0000069733 NATHANS FAMOUS INC false --03-28 Q2 2021 10,024 9,468 3,514 3,860 0.01 0.01 30,000,000 30,000,000 9,369,015 9,368,792 4,114,934 4,141,387 5,254,081 5,227,405 0.89 0.87 0.89 0.87 0.35 0.35 0.70 0.70 0.70 0.70 1 1 1 1 1 0.5 0.89 0.87 0.89 0.87 1.86 1.86 2.14 10,000 0 0 0 5 3 6.625 6.625 6.625 10.000 4,968,750 106.625 Deferred franchise fees of $225 and $1,609 as of September 27, 2020 and $230 and $1,687 as of March 29, 2020 are included in Deferred franchise fees – current and long term, respectively. Represents franchise fees expected to be recognized for the remainder of the 2021 fiscal year, which includes international development fees expected to be recognized over the duration of one year or less. Amount does not include $148 of franchise fee revenue recognized for the twenty-six weeks ended September 27, 2020. The thirteen and twenty-six week periods ended September 27, 2020 and September 29, 2019 include $614, net and $1,194, net and $669, net and $1,209, net, respectively, recorded to "Restaurant Operating Expenses" for leases for Company-operated restaurants; $159 and $332, and $150 and $321, respectively, recorded to "General and administrative expenses" for leases for corporate offices and equipment; and $22 and $22, and $20 and $41, respectively, recorded to "Other income, net" for leased properties that are leased to franchisees. Represents advertising fund revenue The present value of minimum operating lease payments of $1,821 and $7,887 are included in "Current portion of operating lease liabilities" and "Long-term operating lease liabilities," respectively. Represents future lease commitments to be paid and received by the Company for the remainder of the 2021 fiscal year. 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UNITED STATES

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

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

For the quarterly period ended September 27, 2020.

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 and Zip Code of principal executive offices)

 

(516) 338-8500

(Registrant's telephone number, including area code)

                                                                                                                                                        

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

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $.01 per share

 

NATH

 

The NASDAQ Global Market

 

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 ☒   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 ☒  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.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

 

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 ☒

 

At November 6, 2020, an aggregate of 4,114,934 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   3

 

Consolidated Balance Sheets – September 27, 2020 (Unaudited) and March 29, 2020   3
       

 

Consolidated Statements of Earnings (Unaudited) – Thirteen and Twenty-six Weeks Ended September 27, 2020 and September 29, 2019   4
       

 

Consolidated Statements of Stockholders’ Deficit (Unaudited) – Thirteen Weeks Ended September 27, 2020 and September 29, 2019   5
       

 

Consolidated Statements of Stockholders’ Deficit (Unaudited) – Twenty-six Weeks Ended September 27, 2020 and September 29, 2019   6
       

 

Consolidated Statements of Cash Flows (Unaudited) – Twenty-six Weeks Ended September 27, 2020 and September 29, 2019   7
       

 

Notes to Consolidated Financial Statements   8
       

Item 2. 

Management's Discussion and Analysis of Financial Condition and Results of Operations.   22
       

Item 3. 

Quantitative and Qualitative Disclosures About Market Risk.   32
       

Item 4. 

Controls and Procedures.   33
       

PART II.

OTHER INFORMATION    
       

Item 1. 

Legal Proceedings.   34
       

Item 1A.              

Risk Factors.   34
       

Item 2. 

Unregistered Sales of Equity Securities and Use of Proceeds.   34
       

Item 3. 

Defaults Upon Senior Securities.   34
       

Item 4. 

Mine Safety Disclosures.   34
       

Item 5. 

Other Information.   34
       

Item 6. 

Exhibits.   35
       

SIGNATURES

    36

 

2

 

 

Nathan’s Famous, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

September 27, 2020 and March 29, 2020

(in thousands, except share and per share amounts)

 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

  

September 27,

2020

  

March 29,

2020

 
  

(Unaudited)

     
ASSETS        

CURRENT ASSETS

        

Cash and cash equivalents (Note F)

 $81,519  $77,117 

Accounts and other receivables, net (Note H)

  8,967   11,108 

Inventories

  557   378 

Prepaid expenses and other current assets (Note I)

  621   1,181 

Total current assets

  91,664   89,784 
         

Property and equipment, net of accumulated depreciation of $10,024 and $9,468, respectively

  4,372   4,610 

Operating lease assets (Note R)

  8,648   9,181 

Goodwill

  95   95 

Intangible asset

  1,212   1,269 

Deferred income taxes

  7   - 

Other assets

  334   343 
         

Total assets

 $106,332  $105,282 
         

LIABILITIES AND STOCKHOLDERS’ DEFICIT

        
         

