Forward-Looking Statements





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



Statements in this Form 10-Q quarterly report may be "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Forward-looking statements include, but are not limited to, statements
that express our intentions, beliefs, expectations, strategies, predictions or
any other statements relating to our future activities or other future events or
conditions. These statements are based on current expectations, estimates and
projections about our business based, in part, on assumptions made by
management. These statements are not guarantees of future performance and
involve risks, uncertainties and assumptions that are difficult to predict.
These risks and uncertainties, many of which are not within our control, include
but are not limited to: the impact of the COVID-19 pandemic; economic, weather
(including the affects on the supply of cattle and the impact of weather on
sales at our restaurants, particularly during the Summer months), and change in
the price of beef trimmings; our ability to pass on the cost of any price
increases in beef and beef trimmings, or labor costs; legislative, business
conditions or tariffs; the collectibility of receivables; changes in consumer
tastes; the status of our licensing and supply agreements, including our
licensing revenue and overall profitability being substantially dependent on our
agreement with John Morrell & Co., the impact of our debt service and repayment
obligations under the 2025 Notes; the impact of the Tax Cuts and Jobs Act ("the
Tax Act"); the continued viability of Coney Island as a destination location for
visitors; the ability to continue to attract franchisees; the impact of the new
minimum wage legislation in New York State or other changes in labor laws,
including court decisions which could render a franchisor as a "joint employee"
or the impact of our new union contracts; our ability to attract competent
restaurant and managerial personnel; the enforceability of international
franchising agreements and the future effects of any food borne illness; such as
bovine spongiform encephalopathy, BSE or e-coli; as well as those risks
discussed from time to time in this Form 10-Q and our Form 10-K annual report
for the year ended March 29, 2020, and in other documents we file with the
Securities and Exchange Commission. Therefore, actual outcomes and results may
differ materially from what is expressed or forecasted in the forward-looking
statements. We generally identify forward-looking statements with the words
"believe," "intend," "plan," "expect," "anticipate," "estimate," "will,"
"should" and similar expressions. Any forward-looking statements speak only as
of the date on which they are made, and we do not undertake any obligation to
update any forward-looking statement to reflect events or circumstances after
the date of this Form 10-Q.



Introduction



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



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



                                      -21-
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Our revenues are generated primarily from selling products under Nathan's Branded Product Program, operating Company-owned restaurants, licensing agreements for the sale of Nathan's products within supermarkets and club stores, the sale of Nathan's products directly to other foodservice operators and the manufacture of certain proprietary spices by third parties and franchising the Nathan's restaurant concept (including the Branded Menu Program).





At June 28, 2020, our restaurant system consisted of 217 Nathan's franchised
units, including 95 Branded Menu units, and four Company-owned units (including
one seasonal unit), located in 20 states, and 9 foreign countries. At June 30,
2019, our restaurant system consisted of 253 Nathan's franchised units,
including 111 Branded Menu units, and four Company-owned units (including one
seasonal unit), located in 22 states, and 14 foreign countries.



Over the past several years, our strategic emphasis has been to increase the
number of distribution points for our products across all of our business
platforms, including our Licensing Program for distribution of Nathan's Famous
branded consumer packaged goods, our Branded Products Program for distribution
of Nathan's Famous branded bulk products to the foodservice industry, and our
namesake restaurant system comprised of both Company-owned and franchised units.
The primary drivers of our recent growth have been our Licensing and Branded
Product Programs which have been the largest contributors to the Company's
profits.



We remain committed to these parts of our business and we continue to
reinvigorate our restaurant system. The operating plan we have adopted in this
regard is focused on surrounding our core items, Nathan's World Famous beef hot
dogs and crinkle-cut French fried potatoes, with other much higher quality menu
items developed to deliver best-in-class customer experience and greater
customer frequency. Menu development activities have been combined with concept
positioning efforts, operational improvements and more effective digital and
social marketing campaigns. The goal is to improve the performance of the
existing restaurant system and to grow it through franchising efforts.
Additionally, while we do not expect to significantly increase the number of
company-owned units, we do expect to opportunistically and strategically invest
in a small number of new units as showcase locations for prospective franchisees
and master developers as we seek to grow our franchise system.



