Nathan’s Famous, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

June 30, 2019 and March 31, 2019

(in thousands, except share and per share amounts)

 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

 

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

  

 

Nathan’s Famous, Inc. and Subsidiaries

 

CONSOLIDATED STATEMENTS OF EARNINGS

Thirteen weeks ended June 30, 2019 and June 24, 2018

(in thousands, except per share amounts)

(Unaudited)

 

 

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

 

 

Nathan’s Famous, Inc. and Subsidiaries

 

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT)

Thirteen weeks ended June 30, 2019 and June 24, 2018

(in thousands, except share and per share amounts)

(Unaudited)

 

 

 

 

 

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

  

 

Nathan’s Famous, Inc. and Subsidiaries

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

Thirteen weeks ended June 30, 2019 and June 24, 2018

(in thousands, except per share amounts)

(Unaudited)

 

 

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

 

 

NATHAN'S FAMOUS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2019

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

Forward-Looking Statements

 

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.

 

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: economic, weather (including the affects on the supply of cattle and the impact of weather on sales at our restaurants, particularly during Summer months), and change in the price of beef trimmings; our ability to pass on the cost of any price increases in beef and beef trimmings, or labor costs; legislative, business conditions or tariffs; the collectibility of receivables; changes in consumer tastes; the status of our licensing and supply agreements, including our licensing revenue and overall profitability being substantially dependent on our agreement with John Morrell & Co., the impact of our debt service and repayment obligations under the 2025 Notes; the impact of the Tax Cuts and Jobs Act (“the Tax Act”); the continued viability of Coney Island as a destination location for visitors; the ability to continue to attract franchisees; the impact of the new minimum wage legislation in New York State or other changes in labor laws, including court decisions which could render a franchisor as a “joint employee” or the impact of our new union contracts; our ability to attract competent restaurant and managerial personnel; the enforceability of international franchising agreements and the future effects of any food borne illness; such as bovine spongiform encephalopathy, BSE or e-coli; as well as those risks discussed from time to time in this Form 10-Q and our Form 10-K annual report for the year ended March 31, 2019, and in other documents we file with the Securities and Exchange Commission. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in the forward-looking statements. We generally identify forward-looking statements with the words “believe,” “intend,” “plan,” “expect,” “anticipate,” “estimate,” “will,” “should” and similar expressions. Any forward-looking statements speak only as of the date on which they are made, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this Form 10-Q.

 

Introduction

 

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

 

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

 

Our revenues are generated primarily from selling products under Nathan’s Branded Product Program, operating Company-owned restaurants, licensing agreements for the sale of Nathan’s products within supermarkets and club stores, the sale of Nathan’s products directly to other foodservice operators and the manufacture of certain proprietary spices by third parties and franchising the Nathan’s restaurant concept (including the Branded Menu Program).

 

 

At June 30, 2019, our restaurant system consisted of 253 Nathan’s franchised units, including 111 Branded Menu units, and four Company-owned units (including one seasonal unit), located in 22 states, and 14 foreign countries. At June 24, 2018, our restaurant system consisted of 271 Nathan’s franchised units, including 122 Branded Menu units, and five Company-owned units (including one seasonal unit), located in 20 states, and 12 foreign countries.

 

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

 

As described in our Annual Report on Form 10-K for the year ended March 31, 2019, our future results could be materially impacted by many developments including our dependence on John Morrell & Co. as our principal supplier and the dependence of our licensing revenue and overall profitability on our agreement with John Morrell & Co. In addition, our future operating results could be impacted by supply constraints on beef or by increased costs of beef compared to earlier periods in addition to the potential impact that any future tariffs may have on the business.

 

On November 1, 2017, the Company issued $150,000,000 of 6.625% Senior Secured Notes due 2025 (the “2025 Notes”) and used the majority of the proceeds of this offering to redeem (the “Redemption”) the Company’s 10.000% Senior Secured Notes due 2020 (the “2020 Notes”), paid a portion of the special $5.00 cash dividend and used any remaining proceeds for general corporate purposes, including working capital. Our future results could also be impacted by our obligations under the 2025 Notes. As a result of the issuance of the 2025 Notes, Nathan’s expects to incur interest expense of $9,937,500 per annum, reducing its cash interest expense by $3,562,500 per annum as compared to our annual interest requirements under the 2020 Notes. Nathan’s expects to incur annual amortization of debt issuance costs of approximately $691,000 through November 1, 2025.