CURRENT LIABILITIES

        

Accounts payable

 $3,088  $3,509 

Accrued expenses and other current liabilities (Note L)

  7,552   9,297 

Current portion of operating lease liabilities (Note R)

  1,821   1,583 

Deferred franchise fees

  225   230 

Total current liabilities

  12,686   14,619 
         

Long-term debt, net of unamortized debt issuance costs of $3,514 and $3,860, respectively (Note Q)

  146,486   146,140 

Operating lease liabilities (Note R)

  7,887   8,532 

Other liabilities (Note L)

  739   696 

Deferred franchise fees

  1,609   1,687 

Deferred income taxes

  -   9 
         

Total liabilities

  169,407   171,683 
         

COMMITMENTS AND CONTINGENCIES (Note S)

 
         
         

STOCKHOLDERS’ DEFICIT

        

Common stock, $.01 par value; 30,000,000 shares authorized; 9,369,015 and 9,368,792 shares issued; and 4,114,934 and 4,141,387 shares outstanding at September 27, 2020 and March 29, 2020, respectively

  94   94 

Additional paid-in capital

  62,182   62,130 

(Accumulated deficit)

  (40,581)  (45,356)

Stockholders’ equity before treasury stock

  21,695   16,868 
         

Treasury stock, at cost, 5,254,081 and 5,227,405 shares at September 27, 2020 and March 29, 2020

  (84,770)  (83,269)

Total stockholders’ deficit

  (63,075)  (66,401)
         

Total liabilities and stockholders’ deficit

 $106,332  $105,282 

 

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 Twenty-six weeks ended September 27, 2020 and September 29, 2019

(in thousands, except per share amounts)

(Unaudited)

 

   

Thirteen weeks ended

   

Twenty-six weeks ended

 
   

September 27,

2020

   

September 29,

2019

   

September 27,

2020

   

September 29,

2019

 
                                 

REVENUES

                               

Sales

  $ 12,692     $ 22,106     $ 19,375     $ 42,343  

License royalties

    8,268       5,425       18,791       14,147  

Franchise fees and royalties

    476       1,498       667       2,575  

Advertising fund revenue

    403       697       692       1,179  

Total revenues

    21,839       29,726       39,525       60,244  
                                 

COSTS AND EXPENSES

                               

Cost of sales

    9,927       16,289       15,224       31,711  

Restaurant operating expenses

    1,011       1,108       1,863       2,027  

Depreciation and amortization

    302       337       612       647  

General and administrative expenses

    2,612       3,559       5,456       7,496  

Advertising fund expense

    403       1,067       692       1,549  

Total costs and expenses

    14,255       22,360       23,847       43,430  
                                 

Income from operations

    7,584       7,366       15,678       16,814  
                                 

Loss on disposal of property and equipment

    -       (2 )     -       (2 )

Interest expense

    (2,651 )     (2,651 )     (5,301 )     (5,301 )

Interest income

    103       370       220       736  

Other income, net

    22       20       22       41  
                                 

Income before provision for income taxes

    5,058       5,103       10,619       12,288  

Provision for income taxes

    1,403       1,445       2,964       3,261  

Net income

  $ 3,655     $ 3,658     $ 7,655     $ 9,027  
                                 

PER SHARE INFORMATION

                               

Weighted average shares used in computing income per share:

                               

Basic

    4,115       4,227       4,118       4,216  

Diluted

    4,115       4,227       4,118       4,216  
                                 

Income per share:

                               

Basic

  $ .89     $ .87     $ 1.86     $ 2.14  

Diluted

  $ .89     $ .87     $ 1.86     $ 2.14  
                                 

Dividends declared per share

  $ .35     $ .35     $ .70     $ .70  

 

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

 

4

 

 

Nathan’s Famous, Inc. and Subsidiaries

 

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

Thirteen weeks ended September 27, 2020 and September 29, 2019

(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, June 28, 2020

    9,368,792     $ 94     $ 62,159     $ (42,796 )     5,254,081     $ (84,770 )   $ (65,313 )
                                                         

Shares issued in connection with share-based compensation plans

    223       -       -       -       -       -       -  

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

    -       -       (6 )     -       -       -       (6 )

Dividends on common stock

    -       -       -       (1,440 )     -       -       (1,440 )

Share-based compensation

    -       -       29       -       -       -       29  

Net income

    -       -       -       3,655       -       -       3,655  

Balance, September 27, 2020

    9,369,015     $ 94     $ 62,182     $ (40,581 )     5,254,081     $ (84,770 )   $ (63,075 )

 

 

 

                   

Additional

                           

Total

 
   

Common

   

Common

   

Paid-in

   

(Accumulated

   

Treasury Stock, at Cost

   

