FORM 10-Q

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

(Mark One)

 

[X]

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

  For the quarterly period ended December 23, 2018.

OR

[   ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT of 1934

  For the transition period from                            to                           .

 

Commission File No. 001-35962

 

NATHAN'S FAMOUS, INC.

(Exact name of registrant as specified in its charter)

 

                        Delaware                         

               11-3166443              

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

 

One Jericho Plaza, Second Floor – Wing A, Jericho, New York 11753

(Address of principal executive offices)

(Zip Code)

 

(516) 338-8500

(Registrant's telephone number, including area code)

 

                                                                                                                                                     

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X   No __

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes X No __

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check One):

 

Large accelerated filer           Accelerated filer       X  
Non-accelerated filer            
Smaller reporting company       X   Emerging growth company          

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ___

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes __ No X

 

At February 1, 2019, an aggregate of 4,177,179 shares of the registrant's common stock, par value of $.01, were outstanding.

 

-1-

 
 

 

 

NATHAN'S FAMOUS, INC. AND SUBSIDIARIES

 

INDEX

 

   

Page

Number

     
PART I.  FINANCIAL INFORMATION  
     
Item 1. Financial Statements. 3
     
  Consolidated Financial Statements  
  Consolidated Balance Sheets – December 23, 2018 (Unaudited) and March 25, 2018  3
     
  Consolidated Statements of Earnings (Unaudited) – Thirteen and Thirty-nine Weeks Ended December 23, 2018 and December 24, 2017 4
     
  Consolidated Statement of Stockholders’ (Deficit) (Unaudited) – Thirty-nine Weeks Ended December 23, 2018 5
     
  Consolidated Statements of Cash Flows (Unaudited) – Thirty-nine Weeks Ended December 23, 2018 and December 24, 2017   6
     
  Notes to Consolidated Financial Statements 7
     
Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations. 22
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk.  33
     
Item 4. Controls and Procedures. 34
     
PART II. OTHER INFORMATION  
     
Item 1. Legal Proceedings. 35
     
Item 1A.  Risk Factors. 35
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 35
     
Item 3. Defaults Upon Senior Securities.  35
     
Item 4.  Mine Safety Disclosures. 35
     
Item 5. Other Information.  35
     
Item 6. Exhibits. 36
     
SIGNATURES 37
     
Exhibit Index  38

 

-2-

 

 

 

Nathan’s Famous, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

December 23, 2018 and March 25, 2018

(in thousands, except share and per share amounts)

 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

 

 

December 23,

2018

   

March 25,

2018

 
   

(Unaudited)

         
ASSETS                
                 

CURRENT ASSETS

               

Cash and cash equivalents

  $ 72,832     $ 57,339  

Accounts and other receivables, net (Note F)

    9,589       10,502  

Inventories

    482       384  

Prepaid expenses and other current assets (Note G)

    603       2,873  

Assets held for sale (Note H)

    -       610  

Total current assets

    83,506       71,708  
                 

Property and equipment, net of accumulated depreciation of $8,963 and $8,264, respectively

    5,018       6,642  

Goodwill

    95       95  

Intangible asset

    1,353       1,353  

Deferred income taxes

    456       -  

Long term contractual accounts receivable

    400       -  

Other assets

    341       293  
                 

Total assets

  $ 91,169     $ 80,091  
                 

LIABILITIES AND STOCKHOLDERS’ (DEFICIT)

               
                 

CURRENT LIABILITIES

               

Accounts payable

  $ 3,839     $ 6,565  

Accrued expenses and other current liabilities (Note I)

    8,675       11,248  

Deferred franchise fees

    319       193  

Total current liabilities

    12,833       18,006  
                 

Long-term debt, net of unamortized debt issuance costs of $4,724 and $5,242, respectively (Note O)

    145,276       144,758  

Other liabilities (Note I)

    1,377       1,355  

Deferred franchise fees

    3,300       238  

Deferred income taxes

    -       302  
                 

Total liabilities

    162,786       164,659  
                 

COMMITMENTS AND CONTINGENCIES (Note P)

               
                 

STOCKHOLDERS’ (DEFICIT)

               

Common stock, $.01 par value; 30,000,000 shares authorized; 9,318,942 and 9,311,922 shares issued; and 4,177,179 and 4,184,549 shares outstanding at December 23, 2018 and March 25, 2018, respectively

    93       93  

Additional paid-in capital

    60,916       60,823  

(Accumulated deficit)

    (54,323 )     (68,181 )

Stockholders’ equity (deficit) before treasury stock

    6,686       (7,265 )
                 

Treasury stock, at cost, 5,141,763 and 5,127,373 shares at December 23, 2018 and March 25, 2018

    (78,303 )     (77,303 )

Total stockholders’ (deficit)

    (71,617 )     (84,568 )
                 

Total liabilities and stockholders’ (deficit)

  $ 91,169     $ 80,091  

 

 

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

 

-3-

 

 

Nathan’s Famous, Inc. and Subsidiaries

 

CONSOLIDATED STATEMENTS OF EARNINGS

Thirteen and Thirty-nine weeks ended December 23, 2018 and December 24, 2017

(in thousands, except share and per share amounts)

(Unaudited)

 

    Thirteen weeks ended     Thirty-nine weeks ended  
   

December 23,

2018

   

December 24,

2017

   

December 23,

2018

   

December 24,

2017

 
                                 

REVENUES

                               

Sales

  $ 14,404     $ 16,705     $ 56,448     $ 63,327  

License royalties

    4,316       4,228       18,160       17,393  

Franchise fees and royalties

    911       1,088       3,254       3,575  

Advertising fund revenue (Note B)

    591       -       1,858       -  

Total revenues

    20,222       22,021       79,720       84,295  
                                 

COSTS AND EXPENSES

                               

Cost of sales

    10,660       12,537       41,266       47,853  

Restaurant operating expenses

    766       760       2,817       2,769  

Depreciation and amortization

    278       320       962       1,055  

General and administrative expenses

    3,031       3,034       10,354       10,064  

Advertising fund expense (Note B)

    591       -       1,858       -  

Total costs and expenses

    15,326       16,651       57,257       61,741  
                                 

Income from operations

    4,896       5,370       22,463       22,554  
                                 
Gain on sale of property and equipment     10,821       -       11,177       -  

Loss on debt extinguishment

    -       (8,872 )     -       (8,872 )

Interest expense

    (2,650 )     (3,650 )     (7,951 )     (10,976 )

Interest income

    277       44       453       114  

Other income, net

    5       22       189       64  
                                 

Income (loss) before provision (benefit) for income taxes

    13,349       (7,086 )     26,331       2,884  

Provision (benefit) for income taxes

    3,627       (3,307 )     7,330       621  

Net income (loss)

  $ 9,722     $ (3,779 )   $ 19,001     $ 2,263  
                                 

PER SHARE INFORMATION

                               

Weighted average shares used in computing income per share:

                               

Basic

    4,187,000       4,185,000       4,187,000       4,180,000  

Diluted

    4,221,000       4,185,000       4,226,000       4,219,000  
                                 

Income (loss) per share:

                               

Basic

  $ 2.32     $ ( 0.90 )   $ 4.54     $ 0.54  

Diluted

  $ 2.30     $ ( 0.90 )   $ 4.50     $ 0.54  
                                 

Dividends declared per share

  $ 0.25     $ 5.00     $ 0.75     $ 5.00  

 

 

 

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

 

-4-

 

 

Nathan’s Famous, Inc. and Subsidiaries

 

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ (DEFICIT)

Thirty-nine weeks ended December 23, 2018

(in thousands, except share amounts)

(Unaudited)

 

                   

Additional

                           

Total

 
   

Common

   

Common

   

Paid-in

   

(Accumulated

   

Treasury Stock, at Cost

   

Stockholders’

 
   

Shares

   

Stock

   

Capital

   

Deficit)

   

Shares

   

Amount

   

(Deficit)

 
                                                         

Balance, March 25, 2018

    9,311,922     $ 93     $ 60,823     $ (68,181 )     5,127,373     $ (77,303 )   $ (84,568 )
                                                         

Cumulative effect of the adoption of ASC 606

    -       -       -       (2,004 )     -       -       (2,004 )
                                                         

Shares issued in connection with share-based compensation plans

    7,020       -       134       -       -       -       134  
                                                         

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

    -       -       (174 )     -       -       -       (174 )
                                                         

Repurchase of common stock

    -       -       -       -       14,390       (1,000 )     (1,000 )
                                                         

Dividends on common stock

    -       -       -       (3,139 )     -       -       (3,139 )
                                                         

Share-based compensation

    -       -       133       -       -       -       133  
                                                         

Net income

    -       -       -       19,001       -       -       19,001  

Balance, December 23, 2018

    9,318,942     $ 93     $ 60,916     $ (54,323 )     5,141,763     $ (78,303 )   $ (71,617 )

                 

 

 

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

 

-5-

 

 

Nathan’s Famous, Inc. and Subsidiaries

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

Thirty-nine weeks ended December 23, 2018 and December 24, 2017

(in thousands)

(Unaudited)

 

   

December 23,

2018

   

December 24,

2017

 

Cash flows from operating activities:

               

Net income

  $ 19,001     $ 2,263  

Adjustments to reconcile net income to net cash provided by operating activities

               

Loss on debt extinguishment

    -       8,872  

Depreciation and amortization

    962       1,055  

Gain on sale of property and equipment

    (11,177 )     -  

Amortization of debt issuance costs

    518       932  

Share-based compensation expense

    133       298  

Income tax benefit on stock option exercises

    47       194  

Provision for doubtful accounts

    48       42  

Deferred income taxes

    (27 )     (63 )

Changes in operating assets and liabilities:

               

Accounts and other receivables, net

    865       (2,967 )

Inventories

    (98 )     173  

Prepaid expenses and other current assets

    2,270       (2,259 )

Long term contractual accounts receivable

    (400 )     -  

Other assets

    (48 )     5  

Accounts payable, accrued expenses and other current liabilities

    (5,196 )     (779 )

Deferred franchise fees

    453       100  

Other liabilities

    22       (71 )
                 

Net cash provided by operating activities

    7,373       7,795  
                 

Cash flows from investing activities:

               

Proceeds from disposal of property and equipment

    12,775       -  

Purchase of property and equipment

    (326 )     (488 )
                 

Net cash provided by (used in) investing activities

    12,449       (488 )
                 

Cash flows from financing activities:

               

Proceeds from issuance of long-term debt

    -       150,000  

Cash payments for extinguishment of debt

    -       (135,000 )

Premium paid on extinguishment of debt

    -       (6,750 )

Debt issuance costs

    -       (4,902 )

Proceeds from exercise of stock options

    134       -  

Dividends paid to stockholders

    (3,289 )     (125 )

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

    (174 )     (157 )

Repurchase of treasury stock

    (1,000 )     -  
                 

Net cash (used in) provided by financing activities

    (4,329 )     3,066  
                 

Net increase in cash and cash equivalents

    15,493       10,373  
                 

Cash and cash equivalents beginning of period

    57,339       56,915  
                 

Cash and cash equivalents, end of period

  $ 72,832     $ 67,288  
                 

Cash paid during the period for:

               

Interest

  $ 9,936     $ 9,038  

Income taxes paid

  $ 2,658     $ 3,447  
                 

Noncash financing activity:

               

Dividends declared

  $ -     $ 20,948  

 

 

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

 

-6-

 

 

NATHAN'S FAMOUS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 23, 2018

(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 and thirty-nine week periods ended December 23, 2018 and December 24, 2017 have been prepared in accordance with accounting principles generally accepted in the United States of America. The unaudited financial statements include all adjustments (consisting of normal recurring adjustments) which, in the opinion of management, are necessary for a fair presentation of financial condition, results of operations and cash flows for the periods presented. However, our results of operations are seasonal in nature, and the results of any interim period are not necessarily indicative of results for any other interim period or the full fiscal year.

 

Certain information and footnote disclosures normally included in financial statements in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to the requirements of the Securities and Exchange Commission. We have reclassified certain prior period items in the Consolidated Balance Sheet as of March 25, 2018 and the Statement of Earnings for the thirteen and thirty-nine week periods ended December 24, 2017 to be comparable with the classifications as of and for the thirteen and thirty-nine week periods ended December 23, 2018. These reclassifications had no effect on previously reported total assets, total liabilities, stockholders’ deficit or net income (loss). 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 25, 2018.

 

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 25, 2018.

 

Effective March 26, 2018, the Company adopted Accounting Standards Codification 606, “Revenue Recognition – Revenue from Contracts with Customers” (“ASC 606”). There have been no other significant changes to the Company’s significant accounting policies subsequent to March 25, 2018.

 

 

NOTE B – ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS

 

Revenue recognition

 

In May 2014, the Financial Accounting Standards Board (“FASB”) issued guidance codified in ASC 606 which amends the guidance in former ASC 605, “Revenue Recognition.” The core principle of the standard is to recognize revenue when control of the promised goods or services is transferred to customers in an amount that reflects the consideration expected to be received for those goods or services. The standard also requires additional disclosures around the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.

 

This adoption of the new standard did not impact the Company’s recognition of sales from Company-operated restaurants as those sales are recognized on a cash basis at the time of the underlying sale and are presented net of sales tax. The standard also did not impact the recognition of sales from its Branded Product Program or its recognition of royalty income earned from its franchised restaurants or retail licenses, which are based on a percent of sales and recognized at the time the underlying sales occur.

 

The details of the significant changes in revenue recognition and quantitative impact of the changes are discussed below.

 

Franchise fees and international development fees

 

Under previous revenue recognition guidance, franchise fees were recognized as income when substantially all services to be performed by Nathan’s and conditions relating to the sale of the franchise had been performed or satisfied, which generally occurred when the franchised restaurant commenced operations.

 

Under previous revenue recognition guidance, international development fees were recognized as income, net of direct expenses, upon the opening of the first restaurant within the territory.

 

Under the new guidance, the standard requires that the transaction price received from customers be allocated to each separate and distinct performance obligation. The transaction price attributable to each separate and distinct performance obligation is then recognized as the performance obligations are satisfied. The services that we provide related to upfront fees we receive from franchisees do not contain separate and distinct performance obligations from the franchise right and as of March 26, 2018, initial restaurant franchise fees, renewal fees, transfer fees, and international development fees shall be recognized over the term of the respective agreement.

 

-7-

 

 

National advertising fund

 

The Company maintains a national advertising fund (the “Advertising Fund”) established to collect and administer funds contributed for use in advertising and promotional programs for Company-operated and franchised restaurants. Previously, the revenue, expenses and cash flows of the Advertising Fund were reported on the Company’s Consolidated Balance Sheets and not included in the Company’s Consolidated Statements of Earnings and Statements of Cash Flows because the contributions to the Advertising Fund were designated for specific purposes and the Company acted as an agent, in substance, with regard to these contributions as a result of industry-specific guidance.

 

Under the new guidance, which supersedes the previous industry-specific guidance, the revenue, expenses and cash flows of the Advertising Fund are fully consolidated into the Company’s Consolidated Statements of Earnings and Statements of Cash Flows.

 

While this treatment will impact the gross amount of reported advertising fund revenue and related expenses, the impact is expected to be an offsetting increase to both revenue and expense with no impact to income from operations or net income because the Company attempts to manage the Advertising Fund to breakeven over the course of the fiscal year. However, any surplus or deficit in the Advertising Fund will impact income from operations and net income.

 

The Company applied the new guidance using the modified retrospective method, whereby the cumulative effect of initially adopting the guidance was recognized as an adjustment to the opening balance of accumulated deficit at March 26, 2018 in the amount of $2,004,000, net of tax. Therefore, the results of operations from the comparative period have not been adjusted and continue to be reported under the previous revenue recognition guidance.

 

Impacts on Consolidated Financial Statements

 

The following tables summarize the impact of adopting ASC 606 on the Company’s condensed consolidated financial statements as of and for the thirteen and thirty-nine weeks ended December 23, 2018 (in thousands):

       

           

Adjustments

         
   

 

As

Reported

   

 

Franchise

Fees

   

Balance

Sheet

Reclassi-

fications

   

Balances

Without

Adoption

 

Condensed Consolidated Balance Sheet

                               

December 23, 2018

                               

Deferred income taxes

    456       (731 )     275       -  

Total assets

    91,169       (731 )     275       90,713  

Accrued expenses and other current liabilities

    8,675       (150 )     -       8,525  

Deferred franchise fees

    319       (378 )     376       317  

Total current liabilities

    12,833       (528 )     376       12,681  

Deferred income taxes

    -       -       275       275  

Deferred franchise fees

    3,300       (2,112 )     (376 )     812  

Total liabilities

    162,786       (2,640 )     275       160,421  

(Accumulated deficit)

    (54,323 )     1,909       -       (52,414 )

Stockholders’ equity before treasury stock

    6,686       1,909       -       8,595  

Total stockholders’ (deficit)

    (71,617 )     1,909       -       (69,708 )

Total liabilities and stockholders’ (deficit)

    91,169       (731 )     275       90,713  

 

-8-

 

 

           

Adjustments

         
   

 

As

Reported

   

 

Franchise

Fees

   

Balance

Sheet

Reclassi-

fications

   

Balances

Without

Adoption

 

Condensed Consolidated Statement of Earnings

                               

Thirteen weeks ended December 23, 2018

                               

Franchise fees and royalties

    911       (107 )     -       804  

Advertising fund revenue

    591       -       (591 )     -  

Total revenues

    20,222       (107 )     (591 )     19,524  

General and administrative expenses

    3,031       (12 )     -       3,019  

Advertising fund expense

    591       -       (591 )     -  

Total costs and expenses

    15,326       (12 )     (591 )     14,723  

Income from operations

    4,896       (95 )     -       4,801  

Income before provision for income taxes

    13,349       (95 )     -       13,254  

Provision for income taxes

    3,627       (26 )     -       3,601  

Net income

    9,722       (69 )     -       9,653  
                                 

Condensed Consolidated Statement of Earnings

                               

Thirty-nine weeks ended December 23, 2018

                               

Franchise fees and royalties

    3,254       (245 )     -       3,009  

Advertising fund revenue

    1,858       -       (1,858 )     -  

Total revenues

    79,720       (245 )     (1,858 )     77,617  

General and administrative expenses

    10,354       (110 )     -       10,244  

Advertising fund expense

    1,858       -       (1,858 )     -  

Total costs and expenses

    57,257       (110 )     (1,858 )     55,289  

Income from operations

    22,463       (135 )     -       22,328  

Income before provision for income taxes

    26,331       (135 )     -       26,196  

Provision for income taxes

    7,330       (40 )     -       7,290  

Net income

    19,001       (95 )     -       18,906  

 

           

Adjustments

         
   

 

As

Reported

   

 

Franchise

Fees

   

 

Advertising

Fund

   

Balances

Without

Adoption

 

Condensed Consolidated Statement of Cash Flows

                               

Thirty-nine weeks ended December 23, 2018

                               

Cash flows from operating activities:

                               

Net income

    19,001       (95 )     -       18,906  

Changes in operating assets and liabilities:

                               

Accounts payable, accrued expenses and other current liabilities

    (5,196 )     (150 )     -       (5,346 )

Deferred franchise fees

    453       245       -       698  

Net cash provided by operating activities

    7,373       -       -       7,373  

Net cash provided by investing activities

    12,449       -       -       12,449  

Net cash (used in) financing activities

    (4,329 )     -       -       (4,329 )

Net increase in cash and cash equivalents

    15,493       -       -       15,493  

 

 

 

Contract balances

 

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

 

   

December 23, 2018

 

Receivables (a)

  $ 480  

Deferred franchise fees (b)

  $ 3,076  

 

 

(a)

Receivables of $80 and $400 are included in Accounts and other receivables, net and Long term contractual accounts receivable, respectively.

 

(b)

Deferred franchise fees of $319 and $2,757 are included in Deferred franchise fees – current and long term, respectively.

 

-9-

 

 

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

 

   

Thirty-nine Weeks Ended

 
   

December 23, 2018

 

Deferred franchise fees at beginning of period (a)

  $ 3,139  

Additions to deferred revenue

    830  

Revenue recognized during the period

    (350 )

Deferred franchise fees at end of period

  $ 3,619  

 

 

(a)

Includes the cumulative effect of adopting ASC 606 of $2,735.

 

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

 

2019 (a)

  $ 80  

2020

    318  

2021

    309  

2022

    299  

2023

    259  

Thereafter

    2,354  

Total

  $ 3,619  

 

 

(a)

Represents franchise fees expected to be recognized for the remainder of the 2019 fiscal year, which includes international development fees expected to be recognized over the duration of one year or less. Amount does not include $350 of franchise fee revenue recognized for the thirty-nine weeks ended December 23, 2018.

 

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

 

 

NOTE C – NEW ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED   

 

In June 2016, the FASB issued new guidance on the measurement of credit losses, which significantly changes the impairment model for most financial instruments. Current guidance requires the recognition of credit losses based on an incurred loss impairment methodology that reflects losses once the losses are probable. Under the new standard, the Company will be required to use a current expected credit loss model (“CECL”) that will immediately recognize an estimate of credit losses that are expected to occur over the life of the financial instruments that are in the scope of this update, including trade receivables. The CECL model uses a broader range of reasonable and supportable information in the development of credit loss estimates. This guidance is effective for public business entities for annual reporting periods beginning after December 15, 2019. This standard is required to take effect in Nathan’s first quarter (June 2020) of our fiscal year ending March 28, 2021. The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements and related disclosures.

 

In February 2016, the FASB issued new guidance on leases, which outlines principles for the recognition, measurement, presentation and disclosure of leases applicable to both lessors and lessees. The new standard is effective for annual reporting periods beginning after December 15, 2018, including interim reporting periods within those annual reporting periods. The standard is required to take effect in Nathan’s first quarter (June 2019) of our fiscal year ending March 29, 2020. The new guidance requires lessees to recognize on the balance sheet the assets and liabilities for the rights and obligations created by finance and operating leases with lease terms of more than 12 months. The guidance requires either a modified retrospective transition approach with application in all comparative periods presented, or an alternative transition method, which permits a company to use its effective date as the date of initial application without restating comparative period financial statements and recognizing a cumulative effect adjustment to the opening balance sheet of accumulated deficit at April 1, 2019. The new guidance also provides several practical expedients and policies that companies may elect under either transition method. We currently expect to apply the alternative transition method and elect the package of practical expedients under which we will not reassess the classification of our existing leases, reevaluate whether any expired or existing contracts are or contain leases or reassess initial direct costs under the new guidance. We do not expect to elect the practical expedient that permits a reassessment of lease terms for existing leases and are continuing to evaluate other practical expedients and elections specified in the new guidance. Progress implementing the new standard to date includes completing an initial scoping analysis and data gathering process for our current lease portfolio. We are finalizing the review of information for completeness of the lease portfolio, analyzing the financial statement impact of adopting the standards, and evaluating the impact of adoption on our existing accounting policies and disclosures. As of December 23, 2018, there were $10,043,000 in future minimum rental payments for operating leases that are not currently recorded on our balance sheet; therefore, we expect this new guidance will have a material impact on our consolidated balance sheets and related disclosures. We do not expect the adoption of this guidance to have a material impact on our consolidated statements of earnings and statement of cash flows.

 

-10-

 

 

In January 2017, the FASB issued an update to the accounting guidance to simplify the testing for goodwill impairment. The update removes the requirement to determine the implied fair value of goodwill to measure the amount of impairment loss, if any, under the second step of the current goodwill impairment test. A company will perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. A goodwill impairment charge will be recognized for the amount by which the reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of the goodwill. The guidance is effective prospectively for public business entities for annual reporting periods beginning after December 15, 2019. This standard is required to take effect in Nathan’s first quarter (June 2020) of our fiscal year ending March 28, 2021. Nathan’s does not expect the adoption of this new guidance to have a material impact on its results of operations or financial position.

 

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

 

 

NOTE D – INCOME PER SHARE

 

Basic income per common share is calculated by dividing income by the weighted-average number of common shares outstanding and excludes any dilutive effect of stock options. Diluted income per common share gives effect to all potentially dilutive common shares that were outstanding during the period. Dilutive common shares used in the computation of diluted income per common share result from the assumed exercise of stock options and warrants, as determined using the treasury stock method.

 

The following chart provides a reconciliation of information used in calculating the per-share amounts for the thirteen and thirty-nine week periods ended December 23, 2018 and December 24, 2017, respectively.

 

Thirteen weeks

                                               
                                   

Net Income (Loss)

 
   

Net Income (Loss)

   

Number of Shares

   

Per Share

 
   

2018

   

2017

   

2018

   

2017

   

2018

   

2017

 
   

(in thousands)

   

(in thousands)

                 

Basic EPS

                                               

Basic calculation

  $ 9,722     $ (3,779 )     4,187       4,185     $ 2.32     $ ( 0.90 )

Effect of dilutive employee stock options

    -       -       34       -       (0.02 )     -  

Diluted EPS

                                               

Diluted calculation

  $ 9,722     $ (3,779 )     4,221       4,185     $ 2.30     $ ( 0.90 )

 

Thirty-nine weeks

                                               
                                   

Net Income

 
   

Net Income

   

Number of Shares

   

Per Share

 
   

2018

   

2017

   

2018

   

2017

   

2018

   

2017

 
   

(in thousands)

   

(in thousands)

                 

Basic EPS

                                               

Basic calculation

  $ 19,001     $ 2,263       4,187       4,180     $ 4.54     $ 0.54  

Effect of dilutive employee stock options

    -       -       39       39       (0.04 )     -  

Diluted EPS

                                               

Diluted calculation

  $ 19,001     $ 2,263       4,226       4,219     $ 4.50     $ 0.54  

 

Options to purchase 10,000 shares of common stock in the thirteen and thirty-nine week periods ended December 23, 2018 were not included in the computation of diluted EPS because the exercise price exceeded the average market price of common shares during the periods.

 

 

NOTE E – 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

 

-11-

 

 

●     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 Company’s long-term debt had a face value of $150,000,000 as of December 23, 2018 and a fair value of $147,000,000 as of December 23, 2018. 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, which we classify 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.

 

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 23, 2018, no fair value adjustment or material fair value measurements were required for non-financial assets or liabilities.

 

 

NOTE F – ACCOUNTS AND OTHER RECEIVABLES, NET          

 

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

 

   

December 23,

   

March 25,

 
   

2018

   

2018

 
                 

Branded product sales

  $ 6,641     $ 7,604  

Franchise and license royalties

    2,367       2,767  

Other

    1,141       599  
      10,149       10,970  
                 

Less: allowance for doubtful accounts

    560       468  

Accounts and other receivables, net

  $ 9,589     $ 10,502  

 

Accounts receivable are due within 30 days and are stated at amounts due from franchisees, retail licensees and Branded Product Program customers, net of an allowance for doubtful accounts. Accounts that are outstanding longer than the contractual payment terms are generally considered past due. The Company does not recognize franchise and license royalties that are not deemed to be realizable.

 

The Company individually reviews each past due account and determines its allowance for doubtful accounts by considering a number of factors, including the length of time accounts receivable are past due, the Company’s previous loss history, the customer’s current and expected future ability to pay its obligation to the Company, the condition of the general economy and the industry as a whole. Based on management’s assessment, the Company provides for estimated uncollectible amounts through a charge to earnings. After the Company has used reasonable collection efforts, it writes off accounts receivable through a charge to the allowance for doubtful accounts.

 

Changes in the Company’s allowance for doubtful accounts for the thirty-nine week period ended December 23, 2018 and the fiscal year ended March 25, 2018 are as follows (in thousands): 

 

   

December 23,

2018

   

March 25,

2018

 
                 

Beginning balance

  $ 468     $ 457  

Reclassification to conform with ASC 606

    77       -  

Bad debt expense

    48       34  

Accounts written off

    (33 )     (23 )

Ending balance

  $ 560     $ 468  

 

-12-

 

 

 

NOTE G – PREPAID EXPENSES AND OTHER CURRENT ASSETS

 

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

 

   

December 23,

   

March 25,

 
   

2018

   

2018

 
                 

Income taxes

  $ -     $ 1,624  

Insurance

    213       266  

Other

    390       983  

Total prepaid expenses and other current assets

  $ 603     $ 2,873  

 

 

NOTE H – SALE OF PROPERTY AND EQUIPMENT

 

On October 23, 2018, the Company completed the sale of its Company-owned restaurant located in Bay Ridge, Brooklyn, New York for proceeds of $11,445,000, net of direct expenses, and recorded a gain of $10,821,000, which represented the excess of the proceeds, less costs to sell of $33,000, over the carrying value on that date. The Company continued operating the restaurant under a Surrender Agreement with the purchaser until January 6, 2019 and surrendered the property to the purchaser on January 22, 2019.

