FORM
10-Q
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
(Mark
One)
|
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
|
For the
quarterly period ended December
27, 2009.
OR
|
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT of 1934
|
For the
transition period from to .
Commission
file number 0-3189
NATHAN'S
FAMOUS, INC.
(Exact
name of registrant as specified in its charter)
Delaware
|
11-3166443
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
incorporation
or organization)
|
Identification
No.)
|
One Jericho Plaza, Second
Floor – Wing A, Jericho, New York 11753
(Address
of principal executive offices)
(Zip
Code)
(516)
338-8500
(Registrant's
telephone number, including area code)
1400 Old Country Road, Suite
400, Westbury, New York, 11590
(Former
name, former address and former fiscal year, if changed since last
report)
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes x No
¨
Indicate by check mark whether the
registrant has submitted electronically and posted on its corporate Web site, if
any, every Interactive Data File required to be submitted and posted pursuant to
Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required
to submit and post such files). Yes ¨ No
¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check One):
Large
accelerated filer ¨
|
Accelerated
filer x
|
Non-accelerated
filer ¨
|
Smaller
reporting company ¨
|
(Do
not check if a smaller reporting company)
|
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes ¨ No x
At February 4, 2010, an
aggregate of 5,640,919 shares of the registrant's common stock, par value of
$.01, were outstanding.
NATHAN'S
FAMOUS, INC. AND SUBSIDIARIES
INDEX
|
|
Page |
|
|
Number
|
|
|
|
|
PART
I.
|
FINANCIAL
INFORMATION
|
|
|
|
|
|
|
Item
1.
|
Financial
Statements.
|
|
3
|
|
|
|
|
|
Consolidated
Financial Statements
|
|
|
|
Consolidated
Balance Sheets – December 27, 2009 (Unaudited) and March 29,
2009
|
|
3
|
|
|
|
|
|
Consolidated
Statements of Earnings (Unaudited) - Thirteen Weeks
|
|
|
|
Ended
December 27, 2009 and December 28, 2008
|
|
4
|
|
|
|
|
|
Consolidated
Statements of Earnings (Unaudited) - Thirty-nine Weeks
|
|
|
|
Ended
December 27, 2009 and December 28, 2008
|
|
5
|
|
|
|
|
|
Consolidated
Statement of Stockholders’ Equity (Unaudited) –
|
|
|
|
Thirty-nine
Weeks Ended December 27, 2009
|
|
6
|
|
|
|
|
|
Consolidated
Statements of Cash Flows (Unaudited) –
|
|
|
|
Thirty-nine
Weeks Ended December 27, 2009 and December 28, 2008
|
|
7
|
|
|
|
|
|
Notes
to Consolidated Financial Statements
|
|
8
|
|
|
|
|
Item
2.
|
Management's
Discussion and Analysis of Financial
|
|
|
|
Condition
and Results of Operations.
|
|
16
|
|
|
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk.
|
|
24
|
|
|
|
|
Item
4.
|
Controls
and Procedures.
|
|
25
|
|
|
|
|
PART
II.
|
OTHER
INFORMATION
|
|
|
|
|
|
|
Item
1.
|
Legal
Proceedings.
|
|
26
|
|
|
|
|
Item
1A.
|
Risk
Factors.
|
|
27
|
|
|
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds.
|
|
27
|
|
|
|
|
Item
6.
|
Exhibits.
|
|
29
|
|
|
|
|
SIGNATURES
|
|
30
|
|
|
|
Exhibit
Index
|
|
31
|
Nathan’s
Famous, Inc. and Subsidiaries
CONSOLIDATED
BALANCE SHEETS
December
27, 2009 and March 29, 2009
(in
thousands, except share and per share amounts)
Item
1. Financial Statements.
|
|
December 27,
2009
|
|
|
March 29, 2009
|
|
|
|
(Unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
9,004 |
|
|
$ |
8,679 |
|
Marketable
securities
|
|
|
24,918 |
|
|
|
25,670 |
|
Accounts
and other receivables, net
|
|
|
6,417 |
|
|
|
4,869 |
|
Note
receivable
|
|
|
308 |
|
|
|
290 |
|
Inventories
|
|
|
693 |
|
|
|
668 |
|
Prepaid
expenses and other current assets
|
|
|
1,184 |
|
|
|
1,326 |
|
Deferred
income taxes
|
|
|
696 |
|
|
|
696 |
|
Total
current assets
|
|
|
43,220 |
|
|
|
42,198 |
|
|
|
|
|
|
|
|
|
|
Note
receivable
|
|
|
1,232 |
|
|
|
1,466 |
|
Property
and equipment, net
|
|
|
5,504 |
|
|
|
4,126 |
|
Goodwill
|
|
|
95 |
|
|
|
95 |
|
Intangible
asset
|
|
|
1,353 |
|
|
|
1,353 |
|
Deferred
income taxes
|
|
|
356 |
|
|
|
428 |
|
Other
assets
|
|
|
368 |
|
|
|
158 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
52,128 |
|
|
$ |
49,824 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$ |
2,483 |
|
|
$ |
2,857 |
|
Accrued
expenses and other current liabilities
|
|
|
3,791 |
|
|
|
3,867 |
|
Deferred
franchise fees
|
|
|
205 |
|
|
|
171 |
|
Total
current liabilities
|
|
|
6,479 |
|
|
|
6,895 |
|
|
|
|
|
|
|
|
|
|
Other
liabilities
|
|
|
1,472 |
|
|
|
1,080 |
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
7,951 |
|
|
|
7,975 |
|
|
|
|
|
|
|
|
|
|
COMMITMENTS
AND CONTINGENCIES (Note J)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
EQUITY
|
|
|
|
|
|
|
|
|
Common
stock, $.01 par value; 30,000,000 shares authorized;
|
|
|
|
|
|
|
|
|
8,773,241
and 8,305,683 shares issued; 5,640,919 and 5,611,877 shares outstanding at
December 27, 2009 and March 29, 2009, respectively.
|
|
|
88 |
|
|
|
83 |
|
Additional
paid-in capital
|
|
|
51,946 |
|
|
|
49,001 |
|
Retained
earnings
|
|
|
16,006 |
|
|
|
11,228 |
|
Accumulated
other comprehensive income
|
|
|
636 |
|
|
|
335 |
|
|
|
|
68,676 |
|
|
|
60,647 |
|
Treasury
stock, at cost, 3,132,322 and 2,693,806 shares at December 27, 2009 and
March 29, 2009, respectively.
|
|
|
(24,499 |
) |
|
|
(18,798 |
) |
Total
stockholders’ equity
|
|
|
44,177 |
|
|
|
41,849 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
52,128 |
|
|
$ |
49,824 |
|
The
accompanying notes are an integral part of these statements.
Nathan’s
Famous, Inc. and Subsidiaries
CONSOLIDATED
STATEMENTS OF EARNINGS
Thirteen
weeks ended December 27, 2009 and December 28, 2008
(in
thousands, except share and per share amounts)
(Unaudited)
|
|
December 27,
2009
|
|
|
December 28,
2008
|
|
|
|
|
|
|
|
|
REVENUES
|
|
|
|
|
|
|
Sales
|
|
$ |
8,375 |
|
|
$ |
7,949 |
|
Franchise
fees and royalties
|
|
|
1,313 |
|
|
|
1,188 |
|
License
royalties
|
|
|
1,297 |
|
|
|
1,182 |
|
Interest
income
|
|
|
224 |
|
|
|
288 |
|
Other
income
|
|
|
15 |
|
|
|
13 |
|
Total
revenues
|
|
|
11,224 |
|
|
|
10,620 |
|
|
|
|
|
|
|
|
|
|
COSTS
AND EXPENSES
|
|
|
|
|
|
|
|
|
Cost
of sales
|
|
|
6,235 |
|
|
|
6,297 |
|
Restaurant
operating expenses
|
|
|
805 |
|
|
|
710 |
|
Depreciation
and amortization
|
|
|
214 |
|
|
|
210 |
|
General
and administrative expenses
|
|
|
2,408 |
|
|
|
2,135 |
|
Total
costs and expenses
|
|
|
9,662 |
|
|
|
9,352 |
|
|
|
|
|
|
|
|
|
|
Income
before provision for income taxes
|
|
|
1,562 |
|
|
|
1,268 |
|
Provision
for income taxes
|
|
|
510 |
|
|
|
411 |
|
Net
income
|
|
$ |
1,052 |
|
|
$ |
857 |
|
|
|
|
|
|
|
|
|
|
PER
SHARE INFORMATION
|
|
|
|
|
|
|
|
|
Basic
income per share:
|
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
.19 |
|
|
$ |
.15 |
|
|
|
|
|
|
|
|
|
|
Diluted
income per share:
|
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
.19 |
|
|
$ |
.14 |
|
|
|
|
|
|
|
|
|
|
Weighted
average shares used in computing income per
share
|
|
|
|
|
|
|
|
|
Basic
|
|
|
5,603,000 |
|
|
|
5,756,000 |
|
Diluted
|
|
|
5,680,000 |
|
|
|
6,022,000 |
|
The
accompanying notes are an integral part of these
statements.
Nathan’s
Famous, Inc. and Subsidiaries
CONSOLIDATED
STATEMENTS OF EARNINGS
Thirty-nine
weeks ended December 27, 2009 and December 28, 2008
(in
thousands, except share and per share amounts)
(Unaudited)
|
|
December 27,
2009
|
|
|
December 28,
2008
|
|
|
|
|
|
|
|
|
REVENUES
|
|
|
|
|
|
|
Sales
|
|
$ |
31,148 |
|
|
$ |
30,383 |
|
Franchise
fees and royalties
|
|
|
3,779 |
|
|
|
3,531 |
|
License
royalties
|
|
|
4,672 |
|
|
|
4,425 |
|
Interest
income
|
|
|
704 |
|
|
|
810 |
|
Other
income
|
|
|
49 |
|
|
|
38 |
|
Total
revenues
|
|
|
40,352 |
|
|
|
39,187 |
|
|
|
|
|
|
|
|
|
|
COSTS
AND EXPENSES
|
|
|
|
|
|
|
|
|
Cost
of sales
|
|
|
22,437 |
|
|
|
23,230 |
|
Restaurant
operating expenses
|
|
|
2,601 |
|
|
|
2,586 |
|
Depreciation
and amortization
|
|
|
614 |
|
|
|
608 |
|
General
and administrative expenses
|
|
|
7,275 |
|
|
|
6,829 |
|
Recovery
of property taxes
|
|
|
- |
|
|
|
(441 |
) |
Total
costs and expenses
|
|
|
32,927 |
|
|
|
32,812 |
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations before provision for income
taxes
|
|
|
7,425 |
|
|
|
6,375 |
|
Provision
for income taxes
|
|
|
2,647 |
|
|
|
2,304 |
|
Income
from continuing operations
|
|
|
4,778 |
|
|
|
4,071 |
|
|
|
|
|
|
|
|
|
|
Income
from discontinued operations, including gains on disposal of discontinued
operations before income taxes of $3,906 in 2008
|
|
|
- |
|
|
|
3,914 |
|
Provision
for income taxes
|
|
|
- |
|
|
|
1,447 |
|
Income
from discontinued operations
|
|
|
- |
|
|
|
2,467 |
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
4,778 |
|
|
$ |
6,538 |
|
|
|
|
|
|
|
|
|
|
PER
SHARE INFORMATION
|
|
|
|
|
|
|
|
|
Basic
income per share:
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
$ |
.86 |
|
|
$ |
.68 |
|
Income
from discontinued operations
|
|
|
- |
|
|
|
.42 |
|
Net
income
|
|
$ |
.86 |
|
|
$ |
1.10 |
|
|
|
|
|
|
|
|
|
|
Diluted
income per share:
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
$ |
.84 |
|
|
$ |
.65 |
|
Income
from discontinued operations
|
|
|
- |
|
|
|
.39 |
|
Net
income
|
|
$ |
.84 |
|
|
$ |
1.04 |
|
|
|
|
|
|
|
|
|
|
Weighted
average shares used in computing income per share
|
|
|
|
|
|
|
|
|
Basic
|
|
|
5,545,000 |
|
|
|
5,968,000 |
|
Diluted
|
|
|
5,718,000 |
|
|
|
6,268,000 |
|
The
accompanying notes are an integral part of these statements.
Nathan’s
Famous, Inc. and Subsidiaries
CONSOLIDATED
STATEMENT OF STOCKHOLDERS’ EQUITY
Thirty-nine
weeks ended December 27, 2009
(in
thousands, except share amounts)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
|
|
|
Total
|
|
|
|
Common
|
|
|
Common
|
|
|
Paid-in
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
Treasury
Stock, at Cost
|
|
|
Stockholders’
|
|
|
|
Shares
|
|
|
Stock
|
|
|
Capital
|
|
|
Earnings
|
|
|
Income
|
|
|
Shares
|
|
|
Amount
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
March 29, 2009
|
|
|
8,305,683 |
|
|
$ |
83 |
|
|
$ |
49,001 |
|
|
$ |
11,228 |
|
|
$ |
335 |
|
|
|
2,693,806 |
|
|
$ |
(18,798 |
) |
|
$ |
41,849 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued in connection with the exercise of employee stock
options
|
|
|
467,558 |
|
|
|
5 |
|
|
|
1,528 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,533 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase
of common stock
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
438,516 |
|
|
|
(5,701 |
) |
|
|
(5,701 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax benefit on stock option exercises
|
|
|
- |
|
|
|
- |
|
|
|
1,096 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,096 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based
compensation
|
|
|
- |
|
|
|
- |
|
|
|
321 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
321 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
comprehensive income, net - Unrealized gains on available for sale
securities, net of deferred income tax of $200
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
301 |
|
|
|
- |
|
|
|
- |
|
|
|
301 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
4,778 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
4,778 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 27, 2009
|
|
|
8,773,241 |
|
|
$ |
88 |
|
|
$ |
51,946 |
|
|
$ |
16,006 |
|
|
$ |
636 |
|
|
|
3,132,322 |
|
|
$ |
(24,499 |
) |
|
$ |
44,177 |
|
The
accompanying notes are an integral part of these statements.