Stockholders’

 
   

Shares

   

Stock

   

Capital

   

Deficit)

   

Shares

   

Amount

   

Deficit

 
                                                         

Balance, June 30, 2019

    9,368,572     $ 94     $ 62,050     $ (48,989 )     5,141,763     $ (78,303 )   $ (65,148 )
                                                         

Shares issued in connection with share-based compensation plans

    220       -       -       -       -       -       -  

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

    -       -       (8 )     -       -       -       (8 )

Dividends on common stock

    -       -       -       (1,479 )     -       -       (1,479 )

Share-based compensation

    -       -       30       -       -       -       30  

Net income

    -       -       -       3,658       -       -       3,658  

Balance, September 29, 2019

    9,368,792     $ 94     $ 62,072     $ (46,810 )     5,141,763     $ (78,303 )   $ (62,947 )

                 

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

 

5

 

Nathan’s Famous, Inc. and Subsidiaries

 

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

Twenty-six weeks ended September 27, 2020 and September 29, 2019

(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 29, 2020

    9,368,792     $ 94     $ 62,130     $ (45,356 )     5,227,405     $ (83,269 )   $ (66,401 )
                                                         

Shares issued in connection with share-based compensation plans

    223       -       -       -       -       -       -  

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

    -       -       (6 )     -       -       -       (6 )

Repurchase of common stock

    -       -       -       -       26,676       (1,501 )     (1,501 )

Dividends on common stock

    -       -       -       (2,880 )     -       -       (2,880 )

Share-based compensation

    -       -       58       -       -       -       58  

Net income

    -       -       -       7,655       -       -       7,655  

Balance, September 27, 2020

    9,369,015     $ 94     $ 62,182     $ (40,581 )     5,254,081     $ (84,770 )   $ (63,075 )

 

 

 

                   

Additional

                           

Total

 
   

Common

   

Common

   

Paid-in

   

(Accumulated

   

Treasury Stock, at Cost

   

Stockholders’

 
   

Shares

   

Stock

   

Capital

   

Deficit)

   

Shares

   

Amount

   

Deficit

 
                                                         

Balance, March 31, 2019

    9,336,338     $ 93     $ 60,945     $ (52,879 )     5,141,763     $ (78,303 )   $ (70,144 )
                                                         

Shares issued in connection with share-based compensation plans

    32,454       1       1,077       -       -       -       1,078  

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

    -       -       (8 )     -       -       -       (8 )

Dividends on common stock

    -       -       -       (2,958 )     -       -       (2,958 )

Share-based compensation

    -       -       58       -       -       -       58  

Net income

    -       -       -       9,027       -       -       9,027  

Balance, September 29, 2019

    9,368,792     $ 94     $ 62,072     $ (46,810 )     5,141,763     $ (78,303 )   $ (62,947 )

 

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

 

6

 

 

Nathan’s Famous, Inc. and Subsidiaries

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

Twenty-six weeks ended September 27, 2020 and September 29, 2019

(in thousands)

(Unaudited)

 

   

September 27,

2020

   

September 29,

2019

 

Cash flows from operating activities:

               

Net income

  $ 7,655     $ 9,027  

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

               

Depreciation and amortization

    612       647  

Loss on disposal of property and equipment

    -       2  

Non-cash rental expense

    127       -  

Amortization of debt issuance costs

    346       346  

Share-based compensation expense

    58       58  

Income tax benefit on stock option exercises

    -       228  

Provision for doubtful accounts

    27       23  

Deferred income taxes

    (16 )     (16 )

Changes in operating assets and liabilities:

               

Accounts and other receivables, net

    2,114       (2,020 )

Inventories

    (179 )     (80 )

Prepaid expenses and other current assets

    560       412  

Other assets

    9       5  

Accounts payable, accrued expenses and other current liabilities

    (2,166 )     (2,171 )

Deferred franchise fees

    (83 )     (489 )

Other liabilities

    43       123  
                 

Net cash provided by operating activities

    9,107       6,095  
                 

Cash flows from investing activities:

               

Purchase of property and equipment

    (318 )     (182 )
                 

Net cash used in investing activities

    (318 )     (182 )
                 

Cash flows from financing activities:

               

Dividends paid to stockholders

    (2,880 )     (2,958 )

Proceeds from exercise of stock options

    -       1,078  

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

    (6 )     (8 )

Repurchase of treasury stock

    (1,501 )     -  
                 

Net cash used in financing activities

    (4,387 )     (1,888 )
                 

Net increase in cash and cash equivalents

    4,402       4,025  
                 

Cash and cash equivalents, beginning of period

    77,117       75,446  
                 

Cash and cash equivalents, end of period

  $ 81,519     $ 79,471  
                 

Cash paid during the period for:

               

Interest

  $ 4,969     $ 4,969  

Income taxes

  $ 2,743     $ 2,955  
                 

Non-cash financing activity:

               

Dividends declared per share

  $ .70     $ .70  

 

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

 

7

 

NATHAN'S FAMOUS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 27, 2020

(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 twenty-six week periods ended September 27, 2020 and September 29, 2019 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. 

