Item 1. Financial Statements
Item 1. Financial Statements.
Nathan ’ s Famous, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
December 29, 2024 and March 31, 2024
(in thousands, except share and per share amounts)
December 29,
2024
March 31,
2024
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents (Note E)
$
23,711
$
21,027
Accounts and other receivables, net (Note G)
14,744
14,731
Inventories
588
842
Prepaid expenses and other current assets (Note H)
1,112
2,176
Total current assets
40,155
38,776
Property and equipment, net of accumulated depreciation of $ 12,283 and $ 11,687 , respectively
2,243
2,673
Operating lease right-of-use assets (Note Q)
5,220
6,203
Goodwill
95
95
Intangible asset, net (Note I)
565
695
Deferred income taxes
325
275
Other assets
120
141
Total assets
$
48,723
$
48,858
LIABILITIES AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES
Current portion of long-term debt (Note P)
$
2,400
$
-
Accounts payable
4,675
5,744
Accrued expenses and other current liabilities (Note K)
4,349
7,615
Current portion of operating lease liabilities (Note Q)
1,915
1,887
Deferred franchise fees
312
327
Total current liabilities
13,651
15,573
Long-term debt, net of unamortized debt issuance costs of $ 341 and $ 438 , respectively (Note P)
48,659
59,562
Long-term portion of operating lease liabilities (Note Q)
3,809
4,937
Other liabilities
881
810
Deferred franchise fees
714
899
Total liabilities
67,714
81,781
COMMITMENTS AND CONTINGENCIES (Note R)
STOCKHOLDERS’ DEFICIT
Common stock, $ .01 par value; 30,000,000 shares authorized; 9,379,025 and 9,374,130 shares issued; and 4,089,510 and 4,084,615 shares outstanding at December 29, 2024 and March 31, 2024, respectively
94
94
Additional paid-in capital
63,204
62,936
Retained earnings (Accumulated deficit)
4,373
( 9,291
)
Stockholders’ equity before treasury stock
67,671
53,739
Treasury stock, at cost, 5,289,515 shares at December 29, 2024 and March 31, 2024, respectively
( 86,662
)
( 86,662
)
Total stockholders’ deficit
( 18,991
)
( 32,923
)
Total liabilities and stockholders’ deficit
$
48,723
$
48,858
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
-3-
Nathan ’ s Famous, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share amounts)
(Unaudited)
Thirteen weeks ended
Thirty-nine weeks ended
December 29, 2024
December 24, 2023
December 29, 2024
December 24, 2023
REVENUES
Branded Products
$
21,099
$
19,688
$
71,781
$
68,210
Company-owned restaurants
1,804
1,661
11,351
10,512
License royalties
7,105
6,078
29,517
26,075
Franchise fees and royalties
991
955
3,238
3,321
Advertising fund revenue
520
508
1,508
1,501
Total revenues
31,519
28,890
117,395
109,619
COSTS AND EXPENSES
Cost of sales
19,571
17,872
70,841
66,743
Restaurant operating expenses
991
896
3,509
3,279
Depreciation and amortization
235
268
731
896
General and administrative expenses
3,450
4,209
10,677
11,496
Advertising fund expense
520
508
1,508
1,501
Total costs and expenses
24,767
23,753
87,266
83,915
Income from operations
6,752
5,137
30,129
25,704
Interest expense
( 842
)
( 1,392
)
( 3,343
)
( 4,219
)
Loss on debt extinguishment (Note P)
( 55
)
( 169
)
( 389
)
( 169
)
Interest and dividend income
183
138
480
350
Other income, net
21
21
65
65
Income before provision for income taxes
6,059
3,735
26,942
21,731
Provision for income taxes
1,575
1,128
7,151
6,025
Net income
$
4,484
$
2,607
$
19,791
$
15,706
PER SHARE INFORMATION
Weighted average shares used in computing net income per share:
Basic
4,086
4,080
4,085
4,080
Diluted
4,093
4,080
4,092
4,087
Net income per share:
Basic
$
1.10
$
0.64
$
4.84
$
3.85
Diluted
$
1.10
$
0.64
$
4.84
$
3.84
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
-4-
Nathan ’ s Famous, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS ’ DEFICIT
Thirteen weeks ended December 29, 2024 and December 24, 2023
(in thousands, except share and per share amounts)
(Unaudited)
Additional
Total
Common
Common
Paid-in
Retained
Treasury Stock, at Cost
Stockholders’
Shares
Stock
Capital
Earnings
Shares
Amount
Deficit
Balance, September 29, 2024
9,374,130
$
94
$
63,353
$
1,931
5,289,515
$
( 86,662
)
$
( 21,284
)