 

On August 9, 2018, the Company completed the sale of its regional office building located in Fort Lauderdale, Florida for proceeds of $1,330,000, net of direct expenses, and recorded a gain of $306,000, which represented the excess of the proceeds, less costs to sell of $17,000, over the carrying value on that date.

 

 

NOTE I – ACCRUED EXPENSES, OTHER CURRENT LIABILITIES AND OTHER LIABILITIES

 

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

  

   

December 23,

   

March 25,

 
   

2018

   

2018

 

Payroll and other benefits

  $ 2,499     $ 2,733  

Accrued rebates

    1,008       1,541  

Rent and occupancy costs

    143       200  

Deferred revenue

    12       780  

Construction costs

    60       68  

Interest

    1,443       3,948  

Professional fees

    173       157  

Sales, use and other taxes

    3,112       80  

Dividend payable

    -       150  

Deposit payable

    -       1,201  

Other

    225       390  

Total accrued expenses and other current liabilities

  $ 8,675     $ 11,248  

 

Other liabilities consist of the following (in thousands):

                                                         

   

December 23,

   

March 25,

 
   

2018

   

2018

 

Reserve for uncertain tax positions

  $ 491     $ 467  

Deferred rental liability

    675       677  

Other

    211       211  

Total other liabilities

  $ 1,377     $ 1,355  

 

-13-

 

 

 

NOTE J – REVENUES

 

The Company’s disaggregated revenues for the thirteen and thirty-nine weeks ended December 23, 2018 and December 24, 2017 are as follows (in thousands):

                                                        

    Thirteen weeks ended     Thirty-nine weeks ended  
   

December 23,

2018

   

December 24,

2017 (1)

   

December 23,

2018

   

December 24,

2017 (1)

 
                                 

Branded Products

  $ 12,453     $ 14,674     $ 44,308     $ 50,741  

Company-operated restaurants

    1,951       2,031       12,140       12,586  

Total sales

    14,404       16,705       56,448       63,327  
                                 

License royalties

    4,316       4,228       18,160       17,393  
                                 

Royalties

    805       963       2,906       3,293  

Franchise fees

    106       125       348       282  

Total franchise fees and royalties

    911       1,088       3,254       3,575  
                                 

Advertising fund revenue

    591       -       1,858       -  
                                 

Total revenues

  $ 20,222     $ 22,021     $ 79,720     $ 84,295  

 

(1) As disclosed in Note B, prior period amounts have not been adjusted under the modified retrospective method of adoption of ASC 606.

 

The following table disaggregates revenues by primary geographical market (in thousands):

 

    Thirteen weeks ended     Thirty-nine weeks ended  
   

December 23,

2018

   

December 24,

2017

   

December 23,

2018

   

December 24,

2017

 
                                 

United States

  $ 19,546     $ 20,209     $ 77,022     $ 78,852  

International

    676       1,812       2,698       5,443  

Total revenues

  $ 20,222     $ 22,021     $ 79,720     $ 84,295  

 

 

NOTE K – INCOME TAXES

 

On December 22, 2017, the Tax Cuts and Jobs Act, (the “Tax Act”) was enacted which among other provisions, reduced the top corporate tax rate from 35 percent to a flat 21 percent beginning January 1, 2018 and eliminated the corporate Alternative Minimum Tax. The Tax Act limits the deduction of business interest, net of interest income, to 30 percent of the adjusted taxable income of the taxpayer in any taxable year. Any amount disallowed under the limitation is treated as business interest paid or accrued in the following year. Disallowed interest will have an indefinite carryforward. The Tax Act also repeals the performance-based exception to the $1.0 million deduction limitation on executive compensation and modifies the definition of “covered employees”. Additionally, the Tax Act intended to allow businesses to immediately expense the full cost of Qualified Improvement Property. However, the law as written does not permit restaurant companies to take advantage of the laws’ intention. Nathan’s determined that its blended federal tax rate was 31% for its fiscal year ending March 25, 2018, as a result of the Tax Act.

 

The income tax provisions for the thirty-nine week periods ended December 23, 2018 and December 24, 2017 reflect effective tax rates of 27.8% and 21.5%, respectively. The Company’s tax rate reflects the reduction in our Federal income tax rate from 31% to 21% pursuant to the Tax Act. During the quarter ended December 24, 2017, pursuant to Staff Accounting Bulletin #118, Nathan’s determined reasonable estimates to its deferred assets and liabilities and pursuant to ASC 740, Income Taxes, the Company recognized the effect(s) of the Tax Act on current and deferred income taxes in its financial statements. Nathan’s recorded the following discrete adjustment to its deferred tax liability and unrecognized tax benefits which reduced the provision for income taxes by $436,000 or 1,510 BPS during the thirty-nine weeks ended December 24, 2017, lowering its effective tax rate from 36.6% to 21.5%.

 

Nathan’s effective tax rates for the thirty-nine week periods ended December 23, 2018 and December 24, 2017 were also reduced by 20 BPS and 670 BPS, respectively, as a result of the tax benefits associated with stock compensation. For the thirty-nine week periods ended December 23, 2018 and December 24, 2017, excess tax benefits of $47,000 and $194,000, respectively, were reflected in the Consolidated Statements of Earnings as a reduction in determining the provision for income taxes.

 

-14-

 

 

The amount of unrecognized tax benefits at December 23, 2018 was $249,000 all of which would impact Nathan’s effective tax rate, if recognized. As of December 23, 2018, Nathan’s had $242,000 of accrued interest and penalties in connection with unrecognized tax benefits.

 

In January 2018, Nathan’s received notification from the State of Virginia that it was seeking to review Nathan’s tax returns for the period April 2014 through March 2017. The review has been completed; Nathan’s has accepted the findings and settled the matter in the second quarter fiscal 2019. The effects of the review, which were not significant, have been factored into the Company’s effective tax rate for fiscal 2019.

 

Nathan’s estimates that its annual tax rate for the fiscal year ending March 31, 2019 will be in the range of approximately 27.0% to 29.0% excluding the impact of any discrete items recorded and excess tax benefit associated with stock compensation. The final annual tax rate is subject to many variables, including the ultimate determination of revenue and income tax by state, among other factors, and cannot be determined until the end of the fiscal year; therefore, the actual tax rate could differ from our current estimates. In addition, the ultimate benefit of the Tax Act on Nathan’s is unclear as the lower annual tax rate could be outweighed by deduction limitations and other provisions included in further guidance and regulations.           

 

 

NOTE L – 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-operated and franchised restaurants, to distributors that resell our products to the foodservice industry through the Branded Product Program (“BPP”) and by third party manufacturers pursuant to license agreements that sell our products to club stores and grocery stores nationwide. The Company’s Chief Executive Officer has been identified as the Chief Operating Decision Maker (“CODM”) who evaluates performance and allocates resources for the Branded Product Program, Product Licensing and Restaurant Operations segments based upon a number of factors, the primary profit measure being income from operations. Certain administrative expenses are not allocated to the segments and are reported within Corporate.

 

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, sausage and corned beef products, frozen French fries and additional products through retail grocery channels and club stores throughout the United States.

 

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

 

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 and compliance costs.

 

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

 

-15-

 

 

Operating segment information is as follows (in thousands):

 

    Thirteen weeks ended     Thirty-nine weeks ended  
   

December 23,

2018

   

December 24,

2017

   

December 23,

2018

   

December 24,

2017

 
                                 

Revenues

                               

Branded Product Program

  $ 12,453     $ 14,674     $ 44,308     $ 50,741  

Product licensing

    4,316       4,228       18,160       17,393  

Restaurant operations

    2,862       3,119       15,394       16,161  

Corporate (1)

    591       -       1,858       -  

Total revenues

  $ 20,222     $ 22,021     $ 79,720     $ 84,295  
                                 

Income from operations

                               

Branded Product Program

  $ 2,464     $ 2,924     $ 7,725     $ 7,888  

Product licensing

    4,270       4,182       18,023       17,257  

Restaurant operations

    (112 )     (21 )     2,733       3,209  

Corporate

    (1,726 )     (1,715 )     (6,018 )     (5,800 )

Income from operations

  $ 4,896     $ 5,370     $ 22,463     $ 22,554  
                                 
Gain on sale of property and equipment      10,821       -       11,177       -  

Loss on debt extinguishment

    -       (8,872 )     -       (8,872 )

Interest expense

    (2,650 )     (3,650 )     (7,951 )     (10,976 )

Interest income

    277       44       453       114  

Other income, net

    5       22       189       64  

Income (loss) before provision (benefit) for income taxes

  $ 13,349     $ (7,086 )   $ 26,331     $ 2,884  

 

 

(1)

Represents advertising fund revenue

 

 

NOTE M– SHARE-BASED COMPENSATION

 

Total share-based compensation during the thirteen-week periods ended December 23, 2018 and December 24, 2017 was $29,000 and $99,000, respectively. Total share-based compensation during the thirty-nine week periods ended December 23, 2018 and December 24, 2017 was $133,000 and $298,000, respectively. Total share-based compensation is included in general and administrative expenses in our accompanying Consolidated Statements of Earnings. As of December 23, 2018, there was $314,000 of unamortized compensation expense related to share-based incentive awards. We expect to recognize this expense over approximately thirty-three months, which represents the weighted average remaining requisite service periods for such awards.

 

The Company recognizes compensation cost for unvested stock-based incentive awards on a straight-line basis over the requisite service period. Compensation cost charged to expense under all stock-based incentive awards is as follows (in thousands):

            

    Thirteen weeks ended     Thirty-nine weeks ended  
   

December 23,

2018

   

December 24,

2017

   

December 23,

2018

   

December 24,

2017

 
                                 

Stock options

  $ 21     $ 38     $ 81     $ 114  

Restricted stock

    8       61       52       184  

Total compensation cost

  $ 29     $ 99     $ 133     $ 298  

 

Stock options outstanding: 

 

During the fiscal year ended March 29, 2015, the Company granted options to purchase 50,000 shares at an exercise price of $53.89 per share, all of which expire five years from the date of grant. All such stock options vest ratably over a four-year period which commenced August 6, 2015 and contained anti-dilution rights that were structured to equalize the award’s fair value before and after the modification.

 

-16-

 

 

In connection with the Company’s special cash dividend, paid on January 4, 2018, to stockholders of record as of December 22, 2017, the Company performed an analysis, pursuant to the anti-dilution provisions of the 2010 Stock Incentive Plan, as amended (the “2010 Plan”), and issued replacement options to purchase 68,498 shares at an exercise price of $33.438 for the unvested stock options outstanding as of the record date of December 22, 2017, canceling 64,384 shares at an exercise price of $35.58 per share. Nathan’s performed its evaluation based on the closing price of its common stock on December 20, 2017, the day before the stock went ex-dividend, of $83.20 per share, or $78.20 per share excluding the dividend of $5.00 per share. No other terms or conditions of the outstanding options were modified.

 

In connection with the Company’s special cash dividend, paid on March 27, 2015, to stockholders of record as of March 20, 2015, the Company performed an analysis, pursuant to the anti-dilution provisions of the 2010 Plan, and issued replacement options to purchase 75,745 shares at an exercise price of $35.58 for the unvested stock options outstanding as of March 29, 2015, canceling 50,000 shares at an exercise price of $53.89. Nathan’s performed its evaluation based on the closing price of its common stock on March 27, 2015 of $73.56 per share, or $48.56 per share excluding the dividend of $25.00 per share. No other terms or conditions of the outstanding options were modified.

 

During the thirty-nine week period ended December 23, 2018, the Company granted options to purchase 10,000 shares at an exercise price of $89.90 per share, all of which expire five years from the date of grant. All such stock options vest ratably over a three year period commencing September 12, 2019.

 

The weighted-average option fair values, as determined using the Black-Scholes option valuation model, and the assumptions used to estimate these values for stock options granted during the thirty-nine weeks ended December 23, 2018, are as follows:

 

Weighted-average option fair values

  $ 25.6314  

Expected life (years)

    4.5  

Interest rate

    2.87 %

Volatility

    32.57 %

Dividend yield

    1.11 %

 

The expected dividend yield is based on historical and projected dividend yields. The Company expects 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 the grant. The expected option term is the number of years the Company estimates the options will be outstanding prior to exercise based on expected employment termination behavior.

 

Transactions with respect to stock options for the thirty-nine weeks ended December 23, 2018 are as follows:

 

           

Weighted-

   

Weighted-

   

Aggregate

 
           

Average

   

Average

   

Intrinsic

 
           

Exercise

   

Remaining

   

Value

 
   

Shares

   

Price

   

Contractual Life

   

(in thousands)

 
                                 
                                 

Options outstanding at March 25, 2018 fiscal year (A)

    68,498     $ 33.438       1.36     $ 2,648  

Granted

    10,000       89.900       4.72       -  

Exercised

    (4,030 )     33.438       -       224  

Options outstanding at December 23, 2018

    74,468     $ 41.020       1.17     $ 1,912  
                                 

Options exercisable at December 23, 2018

    64,468     $ 33.438       0.62     $ 1,912  

 

 

A-

Represents outstanding options after giving effect to the replacement options issued in connection with the Company’s 2015 and 2017 special dividends.

 

Restricted stock: 

 

Transactions with respect to restricted stock for the thirty-nine weeks ended December 23, 2018 are as follows:

 

           

Weighted-

 
           

Average

 
           

Grant-date

Fair value

 
   

Shares

   

Per share

 

Unvested restricted stock at March 25, 2018

    5,000     $ 49.80  

Granted

    1,000       89.90  

Vested

    (5,000 )     (49.80 )

Unvested restricted stock at December 23, 2018

    1,000     $ 89.90  

 

-17-

 

 

During the thirty-nine week period ended December 23, 2018, the Company granted 1,000 shares of restricted stock at a fair value of $89.90 per share representing the closing price on the date of the grant, which will be fully vested three years from the date of grant. The restrictions on the shares lapse ratably over a three-year period on the annual anniversary of the date of grant. The compensation expense related to this restricted stock award is expected to be $89,900 and will be recognized, commencing on the grant date, over three years.

 

 

NOTE N– STOCKHOLDERS’ EQUITY

 

1. Dividends

 

On May 31, 2018, Nathan’s Board of Directors authorized the commencement of a regular dividend of $1.00 per share per annum, payable at the rate of $0.25 per quarter. Through December 23, 2018, the Company declared and paid three regular quarterly dividends of $0.25 per common share aggregating $3,139,000.

 

Effective February 1, 2019, the Board declared its fourth quarterly cash dividend of $0.25 per share which is payable on March 22, 2019 to stockholders of record as of the close of business on March 11, 2019.

 

On November 1, 2017, the Company’s Board of Directors declared a special cash dividend of $5.00 per share payable to stockholders of record as of December 22, 2017 of which approximately $20,923,000 was paid on January 4, 2018 to the stockholders. The Company also accrued $25,000 for the expected dividends payable on unvested restricted shares pursuant to the terms of the restricted stock agreement. As unvested restricted stock vests, the declared dividend is paid. The Company paid this $25,000 during the thirteen weeks ended June 24, 2018.

 

On March 10, 2015, the Company’s Board of Directors declared a special cash dividend of $25.00 per share payable to stockholders of record as of March 20, 2015 of which approximately $115,100,000 was paid on March 27, 2015 to the stockholders. The Company accrued $1,000,000 for the expected dividends payable on unvested shares pursuant to the terms of the restricted stock agreements. As unvested restricted stock vests, the declared dividend is paid. As of March 25, 2018 we had paid $875,000 of the accrued dividend and the remaining $125,000 was paid during the thirteen weeks ended June 24, 2018.

 

Our ability to pay future dividends is limited by the terms of the Indenture, dated November 1, 2017, between the Company, certain of its wholly-owned subsidiaries, as guarantors and U.S. Bank National Association, as trustee and collateral trustee (the “Indenture”). In addition, 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. Common Stock Purchase Rights

 

On June 5, 2013, Nathan’s adopted a stockholder rights plan (the “2013 Rights Plan”) under which all stockholders of record as of June 17, 2013 received rights to purchase shares of common stock.

 

On June 14, 2018, the Company and American Stock Transfer and Trust Company, LLC, the Rights Agent, amended the 2013 Rights Plan. The Amendment postponed the expiration date to September 30, 2018, at which time it terminated.

 

3. Stock Repurchase Programs

 

During the thirty-nine week period ended December 23, 2018, Nathan’s repurchased 14,390 shares of its common stock at a cost of approximately $1.0 million pursuant to its sixth stock repurchase program.

 

In 2016, the Company’s Board of Directors 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 23, 2018, Nathan’s had repurchased 954,132 shares at a cost of $30,641,000 under the sixth stock repurchase plan. At December 23, 2018, there were 245,868 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.

 

During the period from October 2001 through December 23, 2018, Nathan’s purchased 5,141,763 shares of common stock at a cost of approximately $78,303,000 pursuant to various stock repurchase plans previously authorized by the Board of Directors.

 

-18-

 
 

 

 

NOTE O – LONG-TERM DEBT

 

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

 

   

December 23,

   

March 25,

 
   

2018

   

2018

 
                 

6.625% Senior Secured Notes due 2025

  $ 150,000     $ 150,000  

Less: unamortized debt issuance costs

    (4,724 )     (5,242 )

Long-term debt, net

  $ 145,276     $ 144,758  

 

On November 1, 2017, the Company issued $150,000,000 of 6.625% Senior Secured Notes due 2025 (the "2025 Notes") in a private offering in accordance with Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). The 2025 Notes were issued pursuant to the Indenture. The Company used the net proceeds of the 2025 Notes offering to satisfy and discharge the Indenture relating to the 10.000% Senior Secured Notes due 2020 and redeem the 2020 Notes (the "Redemption"), paid a portion of a special $5.00 per share cash dividend to Nathan's stockholders of record, with the remaining net proceeds for general corporate purposes, including working capital. The Company also funded the majority of the special dividend of $5.00 per share through its existing cash. The Redemption occurred on November 16, 2017.

 

The 2025 Notes bear interest at 6.625% per annum, payable semi-annually on May 1st and November 1st of each year. The Company made its required semi-annual interest payments of $4,968,750 on May 1, 2018 and November 1, 2018.

 

The 2025 Notes have no scheduled principal amortization payments prior to its final maturity on November 1, 2025.

 

The terms and conditions of the 2025 Notes are as follows:

 

There are no financial maintenance covenants associated with the 2025 Notes. As of December 23, 2018, Nathan’s was in compliance with all covenants associated with the 2025 Notes.

 

The Indenture contains certain covenants limiting the Company’s ability and the ability of its restricted subsidiaries (as defined in the Indenture) to, subject to certain exceptions and qualifications: (i) incur additional indebtedness; (ii) pay dividends or make other distributions on, redeem or repurchase, capital stock; (iii) make investments or other restricted payments; (iv) create or incur certain liens; (v) incur restrictions on the payment of dividends or other distributions from its restricted subsidiaries; (vi) enter into certain transactions with affiliates; (vii) sell assets; or (viii) effect a consolidation or merger. Certain Restricted Payments which may be made or indebtedness incurred by Nathan’s or its Restricted Subsidiaries may require compliance with the following financial ratios:

 

Fixed Charge Coverage Ratio: the ratio of the Consolidated Cash Flow to the Fixed Charges for the relevant period, currently set at 2.0 to 1.0 in the Indenture. The Fixed Charge Coverage Ratio applies to determining whether additional Restricted Payments may be made, certain additional debt may be incurred and acquisitions may be made.

 

Priority Secured Leverage Ratio: the ratio of (a) Consolidated Net Debt outstanding as of such date that is secured by a Priority Lien to (b) Consolidated Cash Flow of Nathan’s for the Test Period then most recently ended, in each case with such pro forma adjustments as are appropriate; currently set at 0.40 to 1.00 in the Indenture.

 

Secured Leverage Ratio: the ratio of (a) Consolidated Net Debt outstanding as of such date that is secured by a Lien on any property of Nathan’s or any Guarantor to (b) Consolidated Cash Flow of Nathan’s for the Test Period then most recently ended, in each case with such pro forma adjustments as are appropriate. The Secured Leverage Ratio under the Indenture is 3.75 to 1.00 and applies if Nathan’s wants to incur additional debt on the same terms as the 2025 Notes.

 

The Indenture also contains customary events of default, including, among other things, failure to pay interest, failure to comply with agreements related to the Indenture, failure to pay at maturity or acceleration of other indebtedness, failure to pay certain judgments, and certain events of insolvency or bankruptcy. Generally, if any event of default occurs, the Trustee or the holders of at least 25% in principal amount of the 2025 Notes may declare the 2025 Notes due and payable by providing notice to the Company. In case of default arising from certain events of bankruptcy or insolvency, the 2025 Notes will become immediately due and payable.

 

The 2025 Notes are general senior secured obligations, are fully and unconditionally guaranteed by substantially all of the Company’s wholly-owned subsidiaries and rank pari passu in right of payment with all of the Company’s existing and future indebtedness that is not subordinated, are senior in right of payment to any of the Company’s existing and future subordinated indebtedness, are structurally subordinated to any existing and future indebtedness and other liabilities of the Company’s subsidiaries that do not guarantee the 2025 Notes, and are effectively junior to all existing and future indebtedness that is secured by assets other than the collateral securing the 2025 Notes.

 

Pursuant to the terms of a collateral trust agreement, the liens securing the 2025 Notes and the guarantees will be contractually subordinated to the liens securing any future credit facility.

 

-19-

 

 

The 2025 Notes and the guarantees are the Company and the guarantors’ senior secured obligations and will rank:

 

 

senior in right of payment to all of the Company and the guarantors’ future subordinated indebtedness;

 

 

effectively senior to all unsecured senior indebtedness to the extent of the value of the collateral securing the 2025 Notes and the guarantees;

 

 

pari passu with all of the Company and the guarantors’ other senior indebtedness;

 

 

effectively junior to any future credit facility to the extent of the value of the collateral securing any future credit facility and the 2025 Notes and the guarantees and certain other assets;

 

 

effectively junior to any of the Company and the guarantors’ existing and future indebtedness that is secured by assets other than the collateral securing the 2025 Notes and the guarantees to the extent of the value of any such assets; and

 

 

structurally subordinated to the indebtedness of any of the Company’s current and future subsidiaries that do not guarantee the 2025 Notes.

 

The Company may redeem the 2025 Notes in whole or in part prior to November 1, 2020, at a redemption price of 100% of the principal amount of the 2025 Notes redeemed plus the Applicable Premium, plus accrued and unpaid interest. An Applicable Premium is the greater of 1% of the principal amount of the 2025 Notes; or the excess of the present value at such redemption date of (i) the redemption price of the 2025 Notes at November 1, 2020 plus (ii) all required interest payments due on the 2025 Notes through November 1, 2020 (excluding accrued but unpaid interest to the redemption date), computed using a discount rate equal to the Treasury Rate as of such redemption date plus 50 basis points; over the then outstanding principal amount of the 2025 Notes.

 

Prior to November 1, 2020, if using the net cash proceeds of certain equity offerings, the Company has the option to redeem up to 35% of the aggregate principal amount of the 2025 Notes at a redemption price equal to 106.625% of the principal amount of the 2025 Notes redeemed, plus accrued and unpaid interest and any additional interest.

 

On or after November 1, 2020, the Company may redeem some or all of the 2025 Notes at a decreasing premium over time, plus accrued and unpaid interest as follows:

 

YEAR

 

PERCENTAGE

 

On or after November 1, 2020 and prior to November 1, 2021

    103.313 %

On or after November 1, 2021 and prior to November 1, 2022

    101.656 %

On or after November 1, 2022

    100.000 %

 

In certain circumstances involving a change of control, the Company will be required to make an offer to repurchase all or, at the holder’s option, any part, of each holder’s 2025 Notes pursuant to the offer described below (the “Change of Control Offer”). In the Change of Control Offer, the Company will be required to offer payment in cash equal to 101% of the aggregate principal amount of 2025 Notes repurchased plus accrued and unpaid interest, to the date of purchase.

 

If the Company sells certain collateralized assets and does not use the net proceeds as required, the Company will be required to use such net proceeds to repurchase the 2025 Notes at 100% of the principal amount thereof, plus accrued and unpaid interest and additional interest penalty, if any, to the date of repurchase.

 

The 2025 Notes may be traded between qualified institutional buyers pursuant to Rule 144A of the Securities Act. We have recorded the 2025 Notes at cost.

 

 

NOTE P – COMMITMENTS AND CONTINGENCIES

 

1. Commitments 

 

On February 27, 2017, a wholly-owned subsidiary of the Company executed a Guaranty of Lease (the “Brooklyn Guaranty”) in connection with its re-franchising of a restaurant located in Brooklyn, New York. The Company is obligated to make payments under the Brooklyn Guaranty in the event of a default by the tenant/franchisee. The Brooklyn Guaranty has an initial term of 10 years and one 5-year option and is limited to 24 months of rent for the first three years of the term. Nathan’s has recorded a liability of $204,000 as a component of Other liabilities on the accompanying Consolidated Balance Sheets, in connection with the Brooklyn Guaranty which does not include potential percentage rent, real estate tax increases, attorney’s fees and other costs as these amounts are not reasonably determinable at this time. Nathan’s has received a personal guaranty from the franchisee for all obligations under the Brooklyn Guaranty. For the remainder of the term, the Brooklyn Guaranty is limited to 12 months of rent plus reasonable costs of collection and attorney’s fees.                 

 

-20-

 

 

2. Contingencies

 

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 Q - RELATED PARTY TRANSACTION

 

A subsidiary of a firm to which the Company's Executive Chairman of the Board is the President and Chief Executive Officer, received ordinary and customary real estate brokerage commissions aggregating approximately $72,000 in connection with the sale of the Florida regional office during the fiscal 2019 period.

 

-21-

 
 

 

 

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

 

Forward-Looking Statements

 

Statements in this Form 10-Q quarterly report may be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions. These statements are based on current expectations, estimates and projections about our business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. These risks and uncertainties, many of which are not within our control, include but are not limited to: the status of our licensing and supply agreements, including our licensing revenue and overall profitability being substantially dependent on our agreement with John Morrell & Co., economic, weather (including the effects on the supply of cattle and the impact of weather on sales at our restaurants, particularly during Summer months), and changes in the price of beef trimmings; our ability to pass on the cost of any price increases in beef and beef trimmings, or labor costs; legislative, business conditions or tariffs; the collectibility of receivables; changes in consumer tastes; the impact of our debt service and repayment obligations under the 2025 Notes; the impact of the Tax Cuts and Jobs Act (the “Tax Act”); the continued viability of Coney Island as a destination location for visitors; the ability to continue to attract franchisees; the impact of the new minimum wage legislation in New York State or other changes in labor laws, including court decisions which could render a franchisor as a “joint employee” or the impact of our new union contracts; our ability to attract competent restaurant and managerial personnel; the enforceability of international franchising agreements and the future effects of any food borne illness; such as bovine spongiform encephalopathy, BSE or e-coli; as well as those risks discussed from time to time in this Form 10-Q and our Form 10-K annual report for the year ended March 25, 2018, and in other documents we file with the Securities and Exchange Commission. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in the forward-looking statements. We generally identify forward-looking statements with the words “believe,” “intend,” “plan,” “expect,” “anticipate,” “estimate,” “will,” “should” and similar expressions. Any forward-looking statements speak only as of the date on which they are made, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this Form 10-Q.

 

Introduction

 

As used in this Report, the terms “we”, “us”, “our”, “Nathan’s” or the “Company” mean Nathan’s Famous, Inc. and its subsidiaries (unless the context indicates a different meaning).