Nathan’s
Famous, Inc. and Subsidiaries
CONSOLIDATED
STATEMENTS OF CASH FLOWS
Thirty-nine
weeks ended December 27, 2009 and December 28, 2008
(in
thousands, except share and per share amounts)
(Unaudited)
|
|
December 27,
2009
|
|
|
December 28,
2008
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net
income
|
|
$ |
4,778 |
|
|
$ |
6,538 |
|
Adjustments
to reconcile net income to net cash provided by (used in) operating
activities
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
614 |
|
|
|
608 |
|
Amortization
of intangible assets
|
|
|
- |
|
|
|
3 |
|
Amortization
of bond premium
|
|
|
218 |
|
|
|
189 |
|
Amortization
of deferred compensation
|
|
|
- |
|
|
|
54 |
|
Gain
on sales of subsidiaries
|
|
|
- |
|
|
|
(3,906 |
) |
Share
based compensation expense
|
|
|
321 |
|
|
|
321 |
|
Provision
for doubtful accounts
|
|
|
181 |
|
|
|
151 |
|
Deferred
income taxes
|
|
|
(128 |
) |
|
|
(129 |
) |
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
and other receivables, net
|
|
|
(1,728 |
) |
|
|
(1,427 |
) |
Inventories
|
|
|
(25 |
) |
|
|
235 |
|
Prepaid
expenses and other current assets
|
|
|
142 |
|
|
|
539 |
|
Accounts
payable, accrued expenses and other current liabilities
|
|
|
(450 |
) |
|
|
63 |
|
Deferred
franchise fees
|
|
|
34 |
|
|
|
(73 |
) |
Other
liabilities
|
|
|
392 |
|
|
|
8 |
|
Other
Assets
|
|
|
(210 |
) |
|
|
- |
|
Net
cash provided by operating activities
|
|
|
4,139 |
|
|
|
3,174 |
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Proceeds
from sale of available-for-sale securities
|
|
|
1,035 |
|
|
|
500 |
|
Purchase
of available-for-sale securities
|
|
|
- |
|
|
|
(6,860 |
) |
Purchase
of property and equipment
|
|
|
(1,992 |
) |
|
|
(429 |
) |
Payments
received on notes receivable
|
|
|
215 |
|
|
|
337 |
|
Proceeds
from sale of subsidiary
|
|
|
- |
|
|
|
3,961 |
|
|
|
|
|
|
|
|
|
|
Net
cash used in investing activities
|
|
|
(742 |
) |
|
|
(2,491 |
) |
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Repurchase
of treasury stock
|
|
|
(5,701 |
) |
|
|
(8,443 |
) |
Proceeds
from the exercise of stock options
|
|
|
1,533 |
|
|
|
412 |
|
Income
tax benefits on stock option exercises
|
|
|
1,096 |
|
|
|
502 |
|
|
|
|
|
|
|
|
|
|
Net
cash used in financing activities
|
|
|
(3,072 |
) |
|
|
(7,529 |
) |
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
325 |
|
|
|
(6,846 |
) |
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, beginning of period
|
|
|
8,679 |
|
|
|
14,381 |
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, end of period
|
|
$ |
9,004 |
|
|
$ |
7,535 |
|
|
|
|
|
|
|
|
|
|
Cash
paid during the period for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$ |
- |
|
|
$ |
- |
|
Income
taxes
|
|
$ |
1,830 |
|
|
$ |
2,063 |
|
|
|
|
|
|
|
|
|
|
Noncash
Financing Activities:
|
|
|
|
|
|
|
|
|
Loan
made in connection with the sale of subsidiary
|
|
$ |
- |
|
|
$ |
250 |
|
The
accompanying notes are an integral part of these statements.
NATHAN'S
FAMOUS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
December
27, 2009
(Unaudited)
NOTE
A - BASIS OF PRESENTATION
The
accompanying consolidated financial statements of Nathan's Famous, Inc. and
subsidiaries (collectively “Nathan’s,” the “Company,” “we,” “us” or
“our”) as of and for the thirteen and thirty-nine week periods ended December
27, 2009 and December 28, 2008 have been prepared in accordance with accounting
principles generally accepted in the United States of America. The
unaudited financial statements include all adjustments (consisting of normal
recurring adjustments) which, in the opinion of management, are necessary for a
fair presentation of financial condition, results of operations and cash flows
for the periods presented. However, these results are not necessarily
indicative of results for any other interim period or the full fiscal
year.
Certain
information and footnote disclosures normally included in financial statements
in accordance with accounting principles generally accepted in the United States
of America have been omitted pursuant to the requirements of the Securities and
Exchange Commission. Management believes that the disclosures
included in the accompanying interim financial statements and footnotes are
adequate to make the information not misleading, but should be read in
conjunction with the consolidated financial statements and notes thereto
included in Nathan’s Annual Report on Form 10-K for the fiscal year ended March
29, 2009.
A summary
of the Company’s significant accounting policies is identified in Note B of the
Notes to Consolidated Financial Statements included in the Company’s 2009 Annual
Report on Form 10-K. There have been no changes to the Company’s significant
accounting policies subsequent to March 29, 2009.
On April
23, 2008, Nathan’s completed the sale of its wholly-owned subsidiary, NF
Roasters Corp. (“NF Roasters”) and on June 7, 2007, completed the sale of its
wholly-owned subsidiary, Miami Subs Corporation (“Miami Subs”) (See Note
D).
We
evaluated events or transactions for recognition or disclosure which
occurred subsequent to the balance sheet date through the time that this
Form 10-Q was filed with the SEC on February 4, 2010.
NOTE B –
ADOPTION OF ACCOUNTING PRONOUNCEMENTS
In
December 2007, the Financial Accounting Standards Board (“FASB”) issued an amendment to
its existing accounting standard on business combinations, which establishes new
principles and requirements for how an acquirer recognizes and measures in its
financial statements the identifiable assets acquired, the liabilities assumed,
and any noncontrolling interest in an acquiree, including the recognition and
measurement of goodwill acquired in a business combination. In April 2009, the
FASB also issued new guidelines on the initial recognition and measurement,
subsequent measurement and accounting, and disclosure of assets and liabilities
arising from contingencies in a business combination, which provide that an
acquirer shall recognize an asset acquired or a liability assumed in a business
combination that arises from a contingency at fair value, at the acquisition
date, if the acquisition-date fair value of that asset or liability can be
determined during the measurement period. New guidance is also provided in the
event that the fair value of an asset acquired or liability assumed cannot be
determined during the measurement period. An acquirer shall also develop a
systematic and rational basis for subsequently measuring and accounting for
assets and liabilities arising from contingencies and also provide for the
disclosure requirements. Nathan’s adopted the provisions of the new accounting
standards on business combinations on March 30, 2009, the adoption of which had
no impact on our consolidated financial position or results of
operations.
In
December 2007, the FASB issued a new accounting standard which establishes
accounting and reporting standards for the noncontrolling interest in a
subsidiary and for the deconsolidation of a subsidiary. It clarifies that a
noncontrolling interest in a subsidiary, which is sometimes referred to as
minority interest, is an ownership interest in the consolidated entity that
should be reported as equity in the consolidated financial statements. Among
other requirements, this standard requires consolidated net income to be
reported at amounts that include the amounts attributable to both the parent and
the noncontrolling interest. It also requires disclosure, on the face of the
consolidated income statement, of the amounts of consolidated net income
attributable to the parent and to the noncontrolling interest. Nathan’s adopted
the provisions of this new accounting standard on March 30, 2009, the adoption
of which had no impact on our consolidated financial position or results of
operations.
In April
2008, the FASB issued new guidance which amends the factors that should be
considered in developing renewal or extension assumptions used to determine the
useful life of a recognized intangible asset. Nathan’s adopted the
new guidance on March 30, 2009, the adoption of which had no impact on our
consolidated financial position or results of operations.
In June
2008, the FASB issued new guidance for the accounting for maintenance deposits
paid by a lessee to a lessor. Nathan’s adopted these provisions on March 30,
2009, the adoption of which had no impact on our consolidated financial position
or results of operations.
In April
2009, the FASB issued new guidance on the recognition and presentation of
other-than-temporary impairments, which segregate credit and noncredit
components of impaired debt securities that are not expected to be sold.
Impairments will still have to be measured at fair value in other comprehensive
income. These accounting standards also require some additional disclosures
regarding expected cash flows, credit losses, and an aging of securities with
unrealized losses. Nathan’s adopted the new guidance effective March 30,
2009, the adoption of which had no impact on our consolidated financial position
or results of operations.
In April
2009, the FASB issued new requirements for interim disclosures about fair value
of financial instruments, which increase the frequency of fair value disclosures
to a quarterly basis instead of annually. The requirements relate to fair value
disclosures for any financial instruments that are not currently reflected on
the balance sheet at fair value. Prior to these changes, fair values for these
assets and liabilities were only disclosed annually. Nathan’s adopted the
provisions of these accounting standards effective March 30, 2009. The
newly-required interim disclosures, which we included in Note C, had no impact
on our consolidated financial position or results of operations.
In May
2009, the FASB issued a new accounting standard on subsequent events,
which establishes general standards of accounting for, and disclosure of, events
that occur after the balance sheet date but before financial statements are
issued or are available to be issued. This accounting standard establishes: 1)
The period after the balance sheet date during which management of a reporting
entity should evaluate events or transactions that may occur for potential
recognition or disclosure in the financial statements; 2) the circumstances
under which an entity should recognize events or transactions occurring after
the balance sheet date in its financial statements; and 3) the disclosures that
an entity should make about events or transactions that occurred after the
balance sheet date. This accounting standard also requires disclosure of the
date through which an entity has evaluated subsequent events. Nathan’s adopted
the provisions of this accounting standard effective for its first quarter ended
June 28, 2009. In connection with the adoption of this accounting standard, we
have included disclosure in Note A to disclose the date through which we
evaluated subsequent events.
In June
2009, the FASB issued a new accounting standard which establishes the FASB Accounting Standards
CodificationTM
(“Codification”) as the source of authoritative U.S. Generally Accepted
Accounting Principles (GAAP) recognized by the FASB to be applied by
nongovernmental entities. Rules and interpretive releases of the Securities and
Exchange Commission (“SEC”) under authority of federal securities laws are also
sources of authoritative GAAP for SEC registrants. Nathan’s adopted the
provisions of this accounting standard on June 29, 2009. The
adoption of this accounting standard did not have any impact on our consolidated
financial position and results of operations.
NOTE C –
FAIR VALUE MEASUREMENTS
In
September 2006, the FASB issued a new accounting standard on fair value
measurements which defines fair value, establishes a framework for measuring
fair value and expands disclosures about fair value. This accounting standard
eliminates the diversity in practice that exists due to the different
definitions of fair value. This accounting standard retains the exchange price
notion in earlier definitions of fair value, but clarifies that the exchange
price is the price in an orderly transaction between market participants to sell
an asset or liability in the principal or most advantageous market for the asset
or liability. This accounting standard states that the transaction is
hypothetical at the measurement date, considered from the perspective of the
market participant who holds the asset or liability. As such, fair value is
defined as the price that would be received to sell an asset or paid to transfer
a liability in an orderly transaction between market participants at the
measurement date (an exit price), as opposed to the price that would be paid to
acquire the asset or received to assume the liability at the measurement date
(an entry price). This accounting standard also establishes a three-level
hierarchy, which requires an entity to maximize the use of observable inputs and
minimize the use of unobservable inputs when measuring fair value. In
February 2008, the FASB delayed the effective date of the provisions of this
accounting standard for certain non-financial assets and non-financial
liabilities, except those that are recognized or disclosed at fair value in the
financial statements on a recurring basis (i.e., at least annually) for one
year. Nathan’s adopted the provisions of this accounting standard for financial
assets and liabilities on March 31, 2008 and adopted the remaining provisions
for non-financial assets and liabilities on March 30, 2009.
In April
2009, the FASB issued new guidelines for a broad interpretation of when to apply
market-based fair value measurements. The new guidance reaffirms management’s
need to use judgment to determine when a market that was once active has become
inactive and in determining fair values in markets that are no longer active.
Nathan’s adopted the new guidance on March 30, 2009, the adoption of which did
not have a significant impact on our consolidated financial position and results
of operations.
