NATHANS FAMOUS INC

Previous wording

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 impact of disease epidemics such as the COVID-19 pandemic; increases in the cost of food and paper products; the impact of price increases on customer visits; the status of our licensing and supply agreements, including our licensing revenue and overall profitability being substantially dependent on our agreement with Smithfield Foods, Inc.; the impact of our debt service and repayment obligations under the 2025 Notes (as defined below), including the effect on our ability to fund working capital, operations and make investments; economic (including inflationary pressures like those currently being experienced); weather (including the impact on sales at our restaurants particularly during the summer months); changes in the price of beef and beef trimmings; our ability to pass on the cost of any price increases in beef and beef trimmings; legislative and business conditions; the collectability of receivables; changes in consumer tastes; the continued viability of Coney Island as a destination location for visitors; the ability to attract franchisees; the impact of the minimum wage legislation on labor costs in New York State or other changes in labor laws, including regulations which could render a franchisor as a “joint employee” or the impact of our union contracts; our ability to attract competent restaurant and managerial personnel; the enforceability of international franchising agreements; 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 26, 2023, and in other documents we file with the U.S. 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 …

Excerpt shortened here; the source contains the full paragraph.

Current wording

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 impact of disease epidemics such as the COVID-19 pandemic; increases in the cost of food and paper products; the impact of price increases on customer visits; the status of our licensing and supply agreements, including our licensing revenue and overall profitability being substantially dependent on our agreement with Smithfield Foods, Inc.; the impact of our debt service and repayment obligations under our debt instruments, including the effect on our ability to fund working capital, operations and make investments; economic (including inflationary pressures like those currently being experienced); weather (including the impact on sales at our restaurants particularly during the summer months); changes in the price of beef and beef trimmings; our ability to pass on the cost of any price increases in beef and beef trimmings; legislative and business conditions; the collectability of receivables; changes in consumer tastes; the continued viability of Coney Island as a destination location for visitors; the ability to attract franchisees; the impact of the minimum wage legislation on labor costs in New York State or other changes in labor laws, including regulations which could render a franchisor as a “joint employee” or the impact of our union contracts; our ability to attract competent restaurant and managerial personnel; the enforceability of international franchising agreements; 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 31, 2024, and in other documents we file with the U.S. 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 event…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

At December 24, 2023, our restaurant system, excluding virtual kitchens, consisted of 238 locations, including 117 Branded Menu Program locations, and four Company-owned restaurants (including one seasonal unit), located in 17 states, and 13 foreign countries.

Current wording

At June 30, 2024, our restaurant system, excluding virtual kitchens, consisted of 231** locations, including 118 Branded Menu Program locations, and four Company-owned restaurants (including one seasonal unit), located in 17 states, and 13 **foreign countries.

Previous wording

At December 25, 2022, our restaurant system, excluding virtual kitchens, consisted of 233 locations, including 120 Branded Menu Program locations, and four Company-owned restaurants (including one seasonal unit), located in 17 states, and 12 foreign countries.

Current wording

At June 25, 2023, our restaurant system, excluding virtual kitchens, consisted of 235 locations, including 121 Branded Menu Program locations, and four Company-owned restaurants (including one seasonal unit), located in 17 states, and 13** **foreign countries.

Previous wording

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 Company’s 10.000% Senior Secured Notes due 2020, paid a portion of the special $5.00 cash dividend and used the remaining proceeds for general corporate purposes, including working capital.

Current wording

Refinancing of Senior Secured Notes due 2025

Previous wording

Inflationary pressures negatively impacted our earnings during the first nine months of fiscal 2024, including (i) rising labor costs and (ii) higher commodity prices, including beef and beef trimmings. This trend may continue throughout the remainder of fiscal year 2024. In general, we have been able to offset cost increases resulting from inflation by increasing prices and adjusting product mix. We continue to monitor these inflationary pressures and will continue to implement mitigation measures as needed. Inherent volatility in commodity markets, including beef and beef trimmings, could have a significant impact on our results of operations. Delays in implementing price increases, competitive pressures, a decline in consumer spending levels and other factors may limit our ability to implement further price increases in the future.

