Nathan's Famous, Inc.
Annual Report 2009

2 0 0 9   A n n u A l   R e p o R t

c o r p o r at e  directory

(in thousands, except per share amounts)

Selected Consolidated Financial Data:
Revenues from continuing operations
Income from continuing operations(2)
Income from discontinued operations(2),(3)
Net income(3)
Basic income per share

Income from continuing operations(2)
Income from discontinued operations(2),(3)
  Net income per share(3)
Diluted income per share(2),(3)

Income from continuing operations(2)
Income from discontinued operations(2),(3)
  Net income per share(3)

Weighted average shares used in computing income per share
  Basic
  Diluted
Total assets
Stockholders’ equity

Fiscal Year(1)

2009

2008

2007

2006

$ 49,221
$  4,958
$  2,524
$  7,482

$ 47,225
$  4,781
$  1,774
$  6,555

$ 42,803
$  4,272
$  1,271
$  5,543

$ 38,046
$  2,796
$  2,881
$  5,677

$  0.84
$  0.43
$  1.27

$  0.79
$  0.29
$  1.08

$  0.73
$  0.22
$  0.95

$  0.50
$  0.52
$  1.02

$  0.80
$  0.41
$  1.21

$  0.74
$  0.27
$  1.01

$  0.67
$  0.20
$  0.87

$  0.43
$  0.44
$  0.87

5,898
6,180
$ 49,824
$ 41,849

6,085
6,502
$ 51,202
$ 42,608

5,836
6,341
$ 46,575
$ 35,879

5,584
6,546
$ 37,423
$ 28,048

(1)   Our fiscal year ends on the last Sunday in March which results in a 52- or 53-week year. Fiscal years 2009, 2007, and 2006 consisted of 52 weeks. Fiscal 2008 consisted of  

53 weeks.

(2)   Results have been adjusted to reflect the sale of NF Roasters Corp. in April 2008, the sale of Miami Subs Corporation, including a leasehold interest in May 2007, the sale of 
vacant land and an adjacent leasehold interest during the years during the fiscal years ended March 25, 2007 and March 26, 2006 for the reclassification of the operating 
results to discontinued operations.

(3)   The fiscal years ended March 29, 2009, March 30, 2008, March 25, 2007 and March 26, 2006 include gains of $3,906, $2,489, $400 and $2,917, respectively, before income 
taxes, from the sale of NF Roasters Corp. in April 2008, the sale of Miami Subs Corporation, including a leasehold interest in May 2007 and the sale of a vacant piece of land 
in Coney Island, NY, and an adjacent leasehold interest in July 2005.

Corporate profile

  Nathan’s began as a nickel hot dog stand in Coney Island in 1916 and has become a much-loved “New York institution” now available 

throughout the United States and overseas.

  Through our innovative points-of-distribution strategies, Nathan’s products are marketed within our restaurant system and throughout a 
broad spectrum of other foodservice and retail environments. Our Programs provide for the sale of Nathan’s World Famous Beef Hot Dogs, 
crinkle-cut French fries and other famous favorites to foodservice locations nationwide. Nathan’s products are also featured in supermarkets 
and club stores throughout the United States and are being marketed on television by QVC. In total, Nathan’s products are marketed for sale 
in over 40,000 locations.

  Successful  market  penetration  of  our  highly  recognized  valued  brand  and  products,  through  a  wide  variety  of  distribution  channels,  

continues to provide new and exciting growth opportunities for our Company.

Revenues from    
Continuing Operations
($ in millions)

 $47.2

 $42.8

 $38.0

$49.2

Income from  
Continuing Operations(2)
($ in millions)

$4.8

 $5.0

$4.3

$2.8

Stockholders’ Equity
($ in millions)

 $42.6

 $41.8

 $35.9

 $28.0

’06

’07

’08

’09

’06

’07

’08

’09

’06

’07

’08

’09

n At H A n ’ S  FA M o u S ,   I n C .  &  S u B S I D I A R I e S  2 0 0 9  A n n u A l  R e p o R t

50000

40000

30000

20000

10000

0

5000

4000

3000

2000

1000

0

45000

36000

27000

18000

9000

0

 
 
 
 
 
 
 
 
 
 
S H A R E H O L D ER’S LETTER

E r ic  Gat of f

way n E  nor bi tz

Fiscal 2009 was another exciting year for Nathan’s Famous.

Despite a difficult economic climate, we achieved our sixth con­
secutive year of increased revenues and profits from continuing 
operations.  Our  positive  results  reaffirm  the  strength  of  the 
Nathan’s  Famous  brand,  the  soundness  of  our  business  model, 
and  the  dedication  of  all  of  our  employees,  operators,  franchi­
sees and licensees.

Strategically,  our  focus  for  a  number  of  years  has  been  to 
increase  the  number  and  types  of  points  of  distribution  for 
Nathan’s Famous products. This strategy continues to drive our 
success  and  its  application  has  transformed  Nathan’s  Famous 
from  a  regional  quick  service  restaurant  concept  to  an  inter­
nationally  recognized  brand  with  a  variety  of  unique  products 
sold  through  several  different  channels  of  distribution.  As  a 
result, at Fiscal Year End, Nathan’s Famous products were mar­
keted  for  sale  at  over  40,000  foodservice  and  retail  locations 
throughout all 50 states, the District of Columbia, Puerto Rico, 
Guam, the U.S. Virgin Islands and 5 foreign countries.

Our marketing efforts continue to prove successful as well. The 
pinnacle of that success is our annual Nathan’s Famous July 4th 
International Hot Dog Eating Contest. The contest has become a 
truly singular event, providing global visibility for the Nathan’s 
Famous  brand.  This  past  year,  we  were  joined  by  more  than 
30,000  spectators  in  Coney  Island,  as  well  as  millions  more  
tuning  in  to  watch  live  on  ESPN.  The  great  Joey  Chestnut  
prevailed again, ensuring that the coveted Mustard Yellow Belt 
would  remain  on  American  soil  for  another  year,  although  he 
needed the first overtime in the 93 year history of the event to 

hold  off  the  return  of  a  healthy  Takeru  Kobayashi.  As  always, 
we  look  forward  to  continuing  this  rite  of  summer  well  into  
the future.

This  year  also  saw  Nathan’s  Famous  reinforce  its  position  
as  the  official  hot  dog  of  New  York  Baseball.  Through  new 
long­term  agreements  with  each  team,  we  renewed  our  spon­
sorships with the New York Yankees and New York Mets, each 
of  whom  unveiled  spectacular,  state­of­the­art  stadiums  that 
feature enhanced marketing presence for our brand, along with 
increased opportunities for the sale and exposure of a number of 
Nathan’s Famous menu items, including our World Famous Beef 
Hot  Dogs  and  crinkle  cut  French  fries.  We  view  our  partner­
ships with both teams as core to our consumer marketing efforts, 
and  we  are  excited  that  our  positive  relationships  with  the 
Yankees,  Mets  and  all  New  York  baseball  fans  will  continue 
well into the future.

FINANCIAL RESULTS:
For Fiscal 2009, earnings from continuing operations increased 
by  3.7%  to  $4,956,940.  Total  revenue  increased  by  4.2%  to 
$49,228,422.  Net  income  increased  by  14%  to  $7,481,321,  
and  earnings  per  share  increased  $0.20,  or  20%,  to  $1.21  per 
diluted share.

Restaurant Operations:
Revenues  derived  from  our  system  of  franchised  and  licensed 
restaurant  units  decreased  by  7%  during  Fiscal  2009  to 
$4,620,110.  During  the  year,  we  opened  46  new  Nathan’s 
Famous  franchised  units,  including  43  domestically  and  3 
internationally.

N AT H A N ’ S   FA M O U S ,  I N C .  &  S U B S I D I A R I E S  2 0 0 9  A N N U A L  R E P O R T— p a g e  1

Unit  growth  in  Fiscal  2009  included  the  further  rollout  of  our 
Branded  Menu  Program,  which  involves  the  franchising  of  a 
streamlined Nathan’s Famous prototype featuring our signature, 
World Famous Beef Hot Dogs and French fries. We believe the 
structure  of  the  program  (reduced  initial  fee,  no  royalties  and 
limited space and capital requirements) makes it very attractive 
to  many  operators  in  different  segments  of  the  foodservice 
industry, and in our second full year operating the program, we 
successfully opened 30 units.

In our company­owned restaurants, sales decreased by 4.8% to 
$12,510,665.