The
valuation hierarchy is based upon the transparency of inputs to the valuation of
an asset or liability on the measurement date. The three levels are defined as
follows:
· Level
1 - inputs to the valuation methodology are quoted prices (unadjusted) for an
identical asset or liability in an active market
· Level
2 - inputs to the valuation methodology include quoted prices for a similar
asset or liability in an active market or model-derived valuations in which all
significant inputs are observable for substantially the full term of the asset
or liability
· Level
3 - inputs to the valuation methodology are unobservable and significant to the
fair value measurement of the asset or liability
The
following table presents assets and liabilities measured at fair value on a
recurring basis as of December 27, 2009 based upon the valuation hierarchy (in
thousands):
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Carrying Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable
securities
|
|
$ |
- |
|
|
$ |
24,918 |
|
|
$ |
- |
|
|
$ |
24,918 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets at fair value
|
|
$ |
- |
|
|
$ |
24,918 |
|
|
$ |
- |
|
|
$ |
24,918 |
|
Nathan’s
marketable securities, which consist primarily of municipal bonds, are not
actively traded. The valuation of such bonds is based upon quoted
market prices for similar bonds currently trading in an active
market.
The
carrying amounts of cash equivalents, accounts receivable and accounts payable
approximate fair value due to the short-term maturity of the
instruments. The carrying amount of the note receivable approximates
fair value, as determined using level three inputs, as the current interest rate
on such instrument approximates current market interest rates on similar
instruments.
Certain
non-financial assets and liabilities are measured at fair value on a
nonrecurring basis; that is, the assets and liabilities are not measured at fair
value on an ongoing basis but are subject to fair value adjustments in certain
circumstances, such as when evidence of impairment exists. At December 27, 2009,
no fair value adjustment or material fair value measurements were required for
non-financial assets or liabilities.
NOTE D –
DISCONTINUED OPERATIONS
1.
|
Sale
of NF Roasters Corp.
|
On April 23, 2008, Nathan’s completed the
sale of its wholly-owned subsidiary, NF Roasters, the franchisor of the Kenny
Rogers Roasters concept, to Roasters Asia Pacific
(Cayman) Limited. Pursuant to the Stock
Purchase Agreement (“NFR Agreement”), Nathan’s sold all of the stock of NF
Roasters for $4,000,000 in cash.
In
connection with the NFR Agreement, Nathan’s and its previously-owned subsidiary,
Miami Subs, may continue to sell Kenny Rogers products within the then-existing
restaurants without payment of royalties.
The
following is a summary of the assets and liabilities of NF Roasters, as of the
date of sale, that were sold:
Cash
|
|
$ |
8,000 |
(A) |
Accounts
receivable, net
|
|
|
1,000 |
|
Deferred
income taxes, net
|
|
|
230,000 |
|
Intangible
assets, net
|
|
|
391,000 |
|
Other
assets
|
|
|
30,000 |
|
Total
assets sold
|
|
|
660,000 |
|
|
|
|
|
|
Accrued
expenses
|
|
|
27,000 |
(B) |
Other
liabilities
|
|
|
328,000 |
|
Total
liabilities sold
|
|
|
355,000 |
|
|
|
|
|
|
Net
assets sold
|
|
$ |
305,000 |
|
|
(A)
|
-
Represents unexpended marketing
funds.
|
|
(B)
|
-
Includes unexpended marketing funds of
$8,000.
|
Nathan’s
realized a gain on the sale of NF Roasters of $3,656,000 net of professional fees
of $39,000 and recorded income
taxes of $1,289,000 on the gain during the fiscal year ended March 29,
2009. Nathan’s has
determined that it will not have any significant cash flows or continuing
involvement in the ongoing operations of NF Roasters. Therefore, the results of
operations for NF Roasters, including the gain on disposal, have been presented
as discontinued operations for the thirty-nine week period ended December
28, 2008.
2.
Sale of Miami Subs Corporation
On June
7, 2007, Nathan’s completed the sale of its wholly-owned subsidiary, Miami Subs
to Miami Subs Capital Partners I, Inc. (“Purchaser”). Pursuant to the Stock
Purchase Agreement (“MSC Agreement”), Nathan’s sold all of the stock of Miami
Subs in exchange for $3,250,000 consisting of $850,000 in cash and the
Purchaser’s promissory note in the principal amount of $2,400,000 (the “MSC
Note”). The MSC Note bears interest at 8% per annum and is secured by
a lien on all of the assets of the Purchaser and by the personal guarantees of
two principals of the Purchaser. The Purchaser may also prepay the MSC Note at
any time. In the event the MSC Note was fully repaid within one year of the
sale, Nathan’s would have been required to reduce the amount due by $250,000.
Due to the ability to prepay the loan and reduce the amount due, the recognition
of $250,000 was initially deferred. The MSC Note was not prepaid within the
requisite timeframe and Nathan’s recognized an additional gain of $250,000, or
$158,000 net of tax, resulting from the contingent consideration which was
deferred at the time of sale, during the fiscal year ended March 29, 2009, which
has been presented as discontinued operations for the period ended December 28,
2008. On January 29, 2010, Nathan’s provided the Purchaser and the personal
guarantors with a notice of default for the failure to make the most recent note
payment. The parties have 10 days to cure the default. No
impairment allowance has been recorded as this is the first default notice that
has been issued.
NOTE E -
INCOME PER SHARE
Basic
income per common share is calculated by dividing income by the weighted-average
number of common shares outstanding and excludes any dilutive effect of stock
options or warrants. Diluted income per common share gives effect to all
potentially dilutive common shares that were outstanding during the period.
Dilutive common shares used in the computation of diluted income per common
share result from the assumed exercise of stock options and warrants, as
determined using the treasury stock method.
The
following chart provides a reconciliation of information used in calculating the
per share amounts for the thirteen- and thirty-nine-week periods ended December
27, 2009 and December 28, 2008, respectively.
Thirteen
weeks
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from
|
|
|
|
Income
from
|
|
|
|
|
|
|
|
|
Continuing
Operations
|
|
|
|
Continuing Operations
|
|
|
Number of Shares
|
|
|
Per Share
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
(in
thousands)
|
|
|
(in
thousands)
|
|
|
|
|
|
|
|
Basic EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
calculation
|
|
$ |
1,052 |
|
|
$ |
857 |
|
|
|
5,603 |
|
|
|
5,756 |
|
|
$ |
0.19 |
|
|
$ |
0.15 |
|
Effect
of dilutive employee stock options
|
|
|
- |
|
|
|
- |
|
|
|
77 |
|
|
|
266 |
|
|
|
- |
|
|
|
(0.01 |
) |
Diluted EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
calculation
|
|
$ |
1,052 |
|
|
$ |
857 |
|
|
|
5,680 |
|
|
|
6,022 |
|
|
$ |
0.19 |
|
|
$ |
0.14 |
|
Thirty-nine
weeks
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from
|
|
|
|
Income
from
|
|
|
|
|
|
|
|
|
Continuing
Operations
|
|
|
|
Continuing Operations
|
|
|
Number of Shares
|
|
|
Per Share
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
(in
thousands)
|
|
|
(in
thousands)
|
|
|
|
|
|
|
|
Basic EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
calculation
|
|
$ |
4,778 |
|
|
$ |
4,071 |
|
|
|
5,545 |
|
|
|
5,968 |
|
|
$ |
0.86 |
|
|
$ |
0.68 |
|
Effect
of dilutive employee stock options
|
|
|
- |
|
|
|
- |
|
|
|
173 |
|
|
|
300 |
|
|
|
(0.02 |
) |
|
|
(0.03 |
) |
Diluted EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
calculation
|
|
$ |
4,778 |
|
|
$ |
4,071 |
|
|
|
5,718 |
|
|
|
6,268 |
|
|
$ |
0.84 |
|
|
$ |
0.65 |
|
Options
to purchase 110,000 shares of common stock in the thirteen- and
thirty-nine-week periods ended December 27, 2009 and December 28, 2008 were not
included in the computation of diluted EPS because the exercise prices exceeded
the average market price of common shares during the periods.
NOTE F –
INCOME TAXES
The
income tax provisions on continuing operations reflect effective tax rates of
35.6% in 2009 and 36.1% in 2008. Nathan’s estimates that its annual tax rate for
the fiscal year ending March 28, 2010 will be approximately 35.0% to 37.5%. The
final annual tax rate is subject to many variables, including the effect of
tax-exempt interest earned, among other factors, and therefore cannot be
determined until the end of the fiscal year; therefore, the actual tax rate
could differ from our current estimates.
The
amount of unrecognized tax benefits at December 27, 2009 was $403,000, all of
which would impact Nathan’s effective tax rate, if recognized. As of December
27, 2009, Nathan’s had $330,000 of accrued interest and
penalties in connection with unrecognized tax benefits.
During
the thirty-nine-week period ended December 27, 2009, Nathan’s settled uncertain
tax positions with two state jurisdictions and has accordingly reduced the
associated unrecognized tax benefits and the related accrued interest and
penalties by approximately $137,000. During the year ending March 28, 2010,
Nathan’s is actively seeking to settle uncertain tax positions with the tax
authorities. As a result, it is reasonably possible that the amount of
unrecognized tax benefits and the related accrued interest and penalties could
be reduced by up to $90,000, which would favorably impact Nathan’s effective tax
rate.
NOTE G –
SHARE-BASED COMPENSATION
Total
share-based compensation during the thirteen-week periods ended December 27,
2009 and December 28, 2008 was $107,000 and $126,000, respectively. Total
share-based compensation during the thirty-nine week periods ended December 27,
2009 and December 28, 2008 was $321,000 and $375,000, respectively. Total
share-based compensation is included in general and administrative expense in
our accompanying Consolidated Statements of Earnings. As of December 27, 2009,
there were $578,000 of unamortized
compensation expense related to stock options. We expect to recognize this
expense over approximately two years, which represents the requisite service
periods for such awards.
There
were no share-based awards granted during the thirty-nine-week periods ended
December 27, 2009 or December 28, 2008.
Stock options
outstanding:
Transactions
with respect to stock options for the thirty-nine weeks ended December 27, 2009
are as follows:
|
|
|
|
|
Weighted-
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Average
|
|
|
Aggregate
|
|
|
|
|
|
|
Exercise
|
|
|
Remaining
|
|
|
Intrinsic
|
|
|
|
Shares
|
|
|
Price
|
|
|
Contractual
Life
|
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
outstanding at March 29, 2009
|
|
|
1,027,308 |
|
|
$ |
6.94 |
|
|
|
2.93 |
|
|
$ |
6,723,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Expired
|
|
|
(25,000 |
) |
|
|
3.19 |
|
|
|
- |
|
|
|
- |
|
Exercised
|
|
|
(467,558 |
) |
|
|
3.28 |
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
outstanding at December 27, 2009
|
|
|
534,750 |
|
|
$ |
10.31 |
|
|
|
4.37 |
|
|
$ |
2,764,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
exercisable at December 27, 2009
|
|
|
409,083 |
|
|
$ |
8.97 |
|
|
|
4.15 |
|
|
$ |
2,614,000 |
|
NOTE H –
STOCKHOLDERS’ EQUITY
Through
December 27, 2009, Nathan’s purchased a total of 3,132,322 shares of common
stock at a cost of approximately $24,499,000 pursuant to its stock
repurchase plans previously authorized by the Board of Directors. Of these
repurchased shares, 438,516 shares of common stock were repurchased during the
thirty-nine-week period ended December 27, 2009. On November 13, 2008, Nathan’s
Board of Directors authorized a fourth stock repurchase plan for the
purchase of up to 500,000 shares of the Company’s common stock, under
which 200,309 shares were repurchased at a cost of $2,494,000 as of
December 27, 2009.
On
February 5, 2009, Nathan’s and Mutual Securities Inc. (“MSI”) entered into an
agreement (the “10b5-1 Agreement”) pursuant to which MSI was authorized to
purchase shares of the Company’s common stock, having a value of up to an
aggregate $3.6 million, which commenced on March 16, 2009. The 10b5-1 Agreement
was adopted under the safe harbor provided by Rule 10b5-1 of the Securities
Exchange Act of 1934 in order to assist the Company in implementing its
previously-announced fourth stock repurchase plan, for the purchase of up to
500,000 shares. The 10b5-1 Agreement was originally due to terminate no later
than March 15, 2010. On November 6, 2009, Nathan’s and MSI amended the terms of
the 10b5-1 Agreement to increase the aggregate amount to $4.2 million and extend
the termination date to no later than August 10, 2010.
On June
30, 2009, Nathan’s Board of Directors authorized its fifth stock repurchase plan
for the purchase of up to 500,000 shares of its common stock on behalf of the
Company and the Company repurchased 238,129 shares of common stock at a cost of
$3,015,000 in a privately-negotiated transaction with Prime Logic Capital, LLC.
As of December 27, 2009, the Company has repurchased 432,013 shares at a cost of
$5,608,000 under the fifth stock repurchase plan.
On
November 3, 2009, Nathan’s Board of Directors authorized its sixth stock
repurchase plan for the purchase of up to 500,000 shares of its common stock on
behalf of the Company. No shares have been repurchased under the sixth stock
repurchase plan.
There are
299,691, 67,987 and 500,000 shares remaining to be purchased pursuant to the
fourth, fifth and sixth stock repurchase plans, respectively.
Purchases
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 to be made
under the fourth, fifth and sixth stock-repurchase plans.
At
December 27, 2009, the Company has reserved 12,710,285 shares of common stock
for issuance upon exercise of the Common Stock Purchase Rights approved by the
Board of Directors on June 4, 2008.
