 25, 2022

June 30, 2024

June 25, 2023

United States

3 unchanged sentences

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

December 24, 2023

June 30, 2024

March 31, 2024

2 unchanged sentences

“Accrued expenses and other current liabilities” (b)

Deferred franchise fees of $ 338 and $ 1,014 as of December 24, 2023 and $ 336 and $ 1,272 as of March 26, 2023 are included in Deferred franchise fees – current and long term, respectively.

Includes $ 250 of deferred advertising fund revenue as of December 24, 2023 and $ 906 of deferred license royalties and $ 500 of deferred advertising fund revenue as of March 26, 2023.

Deferred franchise fees of $ 322 and $ 824 as of June 30, 2024 and $ 327 and $ 899 as of March 31, 2024 are included in Deferred franchise fees – current and long term, respectively.

Includes $ 473 of deferred license royalties and $ 250 of deferred advertising fund revenue as of June 30, 2024 and $ 875 of deferred license royalties and $ 500 of deferred advertising fund revenue as of March 31, 2024.

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

Thirty-nine weeks ended

December 24, 2023

December 25, 2022

Thirteen weeks ended

June 30, 2024

June 25, 2023

Deferred franchise fees at beginning of period

3 unchanged sentences

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

Thirty-nine weeks ended

December 24, 2023

December 25, 2022

Thirteen weeks ended

June 30, 2024

June 25, 2023

Deferred revenues at beginning of period

New deferrals due to cash received and other

Revenue recognized during the period

4 unchanged sentences

Represents franchise fees expected to be recognized for the remainder of the 2025 fiscal year, which includes international development fees expected to be recognized over the duration of one year or less.

Amount does not include $ 325 of franchise fee revenue recognized for the thirty-nine weeks ended December 24, 2023.

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.

NOTE E – INCOME PER SHARE

Basic income per common share is calculated by dividing net 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 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 24, 2023 and December 25, 2022, respectively.

Thirteen weeks

Number of Shares

(in thousands)

Basic calculation

Effect of dilutive share-based awards

Diluted calculation

Thirty-nine weeks

Number of Shares

(in thousands)

Basic calculation

Amount does not include $ 92 of franchise fee revenue recognized for the thirteen weeks ended June 30, 2024.

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

Diluted net 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 net income per common share result from the assumed exercise of stock options, 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 week periods ended June 30, 2024 and June 25, 2023, respectively (in thousands, except per share amounts):

Common Stock:

Weighted average basic shares outstanding

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 24, 2023 and December 25, 2022 were excluded in the computation of diluted earnings per share because the exercise price exceeded the average market price of common shares during these periods.

NOTE F – CASH AND CASH EQUIVALENTS

Weighted average diluted shares outstanding

Net income per share:

Anti-dilutive share-based awards

NOTE E – CASH AND CASH EQUIVALENTS

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 24, 2023 and March 26, 2023.

Cash equivalents at June 30, 2024 were $ 10,000 .

The Company did not have any cash equivalents at March 31, 2024.

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

At December 24, 2023 and March 26, 2023, substantially all of the Company’s cash balances are in excess of Federal government insurance limits.

At June 30, 2024 and March 31, 2024, 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.

NOTE G – FAIR VALUE MEASUREMENTS

NOTE F – FAIR VALUE MEASUREMENTS

Nathan’s follows a three-level fair value hierarchy that prioritizes the inputs to measure fair value.

3 unchanged sentences

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 24, 2023 and March 26, 2023 were as follows (in thousands):

December 24, 2023

Level 3 - inputs to the valuation methodology are unobservable and significant to the fair value measurement of the asset or liability and reflect the Company’s own assumptions

The face value and fair value of long-term debt as of June 30, 2024 and March 31, 2024 were as follows (in thousands):

June 30, 2024

March 31, 2024

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 and cash equivalents, 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 24, 2023, no fair value adjustment or material fair value measurements were required for non-financial assets or liabilities.

NOTE H – ACCOUNTS AND OTHER RECEIVABLES, NET

At June 30, 2024, 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):

3 unchanged sentences

Accounts and other receivables, net

Our provision for credit losses is based on the current expected credit losses model.

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

2 unchanged sentences

An allowance for credit losses is determined 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 is 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 inflation and reasonable and supportable forecasts of future economic conditions.

