NATHANS FAMOUS INC

Previous wording

This Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1933, as amended, that involve risks and uncertainties. You can identify forward-looking statements because they contain words such as “believes,” “expects,” “projects,” “may,” “would,” “should,” “seeks,” “intends,” “plans,” “estimates,” “anticipates” or similar expressions that relate to our strategy, plans or intentions. All statements we make relating to our estimated and projected earnings, margins, costs, expenditures, cash flows, growth rates and financial results or to our expectations regarding future industry trends are forward-looking statements. In addition, we, through our senior management, from time to time make forward-looking public statements concerning our expected future operations and performance and other developments. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may change at any time, and, therefore, our actual results may differ materially from those that we expected. We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and, of course, it is impossible for us to anticipate all factors that could affect our actual results. All forward-looking statements contained in this Form 10-Q are based upon information available to us on the date of this Form 10-Q.

Current wording

This Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1933, as amended (the “Exchange Act”), that involve risks and uncertainties. You can identify forward-looking statements because they contain words such as “believes,” “expects,” “projects,” “may,” “would,” “should,” “seeks,” “intends,” “plans,” “estimates,” “anticipates” or similar expressions that relate to our strategy, plans or intentions. All statements we make relating to our estimated and projected earnings, margins, costs, expenditures, cash flows, growth rates and financial results or to our expectations regarding future industry trends are forward-looking statements. In addition, we, through our senior management, from time to time make forward-looking public statements concerning our expected future operations and performance and other developments. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may change at any time, and, therefore, our actual results may differ materially from those that we expected. We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and, of course, it is impossible for us to anticipate all factors that could affect our actual results. All forward-looking statements contained in this Form 10-Q are based upon information available to us on the date of this Form 10-Q.

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 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.

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 Credit Agreement, 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 employer” 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 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.

Current wording

At September 29, 2024, our restaurant system, excluding virtual kitchens, consisted of 243 locations, including 128 Branded Menu Program locations, and four Company-owned restaurants (including one seasonal unit), located in 17** **states, and 13 foreign countries.

Previous 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.

Current wording

At September 24, 2023, our restaurant system, excluding virtual kitchens, consisted of 235** locations, including 117 Branded Menu Program locations, and four Company-owned restaurants (including one seasonal unit), located in 17 **states, and 13 foreign countries.

Previous wording

On July 10, 2024, the Company entered into a five-year unsecured Credit Agreement with Citibank, N.A. and borrowed $60,000,000 in Term Loan borrowings to refinance and redeem the 2025 Notes. See NOTE T – SUBSEQUENT EVENTS to the accompanying consolidated financial statements and “Liquidity and Capital Resources” for additional information on the Credit Agreement and refinancing. Our future results may be impacted by our debt service and repayment obligations under our debt instruments.

Current wording

On July 10, 2024, the Company entered into a five-year unsecured Credit Agreement with Citibank, N.A. and borrowed $60,000,000 in Term Loan borrowings to refinance and redeem the 6.625% Senior Secured Notes due 2025 (the “2025 Notes”). See NOTE P – LONG TERM DEBT of the preceding consolidated financial statements and “Liquidity and Capital Resources” for additional information on the Credit Agreement and refinancing. Our future results may be impacted by our debt service and repayment obligations under our Credit Agreement.

Previous 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.

Current wording

Inflationary pressures impacted our results of operations during the first half of fiscal 2025, including higher commodity prices on beef and beef trimmings. This trend may 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

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.

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 (i) the loss on debt extinguishment and (ii) share-based compensation that the Company believes will impact the comparability of its results of operations.

Previous wording

Our routine business pattern is affected by seasonal fluctuations, including the effects of weather and economic conditions. Historically, sales from our Company-owned restaurants, principally at Coney Island, and franchised restaurants from which franchised royalties are earned and the Company’s earnings have been highest during our first two fiscal quarters, with the fourth quarter representing the slowest period. Additionally, revenues from our Branded Product Program, Branded Menu Program and Product licensing program generally follow similar seasonal fluctuations, although not to the same degree. We expect that this seasonality will continue. Working capital requirements may vary throughout the year to support these seasonal patterns.