 

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

 

Critical Accounting Policies and Estimates

 

As discussed in our Form 10-K for the fiscal year ended March 31, 2019, the discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and assumptions that affect the amounts of assets, liabilities, revenues and expenses reported in those financial statements. These judgments can be subjective and complex, and consequently, actual results could differ from those estimates. Our most critical accounting policies and estimates relate to revenue recognition; leases; impairment of goodwill and other intangible assets; impairment of long-lived assets; share-based compensation and income taxes (including uncertain tax positions). As discussed in Note B, the Company adopted Topic 842, “Leases” effective April 1, 2019. There have been no other significant changes to the Company’s accounting policies subsequent to March 31, 2019.

 

Adoption of New Accounting Standards          

 

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

 

New Accounting Standards Not Yet Adopted

 

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

 

EBITDA and Adjusted EBITDA

 

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

 

Reconciliation of GAAP and Non-GAAP Measures

 

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

 

In addition to disclosing results that are determined in accordance with Generally Accepted Accounting Principles in the United States of America ("US GAAP"), the Company has provided EBITDA, 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.

 

 

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

 

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

 

		Thirteen weeks ended
		June 30, 2019				June 24, 2018
		(unaudited)
Net income		$	5,369			$	4,795
Interest expense			2,650				2,650
Provision for income taxes			1,816				1,724
Depreciation and amortization			310				345
EBITDA			10,145				9,514
Share-based compensation			28				81
Adjusted EBITDA		$	10,173			$	9,595

 

Results of Operations

 

Thirteen weeks ended June 30, 2019 compared to thirteen weeks ended June 24, 2018

 

Revenues 

 

Total sales decreased by 1.1% to $20,237,000 for the thirteen weeks ended June 30, 2019 (“fiscal 2020 period”) as compared to $20,471,000 for the thirteen weeks ended June 24, 2018 (“fiscal 2019 period”). Foodservice sales from the Branded Product Program decreased by 2.0% to $16,113,000 for the fiscal 2020 period as compared to sales of $16,445,000 in the fiscal 2019 period. Our average selling prices decreased by approximately 0.5%. During the fiscal 2020 period, the volume of business decreased by approximately 0.9%.

 

During the fiscal 2018 period, we added a new distributor to our distribution network that increased our sales during implementation of the new distributor. In addition to the additional business realized, beginning in the third quarter fiscal 2018, this distributor temporarily provided distribution to a number of significant contract accounts, further increasing their fiscal 2018 purchases. During the first quarter of fiscal 2019, the temporary distribution to our significant contract accounts began reverting to our traditional methodology, although not fully completed until the second quarter of fiscal 2019. Excluding the effects of the re-distributors’ purchases in both years, we estimate that customer shipments decreased by approximately 3.4% during the fiscal 2020 period.

 

Total Company-owned restaurant sales increased by 2.4% to $4,124,000 during the fiscal 2020 period compared to $4,026,000 during the fiscal 2019 period. Excluding sales from the restaurant that was sold last year, comparable Company-owned restaurant sales increased by approximately $506,000 or 14.0% due primarily to higher sales at our Coney Island locations throughout the quarter when weather conditions were very favorable as compared to the comparable period last year.

 

License royalties increased by 7.7%, to $8,722,000 in the fiscal 2020 period as compared to $8,098,000 in the fiscal 2019 period. Total royalties earned on sales of hot dogs from our license agreement with John Morrell & Co. at retail and foodservice, substantially from sales of hot dogs to Sam’s Club and WalMart, increased 8.2% to $8,157,000 for the 2020 fiscal period as compared to $7,538,000 in the fiscal 2019 period. The increase is due to a 6.6% increase in retail volume during the fiscal 2020 period as compared to the fiscal 2019 period, which was partly offset by a decline in average net selling price of 0.9%. Additionally, the foodservice business earned higher royalties of $177,000 as compared to the fiscal 2019 period. Royalties earned from all other licensing agreements for the manufacture and sale of Nathan’s products increased by $5,000 during the fiscal 2020 period as compared to the fiscal 2019 period.