 

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 29, 2020.

 

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 29, 2020.

 

Covid-19 Pandemic

 

In March 2020, the World Health Organization declared the novel strain of coronavirus (COVID-19) a global pandemic. The COVID-19 pandemic has had an impact on the Company’s business, financial condition, cash flows and results of operations for the thirteen and twenty-six weeks ended September 27, 2020 (“fiscal 2021 period”) and continues into the third quarter of fiscal 2021. Governmental restrictions and public perceptions of the risks associated with COVID-19 have caused consumers to avoid or limit nonessential travel, gatherings in public places and other social interactions, which has adversely affected, and could continue to adversely affect, our business. The COVID-19 pandemic, has and may continue to impact customer traffic at our Company-owned restaurants and franchised restaurants, as well as sales to our Branded Product Program customers. We cannot predict whether, when or the manner in which the conditions surrounding the pandemic will change and cannot currently estimate the impact on our business in the short or long-term.

 

As of the date of this filing, three of our Company-owned restaurants continue to operate. Our seasonal location on the Coney Island Boardwalk closed on September 13, 2020. Beginning in the second quarter fiscal 2021, the Company re-opened the dining rooms at our Company-owned restaurants located in Oceanside, New York and Yonkers, New York. Although these dining rooms are open, they are operating at reduced capacity, as stipulated under government orders, as well as due to social distancing protocols that are also mandated by the same government orders. Even without governmental restrictions, customers may continue to choose to reduce or to eliminate in-restaurant dining because of the rise in the number of COVID-19 cases.

 

A majority of our franchised locations closed temporarily during the fiscal 2021 period due to their locations being in venues that were closed (such as movie theaters) or venues operating at reduced traffic levels (such as airports, highway travel plazas and shopping malls). As a result, franchise system sales have been significantly impacted. Even after these restrictions are lifted, customers may still be reluctant to return to in-restaurant dining. As of the date of this filing, approximately 60% of our franchise locations are open.

 

The sales and profits from our Branded Product Program have been adversely impacted as many of our customers operate in venues that are currently closed (such as movie theaters) or venues operating at significantly reduced traffic, such as professional sports arenas, amusement parks and shopping malls.

 

8

 

To help mitigate the impact of the COVID-19 pandemic, we have taken the following decisive actions which are on-going:

 

 

Reduced payroll costs, through salary reductions and furloughs

 

Reduced discretionary operating expenses, including marketing and travel

 

Postponed non-essential capital spending

 

Launched curbside delivery at three of our four Company-owned restaurants

 

Introduced “ghost kitchens” whereby well-known restaurants have the ability to market our products for pick-up or in the form of meal-kits for at home preparation

 

Implemented enhanced health and safety protocols across the Company

 

The Company also assessed the impact of the COVID-19 pandemic on the estimates and assumptions used in preparing these consolidated financial statements, including, but not limited to the carrying values of Goodwill, Intangible Assets, and other Long-lived Assets. See Note J for a further discussion related to Goodwill and Intangible Assets and Note K for a further discussion related to Long-lived Assets.

 

We continue to actively monitor the evolving situation and may take further actions that alter our business operations as may be required by federal, state or local authorities or that we determine are in the best interests of our team members, customers, suppliers and shareholders.

 

 

NOTE B – ADOPTION OF NEW ACCOUNTING STANDARD

 

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 Company adopted this guidance on March 30, 2020. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

 

 

NOTE C – NEW ACCOUNTING STANDARDS 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. In November 2019, the FASB deferred the effective date for smaller reporting companies for annual reporting periods beginning after December 15, 2022. This standard is required to take effect in Nathan’s first quarter ( June 2023) of our fiscal year ending March 31, 2024. The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements and related disclosures.

 

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,” which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020. This standard is required to take effect in Nathan’s first quarter ( June 2021) of our fiscal year ending March 27, 2022. The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements and related disclosures.