NOTE I -
COMPREHENSIVE INCOME
The
components of comprehensive income are as follows:
|
|
Thirteen
weeks ended
December 27,
2009
|
|
|
Thirteen
weeks ended
December 28,
2008
|
|
|
Thirty-nine
weeks ended
December 27,
2009
|
|
|
Thirty-nine
weeks ended
December 28,
2008
|
|
|
|
(in thousands)
|
|
|
(in thousands)
|
|
|
(in thousands)
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
1,052 |
|
|
$ |
857 |
|
|
$ |
4,778 |
|
|
$ |
6,538 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
gain (loss) on available-for-sale securities, net of tax provision
(benefit) of $(77), $134, $200 and ($49), respectively
|
|
|
(116 |
) |
|
|
200 |
|
|
|
301 |
|
|
|
(69 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income
|
|
$ |
936 |
|
|
$ |
1,057 |
|
|
$ |
5,079 |
|
|
$ |
6,469 |
|
Accumulated
other comprehensive income at December 27, 2009 and March 29, 2009 consists
entirely of unrealized gains and losses on available-for-sale securities, net of
deferred taxes.
NOTE J -
COMMITMENTS AND CONTINGENCIES
In
October 2009, the Company entered into two commitments with its primary hot dog
manufacturer to purchase a total 1,965,000 pounds of hot dogs. The first
commitment is for the purchase of 760,000 pounds of hot dogs for approximately
$1,150,000, which were expected to be purchased in November and December
2009. As of December 27, 2009, Nathan’s purchased 589,000 pounds
under the first commitment and expects to complete the purchase of the remaining
171,000 pounds by March 2010. Nathan’s also entered into a second commitment for
an additional 1,205,000 pounds of hot dogs for approximately $1,915,000, which
is expected to be purchased between January and March 2010.
On
September 11, 2009, a wholly-owned subsidiary of the Company entered into a
lease (the “Lease”) for approximately 9,300 square feet of usable office space
located in Jericho, New York to serve as the Company’s corporate headquarters
and the Company entered into a guarantee of its subsidiary's obligation to pay
rent under the Lease. The Lease commenced on January 1, 2010, has a ten (10)
year term, with a five (5) year renewal right. Base rent under the Lease is
approximately $385,000 per annum with 2% annual increases; however, the Company
has received an abatement of base rent for the first year and two months of the
last year of the initial ten-year term. The rent for any renewal period shall be
based on the then-fair market rent.
The
Company and its subsidiaries are from time to time involved in ordinary and
routine litigation. Management presently believes that the ultimate
outcome of these proceedings, individually or in the aggregate, will not have a
material adverse effect on the Company’s financial position, cash flows or
results of operations. Nevertheless, litigation is subject to
inherent uncertainties and unfavorable rulings could occur. An
unfavorable ruling could include money damages and, in such event, could result
in a material adverse impact on the Company’s results of operations for the
period in which the ruling occurs.
The
Company is also involved in the following legal proceedings:
On March
20, 2007, a personal injury lawsuit was initiated seeking unspecified
damages against the Company's subtenant and the Company's master
landlord at a leased property in Huntington, New York. The claim relates
to damages suffered by an individual as a result of an alleged "trip and fall"
on the sidewalk in front of the leased property, maintenance of which is the
subtenant's responsibility. Although the Company was not named as a
defendant in the lawsuit, under its master lease agreement the Company may have
an obligation to indemnify the master landlord in connection with this
claim. The Company did not maintain its own insurance on the property
concerned at the time of the incident; however, the Company is named as an
additional insured under its subtenant's liability policy.
Accordingly, if the master landlord is found liable for damages and seeks
indemnity from the Company, the Company believes that it would be entitled to
coverage under the subtenant's insurance policy. Additionally, under
the terms of the sublease, the subtenant is required to indemnify the
Company, regardless of insurance coverage. This claim was satisfied by the
subtenant's insurance company without any payment by Nathan’s.
The
Company is party to a License Agreement with SMG, Inc. ("SMG") dated as of
February 28, 1994, as amended (the "License Agreement") pursuant to which: (i)
SMG acts as the Company's exclusive licensee for the manufacture, distribution,
marketing and sale of packaged Nathan's Famous frankfurter product at
supermarkets, club stores and other retail outlets in the United States; and
(ii) the Company has the right, but not the obligation, to require SMG to
produce hot dogs for the Nathan's Famous restaurant system and Branded Product
Program. On July 31, 2007, the Company provided notice to SMG that
the Company has elected to terminate the License Agreement, effective July 31,
2008, due to SMG's breach of certain provisions of the License Agreement. SMG
has disputed that a breach has occurred and has commenced, together with certain
of its affiliates, an action in state court in Illinois seeking, among other
things, a declaratory judgment that SMG did not breach the License
Agreement. The Company has answered SMG's complaint and asserted its
own counterclaims which seek, among other things, a declaratory judgment that
SMG did breach the License Agreement and that the Company has properly
terminated the License Agreement. On July 31, 2008, SMG and Nathan’s entered
into a stipulation pursuant to which Nathan’s agreed that it would not
effectuate the termination of the License Agreement on the grounds alleged in
the present litigation until such litigation has been successfully adjudicated,
and SMG agreed that in such event, Nathan’s shall have the option to require SMG
to continue to perform under the License Agreement for an additional period of
up to six months to ensure an orderly transition of the business to a new
licensee/supplier. Each of the parties has moved for summary judgment in its
favor. On January 28, 2010, SMG sought leave to file a Second Amended
Complaint for, among other things, declaratory and injunctive relief and
damages, and for leave to amend its Answer to Nathan’s counterclaims to include
an additional affirmative defense alleging a breach by Nathan’s of the License
Agreement. SMG’s Motion for Leave to Amend is scheduled to be
presented to the court on February 4, 2010. Nathan’s intends to
oppose this motion and vigorously defend this matter.
On July
31, 2009, the Company was served with a class action complaint filed in the
Superior Court of the State of New Jersey, Essex County (the "Complaint").
In addition to Nathan's Famous, Inc., the Complaint names as defendants Kraft
Foods, Sara Lee Corporation, ConAgra Foods, Inc., and Marathon Enterprises, Inc.
(together with Nathan's Famous, Inc., the "Defendants"). The named class
plaintiffs purport to represent consumers who have purchased processed meat
products that were distributed and sold in New Jersey from July 22, 2003 through
July 22, 2009. The Complaint alleges, among other things, that Defendants
violated the New Jersey Consumer Fraud Act (N.J.S.A. 56:8-2) (the "Act") by
omitting material information about their respective processed meat products for
the purpose of inducing consumers to purchase the products. The Complaint
seeks injunctive relief, attorneys' fees and costs incurred in bringing the
lawsuit. The named plaintiffs are further seeking combined damages in the
amount of $900.00. If a violation of the Act is found to have occurred, named
plaintiffs are entitled to trebled damages in the combined amount of
$2,700.00. The Company, along with all of the defendants made a motion to
dismiss this Complaint on October 9, 2009 and is awaiting a decision; however,
management believes that any liability will not have a material impact on the
financial condition of the Company.
On
October 5, 2009, the Company was served with a summons and complaint filed in
the Supreme Court of Suffolk County, New York. The plaintiff, Painted Pieces
LTD, alleges copyright infringement and asserts causes of action for breach of
contract, unjust enrichment, willful wrongful use of plaintiff’s artwork, and
violation of the New York general business law, in each case due to the
reproduction of certain artwork used by the Company in its advertising.
The complaint seeks damages of an aggregate $10.5 million. On November 2,
2009, the Company removed the action to the United Stated District Court,
Eastern District of New York and on November 9, 2009, filed a motion to
dismiss. The Company denies all of the claims asserted against it in this
litigation and intends to vigorously defend against the action. The
Company has submitted the claim to its various insurance carriers for defense
and indemnification. The majority of Nathan’s insurance carriers have
initially declined coverage and the Company is presently reviewing its rights in
relation thereto.
On
December 1, 2009, a wholly-owned subsidiary of the Company executed a Guaranty
of Lease in connection with its re-franchising of a restaurant located in West
Nyack, New York. The Guaranty of Lease could be called upon in the
event of a default by the tenant/franchisee. The guaranty extends
through the fifth Lease Year, as defined in the lease, and shall not exceed an
amount equal to the highest amount of the annual minimum rent, percentage rent
and any additional rent payable pursuant to the lease and reasonable attorney’s
fees and other costs. We have recorded a liability of $207,700 in
connection with this guaranty, which does not include potential real estate tax
increases and attorney’s fees and other costs as these amounts are not
reasonably determinable at this time. In connection with Nathan’s
Franchise Agreement, Nathan’s has received a personal guaranty from the
franchisee for all obligations under the agreement.
Item
2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Forward-Looking
Statements
Statements
in this Form 10-Q quarterly report may be “forward-looking statements” within
the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include, but are not limited to, statements that
express our intentions, beliefs, expectations, strategies, predictions or any
other statements relating to our future activities or other future events or
conditions. These statements are based on current expectations, estimates and
projections about our business based, in part, on assumptions made by
management. These statements are not guarantees of future performance and
involve risks, uncertainties and assumptions that are difficult to predict.
These risks and uncertainties, many of which are not within our control, include
but are not limited to: the adverse effect that increasing commodity costs have
on our profitability and operating results; the pending litigation with the
primary supplier of hot dogs to our Branded Product Program may result in a
disruption in that supply or increased costs, either of which would
adversely affect our operating results; current economic conditions could result
in decreased consumer spending on discretionary products, such as fast food; as
well as, those risks discussed from time to time in the Company’s Form 10-K
annual report for the year ended March 29, 2009, and in other documents which 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 licensing program began in 1978 by selling
packaged hot dogs and other meat products to retail customers through
supermarkets or grocery-type retailers for off-site consumption. During fiscal
1998, we introduced our Branded Product Program, which currently 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. During fiscal 2008, we launched our
Branded Menu Program, which 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, franchising the Nathan’s
restaurant concept (including under the Branded Menu Program) and licensing
agreements for the sale of Nathan’s products within supermarkets and club
stores, the manufacture of certain proprietary spices and the sale of Nathan’s
products directly to other foodservice operators.
In
addition to plans for expansion through franchising, licensing and our Branded
Product Program, Nathan’s continues to seek to co-brand within its restaurant
system. Nathan’s is also the owner of the Arthur Treacher’s brand. At
December 27, 2009, the Arthur Treacher’s brand was being sold within 61 Nathan’s
restaurants.
At
December 27, 2009, our restaurant system consisted of 246 Nathan’s franchised or
licensed units, including 65 Branded Menu units and five Company-owned units
(including one seasonal unit), located in 24 states, the Cayman Islands and four
foreign countries. At December 28, 2008, our restaurant system consisted of 244
Nathan’s franchised
or licensed units, including 54 Branded Menu locations and six Company-owned
units (including one seasonal unit), located in 25 states and four foreign
countries. All Miami Subs locations have been removed from both years to enhance
the comparability of Nathan’s restaurant system.
Critical
Accounting Policies and Estimates
As
discussed in our Form 10-K for the fiscal year ended March 29, 2009, 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 reported amounts of assets,
liabilities, revenues and expenses reported in those financial statements. These
judgments can be subjective and complex, and consequently, actual results could
differ from those estimates. Our most critical accounting policies and estimates
relate to revenue recognition; impairment of goodwill and other intangible
assets; impairment of long-lived assets; impairment of notes receivable;
share-based compensation and income taxes (including uncertain tax
positions). Since March 29, 2009, there have been no changes in our
critical accounting policies or significant changes to the assumptions and
estimates related to them.
Adoption
of Accounting Pronouncements
See Note
B to the Consolidated Financial Statements contained in Item 1 of this Form
10-Q, for a complete discussion of the impact on the Company’s financial
position of adopting new accounting pronouncements during the fiscal quarter
ended December 27, 2009.
Results
of Operations
Thirteen
weeks ended December 27, 2009 compared to thirteen weeks ended December 28,
2008
Revenues from Continuing
Operations
Total
sales were $8,375,000 for the thirteen weeks ended December 27, 2009 (“third
quarter fiscal 2010”) as compared to $7,949,000 for the thirteen weeks ended
December 28, 2008 (“third quarter fiscal 2009”). Foodservice
sales from the Branded Product and Branded Menu Programs increased by 13.1% to
$5,974,000 for the third quarter fiscal 2010 as compared to sales of $5,283,000
in the third quarter fiscal 2009. This increase was primarily attributable to
higher sales volume of approximately 13.9%, which was partly offset
by lower average selling prices of 3.2%. Total Company-owned
restaurant sales which includes four comparable Nathan’s restaurants, two
restaurants that the Company operated due to the default of a franchisee on its
franchise agreement through November 22, 2009 that were re-franchised to a
different franchisee and one restaurant that was operated during the third
quarter fiscal 2009, until it was transferred to a franchisee on January 26,
2009 were $2,138,000 for the third quarter fiscal 2010 as compared to $2,085,000
during the third quarter fiscal 2009. Sales at the four comparable Company-owned
restaurants decreased by 0.2% to $1,924,000 during the third quarter fiscal
2010, as compared to $1,928,000 during the third quarter fiscal 2009. The sales
decrease at our comparable Company-owned restaurants was due to lower customer
counts of approximately 1.6% which was partly offset by higher check averages of
approximately 1.5%. We believe that the snow storm in the Northeast
on December 20, 2009 significantly reduced sales for that
weekend. During the third quarter fiscal 2010, sales to our
television retailer were approximately $318,000 lower than the third quarter
fiscal 2009. Nathan’s products were on air 6 times during the third quarter
fiscal 2010 as compared to 12 times during the third quarter fiscal 2009 which
included six Today’s Special Value airings.