As described in our Annual Report on Form 10-K for the year ended March 29,
2020, our future results could be materially impacted by many developments
including the impact of the COVID-19 pandemic on our business, our dependence on
John Morrell & Co. as our principal supplier and the dependence of our licensing
revenue and overall profitability on our agreement with John Morrell & Co. In
addition, our future operating results could be impacted by supply constraints
on beef or by increased costs of beef compared to earlier periods in addition to
the potential impact that any future tariffs may have on the business.



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



As described below, we are also including information relating to EBITDA and Adjusted EBITDA, which are non-GAAP financial measures, in this Form 10-Q quarterly report. See "Reconciliation of GAAP and Non-GAAP Measures."

Impact of COVID-19 pandemic on our business





The COVID-19 pandemic has had an impact on the Company's business, financial
condition, cash flows and results of operations for the thirteen weeks ended
June 28, 2020 ("fiscal 2021 period") and continues into the second quarter of
fiscal 2021. Governmental restrictions and public perceptions of the risks
associated with COVID-19 have caused consumers to avoid or limit nonessential
travel, gatherings in public places and other social interactions, which has
adversely affected, and could continue to adversely affect, our business. The
COVID-19 pandemic, has and may continue to impact customer traffic at our
Company-owned restaurants and franchised restaurants, as well as our Branded
Product Program customers.



Three of our four Company-owned restaurants remained open throughout the fiscal
2021 period and continued to offer food primarily through take-out and delivery.
Our seasonal location on the Coney Island Boardwalk opened on May 15, 2020. As
governmental restrictions ease, we expect to offer dine-in seating and service
at reduced capacity at our restaurants.



The majority of our franchised locations were temporarily closed during the
fiscal 2021 period due to their locations in venues that are closed (such as
shopping malls and movie theaters) or venues operating at significantly reduced
traffic (such as airports and highway travel plazas). Such closures and
disruptions have materially impacted franchise fees and royalties, as compared
to the same period last year. We are principally focused on the well-being and
safety of our guests, franchisees, restaurant associates and all other
employees. Approximately 52% of our franchised locations have reopened as of the
date of this report.



                                      -22-

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The sales and profits from our Branded Product Program have been impacted as
many of our customers operate in venues that are currently closed and may be
slow to reopen, such as professional sports venues, amusement parks, shopping
malls and movie theaters.


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





  ? Reduced payroll costs, through salary reductions and furloughs

? Reduced discretionary operating expenses, including marketing and travel




  ? Postponed non-essential capital spending

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

? Introduced "ghost kitchens" whereby well-known restaurants will have the

ability to market our products for pick-up or in the form of meal-kits for at


    home preparation


  ? Implemented enhanced health and safety protocols across the Company




While there is significant uncertainty as to the duration and extent of the
impact of the COVID-19 pandemic, we expect the pandemic will continue to have a
negative impact on our revenue and net income for the remainder of fiscal 2021.
Even as government restrictions are lifted, the ongoing economic impacts and
health concerns associated with the pandemic may continue to affect consumer
behavior, spending levels, and could result in reduced restaurant traffic and
consumer spending trends that may adversely impact our financial position and
results of operations.


Critical Accounting Policies and Estimates





As discussed in our Form 10-K for the fiscal year ended March 29, 2020, 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 consolidated financial statements requires us
to make estimates and assumptions that affect the amounts of assets,
liabilities, revenues and expenses reported in those consolidated financial
statements. These judgments can be subjective and complex, and consequently,
actual results could differ from those estimates. Our most critical accounting
policies and estimates relate to revenue recognition; leases; impairment of
goodwill and other intangible assets; impairment of long-lived assets;
share-based compensation and income taxes (including uncertain tax positions).
Except for the adoption in Note B - simplifying the testing for goodwill
impairment, there have been no other significant changes to the Company's
accounting policies subsequent to March 29, 2020.



Adoption of New Accounting Standards

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

New Accounting Standards Not Yet Adopted

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





EBITDA and Adjusted EBITDA



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



Reconciliation of GAAP and Non-GAAP Measures

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





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



                                      -23-
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EBITDA and Adjusted EBITDA are not recognized terms under US GAAP and should not
be viewed as alternatives to net income or other measures of financial
performance or liquidity in conformity with US GAAP. Additionally, our
definitions of EBITDA and Adjusted EBITDA may differ from other companies.
Analysis of results and outlook on a non-US GAAP basis should be used as a
complement to, and in conjunction with, data presented in accordance with US
GAAP.