The Company considers both qualitative and quantitative information when developing the estimate including assessments of collectability based on historical trends, the financial condition of the Company’s franchisees, licensees and Branded Product Program customers, including any known or anticipated bankruptcies, and an evaluation of current economic conditions as well as the Company’s expectations of conditions in the future.

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 thirty-nine week period ended December 24, 2023 and the fiscal year ended March 26, 2023 are as follows (in thousands):

Changes in the Company’s allowance for credit losses for the thirteen week period ended June 30, 2024 and the fiscal year ended March 31, 2024 are as follows (in thousands):

Beginning balance

Cumulative effect of adoption of ASU 2016-13

Bad debt expense

Provision for expected credit losses

Write offs and other

Ending balance

NOTE I – PREPAID EXPENSES AND OTHER CURRENT ASSETS

NOTE H – PREPAID EXPENSES AND OTHER CURRENT ASSETS

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

Real estate taxes

Deferred financing costs

Total prepaid expenses and other current assets

NOTE J – 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 five 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 four 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 24, 2023 that would indicate that the carrying amount of the Company’s intangible asset may be impaired as of December 24, 2023.

NOTE K - LONG LIVED ASSETS

There have been no significant events or changes in circumstances during the thirteen weeks ended June 30, 2024 that would indicate that the carrying amount of the Company’s intangible asset may be impaired as of June 30, 2024.

NOTE J - LONG LIVED ASSETS

Long-lived assets on a restaurant-by-restaurant basis are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

7 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 24, 2023 that would indicate that the carrying amount of the Company’s long-lived assets may be impaired as of December 24, 2023.

NOTE L – ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

There have been no significant events or changes in circumstances during the thirteen weeks ended June 30, 2024 that would indicate that the carrying amount of the Company’s long-lived assets may be impaired as of June 30, 2024.

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

4 unchanged sentences

Sales, use and other taxes

Corporate income taxes

Total accrued expenses and other current liabilities

NOTE M – INCOME TAXES

The effective income tax rates for the thirteen weeks ended December 24, 2023 and December 25, 2022 were 30.2% and 27.3%, respectively.

The effective income tax rate for the thirteen weeks ended December 24, 2023 reflected $1,128 of income tax expense recorded on $3,735 of pre-tax income.

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 rates for the thirty-nine weeks ended December 24, 2023 and December 25, 2022 were 27.7 % and 27.1 %, respectively.

The effective income tax rate for the thirty-nine weeks ended December 24, 2023 reflected $ 6,025 of income tax expense recorded on $ 21,731 of pre-tax income.

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 rates for the thirteen and thirty-nine weeks ended December 24, 2023 and December 25, 2022 were higher than the United States statutory income tax rate primarily due to state and local taxes, as well as non-deductible executive compensation under the Internal Revenue Code Section 162(m).

The amount of unrecognized tax benefits included in Other liabilities at December 24, 2023 and March 26, 2023 was $ 465 and $ 432 , respectively, all of which would impact the Company’s effective tax rate, if recognized.

As of December 24, 2023 and March 26, 2023, the Company had approximately $ 343 and $ 305 , respectively, accrued for the payment of interest and penalties in connection with unrecognized tax benefits.

NOTE N – SEGMENT INFORMATION

NOTE L – INCOME TAXES

The income tax provisions for the thirteen week periods ended June 30, 2024 and June 25, 2023 reflect effective tax rates of 27.4 % and 27.1 %, respectively.

The effective income tax rate for the thirteen weeks ended June 30, 2024 reflected $ 3,507 of income tax expense recorded on $ 12,784 of pre-tax income.

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 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 30, 2024 and March 31, 2024 was $ 485 and $ 465 , respectively, all of which would impact the Company’s effective rate, if recognized.

As of June 30, 2024 and March 31, 2024, the Company had approximately $ 367 and $ 345 , respectively, of accrued interest and penalties in connection with unrecognized tax benefits.

NOTE M – SEGMENT INFORMATION

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.

3 unchanged sentences

Branded Product Program – This segment derives revenue principally from the sale of hot dog products either directly to foodservice operators or to various foodservice distributors who resell the products to foodservice operators.

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, sausages, frozen crinkle-cut French fries and additional products through retail supermarkets, grocery channels and club stores throughout the United States.