The Branded Products Program:
Sales in the Branded Products Program, which features the sale 
of  Nathan’s  World  Famous  Beef  Hot  Dogs  to  the  foodservice 
industry, increased by 12.3% to $23,181,720 during Fiscal 2009. 
Pursuant  to  our  branded  products  program,  Nathan’s  World 
Famous Beef Hot Dogs are sold in over 13,000 foodservice loca­
tions  throughout  the  United  States,  including  more  than  700 
K­Marts  and  Sears  Grand  retail  locations,  about  750  Auntie 
Anne’s  pretzel  outlets,  and  in  approximately  570  Sam’s  Club 
stores. Our hot dogs are now available for sale by many of the 
largest U.S. foodservice distributors and may be found in many 
movie  theaters,  con venience  stores,  amusement  venues  and 
sports stadiums, including Yankee Stadium and Citi Field.

Product Licensing:
During  Fiscal  2009,  license  royalties  increased  by  24%  to 
$6,008,848. Leveraging our highly­visible and valued Nathan’s 
Famous brand at retail continues to provide increased revenues. 
Today,  a  sample  of  the  most  popular  products  sold  include  a 
wide variety of Nathan’s World Famous Beef Hot Dogs, as well as 
Nathan’s Famous French fries, mustards, pickles, potato pancakes, 
onion rings, potato chips, franks ’n blankets and mini bagel dogs.

STRATEgIC DEvELOPMENTS:
As mentioned above, we have continued to implement our brand 
marketing  and  points­of­distribution  strategy.  As  a  result,  we 
believe that the prominence of the Nathan’s Famous brand and 
the presentation of Nathan’s Famous products are greater today 
than ever before. We intend to devote our energies and resources 
to  the  contin uation  of  this  successful  strategy.  Consistent  with 
this  outlook,  we  announced  the  sale  of  our  NF  Roasters  Corp. 
subsidiary  on  April  23,  2008,  which  resulted  in  a  pre­tax  gain 
during fiscal 2009 of $3,656,000.

STOCk REPURCHASES:
Throughout  Fiscal  2009,  we  repurchased  693,806  shares  of 
common stock at a cost of $9,712,000, underscoring our belief 
that such purchases continue to be an attractive investment that 
will help build shareholder value.

IN CONCLUSION:
Our focused strategies, creative approaches, and ever­expanding 
opportunities are expected to afford us with the ability to con­
tinue to expose the Nathan’s Famous brand and advance the sale 
of  Nathan’s  Famous  products  through  a  broad  variety  of  envi­
ronments  and  distribution  channels.  As  we  seek  to  continue  to 
expand and pursue profitable, new opportunities, we will retain 
our steadfast commitment to quality and endeavor to serve our 
shareholders  responsibly.  We  remain  extremely  appreciative  of 
your continued support.

E R I C  g ATO F F
Chief Executive Officer

WAy N E  N O R B I T z
President and Chief Operating Officer

N AT H A N ’ S   FA M O U S ,  I N C .  &  S U B S I D I A R I E S  2 0 0 9  A N N U A L  R E P O R T— p a g e  2
N AT H A N ’ S  FA M O U S ,  I N C .  &  S U B S I D I A R I E S  2 0 0 9  A N N UA L  R E P O R T — p a g e  2

S e l e c t e d   c o n S o l i dated Financial data

(In thousands, except per share amounts)

Statement of Earnings Data:
Revenues:
  Sales
  Franchise fees and royalties
  License royalties, interest and other income

  Total revenues

Costs and Expenses:
  Cost of sales
  Restaurant operating expenses
  Depreciation and amortization
  General and administrative expenses

Interest expense

  Recovery of property taxes

  Total costs and expenses

Income from continuing operations before provision for income taxes
Income tax expense

Income from continuing operations

Discontinued Operations

 Income from discontinued operations before provision for  

income taxes(3)

  Provision for income taxes

Income from discontinued operations

  Net income(5)

Basic Income Per Share:

Income from continuing operations
Income from discontinued operations

  Net income(5)

Diluted Income Per Share:

Income from continuing operations
Income from discontinued operations

  Net income(5)

Dividends
Weighted average shares used in computing net income per share
  Basic
  Diluted

Fiscal Years Ended(1)

March 29, 
2009

March 30, 
2008(2)

March 25, 
2007(2)

March 26, 
2006(2)

March 27, 
2005(2)

$37,480
4,613
7,128

49,221

$36,259
4,962
6,004

$33,425
4,439
4,939

$29,785
4,169
4,092

$23,296
3,709
3,664

47,225

42,803

38,046

30,669

28,774
3,361
809
9,299
—
(441)

41,802

7,419
2,461

4,958

3,914
1,390

2,524

27,070
3,257
764
8,926
—
—

40,017

7,208
2,427

4,781

2,824
1,050

1,774

24,080
3,187
742
8,216
—
—

36,225

6,578
2,306

4,272

2,104
833

1,271

22,225
3,172
760
7,484
—
—

33,641

4,405
1,609

2,796

4,733
1,852

2,881

17,266
3,054
856
7,060
2
—

28,238

2,431
738

1,693

1,781
737

1,044

$  7,482

$  6,555

$  5,543

$  5,677

$  2,737

$    0.84
0.43

$    1.27

$    0.80
0.41

$    1.21

$    0.79
0.29

$    0.73
0.22

$    0.50
0.52

$    0.32
0.20

$    1.08

$    0.95

$    1.02

$    0.52

$    0.74
0.27

$    0.67
0.20

$    0.43
0.44

$    0.28
0.17

$    1.01

$    0.87

$    0.87

$    0.45

—

—

—

—

—

5,898
6,180

6,085
6,502

5,836
6,341

5,584
6,546

5,307
6,080

(continued)

N AT H A N ’ S   FA M O U S ,  I N C .  &  S U B S I D I A R I E S  2 0 0 9  A N N U A L  R E P O R T— p a g e  3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
S e l e c t e d   c o n S o l i dated Financial data

(continued)

M a n a g e M e n t ’ S   d i S c u S S ion and analySiS oF 

F i n a n c i a l   c o n d i t i o n   a n d  ReSultS oF opeRationS

(In thousands, except per share amounts)

Balance Sheet Data at End of Fiscal Year:
  Working capital
  Total assets
  Long-term debt, net of current maturities
  Stockholders’ equity

Selected Restaurant Operating Data:
Company-owned restaurant sales(4)

Number of Units Open at End of Fiscal Year:
  Company-owned restaurants

  Franchised

Fiscal Years Ended(1)

March 29, 
2009

March 30, 
2008(2)

March 25, 
2007(2)

March 26, 
2006(2)

March 27, 
2005(2)

$35,303
49,824
—
$41,849

$35,650
51,202
—
$42,608

$27,375
46,575
—
$35,879

$19,075
37,423
31
$28,048

$14,009
31,269
692
$21,356

$12,511

$13,142

$11,863

$11,419

$11,538

5

249

6

224

6

196

6

192

6

174

Notes to Selected Financial Data
(1)   Our  fiscal  year  ends  on  the  last  Sunday  in  March,  which  results  in  a  52-  or  53-week  year.  The  fiscal  year  ended  March  29,  2009  is  on  the  basis  of  a  52-week  reporting  
period  as  were  the  fiscal  years  ended  March  25,  2007,  March  26,  2006  and  March  27,  2005  whereas  the  fiscal  year  ended  March  30,  2008  was  on  the  basis  of  53-week  
reporting period.

(2)   Results have been adjusted to reflect the sales of NF Roasters Corp. during the fiscal year ended March 29, 2009 and Miami Subs Corporation, including leasehold interest 
during the fiscal year ended March 30, 2008, the sale of vacant land and an adjacent leasehold interest during the fiscal years ended March 25, 2007 and March 26, 2006, 
and the closure of one restaurant during the fiscal year ended March 27, 2005, in each case for the reclassification of the operating results to discontinued operations.

(3)   The fiscal years ended March 29, 2009, March 30, 2008, March 25, 2007, and March 26, 2006, include gains of $3,906, $2,489, $400 and $2,917 respectively, from the sales 
of NF Roasters Corp. in April 2008, Miami Subs Corporation in May 2007 and the sale of a vacant piece of land in Coney Island, NY, including an adjacent leasehold interest 
in July 2005.

(4)   Company-owned restaurant sales represent sales from restaurants presented within continuing operations and discontinued operations.
(5)   See Notes A, B and G of the Consolidated Financial Statements for any accounting changes, business combinations or dispositions of business operations that materially 

affect the comparability of the information presented.