 

Franchise fees and royalties were $1,077,000 in the fiscal 2020 period as compared to $1,104,000 in the fiscal 2019 period. Total royalties were $980,000 in the fiscal 2020 period as compared to $997,000 in the fiscal 2019 period. Royalties earned under the Branded Menu program were $209,000 in the fiscal 2020 period as compared to $219,000 in the fiscal 2019 period. Royalties earned under the Branded Menu Program are not based upon a percentage of restaurant sales but are based upon product purchases. Traditional franchise royalties were $771,000 in the fiscal 2020 period as compared to $778,000 in the fiscal 2019 period. Franchise restaurant sales increased to $17,516,000 in the fiscal 2020 period as compared to $17,372,000 in the fiscal 2019 period primarily due to a 3.2% increase in comparable domestic sales which was partly offset by the impact of units closed in the previous fiscal year, net of units opened in the current year. Comparable domestic franchise sales (consisting of 88 Nathan’s outlets, excluding sales under the Branded Menu Program) were $14,330,000 in the fiscal 2020 period as compared to $13,890,000 in the fiscal 2019 period.

 

 

At June 30, 2019, 253 franchised outlets, including domestic, international and Branded Menu Program outlets were operating compared to 271 domestic and international franchised or Branded Menu Program franchise outlets at June 24, 2018. Total franchise fee income was $97,000 in the fiscal 2020 period compared to $107,000 in the fiscal 2019 period. Domestic franchise fee income was $38,000 in the fiscal 2020 period compared to $40,000 in the fiscal 2019 period. International franchise fee income, including cancellation fees, was $59,000 in the fiscal 2020 period compared to $67,000 during the fiscal 2019 period. We recognized $18,000 and $16,000 in forfeited fees in the fiscal 2020 and fiscal 2019 periods, respectively. During the fiscal 2020 period, four new traditional franchised outlets opened, domestically. During the fiscal 2019 period, four new franchised outlets opened including two international locations and one new Branded Menu Program outlet opened.

 

Advertising fund revenue, after eliminating Company contributions, was $482,000 in the fiscal 2020 period, as compared to $495,000 in the fiscal 2019 period.

 

Costs and Expenses

 

Overall, our cost of sales decreased by 0.2% to $15,422,000 in the fiscal 2020 period as compared to $15,446,000 in the fiscal 2019 period. Our gross profit (representing the difference between sales and cost of sales) decreased to $4,815,000 or 23.8% of sales during the fiscal 2020 period as compared to $5,025,000 or 24.5% of sales during the fiscal 2019 period. The reduction in margin was primarily due to the higher cost of beef in the Branded Product Program which was partly offset by the higher margin from the Company-operated restaurants due principally to the effects of higher sales on operating margins.

 

Cost of sales in the Branded Product Program decreased by approximately $11,000 during the fiscal 2020 period as compared to the fiscal 2019 period, primarily due to the 0.7% increase in the average cost per pound of our hot dogs and the 0.9% decrease in the volume of product sold discussed above. We did not make any purchase commitments of beef during the fiscal 2020 and 2019 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 2020 period was $2,291,000 or 55.6% of restaurant sales, as compared to $2,304,000 or 57.2% of restaurant sales in the fiscal 2019. Excluding the restaurant that was sold, cost of sales would have been 56.2% of restaurant sales in the fiscal 2019 period. Lower food costs, despite higher beef costs were the primary reason for the improved margin and higher labor costs, principally associated with the effects of the New York State minimum wage increase, were more than offset by the impact of higher sales. We expect that our future labor costs will continue to be impacted by the remaining multi-year increase in minimum wage requirements in New York State, as well as other new labor regulations and any increase in commodity costs.

 

Restaurant operating expenses were $919,000 in the fiscal 2020 period as compared to $910,000 in the fiscal 2019 period. Excluding $90,000 of restaurant operating expenses from the fiscal 2019 period for the restaurant that was sold, we incurred higher marketing expenses of $44,000, occupancy costs of $29,000, primarily percentage rent on higher sales, and higher insurance costs of $16,000.