Shares issued in connection with share-based compensation plans
4,895
-
-
-
-
-
-
Withholding tax on net share settlement of share-based compensation plans
-
-
( 437
)
-
-
-
( 437
)
Dividends on common stock ($ 0.50 per share)
-
-
-
( 2,042
)
-
-
( 2,042
)
Share-based compensation
-
-
288
-
-
-
288
Net income
-
-
-
4,484
-
-
4,484
Balance, December 29, 2024
9,379,025
$
94
$
63,204
$
4,373
5,289,515
$
( 86,662
)
$
( 18,991
)
Additional
Total
Common
Common
Paid-in
Accumulated
Treasury Stock, at Cost
Stockholders’
Shares
Stock
Capital
Deficit
Shares
Amount
Deficit
Balance, September 24, 2023
9,369,235
$
94
$
62,924
$
( 11,727
)
5,289,515
$
( 86,662
)
$
( 35,371
)
Shares issued in connection with share-based compensation plans
4,895
-
-
-
-
-
-
Withholding tax on net share settlement of share-based compensation plans
-
-
( 362
)
-
-
-
( 362
)
Dividends on common stock ($ 0.50 per share)
-
-
-
( 2,040
)
-
-
( 2,040
)
Share-based compensation
-
-
187
-
-
-
187
Net income
-
-
-
2,607
-
-
2,607
Balance, December 24, 2023
9,374,130
$
94
$
62,749
$
( 11,160
)
5,289,515
$
( 86,662
)
$
( 34,979
)
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
-5-
Nathan ’ s Famous, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS ’ DEFICIT
Thirty-nine weeks ended December 29, 2024 and December 24, 2023
(in thousands, except share and per share amounts)
(Unaudited)
Additional
Retained Earnings
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
)
Shares issued in connection with share-based compensation plans
4,895
-
-
-
-
-
-
Withholding tax on net share settlement of share-based compensation plans
-
-
( 437
)
-
-
-
( 437
)
Dividends on common stock ($ 1.50 per share)
-
-
-
( 6,127
)
-
-
( 6,127
)
Share-based compensation
-
-
705
-
-
-
705
Net income
-
-
-
19,791
-
-
19,791
Balance, December 29, 2024
9,379,025
$
94
$
63,204
$
4,373
5,289,515
$
( 86,662
)
$
( 18,991
)
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
)
Shares issued in connection with share-based compensation plans
4,895
-
-
-
-
-
-
Withholding tax on net share settlement of share-based compensation plans
-
-
( 362
)
-
-
-
( 362
)
Dividends on common stock ($ 1.50 per share)
-
-
-
( 6,120
)
-
-
( 6,120
)
Share-based compensation
-
-
546
-
-
-
546
Net income
-
-
-
15,706
-
-
15,706
Balance, December 24, 2023
9,374,130
$
94
$
62,749
$
( 11,160
)
5,289,515
$
( 86,662
)
$
( 34,979
)
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
-6-
Nathan ’ s Famous, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Thirty-nine weeks ended December 29, 2024 and December 24, 2023
(in thousands)
(Unaudited)
December 29,
2024
December 24,
2023
Cash flows from operating activities:
Net income
$
19,791
$
15,706
Adjustments to reconcile net income to net cash provided by operating activities:
Loss on debt extinguishment
389
169
Depreciation and amortization
731
896
Amortization of debt issuance costs
139
276
Share-based compensation expense
705
546
Provision for expected credit losses
53
75
Deferred income taxes
( 50
)
172
Changes in operating assets and liabilities:
Accounts and other receivables, net
( 66
)
1,147
Inventories
254
( 15
)
Prepaid expenses and other current assets
1,064
308
Other assets
21
20
Operating lease assets and liabilities
( 117
)
( 111
)
Accounts payable, accrued expenses and other current liabilities
( 4,335
)
( 5,394
)
Deferred franchise fees
( 200
)
( 256
)
Other liabilities
71
57
Net cash provided by operating activities
18,450
13,596
Cash flows from investing activities:
Purchase of property and equipment
( 171
)
( 243
)
Net cash used in investing activities
( 171
)
( 243
)
Cash flows from financing activities:
Proceeds from Credit Facility
60,000
-
Repayment of Senior Secured Notes
( 60,000
)
( 20,000
)
Repayment of Credit Facility
( 8,600
)
Debt issuance costs
( 431
)
-
Dividends paid to stockholders
( 6,127
)
( 6,120
)
Payments of withholding tax on net share settlement of share-based compensation plans
( 437
)
( 362
)
Net cash used in financing activities
( 15,595
)
( 26,482
)
Net increase (decrease) in cash and cash equivalents
2,684
( 13,129
)
Cash and cash equivalents, beginning of period
21,027
29,861
Cash and cash equivalents, end of period
$