N AT H A N ’ S   FA M O U S ,  I N C .  &  S U B S I D I A R I E S  2 0 0 9  A N N U A L  R E P O R T— p a g e  4

 
 
 
 
S e l e c t e d   c o n S o l i dated Financial data

M a n a g e M e n t ’ S   d i S c u S S ion and analySiS oF 
F i n a n c i a l   c o n d i t i o n   a n d  ReSultS oF opeRationS

Introduction

  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  dis-
tribution. Historically, our business has been the operation and fran-
chising  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 super-
markets  or  grocery-type  retailers  for  off-site  consumption.  During 
fiscal  1998,  we  introduced  our  Branded  Product  Program,  which 
enables  foodservice  retailers  to  sell  some  of  Nathan’s  proprietary 
products outside of the realm of a traditional franchise relationship. 
In conjunction with this program, foodservice operators are granted 
a limited use of the Nathan’s Famous trademark with respect to the 
sale  of  Nathan’s  World  Famous  Beef  Hot  Dogs  and  certain  other 
proprietary  food  items  and  paper  goods.  During  fiscal  2008,  we 
launched  our  Branded  Menu  Program,  under  which  foodservice 
operators may sell a greater variety of Nathan’s Famous menu items 
than under the Branded Product Program.

In  addition  to  the  Nathan’s  Famous  brand,  we  have  also  had 
involvement  with  a  number  of  other  restaurant  concepts  and/or 
brands.  On  April  1,  1999,  we  became  the  franchisor  of  the  Kenny 
Rogers  Roasters  restaurant  system  by  acquiring  the  intellectual 
property rights, including trademarks, recipes and franchise agree-
ments of Roasters Corp. and Roasters Franchise Corp. On September 
30, 1999, we completed our acquisition of the outstanding common 

stock  of  Miami  Subs  Corporation,  which  also  provided  us  with  
co-branding  rights  to  the  Arthur  Treacher’s  brand  in  the  United 
States  allowing  us  to  franchise  and  co-brand  the  Miami  Subs  and 
Arthur Treacher’s brands. On February 28, 2006, we acquired all of 
the intellectual property rights, including, but not limited to, trade-
marks,  trade  names,  and  recipes,  of  the  Arthur  Treacher’s  Fish  N 
Chips  Brand.  On  June  7,  2007,  Nathan’s  completed  the  sale  of  its 
wholly-owned  subsidiary,  Miami  Subs  Corporation,  the  franchisor 
of the Miami Subs brand, effective as of May 31, 2007 in exchange 
for  $3,250,000,  consisting  of  $850,000  cash  and  the  purchaser’s 
promissory note in the principal amount of $2,400,000 (the “MSC 
Note”).  On  April  23,  2008,  Nathan’s  completed  the  sale  of  its 
wholly-owned  subsidiary,  NF  Roasters  Corp.,  franchisor  of  the 
Kenny  Rogers  brand  in  exchange  for  approximately  $4,000,000  in 
cash.  Notwithstanding  the  sale  of  Miami  Subs  Corporation  and  
NF  Roasters  Corp.,  we  are  entitled  to  continue  using  the  Kenny 
Rogers trademarks and service marks in our then-existing Nathan’s 
restaurant locations.

  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 agree-
ments  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, licens-
ing  and  our  Branded  Product  Program,  Nathan’s  continues  to  
co-brand within its restaurant system. At March 29, 2009, the Arthur 
Treacher’s brand was being sold within 58 Nathan’s restaurants.

  The following summary reflects the franchise openings and closings, excluding the Kenny Rogers Roasters franchise system which was 

sold on April 23, 2008, for the fiscal years ended March 29, 2009, March 30, 2008, March 25, 2007, March 26, 2006 and March 27, 2005.

Franchised restaurants operating at the beginning of the period
New franchised restaurants opened during the period
Franchised restaurants closed during the period

Franchised restaurants operating at the end of the period

(a) Includes the opening of two test Branded Menu Program outlets.

March 29, 
2009

March 30, 
2008

March 25, 
2007

March 26, 
2006

March 27, 
2005

224
46
(21)

249

196
46
(18)

224

192
21(a)
(17)

196

174
27
(9)

192

147
36
(9)

174

  At  March  29,  2009,  our  franchise  system  consisted  of  249 
Nathan’s  Famous  franchised  units  located  in  25  states  and  four  
foreign countries. We also operated five Company-owned Nathan’s 
units, including one seasonal location, within the New York metro-
politan area.

Critical Accounting Policies and Estimates

  Our consolidated financial statements and the notes to our con-
solidated  financial  statements  contain  information  that  is  pertinent 

to management’s discussion and analysis. The preparation of finan-
cial  statements  in  conformity  with  accounting  principles  generally 
accepted  in  the  United  States  requires  management  to  make  esti-
mates  and  assumptions  that  affect  the  reported  amounts  of  assets 
and  liabilities  and  disclosures  of  contingent  assets  and  liabilities.  
We  believe  the  following  critical  accounting  policies  involve  addi-
tional management judgment due to the sensitivity of the methods, 
assumptions  and  estimates  necessary  in  determining  the  related 
asset and liability amounts.

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M a n a g e M e n t ’ S   d i S c u S S ion and analySiS oF 
F i n a n c i a l   c o n d i t i o n   a n d  ReSultS oF opeRationS

(continued)
(continued)

Revenue Recognition

  Sales by Company-owned restaurants, which are typically paid 
in  cash  by  the  customer,  are  recognized  upon  the  performance  of 
services. Sales are presented net of applicable sales tax.

In  connection  with  its  franchising  operations,  Nathan’s  
receives  initial  franchise  fees,  development  fees,  royalties,  and  in 
certain  cases,  revenue  from  sub-leasing  restaurant  properties  to 
franchisees.

  Franchise  and  area  development  fees,  which  are  typically 
received prior to completion of the revenue recognition process, are 
recorded as deferred revenue. Initial franchise fees, which are non-
refundable, are recognized as income when substantially all services 
to  be  performed  by  Nathan’s  and  conditions  relating  to  the  sale  of 
the  franchise  have  been  performed  or  satisfied,  which  generally 
occurs  when  the  franchised  restaurant  commences  operations.  The 
following  services  are  typically  provided  by  Nathan’s  prior  to  the 
opening of a franchised restaurant:

•   Approval of all site selections to be developed.
•   Provision of architectural plans suitable for restaurants to be 

developed.

•   Assistance  in  establishing  building  design  specifications, 
reviewing  construction  compliance  and  equipping  the 
restaurant.

•   Provision of appropriate menus to coordinate with the restau-

rant design and location to be developed.

•   Provision of management training for the new franchisee and 

selected staff.

•   Assistance  with  the  initial  operations  and  marketing  of  res-

taurants being developed.

  Development  fees  are  non-refundable  and  the  related  agree-
ments  require  the  franchisee  to  open  a  specified  number  of  res-
taurants  in  the  development  area  within  a  specified  time  period  or 
Nathan’s  may  cancel  the  agreements.  Revenue  from  development 
agreements is deferred and recognized ratably over the term of the 
agreement  or  as  restaurants  in  the  development  area  commence 
operations on a pro rata basis to the minimum number of restaurants 
required  to  be  open,  or  at  the  time  the  development  agreement  is 
effectively canceled.

  Nathan’s  recognizes  franchise  royalties,  which  are  generally 
based  upon  a  percentage  of  sales  made  by  Nathan’s  franchisees, 
when  they  are  earned  and  deemed  collectible.  Franchise  fees  and 
royalties  that  are  not  deemed  to  be  collectible  are  not  recognized  
as  revenue  until  paid  by  the  franchisee,  or  until  collectibility  is 
deemed  to  be  reasonably  assured.  The  number  of  non-performing 
units is determined by analyzing the number of months that royal-
ties  have  been  paid  during  a  period.  When  royalties  have  been  
paid  for  less  than  the  majority  of  the  time  frame  reported,  such  
location  is  deemed  non-performing.  Accordingly,  the  number  of 
non-performing  units  may  differ  between  the  quarterly  results  and 
year-to-date results.

  Nathan’s  recognizes  revenue  from  the  Branded  Product  Pro-
gram  when  it  is  determined  that  the  products  have  been  delivered 
via  third  party  common  carrier  to  Nathan’s  customers.  Rebates  to 
customers are recorded as a reduction to sales. Nathan’s recognizes 
revenue  from  its  Branded  Menu  Program  for  the  sale  of  hot  dogs  
in  the  same  way  as  for  its  Branded  Product  Program,  and  royalty 
income when it has been determined that other qualifying products 
have  been  sold  by  the  manufacturer  to  Nathan’s  Branded  Menu 
Program franchisees.