Current wording

Inflationary pressures impacted our results of operations during the first three months of fiscal 2025, including higher commodity prices on beef and beef trimmings. We expect this trend to continue throughout the remainder of fiscal year 2025. In general, we have been able to offset cost increases resulting from inflation by increasing prices and adjusting product mix. We continue to monitor these inflationary pressures and will continue to implement mitigation measures as needed. Inherent volatility in commodity markets, including beef and beef trimmings, could have a significant impact on our results of operations. Delays in implementing price increases, competitive pressures, a decline in consumer spending levels and other factors may limit our ability to implement further price increases in the future.

Previous wording

As discussed in our Form 10-K for the fiscal year ended March 26, 2023, 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 (“US GAAP”). The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the amounts of assets, liabilities, revenues and expenses reported in those consolidated 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; leases; impairment of intangible assets; impairment of long-lived assets; and income taxes (including uncertain tax positions). As discussed in Note B, the Company adopted ASU 2016-13, “Financial Instruments–* Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” *effective March 27, 2023. There have been no other significant changes to the Company’s accounting policies subsequent to March 26, 2023.

Current wording

As discussed in our Form 10-K for the fiscal year ended March 31, 2024, 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 (“US GAAP”). The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the amounts of assets, liabilities, revenues and expenses reported in those consolidated 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 impairment of intangible assets; impairment of long-lived assets; current expected credit losses and income taxes (including uncertain tax positions). There have been no changes to our critical accounting estimates or significant accounting policies as disclosed in our Annual Report on Form 10-K for the fiscal year ended March 31, 2024.

Previous wording

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

Current wording

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

Previous wording

In addition to disclosing results that are determined in accordance with US GAAP, the Company has provided EBITDA, a non-GAAP financial measure, which is defined as net income excluding (i) interest expense; (ii) provision for income taxes and (iii) depreciation and amortization expense. The Company has also provided Adjusted EBITDA, a non-GAAP financial measure, which is defined as EBITDA, excluding (i) the loss on disposal of property and equipment; (ii) loss on debt extinguishment; and (iii) share-based compensation that the Company believes will impact the comparability of its results of operations.

Current wording

In addition to disclosing results that are determined in accordance with US GAAP, the Company has provided EBITDA, a non-GAAP financial measure, which is defined as net income excluding (i) interest expense; (ii) provision for income taxes and (iii) depreciation and amortization expense. The Company has also provided Adjusted EBITDA, a non-GAAP financial measure, which is defined as EBITDA, excluding share-based compensation that the Company believes will impact the comparability of its results of operations.

Previous wording

Due to the above seasonal factors, as well as inflationary pressures, our results of operations for the thirteen and thirty-nine weeks ended December 24, 2023 are not necessarily indicative of those for a full fiscal year.

Current wording

Due to the above seasonal factors, as well as inflationary pressures, our results of operations for the thirteen weeks ended June 30, 2024 are not necessarily indicative of those for a full fiscal year.

Previous wording

Total revenues increased by approximately 10% to $28,890,000 for the thirteen weeks ended December 24, 2023 (“third quarter fiscal 2024”) as compared to $26,154,000** **for the thirteen weeks ended December 25, 2022 (“third quarter fiscal 2023”).

Current wording

Total revenues increased by approximately 7% to $44,767,000 for the thirteen weeks ended June 30, 2024 (“fiscal 2025 period”) as compared to $41,985,000 for the thirteen weeks ended June 25, 2023 (“fiscal 2024 period”).

Previous wording

License royalties increased to $26,075,000 in the fiscal 2024 period as compared to $26,064,000 in the fiscal 2023 period. Total royalties earned on sales of hot dogs from our license agreement with Smithfield Foods, Inc. at retail and foodservice, were $23,582,000 for the fiscal 2024 period as compared to $23,594,000 in the fiscal 2023 period. The nominal decline is due to a 4% decrease in retail volume as compared to the fiscal 2023 period which was offset, in part, by a 3% increase in average net selling price. The foodservice business earned higher royalties of $217,000 as compared to the fiscal 2023 period. Royalties earned from all other licensing agreements for the manufacture and sale of Nathan’s products increased by $23,000 during the fiscal 2024 period as compared to the fiscal 2023 period primarily due to higher royalties earned on sales of french fries and onion rings, offset, in part, by lower royalties on the sales of franks-in-a-blanket, mozzarella sticks, and other hors d’oeuvres.