23,711
$
16,732
Cash paid during the period for:
Interest
$
4,727
$
5,477
Income taxes
$
6,263
$
6,149
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
-7-
NATHAN'S FAMOUS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 29, 2024
(in thousands, expect share and per share amounts)
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying condensed 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 29, 2024 and December 24, 2023 have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The unaudited condensed consolidated 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 prepared in accordance with GAAP have been omitted pursuant to the requirements of the U.S. Securities and Exchange Commission (“SEC”).
Certain prior period revenue amounts in the condensed consolidated statements of earnings have been reclassified to conform to the current period presentation. These reclassifications had no effect on previously reported results of operations.
Management believes that the disclosures included in the accompanying condensed 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 all public companies for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after 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 first quarter of fiscal year 2026. Early adoption is permitted. Entities are required to adopt this guidance on a retrospective basis.
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.
-8-
In November 2024, the FASB issued ASU 2024-03, “ Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses ”, which requires the disaggregation of certain expenses in the notes to the financial statements, to provide enhanced transparency into the expense captions presented on the face of the statement of earnings. Additionally, in January 2025, the FASB issued ASU 2025-01, “ Income Statement Reporting Comprehensive Income Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date ”, which clarified the effective date for non-calendar year-end entities such as us. The guidance is effective for the first annual reporting period beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The amendments in this Update should be applied either (1) prospectively to financial statements for reporting periods after the effective date of this Update or (2) retrospectively to any or all prior periods presented in the financial statements. For the Company, annual reporting requirements will be effective for our fiscal year 2028 beginning on March 29, 2027 and interim reporting requirements will be effective beginning with our first quarter of fiscal year 2029. The Company is 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 condensed consolidated financial statements.
NOTE C – REVENUES
The Company’s disaggregated revenues for the thirteen and thirty-nine weeks ended December 29, 2024 and December 24, 2023 are as follows (in thousands):
Thirteen weeks ended
Thirty-nine weeks ended
December 29, 2024
December 24, 2023
December 29, 2024
December 24, 2023
Branded Products
$
21,099
$
19,688
$
71,781
$
68,210
Company-owned restaurants
1,804
1,661
11,351
10,512
License royalties
7,105
6,078
29,517
26,075
Franchise royalties
897
868
2,944
2,996
Franchise fees
94
87
294
325
Advertising fund revenue
520
508
1,508
1,501
Total revenues
$
31,519
$
28,890
$
117,395
$
109,619
The following table disaggregates revenues by primary geographical market (in thousands):
Thirteen weeks ended
Thirty-nine weeks ended
December 29, 2024
December 24, 2023
December 29, 2024
December 24, 2023
United States
$
30,659
$
27,644
$
114,419
$
104,970
International
860
1,246
2,976
4,649
Total revenues
$
31,519
$
28,890
$
117,395
$
109,619
Contract balances
The following table provides information about contract liabilities from contracts with customers (in thousands):
December 29, 2024
March 31, 2024
Deferred franchise fees (a)
$
1,026
$
1,226
Deferred revenues, which are included in
“Accrued expenses and other current liabilities” (b)
$
250
$
1,375
(a)
Deferred franchise fees of $ 312 and $ 714 as of December 29, 2024 and $ 327 and $ 899 as of March 31, 2024 are included in Deferred franchise fees – current and long term, respectively.