 

Depreciation and amortization was $310,000 in the fiscal 2020 period as compared to $345,000 in the fiscal 2019 period as a result of lower capital spending and reduced depreciation and amortization attributable to the restaurant that was sold of $8,000.

 

General and administrative expenses increased by $52,000 or 1.2% to $3,937,000 in the fiscal 2020 period as compared to $3,885,000 in the fiscal 2019 period. The increase in general and administrative expenses was primarily attributable to higher compensation and recruiting expenses of $184,000 which were partly offset by lower legal fees of $128,000.

 

Advertising fund expense, after eliminating Company contributions, was $482,000 in the fiscal 2020 period, as compared to $495,000 in the fiscal 2019 period.

 

Other Items

 

Interest expense of $2,650,000 in the fiscal 2020 and fiscal 2019 periods represented accrued interest of $2,477,000 on the 2025 Notes at 6.625% per annum and amortization of debt issuance costs of $173,000.

 

Interest income was $366,000 for the fiscal 2020 period as compared to $61,000 in the fiscal 2019 period.

 

Other income, primarily relates to a sublease of a franchised restaurant, was $21,000 in the fiscal 2020 and fiscal 2019 periods.

 

 

Provision for Income Taxes 

 

The income tax provision for the thirteen-week periods ended June 30, 2019 and June 24, 2018 reflect effective tax rates of 25.3% and 26.4%, respectively. Nathan’s effective tax rate for the thirteen-week periods ended June 30, 2019 and June 24, 2018 were reduced by 3.2% and 1.0%, respectively, as a result of the tax benefits associated with stock compensation. For the thirteen weeks ended June 30, 2019, excess tax benefits of $228,000 were reflected in the Consolidated Statements of Earnings as a reduction to the provision for income taxes. Nathan’s effective tax rates without these adjustments would have been 28.5% for the fiscal 2020 period and 27.4% for the fiscal 2019 period.

 

The amount of recognized tax benefits at June 30, 2019 was $269,000 all of which would impact Nathan’s effective tax rate, if recognized. As of June 30, 2019, Nathan’s had $257,000 of accrued interest and penalties in connection with unrecognized tax benefits.

 

Nathan’s estimates that its unrecognized tax benefit excluding accrued interest and penalties could be further reduced by up to $11,000 during the fiscal year ending March 29, 2020.

 

Off-Balance Sheet Arrangements

 

At June 30, 2019 and June 24, 2018, Nathan’s did not have any open purchase commitments for hot dogs. Nathan’s may enter into purchase commitments in the future as favorable market conditions become available.

 

Liquidity and Capital Resources

 

Cash and cash equivalents at June 30, 2019 aggregated $73,903,000, a $1,543,000 decrease during the fiscal 2020 period as compared to cash and cash equivalents of $75,446,000 at March 31, 2019. Net working capital increased to $76,544,000 from $72,237,000 at March 31, 2019. On May 1, 2019, we paid our first semi-annual interest payment of $4,968,750 for fiscal 2020. We paid our first quarter dividend of $1,479,000 on June 28, 2019.

 

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

 

The 2025 Notes bear interest at 6.625% per annum, payable semi-annually on May 1^st and November 1^st of each year, beginning on May 1, 2018. Semi-annual interest payments are expected to be $4,968,750. During the thirteen week period ended June 30, 2019, we paid interest of $4,968,750 on May 1, 2019 for the 2025 Notes. The 2025 Notes have no scheduled principal amortization payments prior to its final maturity on November 1, 2025.

 

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

 

Certain Restricted Payments which may be made or indebtedness incurred by Nathan’s or its Restricted Subsidiaries may require compliance with the following financial ratios:

 

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

 

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

 

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

 

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

 

As of June 30, 2019, Nathan’s was in compliance with all covenants associated with the 2025 Notes.