Current wording

License royalties increased by approximately 11% to $12,921,000 in the fiscal 2025 period as compared to $11,658,000 in the fiscal 2024 period. Total royalties earned on sales of hot dogs from our license agreement with Smithfield Foods, Inc. at retail and foodservice, increased 11% to $12,010,000 in the fiscal 2025 period as compared to $10,796,000 in the fiscal 2024 period. The increase is due to an 11% increase in retail volume which was offset, in part, by a 0.5% decrease in net selling price.* *The foodservice business earned higher royalties of $67,000 as compared to the fiscal 2024 period. Royalties earned from all other licensing agreements for the manufacture and sale of Nathan’s products increased by $49,000 during the fiscal 2025 period as compared to the fiscal 2024 period primarily due to higher royalties earned on sales of French fries, onion rings, and proprietary spices offset, in part, by lower royalties earned on sales of franks-in-a-blanket, mozzarella sticks and other hors d’oeuvres.

Previous wording

Franchise fees and royalties were $3,321,000 in the fiscal 2024 period as compared to $3,268,000 in the fiscal 2023 period. Total royalties were $2,996,000 in the fiscal 2024 period as compared to $2,785,000 in the fiscal 2023 period. Royalties earned under the Branded Menu program were $603,000 in the fiscal 2024 period as compared to $468,000 in the fiscal 2023 period. Royalties earned under the Branded Menu Program are not based upon a percentage of restaurant sales but are based upon product purchases. Virtual kitchen royalties were $64,000 in the fiscal 2024 period as compared to $112,000 in the fiscal 2023 period. Traditional franchise royalties were $2,329,000 in the fiscal 2024 period as compared to $2,205,000 in the fiscal 2023 period. Franchise restaurant sales increased to $52,068,000 in the fiscal 2024 period as compared to $49,302,000 in the fiscal 2023 period primarily due to higher sales at airport locations, shopping malls and movie theaters. Comparable domestic franchise sales (consisting of 64** **Nathan’s units, excluding sales under the Branded Menu Program) were $42,456,000 in the fiscal 2024 period as compared to $40,847,000 in the fiscal 2023 period.

Current wording

Franchise fees and royalties were $1,073,000 in the fiscal 2025 period as compared to $1,075,000 in the fiscal 2024 period. Total royalties were $981,000 in the fiscal 2025 period as compared to $980,000 in the fiscal 2024 period. Royalties earned under the Branded Menu Program were $175,000 in the fiscal 2025 period as compared to $181,000 in the fiscal 2024 period. Royalties earned under the Branded Menu Program are not based upon a percentage of restaurant sales but are based upon product purchases. Virtual kitchen royalties were $14,000 in the fiscal 2025 period as compared to $32,000 in the fiscal 2024 period. Traditional franchise royalties were $792,000 in the fiscal 2025 period as compared to $767,000 in the fiscal 2024 period. Franchise restaurant sales increased to $17,653,000 in the fiscal 2025 period as compared to $17,263,000 in the fiscal 2024 period primarily due to higher sales at airport locations, shopping malls, and casino locations, primarily in Las Vegas, Nevada. Comparable domestic franchise sales (consisting of 57** **Nathan’s franchised restaurants, excluding sales under the Branded Menu Program) were $14,147,000 in the fiscal 2025 period as compared to $14,199,000 in the fiscal 2024 period.

Previous wording

At December 24, 2023, 238 franchised locations, including domestic, international and Branded Menu Program units were operating as compared to 233 franchised locations, including domestic, international and Branded Menu Program franchise units at December 25, 2022. Total franchise fee income was $325,000 in the fiscal 2024 period as compared to $483,000 in the fiscal 2023 period. Domestic franchise fee income was $81,000 in the fiscal 2024 period as compared to $84,000 in the fiscal 2023 period. International franchise fee income was $181,000 in the fiscal 2024 period as compared to $191,000 during the fiscal 2023 period.

