NATHANS FAMOUS, INC. 10-Q

Item 1. Financial Statements. Nathan ’ s Famous, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS June 30, 2024 and March 31, 2024 (in thousands, except share and per share amounts) June 30, 2024 March 31, 2024 (Unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents (Note E) $ 25,979 $ 21,027 Accounts and other receivables, net (Note G) 20,471 14,731 Inventories 931 842 Prepaid expenses and other current assets (Note H) 1,598 2,176 Total current assets 48,979 38,776 Property and equipment, net of accumulated depreciation of $ 11,893 and $ 11,687 , respectively 2,535 2,673 Operating lease assets (Note Q) 5,852 6,203 Goodwill 95 95 Intangible asset, net (Note I) 652 695 Deferred income taxes 280 275 Other assets 134 141 Total assets $ 58,527 $ 48,858 LIABILITIES AND STOCKHOLDERS’ DEFICIT CURRENT LIABILITIES Accounts payable $ 7,046 $ 5,744 Accrued expenses and other current liabilities (Note K) 8,951 7,615 Current portion of operating lease liabilities (Note Q) 1,897 1,887 Deferred franchise fees 322 327 Total current liabilities 18,216 15,573 Long-term debt, net of unamortized debt issuance costs of $ 369 and $ 438 , respectively (Note P) 59,631 59,562 Operating lease liabilities (Note Q) 4,513 4,937 Other liabilities 844 810 Deferred franchise fees 824 899 Total liabilities 84,028 81,781 COMMITMENTS AND CONTINGENCIES (Note R) STOCKHOLDERS’ DEFICIT Common stock, $ .01 par value; 30,000,000 shares authorized; 9,374,130 shares issued; and 4,084,615 shares outstanding at June 30, 2024 and March 31, 2024 94 94 Additional paid-in capital 63,124 62,936 Accumulated deficit ( 2,057 ) ( 9,291 ) Stockholders’ equity before treasury stock 61,161 53,739 Treasury stock, at cost, 5,289,515 shares at June 30, 2024 and March 31, 2024 ( 86,662 ) ( 86,662 ) Total stockholders’ deficit ( 25,501 ) ( 32,923 ) Total liabilities and stockholders’ deficit $ 58,527 $ 48,858 The accompanying notes are an integral part of these consolidated financial statements. 3 Nathan ’ s Famous, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF EARNINGS Thirteen weeks ended June 30, 2024 and June 25, 2023 (in thousands, except per share amounts) (Unaudited) June 30, 2024 June 25, 2023 REVENUES Branded Products $ 26,146 $ 25,170 Company-owned restaurants 4,199 3,658 License royalties 12,921 11,658 Franchise fees and royalties 1,073 1,075 Advertising fund revenue 428 424 Total revenues 44,767 41,985 COSTS AND EXPENSES Cost of sales 25,241 24,684 Restaurant operating expenses 1,129 1,043 Depreciation and amortization 249 313 General and administrative expenses 3,975 4,058 Advertising fund expense 428 424 Total costs and expenses 31,022 30,522 Income from operations 13,745 11,463 Interest expense ( 1,060 ) ( 1,414 ) Interest and dividend income 78 62 Other income, net 21 21 Income before provision for income taxes 12,784 10,132 Provision for income taxes 3,507 2,744 Net income $ 9,277 $ 7,388 PER SHARE INFORMATION Weighted average shares used in computing net income per share: Basic 4,085 4,080 Diluted 4,089 4,088 Net income per share: Basic $ 2.27 $ 1.81 Diluted $ 2.27 $ 1.81 The accompanying notes are an integral part of these consolidated financial statements. 4 Nathan ’ s Famous, Inc. and Subsidiaries 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) (Unaudited) Additional Total Common Common Paid-in Accumulated Treasury Stock, at Cost Stockholders’ Shares Stock Capital Deficit Shares Amount Deficit Balance, March 31, 2024 9,374,130 $ 94 $ 62,936 $ ( 9,291 ) 5,289,515 $ ( 86,662 ) $ ( 32,923 ) Dividends on common stock ($ 0.50 per share) - - - ( 2,043 ) - - ( 2,043 ) Share-based compensation - - 188 - - - 188 Net income - - - 9,277 - - 9,277 Balance, June 30, 2024 9,374,130 $ 94 $ 63,124 $ ( 2,057 ) 5,289,515 $ ( 86,662 ) $ ( 25,501 ) Additional Total Common Common Paid-in Accumulated Treasury Stock, at Cost Stockholders’ Shares Stock Capital Deficit Shares Amount Deficit Balance, March 26, 2023 9,369,235 $ 94 $ 62,565 $ ( 20,559 ) 5,289,515 $ ( 86,662 ) $ ( 44,562 ) Cumulative effect of adoption of ASU 2016-13 - - - ( 187 ) - - ( 187 ) Dividends on common stock ($ 0.50 per share) - - - ( 2,040 ) - - ( 2,040 ) Share-based compensation - - 177 - - - 177 Net income - - - 7,388 - - 7,388 Balance, June 25, 2023 9,369,235 $ 94 $ 62,742 $ ( 15,398 ) 5,289,515 $ ( 86,662 ) $ ( 39,224 ) The accompanying notes are an integral part of these consolidated financial statements. 