 

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

 

 

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

 

	●	senior in right of payment to all of the Company and the guarantors’ future subordinated indebtedness;
	●	effectively senior to all unsecured senior indebtedness to the extent of the value of the collateral securing the 2025 Notes and the guarantees;
	●	pari passu with all of the Company and the guarantors’ other senior indebtedness;
	●	effectively junior to any future credit facility to the extent of the value of the collateral securing any future credit facility and the 2025 Notes and the guarantees and certain other assets;
	●	effectively junior to any of the Company and the guarantors’ existing and future indebtedness that is secured by assets other than the collateral securing the 2025 Notes and the guarantees to the extent of the value of any such assets; and
	●	structurally subordinated to the indebtedness of any of the Company’s current and future subsidiaries that do not guarantee the 2025 Notes.

 

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

 

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

 

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

 

	YEAR			PERCENTAGE
	On or after November 1, 2020 and prior to November 1, 2021			103.313%
	On or after November 1, 2021 and prior to November 1, 2022			101.656%
	On or after November 1, 2022			100.000%

 

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

 

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

 

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

 

Cash used in operations of $1,036,000 in the fiscal 2020 period is primarily attributable to net income of $5,369,000 in addition to other non-cash operating items of $758,000, offset by changes in other operating assets and liabilities of $7,163,000. Non-cash operating expenses consist principally of $310,000 of depreciation and amortization, $228,000 of excess income tax benefits from stock-based compensation arrangements as a result of the accounting for certain aspects of its share-based payments to employees, $173,000 amortization of debt issuance costs, share-based compensation expense of $28,000 and bad debts of $27,000. In the fiscal 2020 period, accounts and other receivables increased by $4,828,000 due primarily to higher license royalties of $1,846,000, higher receivables from Branded Product Program sales of $1,790,000, and higher receivables due to the Advertising Fund of $986,000. In the fiscal 2020 period, accounts payable, accrued expenses and other current liabilities decreased by $2,351,000 due the reduction in accrued interest of $2,491,000 resulting from our May 2019 debt service payment. Accrued payroll and other benefits declined by $1,698,000 resulting from the payment of year-end incentive compensation. This was offset by higher accrued corporate taxes of $1,645,000 from a shift in the timing of estimated tax payments and higher earnings. Accounts payable increased by $584,000 due principally to seasonal fluctuations of the Branded Product Program sales.

 

Cash used in investing activities was $106,000 in the fiscal 2020 period primarily in connection with capital expenditures incurred for our Branded Product Program and select restaurant improvements.

 

Cash used in financing activities of $401,000 in the fiscal 2020 period relates to the payment of the Company’s regular $0.35 per share cash dividend of $1,479,000. The Company also received $1,078,000 of proceeds from the exercise of stock options.

 

During the period from October 2001 through June 30, 2019, Nathan’s purchased 5,141,763 shares of its common stock at a cost of approximately $78,303,000 pursuant to its stock repurchase plans previously authorized by the Board of Directors. Since March 26, 2007, we have repurchased 3,250,663 shares at a total cost of approximately $71,145,000, reducing the number of shares then-outstanding by 54.0%.

 

In 2016, the Company’s Board of Directors authorized increases to the sixth stock repurchase plan for the purchase of up to 1,200,000 shares of its common stock on behalf of the Company. As of June 30, 2019, Nathan’s has repurchased 954,132 shares at a cost of $30,641,000 under the sixth stock repurchase plan. At June 30, 2019, there were 245,868 shares remaining to be repurchased pursuant to the sixth stock repurchase plan. The plan does not have a set expiration date. Purchases under the Company’s stock repurchase program may be made from time to time, depending on market conditions, in open market or privately-negotiated transactions, at prices deemed appropriate by management. There is no set time limit on the repurchases.

 

 

As discussed above, we had cash and cash equivalents at June 30, 2019 aggregating $73,903,000. Our Board routinely monitors and assesses its cash position and our current and potential capital requirements. In November 2017, we refinanced our 2020 Notes through the issuance of the 2025 Notes and, our Board of Directors announced the payment of a $5.00 per share special dividend to the shareholders of record as of the close of business on December 22, 2017. Effective June 14, 2019, Nathans’ Board of Directors authorized the increase of its regular quarterly dividend to $0.35 from $0.25, and the Company paid its first quarter dividend on June 28, 2019.

 

Effective August 9, 2019, the Company declared its second quarter dividend of $0.35 per common share to stockholders of record as of the close of business on August 26, 2019, which is payable on September 6, 2019.