 

We are engaged primarily in the marketing of the “Nathan’s Famous” brand and the sale of products bearing the “Nathan’s Famous” trademarks through several different channels of distribution. Historically, our business has been the operation and franchising of quick-service restaurants featuring Nathan’s World Famous Beef Hot Dogs, crinkle-cut French-fried potatoes, and a variety of other menu offerings. Our Company-owned and franchised units operate under the name “Nathan’s Famous,” the name first used at our original Coney Island restaurant opened in 1916. Nathan’s product licensing program sells packaged hot dogs and other meat products to retail customers through supermarkets or grocery-type retailers for off-site consumption. Our Branded Product Program enables foodservice retailers and others to sell some of Nathan’s proprietary products outside of the realm of a traditional franchise relationship. In conjunction with this program, purchasers of Nathan’s products are granted a limited use of the Nathan’s Famous trademark with respect to the sale of the purchased products, including Nathan’s World Famous Beef Hot Dogs, certain other proprietary food items and paper goods. Our Branded Menu Program is a limited franchise program, under which foodservice operators may sell a greater variety of Nathan’s Famous menu items than under the Branded Product Program.

 

Our revenues are generated primarily from selling products under Nathan’s Branded Product Program, operating Company-owned restaurants, licensing agreements for the sale of Nathan’s products within supermarkets and club stores, the sale of Nathan’s products directly to other foodservice operators and the manufacture of certain proprietary spices by third parties and franchising the Nathan’s restaurant concept (including the Branded Menu Program). See Note B of these Consolidated Financial Statements for information related to the Company’s adoption of ASC 606 effective March 26, 2018.

 

At December 23, 2018, our restaurant system consisted of 261 Nathan’s franchised units, including 119 Branded Menu units, and five Company-owned units (including one seasonal unit), one of which was closed on January 6, 2019, located in 22 states, and 13 foreign countries. At December 24, 2017, our restaurant system consisted of 285 units comprised of 280 Nathan’s franchised units, including 124 Branded Menu units, and five Company-owned units (including one seasonal unit), located in 19 states, and 12 foreign countries.

 

Nathan’s is also the owner of the Arthur Treacher’s brand and continues to seek to co-brand within its restaurant system. Currently there are also seven locations operating under our Arthur Treacher’s Branded Menu Program agreement.

 

-22-

 

 

As described in our Annual Report on Form 10-K for the year ended March 25, 2018, our future results could be materially impacted by many developments including our dependence on John Morrell & Co. as our principal supplier and the dependence of our licensing revenue and overall profitability on our agreement with John Morrell & Co. In addition, our future operating results could be impacted by supply constraints on beef or by increased costs of beef compared to earlier periods in addition to the potential impact that the recently imposed tariff’s may have on the business.

 

On November 1, 2017, the Company issued $150,000,000 of 6.625% Senior Secured Notes due 2025 (the “2025 Notes”) and used the majority of the proceeds of this offering to redeem (the “Redemption”) the Company’s 10.000% Senior Secured Notes due 2020 (the “2020 Notes”), paid a portion of the special $5.00 cash dividend and used any remaining proceeds for general corporate purposes, including working capital. Our future results could also be impacted by our obligations under the 2025 Notes. As a result of the issuance of the 2025 Notes, Nathan’s expects to incur interest expense of $9,937,500 per annum, reducing its cash interest expense by $3,562,500 per annum as compared to our annual interest requirements under the 2020 Notes. Nathan’s expects to incur annual amortization of debt issuance costs of approximately $691,000 through November 1, 2025. The impact of the reduced interest expense, resulting from the refinancing, and the loss on debt extinguishment on net income have been reflected in our results for the thirteen and thirty-nine week periods ended December 23, 2018 and December 24, 2017.

 

As described below, we are also including information relating to EBITDA and Adjusted EBITDA in the Form 10-Q quarterly report.

 

Critical Accounting Policies and Estimates

 

As discussed in our Form 10-K for the fiscal year ended March 25, 2018, the discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and assumptions that affect the amounts of assets, liabilities, revenues and expenses reported in those financial statements. These judgments can be subjective and complex, and consequently, actual results could differ from those estimates. Our most critical accounting policies and estimates relate to revenue recognition; impairment of goodwill and other intangible assets; impairment of long-lived assets; share-based compensation and income taxes (including uncertain tax positions). As discussed in Note B, the Company adopted ASC 606, “Revenue Recognition – Revenue from Contracts with Customers.” There have been no other significant changes to the Company’s accounting policies subsequent to March 25, 2018.

 

Adoption of New Accounting Pronouncements          

 

Please refer to Note B of the preceding consolidated financial statements for our discussion of the Adoption of the New Accounting Pronouncement.

 

New Accounting Pronouncements Not Yet Adopted

 

Please refer to Note C of the preceding consolidated financial statements for our discussion of New Accounting Pronouncements Not Yet Adopted.

 

EBITDA and Adjusted EBITDA

 

The Company believes that EBITDA and Adjusted EBITDA are useful to investors to assist in assessing and understanding the Company's operating performance and underlying trends in the Company's business because EBITDA and Adjusted EBITDA are (i) among the measures used by management in evaluating performance and (ii) are frequently used by securities analysts, investors and other interested parties as a common performance measure.

 

Reconciliation of GAAP and Non-GAAP Measures

 

The following is provided to supplement certain Non-GAAP financial measures.

 

In addition to disclosing results that are determined in accordance with Generally Accepted Accounting Principles in the United States of America ("US GAAP"), the Company has provided EBITDA which excludes (i) interest expense; (ii) provision (benefit) for income taxes and (iii) depreciation and amortization expense. The Company has also provided Adjusted EBITDA excluding loss on debt extinguishment and stock-based compensation that the Company believes will impact the comparability of its results of operations.

 

EBITDA and Adjusted EBITDA are not recognized terms under US GAAP and should not be viewed as alternatives to net income or other measures of financial performance or liquidity in conformity with US GAAP. Additionally, our definitions of EBITDA and Adjusted EBITDA may differ from other companies. Analysis of results and outlook on a non-US GAAP basis should be used as a complement to, and in conjunction with, data presented in accordance with US GAAP.

 

-23-

 

 

The following is a reconciliation of Net income (loss) to Adjusted EBITDA (in thousands):

                                                             

    Thirteen weeks ended     Thirty-nine weeks ended  
   

December 23,

2018

   

December 24,

2017

   

December 23,

2018

   

December 24,

2017

 
   

(unaudited)

   

(unaudited)

 
                                 

Net income (loss)

  $ 9,722     $ (3,779 )   $ 19,001     $ 2,263  

Interest expense

    2,650       3,650       7,951       10,976  

Provision (benefit) for income taxes

    3,627       (3,307 )     7,330       621  

Depreciation and amortization

    278       320       962       1,055  

EBITDA

    16,277       (3,116 )     35,244       14,915  
                                 

Loss on debt extinguishment

    -       8,872       -       8,872  

Stock-based compensation

    29       99       133       298  

Adjusted EBITDA

  $ 16,306     $ 5,855     $ 35,377     $ 24,085  

 

Results of Operations

 

Thirteen weeks ended December 23, 2018 compared to thirteen weeks ended December 24, 2017

 

Revenues

 

Total sales decreased by 13.8% to $14,404,000 for the thirteen weeks ended December 23, 2018 (“third quarter fiscal 2019”) as compared to $16,705,000 for the thirteen weeks ended December 24, 2017 (“third quarter fiscal 2018”). Foodservice sales from the Branded Product Program decreased by 15.1% to $12,453,000 for the third quarter fiscal 2019 as compared to sales of $14,674,000 in the third quarter fiscal 2018. Our average selling prices decreased by approximately 4.3% as a result of our pricing strategy, which is more closely correlated to the cost of beef which decreased by approximately 5.5%, during the third quarter fiscal 2019 as compared to the third quarter fiscal 2018. During the third quarter fiscal 2019, the volume of business decreased by approximately 10.5%.

 

During the fiscal 2018 period, we added a new distributor to our distribution network that increased our sales during implementation of the new distributor. In addition to the additional business realized, beginning in the third quarter fiscal 2018, this distributor temporarily provided distribution to a number of significant contract accounts, further increasing their fiscal 2018 purchases. During the first quarter fiscal 2019, distribution reverted to our traditional methodology, which caused the re-distributor to reduce their inventory purchased from us. We estimate that excluding the effects of the re-distributors’ purchases in both years, we estimate that customer shipments increased by approximately 2.1% during the third quarter fiscal 2019. Total Company-owned restaurant sales were $1,951,000 during the third quarter fiscal 2019 compared to $2,031,000 during the third quarter fiscal 2018.

 

License royalties were $4,316,000 in the third quarter fiscal 2019 as compared to $4,228,000 in the third quarter fiscal 2018. Total royalties earned on sales of hot dogs from our license agreement with John Morrell & Co. at retail were $3,741,000 for the third quarter fiscal 2019 as compared to $3,680,000 in the third quarter fiscal 2018. We earned $44,000 from John Morrell & Co. from new products, other than hot dogs, during the third quarter fiscal 2019. Retail royalties increased volume by 5.4% during the third quarter fiscal 2019 as compared to the third quarter fiscal 2018, which was offset by a decrease in average selling prices of approximately 5.4%, on which our royalties are calculated. Beginning in fiscal 2019, we agreed to reduce the royalty rate earned on the foodservice business with John Morrell & Co., on sales of hot dogs to Sam’s Club, in an attempt to secure additional business. As a result of these actions, we secured additional business which increased royalties by $35,000 as compared to the third quarter fiscal 2018. Royalties earned from all other licensing agreements for the manufacture and sale of Nathan’s products increased by $27,000 during the third quarter fiscal 2019 as compared to the third quarter fiscal 2018.

 

Franchise fees and royalties were $911,000 in the third quarter fiscal 2019 as compared to $1,088,000 in the third quarter fiscal 2018. Total royalties were $805,000 in the third quarter fiscal 2019 as compared to $963,000 in the third quarter fiscal 2018. Royalties earned under the Branded Menu program were $167,000 in the third quarter fiscal 2019 as compared to $259,000 in the third quarter fiscal 2018. Royalties earned under the Branded Menu Program are based upon product purchases and not a percentage of restaurant sales. Traditional franchise royalties were $638,000 in the third quarter fiscal 2019 as compared to $704,000 in the third quarter fiscal 2018. Franchise restaurant sales decreased to $14,158,000 in the third quarter fiscal 2019 as compared to $15,596,000 in the third quarter fiscal 2018 primarily due to the impact of units closed in the previous fiscal year partly offset by a 2.8% increase in comparable domestic sales.

 

Comparable domestic franchise sales (consisting of 84 Nathan’s outlets), excluding sales under the Branded Menu Program were $11,413,000 in the third quarter fiscal 2019 as compared to $11,098,000 in the third quarter fiscal 2018.

 

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At the beginning of fiscal 2019 we adopted ASC 606. Footnote B in the accompanying Consolidated Financial Statements provides a full explanation of this new accounting standard. The most significant component of this new standard affects the timing that Nathan’s recognizes franchise fees. Franchise fee income is now recorded into income on a prorated basis over the term of the franchise agreement as compared to previously recording the full franchise fee into income upon the opening of a new restaurant.

 

At December 23, 2018, 261 domestic and international franchised or Branded Menu Program franchise outlets were operating compared to 280 domestic and international franchised or Branded Menu Program franchise outlets at December 24, 2017. Total franchise fee income, including cancellations, was $106,000 in the third quarter fiscal 2019 compared to $125,000 in the third quarter fiscal 2018. Domestic franchise fee income was $38,000 in the third quarter fiscal 2019 compared to $33,000 in the third quarter fiscal 2018. Cancellations of $26,000 were recorded in the third quarter fiscal 2019. International franchise fee income was $42,000 in the third quarter fiscal 2019 compared to $92,000 during the third quarter fiscal 2018.

 

Advertising fund revenue, after eliminating Company contributions, was $591,000 during the third quarter fiscal 2019. Pursuant to the adoption of ASC 606, revenue and expenses of the Advertising Fund are required to be included as components of the Company’s Statements of Earnings and Cash Flows. Nathan’s manages its Advertising Fund with the expectation that inflows and outflows will be offsetting and has also recorded a separate Advertising fund expense. Prior to the adoption of ASC 606, the activities of the Advertising Fund were reported within the Consolidated Balance Sheet.

 

Costs and Expenses

 

Overall, our cost of sales decreased by 15.0% to $10,660,000 in the third quarter fiscal 2019 as compared to $12,537,000 in the third quarter fiscal 2018. Our gross profit (representing the difference between sales and cost of sales) decreased to $3,744,000 or 26.0% of sales during the third quarter fiscal 2019 as compared to $4,168,000 or 24.9% of sales during the third quarter fiscal 2018. The margin improvement was primarily due to the lower cost of beef in the Branded Product Program and in the Company-operated restaurants partly offset by higher other commodity costs and higher labor costs at the Company-owned restaurants due to the annual increases in the New York minimum wages and other labor regulations.

 

Cost of sales in the Branded Product Program decreased by approximately $1,813,000 during the third quarter fiscal 2019 period as compared to the third quarter fiscal 2018 period, primarily due to the 5.5% decrease in the average cost per pound of our hot dogs and the 10.5% decrease in the volume of product sold discussed above. We did not make any purchase commitments of beef during the fiscal 2019 and 2018 periods. If the cost of beef and beef trimmings increases and we are unable to pass on these higher costs through price increases or otherwise reduce any increase in our costs through the use of purchase commitments, our margins will be adversely impacted.

 

With respect to Company-owned restaurants, our cost of sales during the third quarter fiscal 2019 was $1,308,000 or 67.0% of restaurant sales, as compared to $1,372,000 or 67.5% of restaurant sales in the third quarter fiscal 2018 primarily due to lower beef costs offset by the impact of higher labor costs principally associated with the effects of the New York State minimum wage increase. Lower beef costs were also offset by higher seafood and other food costs during the third quarter fiscal 2019. We expect that our labor costs going forward will continue to be impacted by the multi-year new increase in minimum wage requirements in New York State, other labor regulations and any increase in food costs from higher commodity costs.

 

Restaurant operating expenses were $766,000 in the third quarter fiscal 2019 as compared to $760,000 in the third quarter fiscal 2018. The increase in restaurant operating costs results primarily from higher home delivery costs, insurance and occupancy costs.

 

Depreciation and amortization was $278,000 in the third quarter fiscal 2019 as compared to $320,000 in the third quarter fiscal 2018.

 

General and administrative expenses were $3,031,000 in the third quarter fiscal 2019 as compared to $3,034,000 in the third quarter fiscal 2018. The decrease in general and administrative expenses was primarily attributable to lower professional fees and lower occupancy costs after selling the Florida office, partly offset by higher compensation and marketing costs.

 

Advertising fund expense was $591,000 during the third quarter fiscal 2019. Pursuant to the adoption of ASC 606, revenue and expenses of the Advertising Fund are required to be included as components of the Company’s Statements of Earnings and Cash Flows. Nathan’s manages its Advertising Fund with the expectation that inflows and outflows will be offsetting. Prior to the adoption of ASC 606, the activities of the Advertising Fund were reported within the Consolidated Balance Sheet.

 

Other Items

 

Gain on sale of property and equipment of $10,821,000 reflects the gain on the sale of its Company-owned restaurant located in Bay Ridge, Brooklyn, NY.

 

Interest expense of $2,650,000 in the third quarter fiscal 2019 represented accrued interest of $2,478,000 on the 2025 Notes at 6.625% per annum and amortization of debt issuance costs of $172,000. Interest expense of $3,650,000 in the third quarter fiscal 2018 represented interest of $1,847,000 on the 2020 Notes at 10.000% per annum, $1,470,000 accrued interest on the 2025 Notes and total amortization of debt issuance costs of $333,000.

 

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Interest income was $277,000 for the third quarter fiscal 2019 as compared to $44,000 in the third quarter fiscal 2018.

 

Other income primarily relates to sublease income from a franchised restaurant which was $22,000 in the third quarter fiscal 2019 and $22,000 in the third quarter fiscal 2018.

 

In connection with the third quarter fiscal 2018 refinancing of the 2020 Notes, the Company recorded a loss on early extinguishment of debt of $8,872,000 that primarily reflects a portion of the premium paid to redeem the 2020 Notes and the write-off of certain debt issuance costs.

 

Provision for Income Taxes

 

On December 22, 2017, the Tax Act was enacted which among other provisions, reduced the top corporate tax rate from 35 percent to a flat 21 percent beginning January 1, 2018 and eliminated the corporate Alternative Minimum Tax. The Tax Act limits the deduction of business interest, net of interest income, to 30 percent of the adjusted taxable income of the taxpayer in any taxable year. Any amount disallowed under the limitation is treated as business interest paid or accrued in the following year. Disallowed interest will have an indefinite carryforward. The Tax Act also repeals the performance-based exception to the $1.0 million deduction limitation on executive compensation and modifies the definition of “covered employees”. Additionally, the Tax Act intended to allow businesses to immediately expense the full cost of Qualified Improvement Property. However, the law as written does not permit restaurant companies to take advantage of the laws’ intention.

 

The income tax provision for the thirteen week period ended December 23, 2018 was $3,627,000 or 27.2% of earnings before income taxes as compared to the income tax benefit of $(3,307,000) or 46.7% of loss before income taxes for the thirteen week period ended December 24, 2017.

 

The Company’s Federal tax rate was reduced to 21% during the thirteen weeks ended December 23, 2018 as compared to its blended rate of 31% during the thirteen weeks ended December 24, 2017, pursuant to the Tax Act.

 

During the quarter ended December 24, 2017, pursuant to Staff Accounting Bulletin #118, Nathan’s determined reasonable estimates to its deferred assets and liabilities and pursuant to ASC 740, Income Taxes, the Company recognized the effect(s) of the Tax Act on current and deferred income taxes in its financial statements. Nathan’s recorded the following discrete adjustment to its deferred tax liability and unrecognized tax benefits which increased the income tax benefit by $436,000 during the thirteen weeks ended December 24, 2017.

 

Results of Operations

 

Thirty-nine weeks ended December 23, 2018 compared to thirty-nine weeks ended December 24, 2017

 

Revenues

 

Total sales decreased by 10.9% to $56,448,000 for the thirty-nine weeks ended December 23, 2018 (“fiscal 2019 period”) as compared to $63,327,000 for the thirty-nine weeks ended December 24, 2017 (“fiscal 2018 period”). Foodservice sales from the Branded Product Program decreased by 12.7% to $44,308,000 for the fiscal 2019 period as compared to sales of $50,741,000 in the fiscal 2018 period. Our average selling prices decreased by approximately 5.5% as a result of our pricing strategy, which is more closely correlated to the cost of beef which decreased by approximately 8.7%, during the fiscal 2019 period as compared to the fiscal 2018 period. During the fiscal 2019 period, the volume of business decreased by approximately 7.6%.

 

During the fiscal 2018 period, we added a new distributor to our distribution network that increased our sales during implementation of the new distributor. In addition to the additional business realized, beginning in the third quarter fiscal 2018, this distributor temporarily provided distribution to a number of significant contract accounts, further increasing their fiscal 2018 purchases. During the first quarter of fiscal 2019, distribution reverted to our traditional methodology, which caused the re-distributor to reduce their inventory purchased from us. We estimate that excluding the effects of the re-distributors’ purchases in both years, we estimate that customer shipments increased by approximately 1.5% during the fiscal 2019 period.  Total Company-owned restaurant sales were $12,140,000 during the fiscal 2019 period compared to $12,586,000 during the fiscal 2018 period due to lower sales at our Coney Island locations principally during April 2018 and the summer of 2018 when the weather was exceptionally unfavorable in the Northeastern United States.

 

License royalties were $18,160,000 in the fiscal 2019 period as compared to $17,393,000 in the fiscal 2018 period. Total royalties earned on sales of hot dogs from our license agreement with John Morrell & Co. at retail increased 4.3% to $16,536,000 for the 2019 fiscal period as compared to $15,853,000 in the fiscal 2018 period. The increase is due to a 3.8% increase in volume during the fiscal 2019 period as compared to the fiscal 2018 period. Beginning in fiscal 2019, we agreed to reduce the royalty rate earned on the foodservice business with John Morrell & Co., substantially on sales of hot dogs to Sam’s Club, in an attempt to secure additional business. Overall, we earned higher royalties of $12,000 as compared to the fiscal 2018 period. We also earned $142,000 from John Morrell & Co. from new products, other than hot dogs, during the fiscal 2019 period. Royalties earned from all other licensing agreements for the manufacture and sale of Nathan’s products increased by $84,000 during the fiscal 2019 period as compared to the fiscal 2018 period.

 

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Franchise fees and royalties were $3,254,000 in the fiscal 2019 period as compared to $3,575,000 in the fiscal 2018 period. Total royalties were $2,906,000 in the fiscal 2019 period as compared to $3,293,000 in the fiscal 2018 period. Royalties earned under the Branded Menu program were $649,000 in the fiscal 2019 period as compared to $873,000 in the fiscal 2018 period. Royalties earned under the Branded Menu Program are not based upon a percentage of restaurant sales but are based upon product purchases. Traditional franchise royalties were $2,257,000 in the fiscal 2019 period as compared to $2,420,000 in the fiscal 2018 period. Franchise restaurant sales decreased to $50,090,000 in the fiscal 2019 period as compared to $54,737,000 in the fiscal 2018 period primarily due to the impact of units closed between the fiscal years and a 0.5% decrease in comparable domestic sales. Comparable domestic franchise sales (consisting of 84 Nathan’s outlets), excluding sales under the Branded Menu Program were $39,561,000 in the fiscal 2019 period as compared to $39,760,000 in the fiscal 2018 period.

 

At the beginning of the fiscal 2019 period we adopted ASC 606. Footnote B in the accompanying Consolidated Financial Statements provides a full explanation of this new accounting standard. The most significant component of this new standard affects the timing that Nathan’s recognizes franchise fees. Franchise fee income is now recorded into income on a prorated basis over the term of the franchise agreement as compared to previously recording the full franchise fee into income upon the opening of a new restaurant.

 

At December 23, 2018, 261 domestic and international franchised or Branded Menu Program franchise outlets were operating compared to 280 domestic and international franchised or Branded Menu Program franchise outlets at December 24, 2017. Total franchise fee income, including cancellations, was $348,000 in the fiscal 2019 period compared to $282,000 in the fiscal 2018 period. Domestic franchise fee income was $117,000 in the fiscal 2019 period compared to $140,000 in the fiscal 2018 period. International franchise fee income was $127,000 in the fiscal 2019 period compared to $132,000 during the fiscal 2018 period. Cancellation fees, were $104,000 in the fiscal 2019 period compared to $10,000 during the fiscal 2018 period. During the fiscal 2019 period, total franchise fees would have been $104,000, under the previous revenue recognition guidance. During the fiscal 2019 period, 12 new franchised outlets opened including five international locations and four new Branded Menu Program outlets opened. During the fiscal 2018 period, 35 new franchised outlets opened, including 13 international locations, and 17 Branded Menu Program outlets.

 

Advertising fund revenue, after eliminating Company contributions, was $1,858,000 during the fiscal 2019 period. Pursuant to the adoption of ASC 606, revenue and expenses of the Advertising Fund are required to be included as components of the Company’s Statements of Earnings and Cash Flows. Nathan’s manages its Advertising Fund with the expectation that inflows and outflows will be offsetting and has also recorded a separate Advertising fund expense. Prior to the adoption of ASC 606, the activities of the Advertising Fund were reported within the Consolidated Balance Sheet.

 

Costs and Expenses

 

Overall, our cost of sales decreased by 13.8% to $41,266,000 in the fiscal 2019 period as compared to $47,853,000 in the fiscal 2018 period. Our gross profit (representing the difference between sales and cost of sales) decreased to $15,182,000 or 26.9% of sales during the fiscal 2019 period as compared to $15,474,000 or 24.4% of sales during the fiscal 2018 period. The margin improvement was primarily due to the lower cost of beef in the Branded Product Program and in the Company-operated restaurants partly offset by higher other commodity costs and higher labor costs at the Company-owned restaurants due to the annual increases in the New York minimum wages and other labor regulations.

 

Cost of sales in the Branded Product Program decreased by approximately $6,443,000 during the fiscal 2019 period as compared to the fiscal 2018 period, primarily due to the 8.7% decrease in the average cost per pound of our hot dogs and the 7.6% decrease in the volume of product sold discussed above. We did not make any purchase commitments of beef during the fiscal 2019 and 2018 periods. If the cost of beef and beef trimmings increases and we are unable to pass on these higher costs through price increases or otherwise reduce any increase in our costs through the use of purchase commitments, our margins will be adversely impacted.

 

With respect to Company-owned restaurants, our cost of sales during the fiscal 2019 period was $6,743,000 or 55.5% of restaurant sales, as compared to $6,887,000 or 54.7% of restaurant sales in the fiscal 2018 period primarily due to lower beef costs offset by the impact of higher labor costs principally associated with the effects of the New York State minimum wage increase. Lower beef costs were also offset by higher seafood and other food costs during the fiscal 2019 period. We expect that our labor costs going forward will continue to be impacted by the multi-year new increase in minimum wage requirements in New York State, other labor regulations and any increase in food costs from higher commodity costs.

 

Restaurant operating expenses were $2,817,000 in the fiscal 2019 period as compared to $2,769,000 in the fiscal 2018 period. The increase in restaurant operating costs results primarily from higher home delivery costs, occupancy costs and insurance.

 

Depreciation and amortization was $962,000 in the fiscal 2019 period as compared to $1,055,000 in the fiscal 2018 period as a result of lower capital spending and the sales of the Florida office and the Company-owned restaurant located in Bay Ridge, Brooklyn, NY.

 

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General and administrative expenses increased by $290,000 or 2.9% to $10,354,000 in the fiscal 2019 period as compared to $10,064,000 in the fiscal 2018 period. The increase in general and administrative expenses was primarily attributable to higher marketing expenses, compensation expense of $73,000 and professional fees. We incurred professional fees of approximately $38,000 to implement ASC 606 and we were also required to expense approximately $110,000 of legal fees as a result of the adoption of ASC 606, which would have previously been offset against franchise fee revenue. We also incurred higher legal fees in connection with the sale of two Company-owned properties.

 

Advertising fund expense was $1,858,000 during the fiscal 2019 period. Pursuant to the adoption of ASC 606, revenue and expenses of the Advertising Fund are required to be included as components of the Company’s Statements of Earnings and Cash Flows. Nathan’s manages its Advertising Fund with the expectation that inflows and outflows will be offsetting. Prior to the adoption of ASC 606, the activities of the Advertising Fund were reported within the Consolidated Balance Sheet.

 

Other Items

 

Gain on sale of property and equipment of $11,177,000 relates to (i) the gain on the sale of its Company-owned restaurant located in Bay Ridge, Brooklyn, NY and (ii) the gain on the sale of our Florida office.

 

In connection with the fiscal 2018 refinancing of the 2020 Notes, the Company recorded a loss on early extinguishment of debt of $8,872,000, that primarily reflects a portion of the premium paid to redeem the 2020 Notes and the write-off of certain debt issuance costs.

 

Interest expense of $7,951,000 in the fiscal 2019 period represented accrued interest of $7,433,000 on the 2025 Notes at 6.625% per annum and amortization of debt issuance costs of $518,000. Interest expense of $10,976,000 in the fiscal 2018 period represents interest of $8,574,000 on the 2020 Notes at 10.000% per annum, $1,470,000 accrued interest on the 2025 Notes and total amortization of debt issuance costs of $932,000.

 

Interest income was $453,000 for the fiscal 2019 period as compared to $114,000 in the fiscal 2018 period.

 

Other income primarily relates to (i) a fee of $175,000 to extend the closing date of the sale of our restaurant located in Bay Ridge, Brooklyn, NY by three months and (ii) sublease income from a franchised restaurant which was $64,000 in the fiscal 2019 period and $64,000 in the fiscal 2018 period.