5 Nathan ’ s Famous, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS Thirteen weeks ended June 30, 2024 and June 25, 2023 (in thousands, except per share amounts) (Unaudited) June 30, 2024 June 25, 2023 Cash flows from operating activities: Net income $ 9,277 $ 7,388 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 249 313 Amortization of debt issuance costs 69 92 Share-based compensation expense 188 177 Provision for expected credit losses 65 81 Deferred income taxes ( 5 ) ( 46 ) Other non-cash items ( 63 ) ( 70 ) Changes in operating assets and liabilities: Accounts and other receivables, net ( 5,805 ) ( 6,232 ) Inventories ( 89 ) ( 225 ) Prepaid expenses and other current assets 578 534 Other assets 7 7 Accounts payable, accrued expenses and other current liabilities 568 156 Deferred franchise fees ( 80 ) ( 52 ) Other liabilities 34 25 Net cash provided by operating activities 4,993 2,148 Cash flows from investing activities: Purchase of property and equipment ( 41 ) ( 73 ) Net cash used in investing activities ( 41 ) ( 73 ) Net increase in cash and cash equivalents 4,952 2,075 Cash and cash equivalents, beginning of period 21,027 29,861 Cash and cash equivalents, end of period $ 25,979 $ 31,936 Cash paid during the period for: Interest $ 1,988 $ 2,650 Income taxes $ 138 $ 81 See Note S for supplemental cash flow information. The accompanying notes are an integral part of these consolidated financial statements. 6 NATHAN'S FAMOUS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2024 (in thousands, except per share amounts) (Unaudited) 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 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. 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. The Company uses a 52-53 week fiscal year ending on the Sunday closest to March 31. 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 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 31, 2024 as filed with the SEC on June 12, 2024. 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 31, 2024. NOTE B – NEW ACCOUNTING STANDARDS NOT YET ADOPTED In November 2023, the FASB issued ASU 2023-07, “ Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures ” which provides guidance to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. In addition, the guidance enhances interim disclosure requirements, clarifies circumstances in which an entity can disclose multiple segment measures of profit or loss, provides new segment disclosure requirements for entities with a single reportable segment and contains other disclosure requirements. The purpose of the guidance is to enable investors to better understand an entity’s overall performance and assess potential future cash flows. The guidance is effective for fiscal years beginning December 15, 2023, and interim periods within fiscal years beginning December 15, 2024. 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. In December 2023, the FASB issued ASU 2023-09, “ Income Taxes (Topic 740): Improvements to Income Tax Disclosures ” which updates income tax disclosure requirements primarily by requiring specific categories and greater disaggregation within the rate reconciliation table and disaggregation of income taxes paid, net of refunds, by jurisdiction. All entities are required to apply the guidance prospectively, with the option to apply it retrospectively. The guidance is effective for fiscal years beginning after December 15, 2024, which for us is our fiscal year 2026 beginning on March 31, 2025. Early adoption is permitted. We are currently evaluating the impact that the new guidance will have on our consolidated financial statements. 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. 7 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 June 30, 2024 June 25, 2023 Branded Products $ 26,146 $ 25,170 Company-owned restaurants 4,199 3,658 License royalties 12,921 11,658 Franchise royalties 981 980 Franchise fees 92 95 Advertising fund revenue 428 424 Total revenues $ 44,767 $ 41,985 The following table disaggregates revenues by primary geographical market (in thousands): Thirteen weeks ended June 30, 2024 June 25, 2023 United States $ 43,296 $ 39,882 International 1,471 2,103 Total revenues $ 44,767 $ 41,985 Contract balances The following table provides information about contract liabilities from contracts with customers (in thousands): June 30, 2024 March 31, 2024 Deferred franchise fees (a) $ 1,146 $ 1,226 Deferred revenues, which are included in “Accrued expenses and other current liabilities” (b) $ 723 $ 1,375 (a) 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. (b) 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): Thirteen weeks ended June 30, 2024 June 25, 2023 Deferred franchise fees at beginning of period $ 1,226 $ 1,608 New deferrals due to cash received and other 12 43 Revenue recognized during the period ( 92 ) ( 95 ) Deferred franchise fees at end of period $ 1,146 $ 1,556 Significant changes in deferred revenues are as follows (in thousands): Thirteen weeks ended June 30, 2024 June 25, 2023 Deferred revenues at beginning of period $ 1,375 $ 1,406 Revenue recognized during the period ( 652 ) ( 609 ) Deferred revenues at end of period $ 723 $ 797 8 Anticipated future recognition of deferred franchise fees The following table reflects the estimated franchise fees to be recognized in the future related to performance obligations that are unsatisfied at the end of the period (in thousands): Estimate for fiscal year 2025 (a) $ 246 2026 299 2027 186 2028 95 2029 63 Thereafter 257 Total $ 1,146 (a) 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 $ 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): 2025 2024 Net income $ 9,277 $ 7,388 Common Stock: Weighted average basic shares outstanding 4,085 4,080 Effect of dilutive share-based awards 4 8 Weighted average diluted shares outstanding 4,089 4,088 Net income per share: Basic $ 2.27 $ 1.81 Diluted $ 2.27 $ 1.81 Anti-dilutive share-based awards - 10 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. 