 

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

 

9

 
 

NOTE D – REVENUES

 

The Company’s disaggregated revenues for the thirteen and twenty-six weeks ended September 27, 2020 and September 29, 2019 are as follows (in thousands):

 

  

Thirteen weeks ended

  

Twenty-six weeks ended

 
  

September 27, 2020

  

September 29, 2019

  

September 27, 2020

  

September 29, 2019

 
                 

Branded Products

 $9,698  $16,182  $14,447  $32,295 

Company-operated restaurants

  2,994   5,924   4,928   10,048 

Total sales

  12,692   22,106   19,375   42,343 
                 

License royalties

  8,268   5,425   18,791   14,147 
                 

Franchise royalties

  409   1,047   519   2,027 

Franchise fees

  67   451   148   548 

Total franchise fees and royalties

  476   1,498   667   2,575 
                 

Advertising fund revenue

  403   697   692   1,179 
                 

Total revenues

 $21,839  $29,726  $39,525  $60,244 

 

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

 

  

Thirteen weeks ended

  

Twenty-six weeks ended

 
  

September 27, 2020

  

September 29, 2019

  

September 27, 2020

  

September 29, 2019

 
                 

United States

 $21,501  $28,235  $38,913  $57,622 

International

  338   1,491   612   2,622 

Total revenues

 $21,839  $29,726  $39,525  $60,244 

 

 

Contract balances

 

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

 

  

September 27,

2020

  

March 29,

2020

 

Deferred franchise fees (a)

 $1,834  $1,917 

 

 

(a)

Deferred franchise fees of $225 and $1,609 as of September 27, 2020 and $230 and $1,687 as of March 29, 2020 are included in Deferred franchise fees – current and long term, respectively.

 

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

 

  

Twenty-six weeks ended

 
  

September 27,

2020

  

September 29,

2019

 

Deferred franchise fees at beginning of period

  1,917   3,005 

Additions to deferred revenue

  65   59 

Revenue recognized during the period

  (148)  (548)

Deferred franchise fees at end of period

 $1,834  $2,516 

 

10

 

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

 

2021 (a)

 $114 

2022

  218 

2023

  195 

2024

  183 

2025

  175 

Thereafter

  949 

Total

 $1,834 

 

 

(a)

Represents franchise fees expected to be recognized for the remainder of the 2021 fiscal year, which includes international development fees expected to be recognized over the duration of one year or less. Amount does not include $148 of franchise fee revenue recognized for the twenty-six weeks ended September 27, 2020.

 

We have applied the optional exemption, as provided for under Topic 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 E – 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 twenty-six week periods ended September 27, 2020 and September 29, 2019, respectively.

 

Thirteen weeks

                        
  

Net Income

  

Number of Shares

  

Net Income

Per Share

 
  

2020

  

2019

  

2020

  

2019

  

2020

  

2019

 
  

(in thousands)

  

(in thousands)

         

Basic EPS

                        

Basic calculation

 $3,655  $3,658   4,115   4,227  $0.89  $0.87 

Effect of dilutive employee stock options

  -   -   -   -   -   - 

Diluted EPS

                        

Diluted calculation

 $3,655  $3,658   4,115   4,227  $0.89  $0.87 

 

Twenty-six weeks

                        
  

Net Income

  

Number of Shares

  

Net Income

Per Share

 
  

2020

  

2019

  

2020

  

2019

  

2020

  

2019

 
  

(in thousands)

  

(in thousands)

         

Basic EPS

                        

Basic calculation

 $7,655  $9,027   4,118   4,216  $1.86  $2.14 

Effect of dilutive employee stock options

  -   -   -   -   -   - 

Diluted EPS

                        

Diluted calculation

 $7,655  $9,027   4,118   4,216  $1.86  $2.14 

 

Options to purchase 10,000 shares of common stock in the thirteen and twenty-six week periods ended September 27, 2020 and September 29, 2019 were not included in the computation of diluted EPS because the exercise price exceeded the average market price of common shares during the period.

 

11

 
 

NOTE F – CASH AND CASH EQUIVALENTS               

 

The Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents. The Company did not have any cash equivalents at September 27, 2020 and March 29, 2020.

 

At September 27, 2020 and March 29, 2020, substantially all of the Company’s cash balances are in excess of Federal government insurance limits. The Company does not believe that it is exposed to any significant risk on these balances.

 

 

NOTE G – 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 face value and fair value of long-term debt as of September 27, 2020 and March 29, 2020 were as follows (in thousands):

 

  

September 27, 2020

  

March 29, 2020

 
  

Face value

  

Fair value

  

Face Value

  

Fair value

 
                 

Long-term debt

 $150,000  $152,250  $150,000  $138,000 

 

The Company estimates the fair value of its long-term debt based upon review of observable pricing in secondary markets as of the last trading day of the fiscal period. Accordingly, the Company classifies its long-term debt as Level 2.

 

The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable approximate fair value due to the short-term 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 September 27, 2020, no fair value adjustment or material fair value measurements were required for non-financial assets or liabilities.