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



                                        Thirteen weeks ended
                                 June 28, 2020         June 30, 2019
                                             (unaudited)
Net income                      $         4,000       $         5,369
Interest expense                          2,650                 2,650
Provision for income taxes                1,561                 1,816
Depreciation and amortization               310                   310
EBITDA                                    8,521                10,145

Share-based compensation                     29                    28
Adjusted EBITDA                 $         8,550       $        10,173




Results of Operations


Thirteen weeks ended June 28, 2020 compared to thirteen weeks ended June 30, 2019





Revenues



Total sales decreased by 67% to $6,683,000 for the thirteen weeks ended June 28,
2020 ("fiscal 2021 period") as compared to $20,237,000 for the thirteen weeks
ended June 30, 2019 ("fiscal 2020 period"). Foodservice sales from the Branded
Product Program decreased by 70.5% to $4,749,000 for the fiscal 2021 period as
compared to sales of $16,113,000 in the fiscal 2020 period. The sales from our
Branded Product Program have been impacted by the COVID-19 pandemic as many of
our customers operate in venues that are currently closed and may be slow to
reopen, such as professional sports venues, amusement parks, shopping malls and
movie theatres. Our average selling prices increased by approximately 7.0%.
During the fiscal 2021 period, the volume of business decreased by approximately
71% as compared to the fiscal 2020 period.



Total Company-owned restaurant sales decreased by 53.1% to $1,934,000 during the
fiscal 2021 period as compared to $4,124,000 during the fiscal 2020 period. The
decrease was primarily due to a decline in traffic related to the impact of the
COVID-19 pandemic during the fiscal 2021 period. Due to governmental
restrictions, our Company-owned restaurants have been only offering food through
take-out and delivery services.



License royalties increased by 20.6%, to $10,523,000 in the fiscal 2021 period
as compared to $8,722,000 in the fiscal 2020 period. Total royalties earned on
sales of hot dogs from our license agreement with John Morrell & Co. at retail
and foodservice, substantially from sales of hot dogs to Sam's Club and WalMart,
increased 19.5% to $9,744,000 for the 2021 fiscal period as compared to
$8,157,000 in the fiscal 2020 period. As consumers shelter at home, our
licensing business continues to show strong consumer demand. The increase is due
to a 7.1% increase in retail volume during the fiscal 2021 period and a 15.3%
increase in average net selling price as compared to the fiscal 2020 period.
Additionally, the foodservice business earned lower royalties of $267,000 as
compared to the fiscal 2020 period due to a shift in the Sam's Club business.
Royalties earned from all other licensing agreements for the manufacture and
sale of Nathan's products increased by $214,000 during the fiscal 2021 period as
compared to the fiscal 2020 period primarily due to additional royalties earned
on sales of French fries, cocktail franks and mozzarella sticks.



Franchise fees and royalties were $191,000 in the fiscal 2021 period as compared
to $1,077,000 in the fiscal 2020 period. Total royalties were $110,000 in the
fiscal 2021 period as compared to $980,000 in the fiscal 2020 period. Royalties
earned under the Branded Menu program were $17,000 in the fiscal 2021 period as
compared to $209,000 in the fiscal 2020 period. Royalties earned under the
Branded Menu Program are not based upon a percentage of restaurant sales but are
based upon product purchases. Traditional franchise royalties were $93,000 in
the fiscal 2021 period as compared to $771,000 in the fiscal 2020 period.
Franchise restaurant sales declined to $2,218,000 in the fiscal 2021 period as
compared to $17,516,000 in the fiscal 2020 period primarily due to mandated
shutdowns and stay at home orders across the country as a result of the COVID-19
pandemic. Comparable domestic franchise sales (consisting of 29 Nathan's
outlets, excluding sales under the Branded Menu Program) were $1,479,000 in the
fiscal 2021 period as compared to $7,600,000 in the fiscal 2020 period.