(b)
Includes $ 250 of deferred advertising fund revenue as of December 29, 2024 and $ 875 of deferred license royalties and $ 500 of deferred advertising fund revenue as of March 31, 2024.
-9-
Significant changes in deferred franchise fees are as follows (in thousands):
Thirty-nine weeks ended
December 29, 2024
December 24, 2023
Deferred franchise fees at beginning of period
$
1,226
$
1,608
New deferrals due to cash received and other
94
69
Revenue recognized during the period
( 294
)
( 325
)
Deferred franchise fees at end of period
$
1,026
$
1,352
Significant changes in deferred revenues are as follows (in thousands):
Thirty-nine weeks ended
December 29, 2024
December 24, 2023
Deferred revenues at beginning of period
$
1,375
$
1,406
New deferrals due to cash received and other
500
500
Revenue recognized during the period
( 1,625
)
( 1,656
)
Deferred revenues at end of period
$
250
$
250
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)
$
83
2026
304
2027
193
2028
98
2029
66
Thereafter
282
Total
$
1,026
(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 $ 294 of franchise fee revenue recognized for the thirty-nine weeks ended December 29, 2024.
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 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 and restricted stock unit awards.
-10-
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 29, 2024 and December 24, 2023, respectively.
Thirteen weeks ended
Thirty-nine weeks ended
December 29, 2024
December 24, 2023
December 29, 2024
December 24, 2023
Net income
$
4,484
$
2,607
$
19,791
$
15,706
Common Stock:
Weighted average basic shares outstanding
4,086
4,080
4,085
4,080
Effect of dilutive share-based awards
7
-
7
7
Weighted average diluted shares outstanding
4,093
4,080
4,092
4,087
Net income per share:
Basic
$
1.10
$
0.64
$
4.84
$
3.85
Diluted
$
1.10
$
0.64
$
4.84
$
3.84
Anti-dilutive share-based awards
120
20
120
20
NOTE E – CASH AND CASH EQUIVALENTS
The Company considers money market funds or short term investments purchased with an original maturity of three months or less to be cash equivalents. Cash equivalents at December 29, 2024 were $ 16,000 . 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 29, 2024 and March 31, 2024, substantially all of the Company’s cash balances are in excess of insurance limits of the Federal Deposit Insurance Corporation, or the FDIC. The Company has not experienced any losses in such accounts.
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 carrying amounts reported in the Company’s Condensed Consolidated Balance Sheets for cash and cash equivalents, accounts receivable and accounts payable approximate fair value due to the short-term nature of those items.
The carrying amount of our long-term debt (see NOTE P – LONG TERM DEBT) also approximates fair value since such borrowings bear interest at variable market rates and is categorized as Level 2. The face and fair value of the 6.625% Senior Secured Notes due 2025 (“2025 Notes”) as of March 31, 2024 was $ 60,000 and $ 59,903 , respectively, and was based upon review of observable pricing in secondary markets as of March 31, 2024. Accordingly, the Company classified it as Level 2.
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 29, 2024, no fair value adjustment or material fair value measurements were required for non-financial assets or liabilities.
-11-
NOTE G – ACCOUNTS AND OTHER RECEIVABLES, NET
Accounts and other receivables, net, consist of the following (in thousands):
December 29,
March 31,
2024
2024
Branded product sales
$
10,840
$
10,833
Franchise and license royalties
3,805
4,139
Other
540
162
15,185
15,134
Less: allowance for credit losses
( 441
)
( 403
)
Accounts and other receivables, net
$
14,744
$
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.