Franchise
fees and royalties were $1,313,000 in the third quarter fiscal 2010 as compared
to $1,188,000 in the third quarter fiscal 2009. Total royalties were $952,000 in
the third quarter fiscal 2010 as compared to $979,000 in the third quarter
fiscal 2009. During the third quarter fiscal 2010, we did not recognize revenue
of $13,000 for royalties deemed to be uncollectible as compared to the third
quarter fiscal 2009, when we did not recognize $46,000 of royalty income. Total
royalties, excluding the adjustments for royalties deemed uncollectible as
described above, were $965,000 in the third quarter fiscal 2010 as compared to
$1,025,000 in the third quarter fiscal 2009. During the third quarter fiscal
2010, Nathan’s earned $19,000 less royalties from sales by our manufacturers and
primary distributor under our Branded Menu Program. Franchise
restaurant sales were $21,355,000 in the third quarter fiscal 2010 as compared
to $22,286,000 in the third quarter fiscal 2009. Comparable domestic franchise
sales (consisting of 125 Nathan’s outlets, excluding sales under the
Branded Menu Program) were $14,360,000 in the third quarter fiscal 2010 as
compared to $15,333,000 in the third quarter fiscal 2009, a decrease of
6.3%. Franchise restaurant sales continued to be negatively affected
by the adverse economic conditions, particularly at our travel, retail and
entertainment venues, where sales are lower by approximately 6.9% compared to
the third quarter fiscal 2009. At December 27, 2009, 246 domestic and
international franchised or Branded Menu Program franchise outlets were
operating as compared to 244 domestic and international franchised or Branded
Menu Program franchise outlets at December 28, 2008. Royalty income from 10
domestic franchised outlets was deemed unrealizable during the thirteen weeks
ended December 27, 2009, as compared to 15 domestic franchised outlets during
the thirteen weeks ended December 28, 2008. Domestic franchise fee income was
$291,000 in the third quarter fiscal 2010 as compared to $199,000 in the third
quarter fiscal 2009 due primarily to the refranchising of five locations during
the third quarter fiscal 2010. International franchise fee income was $15,000 in
the third quarter fiscal 2010, as compared to $10,000 during the third quarter
fiscal 2009 primarily due to higher amortization of deferred development fees
associated with future development in Canada and China. During the third quarter
fiscal 2010, 10 franchised outlets opened, including five re-franchised
locations and three Branded Menu Program outlets. During the third quarter
fiscal 2009, 13 new franchised outlets were opened, including nine Branded Menu
Program outlets. We did not open any new international locations in the third
quarter fiscal 2010 or the third quarter fiscal 2009.
License
royalties increased by $115,000 or 9.7% to $1,297,000 in the third quarter
fiscal 2010 as compared to $1,182,000 in the third quarter fiscal 2009. The
primary reason for this increase is a 9.1% increase in royalties earned on sales
of hot dogs from our retail and foodservice license agreements to $981,000 from
$899,000 due to higher licensee sales during the third quarter fiscal
2010. Royalties earned from SFG, primarily from the retail sale of
hot dogs, were $633,000 during the third quarter fiscal 2010 as compared to
$601,000 during the third quarter fiscal 2009. Royalties earned from another
licensee, substantially from sales of hot dogs to Sam’s Club, were $348,000
during the third quarter fiscal 2010 as compared to $298,000 during the third
quarter fiscal 2009.
Interest
income was $224,000 in the third quarter fiscal 2010 as compared to $288,000 in
the third quarter fiscal 2009, primarily due to lower interest earned on our
cash and cash equivalents as a result of the lower current interest rate
environment.
Other
income was $15,000 in the third quarter fiscal 2010 as compared to $13,000 in
the third quarter fiscal 2009.
Costs and Expenses from
Continuing Operations
Overall,
our cost of sales decreased by $62,000 to $6,235,000 in the third quarter fiscal
2010 as compared to $6,297,000 in the third quarter fiscal 2009. Our gross
profit (representing the difference between sales and cost of sales) was
$2,140,000 or 25.6% of sales during the third quarter fiscal 2010 as compared to
$1,652,000 or 20.8% of sales during the third quarter fiscal 2009 due primarily
to the lower cost of hot dogs in the third quarter fiscal 2010.
Cost of
sales in the Branded Product Program increased by approximately 4.7% or $204,000
during the third quarter fiscal 2010 as compared to the third quarter fiscal
2009, primarily as a result of increased volume of 13.9% which was partly offset
by the lower cost of hot dogs of approximately 10.7% as a percentage of
sales. During the third quarter fiscal 2010, we purchased
approximately 589,000 pounds of hot dogs pursuant to a purchase commitment, as
further described in Note J, to our Consolidated Financial statements contained
in Item 1 of this Form 10-Q saving the Company approximately $35,000
as compared to purchasing all of our products based on the then-prevailing
market price. During the third quarter fiscal 2010, the market prices for hot
dogs began to escalate. Results for the third quarter fiscal 2009 were not
affected by any purchase commitments. If the cost of beef and beef trimmings
increases for product in excess of that covered by the purchase commitment and
we are unable to pass on these higher costs through price increases, our margins
will be adversely impacted.
With
respect to our Company-owned restaurants, our cost of sales during the third
quarter fiscal 2010 was $1,450,000 or 67.8% of restaurant sales, as compared to
$1,451,000 or 69.6% of restaurant sales in the third quarter fiscal
2009. The primary reason for the decrease in cost of sales during the
third quarter fiscal 2010 was a reduction in food and paper costs as a
percentage of sales. The lower food cost as a percentage of sales was due
primarily to the lower commodity cost of certain of our products and the effect
of sales price increases and certain menu changes. Cost of sales to our
television retailer decreased by $265,000 in the third quarter fiscal 2010,
primarily due to lower sales volume.
Restaurant
operating expenses were $805,000 in the third quarter fiscal 2010 as compared to
$710,000 in the third quarter fiscal 2009. The increase is primarily due to
$74,000 of costs from operating an additional restaurant during most of the
third quarter fiscal 2010. Restaurant operating expenses at our comparable
restaurants were $21,000 higher during the third quarter fiscal 2010, due
primarily to higher insurance and marketing costs of $41,000, which
were partly offset by lower utility costs of $20,000. During the third quarter
fiscal 2010, our utility costs were approximately 7.1% lower than the third
quarter fiscal 2009 due to lower commodity costs and lower consumption. We
continue to be concerned about the uncertain market conditions for oil and
natural gas.
Depreciation
and amortization was $214,000 in the third quarter fiscal 2010 as compared to
$210,000 in the third quarter fiscal 2009.
General
and administrative expenses increased by $273,000 to $2,408,000 in the third
quarter fiscal 2010 as compared to $2,135,000 in the third quarter fiscal 2009.
The difference in general and administrative expenses was primarily due to an
un-leased property cost of $117,000, higher compensation and related costs of
$99,000 and occupancy costs of $46,000 primarily in connection with the
relocation of the Corporate office.
On
September 11, 2009, a wholly-owned subsidiary of the Company entered into a
lease (the “Lease”) for approximately 9,300 square feet of usable office space
located in Jericho, New York to serve as the Company’s corporate headquarters
and the Company entered into a guarantee of its subsidiary's obligation to pay
rent under the Lease. The Lease commenced on January 1, 2010, has a ten (10)
year term, with a five (5) year renewal right.
Provision for Income Taxes
from Continuing Operations
In the
third quarter fiscal 2010, the income tax provision was $510,000 or 32.7% of
income from continuing operations before income taxes as compared to $411,000 or
32.4% of income from continuing operations before income taxes in the third
quarter fiscal 2009. For the fiscal periods ended December 27, 2009 and December
28, 2008, Nathan’s tax provision, excluding the effects of tax-exempt interest
income, was 37.3% and 40.3%, respectively. During the third quarter fiscal
2010, Nathan’s resolved an uncertain tax position in one state and reduced the
associated unrecognized tax benefits along with the related accrued interest and
penalties by approximately $41,000, which lowered the effective tax rate by 2.6%
from 35.3% to 32.7%, and, excluding the effect of tax-exempt interest income,
from 39.9% to 37.3%. Nathan’s is seeking to further resolve additional uncertain
tax positions during the year ending March 28, 2010. Nathan’s estimates that its
unrecognized tax benefits and the related accrued interest and penalties could
be further reduced by up to $90,000.
Thirty-nine
weeks ended December 27, 2009 compared to thirty-nine weeks ended December 28,
2008
Revenues from Continuing
Operations
Total
sales were $31,148,000 for the thirty-nine weeks ended December 27, 2009
(“fiscal 2010 period”) as compared to $30,383,000 for the thirty-nine weeks
ended December 28, 2008 (“fiscal 2009 period”). Foodservice
sales from the Branded Product and Branded Menu Programs increased by 5.5% to
$19,189,000 for the fiscal 2010 period as compared to sales of $18,184,000 in
the fiscal 2009 period. This increase was primarily attributable to higher
average selling prices of 5.4%. Total Company-owned restaurant sales which
includes five comparable Nathan’s restaurants (including one seasonal
restaurant), two restaurants that the Company has operated from August 2009
through November 2009 (due to the default of a franchisee on its franchise
agreement), that were re-franchised to a different franchisee and one restaurant
that operated during the fiscal 2009 period until it was transferred to a
franchisee on January 26, 2009 were $10,554,000 for the fiscal 2010 period as
compared to $10,625,000 during the fiscal 2009 period. Sales at the five
comparable Company-owned restaurants (including one seasonal restaurant) were
$10,163,000 during the fiscal 2010 period, as compared to $10,120,000 during the
fiscal 2009 period. Sales at our five comparable Company-owned restaurants were
adversely affected by reduced sales during June 2009 and December 2009, which we
believe was primarily attributable to poor weather conditions, consisting of
rain in June and a snow storm in December. Sales during the eight
months at our comparable restaurants, excluding June 2009, increased by
approximately 3.6% over the same period last year. During the fiscal 2010
period, sales to our television retailer were approximately $169,000 lower than
the fiscal 2009 period. Nathan’s products were on air 63 times during the fiscal
2010 period as compared to 55 times during the fiscal 2009 period. The airings
during the fiscal 2010 period included 10 “Try Me” special promotions, seven
“Today’s Special Value” promotions and two, half-hour food shows.
Franchise
fees and royalties were $3,779,000 in the fiscal 2010 period as compared to
$3,531,000 in the fiscal 2009 period. Total royalties were $3,151,000 in the
fiscal 2010 period as compared to $3,072,000 in the fiscal 2009 period. During
the fiscal 2010 period, we did not recognize revenue of $138,000 for royalties
deemed to be uncollectible as compared to $144,000 of royalty income deemed
uncollectible during the fiscal 2009 period. Total royalties, excluding the
adjustments for royalties deemed uncollectible as described above, were
$3,289,000 in the fiscal 2010 period as compared to $3,216,000 in the fiscal
2009 period. During the fiscal 2010 period, Nathan’s earned $26,000 of higher
royalties from sales by our manufacturers and primary distributor under our
Branded Menu Program, primarily due to the increase in the number of Branded
Menu locations. Franchise restaurant sales were $70,523,000 in the
fiscal 2010 period as compared to $71,185,000 in the fiscal 2009 period.
Comparable domestic franchise sales (consisting of 125 Nathan’s outlets,
excluding sales under the Branded Menu Program) were $52,145,000 in the fiscal
2010 period as compared to $54,878,000 in the fiscal 2009 period, a decrease of
5.0%. Franchise sales continued to be negatively affected by the
adverse economic environment, particularly at our travel, retail and
entertainment venues, where sales are lower by approximately 6.2% compared to
the fiscal 2009 period. At December 27, 2009, 246 domestic and international
franchised or Branded Menu Program franchise outlets were operating as compared
to 244 domestic and international franchised or Branded Menu
Program franchise outlets at December 28, 2008. Royalty income from 10
domestic franchised outlets was deemed unrealizable during the fiscal 2010
period as compared to 14 franchised outlets during the fiscal 2009 period.
Domestic franchise fee income was $495,000 in the fiscal 2010 period as compared
to $325,000 in the fiscal 2009 period due primarily to the re-franchising of
five locations and higher opening fees earned from conventional franchised
locations during the fiscal 2010 period. International franchise fee income was
$78,000 in the fiscal 2010 period, as compared to $89,000 during the fiscal 2009
period primarily due to fewer openings of international franchised restaurants.
During the fiscal 2010 period, 26 new franchised outlets opened, including five
re-franchised locations, 11 Branded Menu Program outlets, one unit in Kuwait and
one unit in the Dominican Republic. During the fiscal 2009 period, 37 new
franchised outlets were opened, including 25 Branded Menu Program outlets, two
units in Kuwait and one unit in Dubai.