Current wording

Our routine business pattern is affected by seasonal fluctuations, including the effects of weather and economic conditions. Historically, sales from our Company-owned restaurants, principally at Coney Island, and franchised restaurants from which franchised royalties are earned and the Company’s earnings have been highest during our first two fiscal quarters, with the fourth quarter representing the slowest period. Additionally, revenues from our Branded Product Program, Branded Menu Program and retail licensing program generally follow similar season fluctuations, although not to the same degree. We expect that this seasonality will continue. Working capital requirements may vary throughout the year to support these seasonal patterns.

Previous 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.

Current wording

Due to the above seasonal factors, as well as inflationary pressures, our results of operations for the thirteen and twenty-six weeks ended September 29, 2024 are not necessarily indicative of those for a full fiscal year.

Previous 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”).

Current wording

Total revenues increased by approximately 6% to $41,109,000 for the thirteen weeks ended September 29, 2024 (“second quarter fiscal 2025”) as compared to $38,744,000 for the thirteen weeks ended September 24, 2023 (“second quarter fiscal 2024”).

Previous wording

Interest expense of $1,414,000 in the fiscal 2024 period represented interest expense of $1,322,000 on the 2025 Notes and amortization of debt issuance costs of $92,000.

Current wording

Interest expense of $1,413,000 in the second quarter fiscal 2024 represented interest expense of $1,321,000 on the 2025 Notes and amortization of debt issuance costs of $92,000.

Previous 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.

Current wording

The amount of unrecognized tax benefits at September 29, 2024 was $494,000 all of which would impact the Company’s effective tax rate, if recognized. As of September 29, 2024, the Company had approximately $379,000 accrued for the payment of interest and penalties in conjunction with unrecognized tax benefits.

Previous wording

Foodservice sales from the Branded Product Program increased by approximately $976,000 to $26,146,000 during the fiscal 2025 period as compared to $25,170,000 for the fiscal 2024 period. During the fiscal 2025 period, the total volume of hot dogs sold in the Branded Product Program was comparable to the fiscal 2024 period. Our average selling price increased by approximately 3.5% as compared to the fiscal 2024 period.

Current wording

Foodservice sales from the Branded Product Program increased by approximately 4% to $50,682,000 for the fiscal 2025 period as compared to $48,522,000 for the fiscal 2024 period. During the fiscal 2025 period, the volume of hot dogs sold in the Branded Product Program increased by approximately 2% as compared to the fiscal 2024 period. Our average selling prices increased by approximately 2.5% as compared to the fiscal 2024 period.

Previous wording

Total Company-owned restaurant sales increased by approximately $541,000 to $4,199,000 during the fiscal 2025 period as compared to $3,658,000 during the fiscal 2024 period. Restaurant sales were impacted by an increase in our average check, as well as higher traffic at our two Company-owned restaurants in Coney Island.

Current wording

Total Company-owned restaurant sales increased by approximately 8% to $9,547,000 during the fiscal 2025 period as compared to $8,851,000 during the fiscal 2024 period. Restaurant sales were impacted by higher sales at our Coney Island locations due to an increase in our average check, offset by lower sales at our location in Oceanside, New York.

Previous 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.

Current wording

License royalties increased by approximately 12% to $22,412,000 in the fiscal 2025 period as compared to $19,997,000 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 13% to $20,605,000 for the fiscal 2025 period as compared to $18,303,000 in the fiscal 2024 period. The increase is due to a 14%** **increase in retail volume which was offset, in part, by a 2% decrease in net selling price. The foodservice business earned higher royalties of $107,000 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 $113,000 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 by lower royalties earned on sales of pickles, franks-in-a-blanket, mozzarella sticks and other hors d’oeuvres.

Previous 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.