  Revenue  from  sub-leasing  properties  is  recognized  as  income 
as  the  revenue  is  earned  and  becomes  receivable  and  deemed  col-
lectible. Sub-lease rental income is presented net of associated lease 
costs in the consolidated statements of earnings.

  Nathan’s  recognizes  revenue  from  royalties  on  the  licensing  
of the use of its name on certain products produced and sold by out-
side  vendors.  The  use  of  the  Nathan’s  name  and  symbols  must  be 
approved  by  Nathan’s  prior  to  each  specific  application  to  ensure 
proper quality and project a consistent image. Revenue from license 
royalties is recognized when it is earned and deemed collectible.

In  the  normal  course  of  business,  we  extend  credit  to  fran-
chisees  and  licensees  for  the  payment  of  ongoing  royalties  and  to 
trade  customers  of  our  Branded  Product  Program.  Accounts  and 
other receivables, net, as shown on our consolidated balance sheets 
are net of allowances for doubtful accounts. An allowance for doubt-
ful accounts is determined through analysis of the aging of accounts 
receivable  at  the  date  of  the  financial  statements,  assessment  of  
collectibility  based  upon  historical  trends  and  an  evaluation  of  the 
impact  of  current  and  projected  economic  conditions.  In  the  event 
that the collectibility of a receivable at the date of the transaction is 
doubtful, the associated revenue is not recorded until the facts and 
circumstances change in accordance with Staff Accounting Bulletin 
(“SAB”) No. 104, “Revenue Recognition.” The Company writes off 
accounts receivable when they are deemed uncollectible.

Impairment of Goodwill and Other Intangible Assets

  Statement of Financial Accounting Standards No. 142, “Good-
will  and  Other  Intangible  Assets,”  (“SFAS  No.  142”)  requires  that 
goodwill and intangible assets with indefinite lives not be amortized 
but  tested  annually  (or  more  frequently  if  events  or  changes  in  
circumstances  indicate  the  carrying  value  may  not  be  recoverable) 
for  impairment.  The  most  significant  assumptions,  which  are  used 
in  this  test,  are  estimates  of  future  cash  flows.  We  typically  use  
the same assumptions for this test as we use in the development of  
our  business  plans.  If  these  assumptions  differ  significantly  from 
actual  results,  impairment  charges  may  be  required  in  the  future. 
We  conducted  our  annual  impairment  tests  and  no  goodwill  or  
other  intangible  assets  were  determined  to  be  impaired  during  the 
fifty-two  week  period  ended  March  29,  2009,  the  fifty-three  week 
period ended March 30, 2008 and the fifty-two week period ended 
March 25, 2007.

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Impairment of Long-Lived Assets

  Statement  of  Financial  Accounting  Standards  No.  144, 
“Accounting for the Impairment or Disposal of Long-Lived Assets,” 
(“SFAS No. 144”) requires management to make judgments regard-
ing the future operating and disposition plans for under-performing 
assets,  and  estimates  of  expected  realizable  values  for  assets  to  be 
sold. We evaluate possible impairment of each restaurant individu-
ally and record an impairment charge whenever we determine that 
impairment factors exist. We consider a history of restaurant operat-
ing  losses  to  be  the  primary  indicator  of  potential  impairment  of  
a  restaurant’s  carrying  value.  During  the  fifty-two  week  period 
ended March 29, 2009, the fifty-three week period ended March 30, 
2008  and  the  fifty-two  week  period  ended  March  25,  2007,  no 
impairment charges on long-lived assets were recorded.

Impairment of Notes Receivable

  Statement  of  Financial  Accounting  Standards  No.  114, 
“Accounting by Creditors for Impairment of a Loan,” as amended, 
requires  management  judgments  regarding  the  future  collectibility 
of  notes  receivable  and  the  underlying  fair  market  value  of  collat-
eral.  We  consider  the  following  factors  when  evaluating  a  note  for 
impairment:  a)  indications  that  the  borrower  is  experiencing  busi-
ness problems, such as payment history, operating losses, marginal 
working  capital,  inadequate  cash  flow  or  business  interruptions;  
b) whether the loan is secured by collateral that is not readily mar-
ketable; and/or c) whether the collateral is susceptible to deteriora-
tion in realizable value. When determining possible impairment, we 
also expect to assess the debtor’s ability to meet its obligation over 
the projected note term and our future intention to enter into a new 
lease or extend the lease beyond the minimum lease term, if appli-
cable. During the fifty-two week period ended March 29, 2009, the 
fifty-three  week  period  ended  March  30,  2008  and  the  fifty-two 
week period ended March 25, 2007, no impairment charges on notes 
receivable were recorded.

Stock-Based Compensation

  As discussed in Note B of the Notes to Consolidated Financial 
Statements,  we  have  various  share-based  compensation  plans  that 
provide stock options and restricted stock awards for certain employ-
ees  and  non-employee  directors  to  acquire  shares  of  our  common 
stock. We consider the following factors in determining the value of 
stock based compensation:

  a)    expected  option  term  based  upon  expected  termination 

behavior;

  b)   volatility  based  upon  historical  price  changes  of  the  Com-
pany’s  common  stock  over  a  period  equal  to  the  expected 
life of the option;

  c)   expected dividend yield; and
  d)   risk free interest rate on date of grant.

  During  fiscal  years  ended  March  29,  2009,  March  30,  2008, 
and  March  25,  2007,  we  recorded  share-based  compensation  
expense  of  $492,000,  $432,000,  and  $367,000,  respectively.  (See 
Note  B  of  the  Consolidated  Financial  Statements  for  a  discussion  
of  assumptions  used  to  determine  the  fair  value  of  share-based 
compensation.)

Income Taxes

  The  Company’s  current  provision  for  income  taxes  is  based 
upon  its  estimated  taxable  income  in  each  of  the  jurisdictions  in 
which  it  operates,  after  considering  the  impact  on  our  taxable 
income of temporary differences resulting from different treatment 
of  items  such  as  depreciation,  estimated  self-insurance  liabilities, 
allowance for  doubtful  accounts  and  tax  credits  and  net  operat-
ing  losses  (“NOL”)  for  tax  and  reporting  purposes.  Deferred  tax 
assets and liabilities are recognized for the future tax consequences 
attributable to differences between the financial statement carrying 
amounts  of  existing  assets  and  liabilities  and  their  respective  tax 
bases and operating loss and tax credit carryforwards. Deferred tax 
assets and liabilities are measured using enacted tax rates expected 
to apply to taxable income in the year in which those temporary dif-
ferences are expected to be recovered or settled.

Uncertain Tax Positions

  The  Financial  Accounting  Standards  Board  (“FASB”)  issued 
Interpre tation  No.  48,  “Accounting  for  Uncertainty  in  Income 
Taxes—an  interpretation  of  FASB  Statement  No.  109,  Accounting 
for  Income  Taxes”  (“FIN  No.  48”),  which  was  adopted  by  the 
Company  on  March  26,  2007.  FIN  No.  48  addresses  the  determi-
nation  of  whether  tax  benefits  claimed  or  expected  to  be  claimed  
on  a  tax  return  should  be  recorded  in  the  financial  statements.  
Under  FIN  No.  48,  the  Company  may  recognize  the  tax  benefit  
from an uncertain tax position only if it is more likely than not that 
the  tax  position  will  be  sustained  on  examination  by  the  taxing 
authorities  based  on  the  technical  merits  of  the  position.  The  tax 
benefits  recognized  in  the  financial  statements  from  such  position 
should  be  measured  based  on  the  largest  benefit  that  has  a  greater 
than fifty percent likelihood of being realized upon ultimate settle-
ment. FIN No. 48 also provides guidance on derecognition, classifi-
cation,  interest  and  penalties,  accounting  in  interim  periods  and 
disclosure  requirements.  (See  Note  J  of  the  Notes  to  Consolidated 
Financial Statements.)