 

Provision for Income Taxes

 

On December 22, 2017, the Tax Cuts and Jobs Act, (the “Tax Act”) was enacted which among other provisions, reduced the top corporate tax rate from 35 percent to a flat 21 percent beginning January 1, 2018 and eliminated the corporate Alternative Minimum Tax. The Tax Act limits the deduction of business interest, net of interest income, to 30 percent of the adjusted taxable income of the taxpayer in any taxable year. Any amount disallowed under the limitation is treated as business interest paid or accrued in the following year. Disallowed interest will have an indefinite carryforward. The Tax Act also repeals the performance-based exception to the $1.0 million deduction limitation on executive compensation and modifies the definition of “covered employees”. Additionally, the Tax Act intended to allow businesses to immediately expense the full cost of Qualified Improvement Property. However, the law as written does not permit restaurant companies to take advantage of the laws’ intention. Nathan’s determined that its blended federal tax rate was 31% for its fiscal year ending March 25, 2018, as a result of the Tax Act.

 

The income tax provisions for the thirty-nine week periods ended December 23, 2018 and December 24, 2017 reflect effective tax rates of 27.8% and 21.5%, respectively. The Company’s tax rate reflects the reduction in our Federal income tax rate from 31% to 21% pursuant to the Tax Act. During the quarter ended December 24, 2017, Pursuant to Staff Accounting Bulletin #118, Nathan’s determined reasonable estimates to its deferred assets and liabilities and pursuant to ASC 740, Income Taxes, the Company recognized the effect(s) of the Tax Act on current and deferred income taxes in its financial statements. Nathan’s recorded the following discrete adjustment to its deferred tax liability and unrecognized tax benefits which reduced the provision for income taxes by $436,000 or 1,510 BPS during the thirty-nine weeks ended December 24, 2017, lowering its effective tax rate from 36.6% to 21.5%.

 

Nathan’s effective tax rates for the thirty-nine week periods ended December 23, 2018 and December 24, 2017 were also reduced by 20 BPS and 670 BPS, respectively, as a result of the tax benefits associated with stock compensation. For the thirty-nine week periods ended December 23, 2018 and December 24, 2017, excess tax benefits of $47,000 and $194,000, respectively, were reflected in the Consolidated Statements of Earnings as a reduction in determining the provision for income taxes.

 

The amount of unrecognized tax benefits at December 23, 2018 was $249,000 all of which would impact Nathan’s effective tax rate, if recognized. As of December 23, 2018, Nathan’s had $242,000 of accrued interest and penalties in connection with unrecognized tax benefits.

 

In January 2018, Nathan’s received notification from the State of Virginia that it was seeking to review Nathan’s tax returns for the period April 2014 through March 2017. The review has been completed; Nathan’s has accepted the findings and settled the matter in the second quarter fiscal 2019. The effects of the review, which were not significant, have been factored into the Company’s effective tax rate for fiscal 2019.

 

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Nathan’s estimates that its annual tax rate for the fiscal year ending March 31, 2019 will be in the range of approximately 27.0% to 29.0% excluding the impact of any discrete items recorded and excess tax benefit associated with stock compensation. The final annual tax rate is subject to many variables, including the ultimate determination of revenue and income tax by state, among other factors, and cannot be determined until the end of the fiscal year; therefore, the actual tax rate could differ from our current estimates. In addition, the ultimate benefit of the Tax Act on Nathan’s is unclear as the lower annual tax rate could be outweighed by deduction limitations and other provisions included in further guidance and regulations.

 

Off-Balance Sheet Arrangements

 

Nathan’s did not have any open purchase commitments for hot dogs outstanding as of December 23, 2018. Nathan’s may enter into purchase commitments in the future as favorable market conditions become available.

 

Liquidity and Capital Resources

 

Cash and cash equivalents at December 23, 2018 aggregated $72,832,000, increasing by $15,493,000 during the fiscal 2019 period as compared to cash of $57,339,000 at March 25, 2018. Net working capital increased to $70,673,000 from $53,702,000 at March 25, 2018. On November 1, 2018, we paid our second semi-annual interest payment of $4,968,750 for fiscal 2019. We paid our third quarter dividend of $1,045,000 on December 14, 2018.

 

In November 2017, the Company refinanced its then-outstanding 2020 Notes totaling $135.0 million at 10.000% per annum by issuing $150.0 million 2025 Notes at 6.625% per annum. Please refer to Note O – Long Term Debt in the accompanying Consolidated Financial Statements, for a summary of the Company’s refinancing.

 

The 2025 Notes bear interest at 6.625% per annum, payable semi-annually on May 1st and November 1st of each year, beginning on May 1, 2018. Semi-annual interest payments are $4,968,750. During the thirty-nine week period ended December 23, 2018, we paid interest of $4,968,750 each on May 1, 2018 and November 1, 2018 for the 2025 Notes. The 2025 Notes have no scheduled principal amortization payments prior to their final maturity on November 1, 2025.

 

The Indenture for the 2025 Notes contains certain covenants limiting the Company’s ability and the ability of its restricted subsidiaries (as defined in the Indenture) to, subject to certain exceptions and qualifications: (i) incur additional indebtedness; (ii) pay dividends or make other distributions on, redeem or repurchase, capital stock; (iii) make investments or other restricted payments; (iv) create or incur certain liens; (v) incur restrictions on the payment of dividends or other distributions from its restricted subsidiaries; (vi) enter into certain transactions with affiliates; (vii) sell assets; or (viii) effect a consolidation or merger.

 

The Indenture for the 2025 Notes also contains customary events of default, including, among other things, failure to pay interest, failure to comply with agreements related to the Indenture, failure to pay at maturity or acceleration of other indebtedness, failure to pay certain judgments, and certain events of insolvency or bankruptcy. Generally, if any event of default occurs, the Trustee or the holders of at least 25% in principal amount of the 2025 Notes may declare the 2025 Notes due and payable by providing notice to the Company. In case of default arising from certain events of bankruptcy or insolvency, the 2025 Notes will become immediately due and payable.

 

As of December 23, 2018, Nathan’s was in compliance with all covenants associated with the 2025 Notes.

 

The 2025 Notes are general senior secured obligations, are fully and unconditionally guaranteed by substantially all of the Company’s wholly-owned subsidiaries and rank pari passu in right of payment with all of the Company’s existing and future indebtedness that is not subordinated, are senior in right of payment to any of the Company’s existing and future subordinated indebtedness, are structurally subordinated to any existing and future indebtedness and other liabilities of the Company’s subsidiaries that do not guarantee the 2025 Notes, and are effectively junior to all existing and future indebtedness that is secured by assets other than the collateral securing the 2025 Notes. Pursuant to the terms of a collateral trust agreement, the liens securing the 2025 Notes and the guarantees will be contractually subordinated to the liens securing any future credit facility.

 

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The 2025 Notes and the guarantees will be the Company and the guarantors’ senior secured obligations and will rank:

 

 

senior in right of payment to all of the Company and the guarantors’ future subordinated indebtedness;

 

 

effectively senior to all unsecured senior indebtedness to the extent of the value of the collateral securing the 2025 Notes and the guarantees;

 

 

pari passu with all of the Company and the guarantors’ other senior indebtedness;

 

 

effectively junior to any future credit facility to the extent of the value of the collateral securing any future credit facility and the 2025 Notes and the guarantees and certain other assets;

 

 

effectively junior to any of the Company and the guarantors’ existing and future indebtedness that is secured by assets other than the collateral securing the 2025 Notes and the guarantees to the extent of the value of any such assets; and

 

 

structurally subordinated to the indebtedness of any of the Company’s current and future subsidiaries that do not guarantee the 2025 Notes.

 

Cash provided by operations of $7,373,000 in the fiscal 2019 period is primarily attributable to net income of $19,001,000 in addition to other non-cash operating expenses of $1,681,000, offset by gains from the sale of our Company-owned restaurant located in Bay Ridge, Brooklyn, NY and our Florida office of $11,177,000 and changes in other operating assets and liabilities of $2,132,000. Non-cash operating expenses consist principally of $962,000 depreciation and amortization, $518,000 amortization of debt issuance costs and $47,000 of excess income tax benefits from stock-based compensation arrangements as a result of the accounting for certain aspects of share-based payments to employees. In the fiscal 2019 period, accounts and other receivables decreased by $865,000 primarily due to lower receivables from Branded Product Program sales of $963,000, lower license royalties of $382,000, partly offset by increased seasonal advances to the Advertising Fund of $444,000. In the fiscal 2019 period, prepaid expenses and other current assets decreased by $2,270,000 due principally to the reduction of prepaid income taxes of $1,624,000 which were deposited in fiscal 2018, prior to the successful debt refinancing that have been applied to current year earnings and the utilization of various prepaid operating expenses of $646,000. The decrease in accounts payable, accrued expenses and other current liabilities of $5,196,000 is primarily due the reduction in accounts payable of $2,726,000 due principally to seasonal fluctuations, reduced accrued interest of $2,505,000, application of deposits payable of $1,201,000 toward proceeds from the sale of our Company-owned restaurant located in Bay Ridge, Brooklyn, NY, accrued benefits of $234,000 due primarily to the payment of prior year incentive compensation, and reductions in deferred revenue of $768,000 and accrued rebates of $533,000 and higher taxes payable of $3,032,000.

 

Cash provided by investing activities of $12,449,000 in the fiscal 2019 period primarily represents net proceeds received from the sale of our Company-owned restaurant located in Bay Ridge, Brooklyn, NY of $11,445,000, as well as the sale of our regional Florida office of $1,330,000, partially offset by capital expenditures incurred for our Branded Product Program and select restaurant improvements of $326,000.

 

Cash used in financing activities of $4,329,000 in the fiscal 2019 period relates primarily to the payments of the Company’s regular $0.25 per share cash dividend of $3,139,000. During the fiscal 2019 period, Nathan’s repurchased 14,390 shares of common stock for $1,000,000. The Company also paid $174,000 for withholding taxes on the net share vesting of employee restricted stock and dividends of $150,000 relating to the previously declared special cash dividend in connection with the vesting of 5,000 shares of the Company’s restricted stock. The Company also received $134,000 of proceeds from the exercise of stock options.

 

During the period from October 2001 through December 23, 2018, Nathan’s purchased 5,141,763 shares of its common stock at a cost of approximately $78,303,000 pursuant to stock repurchase plans previously authorized by the Board of Directors. Since March 26, 2007, we have repurchased 3,250,663 shares at a total cost of approximately $71,145,000, reducing the number of shares then-outstanding by 54.0%.

 

In 2016, the Company’s Board of Directors authorized increases to the sixth stock repurchase plan for the repurchase of up to 1,200,000 shares of the Company’s common stock on behalf of the Company. As of December 23, 2018, Nathan’s has repurchased 954,132 shares at a cost of $30,641,000 under the sixth stock repurchase plan. At December 23, 2018, there were 245,868 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.

 

-30-

 

 

As discussed above, we had cash and cash equivalents at December 23, 2018 aggregating $72,832,000. Our Board routinely monitors and assesses its cash position and our current and potential capital requirements. In November 2017, we refinanced our 2020 Notes through the issuance of the 2025 Notes and, our Board of Directors announced the payment of a $5.00 per share special dividend to the shareholders of record as of the close of business on December 22, 2017. On May 31, 2018, Nathans’ Board of Directors authorized the commencement of a regular dividend of $1.00 per share per annum, payable at the rate of $0.25 per share per quarter. Through December 23, 2018, we have declared and paid three quarterly dividend distributions totaling $3,139,000.

 

Effective February 1, 2019, the Board declared its fourth quarterly cash dividend of $0.25 per share which is payable on March 22, 2019 to stockholders of record as of the close of business on March 11, 2019. Our ability to pay future dividends is limited by the terms of the Indenture for the 2025 Notes. In addition, the 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. We may also return capital to our stockholders through stock repurchases, subject to any restrictions in the Indenture, although there is no assurance that the Company will make any repurchases under its existing stock-repurchase plan.

 

We expect that in the future we will make investments in certain existing restaurants, support the growth of the Branded Product and Branded Menu Programs, service the outstanding debt and continue our stock repurchase programs, funding those investments from our operating cash flow. We may also incur capital and other expenditures or engage in investing activities in connection with opportunistic situations that may arise on a case-by-case basis. In the fiscal year ending March 31, 2019, we are required to make interest payments of $9,937,500, all of which have been made as of November 1, 2018. During the fiscal year ending March 29, 2020, we will be required to make interest payments of $9,937,500.

 

Management believes that available cash and cash equivalents, and cash generated from operations should provide sufficient capital to finance our operations, satisfy our debt service requirements and provide for our quarterly stock dividends and any stock repurchases for at least the next 12 months.

 

At December 23, 2018, we sublet one property to a franchisee that we lease from a third party. We remain contingently liable for all costs associated with this property including: rent, property taxes and insurance. We may incur future cash payments with respect to such property, consisting primarily of future lease payments, including costs and expenses associated with terminating such lease.

 

The following schedule represents Nathan’s cash contractual obligations and commitments by maturity as of December 23, 2018 (in thousands):

 

   

Payments Due by Period

 

Cash Contractual Obligations

 

Total

   

Less than
1 Year

   

1-3 Years

   

3-5 Years

   

More than
5 Years

 

Long term debt (a)

  $ 150,000     $ -     $ -     $ -     $ 150,000  

Employment Agreements

    5,850       1,500       2,000       1,750       600  

Operating Leases

    10,043       1,602       2,172       2,189       4,080  

Gross Cash Contractual Obligations

    165,893       3,102       4,172       3,939       154,680  

Sublease Income

    1,684       267       490       364       563  

Net Cash Contractual Obligations

  $ 164,209     $ 2,835     $ 3,682     $ 3,575     $ 154,117  

 

 

a)

Represents the 2025 Notes.

 

 

b)

At December 23, 2018, the Company had unrecognized tax benefits of $249,000.

 

On February 27, 2017, a wholly-owned subsidiary of the Company executed a Guaranty of Lease (the “Brooklyn Guaranty”) in connection with its re-franchising of a restaurant located in Brooklyn, New York. The Company is obligated to make payments under the Brooklyn Guaranty in the event of a default by the tenant/franchisee. The Brooklyn Guaranty has an initial term of 10 years and one 5-year option and is limited to 24 months of rent for the first three years of the term. Nathan’s has recorded a liability of $204,015 in connection with the Brooklyn Guaranty which does not include potential percentage rent, real estate tax increases, attorney’s fees and other costs as these amounts are not reasonably determinable at this time. Nathan’s has received a personal guaranty from the franchisee for all obligations under the Brooklyn Guaranty. For the remainder of the term, the Brooklyn Guaranty is limited to 12 months of rent plus reasonable costs of collection and attorney’s fees.     

 

-31-

 

 

Inflationary Impact           

 

We do not believe that general inflation has materially impacted earnings since 2006. However, we have experienced significant volatility in our costs for our hot dogs and certain food products, distribution costs and utilities. From 2011 through 2014, we experienced unprecedented increases in the cost of beef. Beginning March 2015, the beef markets stabilized through June 2015 before subsequently declining by approximately 30%. As a result of the decline through March 2016, the market price of hot dogs during the fiscal year ended March 27, 2016 was approximately 7.1% lower than the fiscal year ended March 29, 2015. During the fiscal 2017 period, beef prices remained favorable, and as such, our market price for hot dogs was 17.1% lower than during the fiscal 2016 period. Despite the favorable pricing of fiscal 2017, prices began escalating in January 2017 and continued increasing through June 2017 before beginning to slightly decline until July which is when the costs stabilized through March 2018 at approximately 10% higher than the same period of the fiscal 2017 period. Since April 2018 our commodity cost for hot dogs had been stable before beginning to decline in September 2018 into December 2018. As such, our market price for hot dogs during our fiscal 2019 period was approximately 8.7% lower than the fiscal 2018 period.

 

We are unable to predict the future cost of our hot dogs and expect to experience price volatility for our beef products during fiscal 2019. To the extent that beef prices increase as compared to earlier periods, it could impact our results of operations. In the past, we entered into purchase commitments for a portion of our hot dogs to reduce the impact of increasing market prices. Our most recent purchase commitment was completed in 2016 for approximately 2,600,000 pounds of hot dogs at approximately $2.01 per pound. We may attempt to enter into similar purchase arrangements for hot dogs and other products in the future. Additionally, we expect to continue experiencing volatility in oil and gas prices on our distribution costs for our food products and utility costs in the Company-owned restaurants and volatile insurance costs resulting from the uncertainty of the insurance markets.

 

New York State enacted legislation increasing the minimum hourly wage for fast food workers of restaurant chains with 30 or more locations nationwide. The increase will be phased in differently between New York City and the rest of New York State. Effective December 31, 2018, the minimum wage increased to $15.00 in New York City.

 

The minimum hourly rate of pay for the remainder of New York State increased to $12.75 on Dec. 31, 2018; and will increase to $13.75 on Dec. 31, 2019; $14.50 on Dec. 31, 2020; and $15.00 on July 1, 2021.

 

All of Nathan’s Company-operated restaurants are within New York State, three of which have operated within New York City that have been affected by this new legislation.

 

The Company is further studying the impact on the Company’s operations and is developing strategies and tactics, including pricing and potential operating efficiencies, to minimize the effects of these increases and future increases. We have recently increased certain selling prices to pass on recent cost of sales increases. However, if we are unable to fully offset these and future increases through pricing and operating efficiencies, our margins and profits will be negatively affected.

 

Effective April 1, 2014, the City of New York, passed legislation requiring employers to offer paid sick leave to all employees, including part-time employees, who work more than 80 hours for the employer. Nathan’s operated three restaurants that have been affected by this new legislation.

 

Effective November 27, 2017, the City of New York Fair Work Legislation package of bills took effect that the city estimates will cover some 65,000 fast food workers by giving them more predictable work schedules. A key component of the package is a requirement that fast food restaurants schedule their workers at least two weeks in advance or pay employees between $10 to $75 per change, depending on the situation. Sales at our Coney Island restaurants are significantly impacted by weather conditions, particularly during the summer months. We have estimated that the daily penalty could amount to as much as $10,000 per day during the height of the summer season at our two Coney Island restaurants.

 

Continued increases in labor, food and other operating expenses, including health care, could adversely affect our operations and those of the restaurant industry and we might have to further reconsider our pricing strategy as a means to offset reduced operating margins.

 

We believe that these increases in the minimum wage and other labor regulations could have a significant financial impact on our financial results and the results of our franchisees that operate in New York State. Our business could be negatively impacted if the decrease in margins for our franchisees results in the potential loss of new franchisees or the closing of a significant number of franchised restaurants.

 

The Company’s business, financial condition, operating results and cash flows can be impacted by a number of factors, including but not limited to those set forth above in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” any one of which could cause our actual results to vary materially from recent results or from our anticipated future results. For a discussion identifying additional risk factors and important factors that could cause actual results to differ materially from those anticipated, also see the discussions in “Forward-Looking Statements” and “Notes to Consolidated Financial Statements” in this Form 10-Q and “Risk Factors” in our Form 10-K for our fiscal year ended March 25, 2018.

 

-32-

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

Cash and Cash Equivalents

 

We have historically invested our cash and cash equivalents in money market funds or short-term, fixed rate, highly rated and highly liquid instruments which are generally reinvested when they mature. Although these existing investments are not considered at risk with respect to changes in interest rates or markets for these instruments, our rate of return on short-term investments could be affected at the time of reinvestment as a result of intervening events. As of December 23, 2018, Nathan’s cash and cash equivalents aggregated $72,832,000. Earnings on this cash would increase or decrease by approximately $182,000 per annum for each 0.25% change in interest rates.

 

Borrowings

 

At December 23, 2018, we had $150,000,000 of 2025 Notes outstanding which are due in November 2025. Interest expense on these borrowings would increase or decrease by approximately $375,000 per annum for each 0.25% change in interest rates. We currently do not anticipate entering into interest rate swaps or other financial instruments to hedge our borrowings.

 

Commodity Costs 

 

We do not believe that general inflation has materially impacted earnings since 2006. However, we have experienced significant volatility in our costs for our hot dogs and certain food products, distribution costs and utilities. From 2011 through 2014, we experienced unprecedented increases in the cost of beef. Beginning March 2015, the beef markets stabilized through June 2015 before subsequently declining by approximately 30%. As a result of the decline through March 2016, the market price of hot dogs during the fiscal year ended March 27, 2016 was approximately 7.1% lower than the fiscal year ended March 29, 2015. During the fiscal 2017 period, beef prices remained favorable, and as such, our market price for hot dogs was 17.1% lower than during the fiscal 2016 period. Despite the favorable pricing of fiscal 2017, prices began escalating in January 2017 and continued increasing through June 2017 before beginning to slightly decline until July which is when the costs stabilized through March 2018 at approximately 10% higher than the same period of the fiscal 2017 period. Since April 2018 our commodity cost for hot dogs had been stable before beginning to decline in September 2018 into December 2018. As such, our market price for hot dogs during our fiscal 2019 period was approximately 8.7% lower than the fiscal 2018 period.

 

We are unable to predict the future cost of our hot dogs and expect to experience price volatility for our beef products during fiscal 2019. To the extent that beef prices increase as compared to earlier periods, it could impact our results of operations. In the past, we entered into purchase commitments for a portion of our hot dogs to reduce the impact of increasing market prices. Our most recent purchase commitment was completed in 2016 for approximately 2,600,000 pounds of hot dogs at approximately $2.01 per pound. We may attempt to enter into similar purchase arrangements for hot dogs and other products in the future. Additionally, we expect to continue experiencing volatility in oil and gas prices on our distribution costs for our food products and utility costs in the Company-owned restaurants and volatile insurance costs resulting from the uncertainty of the insurance markets.

 

With the exception of purchase commitments, we have not attempted to hedge against fluctuations in the prices of the commodities we purchase using future, forward, option or other instruments. As a result, we expect that the majority of our future commodity purchases will be subject to market changes in the prices of such commodities. We have attempted to enter sales agreements with our customers that are correlated to our cost of beef, thus reducing our market volatility, or have passed through permanent increases in our commodity prices to our customers that are not on formula pricing, thereby reducing the impact of long-term increases on our financial results. A short-term increase or decrease of 10.0% in the cost of our food and paper products for the thirty-nine weeks ended December 23, 2018 would have increased or decreased our cost of sales by approximately $3,656,000.

 

Foreign Currencies

 

Foreign franchisees generally conduct business with us and make payments in United States dollars, reducing the risks inherent with changes in the values of foreign currencies. As a result, we have not purchased future contracts, options or other instruments to hedge against changes in values of foreign currencies and we do not believe fluctuations in the value of foreign currencies would have a material impact on our financial results.

 

-33-

 

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as required by Exchange Act Rule 13a-15.  Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective to ensure that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

 

Changes in Internal Controls

 

There were no changes in our internal controls over financial reporting that occurred during the quarter ended December 23, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

Limitations on the Effectiveness of Controls

 

We believe that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives and our Chief Executive Officer and Chief Financial Officer have concluded that such controls and procedures are effective at the reasonable assurance level.

 

-34-

 

 

PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

None

 

Item 1A. Risk Factors. 

 

In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in Part I, “Item 1A. Risk Factors” in the Annual Report on Form 10-K for the fiscal year ended March 25, 2018, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing Nathan's. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

ISSUER PURCHASES OF EQUITY SECURITIES

 

 

 

 

 

 

Period (A)

 

 

 

 

Total Number of

Shares Purchased

(B)

 

 

 

 

Average Price Paid

per Share

 

 

Total Number of

Shares Purchased as

Part of Publicly

Announced Plans or

Programs

 

 

Maximum Number

of Shares that May

Yet Be Purchased

Under the Plans or

Programs (C)

 

September 24, 2018

October 21, 2018

 

-

 

-

 

-

 

260,258

 

October 22, 2018

November 18, 2018

 

3,560

 

$69.95

 

3,560

 

256,698

 

November 19, 2018

December 23, 2018

 

10,830

 

$69.29

 

10,830

 

245,868

 

Total

 

14,390

 

$69.45

 

14,390

 

245,868

 

 

A)

Represents the Company’s fiscal periods during the quarter ended December 23, 2018.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

 

Item 4. Mine Safety Disclosures.

 

None.

 

 

Item 5. Other Information.

 

None.

 

-35-

 

 

Item 6. Exhibits. 

 

 

3.1

Certificate of Incorporation. (Incorporated by reference to Exhibit 3.1 to Registration Statement on Form S-1 No. 33- 56976.)

 

 

3.2

Amendment to the Certificate of Incorporation, filed December 15, 1992. (Incorporated by reference to Exhibit 3.2 to Registration Statement on Form S-1 No. 33-56976.)

 

 

3.3

By-Laws, as amended. (Incorporated by reference to Exhibit 3.1 to Form 8-K dated November 1, 2006.)

 

 

4.1

Specimen Stock Certificate. (Incorporated by reference to Exhibit 4.1 to Registration Statement on Form S-1 No. 33-56976.)

 

 

4.2

Indenture, dated as of November 1, 2017, by and among Nathan’s Famous, Inc., certain of its wholly owned subsidiaries, as guarantors, and U.S. Bank National Association, a National Banking Association, as trustee and collateral trustee (including the form of Note) (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report filed on Form 8-K dated November 1, 2017.)

 

 

31.1

*Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

31.2

*Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

32.1

*Certification by Eric Gatoff, CEO, Nathan’s Famous, Inc., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

32.2

*Certification by Ronald G. DeVos, CFO, Nathan’s Famous, Inc., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

101.1

*The following materials from the Nathan’s Famous, Inc., Quarterly Report on Form 10-Q for the quarter ended December 23, 2018 formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Earnings, (iii) the Consolidated Statement of Stockholders’ (Deficit), (iv) the Consolidated Statements of Cash Flows and (v) related notes.

 

 

 

*Filed herewith.

 

-36-

 

 

SIGNATURES

 

        Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

NATHAN'S FAMOUS, INC.

 

 

 

 

 

 Date: February 1, 2019

By:

/s/ Eric Gatoff

 

 

 

Eric Gatoff

 

 

 

Chief Executive Officer

 

    (Principal Executive Officer)  
       
Date: February 1, 2019 By: /s/ Ronald G. DeVos  
    Ronald G. DeVos  
    Vice President - Finance  
    and Chief Financial Officer  
    (Principal Financial and Accounting Officer)  

 

-37-

 

 

Exhibit Index. 

 

 

3.1

Certificate of Incorporation. (Incorporated by reference to Exhibit 3.1 to Registration Statement on Form S-1 No. 33- 56976.)

 

 

3.2

Amendment to the Certificate of Incorporation, filed December 15, 1992. (Incorporated by reference to Exhibit 3.2 to Registration Statement on Form S-1 No. 33-56976.)

 

 

3.3

By-Laws, as amended. (Incorporated by reference to Exhibit 3.1 to Form 8-K dated November 1, 2006.)

 

 

4.1

Specimen Stock Certificate. (Incorporated by reference to Exhibit 4.1 to Registration Statement on Form S-1 No. 33-56976.)

 

 

4.2

Indenture, dated as of November 1, 2017, by and among Nathan’s Famous, Inc., certain of its wholly owned subsidiaries, as guarantors, and U.S. Bank National Association, a National Banking Association, as trustee and collateral trustee (including the form of Note) (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report filed on Form 8-K dated November 1, 2017.)

 

 

 31.1

*Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 31.2

*Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 32.1

*Certification by Eric Gatoff, CEO, Nathan’s Famous, Inc., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 32.2

*Certification by Ronald G. DeVos, CFO, Nathan’s Famous, Inc., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

101.1

*The following materials from the Nathan’s Famous, Inc., Quarterly Report on Form 10-Q for the quarter ended December 23, 2018 formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Earnings, (iii) the Consolidated Statement of Stockholders’ (Deficit), (iv) the Consolidated Statements of Cash Flows and (v) related notes.

 

 

   

*Filed herewith.

  

-38-

ex_133371.htm

Exhibit 31.1

CERTIFICATION

I, Eric Gatoff, certify that:

 

 

1.