Changes in the Company’s allowance for credit losses for the thirty-nine week period ended December 29, 2024 and the fiscal year ended March 31, 2024 are as follows (in thousands):
December 29,
2024
March 31,
2024
Beginning balance
$
403
$
480
Cumulative effect of adoption of ASU 2016-13
-
252
Bad debt expense
53
157
Write offs and other
( 15
)
( 486
)
Ending balance
$
441
$
403
NOTE H – PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consist of the following (in thousands):
December 29,
March 31,
2024
2024
Income taxes
$
-
$
858
Real estate taxes
157
93
Insurance
296
268
Marketing
400
562
Other
259
395
Total prepaid expenses and other current assets
$
1,112
$
2,176
-12-
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 and thirty-nine week periods ended December 29, 2024 that would indicate that the carrying amount of the Company’s intangible asset may be impaired as of December 29, 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 and thirty-nine week periods ended December 29, 2024 that would indicate that the carrying amount of the Company’s long-lived assets may be impaired as of December 29, 2024.
NOTE K – ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consist of the following (in thousands):
December 29,
March 31,
2024
2024
Payroll and other benefits
$
2,431
$
3,522
Accrued rebates
1,102
693
Rent and occupancy costs
56
78
Deferred revenue
250
1,375
Interest
153
1,676
Professional fees
140
56
Sales, use and other taxes
52
41
Corporate income taxes
10
-
Other
155
174
Total accrued expenses and other current liabilities
$
4,349
$
7,615
NOTE L – INCOME TAXES
The effective income tax rates for the thirteen weeks ended December 29, 2024 and December 24, 2023 were 26.0 % and 30.2 %, respectively. The effective income tax rate for the thirteen weeks ended December 29, 2024 reflected $ 1,575 of income tax expense recorded on $ 6,059 of pre-tax income. 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.
-13-
The effective income tax rates for the thirty-nine weeks ended December 29, 2024 and December 24, 2023 were 26.5 % and 27.7 %, respectively. The effective income tax rate for the thirty-nine weeks ended December 29, 2024 reflected $ 7,151 of income tax expense recorded on $ 26,942 of pre-tax income. 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 rates for the thirteen and thirty-nine weeks ended December 29, 2024 and December 24, 2023 were higher than the United States statutory income tax rate primarily due to state and local taxes, as well as non-deductible compensation under the Internal Revenue Code Section 162(m).
The amount of unrecognized tax benefits included in Other liabilities at December 29, 2024 and March 31, 2024 was $ 506 and $ 465 , respectively, all of which would impact the Company’s effective tax rate, if recognized. As of December 29, 2024 and March 31, 2024, the Company had approximately $ 392 and $ 345 , respectively, accrued for the payment of 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 primarily 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.
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, compliance costs and the operating results of the Advertising Fund.
Interest expense, loss on debt extinguishment, 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.