License
royalties increased by $247,000 or 5.6% to $4,672,000 in the fiscal 2010 period
as compared to $4,425,000 in the fiscal 2009 period. Total royalties earned on
sales of hot dogs from our retail and foodservice license agreements increased
11.8% to $3,736,000 from $3,342,000 as a result of higher licensee sales during
the fiscal 2010 period. Royalties earned from SFG, primarily from the
retail sale of hot dogs, were $2,653,000 during the fiscal 2010 period as
compared to $2,439,000 during the fiscal 2009 period. Royalties earned from
another licensee, substantially from sales of hot dogs to Sam’s Club, were
$1,083,000 during the fiscal 2010 period as compared to $903,000 during the
fiscal 2009 period. Beginning March 2008, Nathan’s World Famous Beef Hot Dogs
were introduced into over 500 of the foodservice cafes operating in Sam’s Clubs
throughout the United States. The Sam’s Club introduction was substantially
completed by June 2008. Accordingly, we anticipate earning similar
royalties under this agreement during the balance of this fiscal year as
compared to the last fiscal quarter of last year. We earned lower royalties of
$180,000 from the sale of proprietary ingredients during the fiscal 2010
period. During the fiscal 2009 period, we earned $234,000 in
settlement of a multi-year dispute under that agreement related to the
unauthorized use of certain ingredients. During the fiscal 2010 period, revenues
from this agreement for the manufacture of Nathan’s proprietary ingredients
increased by $54,000 when compared to sales in fiscal 2009.
Interest
income was $704,000 in the fiscal 2010 period as compared to $810,000 in the
fiscal 2009 period, primarily due to lower interest income on our cash and cash
equivalents as a result of the lower current interest rate environment and the
MSC Note (as defined) receivable, received in connection with the sale of Miami
Subs on June 7, 2007.
Other
income was $49,000 in the fiscal 2010 period as compared to $38,000 in the
fiscal 2009 period.
Costs and Expenses from
Continuing Operations
Overall,
our cost of sales decreased by $793,000 to $22,437,000 in the fiscal 2010 period
as compared to $23,230,000 in the fiscal 2009 period. Our gross profit
(representing the difference between sales and cost of sales) was $8,711,000 or
28.0% of sales during the fiscal 2010 period as compared to $7,153,000 or 23.5%
of sales during the fiscal 2009 period. The improved margin was due primarily to
average higher selling prices of our Branded Product Program and lower food
costs.
Cost of
sales in the Branded Product Program decreased by approximately $441,000 during
the fiscal 2010 period as compared to the fiscal 2009 period, primarily as a
result of the decrease in the cost of our hot dogs of approximately 4.0% as a
percentage of sales. In January 2009, we entered into a purchase commitment, as
amended, to acquire 2,592,000 pounds of hot dogs for approximately $4,368,000
from April 2009 through September 2009, or approximately 47% of the expected
usage. In October 2009, we entered into a purchase commitment to acquire 760,000
pounds of hot dogs for approximately $1,150,000, which were expected to be
purchased during November and December 2009 and a second purchase commitment to
acquire 1,205,000 pounds of hot dogs for approximately $1,915,000, which are
expected to be purchased between January 2010 and March 2010. In January 2008,
we entered into a purchase commitment to acquire approximately 1,785,000 pounds
of hot dogs for approximately $2,740,000 from April 2008 through August 2008, or
approximately 30% of the expected usage. These purchase commitments
had varying effects on our hot dog costs during the fiscal 2010 and fiscal 2009
periods, as compared to purchasing all of our products at the then-prevailing
market price. During the fiscal 2010 period, the market price of hot dogs
declined during the summer, before rebounding later in the year. As a result,
the purchase commitments cost the Company approximately $17,000. During the
fiscal 2009 period, the market price of hot dogs continued to escalate and the
2008 purchase commitment yielded savings of $462,000. Beginning in July 2008, we
initiated price increases in our Branded Product Program, in an effort to offset
the increased cost of our hot dogs, which has improved margins. If the cost of
beef and beef trimmings increases for product in excess of that covered by the
purchase commitment and we are unable to pass on these higher costs through
price increases, our margins will be adversely impacted.
With
respect to our Company-owned restaurants, our cost of sales during the fiscal
2010 period was $6,035,000 or 57.2% of restaurant sales, as compared to
$6,211,000 or 58.5% of restaurant sales in the fiscal 2009
period. The primary reason for the decrease in cost of sales in the
fiscal 2010 period was a reduction in food and paper costs as a percentage of
sales. The lower food cost as a percentage of sales was due primarily to the
slightly lower commodity cost of our products and the effect of the sales price
increases and certain menu changes. Cost of sales to our television retailer
declined by $176,000 in the fiscal 2010 period, primarily due to lower sales
volume.
Restaurant
operating expenses increased by $15,000 to $2,601,000 in the fiscal 2010 period
as compared to $2,586,000 in the fiscal 2009 period. The increase during the
fiscal 2010 period when compared to the fiscal 2009 period results from
operating one additional unit in the fiscal 2010 period of $67,000, which was
partly offset by lower operating costs at our comparable restaurants during the
fiscal 2010 period of $52,000. The lower costs at our comparable restaurants was
due primarily to lower utility costs of $111,000 and reductions in various other
costs of $71,000, which were partly offset by higher marketing costs of $76,000
in connection with four monthly free-standing insert campaigns and insurance
costs of $51,000. During the fiscal 2010 period our utility costs were
approximately 19.6% lower than the fiscal 2009 period which was due to lower
commodity costs and lower consumption. We continue to be concerned about the
uncertain market conditions for oil and natural gas.
Depreciation
and amortization was $614,000 in the fiscal 2010 period as compared to $608,000
in the fiscal 2009 period.
General
and administrative expenses increased by $446,000 or 6.5% to $7,275,000 in the
fiscal 2010 period as compared to $6,829,000 in the fiscal 2009 period. The
difference in general and administrative expenses was due primarily to higher
professional fees of $138,000, an un-leased property expense of $117,000, higher
payroll taxes mostly attributable to stock option exercises of $87,000 and
marketing and related expenses of $46,000.
On
September 11, 2009, a wholly-owned subsidiary of the Company entered into a
lease (the “Lease”) for approximately 9,300 square feet of usable office space
located in Jericho, New York to serve as the Company’s corporate headquarters
and the Company entered into a guarantee of its subsidiary's obligation to pay
rent under the Lease. The Lease commenced on January 1, 2010, has a ten (10)
year term, with a five (5) year renewal right.
Provision for Income Taxes
from Continuing Operations
In the
fiscal 2010 period, the income tax provision was $2,647,000 or 35.6% of income
from continuing operations before income taxes as compared to $2,304,000 or
36.1% of income from continuing operations before income taxes in the fiscal
2009 period. For the fiscal periods ended December 27, 2009 and December 28,
2008, Nathan’s tax provision, excluding the effects of tax-exempt interest
income, was 38.8% and 40.4%, respectively. During the fiscal 2010 period,
Nathan’s resolved uncertain tax positions in two states and reduced the
associated unrecognized tax benefits along with the related accrued interest and
penalties by approximately $91,000, which lowered the effective tax rate by 1.3%
from 36.9% to 35.6%, and, excluding the effect of tax-exempt interest income,
from 40.1% to 38.8%. Nathan’s is seeking to further resolve additional uncertain
tax positions during the year ending March 28, 2010. Nathan’s estimates that its
unrecognized tax benefits and the related accrued interest and penalties could
be further reduced by up to $90,000.
Discontinued
Operations
On April
23, 2008, Nathan’s completed the sale of its wholly-owned subsidiary, NF
Roasters Corp. (“NF Roasters”), to Roasters Asia Pacific (Cayman) Limited.
Pursuant to the Stock Purchase Agreement, Nathan’s sold all of the stock of NF
Roasters for $4,000,000 in cash. The results of operations for NF Roasters,
including the gains on disposal, have been presented as discontinued operations
for the fiscal 2009 period.
Nathan’s
realized a gain on the sale of NF Roasters of $3,656,000 net of professional
fees of $39,000, and recorded income taxes of $1,289,000 on the gain during the
fiscal year ended March 29, 2009. Nathan’s has determined that it will not have
any significant cash flows or continuing involvement in the ongoing operations
of NF Roasters.
On June
7, 2007, Nathan’s completed the sale of Miami Subs Corporation to Miami Subs
Capital Partners I, Inc. (“Purchaser”). Pursuant to the Stock Purchase Agreement
(“MSC Agreement”), Nathan’s sold all of the stock of Miami Subs in exchange for
$3,250,000, consisting of $850,000 in cash and the Purchasers’ promissory note
in the amount of $2,400,000 (the “MSC Note”). In the event the MSC
Note was fully repaid within one year of the sale, Nathan’s had agreed to reduce
the amount due by $250,000. Due to the ability to prepay the loan and reduce the
amount due, the recognition of $250,000 was initially deferred. The MSC Note was
not prepaid within the requisite timeframe and Nathan’s recognized $250,000 as
additional gain and initially recorded estimated income taxes of $92,000 during
the fiscal 2009 period, resulting from the contingent consideration which was
deferred at the time of sale.
Off-Balance
Sheet Arrangements
We are
not a party to any off-balance sheet arrangements, other than our remaining
purchase commitment to acquire approximately 1,376,000 pounds of hot dogs
which are expected to be purchased between January 2010 and March 2010,
pursuant to the two purchase commitments that Nathan’s entered in October 2009.
Nathan’s entered into the purchase commitments in an effort to mitigate the
effect of increases in the price of beef and beef trimmings. As a
result of the purchase commitments, Nathan’s costs during the fiscal 2010 period
were approximately $17,000 higher due to the reduction in commodity costs during
the summer of 2009. Nathan’s expects to enter into a new purchase
commitment in February 2010 for 1,647,000 pounds of hot dogs that Nathan’s
believes will be purchased between April and June 2010. The final pricing under
this commitment will be determined after the product has been produced in March
2010. Nathan’s may enter into additional purchase commitments
in the future as favorable market conditions become available. See
Note J to the Consolidated Financial Statements contained in Item 1 of this Form
10-Q.
Liquidity
and Capital Resources
Cash and
cash equivalents at December 27, 2009 aggregated $9,004,000, increasing by
$325,000 during the fiscal 2010 period. At December 27, 2009,
marketable securities were $24,918,000 compared to $25,670,000 at March 29, 2009
and net working capital increased to $36,741,000 from $35,303,000 at March 29,
2009.
Cash
provided by operations of $4,139,000 in the fiscal 2010 period is primarily
attributable to net income of $4,778,000 and other non-cash items of $1,206,000, net. Changes in Nathan’s
operating assets and liabilities decreased cash by $1,845,000, resulting
primarily from increased accounts and other receivables of $1,728,000, decreased
accounts payable and accrued expenses of $450,000 and increased other assets of
$210,000 resulting from a lease guaranty, which were partly offset by increased
other non-current liabilities of $392,000, primarily from master development
fees received in Canada and China and a contingent lease guaranty and decreases
in prepaid expenses of $142,000. The increase in accounts and other receivables
relates primarily to increased sales under the Branded Product Program and to
our television retailer of $678,000, normal seasonal fluctuations from
franchisees and licensees of $593,000 and advances to Nathan’s advertising fund
of $259,000. The decrease in prepaid expenses is due primarily to the usage of
prepaid marketing activities of $110,000 and rent of $50,000.
Cash used
in investing activities was $742,000 in the fiscal 2010 period. We incurred
capital expenditures of $1,992,000 primarily in connection with our office
relocation, our Branded Product Program and capital maintenance projects at our
restaurants. We received cash proceeds of $1,035,000 from the redemption of
maturing available-for-sale securities and $215,000 from the receipt of payments
on the MSC Note receivable. On January 29, 2010, Nathan's provided the Purchaser
and the personal guarantors with a notice of default for the failure to make the
most recent note payment. The parties have 10 days to cure the
default.
Cash used
in financing activities of $3,072,000 in the fiscal 2010 period, primarily for
the purchase of 438,516 treasury shares of the Company’s Common Stock at a cost
of $5,701,000 pursuant to the stock repurchase plans authorized by the Board of
Directors on November 5, 2007 and June 30, 2009, as more fully described
below. Cash was received from the proceeds of employee stock option
exercises of $1,533,000 and the expected realization of the associated tax
benefit of $1,096,000.
Through
December 27, 2009, Nathan’s purchased a total of 3,132,322 shares of common
stock at a cost of approximately $24,499,000 pursuant to its stock
repurchase plans previously authorized by the Board of Directors. Of
these repurchased shares, 438,516 shares of common stock at a cost of
approximately $5,701,000 were repurchased during the thirty-nine-week period
ended December 27, 2009.
On
November 13, 2008, Nathan’s Board of Directors authorized
a fourth stock repurchase plan for the purchase of up to 500,000
shares of the Company’s common stock, under which 200,309 shares were
repurchased at a cost of $2,494,000 as of December 27, 2009.
On
February 5, 2009, Nathan’s and MSI entered into an agreement (the “10b5-1
Agreement”) pursuant to which MSI was authorized to purchase shares of the
Company’s common stock, having a value of up to an aggregate $3.6 million, which
commenced on March 16, 2009. The 10b5-1 Agreement was adopted under
the safe harbor provided by Rule 10b5-1 of the Securities Exchange Act of 1934
in order to assist the Company in implementing its previously-announced fourth
stock repurchase plan for the purchase of up to 500,000 shares. The
10b5-1 Agreement, as amended, increased the aggregate amount to $4.2
million and shall terminate no later than August 10, 2010.
On June
30, 2009, Nathan’s Board of Directors authorized its fifth stock repurchase plan
for the purchase of up to 500,000 shares of its common stock on behalf of the
Company and the Company repurchased 238,129 shares of common stock at a cost of
$3,015,000 in a privately-negotiated transaction with Prime Logic Capital, LLC.
The Company has repurchased 432,013 shares at a cost of $5,608,000 as of
December 27, 2009, under the fifth stock repurchase plan.