I have reviewed this quarterly report on Form 10-Q for the quarter ended December 23, 2018 of Nathan’s Famous, Inc.;

 

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

 

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

   

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

 

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

                               

 

 

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

                               

 

 

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

 

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

                               

 

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

                               

   

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

 

Date: February 1, 2019 /s/ Eric Gatoff
  Eric Gatoff
  Chief Executive Officer
  (Principal Executive Officer)

 

ex_133372.htm

Exhibit 31.2

CERTIFICATION

I, Ronald G. DeVos, certify that:

 

 

1.

I have reviewed this quarterly report on Form 10-Q for the quarter ended December 23, 2018 of Nathan’s Famous, Inc.;

 

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

 

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

 

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

 

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

                               

 

 

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

                               

 

 

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

 

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

                               

 

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

                               

   

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

                

Date: February 1, 2019 /s/ Ronald G. DeVos
  Ronald G. DeVos
  Chief Financial Officer
  (Principal Financial Officer and
  Principle Accounting Officer)

 

ex_133373.htm

Exhibit 32.1

 

CERTIFICATION PURSUANT TO

 

18 U.S.C. SECTION 1350

 

AS ADOPTED PURSUANT TO

 

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

 

I, Eric Gatoff, Chief Executive Officer of Nathan’s Famous, Inc., certify that:

 

The quarterly report on Form 10-Q of Nathan’s Famous, Inc. for the period ended December 23, 2018 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

 

The information contained in such report fairly presents, in all material respects, the financial condition and results of operations of Nathan’s Famous, Inc.

 

 

  /s/ Eric Gatoff 
  Eric Gatoff
  Chief Executive Officer
 

(Principal Executive Officer)

  Date: February 1, 2019

 

 

A signed original of this written statement required by Section 906 has been provided to Nathan’s Famous, Inc. and will be retained by Nathan’s Famous, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

 

 


 

ex_133374.htm

 

Exhibit 32.2

 

CERTIFICATION PURSUANT TO

 

18 U.S.C. SECTION 1350

 

AS ADOPTED PURSUANT TO

 

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

 

I, Ronald G. DeVos, Chief Financial Officer of Nathan’s Famous, Inc., certify that:

 

The quarterly report on Form 10-Q of Nathan’s Famous, Inc. for the period ended December 23, 2018 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

                               

The information contained in such report fairly presents, in all material respects, the financial condition and results of operations of Nathan’s Famous, Inc.

                                                                                                                                             

 

  /s/ Ronald G. DeVos
  Ronald G. DeVos
  Chief Financial Officer
  (Principal Financial Officer and
  Principal Accounting Officer)
  Date: February 1, 2019

                                                                                                                                                                            

A signed original of this written statement required by Section 906 has been provided to Nathan’s Famous, Inc. and will be retained by Nathan’s Famous, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

 

 

 

 

 

v3.10.0.1
Document And Entity Information - shares
9 Months Ended
Dec. 23, 2018
Feb. 01, 2019
Document Information [Line Items]    
Entity Registrant Name NATHANS FAMOUS INC  
Entity Central Index Key 0000069733  
Trading Symbol nath  
Current Fiscal Year End Date --03-31  
Entity Filer Category Accelerated Filer  
Entity Current Reporting Status Yes  
Entity Emerging Growth Company false  
Entity Small Business true  
Entity Common Stock, Shares Outstanding (in shares)   4,177,179
Document Type 10-Q  
Document Period End Date Dec. 23, 2018  
Document Fiscal Year Focus 2019  
Document Fiscal Period Focus Q3  
Amendment Flag false  
v3.10.0.1
Consolidated Balance Sheets (Current Period Unaudited) - USD ($)
$ in Thousands
Dec. 23, 2018
Mar. 25, 2018
CURRENT ASSETS    
Cash and cash equivalents $ 72,832 $ 57,339
Accounts and other receivables, net (Note F) 9,589 10,502
Inventories 482 384
Prepaid expenses and other current assets (Note G) 603 2,873
Assets held for sale (Note H) 610
Total current assets 83,506 71,708
Property and equipment, net of accumulated depreciation of $8,963 and $8,264, respectively 5,018 6,642
Goodwill 95 95
Intangible asset 1,353 1,353
Deferred income taxes 456 0
Long term contractual accounts receivable 400
Other assets 341 293
Total assets 91,169 80,091
CURRENT LIABILITIES    
Accounts payable 3,839 6,565
Accrued expenses and other current liabilities (Note I) 8,675 11,248
Deferred franchise fees 319 193
Total current liabilities 12,833 18,006
Long-term debt, net of unamortized debt issuance costs of $4,724 and $5,242, respectively (Note O) 145,276 144,758
Other liabilities (Note I) 1,377 1,355
Deferred franchise fees 3,300 238
Deferred income taxes 302
Total liabilities 162,786 164,659
COMMITMENTS AND CONTINGENCIES (Note P)
STOCKHOLDERS’ (DEFICIT)    
Common stock, $.01 par value; 30,000,000 shares authorized; 9,318,942 and 9,311,922 shares issued; and 4,177,179 and 4,184,549 shares outstanding at December 23, 2018 and March 25, 2018, respectively 93 93
Additional paid-in capital 60,916 60,823
(Accumulated deficit) (54,323) (68,181)
Stockholders’ equity (deficit) before treasury stock 6,686 (7,265)
Treasury stock, at cost, 5,141,763 and 5,127,373 shares at December 23, 2018 and March 25, 2018 (78,303) (77,303)
Total stockholders’ (deficit) (71,617) (84,568)
Total liabilities and stockholders’ (deficit) $ 91,169 $ 80,091
v3.10.0.1
Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($)
$ in Thousands
Dec. 23, 2018
Mar. 25, 2018
Property and equipment accumulated depreciation $ 8,963 $ 8,264
Long-term debt, unamortized debt costs $ 4,724 $ 5,242
Common stock, par value (in dollars per share) $ 0.01 $ 0.01
Common stock, shares authorized (in shares) 30,000,000 30,000,000
Common stock, shares issued (in shares) 9,318,942 9,311,922
Common stock, shares outstanding (in shares) 4,177,179 4,184,549
Treasury stock, shares (in shares) 5,141,763 5,127,373
v3.10.0.1
Consolidated Statements of Earnings (Unaudited) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Dec. 23, 2018
Dec. 24, 2017
Dec. 23, 2018
Dec. 24, 2017
REVENUES        
Revenues $ 20,222 $ 22,021 [1] $ 79,720 [1] $ 84,295 [1]
COSTS AND EXPENSES        
Cost of sales 10,660 12,537 41,266 47,853
Restaurant operating expenses 766 760 2,817 2,769
Depreciation and amortization 278 320 962 1,055
General and administrative expenses 3,031 3,034 10,354 10,064
Advertising fund expense (Note B) 591 0 1,858
Total costs and expenses 15,326 16,651 57,257 61,741
Income from operations 4,896 5,370 22,463 22,554
Gain on sale of property and equipment 10,821 11,177
Loss on debt extinguishment (8,872) (8,872)
Interest expense (2,650) (3,650) (7,951) (10,976)
Interest income 277 44 453 114
Other income, net 5 22 189 64
Income (loss) before provision (benefit) for income taxes 13,349 (7,086) 26,331 2,884
Provision (benefit) for income taxes 3,627 (3,307) 7,330 621
Net income (loss) $ 9,722 $ (3,779) $ 19,001 $ 2,263
PER SHARE INFORMATION        
Basic (in shares) 4,187,000 4,185,000 4,187,000 4,180,000
Diluted (in shares) 4,221,000 4,185,000 4,226,000 4,219,000
Basic (in dollars per share) $ 2.32 $ (0.90) $ 4.54 $ 0.54
Diluted (in dollars per share) 2.30 (0.90) 4.50 0.54
Dividends declared per share (in dollars per share) $ 0.25 $ 5 $ 0.75 $ 5
Product [Member]        
REVENUES        
Revenues $ 14,404 $ 16,705 [1] $ 56,448 [1] $ 63,327 [1]
License [Member]        
REVENUES        
Revenues 4,316 4,228 [1] 18,160 [1] 17,393 [1]
Franchise Fees and Royalties [Member]        
REVENUES        
Revenues 911 1,088 [1] 3,254 [1] 3,575 [1]
Advertising Fund Revenue [Member]        
REVENUES        
Revenues $ 591 [1] $ 1,858 [1] [1]
[1] As disclosed in Note B, prior period amounts have not been adjusted under the modified retrospective method of adoption of ASC 606.
v3.10.0.1
Consolidated Statement of Stockholders' (Deficit) (Unaudited) - 9 months ended Dec. 23, 2018 - USD ($)
Common Stock [Member]
Additional Paid-in Capital [Member]
Retained Earnings [Member]
Treasury Stock [Member]
Total
Balance (in shares) at Mar. 25, 2018 9,311,922     5,127,373 4,184,549
Balance at Mar. 25, 2018 $ 93,000 $ 60,823,000 $ (68,181,000) $ (77,303,000) $ (84,568,000)
Cumulative effect of the adoption of ASC 606 at Mar. 25, 2018 (2,004,000) (2,004,000)
Shares issued in connection with share-based compensation plans (in shares) 7,020      
Shares issued in connection with share-based compensation plans 134,000 134,000
Withholding tax on net share settlement of share-based compensation plans (174,000) $ (174,000)
Repurchase of common stock (in shares)     14,390 14,390
Repurchase of common stock $ (1,000,000) $ (1,000,000)
Dividends on common stock     (3,139,000)   (3,139,000)
Share-based compensation 133,000 133,000
Net income 19,001,000 $ 19,001,000
Balance (in shares) at Dec. 23, 2018 9,318,942     5,141,763 4,177,179
Balance at Dec. 23, 2018 $ 93,000 $ 60,916,000 $ (54,323,000) $ (78,303,000) $ (71,617,000)
v3.10.0.1
Consolidated Statements of Cash Flows (Unaudited) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended 12 Months Ended
Dec. 23, 2018
Dec. 24, 2017
Dec. 23, 2018
Dec. 24, 2017
Mar. 25, 2018
Cash flows from operating activities:          
Net income $ 9,722 $ (3,779) $ 19,001 $ 2,263  
Adjustments to reconcile net income to net cash provided by operating activities          
Loss on debt extinguishment 8,872 8,872  
Depreciation and amortization 278 320 962 1,055  
Gain on sale of property and equipment     (11,177)  
Amortization of debt issuance costs     518 932  
Share-based compensation expense     133 298  
Income tax benefit on stock option exercises     47 194  
Provision for doubtful accounts     48 42 $ 34
Deferred income taxes     (27) (63)  
Changes in operating assets and liabilities:          
Accounts and other receivables, net     865 (2,967)  
Inventories     (98) 173  
Prepaid expenses and other current assets     2,270 (2,259)  
Long term contractual accounts receivable     (400)  
Other assets     (48) 5  
Accounts payable, accrued expenses and other current liabilities     (5,196) (779)  
Deferred franchise fees     453 100  
Other liabilities     22 (71)  
Net cash provided by operating activities     7,373 7,795  
Cash flows from investing activities:          
Proceeds from disposal of property and equipment     12,775  
Purchase of property and equipment     (326) (488)  
Net cash provided by (used in) investing activities     12,449 (488)  
Cash flows from financing activities:          
Proceeds from issuance of long-term debt     150,000  
Cash payments for extinguishment of debt     (135,000)  
Premium paid on extinguishment of debt     (6,750)  
Debt issuance costs     (4,902)  
Proceeds from exercise of stock options     134  
Dividends paid to stockholders     (3,289) (125)  
Payments of withholding tax on net share settlement of share-based compensation plans     (174) (157)  
Repurchase of treasury stock     (1,000)  
Net cash (used in) provided by financing activities     (4,329) 3,066  
Net increase in cash and cash equivalents     15,493 10,373  
Cash and cash equivalents beginning of period     57,339 56,915 56,915
Cash and cash equivalents, end of period 72,832 67,288 72,832 67,288 $ 57,339
Cash paid during the period for:          
Interest     9,936 9,038  
Income taxes paid     2,658 3,447  
Noncash financing activity:          
Dividends declared $ 20,948 $ 20,948  
v3.10.0.1
Note A - Basis of Presentation
9 Months Ended
Dec. 23, 2018
Notes to Financial Statements  
Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]
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 23, 2018
and
December 24, 2017
have been prepared in accordance with accounting principles generally accepted in the United States of America. The unaudited financial statements include all adjustments (consisting of normal recurring adjustments) which, in the opinion of management, are necessary for a fair presentation of financial condition, results of operations and cash flows for the periods presented. However, our results of operations are seasonal in nature, and the results of any interim period are
not
necessarily indicative of results for any other interim period or the full fiscal year.
 
Certain information and footnote disclosures normally included in financial statements in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to the requirements of the Securities and Exchange Commission. We have reclassified certain prior period items in the Consolidated Balance Sheet as of
March 25, 2018
and the Statement of Earnings for the
thirteen
and
thirty-nine
week periods ended
December 24, 2017
to be comparable with the classifications as of and for the
thirteen
and
thirty-nine
week periods ended
December 23, 2018.
These reclassifications had
no
effect on previously reported total assets, total liabilities, stockholders’ deficit or net income (loss). 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 25, 2018.
 
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 25, 2018.
 
Effective
March 26, 2018,
the Company adopted Accounting Standards Codification
606,
“Revenue Recognition – Revenue from Contracts with Customers” (“ASC
606”
). There have been
no
other significant changes to the Company’s significant accounting policies subsequent to
March 25, 2018.
v3.10.0.1
Note B - Adoption of New Accounting Pronouncements
9 Months Ended
Dec. 23, 2018
Notes to Financial Statements  
New Accounting Pronouncements and Changes in Accounting Principles [Text Block]
NOTE B – ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS
 
Revenue recognition
 
In
May 2014,
the Financial Accounting Standards Board (“FASB”) issued guidance codified in ASC
606
which amends the guidance in former ASC
605,
“Revenue Recognition.” The core principle of the standard is to recognize revenue when control of the promised goods or services is transferred to customers in an amount that reflects the consideration expected to be received for those goods or services. The standard also requires additional disclosures around the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.
 
This adoption of the new standard did
not
impact the Company’s recognition of sales from Company-operated restaurants as those sales are recognized on a cash basis at the time of the underlying sale and are presented net of sales tax. The standard also did
not
impact the recognition of sales from its Branded Product Program or its recognition of royalty income earned from its franchised restaurants or retail licenses, which are based on a percent of sales and recognized at the time the underlying sales occur.
 
The details of the significant changes in revenue recognition and quantitative impact of the changes are discussed below.
 
Franchise fees and international development fees
 
Under previous revenue recognition guidance, franchise fees were recognized as income when substantially all services to be performed by Nathan’s and conditions relating to the sale of the franchise had been performed or satisfied, which generally occurred when the franchised restaurant commenced operations.
 
Under previous revenue recognition guidance, international development fees were recognized as income, net of direct expenses, upon the opening of the
first
restaurant within the territory.
 
Under the new guidance, the standard requires that the transaction price received from customers be allocated to each separate and distinct performance obligation. The transaction price attributable to each separate and distinct performance obligation is then recognized as the performance obligations are satisfied. The services that we provide related to upfront fees we receive from franchisees do
not
contain separate and distinct performance obligations from the franchise right and as of
March 26, 2018,
initial restaurant franchise fees, renewal fees, transfer fees, and international development fees shall be recognized over the term of the respective agreement.
 
National advertising fund
 
The Company maintains a national advertising fund (the “Advertising Fund”) established to collect and administer funds contributed for use in advertising and promotional programs for Company-operated and franchised restaurants. Previously, the revenue, expenses and cash flows of the Advertising Fund were reported on the Company’s Consolidated Balance Sheets and
not
included in the Company’s Consolidated Statements of Earnings and Statements of Cash Flows because the contributions to the Advertising Fund were designated for specific purposes and the Company acted as an agent, in substance, with regard to these contributions as a result of industry-specific guidance.
 
Under the new guidance, which supersedes the previous industry-specific guidance, the revenue, expenses and cash flows of the Advertising Fund are fully consolidated into the Company’s Consolidated Statements of Earnings and Statements of Cash Flows.
 
While this treatment will impact the gross amount of reported advertising fund revenue and related expenses, the impact is expected to be an offsetting increase to both revenue and expense with
no
impact to income from operations or net income because the Company attempts to manage the Advertising Fund to breakeven over the course of the fiscal year. However, any surplus or deficit in the Advertising Fund will impact income from operations and net income.
 
The Company applied the new guidance using the modified retrospective method, whereby the cumulative effect of initially adopting the guidance was recognized as an adjustment to the opening balance of accumulated deficit at
March 26, 2018
in the amount of
$2,004,000,
net of tax. Therefore, the results of operations from the comparative period have
not
been adjusted and continue to be reported under the previous revenue recognition guidance.
 
Impacts on
Consolidated Financial S
tatements
 
The following tables summarize the impact of adopting ASC
606
on the Company’s condensed consolidated financial statements as of and for the
thirteen
and
thirty-nine
weeks ended
December 23, 2018 (
in thousands):
       
   
 
 
 
 
Adjustments
   
 
 
 
   
 
As
Reported
   
 
Franchise
Fees
   
Balance
Sheet
Reclassi
-
fications
   
Balances
Without
Adoption
 
Condensed Consolidated
Balance Sheet
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dece
mber 23, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred income taxes
   
456
     
(731
)    
275
     
-
 
Total assets
   
91,169
     
(731
)    
275
     
90,713
 
Accrued expenses and other current liabilities
   
8,675
     
(150
)    
-
     
8,525
 
Deferred franchise fees
   
319
     
(378
)    
376
     
317
 
Total current liabilities
   
12,833
     
(528
)    
376
     
12,681
 
Deferred income taxes
   
-
     
-
     
275
     
275
 
Deferred franchise fees
   
3,300
     
(2,112
)    
(376
)    
812
 
Total liabilities
   
162,786
     
(2,640
)    
275
     
160,421
 
(Accumulated deficit)
   
(54,323
)    
1,909
     
-
     
(52,414
)
Stockholders’ equity before treasury stock
   
6,686
     
1,909
     
-
     
8,595
 
Total stockholders’ (deficit)
   
(71,617
)    
1,909
     
-
     
(69,708
)
Total liabilities and stockholders’ (deficit)
   
91,169
     
(731
)    
275
     
90,713
 
 
 
   
 
 
 
 
Adjustments
   
 
 
 
   
 
As
Reported
   
 
Franchise
Fees
   
Balance
Sheet
Reclassi-
fications
   
Balances
Without
Adoption
 
Condensed Consolidated Statement of Earnings
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Thirteen weeks ended
Dec
ember 23, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Franchise fees and royalties
   
911
     
(107
)    
-
     
804
 
Advertising fund revenue
   
591
     
-
     
(591
)    
-
 
Total revenues
   
20,222
     
(107
)    
(591
)    
19,524
 
General and administrative expenses
   
3,031
     
(12
)    
-
     
3,019
 
Advertising fund expense
   
591
     
-
     
(591
)    
-
 
Total costs and expenses
   
15,326
     
(12
)    
(591
)    
14,723
 
Income from operations
   
4,896
     
(95
)    
-
     
4,801
 
Income before provision for income taxes
   
13,349
     
(95
)    
-
     
13,254
 
Provision for income taxes
   
3,627
     
(26
)    
-
     
3,601
 
Net income
   
9,722
     
(69
)    
-
     
9,653
 
                                 
Condensed Consolidated Statement of Earnings
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
T
hirty
-
nine
weeks ended
Dec
ember 23, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Franchise fees and royalties
   
3,254
     
(245
)    
-
     
3,009
 
Advertising fund revenue
   
1,858
     
-
     
(1,858
)    
-
 
Total revenues
   
79,720
     
(245
)    
(1,858
)    
77,617
 
General and administrative expenses
   
10,354
     
(110
)    
-
     
10,244
 
Advertising fund expense
   
1,858
     
-
     
(1,858
)    
-
 
Total costs and expenses
   
57,257
     
(110
)    
(1,858
)    
55,289
 
Income from operations
   
22,463
     
(135
)    
-
     
22,328
 
Income before provision for income taxes
   
26,331
     
(135
)    
-
     
26,196
 
Provision for income taxes
   
7,330
     
(40
)    
-
     
7,290
 
Net income
   
19,001
     
(95
)    
-
     
18,906
 
 
   
 
 
 
 
Adjustments
   
 
 
 
   
 
As
Reported
   
 
Franchise
Fees
   
 
Advertising
Fund
   
Balances
Without
Adoption
 
Condensed Consolidated Statement of Cash Flows
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
T
hirty-nine
weeks ended
December
23, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash flows from operating activities:
                               
Net income
   
19,001
     
(95
)    
-
     
18,906
 
Changes in operating assets and liabilities:
                               
Accounts payable, accrued expenses and other current liabilities
   
(5,196
)    
(150
)    
-
     
(5,346
)
Deferred franchise fees
   
453
     
245
     
-
     
698
 
Net cash provided by operating activities
   
7,373
     
-
     
-
     
7,373
 
Net cash provided by investing activities
   
12,449
     
-
     
-
     
12,449
 
Net cash (used in) financing activities
   
(4,329
)    
-
     
-
     
(4,329
)
Net increase in cash and cash equivalents
   
15,493
     
-
     
-
     
15,493
 
 
 
 
Contract balances
 
The following table provides information about receivables and contract liabilities (Deferred franchise fees) from contracts with customers (in thousands):                  
 
   
December
2
3
, 2018
 
Receivables (a)
  $
480
 
Deferred franchise fees (b)
  $
3,076
 
 
 
(a)
Receivables of
$80
and
$400
are included in Accounts and other receivables, net and Long term contractual accounts receivable, respectively.
 
(b)
Deferred franchise fees of
$319
and
$2,757
are included in Deferred franchise fees – current and long term, respectively.
 
Significant changes in Deferred franchise fees are as follows (in thousands):     
 
   
T
hirty
-
nine
Weeks
Ended
 
   
Dec
ember 23
, 2018
 
Deferred franchise fees at beginning of period (a)
  $
3,139
 
Additions to deferred revenue
   
830
 
Revenue recognized during the period
   
(350
)
Deferred franchise fees at end of period
  $
3,619
 
 
 
(a)
Includes the cumulative effect of adopting ASC
606
of
$2,735.
 
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
 
2019 (a)
  $
80
 
2020
   
318
 
2021
   
309
 
2022
   
299
 
2023
   
259
 
Thereafter
   
2,354
 
Total
  $
3,619
 
 
 
(a)
Represents franchise fees expected to be recognized for the remainder of the
2019
fiscal year, which includes international development fees expected to be recognized over the duration of
one
year or less. Amount does
not
include
$350
of franchise fee revenue recognized for the
thirty-nine
weeks ended
December 23, 2018.
 
We have applied the optional exemption, as provided for under ASC
606,
which allows us
not
to disclose the transaction price allocated to unsatisfied performance obligations when the transaction price is a sales-based royalty.
v3.10.0.1
Note C - New Accounting Pronouncements Not Yet Adopted
9 Months Ended
Dec. 23, 2018
Notes to Financial Statements  
Description of New Accounting Pronouncements Not yet Adopted [Text Block]
NOTE C – NEW ACCOUNTING PRONOUNCEMENTS
NOT
YET ADOPTED   
 
In
June 2016,
the FASB issued new guidance on the measurement of credit losses, which significantly changes the impairment model for most financial instruments. Current guidance requires the recognition of credit losses based on an incurred loss impairment methodology that reflects losses once the losses are probable. Under the new standard, the Company will be required to use a current expected credit loss model (“CECL”) that will immediately recognize an estimate of credit losses that are expected to occur over the life of the financial instruments that are in the scope of this update, including trade receivables. The CECL model uses a broader range of reasonable and supportable information in the development of credit loss estimates. This guidance is effective for public business entities for annual reporting periods beginning after
December 15, 2019.
This standard is required to take effect in Nathan’s
first
quarter (
June 2020)
of our fiscal year ending
March 28, 2021.
The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements and related disclosures.
 
In
February 2016,
the FASB issued new guidance on leases, which outlines principles for the recognition, measurement, presentation and disclosure of leases applicable to both lessors and lessees. The new standard is effective for annual reporting periods beginning after
December 15, 2018,
including interim reporting periods within those annual reporting periods. The standard is required to take effect in Nathan’s
first
quarter (
June 2019)
of our fiscal year ending
March 29, 2020.
The new guidance requires lessees to recognize on the balance sheet the assets and liabilities for the rights and obligations created by finance and operating leases with lease terms of more than
12
months. The guidance requires either a modified retrospective transition approach with application in all comparative periods presented, or an alternative transition method, which permits a company to use its effective date as the date of initial application without restating comparative period financial statements and recognizing a cumulative effect adjustment to the opening balance sheet of accumulated deficit at
April 1, 2019.
The new guidance also provides several practical expedients and policies that companies
may
elect under either transition method. We currently expect to apply the alternative transition method and elect the package of practical expedients under which we will
not
reassess the classification of our existing leases, reevaluate whether any expired or existing contracts are or contain leases or reassess initial direct costs under the new guidance. We do
not
expect to elect the practical expedient that permits a reassessment of lease terms for existing leases and are continuing to evaluate other practical expedients and elections specified in the new guidance. Progress implementing the new standard to date includes completing an initial scoping analysis and data gathering process for our current lease portfolio. We are finalizing the review of information for completeness of the lease portfolio, analyzing the financial statement impact of adopting the standards, and evaluating the impact of adoption on our existing accounting policies and disclosures. As of
December 23, 2018,
there were
$10,043,000
in future minimum rental payments for operating leases that are
not
currently recorded on our balance sheet; therefore, we expect this new guidance will have a material impact on our consolidated balance sheets and related disclosures. We do
not
expect the adoption of this guidance to have a material impact on our consolidated statements of earnings and statement of cash flows.
 
In
January 2017,
the FASB issued an update to the accounting guidance to simplify the testing for goodwill impairment. The update removes the requirement to determine the implied fair value of goodwill to measure the amount of impairment loss, if any, under the
second
step of the current goodwill impairment test. A company will perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. A goodwill impairment charge will be recognized for the amount by which the reporting unit’s carrying amount exceeds its fair value,
not
to exceed the carrying amount of the goodwill. The guidance is effective prospectively for public business entities for annual reporting periods beginning after
December 15, 2019.
This standard is required to take effect in Nathan’s
first
quarter (
June 2020)
of our fiscal year ending
March 28, 2021.
Nathan’s does
not
expect the adoption of this new guidance to have a material impact on its results of operations or financial position.
 
The Company does
not
believe that any other recently issued, but
not
yet effective accounting standards, when adopted, will have a material effect on the accompanying consolidated financial statements.
v3.10.0.1
Note D - Income Per Share
9 Months Ended
Dec. 23, 2018
Notes to Financial Statements  
Earnings Per Share [Text Block]
NOTE D – INCOME PER SHARE
 
Basic income per common share is calculated by dividing income by the weighted-average number of common shares outstanding and excludes any dilutive effect of stock options. Diluted income per common share gives effect to all potentially dilutive common shares that were outstanding during the period. Dilutive common shares used in the computation of diluted income per common share result from the assumed exercise of stock options and warrants, as determined using the treasury stock method.
 
The following chart provides a reconciliation of information used in calculating the per-share amounts for the
thirteen
and
thirty-nine
week periods ended
December 23, 2018
and
December 24, 2017,
respectively.
 