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, frozen crinkle-cut French fries and additional products through retail supermarkets, grocery channels and club stores throughout the United States.

Restaurant operations – This segment derives revenue from the sale of our products at Company-owned restaurants and earns fees and royalties from its franchised restaurants, including its virtual kitchens.

1 unchanged sentence

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, loss on debt extinguishment, interest income, and other income (expense), 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 and dividend 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

December 24, 2023

December 25, 2022

December 24, 2023

December 25, 2022

June 30, 2024

June 25, 2023

Branded Product Program

9 unchanged sentences

Interest expense

Loss on debt extinguishment

Interest income

Other income (expense), net

Interest and dividend income

Other income, net

Income before provision for income taxes

Represents advertising fund revenue.

NOTE O – SHARE-BASED COMPENSATION

Total share-based compensation during each of the thirteen and thirty-nine week periods ended December 24, 2023 and December 25, 2022 was $ 187 and $ 65 , and $ 546 and $ 81 , respectively.

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

As of December 24, 2023, there was $ 2,848 of unamortized compensation expense related to share-based awards.

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

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

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

NOTE N – SHARE-BASED COMPENSATION

Total share-based compensation expense during the thirteen week periods ended June 30, 2024 and June 25, 2023 was $ 188 and $ 177 , respectively.

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

As of June 30, 2024, there was $ 2,473 of unamortized compensation expense related to share-based awards.

We expect to recognize this expense over approximately thirty-six 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

December 24, 2023

December 25, 2022

December 24, 2023

December 25, 2022

June 30, 2024

June 25, 2023

Stock options

2 unchanged sentences

Stock options

During the thirty-nine week period ended December 24, 2023, the Company granted options to purchase 10,000 shares at an exercise price of $ 78.00 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 11, 2023.

The weighted average option fair value, 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 24, 2023 are as follows:

Weighted average option fair values

Expected life (years)

Interest rate

Dividend yield

The expected dividend yield is based on historical and projected dividend yields.

The Company estimates volatility based primarily on historical monthly price changes of the Company’s stock equal to the expected life of the option.

The risk-free interest rate is based on the U.S.

Treasury yield in effect at the time of grant.

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 thirty-nine weeks ended December 24, 2023 are as follows:

There were no new share-based awards granted during the thirteen week period ended June 30, 2024.

Transactions with respect to stock options for the thirteen weeks ended June 30, 2024 are as follows:

Contractual Life

1 unchanged sentence

Options outstanding at March 31, 2024

Options outstanding at December 24, 2023

Options exercisable at December 24, 2023

Options outstanding at June 30, 2024

Options exercisable at June 30, 2024

Restricted stock units

Transactions with respect to restricted stock units for the thirty-nine weeks ended December 24, 2023 are as follows:

Transactions with respect to restricted stock units for the thirteen weeks ended June 30, 2024 are as follows:

Unvested restricted stock units at March 31, 2024

Unvested restricted stock units at December 24, 2023

NOTE P– STOCKHOLDERS’ EQUITY

On June 28, 2023, September 1, 2023 and December 1, 2023, the Company paid quarterly dividends of $ 0.50 per share.

Through December 24, 2023, the Company paid quarterly dividends aggregating $ 6,120 .

Effective February 1, 2024, the Company’s Board of Directors (the “Board”) declared its fourth quarterly cash dividend of $ 0.50 per share for fiscal 2024 payable on March 1, 2024 to stockholders of record as of the close of business on February 20, 2024.

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

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 is subject to final determination of the Board and will be dependent upon our earnings and financial requirements.

Stock Repurchase Program

Unvested restricted stock units at June 30, 2024

NOTE O – STOCKHOLDERS’ EQUITY

Effective June 12, 2024, the Company’s Board of Directors (the “Board”) declared its first quarterly cash dividend of $ 0.50 per share for fiscal 2025, which was paid on July 2, 2024 to stockholders of record as of the close of business on June 24, 2024 .

Effective August 8, 2024, the Board declared its second quarterly cash dividend of $ 0.50 per share for fiscal 2025 payable on September 6, 2024 to stockholders of record as of the close of business on August 26, 2024 .

Our ability to pay future dividends is limited by the terms of our debt instruments.

In addition to the terms of our debt instruments, 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 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 24, 2023, Nathan’s had repurchased 1,101,884 shares at a cost of $ 39,000 under the sixth stock repurchase plan.