On
November 3, 2009, Nathan’s Board of Directors authorized its sixth stock
repurchase plan for up to 500,000 shares of its common stock on behalf of the
Company. No repurchases have been made under the sixth stock repurchase
plan.
There are
299,691, 67,987 and 500,000 shares remaining to be purchased pursuant to the
fourth, fifth and sixth stock repurchase plans, respectively.
Purchases
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 to be made
under the fourth, fifth and sixth stock-repurchase plans.
Management
believes that available cash, marketable securities and cash generated from
operations should provide sufficient capital to finance our operations and stock
repurchases for at least the next twelve months.
Nathan’s
philosophy with respect to maintaining a balance sheet with a significant amount
of cash and marketable securities reflects our views of maintaining readily
available capital to expand our existing business and pursue any new business
opportunities which might present themselves to expand our
business. Nathan’s routinely assesses its investment management
approach with respect to our current and potential capital
requirements.
We expect that in the
future we will continue the stock repurchase programs, make investments in
certain existing restaurants, support the growth of the Branded Product and
Branded Menu Programs and fund 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.
At
December 27, 2009, there were four properties that we lease from third parties
which we sublease to two franchisees and a non-franchisee. We remain
contingently liable for all costs associated with these properties including:
rent, property taxes and insurance. We may incur future cash payments with
respect to such properties, consisting primarily of future lease payments,
including costs and expenses associated with terminating any of such
leases.
The
following schedule represents Nathan’s cash contractual obligations and
commitments by maturity (in thousands):
|
|
Payments Due by Period
|
|
|
|
|
|
|
Less than
|
|
|
|
|
|
|
|
|
More than
|
|
Cash Contractual Obligations
|
|
Total
|
|
|
1 Year
|
|
|
1 - 3 Years
|
|
|
3-5 Years
|
|
|
5 Years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employment
Agreements
|
|
$ |
2,584 |
|
|
$ |
1,184 |
|
|
$ |
800 |
|
|
$ |
400 |
|
|
$ |
200 |
|
Operating
Leases
|
|
|
13,748 |
|
|
|
945 |
|
|
|
2,019 |
|
|
|
1,933 |
|
|
|
8,851 |
|
Gross
Cash Contractual Obligations
|
|
|
16,322 |
|
|
|
2,129 |
|
|
|
2,819 |
|
|
|
2,333 |
|
|
|
9,051 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sublease
Income
|
|
|
771 |
|
|
|
245 |
|
|
|
345 |
|
|
|
101 |
|
|
|
80 |
|
Net
Cash Contractual Obligations
|
|
$ |
15,561 |
|
|
$ |
1,884 |
|
|
$ |
2,474 |
|
|
$ |
2,232 |
|
|
$ |
8,971 |
|
|
|
Amount of Commitment Expiration by Period
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts
|
|
|
Less than
|
|
|
|
|
|
|
|
|
More than
|
|
Other
Contractual Commitments
|
|
Committed
|
|
|
1
Year
|
|
|
1 -
3 Years
|
|
|
3-5
Years
|
|
|
5
Years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments
to purchase
|
|
$ |
2,178 |
|
|
$ |
2,178 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Total
Other Contractual Commitments
|
|
$ |
2,178 |
|
|
$ |
2,178 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Inflationary
Impact
We do not
believe that general inflation has materially impacted earnings since 2006.
However, since then, we have experienced volatility in our costs for certain
food products, distribution costs and utilities. Our commodity costs for beef
have been especially volatile since fiscal 2004. During the fiscal 2010 period,
the market price of hot dogs was approximately 7.2% lower than during the fiscal
2009 period. However, as a result of the Company’s purchase commitment during
that same period, our cost of beef was only approximately 4.1% lower than the
fiscal 2009 period. During the fiscal 2010 period, the cost of hot dogs did not
increase as rapidly as we experienced during the period May 2008 through
September 2008, when the cost of hot dogs reached the highest level since the
inception of our Branded Product Program. Consequently, the purchase commitments
did not yield the same benefit to the Company during the fiscal 2010 period as
the purchase commitment in effect during the fiscal 2009 period. During the
fiscal 2010 period, our costs were approximately 0.1% higher than if our
purchases were made at the prevailing market prices as compared to the fiscal
2009 period, when our costs were lowered by 3.2%. During calendar 2009, the cost
of beef and beef trimmings has been relatively stable, experiencing normal
seasonal fluctuations, with increasing costs during the October through December
period. However, we
are unable to predict the future cost of our hot dogs and expect to
experience price
volatility for our beef products during the balance of fiscal 2010. During the fiscal 2010
period we experienced lower costs for corn oil and cheese, which were partly
offset by higher costs for potatoes. We may seek to enter into additional
purchase commitments for both hot dogs and corn oil in the future. Additionally,
we continue to experience the volatility in oil and gas prices on our
distribution costs for our food products and utility costs in our Company-owned
restaurants.
From time
to time, various Federal and New York State legislators have proposed changes to
the minimum wage requirements. The Federal and New York State minimum wages were
increased to $7.25 per hour, effective July 24, 2009. This increase
was the final scheduled increase pursuant to existing legislation where our
Company-owned restaurants are located. This wage increase did not have a
material impact on our results of operations or financial position as the vast
majority of our employees are paid at a rate higher than the minimum
wage. Although we only operate five Company-owned restaurants, we
believe that significant increases in the minimum wage could have a significant
financial impact on our financial results and the results of our franchisees.
Continued increases in labor, food and other operating expenses 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.
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 29, 2009.
Item
3.
|
Quantitative and
Qualitative Disclosures About Market
Risk.
|
Cash
and Cash Equivalents
We have
historically invested our cash and cash equivalents in short term, fixed rate,
highly rated and highly liquid instruments which are reinvested when they mature
throughout the year. Although our existing investments are not
considered at risk with respect to changes in interest rates or markets for
these instruments, our rate of return on short-term investments could be
affected at the time of reinvestment as a result of intervening events. As of
December 27, 2009, Nathans’ cash and cash equivalents aggregated $9,004,000.
Earnings on these cash and cash equivalents would increase or decrease by
approximately $23,000 per annum for each 0.25% change in interest
rates.
Marketable
Securities
We have
invested our marketable securities in intermediate term, fixed rate, highly
rated and highly liquid instruments. These investments are subject to
fluctuations in interest rates. As of December 27, 2009, the market value of
Nathans’ marketable securities aggregated $24,918,000. Interest income on these
marketable securities would increase or decrease by approximately $62,000 per
annum for each 0.25% change in interest rates. The following chart presents the
hypothetical changes in the fair value of the marketable investment securities
held at December 27, 2009 that are sensitive to interest rate fluctuations (in
thousands):
|
|
Valuation of securities
|
|
|
|
|
|
Valuation of securities
|
|
|
|
Given an interest rate
|
|
|
|
|
|
Given an interest rate
|
|
|
|
Decrease of X Basis points
|
|
|
Fair
|
|
|
Increase of X Basis points
|
|
|
|
(150BPS)
|
|
|
(100BPS)
|
|
|
(50BPS)
|
|
|
Value
|
|
|
+50BPS
|
|
|
+100BPS
|
|
|
+150BPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal
bonds
|
|
$ |
25,874 |
|
|
$ |
25,590 |
|
|
$ |
25,271 |
|
|
$ |
24,918 |
|
|
$ |
24,533 |
|
|
$ |
24,144 |
|
|
$ |
23,754 |
|
Borrowings
The
interest rate on our prior borrowings was generally determined based upon the
prime rate and was subject to market fluctuation as the prime rate changed, as
determined within each specific agreement. At December 27, 2009, we
had no outstanding indebtedness. If we were to borrow money in the future, such
borrowings would be based upon the then-prevailing interest rates. We do not
anticipate entering into interest rate swaps or other financial instruments to
hedge our borrowings. Accordingly, we do not believe that fluctuations in
interest rates would have a material impact on our financial
results.
Commodity
Costs
The cost
of commodities is subject to market fluctuation. Since January 2008, we have
begun a program of entering into purchase commitments with our primary supplier
to produce and deliver hot dogs at an agreed-upon price. In January
2008, we entered into a purchase commitment to acquire approximately 1,785,000
pounds of hot dogs for approximately $2,740,000, which were purchased from April
2008 through August 2008. In January 2009, we entered a purchase
commitment, as amended, to acquire 2,592,000 pounds of hot dogs for $4,368,000
from April 2009 through September 2009. In October 2009, we entered into two
purchase commitments to acquire 760,000 pounds of hot dogs for $1,150,000, which
were expected to be purchased in November and December 2009 and to acquire
1,205,000 pounds of hot dogs for $1,915,000, which were expected to be purchased
in January through March 2010. During the fiscal 2010 period, the market price
of hot dogs was approximately 7.2% lower than during the fiscal 2009 period.
However, during that same period, due to our purchase commitment our cost of
beef was only approximately 4.1% lower than the fiscal 2009 period. Nathan’s
expects to enter into a new purchase commitment in February 2010, for
1,647,000 pounds of hot dogs that Nathan’s expects to purchase between April and
June 2010. The final pricing under this commitment will be determined after the
product has been produced in March 2010. We may attempt to enter into similar
arrangements for hot dogs and other products in the future. With the
exception of those 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 commodities purchases will be subject to changes in the prices of
such commodities. Generally, we have attempted to pass through permanent
increases in our commodity prices to our customers, thereby reducing the impact
of long-term increases on our financial results. A short-term increase or
decrease of 10.0% in the cost of our food and paper products for the thirty-nine
weeks ended December 27, 2009 would have increased or decreased our cost of
sales by approximately $1,791,000.
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, Chief
Operating Officer and Chief Financial Officer, conducted an evaluation of the
effectiveness of the design and operation of our disclosure controls and
procedures, as required by Exchange Act Rule 13a-15. Based on that
evaluation, the Chief Executive Officer, Chief Operating 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 thirteen weeks ended December 27, 2009 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, Chief Operating
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.
We and
our subsidiaries are from time to time involved in ordinary and routine
litigation. Management presently believes that the ultimate outcome
of such ordinary and routine litigation, individually or in the aggregate, will
not have a material adverse effect on our financial position, cash flows or
results of operations. Nevertheless, litigation is subject to
inherent uncertainties and unfavorable rulings could occur. An
unfavorable ruling could include money damages and, in such event, could result
in a material adverse impact on our results of operations for the period in
which the ruling occurs.
On March
20, 2007, a personal injury lawsuit was initiated seeking unspecified
damages against the Company's subtenant and the Company's master
landlord at a leased property in Huntington, New York. The claim relates
to damages suffered by an individual as a result of an alleged "trip and fall"
on the sidewalk in front of the leased property, maintenance of which is the
subtenant's responsibility. Although the Company was not named as a
defendant in the lawsuit, under its master lease agreement the Company may have
an obligation to indemnify the master landlord in connection with this
claim. The Company did not maintain its own insurance on the property
concerned at the time of the incident; however, the Company is named as an
additional insured under its subtenant's liability policy.
Accordingly, if the master landlord is found liable for damages and seeks
indemnity from the Company, the Company believes that it would be entitled to
coverage under the subtenant's insurance policy. Additionally, under
the terms of the sublease, the subtenant is required to indemnify the
Company, regardless of insurance coverage. This claim was satisfied by the
subtenant's insurance company without any payment by Nathan’s.
The
Company is party to a License Agreement with SMG, Inc. ("SMG") dated as of
February 28, 1994, as amended (the "License Agreement") pursuant to which: (i)
SMG acts as the Company's exclusive licensee for the manufacture, distribution,
marketing and sale of packaged Nathan's Famous frankfurter product at
supermarkets, club stores and other retail outlets in the United States; and
(ii) the Company has the right, but not the obligation, to require SMG to
produce frankfurters for the Nathan's Famous restaurant system and Branded
Product Program. On July 31, 2007, the Company provided notice to SMG
that the Company has elected to terminate the License Agreement, effective July
31, 2008 (the "Termination Date"), due to SMG's breach of certain provisions of
the License Agreement. SMG has disputed that a breach has occurred and has
commenced, together with certain of its affiliates, an action in state court in
Illinois seeking, among other things, a declaratory judgment that SMG did not
breach the License Agreement. The Company filed its own action on August 2,
2007, in New York State court seeking a declaratory judgment that SMG has
breached the License Agreement and that the Company has properly terminated the
License Agreement. On January 23, 2008, the New York court granted SMG’s motion
to dismiss the Company’s case in New York on the basis that the dispute was
already the subject of a pending lawsuit in Illinois. The
Company has answered SMG's complaint and asserted its own counterclaims which
seek, among other things, a declaratory judgment that SMG did breach the License
Agreement and that the Company has properly terminated the License Agreement. On
July 31, 2008, SMG and Nathan’s entered into a Stipulation pursuant to which
Nathan’s agreed that it would not effectuate the termination of the License
Agreement on the grounds alleged in the present litigation until such litigation
has been successfully adjudicated, and SMG agreed that in such event, Nathan’s
shall have the option to require SMG to continue to perform under the License
Agreement for an additional period of up to six months to ensure an orderly
transition of the business to a new licensee/supplier. Each of the parties has
moved for summary judgment in its favor. On January 28, 2010, SMG
sought leave to file a Second Amended Complaint for, among other things,
declaratory and injunctive relief and damages, and for leave to amend its Answer
to Nathan’s counterclaims to include an additional affirmative defense alleging
a breach by Nathan’s of the License Agreement. SMG’s Motion for Leave
to Amend is scheduled to be presented to the court on February 4,
2010. Nathan’s intends to oppose this motion and vigorously defend
this matter.