Adoption of New Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board 
issued  SFAS  No.  157,  “Fair  Value  Measurements”  (“SFAS  No. 
157”),  to  eliminate  the  diversity  in  practice  that  existed  due  to  
the  different  definitions  of  fair  value.  SFAS  No.  157  retained  the 
exchange price notion in earlier definitions of fair value, but clari-
fied  that  the  exchange  price  is  the  price  in  an  orderly  transaction  

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(continued)

between market participants to sell an asset or liability in the princi-
pal or most advantageous market for the asset or liability. SFAS No. 
157  stated  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  mea-
surement 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). SFAS No. 157 also established 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  issued  FASB  Staff  Position  No. 
157-2, “Effective Date of FASB Statement No. 157,” which delayed 
the effective date of SFAS No. 157 for all non-financial assets and 
non-financial liabilities, except for items that are recognized or dis-
closed at fair value in the financial statements on a recurring basis 
(at least annually). Nathan’s adopted the provisions of SFAS No. 157 
on March 31, 2008 and elected the deferral option for non-financial 
assets and liabilities. The effect on our consolidated financial posi-
tion  and  results  of  operations  of  adopting  this  standard  was  not 
significant.

In  October  2008,  the  FASB  issued  FASB  Staff  Position  
No. 157-3, “Determining the Fair Value of a Financial Asset When 
the  Market  for  That  Asset  Is  Not  Active”  (“FSP  No.  157-3”).  FSP 
No. 157-3 applies to financial assets within the scope of accounting 
pronouncements  that  require  or  permit  fair  value  measurements  in 
accordance  with  SFAS  No.  157.  FSP  No.  157-3  clarifies  the  appli-
cation of SFAS No. 157 in a market that is not active and provides  
an example to illustrate key conditions in determining the fair value 
of  a  financial  asset  when  the  market  for  that  financial  asset  is  not 
active.  FSP  No.  157-3  became  effective  upon  issuance,  including 
prior  periods  for  which  financial  statements  have  not  been  
issued. Nathan’s adopted the provisions of  FSP No. 157-3 effective 
September  28,  2008.  The  effect  on  our  consolidated  financial  
position  and  results  of  operations  of  adopting  this  standard  was  
not significant.

  The effect on our consolidated financial position and results of 

operations of adopting these standards was not significant.

  The valuation hierarchy established by SFAS No. 157 is based 
upon the transparency of inputs to the valuation of an asset or lia-
bility  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 unobserv-
able  and  significant  to  the  fair  value  measurement  of  the 
asset or liability.

  The following table presents the Company’s assets and liabili-
ties measured at fair value on a recurring basis as of March 29, 2009 
by SFAS No. 157 valuation hierarchy: (in thousands)

Level 1

Level 2

Level 3

Marketable securities

Total assets at fair value

$—

$—

$25,670

$25,670

$—

$—

Carrying 
Value

$25,670

$25,670

  Nathan’s  marketable  securities,  which  primarily  represent 
municipal  bonds,  are  not  actively  traded.  The  valuation  of  such 
bonds  is  based  upon  quoted  market  prices  for  similar  bonds  cur-
rently 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 MSC 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.

In  February  2007,  the  FASB  issued  SFAS  No.  159,  “The  Fair 
Value  Option  for  Financial  Assets  and  Financial  Liabilities—
Including  an  amendment  of  FASB  Statement  No.  115”  (“SFAS  
No.  159”).  This  standard  amends  SFAS  No.  115,  “Accounting  for 
Certain  Investments  in  Debt  and  Equity  Securities,”  with  respect  
to  accounting  for  a  transfer  to  the  trading  category  for  all  entities 
with available-for-sale and trading securities electing the fair value 
option. SFAS No. 159 allows companies to elect fair value account-
ing  for  many  financial  instruments  and  other  items  that  currently  
are not required to be accounted for as such, allows different appli-
cations for electing the option for a single item or groups of items, 
and  requires  disclosures  to  facilitate  comparisons  of  similar  assets 
and  liabilities  that  are  accounted  for  differently  in  relation  to  the  
fair value option. Nathan’s adopted the provisions of SFAS No. 159 
on March  31, 2008.  The adoption of  SFAS No. 159 had no impact  
on  our  consolidated  financial  position  and  results  of  operations  
as Nathan’s did not elect the fair value option to report its financial 
assets and liabilities at fair value and elected to continue the treat-
ment  of  its  marketable  securities  as  available-for-sale  securities  
with  unrealized  gains  and  losses  recorded  in  accumulated  other 
comprehensive income.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy 
of  Generally  Accepted  Accounting  Principles”  (“SFAS  No.  162”). 
SFAS No. 162 identifies the sources of accounting principles and the 
framework for selecting the principles to be used in the preparation 
of  financial  statements  of  nongovernmental  entities  that  are  pre-
sented  in  conformity  with  GAAP.  SFAS  No.  162  became  effective 
on November 15, 2008. We adopted SFAS No. 162 during our fiscal  

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quarter ended December 28, 2008. Our adoption of SFAS No. 162  
did  not  have  any  effect  on  our  consolidated  financial  position  and 
results of operations.

New Accounting Pronouncements Not Yet Adopted

In December 2007, the Financial Accounting Standards Board 
(“FASB”)  issued  SFAS  No.  141  (revised  2007),  “Business 
Combinations”  (“SFAS  No.  141R”),  which  establishes  principles 
and  requirements  for  how  an  acquirer  recognizes  and  measures  in 
its  financial  statements  the  identifiable  assets  acquired,  the  lia-
bilities  assumed,  and  any  noncontrolling  interest  in  an  acquiree, 
including the recognition and measurement of goodwill acquired in 
a business combination.

  The  requirements  of  SFAS  No.  141R  and  FSP  No.  141R-1  
are  effective  for  fiscal  years  beginning  on  or  after  December  15, 
2008, which for us is fiscal 2010. Earlier adoption is prohibited. The 
adoption  of  SFAS  No.  141R  and  FSP  No.  141R-1  will  impact  our 
accounting for future business combinations, if any.

In December 2007, the FASB issued SFAS No. 160, “Noncon-
trolling Interests in Consolidated Financial Statements—an amend-
ment  of  ARB  No.  51”  (“SFAS  No.  160”).  SFAS  No.  160  amends 
ARB No. 51 to establish 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  statement  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  con-
solidated net income attributable to the parent and to the noncontrol-
ling interest. SFAS No. 160 is effective for fiscal years and interim 
periods  within  those  fiscal  years,  beginning  on  or  after  December 
15,  2008,  which  for  us  is  the  first  quarter  of  fiscal  2010.  Earlier 
adoption  is  prohibited.  Based  upon  Nathan’s  current  organization 
structure, we do not expect the implementation of SFAS No. 160 to 
have  any  impact  on  our  consolidated  financial  position  and  results  
of operations.

In April 2008, the FASB issued FASB Staff Position No. 142-3 
(“FSP No. 142-3”), “Determination of the Useful Life of Intangible 
Assets,”  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  under  SFAS  No.  142, 
“Goodwill and Other Intangible Assets.” FSP No. 142-3 is effective 
for  fiscal  years  beginning  after  December  15,  2008,  which  for  us  
is the first quarter of fiscal 2010. We do not expect the adoption of 
FSP No. 142-3 to have a material effect on our consolidated finan-
cial position and results of operations.

In  June  2008,  the  FASB  ratified  Emerging  Issues  Task  Force 
08-3  (“EITF  08-3”),  “Accounting  by  Lessees  for  Maintenance 
Deposits,” which provides guidance for accounting for maintenance 
deposits paid by a lessee to a lessor. EITF 08-3 is effective for fiscal 
years beginning after December 15, 2008, which for us is the first 
quarter of fiscal 2010. We do not expect the adoption of EITF 08-3 
to  have  a  significant  impact  on  our  consolidated  financial  position 
and results of operations.

In  April  2009,  the  FASB  issued  FASB  Staff  Position  No.  
141R-1,  “Accounting  for  Assets  Acquired  and  Liabilities  Assumed  
in a Business Combination That Arises from Contingencies” (“FSP 
No.  141R-1”),  which  provides  guidelines  on  the  initial  recognition 
and  measurement,  subsequent  measurement  and  accounting,  and 
disclosure  of  assets  and  liabilities  arising  from  contingencies  in  a 
business  combination.  FSP  No.  141R-1  provides  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.  FSP  
No. 141R-1 provides guidance in the event that the fair value of an 
asset acquired or liability assumed cannot be determined during the 
measurement period. FSP No. 141R-1 provides that an acquirer shall 
develop a systematic and rational basis for subsequently measuring 
and accounting for assets and liabilities arising from contingencies 
and  also  provides  for  the  disclosure  requirements.  FSP  No.  141R-1  
is  effective  for  assets  or  liabilities  arising  from  contingencies  in 
business combinations for which the acquisition date is on or after 
the  beginning  of  the  first  annual  reporting  period  beginning  on  or 
after December 15, 2008.