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 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. 9 NOTE F – FAIR VALUE MEASUREMENTS Nathan’s follows a three-level fair value hierarchy that prioritizes the inputs to measure fair value. This hierarchy requires entities to maximize the use of “observable inputs” and minimize the use of “unobservable inputs.” The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability on the measurement date. 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 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 Face value Fair value Face Value Fair value Long-term debt $ 60,000 $ 60,101 $ 60,000 $ 59,903 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 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 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): June 30, March 31, 2024 2024 Branded product sales $ 12,964 $ 10,833 Franchise and license royalties 7,170 4,139 Other 799 162 20,933 15,134 Less: allowance for credit losses ( 462 ) ( 403 ) Accounts and other receivables, net $ 20,471 $ 14,731 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. 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. 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 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. 10 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): June 30, 2024 March 31, 2024 Beginning balance $ 403 $ 480 Cumulative effect of adoption of ASU 2016-13 - 252 Provision for expected credit losses 65 157 Write offs and other ( 6 ) ( 486 ) Ending balance $ 462 $ 403 NOTE H – PREPAID EXPENSES AND OTHER CURRENT ASSETS Prepaid expenses and other current assets consist of the following (in thousands): June 30, March 31, 2024 2024 Income taxes $ - $ 858 Real estate taxes 154 93 Deferred financing costs 265 - Insurance 235 268 Marketing 646 562 Other 298 395 Total prepaid expenses and other current assets $ 1,598 $ 2,176 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 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. The Company tests for recoverability of its definite-lived intangible asset based on the projected undiscounted cash flows to be derived from such co-branding agreements. Cash flow projections require significant estimates and assumptions by management. 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 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. Long-lived assets include property, equipment and right-of-use assets for operating leases with finite useful lives. Assets are grouped at the individual restaurant level which represents the lowest level for which cash flows can be identified largely independent of the cash flows of other assets and liabilities. The Company generally considers a history of restaurant operating losses to be its primary indicator of potential impairment for individual restaurant locations. The Company tests for recoverability based on the projected undiscounted cash flows to be derived from such assets. If the projected undiscounted future cash flows are less than the carrying value of the asset, the Company will record on a restaurant-by-restaurant basis, an impairment loss, if any, based on the difference between the estimated fair value and the carrying value of the asset. The Company generally measures fair value by considering discounted estimated future cash flows from such assets. Cash flow projections and fair value estimates require significant estimates and assumptions by management. 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 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. 11 NOTE K – ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Accrued expenses and other current liabilities consist of the following (in thousands): June 30, March 31, 2024 2024 Dividend payable $ 2,043 $ - Payroll and other benefits 1,495 3,522 Accrued rebates 880 693 Rent and occupancy costs 98 78 Deferred revenue 723 1,375 Interest 679 1,676 Professional fees 223 56 Sales, use and other taxes 105 41 Corporate income taxes 2,483 - Other 222 174 Total accrued expenses and other current liabilities $ 8,951 $ 7,615 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. 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 supermarkets, club stores and grocery stores nationwide. The Company’s Chief Executive Officer has been identified as the Chief Operating Decision Maker (“CODM”) who regularly reviews operating results, 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. Certain administrative expenses are not allocated to the segments and are reported within the Corporate segment. 