At June 28, 2020, 217 franchised outlets, including domestic, international and
Branded Menu Program outlets were operating compared to 253 franchised outlets,
including domestic, international and Branded Menu Program outlets at June 30,
2019. Total franchise fee income was $81,000 in the fiscal 2021 period as
compared to $97,000 in the fiscal 2020 period. Domestic franchise fee income was
$33,000 in the fiscal 2021 period as compared to $38,000 in the fiscal 2020
period. International franchise fee income was $25,000 in the fiscal 2021 period
as compared to $41,000 during the fiscal 2020 period. We recognized $23,000 and
$18,000 in forfeited fees in the fiscal 2021 and fiscal 2020 periods,
respectively. During the fiscal 2021 period, two new traditional franchised
outlets opened, domestically. During the fiscal 2020 period, four new
traditional franchised outlets opened, domestically.



                                      -24-
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Advertising fund revenue, after eliminating Company contributions, was $289,000 in the fiscal 2021 period, as compared to $482,000 in the fiscal 2020 period.





Costs and Expenses



Overall, our cost of sales decreased by 65.7% to $5,297,000 in the fiscal 2021
period as compared to $15,422,000 in the fiscal 2020 period. Our gross profit
(representing the difference between sales and cost of sales) decreased to
$1,386,000 or 20.7% of sales during the fiscal 2021 period as compared to
$4,815,000 or 23.8% of sales during the fiscal 2020 period. The reduction in
margin was primarily due to the higher cost of beef in the Branded Product
Program and higher prime restaurant costs associated with new menu offerings.



Cost of sales in the Branded Product Program decreased by approximately
$9,178,000 during the fiscal 2021 period as compared to the fiscal 2020 period,
primarily due to the 10.4% increase in the average cost per pound of our hot
dogs offset by the 71% decrease in the volume of product sold due to the
COVID-19 pandemic as discussed above. We did not make any purchase commitments
of beef during the fiscal 2021 and 2020 periods. If the cost of beef and beef
trimmings increases and we are unable to pass on these higher costs through
price increases or otherwise reduce any increase in our costs through the use of
purchase commitments, our margins will be adversely impacted.



Beginning in May 2020, the cost of hot dogs increased significantly due primarily to the effects of the COVID-19 pandemic on the meat processing industry.





With respect to Company-owned restaurants, our cost of sales during the fiscal
2021 period was $1,344,000 or 69.5% of restaurant sales, as compared to
$2,291,000 or 55.6% of restaurant sales in the fiscal 2020 period. We
experienced higher food costs driven by the higher commodity costs of beef, and
higher labor costs in connection with training associated with the introduction
of new menu offerings. We expect that our future labor costs will continue to be
impacted by the remaining multi-year increase in minimum wage requirements in
New York State as well as other new labor regulations and our food costs may be
impacted by increases in commodity costs.



Restaurant operating expenses were $852,000 in the fiscal 2021 period as compared to $919,000 in the fiscal 2020 period. We incurred lower marketing expenses of $48,000 and lower utility expenses of $14,000.

Depreciation and amortization was $310,000 in the fiscal 2021 and fiscal 2020 periods.





General and administrative expenses decreased by $1,093,000 or 27.8% to
$2,844,000 in the fiscal 2021 period as compared to $3,937,000 in the fiscal
2020 period. The decrease in general and administrative expenses was primarily
attributable to reduced corporate payroll expenses through salary reductions and
furloughs, a lower incentive compensation accrual, reduced tradeshow expenses in
light of the COVID-19 pandemic and reductions in other discretionary expenses
including marketing and travel.



Advertising fund expense, after eliminating Company contributions, was $289,000 in the fiscal 2021 period, as compared to $482,000 in the fiscal 2020 period.





Other Items



Interest expense of $2,650,000 in the fiscal 2021 and fiscal 2020 periods represented accrued interest of $2,477,000 on the 2025 Notes at 6.625% per annum and amortization of debt issuance costs of $173,000.

Interest income was $117,000 for the fiscal 2021 period as compared to $366,000 in the fiscal 2020 period.

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





Provision for Income Taxes



The income tax provision for the thirteen-week periods ended June 28, 2020 and
June 30, 2019 reflect effective tax rates of 28.1% and 25.3%, respectively.
Nathan's effective tax rate for the thirteen-week period June 30, 2019 was
reduced by 3.2%, as a result of the tax benefits associated with stock
compensation. For the thirteen weeks ended June 30, 2019, excess tax benefits of
$228,000, were reflected in the Consolidated Statements of Earnings as a
reduction to the provision for income taxes. Nathan's effective tax rate without
this adjustment would have been 28.5% for the fiscal 2020 period. In November
2019, the State of New Jersey notified Nathan's that our tax returns for the
fiscal years ended March 27, 2016, March 26, 2017, and March 25, 2018 will be
audited. The audit is ongoing.