Current wording

At June 30, 2024, 231 franchised locations, including domestic, international and Branded Menu Program units were operating as compared to 235 franchised locations, including domestic, international and Branded Menu Program units at June 25, 2023. Total franchise fee income was $92,000 in the fiscal 2025 period as compared to $95,000 in the fiscal 2024 period. Domestic franchise fee income was $23,000 in the fiscal 2025 period as compared to $27,000 in the fiscal 2024 period. International franchise fee income was $60,000 in the fiscal 2025 period and the fiscal 2024 period. We recognized $9,000 and $8,000 in forfeited fees in the fiscal 2025 and fiscal 2024 periods, respectively. During the fiscal 2025 period, three franchise locations opened and two franchise locations closed. During the fiscal 2024 period, seven franchise locations opened and four franchise locations closed.

Previous wording

Advertising fund revenue, after eliminating Company contributions, was $1,501,000 in the fiscal 2024 period, as compared to $1,504,000 during the fiscal 2023 period.

Current wording

Advertising fund revenue, after eliminating Company contributions, was $428,000 in the fiscal 2025 period as compared to $424,000 in the fiscal 2024 period.

Previous wording

Overall, our cost of sales increased by 12% to $66,743,000 in the fiscal 2024 period as compared to $59,490,000 in the fiscal 2023 period. Our gross profit (calculated as total sales less cost of sales) decreased to $11,979,000 or 15% of sales during the fiscal 2024 period as compared to $13,045,000 or 18% of sales during the fiscal 2023 period.

Current wording

Overall, our cost of sales increased* *by 2.3% to $25,241,000 in the fiscal 2025 period as compared to $24,684,000 in the fiscal 2024 period. Our gross profit (calculated as total Branded Products sales plus total Company-owned restaurant sales less cost of sales) was $5,104,000 during the fiscal 2025 period as compared to $4,144,000 during the fiscal 2024 period.

Previous wording

Cost of sales in the Branded Product Program increased by 14% to $60,698,000 during the fiscal 2024 period as compared to $53,056,000 during the fiscal 2023 period, primarily due to the 2% increase in the volume of hot dogs sold as discussed above, as well as a 12% increase in the average cost per pound of our hot dogs. Inflationary pressures eased slightly in December 2023, yet pricing pressures on commodities, including beef and beef trimmings remain. We did not make any purchase commitments of beef during the fiscal 2024 and 2023 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 2024 period was $6,045,000 or 58% of restaurant sales as compared to $6,434,000 or 60% of restaurant sales in the fiscal 2023 period.** The decrease in cost of sales during the fiscal 2024 period was primarily due to the 2% decrease in sales discussed above. **Food and paper costs as a percentage of Company-owned restaurant sales were 28%, down from 29% in the comparable period of the prior year. Labor and related expenses as a percentage of Company-owned restaurant sales were 29%, down from 31% in the comparable period in the prior year due to tighter management and staffing stabilization.

Current wording

Cost of sales in the Branded Product Program increased by approximately 2% to $22,972,000 in the fiscal 2025 period as compared to $22,568,000 in the fiscal 2024 period, primarily due to a 0.4% increase in the volume of hot dogs sold, as well as a 1.1% increase in the average cost per pound of our hot dogs. A shrinking supply of cattle, combined with drought conditions, industry demand and inflationary pressures have resulted in higher commodity prices, including beef and beef trimmings, contributing to the increase in the average cost per pound of our hot dogs. We did not make any purchase commitments of beef during the fiscal 2025 and 2024 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 2025 period was $2,269,000 or 54% of restaurant sales, as compared to $2,116,000 or 58% of restaurant sales during the fiscal 2024 period. Food and paper costs as a percentage of Company-owned restaurant sales were 25%, down from 28% in the comparable period of the prior year, driven, in part, by price increases across most menu offerings. Labor and related expenses as a percentage of Company-owned restaurant sales were 29%, down from 30% in the comparable period in the prior year due to increases in our average check and tighter management and staffing stabilization.