Current wording

Franchise fees and royalties decreased by approximately 5% to $2,247,000 in the fiscal 2025 period as compared to $2,366,000 in the fiscal 2024 period. Total royalties were $2,047,000 in the fiscal 2025 period as compared to $2,128,000 in the fiscal 2024 period. Royalties earned under the Branded Menu Program were $423,000 in the fiscal 2025 period as compared to $453,000 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 $25,000 in the fiscal 2025 period as compared to $50,000 in the fiscal 2024 period. Traditional franchise royalties were $1,599,000 in the fiscal 2025 period as compared to $1,625,000 in the fiscal 2024 period. Franchise restaurant sales decreased to $36,334,000 in the fiscal 2025 period as compared to $36,433,000 in the fiscal 2024 period primarily due to lower traffic at international locations, seasonal entertainment venues, and travel plazas which were offset, in part, by higher traffic at casino locations primarily in Las Vegas, Nevada.* * Comparable domestic franchise sales (consisting of 58 Nathan’s outlets, excluding sales under the Branded Menu Program) were $29,037,000 in the fiscal 2025 period as compared to $29,388,000 in the fiscal 2024 period.

Previous 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.

Current wording

At September 29, 2024, 243** **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 September 24, 2023. Total franchise fee income was $200,000 in the fiscal 2025 period as compared to $238,000 in the fiscal 2024 period. Domestic franchise fee income was $58,000 in the fiscal 2025 period as compared to $55,000 in the fiscal 2024 period. International franchise fee income was $119,000 in the fiscal 2025 period as compared to $120,000 in the fiscal 2024 period.

Previous 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.

Current wording

Advertising fund revenue, after eliminating Company contributions, was $988,000 during the fiscal 2025 period as compared to $993,000 during the fiscal 2024 period.

Previous 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.

Current wording

Overall, our cost of sales increased by approximately 5% to $51,270,000 in the fiscal 2025 period as compared to $48,871,000 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 $8,959,000 or 15% during the fiscal 2025 period as compared to $8,502,000 or 15% during the fiscal 2024 period.

Previous 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.

Current wording

Cost of sales in the Branded Product Program increased by 5% to $46,290,000 during the fiscal 2025 period as compared to $44,010,000 during the fiscal 2024 period, primarily due to a 2% increase in the volume of hot dogs sold, as well as a 3% increase in the average cost per pound of our hot dogs. A shrinking supply of cattle, combined with 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 $4,980,000 or 52% of restaurant sales, as compared to $4,861,000 or 55% of restaurant sales in the fiscal 2024 period. Food and paper costs as a percentage of Company-owned restaurant sales were 24.8%, down from 27.8% 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 27.4%, up from 27.1% in the comparable period of the prior year due to higher salaries expense attributable to minimum wage increases as well as higher incentive compensation expense.** **

Previous wording

Restaurant operating expenses were $1,129,000 in the fiscal 2025 period as compared to $1,043,000 in the fiscal 2024 period. The increase is due primarily to higher occupancy expenses of $44,000, higher insurance costs of $28,000, and higher maintenance costs of $18,000. As a percentage of Company-owned restaurant sales, restaurant operating expenses were 26.9% in the fiscal 2025 period as compared to 28.5% in the fiscal 2024 period.

Current wording

Restaurant operating expenses were $2,518,000 in the fiscal 2025 period as compared to $2,383,000 in the fiscal 2024 period. The increase is due primarily to higher occupancy expenses of $147,000 and higher insurance costs of $54,000 which were offset, in part, by lower marketing expenses of $16,000 and lower delivery charges of $37,000. As a percentage of Company-owned restaurant sales, restaurant operating expenses were 26.4% in the fiscal 2025 period as compared to 26.9% in the fiscal 2024 period.

Previous 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.

Current wording

Depreciation and amortization, which primarily consists of the depreciation of fixed assets, including leasehold improvements and equipment, and the amortization of a definite-lived intangible asset, was $496,000 in the fiscal 2025 period as compared to $628,000 in the fiscal 2024 period.

Previous wording

General and administrative expenses decreased by $83,000 or 2% to $3,975,000 in the fiscal 2025 period as compared to $4,058,000 in the fiscal 2024 period. The decrease in general and administrative expenses was primarily attributable to lower professional fees of $103,000, which were offset, in part, by higher salaries expense of $38,000 attributable to annual rate increases.