In April 2009, the FASB issued FASB Staff Position No. 157-4, 
“Determining  Fair  Value  When  the  Volume  and  Level  of  Activity 
for the Asset or Liability Have Significantly Decreased and Identi-
fying Transactions That Are Not Orderly,” (“FSP No. 157-4”) which 
provides  guidelines  for  a  broad  interpretation  of  when  to  apply  
market-based  fair  value  measurements.  FSP  No.  157-4  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. FSP No. 157-4 is effec-
tive for interim and annual periods ending after June 15, 2009, but 
may  be  early  adopted  for  the  interim  and  annual  periods  ending 
after  March  15,  2009.  Nathan’s  will  adopt  the  provisions  of  FSP  
No. 157-4 on March 30, 2009. We do not expect the adoption of FSP 
No.  157-4  to  have  a  material  effect  on  our  consolidated  financial 
position and results of operations.

In April 2009, the FASB issued FASB Staff Position Nos. FAS 
115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-
Temporary  Impairments,”  (“FSP  No.  115-2  and  FSP  No.  124-2”) 
which segregate credit and noncredit components of impaired debt 
securities  that  are  not  expected  to  be  sold.  Impairments  will  still  

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(continued)

have  to  be  measured  at  fair  value  in  other  comprehensive  income. 
The  FSPs  also  require  some  additional  disclosures  regarding 
expected  cash  flows,  credit  losses,  and  an  aging  of  securities  with 
unrealized  losses.  These  FSPs  are  effective  for  interim  and  annual 
periods ending after June 15, 2009, but may be early adopted for the 
interim  and  annual  periods  ending  after  March  15,  2009.  Nathan’s 
will  adopt  the  provisions  of  FSP  No.  115-2  and  FSP  No.  124-2  on 
March  30,  2009.  We  do  not  expect  the  adoption  of  FSP  No.  115-2 
and  FSP  No.  124-2  to  have  a  material  effect  on  our  consolidated 
financial position and results of operations.

In April 2009, the FASB issued FASB Staff Position Nos. FAS 
107-1  and  APB  28-1,  “Interim  Disclosures  about  Fair  Value  of 
Financial  Instruments,”  which  increase  the  frequency  of  fair  value 
disclosures  to  a  quarterly  basis  instead  of  annually.  The  guidance 
relates to fair value disclosures for any financial instruments that are 
not  currently  reflected  on  the  balance  sheet  at  fair  value.  Prior  to 
these  FSPs,  fair  values  for  these  assets  and  liabilities  were  only  
disclosed  once  a  year.  These  FSPs  are  effective  for  interim  and 
annual periods ending after June 15, 2009, but may be early adopted 
for  the  interim  and  annual  periods  ending  after  March  15,  2009. 
Nathan’s  will  adopt  the  provisions  of  FSP  No.  107-1  and  APB  
No.  28-1  on  March  30,  2009.  We  do  not  expect  the  adoption  of  
FSP  No.  107-1  and  APB  No.  28-1  to  have  a  material  effect  on  our 
consolidated financial position and results of operations.

Results of Operations

Fiscal Year Ended March 29, 2009 Compared to Fiscal Year 
Ended March 30, 2008

Revenues from Continuing Operations

  Total sales increased by $1,221,000 or 3.4% to $37,480,000 for 
the  fifty-two  weeks  ended  March  29,  2009  (“fiscal  2009  period”)  
as compared to $36,259,000 for the fifty-three weeks ended March 
30,  2008  (“fiscal  2008  period”).  Total  sales  generated  during  the 
extra  week  during  the  fiscal  2008  period  were  approximately 
$528,000.  On  a  comparative  basis,  the  sales  increase  would  have 
been  approximately  $1,749,000  or  4.9%.  Sales  from  the  Branded 
Product  Program  increased  by  12.3%  to  $23,182,000  for  the  fiscal 
2009 period as compared to sales of $20,647,000 in the fiscal 2008 
period.  This  increase  was  primarily  attributable  to  price  increases  
of  6.3%,  increased  sales  volume  of  approximately  5.2%  and  the 
reversal  of  rebate  accruals  and  forfeitures  in  the  amount  of  0.9%. 
Sales of Branded Products during the extra week in fiscal 2008 were 
approximately  $316,000.  Total  Company-owned  restaurant  sales 
(representing  four  comparable  Nathan’s  restaurants,  one  seasonal 
restaurant and one restaurant that was transferred to a franchisee on 
January  26,  2009)  were  $12,511,000  for  the  fiscal  2009  period  as 
compared to $13,142,000 during the fiscal 2008 period. Sales at the 
five  remaining  Company-owned  restaurants  were  $11,955,000  
during  the  fiscal  2009  period,  as  compared  to  $12,382,000  during 
the  fiscal  2008  period.  Sales  during  the  extra  week  in  fiscal  2008 

were approximately $212,000. Sales declined at our four compara-
ble  Company-owned  restaurants  commencing  in  September  2008 
for  the  balance  of  the  fiscal  2009  period,  with  the  most  severe 
decline during September and October 2008, with declines of 18.6% 
and  11.6%,  respectively,  from  the  same  months  in  the  fiscal  2008 
period. We also realized a sales decline of 6.8% during the period 
from January through March 2009, after adjusting for the additional 
week in the fiscal 2008 period. We believe these declines were pri-
marily due to the economic recession. During the fiscal 2009 period, 
sales  to  our  television  retailer  were  approximately  $683,000  lower 
than the fiscal 2008 period. Nathan’s products were on air 50 times 
during  the  fiscal  2009  period  as  compared  to  55  times  during  the 
fiscal 2008 period, last year’s airings included 15 “Try Me” special 
promotions and two, half-hour food shows, which have historically 
produced higher sales.

  Franchise fees and royalties decreased by $349,000 or 7.0% to 
$4,613,000  in  the  fiscal  2009  period  as  compared  to  $4,962,000  
in  the  fiscal  2008  period.  Total  royalties  were  $3,966,000  in  the  
fiscal  2009  period  as  compared  to  $4,131,000  in  the  fiscal  2008 
period. During the fiscal 2009 period, we did not recognize revenue 
of  $198,000  for  royalties  deemed  to  be  uncollectible  as  compared  
to  the  fiscal  2008  period,  when  we  did  not  recognize  $19,000  of 
royalty income. Total royalties, excluding the adjustments for royal-
ties  deemed  uncollectible  as  described  above,  were  $4,164,000  in 
the  fiscal  2009  period  as  compared  to  $4,150,000  in  the  fiscal  
2008 period. Royalties earned during the extra week in fiscal 2008 
were  approximately  $59,000.  During  the  fiscal  2009  period, 
Nathan’s  earned  $142,000  of  higher  royalties  from  sales  by  our  
manufacturers  and  primary  distributor  under  our  Branded  Menu 
Program. Franchise restaurant sales were $92,408,000 in the fiscal 
2009 period as compared to $96,713,000 in the fiscal 2008 period 
including  approximately  $1,500,000  from  the  extra  week. 
Comparable  domestic  franchise  sales  (consisting  of  133  Nathan’s 
outlets,  excluding  sales  under  the  Branded  Menu  Program)  were 
$67,145,000  in  the  fiscal  2009  period  as  compared  to  $72,267,000  
in  the  fiscal  2008  period.  Franchise  sales  have  been  negatively 
affected since September 2008, which we believe is due to the eco-
nomic  recession.  Approximately  87%  of  the  sales  decline  during  
the  fiscal  2009  period  occurred  from  September  through  March 
2009, predominantly at our travel, retail and entertainment venues. 
At  March  29,  2009,  249  domestic  and  international  franchised  or 
Branded  Menu  Program  franchise  outlets  were  operating  as  com-
pared  to  224  domestic  and  international  franchised  or  Branded 
Menu Program franchise outlets at March 30, 2008. Royalty income 
from  14  domestic  franchised  outlets  was  deemed  unrealizable  dur-
ing the fifty-two weeks ended March 29, 2009, as compared to two 
franchised  outlets  during  the  fifty-three  weeks  ended  March  30, 
2008.  Domestic  franchise  fee  income  was  $504,000  in  the  fiscal 
2009 period as compared to $586,000 in the fiscal 2008 period, due 
to  lower  average  fee  per  domestic  opening  and  lower  fees  earned 
from  restaurant  transfers  of  $31,000.  International  franchise  fee 
income  was  $97,000  in  the  fiscal  2009  period,  as  compared  to 

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$160,000  during  the  fiscal  2008  period  primarily  due  to  fewer  
openings  of  international  franchised  restaurants.  During  the  fiscal 
2009  period,  46  new  franchised  outlets  opened,  including  30 
Branded Menu Program outlets, two units in Kuwait and one unit in 
Dubai.  During  the  fiscal  2008  period,  46  new  franchised  outlets 
were  opened,  including  28  Branded  Menu  Program  outlets,  four 
units in Kuwait and one unit in the Dominican Republic.