Thirteen weeks
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                   
Net Income (Loss)
 
   
Net Income (Loss)
   
Number of Shares
   
Per Share
 
   
201
8
   
2017
   
2018
   
2017
   
2018
   
2017
 
   
(in thousands)
   
(in thousands)
                 
Basic EPS
                                               
Basic calculation
 
$
9,722
    $
(3,779
)  
 
4,187
     
4,185
   
$
2.32
    $
( 0.90
)
Effect of dilutive employee stock options
 
 
-
     
-
   
 
34
     
-
   
 
(0.02
)
   
-
 
Diluted EPS
                                               
Diluted calculation
 
$
9,722
    $
(3,779
)  
 
4,221
     
4,185
   
$
2.30
    $
( 0.90
)
 
T
hirt
y-
nine
weeks
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                   
Net Income
 
   
Net Income
   
Number of Shares
   
Per Share
 
   
201
8
   
2017
   
2018
   
2017
   
2018
   
2017
 
   
(in thousands)
   
(in thousands)
                 
Basic EPS
                                               
Basic calculation
 
$
19,001
    $
2,263
   
 
4,187
     
4,180
   
$
4.54
    $
0.54
 
Effect of dilutive employee stock options
 
 
-
     
-
   
 
39
     
39
   
 
(0.04
)
   
-
 
Diluted EPS
                                               
Diluted calculation
 
$
19,001
    $
2,263
   
 
4,226
     
4,219
   
$
4.50
    $
0.54
 
 
Options to purchase
10,000
shares of common stock in the
thirteen
and
thirty-nine
week periods ended
December 23, 2018
were
not
included in the computation of diluted EPS because the exercise price exceeded the average market price of common shares during the periods.
v3.10.0.1
Note E - Fair Value Measurements
9 Months Ended
Dec. 23, 2018
Notes to Financial Statements  
Fair Value Disclosures [Text Block]
NOTE E – 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
 
The Company’s long-term debt had a face value of
$150,000,000
as of
December 23, 2018
and a fair value of
$147,000,000
as of
December 23, 2018.
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, which we classify 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.
 
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 23, 2018,
no
fair value adjustment or material fair value measurements were required for non-financial assets or liabilities.
v3.10.0.1
Note F - Accounts and Other Receivables, Net
9 Months Ended
Dec. 23, 2018
Notes to Financial Statements  
Loans, Notes, Trade and Other Receivables Disclosure [Text Block]
NOTE F – ACCOUNTS AND OTHER RECEIVABLES, NET          
 
Accounts and other receivables, net, consist of the following (in thousands):
 
   
Dec
ember 23
,
   
March 25,
 
   
201
8
   
2018
 
                 
Branded product sales
 
$
6,641
    $
7,604
 
Franchise and license royalties
 
 
2,367
     
2,767
 
Other
 
 
1,141
     
599
 
   
 
10,149
     
10,970
 
                 
Less: allowance for doubtful accounts
 
 
560
     
468
 
Accounts and other receivables, net
 
$
9,589
    $
10,502
 
 
Accounts receivable are due within
30
days and are stated at amounts due from franchisees, retail licensees and Branded Product Program customers, net of an allowance for doubtful accounts. Accounts that are outstanding longer than the contractual payment terms are generally considered past due. The Company does
not
recognize franchise and license royalties that are
not
deemed to be realizable.
 
The Company individually reviews each past due account and determines its allowance for doubtful accounts by considering a number of factors, including the length of time accounts receivable are past due, the Company’s previous loss history, the customer’s current and expected future ability to pay its obligation to the Company, the condition of the general economy and the industry as a whole. Based on management’s assessment, the Company provides for estimated uncollectible amounts through a charge to earnings. After the Company has used reasonable collection efforts, it writes off accounts receivable through a charge to the allowance for doubtful accounts.
 
Changes in the Company’s allowance for doubtful accounts for the
thirty-nine
week period ended
December 23, 2018
and the fiscal year ended
March 25, 2018
are as follows (in thousands): 
 
   
Dec
ember 23
,
20
1
8
   
March 25,
2018
 
                 
Beginning balance
 
$
468
    $
457
 
Reclassification to conform with ASC 606
 
 
77
     
-
 
Bad debt expense
 
 
48
     
34
 
Accounts written off
 
 
(33
)
   
(23
)
Ending balance
 
$
560
    $
468
 
 
v3.10.0.1
Note G - Prepaid Expenses and Other Current Assets
9 Months Ended
Dec. 23, 2018
Notes to Financial Statements  
Other Current Assets [Text Block]
NOTE G – PREPAID EXPENSES AND OTHER CURRENT ASSETS
 
Prepaid expenses and other current assets consist of the following (in thousands):
 
   
D
e
c
ember 23
,
   
March 25,
 
   
201
8
   
2018
 
                 
Income taxes
 
$
-
    $
1,624
 
Insurance
 
 
213
     
266
 
Other
 
 
390
     
983
 
Total prepaid expenses and other current assets
 
$
603
    $
2,873
 
v3.10.0.1
Note H - Sale of Property and Equipment
9 Months Ended
Dec. 23, 2018
Notes to Financial Statements  
Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]
NOTE H – SALE OF PROPERTY AND EQUIPMENT
 
On
October 23, 2018,
the Company completed the sale of its Company-owned restaurant located in Bay Ridge, Brooklyn, New York for proceeds of
$11,445,000,
net of direct expenses, and recorded a gain of
$10,821,000,
which represented the excess of the proceeds, less costs to sell of
$33,000,
over the carrying value on that date. The Company continued operating the restaurant under a Surrender Agreement with the purchaser until
January 6, 2019
and surrendered the property to the purchaser on
January 22, 2019.
 
On
August 9, 2018,
the Company completed the sale of its regional office building located in Fort Lauderdale, Florida for proceeds of
$1,330,000,
net of direct expenses, and recorded a gain of
$306,000,
which represented the excess of the proceeds, less costs to sell of
$17,000,
over the carrying value on that date.
v3.10.0.1
Note I - Accrued Expenses, Other Current Liabilities and Other Liabilities
9 Months Ended
Dec. 23, 2018
Notes to Financial Statements  
Accounts Payable, Accrued Liabilities, and Other Liabilities Disclosure, Current [Text Block]
NOTE I – ACCRUED EXPENSES, OTHER CURRENT LIABILITIES AND OTHER LIABILITIES
 
Accrued expenses and other current liabilities consist of the following (in thousands):
  
   
Dec
ember 2
3
,
   
March 25,
 
   
201
8
   
2018
 
Payroll and other benefits
 
$
2,499
    $
2,733
 
Accrued rebates
 
 
1,008
     
1,541
 
Rent and occupancy costs
 
 
143
     
200
 
Deferred revenue
 
 
12
     
780
 
Construction costs
 
 
60
     
68
 
Interest
 
 
1,443
     
3,948
 
Professional fees
 
 
173
     
157
 
Sales, use and other taxes
 
 
3,112
     
80
 
Dividend payable
 
 
-
     
150
 
Deposit payable
 
 
-
     
1,201
 
Other
 
 
225
     
390
 
Total accrued expenses and other current liabilities
 
$
8,675
    $
11,248
 
 
Other liabilities consist of the following (in thousands):
                                                         
   
Dec
ember 23
,
   
March 25,
 
   
201
8
   
2018
 
Reserve for uncertain tax positions
 
$
491
    $
467
 
Deferred rental liability
 
 
675
     
677
 
Other
 
 
211
     
211
 
Total other liabilities
 
$
1,377
    $
1,355
 
 
v3.10.0.1
Note J - Revenues
9 Months Ended
Dec. 23, 2018
Notes to Financial Statements  
Revenue from Contract with Customer [Text Block]
NOTE J – REVENUES
 
The Company’s disaggregated revenues for the
thirteen
and
thirty-nine
weeks ended
December 23, 2018
and
December 24, 2017
are as follows (in thousands):
                                                        
    Thirteen weeks ended     Thirty-nine weeks ended  
   
Dec
ember 23,
2018
   
December 24,
2017 (1)
   
Dec
ember 23,
2018
   
December 24,
2017 (1)
 
                                 
Branded Products
 
$
12,453
    $
14,674
   
$
44,308
    $
50,741
 
Company-operated restaurants
 
 
1,951
     
2,031
   
 
12,140
     
12,586
 
Total sales
 
 
14,404
     
16,705
   
 
56,448
     
63,327
 
                                 
License royalties
 
 
4,316
     
4,228
   
 
18,160
     
17,393
 
                                 
Royalties
 
 
805
     
963
   
 
2,906
     
3,293
 
Franchise fees
 
 
106
     
125
   
 
348
     
282
 
Total franchise fees and royalties
 
 
911
     
1,088
   
 
3,254
     
3,575
 
                                 
Advertising fund revenue
 
 
591
     
-
   
 
1,858
     
-
 
                                 
Total revenues
 
$
20,222
    $
22,021
   
$
79,720
    $
84,295
 
 
(
1
) As disclosed in Note B, prior period amounts have
not
been adjusted under the modified retrospective method of adoption of ASC
606.
 
The following table disaggregates revenues by primary geographical market (in thousands):
 
    Thirteen weeks ended     Thirty-nine weeks ended  
   
Dec
ember 23
,
201
8
   
December 24,
2017
   
Dece
mber 23
,
201
8
   
December 24,
2017
 
                                 
United States
 
$
19,546
    $
20,209
   
$
77,022
    $
78,852
 
International
 
 
676
     
1,812
   
 
2,698
     
5,443
 
Total revenues
 
$
20,222
    $
22,021
   
$
79,720
    $
84,295
 
v3.10.0.1
Note K - Income Taxes
9 Months Ended
Dec. 23, 2018
Notes to Financial Statements  
Income Tax Disclosure [Text Block]
NOTE K – INCOME TAXES
 
On
December 22, 2017,
the Tax Cuts and Jobs Act, (the “Tax Act”) was enacted which among other provisions, reduced the top corporate tax rate from
35
percent to a flat
21
percent beginning
January 1, 2018
and eliminated the corporate Alternative Minimum Tax. The Tax Act limits the deduction of business interest, net of interest income, to
30
percent of the adjusted taxable income of the taxpayer in any taxable year. Any amount disallowed under the limitation is treated as business interest paid or accrued in the following year. Disallowed interest will have an indefinite carryforward. The Tax Act also repeals the performance-based exception to the
$1.0
million deduction limitation on executive compensation and modifies the definition of “covered employees”. Additionally, the Tax Act intended to allow businesses to immediately expense the full cost of Qualified Improvement Property. However, the law as written does
not
permit restaurant companies to take advantage of the laws’ intention. Nathan’s determined that its blended federal tax rate was
31%
for its fiscal year ending
March 25, 2018,
as a result of the Tax Act.
 
The income tax provisions for the
thirty-nine
week periods ended
December 23, 2018
and
December 24, 2017
reflect effective tax rates of
27.8%
and
21.5%,
respectively. The Company’s tax rate reflects the reduction in our Federal income tax rate from
31%
to
21%
pursuant to the Tax Act. During the quarter ended
December 24, 2017,
pursuant to Staff Accounting Bulletin
#118,
Nathan’s determined reasonable estimates to its deferred assets and liabilities and pursuant to ASC
740,
Income Taxes, the Company recognized the effect(s) of the Tax Act on current and deferred income taxes in its financial statements. Nathan’s recorded the following discrete adjustment to its deferred tax liability and unrecognized tax benefits which reduced the provision for income taxes by
$436,000
or
1,510
BPS during the
thirty-nine
weeks ended
December 24, 2017,
lowering its effective tax rate from
36.6%
to
21.5%.
 
Nathan’s effective tax rates for the
thirty-nine
week periods ended
December 23, 2018
and
December 24, 2017
were also reduced by
20
BPS and
670
BPS, respectively, as a result of the tax benefits associated with stock compensation. For the
thirty-nine
week periods ended
December 23, 2018
and
December 24, 2017,
excess tax benefits of
$47,000
and
$194,000,
respectively, were reflected in the Consolidated Statements of Earnings as a reduction in determining the provision for income taxes.
 
The amount of unrecognized tax benefits at
December 23, 2018
was
$249,000
all of which would impact Nathan’s effective tax rate, if recognized. As of
December 23, 2018,
Nathan’s had
$242,000
of accrued interest and penalties in connection with unrecognized tax benefits.
 
In
January 2018,
Nathan’s received notification from the State of Virginia that it was seeking to review Nathan’s tax returns for the period
April 2014
through
March 2017.
The review has been completed; Nathan’s has accepted the findings and settled the matter in the
second
quarter fiscal
2019.
The effects of the review, which were
not
significant, have been factored into the Company’s effective tax rate for fiscal
2019.
 
Nathan’s estimates that its annual tax rate for the fiscal year ending
March 31, 2019
will be in the range of approximately
27.0%
to
29.0%
excluding the impact of any discrete items recorded and excess tax benefit associated with stock compensation. The final annual tax rate is subject to many variables, including the ultimate determination of revenue and income tax by state, among other factors, and cannot be determined until the end of the fiscal year; therefore, the actual tax rate could differ from our current estimates
.
In addition, the ultimate benefit of the Tax Act on Nathan’s is unclear as the lower annual tax rate could be outweighed by deduction limitations and other provisions included in further guidance and regulations.           
v3.10.0.1
Note L - Segment Information
9 Months Ended
Dec. 23, 2018
Notes to Financial Statements  
Segment Reporting Disclosure [Text Block]
NOTE L – 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-operated and franchised restaurants, to distributors that resell our products to the foodservice industry through the Branded Product Program (“BPP”) and by
third
party manufacturers pursuant to license agreements that sell our products to club stores and grocery stores nationwide. The Company’s Chief Executive Officer has been identified as the Chief Operating Decision Maker (“CODM”) who evaluates performance and allocates resources for the Branded Product Program, Product Licensing and Restaurant Operations segments based upon a number of factors, the primary profit measure being income from operations. Certain administrative expenses are
not
allocated to the segments and are reported within Corporate.
 
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, sausage and corned beef products, frozen French fries and additional products through retail grocery channels and club stores throughout the United States.
 
Restaurant operations
– This segment derives revenue from sale of our products at Company-owned restaurants and earns fees and royalties from its franchised restaurants.
 
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 and compliance costs.
 
Interest expense, interest income and other income, net are managed centrally at the corporate level, and, accordingly, such items are
not
presented by segment since they are excluded from the measure of profitability reviewed by the CODM.
 
Operating segment information is as follows (in thousands):
 
    Thirteen weeks ended     Thirty-nine weeks ended  
   
December
2
3
,
201
8
   
December 24,
2017
   
December
2
3
,
201
8
   
December 24,
2017
 
                                 
Revenues
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Branded Product Program
 
$
12,453
    $
14,674
   
$
44,308
    $
50,741
 
Product licensing
 
 
4,316
     
4,228
   
 
18,160
     
17,393
 
Restaurant operations
 
 
2,862
     
3,119
   
 
15,394
     
16,161
 
Corporate (1)
 
 
591
     
-
   
 
1,858
     
-
 
Total revenues
 
$
20,222
    $
22,021
   
$
79,720
    $
84,295
 
                                 
Income from operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Branded Product Program
 
$
2,464
    $
2,924
   
$
7,725
    $
7,888
 
Product licensing
 
 
4,270
     
4,182
   
 
18,023
     
17,257
 
Restaurant operations
 
 
(112
)
   
(21
)  
 
2,733
     
3,209
 
Corporate
 
 
(1,726
)
   
(1,715
)  
 
(6,018
)
   
(5,800
)
Income from operations
 
$
4,896
    $
5,370
   
$
22,463
    $
22,554
 
                                 
Gain on sale of property and equipment     
10,821
     
-
     
11,177
     
-
 
Loss on debt extinguishment
 
 
-
     
(8,872
)  
 
-
     
(8,872
)
Interest expense
 
 
(2,650
)
   
(3,650
)  
 
(7,951
)
   
(10,976
)
Interest income
 
 
277
     
44
   
 
453
     
114
 
Other income, net
 
 
5
     
22
   
 
189
     
64
 
Income (loss) before provision (benefit) for income taxes
 
$
13,349
    $
(7,086
)  
$
26,331
    $
2,884
 
 
 
(
1
)
Represents advertising fund revenue
v3.10.0.1
Note M - Share-based Compensation
9 Months Ended
Dec. 23, 2018
Notes to Financial Statements  
Disclosure of Compensation Related Costs, Share-based Payments [Text Block]
NOTE M– SHARE-BASED COMPENSATION
 
Total share-based compensation during the
thirteen
-week periods ended
December 23, 2018
and
December 24, 2017
was
$29,000
and
$99,000,
respectively. Total share-based compensation during the
thirty-nine
week periods ended
December 23, 2018
and
December 24, 2017
was
$133,000
and
$298,000,
respectively.
Total share-based compensation is included in general and administrative expenses in our accompanying Consolidated Statements of Earnings. As of
December 23, 2018,
there was
$314,000
of unamortized compensation expense related to share-based incentive awards. We expect to recognize this expense over approximately
thirty-three
months, which represents the weighted average remaining requisite service periods for such awards.
 
The Company recognizes compensation cost for unvested stock-based incentive awards on a straight-line basis over the requisite service period. Compensation cost charged to expense under all stock-based incentive awards is as follows (in thousands):
            
    Thirteen weeks ended     Thirty-nine weeks ended  
   
December
23,
2018
   
December 24,
2017
   
December
23,
2018
   
December 24,
2017
 
                                 
Stock options
 
$
21
    $
38
   
$
81
    $
114
 
Restricted stock
 
 
8
     
61
   
 
52
     
184
 
Total compensation cost
 
$
29
    $
99
   
$
133
    $
298
 
 
Stock options outstanding:
 
 
During the fiscal year ended
March 29, 2015,
the Company granted options to purchase
50,000
shares at an exercise price of
$53.89
per share, all of which expire
five
years from the date of grant. All such stock options vest ratably over a
four
-year period which commenced
August 6, 2015
and contained anti-dilution rights that were structured to equalize the award’s fair value before and after the modification
.
 
In connection with the Company’s special cash dividend, paid on
January 4, 2018,
to stockholders of record as of
December 22, 2017,
the Company performed an analysis, pursuant to the anti-dilution provisions of the
2010
Stock Incentive Plan, as amended (the
“2010
Plan”), and issued replacement options to purchase
68,498
shares at an exercise price of
$33.438
for the unvested stock options outstanding as of the record date of
December 22, 2017,
canceling
64,384
shares at an exercise price of
$35.58
per share. Nathan’s performed its evaluation based on the closing price of its common stock on
December 20, 2017,
the day before the stock went ex-dividend, of
$83.20
per share, or
$78.20
per share excluding the dividend of
$5.00
per share.
No
other terms or conditions of the outstanding options were modified.
 
In connection with the Company’s special cash dividend, paid on
March 27, 2015,
to stockholders of record as of
March 20, 2015,
the Company performed an analysis, pursuant to the anti-dilution provisions of the
2010
Plan, and issued replacement options to purchase
75,745
shares at an exercise price of
$35.58
for the unvested stock options outstanding as of
March 29, 2015,
canceling
50,000
shares at an exercise price of
$53.89.
Nathan’s performed its evaluation based on the closing price of its common stock on
March 27, 2015
of
$73.56
per share, or
$48.56
per share excluding the dividend of
$25.00
per share.
No
other terms or conditions of the outstanding options were modified.
 
During the
thirty-nine
week period ended
December 23, 2018,
the Company granted options to purchase
10,000
shares at an exercise price of
$89.90
per share, all of which expire
five
years from the date of grant. All such stock options vest ratably over a
three
year period commencing
September 12, 2019.
 
The weighted-average option fair values, as determined using the Black-Scholes option valuation model, and the assumptions used to estimate these values for stock options granted during the
thirty-nine
weeks ended
December 23, 2018,
are as follows:
 
Weighted-average option fair values
  $
25.6314
 
Expected life (years)
   
4.5
 
Interest rate
   
2.87
%
Volatility
   
32.57
%
Dividend yield
   
1.11
%
 
The expected dividend yield is based on historical and projected dividend yields. The Company expects 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 the grant. The expected option term is the number of years the Company estimates the options will be outstanding prior to exercise based on expected employment termination behavior.
 
Transactions with respect to stock options for the
thirty-nine
weeks ended
December 23, 2018
are as follows:
 
           
Weighted-
   
Weighted-
   
Aggregate
 
           
Average
   
Average
   
Intrinsic
 
           
Exercise
   
Remaining
   
Value
 
   
Shares
   
Price
   
Contractual Life
   
(in thousands)
 
                                 
                                 
Options outstanding at March 25, 2018 fiscal year (A)
   
68,498
    $
33.438
     
1.36
    $
2,648
 
Granted
   
10,000
     
89.900
     
4.72
     
-
 
Exercised
   
(4,030
)    
33.438
     
-
     
224
 
Options outstanding at December 23, 2018
 
 
74,468
   
$
41.020
   
 
1.17
   
$
1,912
 
                                 
Options exercisable at December 23, 2018
 
 
64,468
   
$
33.438
   
 
0.62
   
$
1,912
 
 
 
A-
Represents outstanding options after giving effect to the replacement options issued in connection with the Company’s
2015
and
2017
special dividends.
 
Restricted stock:
 
 
Transactions with respect to restricted stock for the
thirty-nine
weeks ended
December 23, 2018
are as follows:
 
   
 
 
 
 
Weighted-
 
   
 
 
 
 
Average
 
   
 
 
 
 
Grant-date
Fair value
 
   
Shares
   
Per share
 
Unvested restricted stock at March 25, 2018
 
 
5,000
   
$
49.80
 
Granted
 
 
1,000
   
 
89.90
 
Vested
 
 
(5,000
)
 
 
(49.80
)
Unvested restricted stock at December 23, 2018
 
 
1,000
   
$
89.90
 
 
During the
thirty-nine
week period ended
December 23, 2018,
the Company granted
1,000
shares of restricted stock at a fair value of
$89.90
per share representing the closing price on the date of the grant, which will be fully vested
three
years from the date of grant. The restrictions on the shares lapse ratably over a
three
-year period on the annual anniversary of the date of grant. The compensation expense related to this restricted stock award is expected to be
$89,900
and will be recognized, commencing on the grant date, over
three
years.
v3.10.0.1
Note N - Stockholders' Equity
9 Months Ended
Dec. 23, 2018
Notes to Financial Statements  
Stockholders' Equity Note Disclosure [Text Block]
NOTE N– STOCKHOLDERS’ EQUITY
 
1.
Dividend
s
 
On
May 31, 2018,
Nathan’s Board of Directors authorized the commencement of a regular dividend of
$1.00
per share per annum, payable at the rate of
$0.25
per quarter. Through
December 23, 2018,
the Company declared and paid
three
regular quarterly dividends of
$0.25
per common share aggregating
$3,139,000.
 
Effective
February 1, 2019,
the Board declared its
fourth
quarterly cash dividend of
$0.25
per share which is payable on
March 22, 2019
to stockholders of record as of the close of business on
March 11, 2019.
 
On
November 1, 2017,
the Company’s Board of Directors declared a special cash dividend of
$5.00
per share payable to stockholders of record as of
December 22, 2017
of which approximately
$20,923,000
was paid on
January 4, 2018
to the stockholders.
The Company also accrued
$25,000
for the expected dividends payable on unvested restricted shares pursuant to the terms of the restricted stock agreement. As unvested restricted stock vests, the declared dividend is paid. The Company paid this
$25,000
during the
thirteen
weeks ended
June 24, 2018.
 
On
March 10, 2015,
the Company’s Board of Directors declared a special cash dividend of
$25.00
per share payable to stockholders of record as of
March 20, 2015
of which approximately
$115,100,000
was paid on
March 27, 2015
to the stockholders. The Company accrued
$1,000,000
for the expected dividends payable on unvested shares pursuant to the terms of the restricted stock agreements. As unvested restricted stock vests, the declared dividend is paid. As of
March 25, 2018
we had paid
$875,000
of the accrued dividend and the remaining
$125,000
was paid during the
thirteen
weeks ended
June 24, 2018.
 
Our ability to pay future dividends is limited by the terms of the Indenture, dated
November 1, 2017,
between the Company, certain of its wholly-owned subsidiaries, as guarantors and U.S. Bank National Association, as trustee and collateral trustee (the “Indenture”). In addition, 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
. Common Stock Purchase Rights
 
On
June 5, 2013,
Nathan’s adopted a stockholder rights plan (the
“2013
Rights Plan”) under which all stockholders of record as of
June 17, 2013
received rights to purchase shares of common stock.
 
On
June 14, 2018,
the Company and American Stock Transfer and Trust Company, LLC, the Rights Agent, amended the
2013
Rights Plan. The Amendment postponed the expiration date to
September 30, 2018,
at which time it terminated.
 
3.
Stock Repurchase Programs
 
During the
thirty-nine
week period ended
December 23, 2018,
Nathan’s repurchased
14,390
shares of its common stock at a cost of approximately
$1.0
million pursuant to its
sixth
stock repurchase program.
 
In
2016,
the Company’s Board of Directors 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 23, 2018,
Nathan’s had repurchased
954,132
shares at a cost of
$30,641,000
under the
sixth
stock repurchase plan. At
December 23, 2018,
there were
245,868
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.
 
During the period from
October 2001
through
December 23, 2018,
Nathan’s purchased
5,141,763
shares of common stock at a cost of approximately
$78,303,000
pursuant to various stock repurchase plans previously authorized by the Board of Directors.
v3.10.0.1
Note O - Long-term Debt
9 Months Ended
Dec. 23, 2018
Notes to Financial Statements  
Debt Disclosure [Text Block]
NOTE O – LONG-TERM DEBT
 
Long-term debt consists of the following (in thousands):
 
   
Dec
ember 23
,
   
March 25,
 
   
201
8
   
2018
 
                 
6.625% Senior Secured Notes due 2025
 
$
150,000
    $
150,000
 
Less: unamortized debt issuance costs
 
 
(4,724
)
   
(5,242
)
Long-term debt, net
 
$
145,276
    $
144,758
 
 
On
November 1, 2017,
the Company issued
$150,000,000
of
6.625%
Senior Secured Notes due
2025
(the
"2025
Notes") in a private offering in accordance with Rule
144A
under the Securities Act of
1933,
as amended (the “Securities Act”). The
2025
Notes were issued pursuant to the Indenture. The Company used the net proceeds of the
2025
Notes offering to satisfy and discharge the Indenture relating to the
10.000%
Senior Secured Notes due
2020
and redeem the
2020
Notes (the "Redemption"), paid a portion of a special
$5.00
per share cash dividend to Nathan's stockholders of record, with the remaining net proceeds for general corporate purposes, including working capital. The Company also funded the majority of the special dividend of
$5.00
per share through its existing cash. The Redemption occurred on
November 16, 2017.
 
The
2025
Notes bear interest at
6.625%
per annum, payable semi-annually on
May 1
st
and
November 1
st
of each year. The Company made its required semi-annual interest payments of
$4,968,750
on
May 1, 2018
and
November 1, 2018.
 
The
2025
Notes have
no
scheduled principal amortization payments prior to its final maturity on
November 1, 2025.
 
The terms and conditions of the
2025
Notes are as follows:
 
There are
no
financial maintenance covenants associated with the
2025
Notes. As of
December 23, 2018,
Nathan’s was in compliance with all covenants associated with the
2025
Notes.
 
The Indenture contains certain covenants limiting the Company’s ability and the ability of its restricted subsidiaries (as defined in the Indenture) to, subject to certain exceptions and qualifications: (i) incur additional indebtedness; (ii) pay dividends or make other distributions on, redeem or repurchase, capital stock; (iii) make investments or other restricted payments; (iv) create or incur certain liens; (v) incur restrictions on the payment of dividends or other distributions from its restricted subsidiaries; (vi) enter into certain transactions with affiliates; (vii) sell assets; or (viii) effect a consolidation or merger. Certain Restricted Payments which
may
be made or indebtedness incurred by Nathan’s or its Restricted Subsidiaries
may
require compliance with the following financial ratios:
 
Fixed Charge Coverage Ratio
: the ratio of the Consolidated Cash Flow to the Fixed Charges for the relevant period, currently set at
2.0
to
1.0
in the Indenture.
The Fixed Charge Coverage Ratio applies to determining whether additional Restricted Payments
may
be made, certain additional debt
may
be incurred and acquisitions
may
be made.
 
Priority Secured Leverage Ratio
: the ratio of (a) Consolidated Net Debt outstanding as of such date that is secured by a Priority Lien to (b) Consolidated Cash Flow of Nathan’s for the Test Period then most recently ended, in each case with such pro forma adjustments as are appropriate; currently set at
0.40
to
1.00
in the Indenture.
 