Previous wording

Depreciation and amortization, which primarily consists of the depreciation of fixed assets, including leasehold improvements and equipment, was $896,000 in the fiscal 2024 period as compared to $837,000 in the fiscal 2023 period.

Current wording

Depreciation and amortization, which primarily consist of the depreciation of fixed assets, including leasehold improvements and equipment and the amortization of a definite-lived intangible asset, was $249,000 in the fiscal 2025 period as compared to $313,000 in the fiscal 2024 period.

Previous wording

Advertising fund expense, after eliminating Company contributions, was $1,501,000 in the fiscal 2024 period, as compared to $1,679,000 in the fiscal 2023 period.

Current wording

Advertising fund expense, after eliminating Company contributions, was $428,000 in the fiscal 2025 period as compared to $424,000 in the fiscal 2024 period.

Previous wording

The reduction in interest expense of $552,000 is due to the reduction in the outstanding principal amount of the Company’s 2025 Notes as a result of the partial redemptions of $30,000,000 principal amount of its 2025 Notes completed in March 2023 and $20,000,000 principal amount of its 2025 Notes completed in December 2023.

Current wording

The reduction in interest expense of $354,000 is due to the reduction in the outstanding balance of the Company’s 2025 Notes from $80,000,000 at June 25, 2023 to $60,000,000 at June 30, 2024, as a result of the $20,000,000 partial redemption completed in December 2023.

Previous wording

Interest income of $350,000 in the fiscal 2024 period represented amounts earned by the Company on its certificates of deposit, as well as interest bearing bank and money market accounts, as compared to $260,000 in the fiscal 2023 period.

Current wording

Interest and dividend income of $78,000 in the fiscal 2025 period represented amounts earned by the Company on its interest bearing bank and money market accounts and mutual funds, as compared to $62,000 in the fiscal 2024 period.

Previous wording

Other income, net was $21,000 in the third quarter fiscal 2024, which primarily relates to sublease income from a franchised restaurant. Other expense, net was $60,000 in the third quarter fiscal 2023, which primarily relates to a loss on disposal of assets for capitalized software no longer in use of $101,000 offset by sublease income from a franchised restaurant.

Current wording

Other income, net was $21,000 in the fiscal 2025 period and the fiscal 2024 period, which primarily relates to sublease income from a franchised restaurant.

Previous wording

The effective income tax rate for the fiscal 2024 period was 27.7% compared to 27.1% in the fiscal 2023 period. The effective income tax rate for the fiscal 2024 period reflected income tax expense of $6,025,000 recorded on $21,731,000 of pre-tax income. The effective income tax rate for the fiscal 2023 period reflected income tax expense of $6,093,000 recorded on $22,451,000 of pre-tax income. The effective tax rates are higher than the U.S. Federal statutory rates primarily due to state and local taxes, as well as non-deductible executive compensation under the Internal Revenue Code Section 162(m).

Current wording

The effective income tax rate for the fiscal 2025 period was 27.4% as compared to 27.1% in the fiscal 2024 period. The effective income tax rate for the fiscal 2025 period reflected income tax expense of $3,507,000 recorded on $12,784,000 of pre-tax income. The effective income tax rate for the fiscal 2024 period reflected income tax expense of $2,744,000 recorded on $10,132,000 of pre-tax income. The effective tax rates are higher than the statutory rates primarily due to state and local taxes, as well as non-deductible compensation under the Internal Revenue Code Section 162(m).

Previous wording

The amount of unrecognized tax benefits at December 24, 2023 was $465,000 all of which would impact the Company’s effective tax rate, if recognized. As of December 24, 2023, the Company had approximately $343,000 accrued for the payment of interest and penalties in connection with unrecognized tax benefits.

Current wording

The amount of unrecognized tax benefits at June 30, 2024 was $485,000 all of which would impact the Company’s effective tax rate, if recognized. As of June 30, 2024, the Company had approximately $367,000 accrued for the payment of interest and penalties in conjunction with unrecognized tax benefits.