On July
31, 2009, the Company was served with a class action complaint filed in the
Superior Court of the State of New Jersey, Essex County (the "Complaint").
In addition to Nathan's Famous, Inc., the Complaint names as defendants Kraft
Foods, Sara Lee Corporation, ConAgra Foods, Inc., and Marathon Enterprises, Inc.
(and together with Nathan's Famous, Inc., the "Defendants"). The named
class plaintiffs purport to represent consumers who have purchased processed
meat products that were distributed and sold in New Jersey from July 22, 2003
through July 22, 2009. The Complaint alleges, among other things, that
Defendants violated the New Jersey Consumer Fraud Act (N.J.S.A. 56:8-2) (the
"Act") by omitting material information about their respective processed meat
products for the purpose of inducing consumers to purchase the products.
The Complaint seeks injunctive relief, attorneys' fees and costs incurred in
bringing the lawsuit. The named plaintiffs are further seeking combined
damages in the amount of $900.00. If a violation of the Act is found to have
occurred, named plaintiffs are entitled to trebled damages in the combined
amount of $2,700.00. The Company, along with all of the defendants made a
motion to dismiss this Complaint on October 9, 2009 and is awaiting a decision;
however, management believes that any liability will not have a material impact
on the financial condition of the Company.
On
October 5, 2009, the Company was served with a summons and complaint filed in
the Supreme Court of Suffolk County, New York. The plaintiff, Painted Pieces
LTD, alleges copyright infringement and asserts causes of action for breach of
contract, unjust enrichment, willful wrongful use of plaintiff’s artwork, and
violation of the New York general business law, in each case due to the
reproduction of certain artwork used by the Company in its advertising.
The complaint seeks damages of an aggregate $10.5 million. On November 2,
2009, the Company removed the action to the United Stated District Court,
Eastern District of New York and on November 9, 2009, filed a motion to
dismiss. The Company denies all of the claims asserted against it in this
litigation and intends to vigorously defend against the action. The
Company has submitted the claim to its various insurance carriers for defense
and indemnification. The majority of Nathan’s insurance carriers have
initially declined coverage and the Company is presently reviewing its rights in
relation thereto.
Item
1A. Risk Factors.
In
addition to the other information set forth in this report, you should carefully
consider the factor described below, as well as those discussed in Part I, “Item
1A. Risk Factors” in the Annual Report on Form 10-K for the fiscal year ended
March 29, 2009, which could materially affect our business, financial condition
or future results. The risks described below and 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.
Changes
in the U.S. healthcare system could increase our cost of doing
business.
The
Federal government has been considering various proposals to reform the U.S.
health care system. Certain proposals contemplate an increase in employer costs.
If adopted, those proposals would increase our cost of doing business and
adversely impact our results of operations.
Item 2. Unregistered Sales of Equity
Securities and Use of Proceeds.
ISSUER PURCHASES OF EQUITY
SECURITIES
Period (A)
|
|
(a) Total Number of
Shares Purchased
|
|
|
(b) Average Price
Paid per Share
|
|
|
(c) Total Number of
Shares Purchased as
Part of Publicly
Announced Plans
|
|
|
(d) Maximum
Number of Shares
that May Yet Be
Purchased Under the
Plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
28, 2009
October
25, 2009
|
|
|
-0- |
|
|
$ |
-0- |
|
|
|
-0- |
|
|
|
415,698 |
|
October
26, 2009
November
22, 2009
|
|
|
-0- |
|
|
$ |
-0- |
|
|
|
-0- |
|
|
|
915,698 |
|
November
23, 2009
December
27, 2009
|
|
|
48,020 |
|
|
$ |
14.2110 |
|
|
|
48,020 |
|
|
|
867,678 |
|
Total
|
|
|
48,020 |
|
|
$ |
14.2110 |
|
|
|
48,020 |
|
|
|
867,678 |
|
A)
Represents the Company’s fiscal periods during the third quarter ended December
27, 2009.
On
September 14, 2001, Nathan’s was authorized to purchase up to 1,000,000 shares
of its common stock. Pursuant to its first stock repurchase program, Nathan’s
repurchased 1,000,000 shares of common stock in open market transactions and a
private transaction at a total cost of $3,670,000. On October 7, 2002, Nathan’s
was authorized to purchase up to 1,000,000 additional shares of its common
stock. Nathan’s concluded the second authorized stock repurchase program of
1,000,000 shares of common stock at a cost of approximately $5,416,000. On
November 5, 2007, Nathan’s Board of Directors authorized the purchase of up to
an additional 500,000 shares of its common stock on behalf of the
Company. On June 11, 2008, Nathan’s and Mutual Securities, Inc.
(“MSI”) entered into an agreement (the “first 10b5-1 Agreement”) pursuant to
which MSI was authorized to purchase shares of the Company’s common stock having
a value of up to an aggregate $6 million. Purchases under the first
10b5-1 Agreement have been completed. On February 5, 2009, Nathan’s and MSI
entered into a second agreement (the “second 10b5-1 Agreement”) pursuant to
which MSI has been authorized to purchase shares of the Company’s common stock,
having a value of up to an aggregate $3.6 million, which purchases commenced on
March 16, 2009. Both the first and the second 10b5-1 Agreements were
adopted under the safe harbor provided by Rule 10b5-1 of the Securities Exchange
Act of 1934 in order to assist the Company in implementing its
previously-announced stock repurchase plans, for the purchase of up to 500,000
shares. The first 10b5-1 plan was completed. The second
10b5-1 Agreement was originally due to terminate no later than March 15,
2010. On November 6, 2009, Nathan’s and MSI amended the terms of the
second 10b5-1 Agreement to increase the aggregate amount to $4.2 million and
extend the termination date to no later than August 10, 2010.
On
November 13, 2008, Nathan’s Board of Directors authorized
a fourth stock repurchase plan for the purchase of up to 500,000
shares of the Company’s common stock, under which 200,309 shares were
repurchased at a cost of $2,494,000 as of December 27, 2009.
On June
30, 2009, Nathan’s Board of Directors authorized its fifth stock repurchase plan
for the purchase of up to 500,000 shares of its common stock on behalf of the
Company and the Company repurchased 238,129 shares of common stock at a cost of
$3,015,000 in a privately-negotiated transaction with Prime Logic Capital, LLC.
The Company has repurchased 432,016 shares at a cost of $5,608,000 as of
December 27, 2009, under the fifth stock repurchase plan.
On November 3, 2009, Nathan’s Board of
Directors authorized its sixth stock repurchase plan for the purchase of up to
500,000 shares of its common stock on behalf of the Company. No purchases have been made under the
sixth stock repurchase plan.
There are
299,691, 67,987 and 500,000 shares remaining to be purchased pursuant to the
fourth, fifth and sixth stock repurchase plans, respectively.
Through
December 27, 2009, Nathan’s purchased a total of 3,132,322 shares of common
stock at a cost of approximately $24,499,000 pursuant to stock repurchase
plans previously authorized by the Board of Directors. Of these
repurchased shares, 438,516 shares of common stock at a cost of approximately
$5,701,000 were repurchased during the thirty-nine-week period ended
December 27, 2009.
Purchases
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 to be made
under the fourth, fifth and sixth stock-repurchase plans.
Item
6. Exhibits
|
3.1
|
|
Certificate
of Incorporation. (Incorporated by reference to Exhibit 3.1 to
Registration Statement on Form S-1 No. 33- 56976.)
|
|
|
|
|
|
3.2
|
|
Amendment
to the Certificate of Incorporation, filed December 15, 1992.
(Incorporated by reference to Exhibit 3.2 to Registration Statement on
Form S-1 No. 33-56976.)
|
|
|
|
|
|
3.3
|
|
By-Laws,
as amended. (Incorporated by reference to Exhibit 3.1 to Form 8-K dated
November 1, 2006.)
|
|
|
|
|
|
4.1
|
|
Specimen
Stock Certificate. (Incorporated by reference to Exhibit 4.1 to
Registration Statement on Form S-1 No. 33-56976.)
|
|
|
|
|
|
4.2
|
|
Rights
Agreement dated as of June 4, 2008 between Nathan’s Famous, Inc. and
American Stock Transfer and Trust Company. (Incorporated by reference to
Exhibit 4.2 to Current Report filed on Form 8-K dated June 6,
2008.)
|
|
|
|
|
|
10.1
|
|
First
Amendment to 10b5-1 Issuer Repurchase Instructions between Nathan’s
Famous, Inc. and Mutual Securities, Inc. dated November 6, 2009 (including
Form of Right Certificate). (Incorporated by reference for Exhibit 10.4 to
Quarterly Report on Form 10-Q for the fiscal quarter ended September 27,
2009.)
|
|
|
|
|
|
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.
|
*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:
February 4, 2010
|
By:
|
/s/Eric Gatoff
|
|
|
Eric Gatoff
|
|
|
Chief Executive Officer
|
|
|
(Principal Executive Officer)
|
|
|
Date:
February 4, 2010
|
By:
|
/s/Ronald G. DeVos
|
|
|
Ronald G. DeVos
|
|
|
Vice President - Finance
|
|
|
and Chief Financial Officer
|
|
|
(Principal Financial and Accounting
Officer)
|
Exhibit
Index
3.1
|
Certificate
of Incorporation. (Incorporated by reference to Exhibit 3.1 to
Registration Statement on Form S-1 No. 33- 56976.)
|
|
|
3.2
|
Amendment
to the Certificate of Incorporation, filed December 15, 1992.
(Incorporated by reference to Exhibit 3.2 to Registration Statement on
Form S-1 No. 33-56976.)
|
|
|
3.3
|
By-Laws,
as amended. (Incorporated by reference to Exhibit 3.1 to Form 8-K dated
November 1, 2006.)
|
|
|
4.1
|
Specimen
Stock Certificate. (Incorporated by reference to Exhibit 4.1 to
Registration Statement on Form S-1 No. 33-56976.)
|
|
|
4.2
|
Rights
Agreement dated as of June 4, 2008 between Nathan’s Famous, Inc. and
American Stock Transfer and Trust Company. (Incorporated by reference to
Exhibit 4.2 to Current Report filed on Form 8-K dated June 6,
2008.)
|
|
|
10.1
|
First
Amendment to 10b5-1 Issuer Repurchase Instructions between Nathan’s
Famous, Inc. and Mutual Securities, Inc. dated November 6, 2009 (including
Form of Right Certificate). (Incorporated by reference for Exhibit 10.4 to
Quarterly Report on Form 10-Q for the fiscal quarter ended September 27,
2009.)
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|
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31.1
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*Certification
of the Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
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31.2
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*Certification
of the Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
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32.1
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*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.
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|
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32.2
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*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.
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|
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*Filed
herewith.
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Exhibit
31.1
CERTIFICATION
I, Eric Gatoff, certify
that:
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1.
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I
have reviewed this quarterly report on Form 10-Q for the quarter ended
December 27, 2009 of Nathan’s Famous,
Inc.;
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2.
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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;
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3.
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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;
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4.
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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:
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(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
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5.
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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):
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(a) All
significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to
adversely affect the registrant's ability to record, process, summarize and
report financial information; and
(b) Any
fraud, whether or not material, that involves management or other employees who
have a significant role in the registrant's internal control over financial
reporting.
Date:
February 4, 2010
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/s/
Eric Gatoff
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|
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Eric
Gatoff
|
|
Chief
Executive Officer
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Exhibit
31.2
CERTIFICATION
I, Ronald G. DeVos, certify
that:
|
1.
|
I
have reviewed this quarterly report on Form 10-Q for the quarter ended
December 27, 2009 of Nathan’s Famous,
Inc.;
|
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
|
4.
|
The
registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and
have:
|
(a)
Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent fiscal
quarter (the registrant’s fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
|
5.
|
The
registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's
board of directors (or persons performing the equivalent
functions):
|
(a) All
significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to
adversely affect the registrant's ability to record, process, summarize and
report financial information; and
(b) Any
fraud, whether or not material, that involves management or other employees who
have a significant role in the registrant's internal control over financial
reporting.
Date:
February 4, 2010
|
/s/
Ronald G. DeVos
|
|
|
Ronald
G. DeVos
|
|
Chief
Financial Officer
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Exhibit
32.1
CERTIFICATION
PURSUANT TO
18 U.S.C.
SECTION 1350
AS
ADOPTED PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
I, Eric
Gatoff, Chief Executive Officer of Nathan’s Famous, Inc., certify
that:
The
quarterly report on Form 10-Q of Nathan’s Famous, Inc. for the period ended
December 27, 2009 fully complies with the requirements of Section 13(a) of the
Securities Exchange Act of 1934; and
The
information contained in such report fairly presents, in all material respects,
the financial condition and results of operations of Nathan’s Famous,
Inc.
/s/ Eric Gatoff
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Name:
Eric Gatoff
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Date:
February 4, 2010
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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
December 27, 2009 fully complies with the requirements of Section 13(a) of the
Securities Exchange Act of 1934; and
The
information contained in such report fairly presents, in all material respects,
the financial condition and results of operations of Nathan’s Famous,
Inc.
|
/s/ Ronald G. DeVos
|
|
Name:
Ronald G. DeVos
|
|
Date:
February 4, 2010
|
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.