Current wording

General and administrative expenses decreased* *by approximately $60,000 or 1% to $7,227,000 in the fiscal 2025 period as compared to $7,287,000 in the fiscal 2024 period. The decrease in general and administrative expenses was primarily attributable to lower professional fees of $142,000, which were offset, in part, by higher incentive compensation expense of $57,000 and higher share-based compensation expense of $58,000.

Previous 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.

Current wording

Advertising fund expense, after eliminating Company contributions, was $988,000 during the fiscal 2025 period as compared to $993,000 in the fiscal 2024 period.

Previous wording

Interest expense of $1,060,000 in the fiscal 2025 period represented interest expense of $991,000 on the 2025 Notes and amortization of debt issuance costs of $69,000.

Current wording

Interest expense of $2,827,000 in the fiscal 2024 period represented interest expense of $2,643,000 on the 2025 Notes and amortization of debt issuance costs of $184,000.

Previous 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.

Current wording

Interest and dividend income of $297,000 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 $212,000 in the fiscal 2024 period.

Previous 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.

Current wording

Other income, net was $44,000 in the fiscal 2025 and fiscal 2024 periods which primarily relates to sublease income from a franchised restaurant.

Previous 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).

Current wording

The effective income tax rate for the fiscal 2025 period was 26.7% compared to 27.2% in the fiscal 2024 period. The effective income tax rate for the fiscal 2025 period reflected income tax expense of $5,576,000 recorded on $20,883,000 of pre-tax income. The effective income tax rate for the fiscal 2024 period reflected income tax expense of $4,897,000 recorded on $17,996,000 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

Cash and cash equivalents at June 30, 2024 aggregated $25,979,000, a $4,952,000 increase during the fiscal 2025 period as compared to cash of $21,027,000 at March 31, 2024. Net working capital increased to $30,763,000 at June 30, 2024 as compared to $23,203,000 at March 31, 2024.* *

Current wording

Cash and cash equivalents at September 29, 2024 aggregated $31,207,000, a $10,180,000 increase during the fiscal 2025 period as compared to cash of $21,027,000 at March 31, 2024. Net working capital increased to $32,618,000 at September 29, 2024 as compared to $23,203,000 at March 31, 2024.* *

Previous wording

Our primary sources of liquidity are cash flows from operations. Our primary cash requirements are to fund our quarterly dividends, to satisfy the debt service under our debt instruments, capital expenditures, working capital and general corporate needs.

Current wording

Our primary sources of liquidity are cash flows from operations. Our primary cash requirements are to fund our quarterly dividends, to satisfy the debt service under our debt instrument, capital expenditures, working capital and general corporate needs.

Previous wording

On May 1, 2024, we paid our first semi-annual interest payment on the 2025 Notes of $1,987,500 for the fiscal 2025 period. On July 2, 2024, we paid our first quarterly cash dividend of fiscal 2025 of $2,043,000.

Current wording

On May 1, 2024, we paid our first semi-annual interest payment on the 2025 Notes of $1,987,500 for the fiscal 2025 period. On August 13, 2024, in connection with the redemption of all of the outstanding $60,000,000 principal amount of its 2025 Notes, the Company paid its required interest payment of $1,137,000 on the redeemed 2025 Notes.* * Subsequent to the quarter ending September 29, 2024, we paid our mandatory debt principal repayment of $600,000 on our Term Loan borrowings under the Credit Agreement. Additionally, on October 10, 2024, we paid interest of $1,042,000 on our Term Loan borrowings and made a voluntary principal prepayment of $8,000,000 on our outstanding Term Loan borrowings.

Previous wording

Cash flow for the fiscal year 2025 will be impacted by various factors, including, as discussed further below in this “Liquidity and Capital Resources” section, (i) debt issuance costs incurred in connection with our new Credit Agreement, (ii) mandatory debt repayments on our Term Loan borrowings under our new Credit Agreement, (iii) interest payments on our 2025 Notes and our Term Loan borrowings under our new Credit Agreement and (iv) expected dividend payments.