 

 

NOTE H – ACCOUNTS AND OTHER RECEIVABLES, NET          

 

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

 

  

September 27,

  

March 29,

 
  

2020

  

2020

 
         

Branded product sales

 $5,632  $6,789 

Franchise and license royalties

  3,130   4,299 

Other

  460   257 
   9,222   11,345 
         

Less: allowance for doubtful accounts

  255   237 

Accounts and other receivables, net

 $8,967  $11,108 

 

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.

 

12

 

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 twenty-six week period ended September 27, 2020 and the fiscal year ended March 29, 2020 are as follows (in thousands): 

 

  

September 27,

2020

  

March 29,

2020

 
         

Beginning balance

 $237  $585 

Bad debt expense

  27   71 

Write-offs and other

  (9)  (419)

Ending balance

 $255  $237 

 

 

NOTE I – PREPAID EXPENSES AND OTHER CURRENT ASSETS

 

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

 

  

September 27,

  

March 29,

 
  

2020

  

2020

 
         

Real estate taxes

 $73  $75 

Insurance

  184   263 

Marketing

  -   369 

Other

  364   474 

Total prepaid expenses and other current assets

 $621  $1,181 

 

 

NOTE J - GOODWILL AND INTANGIBLE ASSETS

 

The Company determined that the impact of COVID-19 was a triggering event that required the Company to perform a quantitative interim goodwill impairment test. The Company’s impairment assessment was performed in accordance with the accounting guidance adopted in the first quarter of fiscal 2021 that simplifies the testing for goodwill impairment, as discussed in Note B – Adoption of New Accounting Standard. Based on the quantitative assessment performed, management determined that the Company’s goodwill has not been impaired as of September 27, 2020 and, as a result, no impairment charge was recorded for the thirteen and twenty-six week periods ended September 27, 2020.

 

The Company's definite-lived intangible asset consists of trademarks, tradenames and other intellectual property in connection with its Arthur Treacher's co-branding agreements.  The Company reviews its definite-lived intangible asset for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable.  The Company determined that the impact of COVID-19 on its business was a sufficient indicator that the carrying value may not be recoverable.  The Company tested for recoverability of its definite-lived intangible asset based on the projected undiscounted cash flows to be derived from such co-branding agreements, which has a remaining useful life based upon the term of its agreements. Based on the quantitative test performed and other qualitative factors, the Company determined that the definite-lived intangible asset was recoverable and no impairment charge was recorded for the thirteen and twenty-six week periods ended September 27, 2020.

 

 

NOTE K - LONG LIVED ASSETS

 

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

 

As a result of the impact of the COVID-19 pandemic on its business, the Company determined that sufficient indicators existed to trigger the performance of an interim impairment analysis as of September 27, 2020.

 

The Company tests for recoverability based on the projected undiscounted cash flows to be derived from such assets. If the projected undiscounted future cash flows are less than the carrying value of the asset, the Company will record an impairment loss, if any, based on the difference between the estimated fair value and the carrying value of the asset. The Company generally measures fair value by considering discounted estimated future cash flows from such assets. Cash flow projections and fair value estimates require significant estimates and assumptions by management. Should the estimates and assumptions prove to be incorrect, the Company may be required to record impairments in future periods and such impairments could be material. The Company considers a history of restaurant operating losses to be its primary indicator of potential impairment for individual restaurant locations. No long-lived assets were deemed to be permanently impaired during the thirteen and twenty-six week periods ended September 27, 2020 based upon quantitative analysis.

 

13

 
 

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

 

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

 

  

September 27,

  

March 29,

 
  

2020

  

2020

 

Payroll and other benefits

 $1,541  $3,075 

Accrued rebates

  212   514 

Rent and occupancy costs

  440   84 

Deferred revenue

  303   797 

Construction costs

  66   105 

Interest

  4,070   4,084 

Professional fees

  134   194 

Sales, use and other taxes

  57   17 

Corporate income taxes

  371   176 

Other

  358   251 

Total accrued expenses and other current liabilities

 $7,552  $9,297 

 

Other liabilities consist of the following (in thousands):

 

  

September 27,

  

March 29,

 
  

2020

  

2020

 

Reserve for uncertain tax positions

 $610  $567 

Other

  129   129 

Total other liabilities

 $739  $696 

 

 

NOTE M – INCOME TAXES       

 

On March 27, 2020, President Trump signed the Coronavirus Aid, Relief and Economic Security (the “CARES Act”) into law which among other provisions increases the limitation on the allowed business interest expense deduction from 30 percent to 50 percent of adjusted taxable income for tax years beginning January 1, 2019 and 2020. Additionally, the CARES Act allows businesses to immediately expense the full cost of Qualified Improvement Property, retroactive to tax years beginning on or after January 1, 2018.