 

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 29, 2020, we will be required to make interest payments of $9,937,500, of which $4,968,750 has been made on May 1, 2019.

 

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

 

At June 30, 2019, we sublet one property to a franchisee that we lease from a third party. We remain contingently liable for all costs associated with this property including: rent, property taxes and insurance. We may incur future cash payments with respect to such property, consisting primarily of future lease payments, including costs and expenses associated with terminating such lease.

 

The following schedule represents Nathan’s cash contractual obligations and commitments by maturity as of June 30, 2019 (in thousands):

 

		Payments Due by Period
Cash Contractual Obligations		Total				Less than 1 Year				1-3 Years				3-5 Years				More than 5 Years
Long term debt (a)		$	150,000			$	-			$	-			$	-			$	150,000
Employment Agreements			4,850				1,500				2,250				700				400
Operating Leases (b)			8,373				321				1,533				1,917				4,602
Gross Cash Contractual Obligations			163,223				1,821				3,783				2,617				155,002
Sublease Income (b)			1,584				269				498				338				479
Net Cash Contractual Obligations		$	161,639			$	1,552			$	3,285			$	2,279			$	154,523

 

	a)	Represents the principal due on the 2025 Notes, but does not include interest expense.
	b)	See Note P to the Consolidated Financial Statements for additional information on the Company’s lease commitments.

 

At June 30, 2019, the Company had unrecognized tax benefits of $269,000. The Company believes that is reasonably possible that the unrecognized tax benefits may decrease by $11,000 within the next year. A reasonable estimate of the timing of the remaining liabilities is not practicable.

 

On February 27, 2017, a wholly-owned subsidiary of the Company executed a Guaranty of Lease (the “Brooklyn Guaranty”) in connection with its re-franchising of a restaurant located in Brooklyn, New York. The Company is obligated to make payments under the Brooklyn Guaranty in the event of a default by the tenant/franchisee. The Brooklyn Guaranty has an initial term of 10 years and one 5-year option and is limited to 24 months of rent for the first three years of the term. Nathan’s has recorded a liability of $217,000 in connection with the Brooklyn Guaranty which does not include potential percentage rent, real estate tax increases, attorney’s fees and other costs as these amounts are not reasonably determinable at this time. Nathan’s has received a personal guaranty from the franchisee for all obligations under the Brooklyn Guaranty. For the remainder of the term, the Brooklyn Guaranty is limited to 12 months of rent plus reasonable costs of collection and attorney’s fees.

 

Inflationary Impact           

  

We do not believe that general inflation has materially impacted earnings since 2006. However, we have experienced significant volatility in our costs for our hot dogs and certain food products, distribution costs and utilities. Since April 2018 our commodity cost for hot dogs had been stable before beginning to decline in September 2018 into December 2018. Beef prices have begun moderately escalating between January and June 2019. As such, our market price for hot dogs during our fiscal 2020 period was approximately 0.7% higher than the fiscal 2019 period.

 

We are unable to predict the future cost of our hot dogs and expect to experience price volatility for our beef products during fiscal 2020. To the extent that beef prices increase as compared to earlier periods, it could impact our results of operations. In the past, we entered into purchase commitments for a portion of our hot dogs to reduce the impact of increasing market prices. Our most recent purchase commitment was completed in 2016 for approximately 2,600,000 pounds of hot dogs. We may attempt to enter into similar purchase arrangements for hot dogs and other products in the future. Additionally, we expect to continue experiencing volatility in oil and gas prices on our distribution costs for our food products and utility costs in the Company-owned restaurants and volatile insurance costs resulting from the uncertainty of the insurance markets.

 

New York State passed legislation increasing the minimum hourly wage for fast food workers of restaurant chains with 30 or more locations nationwide. The increase is being phased in differently between New York City and the rest of New York State. Effective December 31, 2018, the minimum wage increased to $15.00 and $12.75 in New York City and outside of New York City, respectively.