Secured Leverage Ratio
: the ratio of (a) Consolidated Net Debt outstanding as of such date that is secured by a Lien on any property of Nathan’s or any Guarantor to (b) Consolidated Cash Flow of Nathan’s for the Test Period then most recently ended, in each case with such pro forma adjustments as are appropriate. The Secured Leverage Ratio under the Indenture is
3.75
to
1.00
and applies if Nathan’s wants to incur additional debt on the same terms as the
2025
Notes.
 
The Indenture also contains customary events of default, including, among other things, failure to pay interest, failure to comply with agreements related to the Indenture, failure to pay at maturity or acceleration of other indebtedness, failure to pay certain judgments, and certain events of insolvency or bankruptcy. Generally, if any event of default occurs, the Trustee or the holders of at least
25%
in principal amount of the
2025
Notes
may
declare the
2025
Notes due and payable by providing notice to the Company. In case of default arising from certain events of bankruptcy or insolvency, the
2025
Notes will become immediately due and payable.
 
The
2025
Notes are general senior secured obligations, are fully and unconditionally guaranteed by substantially all of the Company’s wholly-owned subsidiaries and rank
pari passu
in right of payment with all of the Company’s existing and future indebtedness that is
not
subordinated, are senior in right of payment to any of the Company’s existing and future subordinated indebtedness, are structurally subordinated to any existing and future indebtedness and other liabilities of the Company’s subsidiaries that do
not
guarantee the
2025
Notes, and are effectively junior to all existing and future indebtedness that is secured by assets other than the collateral securing the
2025
Notes.
 
Pursuant to the terms of a collateral trust agreement, the liens securing the
2025
Notes and the guarantees will be contractually subordinated to the liens securing any future credit facility.
 
The
2025
Notes and the guarantees are the Company and the guarantors’ senior secured obligations and will rank:
 
 
senior in right of payment to all of the Company and the guarantors’ future subordinated indebtedness;
 
 
effectively senior to all unsecured senior indebtedness to the extent of the value of the collateral securing the
2025
Notes and the guarantees;
 
 
pari passu
with all of the Company and the guarantors’ other senior indebtedness;
 
 
effectively junior to any future credit facility to the extent of the value of the collateral securing any future credit facility and the
2025
Notes and the guarantees and certain other assets;
 
 
effectively junior to any of the Company and the guarantors’ existing and future indebtedness that is secured by assets other than the collateral securing the
2025
Notes and the guarantees to the extent of the value of any such assets; and
 
 
structurally subordinated to the indebtedness of any of the Company’s current and future subsidiaries that do
not
guarantee the
2025
Notes.
 
The Company
may
redeem the
2025
Notes in whole or in part prior to
November 1, 2020,
at a redemption price of
100%
of the principal amount of the
2025
Notes redeemed plus the Applicable Premium, plus accrued and unpaid interest. An Applicable Premium is the greater of
1%
of the principal amount of the
2025
Notes; or the excess of the present value at such redemption date of (i) the redemption price of the
2025
Notes at
November 1, 2020
plus (ii) all required interest payments due on the
2025
Notes through
November 1, 2020 (
excluding accrued but unpaid interest to the redemption date), computed using a discount rate equal to the Treasury Rate as of such redemption date plus
50
basis points; over the then outstanding principal amount of the
2025
Notes.
 
Prior to
November 1, 2020,
if using the net cash proceeds of certain equity offerings, the Company has the option to redeem up to
35%
of the aggregate principal amount of the
2025
Notes at a redemption price equal to
106.625%
of the principal amount of the
2025
Notes redeemed, plus accrued and unpaid interest and any additional interest.
 
On or after
November 1, 2020,
the Company
may
redeem some or all of the
2025
Notes at a decreasing premium over time, plus accrued and unpaid interest as follows:
 
YEAR
 
PERCENTAGE
 
On or after November 1, 2020 and prior to November 1, 2021
   
103.313
%
On or after November 1, 2021 and prior to November 1, 2022
   
101.656
%
On or after November 1, 2022
   
100.000
%
 
In certain circumstances involving a change of control, the Company will be required to make an offer to repurchase all or, at the holder’s option, any part, of each holder’s
2025
Notes pursuant to the offer described below (the “Change of Control Offer”). In the Change of Control Offer, the Company will be required to offer payment in cash equal to
101%
of the aggregate principal amount of
2025
Notes repurchased plus accrued and unpaid interest, to the date of purchase.
 
If the Company sells certain collateralized assets and does
not
use the net proceeds as required, the Company will be required to use such net proceeds to repurchase the
2025
Notes at
100%
of the principal amount thereof, plus accrued and unpaid interest and additional interest penalty, if any, to the date of repurchase.
 
The
2025
Notes
may
be traded between qualified institutional buyers pursuant to Rule
144A
of the Securities Act. We have recorded the
2025
Notes at cost.
v3.10.0.1
Note P - Commitments and Contingencies
9 Months Ended
Dec. 23, 2018
Notes to Financial Statements  
Commitments and Contingencies Disclosure [Text Block]
NOTE P – COMMITMENTS AND CONTINGENCIES
 
1.
Commitments 
 
On
February 27, 2017,
a wholly-owned subsidiary of the Company executed a Guaranty of Lease (the “Brooklyn Guaranty”) in connection with its re-franchising of a restaurant located in Brooklyn, New York. The Company is obligated to make payments under the Brooklyn Guaranty in the event of a default by the tenant/franchisee. The Brooklyn Guaranty has an initial term of
10
years and
one
5
-year option and is limited to
24
months of rent for the
first
three
years of the term. Nathan’s has recorded a liability of
$204,000
as a component of Other liabilities on the accompanying Consolidated Balance Sheets, in connection with the Brooklyn Guaranty which does
not
include potential percentage rent, real estate tax increases, attorney’s fees and other costs as these amounts are
not
reasonably determinable at this time. Nathan’s has received a personal guaranty from the franchisee for all obligations under the Brooklyn Guaranty. For the remainder of the term, the Brooklyn Guaranty is limited to
12
months of rent plus reasonable costs of collection and attorney’s fees.                 
 
2.
Contingencies
 
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.
v3.10.0.1
Note Q - Related Party Transaction
9 Months Ended
Dec. 23, 2018
Notes to Financial Statements  
Related Party Transactions Disclosure [Text Block]
NOTE Q - RELATED PARTY TRANSACTION
 
A subsidiary of a firm to which the Company's Executive Chairman of the Board is the President and Chief Executive Officer, received ordinary and customary real estate brokerage commissions aggregating approximately
$72,000
in connection with the sale of the Florida regional office during the fiscal
2019
period.
v3.10.0.1
Note B - Adoption of New Accounting Pronouncements (Tables)
9 Months Ended
Dec. 23, 2018
Notes Tables  
Schedule of New Accounting Pronouncements and Changes in Accounting Principles [Table Text Block]
   
 
 
 
 
Adjustments
   
 
 
 
   
 
As
Reported
   
 
Franchise
Fees
   
Balance
Sheet
Reclassi
-
fications
   
Balances
Without
Adoption
 
Condensed Consolidated
Balance Sheet
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dece
mber 23, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred income taxes
   
456
     
(731
)    
275
     
-
 
Total assets
   
91,169
     
(731
)    
275
     
90,713
 
Accrued expenses and other current liabilities
   
8,675
     
(150
)    
-
     
8,525
 
Deferred franchise fees
   
319
     
(378
)    
376
     
317
 
Total current liabilities
   
12,833
     
(528
)    
376
     
12,681
 
Deferred income taxes
   
-
     
-
     
275
     
275
 
Deferred franchise fees
   
3,300
     
(2,112
)    
(376
)    
812
 
Total liabilities
   
162,786
     
(2,640
)    
275
     
160,421
 
(Accumulated deficit)
   
(54,323
)    
1,909
     
-
     
(52,414
)
Stockholders’ equity before treasury stock
   
6,686
     
1,909
     
-
     
8,595
 
Total stockholders’ (deficit)
   
(71,617
)    
1,909
     
-
     
(69,708
)
Total liabilities and stockholders’ (deficit)
   
91,169
     
(731
)    
275
     
90,713
 
   
 
 
 
 
Adjustments
   
 
 
 
   
 
As
Reported
   
 
Franchise
Fees
   
Balance
Sheet
Reclassi-
fications
   
Balances
Without
Adoption
 
Condensed Consolidated Statement of Earnings
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Thirteen weeks ended
Dec
ember 23, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Franchise fees and royalties
   
911
     
(107
)    
-
     
804
 
Advertising fund revenue
   
591
     
-
     
(591
)    
-
 
Total revenues
   
20,222
     
(107
)    
(591
)    
19,524
 
General and administrative expenses
   
3,031
     
(12
)    
-
     
3,019
 
Advertising fund expense
   
591
     
-
     
(591
)    
-
 
Total costs and expenses
   
15,326
     
(12
)    
(591
)    
14,723
 
Income from operations
   
4,896
     
(95
)    
-
     
4,801
 
Income before provision for income taxes
   
13,349
     
(95
)    
-
     
13,254
 
Provision for income taxes
   
3,627
     
(26
)    
-
     
3,601
 
Net income
   
9,722
     
(69
)    
-
     
9,653
 
                                 
Condensed Consolidated Statement of Earnings
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
T
hirty
-
nine
weeks ended
Dec
ember 23, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Franchise fees and royalties
   
3,254
     
(245
)    
-
     
3,009
 
Advertising fund revenue
   
1,858
     
-
     
(1,858
)    
-
 
Total revenues
   
79,720
     
(245
)    
(1,858
)    
77,617
 
General and administrative expenses
   
10,354
     
(110
)    
-
     
10,244
 
Advertising fund expense
   
1,858
     
-
     
(1,858
)    
-
 
Total costs and expenses
   
57,257
     
(110
)    
(1,858
)    
55,289
 
Income from operations
   
22,463
     
(135
)    
-
     
22,328
 
Income before provision for income taxes
   
26,331
     
(135
)    
-
     
26,196
 
Provision for income taxes
   
7,330
     
(40
)    
-
     
7,290
 
Net income
   
19,001
     
(95
)    
-
     
18,906
 
   
 
 
 
 
Adjustments
   
 
 
 
   
 
As
Reported
   
 
Franchise
Fees
   
 
Advertising
Fund
   
Balances
Without
Adoption
 
Condensed Consolidated Statement of Cash Flows
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
T
hirty-nine
weeks ended
December
23, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash flows from operating activities:
                               
Net income
   
19,001
     
(95
)    
-
     
18,906
 
Changes in operating assets and liabilities:
                               
Accounts payable, accrued expenses and other current liabilities
   
(5,196
)    
(150
)    
-
     
(5,346
)
Deferred franchise fees
   
453
     
245
     
-
     
698
 
Net cash provided by operating activities
   
7,373
     
-
     
-
     
7,373
 
Net cash provided by investing activities
   
12,449
     
-
     
-
     
12,449
 
Net cash (used in) financing activities
   
(4,329
)    
-
     
-
     
(4,329
)
Net increase in cash and cash equivalents
   
15,493
     
-
     
-
     
15,493
 
Contract with Customer, Asset and Liability [Table Text Block]
   
December
2
3
, 2018
 
Receivables (a)
  $
480
 
Deferred franchise fees (b)
  $
3,076
 
Contract with Customer, Deferred Franchise Fees [Table Text Block]
   
T
hirty
-
nine
Weeks
Ended
 
   
Dec
ember 23
, 2018
 
Deferred franchise fees at beginning of period (a)
  $
3,139
 
Additions to deferred revenue
   
830
 
Revenue recognized during the period
   
(350
)
Deferred franchise fees at end of period
  $
3,619
 
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Table Text Block]
   
Estimate for fiscal year
 
2019 (a)
  $
80
 
2020
   
318
 
2021
   
309
 
2022
   
299
 
2023
   
259
 
Thereafter
   
2,354
 
Total
  $
3,619
 
v3.10.0.1
Note D - Income Per Share (Tables)
9 Months Ended
Dec. 23, 2018
Notes Tables  
Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]
Thirteen weeks
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                   
Net Income (Loss)
 
   
Net Income (Loss)
   
Number of Shares
   
Per Share
 
   
201
8
   
2017
   
2018
   
2017
   
2018
   
2017
 
   
(in thousands)
   
(in thousands)
                 
Basic EPS
                                               
Basic calculation
 
$
9,722
    $
(3,779
)  
 
4,187
     
4,185
   
$
2.32
    $
( 0.90
)
Effect of dilutive employee stock options
 
 
-
     
-
   
 
34
     
-
   
 
(0.02
)
   
-
 
Diluted EPS
                                               
Diluted calculation
 
$
9,722
    $
(3,779
)  
 
4,221
     
4,185
   
$
2.30
    $
( 0.90
)
T
hirt
y-
nine
weeks
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                   
Net Income
 
   
Net Income
   
Number of Shares
   
Per Share
 
   
201
8
   
2017
   
2018
   
2017
   
2018
   
2017
 
   
(in thousands)
   
(in thousands)
                 
Basic EPS
                                               
Basic calculation
 
$
19,001
    $
2,263
   
 
4,187
     
4,180
   
$
4.54
    $
0.54
 
Effect of dilutive employee stock options
 
 
-
     
-
   
 
39
     
39
   
 
(0.04
)
   
-
 
Diluted EPS
                                               
Diluted calculation
 
$
19,001
    $
2,263
   
 
4,226
     
4,219
   
$
4.50
    $
0.54
 
v3.10.0.1
Note F - Accounts and Other Receivables, Net (Tables)
9 Months Ended
Dec. 23, 2018
Notes Tables  
Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]
   
Dec
ember 23
,
   
March 25,
 
   
201
8
   
2018
 
                 
Branded product sales
 
$
6,641
    $
7,604
 
Franchise and license royalties
 
 
2,367
     
2,767
 
Other
 
 
1,141
     
599
 
   
 
10,149
     
10,970
 
                 
Less: allowance for doubtful accounts
 
 
560
     
468
 
Accounts and other receivables, net
 
$
9,589
    $
10,502
 
Schedule of Credit Losses for Financing Receivables, Current [Table Text Block]
   
Dec
ember 23
,
20
1
8
   
March 25,
2018
 
                 
Beginning balance
 
$
468
    $
457
 
Reclassification to conform with ASC 606
 
 
77
     
-
 
Bad debt expense
 
 
48
     
34
 
Accounts written off
 
 
(33
)
   
(23
)
Ending balance
 
$
560
    $
468
 
v3.10.0.1
Note G - Prepaid Expenses and Other Current Assets (Tables)
9 Months Ended
Dec. 23, 2018
Notes Tables  
Schedule of Other Current Assets [Table Text Block]
   
D
e
c
ember 23
,
   
March 25,
 
   
201
8
   
2018
 
                 
Income taxes
 
$
-
    $
1,624
 
Insurance
 
 
213
     
266
 
Other
 
 
390
     
983
 
Total prepaid expenses and other current assets
 
$
603
    $
2,873
 
v3.10.0.1
Note I - Accrued Expenses, Other Current Liabilities and Other Liabilities (Tables)
9 Months Ended
Dec. 23, 2018
Notes Tables  
Schedule of Accrued Liabilities [Table Text Block]
   
Dec
ember 2
3
,
   
March 25,
 
   
201
8
   
2018
 
Payroll and other benefits
 
$
2,499
    $
2,733
 
Accrued rebates
 
 
1,008
     
1,541
 
Rent and occupancy costs
 
 
143
     
200
 
Deferred revenue
 
 
12
     
780
 
Construction costs
 
 
60
     
68
 
Interest
 
 
1,443
     
3,948
 
Professional fees
 
 
173
     
157
 
Sales, use and other taxes
 
 
3,112
     
80
 
Dividend payable
 
 
-
     
150
 
Deposit payable
 
 
-
     
1,201
 
Other
 
 
225
     
390
 
Total accrued expenses and other current liabilities
 
$
8,675
    $
11,248
 
Schedule of Other Assets and Other Liabilities [Table Text Block]
   
Dec
ember 23
,
   
March 25,
 
   
201
8
   
2018
 
Reserve for uncertain tax positions
 
$
491
    $
467
 
Deferred rental liability
 
 
675
     
677
 
Other
 
 
211
     
211
 
Total other liabilities
 
$
1,377
    $
1,355
 
v3.10.0.1
Note J - Revenues (Tables)
9 Months Ended
Dec. 23, 2018
Notes Tables  
Disaggregation of Revenue [Table Text Block]
    Thirteen weeks ended     Thirty-nine weeks ended  
   
Dec
ember 23,
2018
   
December 24,
2017 (1)
   
Dec
ember 23,
2018
   
December 24,
2017 (1)
 
                                 
Branded Products
 
$
12,453
    $
14,674
   
$
44,308
    $
50,741
 
Company-operated restaurants
 
 
1,951
     
2,031
   
 
12,140
     
12,586
 
Total sales
 
 
14,404
     
16,705
   
 
56,448
     
63,327
 
                                 
License royalties
 
 
4,316
     
4,228
   
 
18,160
     
17,393
 
                                 
Royalties
 
 
805
     
963
   
 
2,906
     
3,293
 
Franchise fees
 
 
106
     
125
   
 
348
     
282
 
Total franchise fees and royalties
 
 
911
     
1,088
   
 
3,254
     
3,575
 
                                 
Advertising fund revenue
 
 
591
     
-
   
 
1,858
     
-
 
                                 
Total revenues
 
$
20,222
    $
22,021
   
$
79,720
    $
84,295
 
Revenue from External Customers by Geographic Areas [Table Text Block]
    Thirteen weeks ended     Thirty-nine weeks ended  
   
Dec
ember 23
,
201
8
   
December 24,
2017
   
Dece
mber 23
,
201
8
   
December 24,
2017
 
                                 
United States
 
$
19,546
    $
20,209
   
$
77,022
    $
78,852
 
International
 
 
676
     
1,812
   
 
2,698
     
5,443
 
Total revenues
 
$
20,222
    $
22,021
   
$
79,720
    $
84,295
 
v3.10.0.1
Note L - Segment Information (Tables)
9 Months Ended
Dec. 23, 2018
Notes Tables  
Schedule of Segment Reporting Information, by Segment [Table Text Block]
    Thirteen weeks ended     Thirty-nine weeks ended  
   
December
2
3
,
201
8
   
December 24,
2017
   
December
2
3
,
201
8
   
December 24,
2017
 
                                 
Revenues
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Branded Product Program
 
$
12,453
    $
14,674
   
$
44,308
    $
50,741
 
Product licensing
 
 
4,316
     
4,228
   
 
18,160
     
17,393
 
Restaurant operations
 
 
2,862
     
3,119
   
 
15,394
     
16,161
 
Corporate (1)
 
 
591
     
-
   
 
1,858
     
-
 
Total revenues
 
$
20,222
    $
22,021
   
$
79,720
    $
84,295
 
                                 
Income from operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Branded Product Program
 
$
2,464
    $
2,924
   
$
7,725
    $
7,888
 
Product licensing
 
 
4,270
     
4,182
   
 
18,023
     
17,257
 
Restaurant operations
 
 
(112
)
   
(21
)  
 
2,733
     
3,209
 
Corporate
 
 
(1,726
)
   
(1,715
)  
 
(6,018
)
   
(5,800
)
Income from operations
 
$
4,896
    $
5,370
   
$
22,463
    $
22,554
 
                                 
Gain on sale of property and equipment     
10,821
     
-
     
11,177
     
-
 
Loss on debt extinguishment
 
 
-
     
(8,872
)  
 
-
     
(8,872
)
Interest expense
 
 
(2,650
)
   
(3,650
)  
 
(7,951
)
   
(10,976
)
Interest income
 
 
277
     
44
   
 
453
     
114
 
Other income, net
 
 
5
     
22
   
 
189
     
64
 
Income (loss) before provision (benefit) for income taxes
 
$
13,349
    $
(7,086
)  
$
26,331
    $
2,884
 
v3.10.0.1
Note M - Share-based Compensation (Tables)
9 Months Ended
Dec. 23, 2018
Notes Tables  
Schedule of Compensation Cost for Share-based Payment Arrangements, Allocation of Share-based Compensation Costs by Plan [Table Text Block]
    Thirteen weeks ended     Thirty-nine weeks ended  
   
December
23,
2018
   
December 24,
2017
   
December
23,
2018
   
December 24,
2017
 
                                 
Stock options
 
$
21
    $
38
   
$
81
    $
114
 
Restricted stock
 
 
8
     
61
   
 
52
     
184
 
Total compensation cost
 
$
29
    $
99
   
$
133
    $
298
 
Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]
Weighted-average option fair values
  $
25.6314
 
Expected life (years)
   
4.5
 
Interest rate
   
2.87
%
Volatility
   
32.57
%
Dividend yield
   
1.11
%
Share-based Compensation, Activity [Table Text Block]
           
Weighted-
   
Weighted-
   
Aggregate
 
           
Average
   
Average
   
Intrinsic
 
           
Exercise
   
Remaining
   
Value
 
   
Shares
   
Price
   
Contractual Life
   
(in thousands)
 
                                 
                                 
Options outstanding at March 25, 2018 fiscal year (A)
   
68,498
    $
33.438
     
1.36
    $
2,648
 
Granted
   
10,000
     
89.900
     
4.72
     
-
 
Exercised
   
(4,030
)    
33.438
     
-
     
224
 
Options outstanding at December 23, 2018
 
 
74,468
   
$
41.020
   
 
1.17
   
$
1,912
 
                                 
Options exercisable at December 23, 2018
 
 
64,468
   
$
33.438
   
 
0.62
   
$
1,912
 
Schedule of Nonvested Restricted Stock Units Activity [Table Text Block]
   
 
 
 
 
Weighted-
 
   
 
 
 
 
Average
 
   
 
 
 
 
Grant-date
Fair value
 
   
Shares
   
Per share
 
Unvested restricted stock at March 25, 2018
 
 
5,000
   
$
49.80
 
Granted
 
 
1,000
   
 
89.90
 
Vested
 
 
(5,000
)
 
 
(49.80
)
Unvested restricted stock at December 23, 2018
 
 
1,000
   
$
89.90
 
v3.10.0.1
Note O - Long-term Debt (Tables)
9 Months Ended
Dec. 23, 2018
Notes Tables  
Schedule of Debt [Table Text Block]
   
Dec
ember 23
,
   
March 25,
 
   
201
8
   
2018
 
                 
6.625% Senior Secured Notes due 2025
 
$
150,000
    $
150,000
 
Less: unamortized debt issuance costs
 
 
(4,724
)
   