 

The income tax provisions for the twenty-six periods ended September 27, 2020 and September 29, 2019 reflect effective tax rates of 27.9% and 26.5%, respectively.

 

Nathan’s effective tax rate for the twenty-six week period September 29, 2019 was reduced by 1.9% as a result of the tax benefits associated with stock compensation. For the twenty-six week period ended September 29, 2019, excess tax benefits of $228,000 were reflected in the Consolidated Statements of Earnings as a reduction in determining the provision for income taxes. Nathan’s effective tax rate without this adjustment would have been 28.4% for the fiscal 2020 period.

 

The amount of unrecognized tax benefits at September 27, 2020 was $333,000 all of which would impact Nathan’s effective tax rate, if recognized. As of September 27, 2020, Nathan’s had $289,000 of accrued interest and penalties in connection with unrecognized tax benefits.

 

In November 2019, the State of New Jersey notified Nathan’s that our tax returns for the fiscal years ended March 27, 2016, March 26, 2017 and March 25, 2018 will be audited. The audit is ongoing.

 

 

NOTE N – 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 the Corporate segment.

 

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

 

14

 

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 the 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 and expenses of the advertising fund.

 

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

  

Twenty-six weeks ended

 
  

Sept. 27, 2020

  

Sept. 29, 2019

  

Sept. 27, 2020

  

Sept. 29, 2019

 
                 

Revenues

                

Branded Product Program

 $9,698  $16,182  $14,447  $32,295 

Product licensing

  8,268   5,425   18,791   14,147 

Restaurant operations

  3,470   7,422   5,595   12,623 

Corporate (1)

  403   697   692   1,179 

Total revenues

 $21,839  $29,726  $39,525  $60,244 
                 

Income from operations

                

Branded Product Program

 $1,252  $2,124  $1,524  $4,327 

Product licensing

  8,223   5,380   18,700   14,056 

Restaurant operations

  (138)  2,103   (1,031)  2,853 

Corporate

  (1,753)  (2,241)  (3,515)  (4,422)

Income from operations

 $7,584  $7,366  $15,678  $16,814 
                 

Loss on disposal of property and equipment

  -   (2)  -   (2)

Interest expense

  (2,651)  (2,651)  (5,301)  (5,301)

Interest income

  103   370   220   736 

Other income, net

  22   20   22   41 

Income before provision for income taxes

 $5,058  $5,103  $10,619  $12,288 

 

 

(1)

Represents advertising fund revenue

 

 

NOTE O – SHARE-BASED COMPENSATION

 

Total share-based compensation during the thirteen week periods ended September 27, 2020 and September 29, 2019 was $29,000 and $30,000, respectively. Total share-based compensation during the twenty-six week periods ended September 27, 2020 and September 29, 2019 was $58,000. Total share-based compensation is included in general and administrative expenses in our accompanying Consolidated Statements of Earnings. As of September 27, 2020, there was $111,000 of unamortized compensation expense related to share-based incentive awards. The Company expects to recognize this expense over approximately eleven months, which represents the weighted average remaining requisite service periods for such awards.

 

15

 

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  Twenty-six weeks ended 
  

Sept. 27, 2020

  

Sept. 29, 2019

  

Sept. 27, 2020

  

Sept. 29, 2019

 
                 

Stock options

 $21  $22  $42  $43 

Restricted stock

  8   8   16   15 

Total compensation cost

 $29  $30  $58  $58 

 

Stock options: 

 

There were no new share-based awards granted during the twenty-six week period ended September 27, 2020.

 

During the fiscal year March 31, 2019, 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.

 

Transactions with respect to stock options for the twenty-six weeks ended September 27, 2020 are as follows:

 

  Shares  

Weighted-

Average

Exercise

Price

  

Weighted-

Average

Remaining

Contractual Life

  

Aggregate

Intrinsic

Value

(in thousands)

 
                 

Options outstanding at March 29, 2020

  10,000  $89.90   3.45   - 

Granted

  -   -   -   - 

Exercised

  -   -   -   - 

Options outstanding at September 27, 2020

  10,000  $89.90   2.96   - 
                 

Options exercisable at September 27, 2020

  6,667  $89.90   2.96   - 

 

Restricted stock: 

 

Transactions with respect to restricted stock for the twenty-six weeks ended September 27, 2020 are as follows:

 

  Shares  

Weighted-

Average

Grant-date

Fair value

Per share

 

Unvested restricted stock at March 29, 2020

  667  $89.90 

Granted

  -   - 

Vested

  (334) $89.90 

Unvested restricted stock at September 27, 2020

  333  $89.90 

 

 

NOTE P – STOCKHOLDERS’ EQUITY

 

1. Dividends

 

Effective June 12, 2020, the Board declared its first quarterly cash dividend of $0.35 per share for fiscal year 2021, aggregating $1,440,000, which was paid on June 26, 2020 to stockholders of record as of the close of business on June 22, 2020.