 

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

 

 

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

 

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

 

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

 

Effective November 27, 2017, the City of New York Fair Work Week Legislation package of bills took effect that the city estimates will cover some 65,000 fast food workers by giving them more predictable work schedules. A key component of the package is a requirement that fast food restaurants schedule their workers at least two weeks in advance or pay employees between $10 to $75 per scheduling change, depending on the situation. Due to Nathan’s dependency on weather conditions at our two Coney Island beach locations during the summer season, we are unable to determine the potential impact on our results of operations, which could be material. We believe that we have been able to implement tools to minimize the financial impact of this legislation. Nevertheless, we incurred approximately $5,000 of additional costs due to this legislation during the fiscal 2020 period.

 

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

 

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

 

The Company’s business, financial condition, operating results and cash flows can be impacted by a number of factors, including but not limited to those set forth above in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” any one of which could cause our actual results to vary materially from recent results or from our anticipated future results. For a discussion identifying additional risk factors and important factors that could cause actual results to differ materially from those anticipated, also see the discussions in “Forward-Looking Statements” and “Notes to Consolidated Financial Statements” in this Form 10-Q and “Risk Factors” in our Form 10-K for our fiscal year ended March 31, 2019.

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.          

 

Cash and Cash Equivalents                    

 

We have historically invested our cash and cash equivalents in money market funds or short-term, fixed rate, highly rated and highly liquid instruments which are generally reinvested when they mature. Although these existing investments are not considered at risk with respect to changes in interest rates or markets for these instruments, our rate of return on short-term investments could be affected at the time of reinvestment as a result of intervening events. As of June 30, 2019, Nathan’s cash and cash equivalents aggregated $73,903,000. Earnings on this cash would increase or decrease by approximately $185,000 per annum for each 0.25% change in interest rates.

 

Borrowings

 

At June 30, 2019, we had $150,000,000 of Notes outstanding which are due in November 2025. Interest expense on these borrowings would increase or decrease by approximately $375,000 per annum for each 0.25% change in interest rates. We currently do not anticipate entering into interest rate swaps or other financial instruments to hedge our borrowings.

 

Commodity Costs

 

We do not believe that general inflation has materially impacted earnings since 2006. However, we have experienced significant volatility in our costs for our hot dogs and certain food products, distribution costs and utilities. Since April 2018 our commodity cost for hot dogs had been stable before beginning to decline in September 2018 into December 2018. Beef prices have begun moderately escalating between January and June 2019. As such, our market price for hot dogs during our fiscal 2020 period was approximately 0.7% higher than the fiscal 2019 period.

 

We are unable to predict the future cost of our hot dogs and expect to experience price volatility for our beef products during fiscal 2020. To the extent that beef prices increase as compared to earlier periods, it could impact our results of operations. In the past, we entered into purchase commitments for a portion of our hot dogs to reduce the impact of increasing market prices. Our most recent purchase commitment was completed in 2016 for approximately 2,600,000 pounds of hot dogs. We may attempt to enter into similar purchase arrangements for hot dogs and other products in the future. Additionally, we expect to continue experiencing volatility in oil and gas prices on our distribution costs for our food products and utility costs in the Company-owned restaurants and volatile insurance costs resulting from the uncertainty of the insurance markets.

 

With the exception of purchase commitments, we have not attempted to hedge against fluctuations in the prices of the commodities we purchase using future, forward, option or other instruments. As a result, we expect that the majority of our future commodity purchases will be subject to market changes in the prices of such commodities. We have attempted to enter sales agreements with our customers that are correlated to our cost of beef, thus reducing our market volatility, or have passed through permanent increases in our commodity prices to our customers that are not on formula pricing, thereby reducing the impact of long-term increases on our financial results. A short-term increase or decrease of 10.0% in the cost of our food and paper products for the thirteen weeks ended June 30, 2019 would have increased or decreased our cost of sales by approximately $1,370,000.

 

Foreign Currencies

 

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

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

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

 

 

Changes in Internal Controls

 

There were no changes in our internal controls over financial reporting that occurred during the quarter ended June 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

Limitations on the Effectiveness of Controls

 

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

 

 

PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

None

 

Item 1A. Risk Factors.

 

In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in Part I, “Item 1A. Risk Factors” in the Annual Report on Form 10-K for the fiscal year ended March 31, 2019, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing Nathan's. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results

 

 

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

 

None.