  License  royalties  increased  by  $1,160,000  or  23.9%  to 
$6,009,000  in  the  fiscal  2009  period  as  compared  to  $4,849,000  
in the fiscal 2008 period. Generally, our licensees report sales and 
royalties  based  on  their  own  fiscal  periods  or  a  calendar  basis. 
Therefore we do not believe the additional week in the fiscal 2008 
period had a significant impact on royalties. Total royalties earned 
on sales of hot dogs from our retail and foodservice license agree-
ments of $4,574,000 increased 26.5% from $3,616,000 as a result of 
higher licensee sales during the fiscal 2009 period. Royalties earned 
from  SFG,  primarily  from  the  retail  sale  of  hot  dogs,  were 
$3,329,000 during the fiscal 2009 period as compared to $3,154,000 
during  the  fiscal  2008  period.  Royalties  earned  from  another 
licensee,  substantially  from  sales  of  hot  dogs  to  Sam’s  Club,  were 
$1,245,000 during the fiscal 2009 period as compared to $462,000 
during  the  fiscal  2008  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. We earned higher revenues of $301,000 from our agreement 
for  the  manufacture  of  Nathan’s  proprietary  ingredients,  including 
$234,000 received as a result of the settlement of a multi-year dis-
crepancy  under  that  agreement  related  to  the  unauthorized  use  of 
certain ingredients. We earned lower royalties of $61,000 from our 
agreement  for  the  sale  of  Nathan’s  pet  treats,  primarily  because 
there was a substantial sales promotion supporting the introduction 
of our pet treats into Wal-Mart during the fiscal 2008 period that did 
not occur in fiscal 2009. Net royalties from our other seven license 
agreements  in  the  fiscal  2009  period  were  $38,000  less  than  the  
fiscal 2008 period.

Interest  income  was  $1,056,000  in  the  fiscal  2009  period  as 
compared to $1,084,000 in the fiscal 2008 period, primarily due to 
lower interest income on our invested cash and marketable securities 
due  primarily  to  the  reduced  interest  rate  environment  and  the 
liquidity crisis which caused Nathan’s to shift its short-term invest-
ments  into  more  secure,  but  low  yielding,  Treasury  Bills  earlier  in 
the  year.  During  the  second  and  third  quarters  of  the  fiscal  2009 
period, we began investing additional cash into longer-term munici-
pal securities. Interest earned on our MSC Note (as defined) receiv-
able, received in connection with the sale of Miami Subs on June 7, 
2007,  was  $152,000  in  the  fiscal  2009  period  as  compared  to 
$155,000 in the fiscal 2008 period. This decrease was primarily due 
to  the  principal  payments  received  on  the  MSC  Note  even  though 
the  note  was  outstanding  for  12  months  during  the  fiscal  2009 
period  as  compared  to  nine  months  during  the  fiscal  2008  period 
due to the fact that the MSC Note is self-amortizing.

  Other  income  was  $63,000  in  the  fiscal  2009  period  as  com-
pared to $71,000 in the fiscal 2008 period. During the fiscal 2008 
period, Nathan’s earned a $30,000 consent fee in connection with a 
licensee’s refinancing.

Costs and Expenses from Continuing Operations

  Overall,  our  cost  of  sales  increased  by  $1,704,000  to 
$28,774,000 in the fiscal 2009 period as compared to $27,070,000 
in the fiscal 2008 period. Our gross profit (representing the differ-
ence  between  sales  and  cost  of  sales)  was  $8,706,000  or  23.2%  of 
sales  during  the  fiscal  2009  period  as  compared  to  $9,189,000  
or  25.3%  of  sales  during  the  fiscal  2008  period.  In  the  Branded 
Product  Program,  our  cost  of  sales  increased  by  approximately 
$2,512,000  during  the  fiscal  2009  period  when  compared  to  the  
fiscal  2008  period,  primarily  as  a  result  of  an  approximate  10.7% 
increase  in  the  cost  of  our  hot  dogs,  as  well  as  increased  sales  
volume.  The  increase  in  the  cost  of  our  hot  dogs  would  have  been 
approximately 13.5% but for the purchase commitment we entered 
into in January 2008, which locked in a fixed cost on approximately 
1.8 million pounds of hot dogs and resulted in a savings of approxi-
mately $462,000 during the fiscal 2009 period. These savings offset 
some of the effects of the substantially higher commodity costs for 
beef  and  beef  trimmings.  The  cost  of  beef  and  beef  trimmings 
increased through August 2008, reaching the highest level since the 
inception of the Branded Product Program. During the fourth quar-
ter of the fiscal 2009 period, these costs have declined by approxi-
mately 17.5% from August 2008. However, despite this decline, the 
cost  of  beef  and  beef  trimmings  in  the  fiscal  2009  period  is  still 
significantly higher than the prior year. Since January 2009, the cost 
of beef and beef trimmings have increased, causing our per-pound 
beef costs to increase by approximately 7% over the fourth quarter 
of the fiscal 2008 period. In an effort to offset the increased cost of 
our  hot  dogs,  beginning  in  July  2008,  we  initiated  price  increases  
in  our  Branded  Product  Program.  If  the  cost  of  beef  and  beef  
trimmings  does  not  decline  and  we  are  unable  to  pass  on  these 
higher costs through price increases, our margins will continue to be 
adversely impacted.

  With  respect  to  our  Company-owned  restaurants,  our  cost  
of sales during the fiscal 2009 period was $7,582,000 or 60.6% of 
restaurant sales, as compared to $7,856,000 or 59.8% of restaurant 
sales  in the fiscal 2008 period. During  the fiscal 2009 period, our 
Company-owned  stores  experienced  higher  food  and  direct  labor 
costs, which were partly offset by other slightly lower labor-related 
costs as a percentage of sales. The higher food cost as a percentage 
of sales was due primarily to the higher commodity cost of our hot 
dogs, hamburgers, cooking oil, bread and fish, which were partially 
mitigated  by  our  sales  price  increases  for  select  menu  items  of 
between  3.0%  and  7.3%.  Cost  of  sales  to  our  television  retailer 
declined  by  $534,000  in  the  fiscal  2009  period,  primarily  due  to 
lower  sales  volume  which  was  partly  offset  by  our  higher  cost  of  
hot dogs.

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  Restaurant  operating  expenses  increased  by  $104,000  to 
$3,361,000 in the fiscal 2009 period as compared to $3,257,000 in 
the  fiscal  2008  period.  The  increase  during  the  fiscal  2009  period 
when  compared  to  the  fiscal  2008  period  resulted  primarily  from 
higher  utility  costs  of  $88,000,  occupancy  costs  of  $28,000  and  
various  other  costs  of  $63,000,  which  were  partly  offset  by  lower 
marketing costs of $36,000 and insurance costs of $12,000. During 
the  fiscal  2009  period  our  utility  costs  were  approximately  12.8% 
higher  than  the  fiscal  2008  period.  Despite  reductions  in  the  com-
modity  markets  for  oil  and  natural  gas  over  the  past  nine  months,  
we  remain  concerned  over  the  uncertain  market  conditions  for  oil 
and  natural  gas.  We  may  continue  to  incur  higher  utility  costs  in  
the future.

  Depreciation and amortization was $809,000 in the fiscal 2009 

period as compared to $764,000 in the fiscal 2008 period.

  General  and  administrative  expenses  increased  by  $373,000  
or  4.2%  to  $9,299,000  in  the  fiscal  2009  period  as  compared  to 
$8,926,000  in  the  fiscal  2008  period.  The  difference  in  general  
and  administrative  expenses  was  due  to  an  increase  in  bad  debts  
of  $172,000  and  higher  legal  fees  of  $83,000  during  the  fiscal  
2009  period  primarily  associated  with  Nathan’s  litigation  against 
SFG  (See  Note  L  to  the  Consolidated  Financial  Statements).  The 
actual  amount  and  timing  of  future  SFG  litigation  costs  is  not  
presently  determinable.  We  also  incurred  higher  accounting  fees  
of $78,000 in the fiscal 2009 period related to Nathan’s compliance 
with  Section  404  of  the  Sarbanes-Oxley  Act  of  2002  (“SOX”), 
requiring  Nathan’s  auditor  to  audit  Nathan’s  internal  controls  over 
financial  reporting,  a  $61,000  increase  in  Nathan’s  stock-based  
compensation  expense  and  higher  income  tax  preparation  fees  of 
$53,000 due partly to the fiscal 2009 tax examinations which were 
partly offset by various reductions, principally $82,000 of expense 
incurred during the additional week of the fiscal 2008 period.