                                      -25-
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The amount of unrecognized tax benefits at June 28, 2020 was $321,000 all of
which would impact Nathan's effective tax rate, if recognized. As of June 28,
2020, Nathan's had $274,000 of accrued interest and penalties in connection with
unrecognized tax benefits.



Nathan's estimates that its unrecognized tax benefit excluding accrued interest
and penalties could be further reduced by up to $16,000 during the fiscal year
ending March 28, 2021.


Off-Balance Sheet Arrangements

At June 28, 2020 and June 30, 2019, Nathan's did not have any open purchase commitments for hot dogs. Nathan's may enter into purchase commitments in the future as favorable market conditions become available.

Liquidity and Capital Resources





Cash and cash equivalents at June 28, 2020 aggregated $76,941,000, a $176,000
decrease during the fiscal 2021 period as compared to cash and cash equivalents
of $77,117,000 at March 29, 2020. Net working capital increased to $76,404,000
from $75,165,000 at March 29, 2020. On May 1, 2020, we paid our first
semi-annual interest payment of $4,968,750 for fiscal 2021. We paid our first
quarter dividend of $1,440,000 on June 26, 2020.



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





The 2025 Notes bear interest at 6.625% per annum, payable semi-annually on May
1st and November 1st of each year, beginning on May 1, 2018. Semi-annual
interest payments are $4,968,750. During the thirteen-week period ended June 28,
2020, we paid interest of $4,968,750 on May 1, 2020 for the 2025 Notes. The 2025
Notes have no scheduled principal amortization payments prior to its final
maturity on November 1, 2025.



Cash provided by operations of $3,002,000 in the fiscal 2021 period is primarily
attributable to net income of $4,000,000 in addition to other non-cash operating
items of $584,000, offset by changes in other operating assets and liabilities
of $1,582,000. Non-cash operating expenses consist principally of $310,000 of
depreciation and amortization, $173,000 amortization of debt issuance costs,
share-based compensation expense of $29,000, non-cash rental expense of $66,000,
and bad debts of $14,000. In the fiscal 2021 period, accounts and other
receivables decreased by $2,870,000 due primarily to lower Branded Product
Program receivables of $3,231,000 due to reduced sales as a result of the
COVID-19 pandemic, offset, in part, by higher franchise and license royalty
receivables and higher seasonal receivables due on behalf of the Advertising
Fund. In the fiscal 2021 period, accounts payable, accrued expenses and other
current liabilities decreased by $4,127,000 due to the reduction in accrued
interest of $2,491,000 resulting from our May 2020 debt service payment. Accrued
payroll and other benefits declined by $1,929,000 resulting from the payment of
year-end compensation. This was offset by higher accrued corporate taxes of
$1,199,000. Accounts payable decreased by $790,000 due principally to reduced
product purchases made for the Branded Product Program due to the slowdown
resulting from the COVID-19 pandemic. Rebates due under the Branded Product
Program were lower by $337,000 due primarily to reduced sales as a result of the
COVID-19 pandemic. Partially offsetting this reduction were increased accrued
expenses for construction costs and other items.



                                      -26-
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Cash used in investing activities was $237,000 in the fiscal 2021 period primarily in connection with capital expenditures incurred for our Branded Product Program and the installation of a new point-of-sale system at our Company-owned units.





Cash used in financing activities of $2,941,000 in the fiscal 2021 period
relates to the payment of the Company's regular $0.35 per share cash dividend of
$1,440,000. Additionally, during the fiscal 2021 period, Nathan's repurchased
26,676 shares of common stock for $1,501,000.



During the period from October 2001 through June 28, 2020, Nathan's purchased
5,254,081 shares of its common stock at a cost of approximately $84,770,000
pursuant to its stock repurchase plans previously authorized by the Board of
Directors. Since March 26, 2007, we have repurchased 3,362,981 shares at a total
cost of approximately $77,612,000, reducing the number of shares
then-outstanding by 55.9%.