 

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

 

Item 4. Mine Safety Disclosures.

 

None.

 

 

Item 5. Other Information.

 

Effective August 9, 2019, the Board declared its quarterly cash dividend of $0.35 per share payable on September 6, 2019 to shareholders of record as of the close of business on August 26, 2019.

 

 

Item 6. Exhibits. 

 

	31.1	*Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31.2	*Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32.1	*Certification by Eric Gatoff, CEO, Nathan’s Famous, Inc., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	32.2	*Certification by Ronald G. DeVos, CFO, Nathan’s Famous, Inc., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	101.1	*The following materials from the Nathan’s Famous, Inc., Quarterly Report on Form 10-Q for the quarter ended June 30, 2019 formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Earnings, (iii) the Consolidated Statements of Stockholders’ (Deficit), (iv) the Consolidated Statements of Cash Flows and (v) related notes.

                

 

*Filed herewith.

 

 

SIGNATURES

 

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

 

	NATHAN'S FAMOUS, INC.
Date: August 9, 2019	By:	/s/ Eric Gatoff
		Eric Gatoff
		Chief Executive Officer
		(Principal Executive Officer)
Date: August 9, 2019	By:	/s/ Ronald G. DeVos
		Ronald G. DeVos
		Vice President - Finance
		and Chief Financial Officer
		(Principal Financial and Accounting Officer)

 

 

Exhibit Index. 

 

	31.1	*Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31.2	*Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32.1	*Certification by Eric Gatoff, CEO, Nathan’s Famous, Inc., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	32.2	*Certification by Ronald G. DeVos, CFO, Nathan’s Famous, Inc., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	101.1	*The following materials from the Nathan’s Famous, Inc., Quarterly Report on Form 10-Q for the quarter ended June 30, 2019 formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Earnings, (iii) the Consolidated Statements of Stockholders’ (Deficit), (iv) the Consolidated Statements of Cash Flows and (v) related notes.

                

 

*Filed herewith.

 

-34-

 

Exhibit 31.1

CERTIFICATION

 

I, Eric Gatoff, certify that:

 

1.

I have reviewed this quarterly report on Form 10-Q for the quarter ended June 30, 2019 of Nathan’s Famous, Inc.;

 

2.

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

 

3.

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

 

4.

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

 

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

 

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

 

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

 

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

 

5.

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

 

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

 

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

 

 

Date: August 9, 2019	/s/ Eric Gatoff
	Eric Gatoff
	Chief Executive Officer
	(Principal Executive Officer)

 

 

Exhibit 31.2

CERTIFICATION

 

I, Ronald G. DeVos, certify that:

 

1.

I have reviewed this quarterly report on Form 10-Q for the quarter ended June 30, 2019 of Nathan’s Famous, Inc.;

 

2.

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

 

3.

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

 

4.

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

 

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

 

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

 

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

 

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

 

5.

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

 

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

 

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

 

 

Date: August 9, 2019	/s/ Ronald G. DeVos
	Ronald G. DeVos
	Chief Financial Officer
	(Principal Financial Officer and
	Principle Accounting Officer)

 

 

Exhibit 32.1

 

CERTIFICATION PURSUANT TO

 

18 U.S.C. SECTION 1350

 

AS ADOPTED PURSUANT TO

 

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

 

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

 

The quarterly report on Form 10-Q of Nathan’s Famous, Inc. for the period ended June 30, 2019 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

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

 

 

	/s/ Eric Gatoff
	Eric Gatoff
	Chief Executive Officer
	(Principal Executive Officer)
	Date: August 9, 2019

                                                            

 

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

 

 

Exhibit 32.2

 

CERTIFICATION PURSUANT TO

 

18 U.S.C. SECTION 1350

 

AS ADOPTED PURSUANT TO

 

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

 

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

 

The quarterly report on Form 10-Q of Nathan’s Famous, Inc. for the period ended June 30, 2019 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

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

 

 

	/s/ Ronald G. DeVos
	Ronald G. DeVos
	Chief Financial Officer
	(Principal Financial Officer and
	Principal Accounting Officer)
	Date: August 9, 2019

 

 

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