 

Effective August 7, 2020, the Board declared its second quarterly cash dividend of $0.35 per share for fiscal year 2021, aggregating $1,440,000, which was paid on September 4, 2020 to stockholders of record as of the close of business on August 24, 2020.

 

Effective November 6, 2020 the Board declared its third quarterly cash dividend of $0.35 per share payable on December 4, 2020 to stockholders of record as of the close of business on November 23, 2020.

 

Our ability to pay future dividends is limited by the terms of the Indenture with U.S. Bank National Association, as trustee and collateral trustee (see Note Q). In addition to the terms of the Indenture, the declaration and payment of any cash dividends in the future are subject to final determination of the Board and will be dependent upon our earnings and financial requirements.

 

16

 

2. Stock Incentive Plans

 

On September 13, 2012, the Company amended the Nathan’s Famous, Inc. 2010 Stock Incentive Plan (the “2010 Plan”) increasing the number of shares available for issuance by 250,000 shares. Shares to be issued under the 2010 Plan may be made available from authorized but unissued stock, common stock held by the Company in its treasury, or common stock purchased by the Company on the open market or otherwise. The number of shares issuable and the grant, purchase or exercise price of outstanding awards are subject to adjustment in the amount that the Company’s Compensation Committee considers appropriate upon the occurrence of certain events, including stock dividends, stock splits, mergers, consolidations, reorganizations, recapitalizations, or other capital adjustments. In the event that the Company issues restricted stock awards pursuant to the 2010 Plan, each share of restricted stock would reduce the amount of available shares for issuance by either 3.2 shares for each share of restricted stock granted or 1 share for each share of restricted stock granted.

 

On September 18, 2019, the Company’s shareholders approved the Nathan’s Famous, Inc. 2019 Stock Incentive Plan (the “2019 Plan”). The 2019 Plan became effective as of July 1, 2020 (the "Effective Date"). Following the Effective Date, (i) no additional stock awards were granted under the 2010 Plan and (ii) all outstanding stock awards previously granted under the 2010 Plan remained subject to the terms of the 2010 Plan. All awards granted on or after the Effective Date of the 2019 Plan shall be subject to the terms of the 2019 Plan.

 

As of the Effective Date, we were able to issue up to: (a) 369,584 shares of common stock under the 2019 Plan which includes: (i) shares that have been authorized but not issued pursuant to the 2010 Plan as of the Effective Date up to a maximum of an additional 208,584 shares and (ii) any shares subject to any outstanding options or restricted stock grants under any plan of the Company that were outstanding as of the Effective Date and that subsequently expire unexercised, or are otherwise forfeited, up to a maximum of an additional 11,000 shares. As of September 27, 2020, there were up to 208,584 shares available to be issued for future option grants or up to 184,808 shares of restricted stock that may be granted under the 2010 Plan.

 

3. Stock Repurchase Programs

 

During the period from October 2001 through September 27, 2020, Nathan’s purchased 5,254,081 shares of common stock at a cost of $84,770,000 pursuant to various stock repurchase plans previously authorized by the Board of Directors. During the twenty-six week period ended September 27, 2020, we repurchased 26,676 shares of common stock at a cost of $1,501,000.

 

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 September 27, 2020, Nathan’s had repurchased 1,066,450 shares at a cost of $37,108,000 under the sixth stock repurchase plan. At September 27, 2020 there were 133,550 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.

 

On March 13, 2020, the Company’s Board of Directors approved a 10b5-1 stock plan (the “10b5-1 Plan”) which expired on August 12, 2020. During the twenty-six week period ended September 27, 2020, the Company repurchased in open market transactions 26,676 shares of the Company’s common stock at an average share price of $56.26 for a total cost of $1,501,000 under the 10b5-1 Plan.

 

 

NOTE Q – LONG-TERM DEBT

 

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

 

  

September 27,

  

March 29,

 
  

2020

  

2020

 
         

6.625% Senior Secured Notes due 2025

 $150,000  $150,000 

Less: unamortized debt issuance costs

  (3,514)  (3,860)

Long-term debt, net

 $146,486  $146,140 

 

17

 

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 an indenture dated as of November 1, 2017 by and among the Company, certain of its wholly-owned subsidiaries and U.S. Bank National Association (the “Indenture”). The Company used the net proceeds of the 2025 Notes offering to satisfy and discharge the Indenture relating to the $135,000,000 of 10.000% Senior Secured Notes due 2020 and redeem such 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 $