In 2016, the Company's Board of Directors authorized increases to the sixth
stock repurchase plan for the purchase of up to 1,200,000 shares of its common
stock on behalf of the Company. As of June 28, 2020, Nathan's has repurchased
1,066,450 shares at a cost of $37,108,000 under the sixth stock repurchase plan.
At June 28, 2020, there were 133,550 shares remaining to be repurchased pursuant
to the sixth stock repurchase plan. The plan does not have a set expiration
date. Purchases under the Company's stock repurchase program may be made from
time to time, depending on market conditions, in open market or
privately-negotiated transactions, at prices deemed appropriate by management.
There is no set time limit on the repurchases.



On March 13, 2020, The Company's Board of Directors approved a 10b5-1 stock plan
(the "10b5-1 Plan") which will expire on the earlier of (a) August 12, 2020 or
(b) the earlier of when (i) the aggregate purchase price of all shares of common
stock purchased under the 10b5-1 Plan equals $5,550,000 and (ii) the aggregate
purchases under the 10b5-1 Plan equals 100,000 shares unless terminated earlier
by the Company's Board of Directors.



During the thirteen weeks ended June 28, 2020, the Company repurchased in open
market transactions 26,676 shares of the Company's common stock at an average
share price of $56.26 for a total cost of $1,501,000 under the 10b5-1 Plan. At
June 28, 2020, $1,322,000 or 22,406 shares were available for repurchase under
the 10b5-1 Plan.



Effective June 1, 2020, Nathan's Board of Directors authorized the repurchase of
up to $10,000,000 of the 2025 Notes by the Company (at a price equal to or less
than par) from time to time. There is no set time limit on the repurchases.



As discussed above, we had cash and cash equivalents at June 28, 2020
aggregating $76,941,000. Our Board routinely monitors and assesses its cash
position and our current and potential capital requirements. In November 2017,
we refinanced our 2020 Notes through the issuance of the 2025 Notes and, our
Board of Directors announced the payment of a $5.00 per share special dividend
to the shareholders of record as of the close of business on December 22, 2017.
On May 31, 2018, Nathan's Board of Directors authorized the commencement of a
regular dividend of $1.00 per share per annum, payable at the rate of $0.25 per
share per quarter. On June 14, 2019, Nathans' Board of Directors authorized the
increase of its regular quarterly dividend to $0.35 from $0.25. The Company paid
its first quarter fiscal 2021 dividend of $1,440,000 on June 26, 2020.



Effective August 7, 2020, the Company declared its second quarter dividend of
$0.35 per common share to stockholders of record as of the close of business on
August 24, 2020, which is payable on September 4, 2020.



We expect that in the future we will make investments in certain existing
restaurants, support the growth of the Branded Product and Branded Menu
Programs, service the outstanding debt, fund our dividend program and may
continue our stock repurchase programs, funding those investments from our
operating cash flow. We may also incur capital and other expenditures or engage
in investing activities in connection with opportunistic situations that may
arise on a case-by-case basis. During the fiscal year ending March 28, 2021, we
will be required to make interest payments of $9,937,500, of which $4,968,750
has been made on May 1, 2020.



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



At June 28, 2020, we sublet one property to a franchisee that we lease from a
third party. We remain contingently liable for all costs associated with this
property including: rent, property taxes and insurance. We may incur future cash
payments with respect to such property, consisting primarily of future lease
payments, including costs and expenses associated with terminating such lease.



                                      -27-

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The following schedule represents Nathan's cash contractual obligations and commitments by maturity as of June 28, 2020 (in thousands):





                                                        Payments Due by Period
Cash Contractual                              Less than                                       More than
Obligations                     Total          1 Year         1-3 Years       3-5 Years        5 Years
Long term debt (a)            $  150,000     $         -     $         -     $         -     $   150,000
Employment Agreements (b)          3,892           1,292           2,000             400             200
Operating Leases (c)              13,775           1,702           3,691           3,417           4,965
Gross Cash Contractual
Obligations                      167,667           2,994           5,691           3,817         155,165
Sublease Income (c)                1,275             246             381             338             310
Net Cash Contractual
Obligations                   $  166,392     $     2,748     $     5,310     $     3,479     $   154,855

a) Represents the principal due on the 2025 Notes, but does not include interest

expense.

b) Reflects the temporary salary reductions implemented in response to COVID-19,


     estimated to remain in place for six months.


  c) See Note R to the Consolidated Financial Statements for additional
     information on the Company's lease commitments.