Previous wording

Nathan’s estimates that its unrecognized tax benefit excluding accrued interest and penalties could be further reduced by up to $19,000 during the fiscal year ending March 31, 2024 due primarily to the lapse of statutes of limitations which would favorably impact the Company’s effective tax rate, although no assurances can be given in this regard.

Current wording

Nathan’s estimates that its unrecognized tax benefit excluding accrued interest and penalties could be further reduced by up to $46,000 during the fiscal year ending March 30, 2025 due primarily to the lapse of statutes of limitations which would favorably impact the Company’s effective tax rate, although no assurances can be given in this regard.

Previous wording

Cash provided by operations of $13,596,000 in the fiscal 2024 period is primarily attributable to net income of $15,706,000 in addition to other non-cash operating items of $2,023,000, offset by changes in other operating assets and liabilities of $4,133,000. Non-cash operating expenses consist principally of depreciation and amortization of $896,000, amortization of debt issuance costs of $276,000, share-based compensation expense of $546,000, a loss on debt extinguishment of $169,000 and a provision for uncollectible accounts of $75,000. In the fiscal 2024 period, accounts and other receivables decreased by $1,147,000 due primarily to lower Branded Product Program receivables of $895,000 and lower franchise and license royalty receivables of $792,000**.*Prepaid expenses and other current assets decreased by $308,000 due principally to a decrease in prepaid marketing and other expenses of $596,000 which were offset, in part, by an increase in prepaid income taxes of $353,000. *Accounts payable, accrued expenses and other current liabilities decreased by $5,394,000 due to lower accrued interest expense of $1,535,000 as a result of the partial redemption of our 2025 Notes; a decline in accrued payroll and other benefits of $1,053,000 resulting primarily from the payment of year-end fiscal 2023 incentive compensation; earned deferred revenue of $1,156,000; and a decline in accounts payable of $1,780,000 due to the timing of product purchases for our Branded Product Program and Company-owned restaurants.

Current wording

Cash provided by operations of $4,993,000 in the fiscal 2025 period is primarily attributable to net income of $9,277,000 in addition to other non-cash operating items of $503,000, offset by changes in other operating assets and liabilities of $4,787,000. Non-cash operating expenses consist principally of depreciation and amortization of $249,000, amortization of debt issuance costs of $69,000, share-based compensation expense of $188,000, and a provision for credit losses of $65,000. In the fiscal 2025 period, accounts and other receivables increased by $5,805,000 due primarily to higher Branded Product Program receivables of $2,131,000, higher franchise and license royalties receivable of $3,031,000 and higher receivables due to the Advertising Fund of $730,000. Prepaid expenses and other current assets decreased by $578,000 due principally to a decrease in prepaid income taxes of $858,000 which was offset by an increase in prepaid real estate taxes of $61,000 and an increase in deferred financing costs of $265,000. Accounts payable, accrued expenses and other current liabilities increased by $568,000 due principally to an increase in accounts payable due to the timing of seasonal product purchases for our Branded Product Program and Company-owned restaurants, as well as an increase in accrued rebates of $187,000 as a result of higher sales. Additionally, there was an increase in accrued corporate taxes of $2,483,000 due to the timing of estimated tax payments and higher earnings, as well as an increase in dividends payable of $2,043,000 due to the timing of our first quarter fiscal 2025 dividend payment. Offsetting these increases was a reduction in accrued payroll and other benefits of $2,027,000 resulting from the payment of year-end fiscal 2024 compensation as well as a reduction in accrued interest expense of $997,000 resulting from our May 2024 semi-annual interest payment on our 2025 Notes.

Previous wording

Cash used in investing activities was $243,000 in the fiscal 2024 period primarily in connection with capital expenditures incurred for our Branded Product Program and our Coney Island restaurants.

Current wording

Cash used in investing activities of $41,000** **is primarily comprised of capital expenditures incurred for our Branded Product Program and our Coney Island restaurants.