-14-
Operating segment information is as follows (in thousands):
Thirteen weeks ended
Thirty-nine weeks ended
December 29, 2024
December 24, 2023
December 29, 2024
December 24, 2023
Revenues
Branded Product Program
$
21,099
$
19,688
$
71,781
$
68,210
Product licensing
7,105
6,078
29,517
26,075
Restaurant operations
2,795
2,616
14,589
13,833
Advertising fund revenue
520
508
1,508
1,501
Total revenues
$
31,519
$
28,890
$
117,395
$
109,619
Income from operations
Branded Product Program
$
2,209
$
2,421
$
5,406
$
5,769
Product licensing
7,059
6,033
29,380
25,939
Restaurant operations
( 86
)
( 308
)
2,741
2,000
Corporate
( 2,430
)
( 3,009
)
( 7,398
)
( 8,004
)
Income from operations
$
6,752
$
5,137
$
30,129
$
25,704
Interest expense
( 842
)
( 1,392
)
( 3,343
)
( 4,219
)
Loss on debt extinguishment
( 55
)
( 169
)
( 389
)
( 169
)
Interest and dividend income
183
138
480
350
Other income, net
21
21
65
65
Income before provision for income taxes
$
6,059
$
3,735
$
26,942
$
21,731
NOTE N – SHARE-BASED COMPENSATION
Total share-based compensation during the thirteen and thirty-nine week periods ended December 29, 2024 and December 24, 2023 was $ 288 and $ 187 , and $ 705 and $ 546 , respectively. Total share-based compensation is included in general and administrative expenses in our accompanying Condensed Consolidated Statements of Earnings. As of December 29, 2024, there was $ 3,569 of unamortized compensation expense related to share-based awards. We expect to recognize this expense over approximately 39 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):
Thirteen weeks ended
Thirty-nine weeks ended
December 29, 2024
December 24, 2023
December 29, 2024
December 24, 2023
Stock options
$
119
$
18
$
198
$
39
Restricted stock units
169
169
507
507
Total compensation cost
$
288
$
187
$
705
$
546
Stock options:
During the thirty-nine week period ended December 29, 2024, the Company granted options to purchase 110,000 shares at an exercise price of $ 74.47 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 19, 2024.
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 29, 2024 are as follows:
Weighted average option fair values
$
14.67
Expected life (years)
4.4
Interest rate
3.75
%
Volatility
24.50
%
Dividend yield
2.69
%
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.
-15-
Transactions with respect to stock options for the thirty-nine weeks ended December 29, 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
110,000
$
74.47
4.64
-
Exercised
-
-
-
-
Options outstanding at December 29, 2024
130,000
$
74.28
4.33
$
608
Options exercisable at December 29, 2024
10,000
$
70.88
2.11
$
81
Restricted stock units:
Transactions with respect to restricted stock units for the thirty-nine weeks ended December 29, 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
( 10,000
)
$
67.59
Unvested restricted stock units at December 29, 2024
30,000
$
67.59
NOTE O– STOCKHOLDERS’ EQUITY
1. Dividends
On July 2, 2024, September 6, 2024 and December 6, 2024, the Company paid quarterly dividends of $ 0.50 per share. Through December 29, 2024, the Company paid quarterly dividends aggregating $ 6,127 .
Effective February 6, 2025 , the Board of Directors (the “Board”) declared its fourth quarterly cash dividend of $ 0.50 per share for fiscal 2025 payable on February 28, 2025 to stockholders of record as of the close of business on February 18, 2025 .
Our ability to pay future dividends is limited by the terms of our Credit Agreement (as defined in NOTE P – LONG TERM DEBT). In addition to the terms of our Credit Agreement, 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 Program
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 29, 2024, Nathan’s had repurchased 1,101,884 shares at a cost of $ 39,000 under the sixth stock repurchase plan. At December 29, 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.
-16-
NOTE P – LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
December 29, 2024
March 31, 2024
6.625 % Senior Secured Notes due 2025
$
-
$
60,000
SOFR Term Loan Borrowings with an effective interest rate of 5.946 %
51,400
-
Total debt
51,400
60,000
Less: Unamortized debt issuance costs
( 341
)
( 438
)
Total debt, net of debt issuance costs
51,059
59,562
Less: Current portion of long-term debt
( 2,400
)
-
Long-term debt, net
$
48,659
$
59,562
The Company’s mandatory debt principal repayments as of December 29, 2024 were as follows (in thousands):
Fiscal Year
Amount
Remainder of 2025
$
600
2026
2,400
2027
2,400
2028
2,400
2029
2,400
2030
41,200
Total
$
51,400
Total debt repayments for the remainder of 2025 through 2030 exceed the total carrying amount of the Company’s debt as of December 29, 2024 because the carrying amount reflects the unamortized portion of debt issuance costs.
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 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 2025 Notes. The Company will use any Revolving Loan borrowings under the Credit Agreement for working capital and general corporate purposes. As of December 29, 2024, there were no outstanding borrowings under the Revolving Loan.