At December 24, 2023 there were 98,116 shares remaining to be repurchased pursuant to the sixth stock repurchase plan.

As of June 30, 2024, Nathan’s had repurchased 1,101,884 shares at a cost of $ 39,000 under the sixth stock repurchase plan.

At June 30, 2024 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.

NOTE Q – LONG-TERM DEBT

NOTE P – LONG-TERM DEBT

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

June 30, 2024

March 31, 2024

6.625% Senior Secured Notes due 2025

1 unchanged sentence

Long-term debt, net

On November 14, 2023, the Company announced its intent to complete the partial redemption, in the principal amount of $ 20,000 , of the 2025 Notes in accordance with the terms and conditions of the Indenture.

The redemption price of the redeemed notes was 100 % of the principal amount, plus accrued and unpaid interest from, and including November 1, 2023 to, but excluding the redemption date of December 19, 2023.

On December 19, 2023, the Company completed the partial redemption by paying cash of $ 20,177 , inclusive of accrued interest of $ 177 , and recognized a loss on early extinguishment of $ 169 that reflected the write-off of a portion of previously recorded debt issuance costs.

NOTE R – LEASES

Subsequent to the quarter ending June 30, 2024, on July 10, 2024, the Company entered into a new five-year unsecured Credit Agreement with Citibank, N.A., (the “Credit Agreement”) that includes a term loan facility and revolving credit facility and used $60,000 of term loan borrowings under the Credit Agreement to refinance and redeem its outstanding Senior Secured Notes due 2025.

The transaction did not add any additional new debt to the Company’s Consolidated Balance Sheet.

See NOTE T – SUBSEQUENT EVENTS in the accompanying consolidated financial statements for additional information on the Credit Agreement.

NOTE Q – LEASES

The Company is party as lessee to various leases for its Company-owned restaurants and lessee/sublessor to one franchised location property, including land and buildings, as well as leases for its corporate office and certain office equipment.

Company as lessee

The components of the net lease cost for the thirteen and thirty-nine week periods ended December 24, 2023 and December 25, 2022 were as follows (in thousands):

The components of the net lease cost for the thirteen week periods ended June 30, 2024 and June 25, 2023 were as follows (in thousands):

Thirteen weeks ended

Thirty-nine weeks ended

December 24, 2023

December 25, 2022

December 24, 2023

December 25, 2022

June 30, 2024

June 25, 2023

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 24, 2023 and December 25, 2022 (in thousands):

The components of the net lease cost on the Consolidated Statement of Earnings for the thirteen week periods ended June 30, 2024 and June 25, 2023 were as follows (in thousands):

Thirteen weeks ended

Thirty-nine weeks ended

December 24, 2023

December 25, 2022

December 24, 2023

December 25, 2022

June 30, 2024

June 25, 2023

Restaurant operating expenses

2 unchanged sentences

Total net lease cost

Cash paid for amounts included in the measurement of lease liabilities for the thirteen and thirty-nine week periods ended December 24, 2023 and December 25, 2022 were as follows (in thousands):

Cash paid for amounts included in the measurement of lease liabilities for the thirteen week periods ended June 30, 2024 and June 25, 2023 were as follows (in thousands):

Thirteen weeks ended

Thirty-nine weeks ended

December 24, 2023

December 25, 2022

December 24, 2023

December 25, 2022

June 30, 2024

June 25, 2023

Operating cash flows from operating leases

The weighted average remaining lease term and weighted average discount rate for operating leases as of December 24, 2023 were as follows:

The weighted average remaining lease term and weighted average discount rate for operating leases as of June 30, 2024 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 24, 2023 were as follows (in thousands):

Future lease commitments to be paid and received by the Company as of June 30, 2024 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 2025 fiscal year.

Amount does not include $ 1,234 of lease commitments paid and received by the Company for the thirty-nine week period ended December 24, 2023.

Amount does not include $ 466 of lease commitments paid and received by the Company for the thirteen week period ended June 30, 2024.