Previous wording

In 2016, the Board authorized increases to the sixth stock repurchase plan for the purchase of up to 1,200,000 shares of its common stock on behalf of the Company. As of December 24, 2023, Nathan’s has repurchased 1,101,884 shares at a cost of $39,000,000** **under the sixth stock repurchase plan. At December 24, 2023, there were 98,116 shares remaining to be repurchased pursuant to the sixth stock repurchase plan. 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. There were no stock repurchases during the fiscal 2024 period.

Current wording

In 2016, the Board authorized increases to the sixth stock repurchase plan for the purchase of up to 1,200,000 shares of its common stock on behalf of the Company. As of June 30, 2024, Nathan’s has repurchased 1,101,884 shares at a cost of $39,000,000** **under the sixth stock repurchase plan. At June 30, 2024, there were 98,116 shares remaining to be repurchased pursuant to the sixth stock repurchase plan. The plan does not have a set expiration date. Purchases under the Company’s stock repurchase program may be made from time to time, depending on market conditions, in open market or privately negotiated transactions, at prices deemed appropriate by management. There is no set time limit on the repurchases. There were no stock repurchases during the fiscal 2025 period. We may return capital to our stockholders through stock repurchases, subject to any restrictions in our debt instruments including our new Credit Agreement, although there is no assurance that the Company will make any repurchases under its existing stock repurchase plan.

Previous wording

As discussed above, we had cash at December 24, 2023 aggregating $16,732,000.** ** Our Board routinely monitors and assesses its cash position and our current and potential capital requirements. The Company paid its first quarter fiscal 2024 dividend of $2,040,000 on June 28, 2023, its second quarter fiscal 2024 dividend of $2,040,000 on September 1, 2023 and its third quarter fiscal 2024 dividend of $2,040,000 on December 1, 2023.

Current wording

As discussed above, we had cash and cash equivalents at June 30, 2024 aggregating $25,979,000. Our Board routinely monitors and assesses its cash position and our current and potential capital requirements. The Company paid its first quarterly cash dividend of fiscal 2025 of $2,043,000 on July 2, 2024.

Previous wording

Effective February 1, 2024, the Company declared its fourth quarter dividend of $0.50 per common share to stockholders of record as of the close of business on February 20, 2024, which is payable on March 1, 2024.

Current wording

Effective August 8, 2024, the Company declared its second quarter fiscal 2025 dividend of $0.50 per common share to stockholders of record as of the close of business on August 26, 2024, which is payable on September 6, 2024.

Previous wording

The Company’s total cash requirement for dividends for all of fiscal 2024 would be approximately $8,162,000 based on the number of shares of common stock outstanding at January 26, 2024. The Company intends to declare and pay quarterly cash dividends; however, there can be no assurance that any additional quarterly dividends will be declared or paid or of the amount or timing of such dividends, if any.

Current wording

If the Company pays regular quarterly cash dividends for the remainder of fiscal 2025 at the same rate as declared in the first quarter of fiscal 2025, the Company’s total cash requirement for dividends for all of fiscal 2025 would be approximately $8,169,000 based on the number of shares of common stock outstanding at August 8, 2024. The Company intends to declare and pay quarterly cash dividends; however, there can be no assurance that any additional quarterly dividends will be declared or paid or of the amount or timing of such dividends, if any.

Previous wording

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.

Current wording

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

Previous wording

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, fund our dividend program and may 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. During the fiscal year ending March 31, 2024, we will be required to make interest payments of $5,477,000, inclusive of the interest payment in connection with the partial redemption of its 2025 Notes, of which all have been made as of December 19, 2023.

Current wording

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 principal and interest obligations under the Credit Agreement, fund our dividend program and may 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. During the fiscal year ending March 30, 2025, we expect to make cash interest payments of $3,125,000 on the 2025 Notes. While our Credit Agreement bears interest at a fluctuating interest rate based on the Secured Overnight Financing Rate (“SOFR”) plus a spread adjustment, if the Company makes cash interest payments on the Term Loan borrowings at the interest rate established on the Effective Date, then during the fiscal year ended March 30, 2025, we expect to make cash interest payments of approximately $2,000,000 on the Term Loan borrowings.