Current wording

Cash flow for the fiscal year 2025 will be impacted by various factors, including, as discussed further below in this “Liquidity and Capital Resources” section, (i) debt issuance costs incurred in connection with our new Credit Agreement, (ii) mandatory debt repayments on our Term Loan borrowings under our new Credit Agreement, (iii) interest payments on our 2025 Notes and our Term Loan borrowings under our new Credit Agreement, (iv) voluntary debt repayments on our Term Loan borrowings and (v) expected dividend payments.

Previous wording

The following table presents a summary of our cash flows from operating and investing activities:

Current wording

The following table presents a summary of our cash flows from operating, investing and financing activities:

Previous 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.

Current wording

Cash provided by operations of $14,826,000 in the fiscal 2025 period is primarily attributable to net income of $15,307,000 in addition to other non-cash operating items of $1,278,000, offset by changes in other operating assets and liabilities of $1,759,000. Non-cash operating expenses consist principally of depreciation and amortization of $496,000, amortization of debt issuance costs of $122,000, share-based compensation expense of $417,000, a loss on debt extinguishment of $334,000 and a provision for credit losses of $53,000. In the fiscal 2025 period, accounts and other receivables increased by $994,000 due primarily to higher Branded Product Program receivables of $696,000, and higher receivables due to the Advertising Fund of $933,000 which were offset, in part, by lower franchise and license royalties receivable of $556,000. Prepaid expenses and other current assets decreased by $1,370,000 due principally to a decrease in prepaid income taxes of $858,000, a decrease in prepaid insurance of $174,000 and a decrease in prepaid marketing and other expenses of $324,000. Accounts payable, accrued expenses and other current liabilities decreased by $1,912,000 due to a decline in accrued payroll and other benefits of $1,609,000 resulting primarily from the payment of year-end fiscal 2024 incentive compensation; earned deferred revenue of $775,000; and a decline in accrued interest expense of $746,000 resulting primarily from our May 2024 semi-annual interest payment on our 2025 Notes. Offsetting these decreases was an increase in accounts payable due to the timing of seasonal product purchases for our Branded Product Program and Company-owned restaurants.

Previous 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.

Current wording

Cash used in investing activities of $130,000** **is primarily comprised of capital expenditures incurred for our Branded Product Program and our Coney Island restaurants.

Previous wording

The Company borrowed $60,000,000 in Term Loan borrowings on the Effective Date to refinance and redeem its 2025 Notes. The Company will use any Revolving Loan borrowings under the Credit Agreement for working capital and general corporate purposes. See NOTE T – SUBSEQUENT EVENTS in the accompanying consolidated financial statements for additional information on the Credit Agreement.

Current wording

The Company borrowed $60,000,000 in Term Loan borrowings on the Effective Date to refinance and redeem its 2025 Notes. The Company will use any Revolving Loan borrowings under the Credit Agreement for working capital and general corporate purposes. See NOTE P – LONG TERM DEBT in the accompanying consolidated financial statements for additional information on the Credit Agreement.

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 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.

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 September 29, 2024, Nathan’s has repurchased 1,101,884 shares at a cost of $39,000,000** **under the sixth stock repurchase plan. At September 29, 2024, there were 98,116 shares remaining to be repurchased pursuant to the sixth stock repurchase plan. The plan does not have a set expiration date. Purchases under the Company’s stock repurchase program may be made from time to time, depending on market conditions, in open market or privately negotiated transactions, at prices deemed appropriate by management. There is no set time limit on the repurchases. 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 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 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.

Current wording

As discussed above, we had cash and cash equivalents at September 29, 2024 aggregating $31,207,000. Our Board routinely monitors and assesses its cash position and our current and potential capital requirements. The Company paid its first and second quarterly cash dividends of fiscal 2025 on July 2, 2024 and September 6, 2024 aggregating $4,085,000.

Previous 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.

Current wording

Effective November 7, 2024, the Company declared its third quarter fiscal 2025 dividend of $0.50 per common share to stockholders of record as of the close of business on November 25, 2024, which is payable on December 6, 2024.

Previous 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.

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 and second 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 November 7, 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.