At June 28, 2020, the Company had unrecognized tax benefits of $321,000. The
Company believes that is reasonably possible that the unrecognized tax benefits
may decrease by $16,000 within the next year. A reasonable estimate of the
timing of the remaining liabilities is not practicable.



On February 27, 2017, a wholly-owned subsidiary of the Company executed a
Guaranty of Lease (the "Brooklyn Guaranty") in connection with its
re-franchising of a restaurant located in Brooklyn, New York. The Company is
obligated to make payments under the Brooklyn Guaranty in the event of a default
by the tenant/franchisee. The Brooklyn Guaranty has an initial term of 10 years
and one 5-year option and is limited to 24 months of rent for the first three
years of the term. For the remainder of the term, the Brooklyn Guaranty is
limited to 12 months of rent plus reasonable costs of collection and attorney's
fees. As of June 28, 2020, Nathan's has recorded a liability of $110,000 in
connection with the Brooklyn Guaranty which does not include potential
percentage rent, real estate tax increases, attorney's fees and other costs as
these amounts are not reasonably determinable at this time. Nathan's has
received a personal guaranty from the franchisee for all obligations under the
Brooklyn Guaranty.



Inflationary Impact



We do not believe that general inflation has materially impacted earnings since
2006. However, we have experienced significant volatility in our costs for our
hot dogs and certain food products, distribution costs and utilities. Between
April 2018 and March 2020, beef prices traded within a range of + or - 10%.
Prices were at the lowest levels between October 2018 and March 2019 as compared
to higher levels between October 2019 and March 2020. Our average cost of hot
dogs between October 2019 and March 2020 was approximately 11.2% higher than
between October 2018 and March 2019. Our average cost of hot dogs between April
2020 and June 2020 was approximately 9.1% higher than between April 2019 and
June 2019.


Beginning in May 2020, the cost of hot dogs has increased significantly due primarily to the effects of the COVID-19 pandemic on the meat processing industry.





We are unable to predict the future cost of our hot dogs and expect to
experience price volatility for our beef products during fiscal 2021. To the
extent that beef prices increase as compared to earlier periods, it could impact
our results of operations. In the past, we entered into purchase commitments for
a portion of our hot dogs to reduce the impact of increasing market prices. Our
most recent purchase commitment was completed in 2016 for approximately
2,600,000 pounds of hot dogs. We may attempt to enter into similar purchase
arrangements for hot dogs and other products in the future. Additionally, we
expect to continue experiencing volatility in oil and gas prices on our
distribution costs for our food products and utility costs in the Company-owned
restaurants and volatile insurance costs resulting from the uncertainty of the
insurance markets.



New York State passed legislation increasing the minimum hourly wage for fast
food workers of restaurant chains with 30 or more locations nationwide. The
increase is being phased in differently between New York City and the rest of
New York State. Effective December 31, 2019, the minimum wage was $15.00 in New
York City and increased to $13.75 per hour for the remainder of New York State.



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


                                      -28-
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All of Nathan's Company-operated restaurants are within New York State, two of
which operate within New York City that have been significantly affected by this
new legislation.



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



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





Effective November 27, 2017, the City of New York Fair Work Week Legislation
package of bills took effect that the city estimates will cover some 65,000 fast
food workers by giving them more predictable work schedules. A key component of
the package is a requirement that fast food restaurants schedule their workers
at least two weeks in advance or pay employees between $10 to $75 per scheduling
change, depending on the situation. Due to Nathan's dependency on weather
conditions at our two Coney Island beach locations during the summer season, we
are unable to determine the potential impact on our results of operations, which
could be material. We believe that we have been able to implement tools to
minimize the financial impact of this legislation. Nevertheless, we incurred
approximately $1,000 of additional costs due to this legislation during the
fiscal 2021 period.



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



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



The Company's business, financial condition, operating results and cash flows
can be impacted by a number of factors, including but not limited to those set
forth above in "Management's Discussion and Analysis of Financial Condition and
Results of Operations," any one of which could cause our actual results to vary
materially from recent results or from our anticipated future results. For a
discussion identifying additional risk factors and important factors that could
cause actual results to differ materially from those anticipated, also see the
discussions in "Forward-Looking Statements" and "Notes to Consolidated Financial
Statements" in this Form 10-Q and "Risk Factors" in our Form 10-K for our fiscal
year ended March 29, 2020.



                                      -29-

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