The present value of minimum operating lease payments of $ 1,897 and $ 4,513 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 net lease income for the thirteen and thirty-nine week periods ended December 24, 2023 and December 25, 2022 were as follows (in thousands):

The components of lease income for the thirteen week periods ended June 30, 2024 and June 25, 2023 were as follows (in thousands):

Thirteen weeks ended

Thirty-nine weeks ended

December 24, 2023

December 25, 2022

December 24, 2023

December 25, 2022

June 30, 2024

June 25, 2023

Operating lease income, net

NOTE S – COMMITMENTS AND CONTINGENCIES

Contingencies

NOTE R - COMMITMENTS AND CONTINGENCIES

Legal Proceedings

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

2 unchanged sentences

An unfavorable ruling could include money damages and, in such event, could result in a material adverse impact on the Company’s results of operations for the period in which the ruling occurs.

NOTE S – SUPPLEMENTAL CASH FLOW INFORMATION

Non-cash investing activities

Accruals for purchases of property and equipment of $ 27 are included in Accrued expenses and other current liabilities on the Consolidated Balance Sheet at June 30, 2024.

Non-cash financing activities

Dividends declared but not yet paid of $ 2,043 are included in Accrued expenses and other current liabilities on the Consolidated Balance Sheet at June 30, 2024.

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.

On July 10, 2024 (the “Effective Date”), the Company entered into a five-year unsecured Credit Agreement (the “Credit Agreement”) among the Company, as borrower, direct and indirect subsidiaries of the Company, as guarantors, the lenders from time to time party thereto (the “Lenders”) and Citibank, N.A., as administrative agent, swing line lender, L/C issuer and a Lender (capitalized terms used and not otherwise defined herein in NOTE T – SUBSEQUENT EVENTS shall have the meanings set forth in the Credit Agreement).

The Credit Agreement provides for a term loan facility (“Term Loan”) of $ 60,000 and a revolving credit facility (“Revolving Loan”) of up to $ 10,000 .

The Credit Agreement also provides that the Company has the right from time to time during the term of the Credit Agreement to request the Lenders for incremental revolving loan borrowing increases of up to an additional $ 10,000 in the aggregate, subject to, among other items, the Lenders agreeing to lend any such additional amounts and compliance with terms specified in the Credit Agreement.

The Credit Agreement matures on July 10, 2029.

The Company borrowed $ 60,000 in Term Loan borrowings on the Effective Date to refinance and redeem its outstanding Senior Secured Notes due 2025.

The Company will use any Revolving Loan borrowings under the Credit Agreement for working capital and general corporate purposes.

Term Loan and Revolving Loan borrowings under the Credit Agreement will bear interest at a rate per annum, at the Company’s option, of (a) for Base Rate Loans, the Base Rate plus the Applicable Rate (as defined in the Credit Agreement) of 0.00 % or (b) for Term SOFR Loans, Term SOFR plus the Applicable Rate of 1.40 %.

The Company will be subject to a commitment fee of 0.20 % per annum on the daily amount of the undrawn portion of the Revolving Committed Amount.

The Credit Agreement contains customary affirmative covenants and negative covenants and requires the Company to maintain a Consolidated Fixed Charge Ratio not to exceed 1.20 to 1.00 and a Consolidated Net Leverage Ratio not to exceed 3.00 to 1.00, in each case, beginning with the fiscal quarter ending September 29, 2024.

The outstanding Term Loan borrowings under the Credit Agreement are payable in equal quarterly installments of 1.0 % of the original principal amount of the Term Loan, or $ 600 , beginning September 30, 2024.

The outstanding Term Loan borrowings and the Revolving Loan borrowings under the Credit Agreement are voluntarily prepayable by the Company without penalty or premium, provided, that each of the following shall require a mandatory prepayment of outstanding Term Loan borrowings and Revolving Loan borrowings by the Company as follows:

(i) 100 % of any Net Cash Proceeds in excess of $ 2,000 individually or in the aggregate over the term of the Credit Agreement in respect of any Extraordinary Receipt provided that the Company shall be permitted to reinvest such Net Cash Proceeds in accordance with the Credit Agreement, (ii) 100 % of any Net Cash Proceeds of an Equity Issuance, (iii) 100 % of any Net Cash Proceeds from a Debt Issuance and (iv) 100 % of any Net Cash Proceeds from the Disposition of certain assets individually, or in the aggregate, in excess of $ 2,000 in any fiscal year provided that the Company shall be permitted to reinvest such Net Cash Proceeds in accordance with the Credit Agreement.

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