(5,242
)
Long-term debt, net
 
$
145,276
    $
144,758
 
Debt Instrument Redemption [Table Text Block]
YEAR
 
PERCENTAGE
 
On or after November 1, 2020 and prior to November 1, 2021
   
103.313
%
On or after November 1, 2021 and prior to November 1, 2022
   
101.656
%
On or after November 1, 2022
   
100.000
%
v3.10.0.1
Note B - Adoption of New Accounting Pronouncements (Details Textual) - USD ($)
3 Months Ended 9 Months Ended
Dec. 23, 2018
Dec. 24, 2017
[4]
Dec. 23, 2018
Dec. 24, 2017
[4]
Mar. 26, 2018
Mar. 25, 2018
Cumulative Effect of New Accounting Principle in Period of Adoption           $ (2,004,000)
Contract with Customer, Asset, Net, Total [1] $ 480,000   $ 480,000      
Contract with Customer, Liability, Excluding Cash Received [2] 3,076,000   3,076,000      
Contract with Customer, Liability, Total 3,619,000   3,619,000     $ 3,139,000 [3]
Revenue from Contract with Customer, Excluding Assessed Tax, Total 20,222,000 $ 22,021,000 79,720,000 [4] $ 84,295,000    
Franchise [Member]            
Revenue from Contract with Customer, Excluding Assessed Tax, Total 106,000 $ 125,000 348,000 $ 282,000    
Accounting Standards Update 2014-09 [Member]            
Contract with Customer, Liability, Total 2,735,000   2,735,000      
Accounts and Other Receivables, Net [Member]            
Contract with Customer, Asset, Net, Total 80,000   80,000      
Long-term Contractual Accounts Receivable [Member]            
Contract with Customer, Asset, Net, Total 400,000   400,000      
Deferred Franchise Fees [Member]            
Contract with Customer, Liability, Excluding Cash Received 319,000   319,000      
Other Liabilities [Member]            
Contract with Customer, Liability, Excluding Cash Received $ 2,757,000   $ 2,757,000      
AOCI Attributable to Parent [Member]            
Cumulative Effect of New Accounting Principle in Period of Adoption         $ (2,004,000)  
[1] Receivables of $80 and $400 are included in Accounts and other receivables, net and Long term contractual accounts receivable, respectively.
[2] Deferred franchise fees of $319 and $2,757 are included in Deferred franchise fees - current and long term, respectively.
[3] Includes the cumulative effect of adopting ASC 606 of $2,735.
[4] As disclosed in Note B, prior period amounts have not been adjusted under the modified retrospective method of adoption of ASC 606.
v3.10.0.1
Note B - Adoption of New Accounting Pronouncements - Impact of New Standard on Condensed Consolidated Financial Statements (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Dec. 23, 2018
Dec. 24, 2017
Dec. 23, 2018
Dec. 24, 2017
Mar. 25, 2018
Deferred income taxes $ 456   $ 456   $ 0
Total assets 91,169   91,169   80,091
Accrued expenses and other current liabilities 8,675   8,675   11,248
Deferred franchise fees 319   319   193
Total current liabilities 12,833   12,833   18,006
Deferred income taxes     302
Deferred franchise fees 3,300   3,300   238
Total liabilities 162,786   162,786   164,659
(Accumulated deficit) (54,323)   (54,323)   (68,181)
Stockholders’ equity before treasury stock 6,686   6,686   (7,265)
Total stockholders’ (deficit) (71,617)   (71,617)   (84,568)
Total liabilities and stockholders’ (deficit) 91,169   91,169   $ 80,091
Revenues 20,222 $ 22,021 [1] 79,720 [1] $ 84,295 [1]  
General and administrative expenses 3,031 3,034 10,354 10,064  
Advertising fund expense (Note B) 591 0 1,858  
Total costs and expenses 15,326 16,651 57,257 61,741  
Income from operations 4,896 5,370 22,463 22,554  
Income before provision for income taxes 13,349 (7,086) 26,331 2,884  
Provision (benefit) for income taxes 3,627 (3,307) 7,330 621  
Net income 9,722 (3,779) 19,001 2,263  
Accounts payable, accrued expenses and other current liabilities     (5,196) (779)  
Deferred franchise fees     453 100  
Net cash provided by operating activities     7,373 7,795  
Net cash provided by investing activities     12,449 (488)  
Net cash (used in) financing activities     (4,329) 3,066  
Net increase in cash and cash equivalents     15,493 10,373  
Difference between Revenue Guidance in Effect before and after Topic 606 [Member] | Accounting Standards Update 2014-09 [Member] | Franchise Fees Adjustments [Member]          
Deferred income taxes (731)   (731)    
Total assets (731)   (731)    
Accrued expenses and other current liabilities (150)   (150)    
Deferred franchise fees (378)   (378)    
Total current liabilities (528)   (528)    
Deferred income taxes      
Deferred franchise fees (2,112)   (2,112)    
Total liabilities (2,640)   (2,640)    
(Accumulated deficit) 1,909   1,909    
Stockholders’ equity before treasury stock 1,909   1,909    
Total stockholders’ (deficit) 1,909   1,909    
Total liabilities and stockholders’ (deficit) (731)   (731)    
Revenues (107)   (245)    
General and administrative expenses (12)   (110)    
Advertising fund expense (Note B)      
Total costs and expenses (12)   (110)    
Income from operations (95)   (135)    
Income before provision for income taxes (95)   (135)    
Provision (benefit) for income taxes (26)   (40)    
Net income (69)   (95)    
Accounts payable, accrued expenses and other current liabilities     (150)    
Deferred franchise fees     245    
Net cash provided by operating activities        
Net cash provided by investing activities        
Net cash (used in) financing activities        
Net increase in cash and cash equivalents        
Difference between Revenue Guidance in Effect before and after Topic 606 [Member] | Accounting Standards Update 2014-09 [Member] | Balance Sheet Reclassification Adjustments [Member]          
Deferred income taxes 275   275    
Total assets 275   275    
Accrued expenses and other current liabilities      
Deferred franchise fees 376   376    
Total current liabilities 376   376    
Deferred income taxes 275   275    
Deferred franchise fees (376)   (376)    
Total liabilities 275   275    
(Accumulated deficit)      
Stockholders’ equity before treasury stock      
Total stockholders’ (deficit)      
Total liabilities and stockholders’ (deficit) 275   275    
Revenues (591)   (1,858)    
General and administrative expenses      
Advertising fund expense (Note B) (591)   (1,858)    
Total costs and expenses (591)   (1,858)    
Income from operations      
Income before provision for income taxes      
Provision (benefit) for income taxes      
Net income      
Difference between Revenue Guidance in Effect before and after Topic 606 [Member] | Accounting Standards Update 2014-09 [Member] | Advertising Fund Adjustments [Member]          
Net income        
Accounts payable, accrued expenses and other current liabilities        
Deferred franchise fees        
Net cash provided by operating activities        
Net cash provided by investing activities        
Net cash (used in) financing activities        
Net increase in cash and cash equivalents        
Calculated under Revenue Guidance in Effect before Topic 606 [Member]          
Deferred income taxes      
Total assets 90,713   90,713    
Accrued expenses and other current liabilities 8,525   8,525    
Deferred franchise fees 317   317    
Total current liabilities 12,681   12,681    
Deferred income taxes 275   275    
Deferred franchise fees 812   812    
Total liabilities 160,421   160,421    
(Accumulated deficit) (52,414)   (52,414)    
Stockholders’ equity before treasury stock 8,595   8,595    
Total stockholders’ (deficit) (69,708)   (69,708)    
Total liabilities and stockholders’ (deficit) 90,713   90,713    
Revenues 19,524   77,617    
General and administrative expenses 3,019   10,244    
Advertising fund expense (Note B)      
Total costs and expenses 14,723   55,289    
Income from operations 4,801   22,328    
Income before provision for income taxes 13,254   26,196    
Provision (benefit) for income taxes 3,601   7,290    
Net income 9,653   18,906    
Accounts payable, accrued expenses and other current liabilities     (5,346)    
Deferred franchise fees     698    
Net cash provided by operating activities     7,373    
Net cash provided by investing activities     12,449    
Net cash (used in) financing activities     (4,329)    
Net increase in cash and cash equivalents     15,493    
Franchise Fees and Royalties [Member]          
Revenues 911 1,088 [1] 3,254 [1] 3,575 [1]  
Franchise Fees and Royalties [Member] | Difference between Revenue Guidance in Effect before and after Topic 606 [Member] | Accounting Standards Update 2014-09 [Member] | Franchise Fees Adjustments [Member]          
Revenues (107)   (245)    
Franchise Fees and Royalties [Member] | Difference between Revenue Guidance in Effect before and after Topic 606 [Member] | Accounting Standards Update 2014-09 [Member] | Balance Sheet Reclassification Adjustments [Member]          
Revenues      
Franchise Fees and Royalties [Member] | Calculated under Revenue Guidance in Effect before Topic 606 [Member]          
Revenues 804   3,009    
Advertising Fund Revenue [Member]          
Revenues 591 [1] 1,858 [1] [1]  
Advertising Fund Revenue [Member] | Difference between Revenue Guidance in Effect before and after Topic 606 [Member] | Accounting Standards Update 2014-09 [Member] | Franchise Fees Adjustments [Member]          
Revenues      
Advertising Fund Revenue [Member] | Difference between Revenue Guidance in Effect before and after Topic 606 [Member] | Accounting Standards Update 2014-09 [Member] | Balance Sheet Reclassification Adjustments [Member]          
Revenues (591)   (1,858)    
Advertising Fund Revenue [Member] | Calculated under Revenue Guidance in Effect before Topic 606 [Member]          
Revenues      
[1] As disclosed in Note B, prior period amounts have not been adjusted under the modified retrospective method of adoption of ASC 606.
v3.10.0.1
Note B - Adoption of New Accounting Pronouncements - Receivables and Contract Liabilities From Contracts With Customers (Details)
$ in Thousands
Dec. 23, 2018
USD ($)
Receivables (a) $ 480 [1]
Deferred franchise fees (b) $ 3,076 [2]
[1] Receivables of $80 and $400 are included in Accounts and other receivables, net and Long term contractual accounts receivable, respectively.
[2] Deferred franchise fees of $319 and $2,757 are included in Deferred franchise fees - current and long term, respectively.
v3.10.0.1
Note B - Adoption of New Accounting Pronouncements - Significant Changes in Deferred Franchise Fees (Details)
$ in Thousands
9 Months Ended
Dec. 23, 2018
USD ($)
Deferred franchise fees at beginning of period $ 3,139 [1]
Additions to deferred revenue 830
Revenue recognized during the period (350)
Deferred franchise fees at end of period $ 3,619
[1] Includes the cumulative effect of adopting ASC 606 of $2,735.
v3.10.0.1
Note B - Adoption of New Accounting Pronouncements - Remaining Performance Obligations (Details)
$ in Thousands
Dec. 23, 2018
USD ($)
Revenue, Remaining Performance Obligation, Amount $ 3,619
v3.10.0.1
Note B - Adoption of New Accounting Pronouncements - Remaining Performance Obligations 2 (Details)
$ in Thousands
Dec. 23, 2018
USD ($)
Revenue, Remaining Performance Obligation, Amount $ 3,619
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-12-24  
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period (Year) 91 days [1]
Revenue, Remaining Performance Obligation, Amount $ 80 [1]
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-04-01  
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period (Year) 1 year
Revenue, Remaining Performance Obligation, Amount $ 318
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-03-30  
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period (Year) 1 year
Revenue, Remaining Performance Obligation, Amount $ 309
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-03-29  
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period (Year) 1 year
Revenue, Remaining Performance Obligation, Amount $ 299
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-03-28  
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period (Year) 1 year
Revenue, Remaining Performance Obligation, Amount $ 259
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-03-27  
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period (Year)
Revenue, Remaining Performance Obligation, Amount $ 2,354
[1] Represents franchise fees expected to be recognized for the remainder of the 2019 fiscal year, which includes international development fees expected to be recognized over the duration of one year or less. Amount does not include $350 of franchise fee revenue recognized for the thirty-nine weeks ended December 23, 2018.
v3.10.0.1
Note C - New Accounting Pronouncements Not Yet Adopted (Details Textual)
Dec. 23, 2018
USD ($)
Operating Leases, Future Minimum Payments Due, Total $ 10,043,000
v3.10.0.1
Note D - Income Per Share (Details Textual) - shares
3 Months Ended 9 Months Ended
Dec. 23, 2018
Dec. 23, 2018
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount 10,000 10,000
v3.10.0.1
Note D - Income Per Share - Earnings Per Share Reconciliation (Details) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended 9 Months Ended
Dec. 23, 2018
Dec. 24, 2017
Dec. 23, 2018
Dec. 24, 2017
Net income, basic calculation $ 9,722 $ (3,779) $ 19,001 $ 2,263
Number of shares, basic calculation (in shares) 4,187,000 4,185,000 4,187,000 4,180,000
Net income per share, basic calculation (in dollars per share) $ 2.32 $ (0.90) $ 4.54 $ 0.54
Effect of dilutive employee stock options (in shares) 34,000 39,000 39,000
Effect of dilutive employee stock option (in dollars per share) $ (0.02) $ (0.04)
Net income, diluted calculation $ 9,722 $ (3,779) $ 19,001 $ 2,263
Number of shares, diluted calculation (in shares) 4,221,000 4,185,000 4,226,000 4,219,000
Net income per share, diluted calculation (in dollars per share) $ 2.30 $ (0.90) $ 4.50 $ 0.54
v3.10.0.1
Note E - Fair Value Measurements (Details Textual)
Dec. 23, 2018
USD ($)
Long-term Debt, Gross $ 150,000,000
Long-term Debt, Fair Value $ 147,000,000
v3.10.0.1
Note F - Accounts and Other Receivables, Net (Details Textual)
9 Months Ended
Dec. 23, 2018
Accounts Receivable Payment Terms 30 days
v3.10.0.1
Note F - Accounts and Other Receivables, Net - Summary of Accounts and Other Receivables (Details) - USD ($)
$ in Thousands
Dec. 23, 2018
Mar. 25, 2018
Mar. 26, 2017
Accounts receivable, gross, current $ 10,149 $ 10,970  
Less: allowance for doubtful accounts 560 468 $ 457
Accounts and other receivables, net 9,589 10,502  
Branded Product Sales [Member]      
Accounts receivable, gross, current 6,641 7,604  
Franchise and License Royalties [Member]      
Accounts receivable, gross, current 2,367 2,767  
Other Receivables [Member]      
Accounts receivable, gross, current $ 1,141 $ 599  
v3.10.0.1
Note F - Accounts and Other Receivables, Net - Changes in Allowance for Doubtful Accounts (Details) - USD ($)
$ in Thousands
9 Months Ended 12 Months Ended
Dec. 23, 2018
Dec. 24, 2017
Mar. 25, 2018
Beginning balance $ 468 $ 457 $ 457
Reclassification to conform with ASC 606 77  
Bad debt expense 48 $ 42 34
Accounts written off (33)   (23)
Ending balance $ 560   $ 468
v3.10.0.1
Note G - Prepaid Expenses and Other Current Assets - Summary of Prepaid Expenses and Other Current Assets (Details) - USD ($)
$ in Thousands
Dec. 23, 2018
Mar. 25, 2018
Income taxes $ 1,624
Insurance 213 266
Other 390 983
Total prepaid expenses and other current assets $ 603 $ 2,873
v3.10.0.1
Note H - Sale of Property and Equipment (Details Textual) - USD ($)
3 Months Ended
Oct. 23, 2018
Aug. 09, 2018
Dec. 23, 2018
Regional Office Building in Fort Lauderdale, Florida [Member]      
Sale of Real Estate, Selling Costs   $ 17,000  
Proceeds from Sale of Real Estate, Total   $ 1,330,000  
Other Income [Member] | Regional Office Building in Fort Lauderdale, Florida [Member]      
Gains (Losses) on Sales of Other Real Estate     $ 306,000
Company Owned Restaurant in Bay Ridge [Member]      
Proceeds from Divestiture of Businesses $ 11,445,000    
Sale of Real Estate, Selling Costs $ 33,000    
Company Owned Restaurant in Bay Ridge [Member] | Other Income [Member]      
Gain (Loss) on Disposition of Business     $ 10,821,000
v3.10.0.1
Note I - Accrued Expenses, Other Current Liabilities and Other Liabilities - Accrued Expenses and Other Current Liabilities (Details) - USD ($)
$ in Thousands
Dec. 23, 2018
Mar. 25, 2018
Payroll and other benefits $ 2,499 $ 2,733
Accrued rebates 1,008 1,541
Rent and occupancy costs 143 200
Construction costs 60 68
Interest 1,443 3,948
Professional fees 173 157
Sales, use and other taxes 3,112 80
Dividend payable 150
Deposit payable 1,201
Other 225 390
Total accrued expenses and other current liabilities 8,675 11,248
Deferred Franchise Fees And Other Deferred Revenue [Member]    
Deferred revenue $ 12 $ 780
v3.10.0.1
Note I - Accrued Expenses, Other Current Liabilities and Other Liabilities - Other Liabilities (Details) - USD ($)
$ in Thousands
Dec. 23, 2018
Mar. 25, 2018
Reserve for uncertain tax positions $ 491 $ 467
Deferred rental liability 675 677
Other 211 211
Total other liabilities $ 1,377 $ 1,355
v3.10.0.1
Note J - Revenues - Disaggregation of Revenue (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Dec. 23, 2018
Dec. 24, 2017
[1]
Dec. 23, 2018
Dec. 24, 2017
[1]
Revenues $ 20,222 $ 22,021 $ 79,720 [1] $ 84,295
Branded Products [Member]        
Revenues 12,453 14,674 44,308 [1] 50,741
Company-operated Restaurants [Member]        
Revenues 1,951 2,031 12,140 [1] 12,586
Product [Member]        
Revenues 14,404 16,705 56,448 [1] 63,327
License [Member]        
Revenues 4,316 4,228 18,160 [1] 17,393
Royalty [Member]        
Revenues 805 963 2,906 [1] 3,293
Franchise [Member]        
Revenues 106 125 348 282
Franchise Fees and Royalties [Member]        
Revenues 911 1,088 3,254 [1] 3,575
Advertising Fund Revenue [Member]        
Revenues $ 591 $ 1,858 [1]
[1] As disclosed in Note B, prior period amounts have not been adjusted under the modified retrospective method of adoption of ASC 606.
v3.10.0.1
Note J - Revenues - Revenues by Geographical Market (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Dec. 23, 2018
Dec. 24, 2017
Dec. 23, 2018
Dec. 24, 2017
Revenues $ 20,222 $ 22,021 [1] $ 79,720 [1] $ 84,295 [1]
UNITED STATES        
Revenues 19,546 20,209 77,022 78,852
Non-US [Member]        
Revenues $ 676 $ 1,812 $ 2,698 $ 5,443
[1] As disclosed in Note B, prior period amounts have not been adjusted under the modified retrospective method of adoption of ASC 606.
v3.10.0.1
Note K - Income Taxes (Details Textual) - USD ($)
9 Months Ended 12 Months Ended
Mar. 26, 2017
Dec. 23, 2018
Dec. 24, 2017
Mar. 31, 2019
Mar. 25, 2018
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent         31.00%
Effective Income Tax Rate Reconciliation, Percent, Total 36.60% 27.80% 21.50%    
Income Tax Expense (Benefit), Continuing Operations, Adjustment of Deferred Tax (Asset) Liability     $ (436,000)    
Income Tax Expense (Benefit), Continuing Operations, Adjustment of Deferred Tax (Asset) Liability, Percent     (15.10%)    
Effective Income Tax Rate, Effect of Stock Compensation   0.20% 6.70%    
Employee Service Share-based Compensation, Tax Benefit from Compensation Expense   $ 47,000 $ 194,000    
Unrecognized Tax Benefits that Would Impact Effective Tax Rate   249,000      
Unrecognized Tax Benefits, Income Tax Penalties and Interest Accrued, Total   $ 242,000      
Scenario, Forecast [Member] | Minimum [Member]          
Effective Income Tax Rate Reconciliation, Percent, Total       27.00%  
Scenario, Forecast [Member] | Maximum [Member]          
Effective Income Tax Rate Reconciliation, Percent, Total       29.00%  
v3.10.0.1
Note L - Segment Information - Operating Segment Information (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Dec. 23, 2018
Dec. 24, 2017
Dec. 23, 2018
Dec. 24, 2017
Revenues $ 20,222 $ 22,021 [1] $ 79,720 [1] $ 84,295 [1]
Income from operations 4,896 5,370 22,463 22,554
Gain on sale of property and equipment 10,821 11,177
Loss on debt extinguishment (8,872) (8,872)
Interest expense (2,650) (3,650) (7,951) (10,976)
Interest income 277 44 453 114
Other income, net 5 22 189 64
Income before provision for income taxes 13,349 (7,086) 26,331 2,884
Corporate, Non-Segment [Member]        
Revenues [2] 591 1,858
Income from operations (1,726) (1,715) (6,018) (5,800)
Branded Product Program [Member] | Operating Segments [Member]        
Revenues 12,453 14,674 44,308 50,741
Income from operations 2,464 2,924 7,725 7,888
Product Licensing [Member] | Operating Segments [Member]        
Revenues 4,316 4,228 18,160 17,393
Income from operations 4,270 4,182 18,023 17,257
Restaurant Operations [Member] | Operating Segments [Member]        
Revenues 2,862 3,119 15,394 16,161
Income from operations $ (112) $ (21) $ 2,733 $ 3,209
[1] As disclosed in Note B, prior period amounts have not been adjusted under the modified retrospective method of adoption of ASC 606.
[2] Represents advertising fund revenue
v3.10.0.1
Note M - Share-based Compensation (Details Textual) - USD ($)
3 Months Ended 9 Months Ended
Dec. 22, 2017
Dec. 20, 2017
Nov. 01, 2017
Mar. 29, 2015
Mar. 27, 2015
Mar. 10, 2015
Dec. 23, 2018
Dec. 24, 2017
Dec. 23, 2018
Dec. 24, 2017
Allocated Share-based Compensation Expense, Total             $ 29,000 $ 99,000 $ 133,000 $ 298,000
Share Based Compensation Total Unamortized Compensation Expense             $ 314,000   $ 314,000  
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross       50,000         10,000  
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price       $ 53.89         $ 89.90  
Share Based Compensation Arrangement by Share Based Payment Award Option Life       5 years            
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period       4 years            
Share Price   $ 83.20     $ 73.56          
Common Stock, Dividends, Per Share, Declared             $ 0.25 $ 5 $ 0.75 $ 5
Special Cash Dividend [Member]                    
Common Stock, Dividends, Per Share, Declared   5 $ 5   25 $ 25        
Excluding Dividend [Member]                    
Share Price   $ 78.20     $ 48.56          
Employee Stock Option [Member]                    
Allocated Share-based Compensation Expense, Total             $ 21,000 $ 38,000 $ 81,000 $ 114,000
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period                 3 years  
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period                 5 years  
Employee Stock Option [Member] | The 2010 Plan [Member]                    
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross 68,498     75,745            
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price $ 33.438     $ 35.58            
Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures in Period 64,384     50,000            
Share-based Compensation Arrangements by Share-based Payment Award, Options, Forfeitures in Period, Weighted Average Exercise Price $ 35.58     $ 53.89            
Restricted Stock [Member]                    
Allocated Share-based Compensation Expense, Total             8,000 $ 61,000 $ 52,000 $ 184,000
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period                 3 years  
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period                 1,000  
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Total             $ 89,900   $ 89,900  
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition                 3 years  
v3.10.0.1
Note M - Share-based Compensation - Compensation Cost Charged to Expense Under All Stock-based Incentive Awards (Details) - USD ($)
3 Months Ended 9 Months Ended
Dec. 23, 2018
Dec. 24, 2017
Dec. 23, 2018
Dec. 24, 2017
Share-based compensation expense $ 29,000 $ 99,000 $ 133,000 $ 298,000
Employee Stock Option [Member]        
Share-based compensation expense 21,000 38,000 81,000 114,000
Restricted Stock [Member]        
Share-based compensation expense $ 8,000 $ 61,000 $ 52,000 $ 184,000
v3.10.0.1
Note M - Share-based Compensation - Fair Value Option Valuation Assumptions (Details)
9 Months Ended
Dec. 23, 2018
$ / shares
Weighted-average option fair values (in dollars per share) $ 25.6314
Expected life (years) (Year) 4 years 182 days
Interest rate 2.87%
Volatility 32.57%
Dividend yield 1.11%
v3.10.0.1
Note M - Share-based Compensation - Outstanding Stock Options (Details) - USD ($)
$ / shares in Units, $ in Thousands
9 Months Ended 12 Months Ended
Mar. 29, 2015
Dec. 23, 2018
Mar. 25, 2018
[1]
Options outstanding (in shares) [1]   68,498  
Options outstanding, weighted average exercise price (in dollars per share) [1]   $ 33.438  
Options outstanding, weighted average remaining contractual life (Year)   1 year 62 days 1 year 131 days
Options outstanding, aggregate intrinsic value   $ 1,912 $ 2,648
Options granted (in shares) 50,000 10,000  
Granted, weighted average exercise price (in dollars per share) $ 53.89 $ 89.90  
Granted, weighted average remaining contractual life (Year)   4 years 262 days  
Options exercised (in shares)   (4,030)  
Exercised, weighted average exercise price (in dollars per share)   $ 33.438  
Exercised, aggregate intrinsic value   $ 224  
Options outstanding (in shares)   74,468 68,498
Options outstanding, weighted average exercise price (in dollars per share)   $ 41.02 $ 33.438
Options exercisable (in shares)   64,468  
Options exercisable, weighted average exercise price (in dollars per share)   $ 33.438  
Options exercisable, weighted average remaining contractual life (Year)   226 days  
Options exercisable, aggregate intrinsic value   $ 1,912  
[1] Represents outstanding options after giving effect to the replacement options issued in connection with the Company's 2015 and 2017 special dividends.
v3.10.0.1
Note M - Share-based Compensation - Transactions With Respect to Restricted Stock (Details) - Restricted Stock [Member]
9 Months Ended
Dec. 23, 2018
$ / shares
shares
Unvested restricted stock, Shares (in shares) | shares 5,000
Unvested restricted stock, weighted average grant date fair value per share (in dollars per share) | $ / shares $ 49.80
Granted, Shares (in shares) | shares 1,000
Granted, weighted average grant date fair value per share (in dollars per share) | $ / shares $ 89.90
Vested, Shares (in shares) | shares (5,000)
Vested, weighted average grant date fair value per share (in dollars per share) | $ / shares $ (49.80)
Unvested restricted stock, ending balance (in shares) | shares 1,000
Unvested restricted stock, weighted average grant date fair value per share (in dollars per share) | $ / shares $ 89.90
v3.10.0.1
Note N - Stockholders' Equity (Details Textual) - USD ($)
3 Months Ended 9 Months Ended 12 Months Ended 109 Months Ended 207 Months Ended
Feb. 01, 2019
May 31, 2018
Jan. 04, 2018
Dec. 20, 2017
Nov. 01, 2017
Mar. 27, 2015
Mar. 10, 2015
Dec. 23, 2018
Jun. 24, 2018
Dec. 24, 2017
Dec. 23, 2018
Dec. 24, 2017
Mar. 25, 2018
Dec. 23, 2018
Dec. 23, 2018
Mar. 11, 2016
Common Stock, Dividends, Amount per Annum   $ 1                            
Common Stock, Dividends, Amount per Quarter   $ 0.25                            
Common Stock, Dividends, Per Share, Declared               $ 0.25   $ 5 $ 0.75 $ 5        
Dividends, Common Stock, Cash                     $ 3,139,000          
Payments of Ordinary Dividends, Common Stock                     3,289,000 $ 125,000        
Dividends Payable                 $ 20,948,000 $ 20,948,000    
Treasury Stock, Shares, Acquired                     14,390       5,141,763  
Treasury Stock, Value, Acquired, Cost Method                     $ 1,000,000       $ 78,303,000  
Sixth Stock Repurchase Plan [Member]                                
Treasury Stock, Shares, Acquired                           954,132    
Treasury Stock, Value, Acquired, Cost Method                           $ 30,641,000    
Stock Repurchase Program, Number of Shares Authorized to be Repurchased                               1,200,000
Stock Repurchase Program, Remaining Number of Shares Authorized to be Repurchased               245,868     245,868     245,868 245,868  
Special Cash Dividend [Member]                                
Common Stock, Dividends, Per Share, Declared       $ 5 $ 5 $ 25 $ 25                  
Payments of Ordinary Dividends, Common Stock     $ 20,923,000     $ 115,100,000                    
Special Cash Dividends on Restricted Stock Declared on November 1, 2017 [Member]                                
Payments of Ordinary Dividends, Common Stock                 $ 25,000              
Dividends Payable         $ 25,000                      
Special Cash Dividends on Restricted Stock Declared on March 10, 2015 [Member]                                
Payments of Ordinary Dividends, Common Stock                 $ 125,000       $ 875,000      
Dividends Payable           $ 1,000,000                    
Subsequent Event [Member]                                
Common Stock, Dividends, Per Share, Declared $ 0.25                              
v3.10.0.1
Note O - Long-term Debt (Details Textual) - USD ($)
9 Months Ended
Dec. 23, 2018
Nov. 01, 2018
May 01, 2018
Nov. 01, 2017
Dec. 23, 2018
Dec. 24, 2017
Mar. 25, 2018
Proceeds from Issuance of Long-term Debt, Total         $ 150,000,000  
Dividends Payable, Amount Per Share       $ 5      
Senior Notes [Member]              
Debt Instrument, Fixed Charge Coverage Ratio 2       2    
Debt Instrument, Priority Secured Leverage Ratio 0.4       0.4    
Debt Instrument Secured Leverage Ratio 3.75       3.75    
Debt Instrument, Event of Default, Percentage Ownership Enabling the Declaration of Due and Payable 25.00%       25.00%    
Senior Notes [Member] | In The Event of Certain Equity Offerings [Member]              
Debt Instrument, Redemption Price, Percentage 106.625%            
Senior Notes [Member] | In the Event of Chang of Control Offer [Member]              
Debt Instrument, Redemption Price, Percentage 101.00%            
Senior Notes [Member] | In the Event the Company Sells Certain Assets and Fails to Use the Proceeds as Required [Member]              
Debt Instrument, Redemption Price, Percentage 100.00%            
Senior Notes [Member] | Senior Secured 2025 Notes [Member]              
Proceeds from Issuance of Long-term Debt, Total       $ 150,000,000      
Debt Instrument, Interest Rate, Stated Percentage 6.625%     6.625% 6.625%   6.625%
Debt Instrument, Periodic Payment, Interest   $ 4,968,750 $ 4,968,750        
Senior Notes [Member] | Senior Secured 2020 Notes [Member]              
Debt Instrument, Interest Rate, Stated Percentage       10.00%      
Senior Notes [Member] | Option to Redeem Notes at Redemption Price Equal to the Percentage of Principal Amount plus the Applicable Premium [Member]              
Debt Instrument, Redemption Price, Percentage 100.00%            
Senior Notes [Member] | Option to Redeem Notes at Redemption Price Equal to the Percentage of Principal Amount plus the Applicable Premium [Member] | Applicable Premium if Percentage of Principal Amount is Greater than Treasury Rate Basis Spread [Member]              
Debt Instrument, Applicable Premium, Percentage of Principal Amount 1.00%       1.00%    
Senior Notes [Member] | Option to Redeem Notes at Redemption Price Equal to the Percentage of Principal Amount plus the Applicable Premium [Member] | Applicable Premium if Treasury Rate Basis Spread is Greater than Percentage of Principal Amount [Member] | Treasury Rate [Member]              
Debt Instrument, Applicable Premium, Treasury Rate Basis Spread 0.50%       0.50%    
Senior Notes [Member] | Option to Redeem at Redemption Price Equal to Percentage of Principal Amount [Member] | In The Event of Certain Equity Offerings [Member] | Maximum [Member]              
Debt Instrument, Redemption Price, Percentage of Principal Amount Redeemed 35.00%            
v3.10.0.1
Note O - Long-term Debt - Summary of Debt (Details) - USD ($)
Dec. 23, 2018
Mar. 25, 2018
Senior secured notes $ 150,000,000  
Less: unamortized debt issuance costs (4,724,000) $ (5,242,000)
Long-term debt, net 145,276,000 144,758,000
Senior Secured 2025 Notes [Member] | Senior Notes [Member]    
Senior secured notes $ 150,000,000 $ 150,000,000
v3.10.0.1
Note O - Long-term Debt - Summary of Debt (Details) (Parentheticals)
Dec. 23, 2018
Mar. 25, 2018
Nov. 01, 2017
Senior Secured 2025 Notes [Member] | Senior Notes [Member]      
Interest Rate 6.625% 6.625% 6.625%
v3.10.0.1
Note O - Long-term Debt - Summary of Redemption Features (Details)
9 Months Ended
Dec. 23, 2018
Debt Instrument, Redemption, Period One [Member]  
Debt instrument, redemption price, percentage 103.313%
Debt Instrument, Redemption, Period Two [Member]  
Debt instrument, redemption price, percentage 101.656%
Debt Instrument, Redemption, Period Three [Member]  
Debt instrument, redemption price, percentage 100.00%
v3.10.0.1
Note P - Commitments and Contingencies (Details Textual)
Feb. 27, 2017
USD ($)
Guaranty Liabilities $ 204,000
v3.10.0.1
Note Q - Related Party Transaction (Details Textual)
9 Months Ended
Dec. 23, 2018
USD ($)
Firm where Lorber Serves as President and Chief Executive Officer [Member] | Ordinary and Customary Real Estate Brokerage Commissions in Connection with the Sale of the Florida Regional Office [Member]  
Related Party Transaction, Amounts of Transaction $ 72,000