In connection with the refinancing, the Company recorded a loss on extinguishment of debt of $ 334 that reflected the write-off of the remainder of the debt issuance costs on the 2025 Notes. Additionally, in connection with the refinancing, the Company incurred $ 431 of debt issuance costs on the Term Loan borrowings that were capitalized and will be amortized over the term of the Credit Agreement.
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 of 0.00 % or (b) for Term SOFR Loans, Term SOFR plus the Applicable Rate of 1.40 % for one (1), three (3) or six (6) month periods, as selected by the Company in its Loan Notice. 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 interest rate on the Term Loan borrowings at December 29, 2024 was 5.946 %.
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, as of the end of each fiscal quarter. The Company was in compliance with the covenants of the Credit Agreement at December 29, 2024.
-17-
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, with the balance payable on the final maturity date.
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.
On October 10, 2024, the Company made a voluntary principal prepayment of $ 8,000 of its Term Loan borrowings and incurred a loss on debt extinguishment of approximately $ 55 in the third quarter of fiscal 2025 related to the write-off of a portion of previously recorded debt issuance costs on the Term Loan borrowings.
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 29, 2024 and December 24, 2023 were as follows (in thousands):
Thirteen weeks ended
Thirty-nine weeks ended
December 29, 2024
December 24, 2023
December 29, 2024
December 24, 2023
Operating lease cost
$
392
$
389
$
1,253
$
1,238
Variable lease cost
470
424
1,568
1,311
Less: Sublease income, net
( 21
)
( 21
)
( 63
)
( 65
)
Total net lease cost
$
841
$
792
$
2,758
$
2,484
The following table presents the components of the net lease cost on the Condensed Consolidated Statements of Earnings for the thirteen and thirty-nine week periods ended December 29, 2024 and December 24, 2023 (in thousands):
Thirteen weeks ended
Thirty-nine weeks ended
December 29, 2024
December 24, 2023
December 29, 2024
December 24, 2023
Restaurant operating expenses
$
659
$
613
$
2,207
$
1,960
General and administrative expenses
203
200
614
589
Less: Other income, net
( 21
)
( 21
)
( 63
)
( 65
)
Total net lease cost
$
841
$
792
$
2,758
$
2,484
Cash paid for amounts included in the measurement of lease liabilities for the thirteen and thirty-nine week periods ended December 29, 2024 and December 24, 2023 were as follows (in thousands):
Thirteen weeks ended
Thirty-nine weeks ended
December 29, 2024
December 24, 2023
December 29, 2024
December 24, 2023
Operating cash flows from operating leases
$
267
$
234
$
1,099
$
1,019
-18-
The weighted average remaining lease term and weighted average discount rate for operating leases as of December 29, 2024 were as follows:
Weighted average remaining lease term (years):
3.8
Weighted average discount rate:
8.482
%
Future lease commitments to be paid and received by the Company as of December 29, 2024 were as follows (in thousands):
Payments
Receipts
Operating Leases
Subleases
Net Leases
Fiscal year:
2025 (a)
$
392
$
42
$
350
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
$
6,632
$
1,224
$
5,408
Less: Amount representing interest
( 908
)
Present value of lease liabilities (b)
$
5,724
(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 $ 1,255 of lease commitments paid and received by the Company for the thirty-nine week period ended December 29, 2024.
(b)
The present value of minimum operating lease payments of $ 1,915 and $ 3,809 are included in “Current portion of operating lease liabilities” and “Long-term operating lease liabilities,” respectively on the Condensed Consolidated Balance Sheets.
Company as lessor
The components of net lease income for the thirteen and thirty-nine week periods ended December 29, 2024 and December 24, 2023 were as follows (in thousands):
Thirteen weeks ended
Thirty-nine weeks ended
December 29, 2024
December 24, 2023
December 29, 2024
December 24, 2023
Operating lease income, net
$
21
$
21
$
63
$
65
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 – SUBSEQUENT EVENTS
The Company evaluated subsequent events through the date the condensed consolidated financial statements were issued and filed with the SEC. There were no subsequent events that required recognition or disclosure.
-19-
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.