Previous wording

We may from time to time seek to redeem additional portions of our 2025 Notes, through open market purchases, privately negotiated transactions or otherwise. Such repurchases, if any, will depend on market conditions, our liquidity requirements, and other factors.

Current wording

We may from time to time seek to make voluntary prepayments of our debt instruments. Such voluntary prepayments, if any, will depend on market conditions, our liquidity requirements, satisfactory compliance of conditions pursuant to our debt instruments and other factors.

Previous wording

Our contractual obligations primarily consist of the 2025 Notes and the related interest payments, operating leases, and employment agreements with certain executive officers. These contractual obligations impact our short-term and long-term liquidity and capital resource needs. There have been no material changes in our contractual obligations since March 26, 2023 except for the partial redemption of the 2025 Notes on December 19, 2023 discussed above.

Current wording

At June 30, 2024, our contractual obligations primarily consist of the 2025 Notes and the related interest payments, operating leases, and employment agreements with certain executive officers. These contractual obligations impact our short-term and long-term liquidity and capital resource needs. See NOTE P – LONG TERM DEBT, NOTE Q – LEASES, AND NOTE T – SUBSEQUENT EVENTS in the accompanying consolidated financial statements included in Part I, Item 1. for additional information.

Previous wording

Inflationary pressures on labor and rising commodity prices, most notably for beef and beef trimmings, have impacted our consolidated results of operations during the fiscal 2024 period, and this trend may continue through the remainder of fiscal year 2024. From April 2023 through September 2023, we experienced significant increases in the cost of beef and beef trimmings. From October 2023 through December 2023, we began to experience slight declines in beef and beef trimming costs.

Current wording

Inflationary pressures on commodity prices, most notably for beef and beef trimmings, have impacted our consolidated results of operations during the fiscal 2025 period, and this trend may continue through the remainder of fiscal year 2025.

Previous wording

We are unable to predict the future cost of our hot dogs and expect to experience price volatility for our beef products during the remainder of fiscal 2024. 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. 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.

Current wording

Our average cost of hot dogs during the fiscal 2025 period was approximately 1.1% higher than during the fiscal 2024 period. Inherent volatility experienced in certain commodity markets, such as those for beef and beef trimmings due to seasonal shifts, climate conditions, industry demand, inflationary pressures and other macroeconomic factors could have an adverse effect on our results of operations. This impact will depend on our ability to manage such volatility through price increases and product mix. We are unable to predict the future cost of our hot dogs and expect to experience price volatility for our beef products during fiscal 2025. 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. We may attempt to enter into similar purchase arrangements for hot dogs and other products in the future.

Previous wording

We have experienced competitive pressure on labor rates as a result of the increase in the minimum hourly wage for fast food workers which increased to $15.00 in New York state during fiscal 2022 where our Company-owned restaurants are located. On January 1, 2024, the minimum wage increased to $16.00 in New York City, Long Island and Westchester which will be followed by $0.50 annual increases in 2025 and 2026. Further, beginning in 2027, the minimum wage across New York State will increase annually according to the Consumer Price Index. There has also been an increased demand for labor at all levels which has resulted in greater challenges retaining adequate staffing levels at our Company-owned restaurants; our franchised restaurants and Branded Menu Program locations; as well as for certain vendors in our supply chain that we depend on for our commodities. We remain in contact with our major suppliers and to date we have not experienced significant disruptions in our supply chain.

Current wording

We have experienced competitive pressure on labor rates as a result of the increase in the minimum hourly wage for fast food workers where our Company-owned restaurants are located. On January 1, 2024, the minimum wage increased to $16.00 in New York City, Long Island and Westchester which will be followed by $0.50 annual increases in 2025 and 2026. Further, beginning in 2027, the minimum wage across New York State will increase annually according to the Consumer Price Index. There has also been an increased demand for labor at all levels which has resulted in greater challenges retaining adequate staffing levels at our Company-owned restaurants; our franchised restaurants and Branded Menu Program locations; as well as for certain vendors in our supply chain that we depend on for our commodities. We remain in contact with our major suppliers and to date we have not experienced significant disruptions in our supply chain.