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, 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. Revenues from operating segments are from transactions with unaffiliated third parties and do not include any intersegment revenues. 12 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 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 June 30, 2024 June 25, 2023 Revenues Branded Product Program $ 26,146 $ 25,170 Product licensing 12,921 11,658 Restaurant operations 5,272 4,733 Corporate (1) 428 424 Total revenues $ 44,767 $ 41,985 Income from operations Branded Product Program $ 2,500 $ 1,961 Product licensing 12,875 11,613 Restaurant operations 1,046 669 Corporate ( 2,676 ) ( 2,780 ) Income from operations $ 13,745 $ 11,463 Interest expense ( 1,060 ) ( 1,414 ) Interest and dividend income 78 62 Other income, net 21 21 Income before provision for income taxes $ 12,784 $ 10,132 (1) Represents advertising fund revenue. 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 June 30, 2024 June 25, 2023 Stock options $ 19 $ 8 Restricted stock units 169 169 Total compensation cost $ 188 $ 177 13 Stock options 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: Weighted Weighted Aggregate Average Average Intrinsic Exercise Remaining Value Shares Price Contractual Life (in thousands) Options outstanding at March 31, 2024 20,000 $ 73.25 3.36 $ 23 Granted - - - - Exercised - - - - Options outstanding at June 30, 2024 20,000 $ 73.25 3.11 $ - Options exercisable at June 30, 2024 5,000 $ 68.50 2.11 $ - Restricted stock units Transactions with respect to restricted stock units for the thirteen weeks ended June 30, 2024 are as follows: Weighted Average Grant-date Fair value Shares Per share Unvested restricted stock units at March 31, 2024 40,000 $ 67.59 Granted - $ - Vested - $ - Unvested restricted stock units at June 30, 2024 40,000 $ 67.59 NOTE O – STOCKHOLDERS’ EQUITY 1. Dividends 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. 2. 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 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. Purchases under the Company’s stock repurchase program may be made from time to time, depending on market conditions, in open market or privately negotiated transactions, at prices deemed appropriate by management. There is no set time limit on the repurchases. 14 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 $ 60,000 $ 60,000 Less: unamortized debt issuance costs ( 369 ) ( 438 ) Long-term debt, net $ 59,631 $ 59,562 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 week periods ended June 30, 2024 and June 25, 2023 were as follows (in thousands): Thirteen weeks ended June 30, 2024 June 25, 2023 Operating lease cost $ 441 $ 426 Variable lease cost 460 388 Less: Sublease income, net ( 21 ) ( 21 ) Total net lease cost $ 880 $ 793 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 June 30, 2024 June 25, 2023 Restaurant operating expenses $ 687 $ 615 General and administrative expenses 214 199 Less: Other income, net ( 21 ) ( 21 ) Total net lease cost $ 880 $ 793 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 June 30, 2024 June 25, 2023 Operating cash flows from operating leases $ 412 $ 393 15 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): 4.3 Weighted average discount rate: 8.484 % Future lease commitments to be paid and received by the Company as of June 30, 2024 were as follows (in thousands): Payments Receipts Operating Leases Subleases Net Leases Fiscal year: 2025 (a) $ 1,336 $ 190 $ 1,146 2026 1,923 278 1,645 2027 1,931 281 1,650 2028 1,781 129 1,652 2029 434 118 316 Thereafter 171 376 ( 205 ) Total lease commitments $ 7,576 $ 1,372 $ 6,204 Less: Amount representing interest ( 1,166 ) Present value of lease liabilities (b) $ 6,410 (a) Represents future lease commitments to be paid and received by the Company for the remainder of the 2025 fiscal year. Amount does not include $ 466 of lease commitments paid and received by the Company for the thirteen week period ended June 30, 2024. (b) 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 lease income for the thirteen week periods ended June 30, 2024 and June 25, 2023 were as follows (in thousands): Thirteen weeks ended June 30, 2024 June 25, 2023 Operating lease income, net $ 21 $ 21 NOTE R - COMMITMENTS AND CONTINGENCIES Legal Proceedings The Company and its subsidiaries are from time to time involved in ordinary and routine litigation. Management presently believes that the ultimate outcome of these proceedings, individually or in the aggregate, will not have a material adverse effect on the Company’s financial position, cash flows or results of operations. Nevertheless, litigation is subject to inherent uncertainties and unfavorable rulings could occur. 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. 16 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 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. 17