  Recovery of property taxes of $441,000 recorded in the second 
quarter fiscal 2009 period represents the settlement of a multi-year 
certiorari proceeding at one of the Company-owned restaurants, net 
of fees.

Provision for Income Taxes from Continuing Operations

In  the  fiscal  2009  period,  the  income  tax  provision  was 
$2,461,000  or  33.2%  of  income  from  continuing  operations  before 
income taxes as compared to $2,427,000 or 33.7% of income from 
continuing operations before income taxes in the fiscal 2008 period. 
For  the  fiscal  years  ended  March  29,  2009  and  March  30,  2008, 
Nathan’s tax provision, excluding the effects of tax-exempt interest 
income, was 37.7% and 38.5%, respectively.

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.

  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  fifty-two  weeks  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  gains  on  disposal,  have  been  presented 
as discontinued operations for all periods presented.

  On June 7, 2007, Nathan’s completed the sale of 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 MSC Note. The MSC Note bears inter-
est 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 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  the  additional  $250,000  was  initially  deferred.  The 
MSC  Note  was  not  prepaid  within  the  requisite  timeframe  and 
Nathan’s recognized the deferred amount of $250,000 as additional 
gain and initially recorded estimated income taxes of $92,000 dur-
ing the first quarter ended June 29, 2008. Effective August 31, 2008, 
Nathan’s  and  the  Purchaser  agreed  to  extend  the  due  date  of  the 
MSC Note from its initial four-year term until April 2014, to reduce 
the  monthly  payments  and  to  settle  certain  claims  under  the  MSC 
Agreement.  In  accordance  with  the  MSC  Agreement,  Nathan’s 
retained ownership of Miami Subs’ then-owned corporate office in 
Fort Lauderdale, Florida.

  Nathan’s initially realized a gain on the sale of Miami Subs of 
$983,000, net of professional fees of $37,000 and recorded income 
taxes  of  $356,000  on  the  gain  during  the  fiscal  2008  period. 
Nathan’s  also  recognized  an  additional  gain  of  $250,000,  or 
$153,000  net  of  tax,  during  the  fiscal  2009  period,  resulting  from 
the contingent consideration which was deferred at the time of sale. 
Nathan’s  has  determined  that  it  will  not  have  any  significant  cash 
flows or continuing involvement in the ongoing operations of Miami 
Subs. Therefore, the results of operations for Miami Subs, including 
the  gains  on  disposal,  have  been  presented  as  discontinued  opera-
tions for all periods presented.

  During  the  fiscal  2008  period,  Nathan’s  completed  a  Lease 
Termination  Agreement  with  respect  to  three  leased  properties  in 
Fort  Lauderdale,  Florida,  with  its  landlord,  and  CVS  3285  FL, 
L.L.C., (“CVS”) to sell its leasehold interests to CVS for $2,000,000. 
As the properties were subject to certain sublease and management 
agreements  between  Nathan’s  and  the  then-current  occupants, 
Nathan’s  made  payments  to,  or  forgave  indebtedness  of,  the  then-
current occupants of the properties and paid brokerage commissions 
of $494,000 in the aggregate. Nathan’s made the properties available 
to CVS by May 29, 2007, and Nathan’s received the proceeds of the  

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sale on June 5, 2007. Nathan’s recognized a gain of $1,506,000 and 
recorded  income  taxes  of  $557,000  during  the  fiscal  2008  period. 
The results of operations for these properties, including the gain on 
disposal, have been included as discontinued operations for all peri-
ods presented.

Fiscal Year Ended March 30, 2008 Compared to Fiscal Year 
Ended March 25, 2007

Revenues from Continuing Operations

  Total sales increased by $2,834,000 or 8.5% to $36,259,000 for 
the fifty-three weeks ended March 30, 2008 (“fiscal 2008 period”) 
as  compared  to  $33,425,000  for  the  fifty-two  weeks  ended  March 
25, 2007 (“fiscal 2007 period”). We estimate that sales which arose 
during the additional week included in the fiscal 2008 period were 
approximately $528,000. Sales from the Branded Product Program 
increased  by  10.0%  to  $20,647,000  for  the  fiscal  2008  period  as 
compared  to  sales  of  $18,774,000  in  the  fiscal  2007  period.  This 
increase  was  primarily  attributable  to  increased  sales  volume  of 
8.3%.  During  the  fiscal  2008  period,  approximately  1,200  new 
accounts were opened. Total Company-owned restaurant sales (rep-
resenting  five  comparable  Nathan’s  restaurants  and  one  seasonal 
restaurant)  increased  by  10.8%  to  $13,142,000  as  compared  to 
$11,863,000  during  the  fiscal  2007  period.  During  the  fiscal  2008 
period, we experienced very favorable weather conditions during the 
summer  season  that  had  a  positive  impact  on  sales  at  our  Coney 
Island locations. However, during December 2007, the unfavorable 
weather conditions in the Northeast had a negative impact on sales 
at  our  Company-owned  locations  as  compared  to  December  2006. 
Nevertheless, the overall weather conditions during the fiscal 2008 
period  had  a  positive  impact  on  the  sales  of  our  Company-owned 
restaurants.  During  the  fiscal  2008  period,  sales  to  our  television 
retailer  were  approximately  $318,000  lower  than  the  fiscal  2007 
period.  Our  television  retailer  reduced  its  number  of  special  food 
airings during the fiscal 2008 period. As a result, Nathan’s did not 
run a “Today’s Special Value” which ran during the first quarter fis-
cal  2007.  Nathan’s  products  were  on  air  55  times  during  the  fiscal 
2008 period as compared to 59 times during the fiscal 2007 period, 
which included eight “Today’s Special Value” airings.

  Franchise fees and royalties increased by $523,000 or 11.8% to 
$4,962,000 in the fiscal 2008 period compared to $4,439,000 in the 
fiscal 2007 period. Franchise royalties were $4,131,000 in the fiscal 
2008  period  as  compared  to  $3,950,000  in  the  fiscal  2007  period. 
Franchise  restaurant  sales  increased  by  $3,034,000  to  $96,713,000 
in the fiscal 2008 period as compared to  $93,679,000 in  the  fiscal 
2007  period.  Comparable  domestic  franchise  sales  (consisting  of 
136  Nathan’s  restaurants)  increased  by  $3,318,000  or  4.4%  to 
$78,763,000  in  the  fiscal  2008  period  as  compared  to  $75,445,000 
in the fiscal 2007 period. Approximately $1,500,000 of the increase 
was  attributable  to  the  additional  week  in  the  fiscal  2008  period. 
During  December  2007,  the  unfavorable  weather  conditions  in  the 
Northeast had a negative impact on sales at a number of franchised  

locations  as  compared  to  December  2006.  Based  upon  the  overall 
comparable restaurant sales increase during the fiscal 2008 period, 
we  believe  that  weather  conditions  had  a  positive  impact  on  fran-
chised  restaurant  sales.  During  the  fiscal  2008  period,  Nathan’s 
earned  $56,000  of  distributor  royalties  from  sales  pursuant  to  our 
Branded  Menu  Program  as  compared  to  $17,000  during  the  fiscal 
2007 period. From June 1, 2007 through the end of the fiscal 2008 
period, we earned monthly royalties totaling $60,000 from the sale 
of  our  products  within  the  Miami  Subs  restaurant  system.  During 
the  fiscal  2008  period,  we  also  recorded  reserves  of  $19,000  for  
royalties deemed to be uncollectible as compared to the fiscal 2007 
period,  when  we  recognized  $36,000  of  royalty  income  that  was 
previously  deemed  to  be  uncollectible.  At  March  30,  2008,  224 
domestic  and  international  franchised  or  Branded  Menu  Program 
franchised outlets were operating as compared to 196 domestic and 
international franchised or licensed units at March 25, 2007. Royalty 
income from two domestic franchised locations was deemed unreal-
izable  during  the  fifty-three  weeks  ended  March  30,  2008.  No 
domestic franchised locations were deemed non-performing during 
the fifty-two weeks ended March 25, 2007. Domestic franchise fee 
income  was  $586,000  in  the  fiscal  2008  period  as  compared  to 
$331,000  in  the  fiscal  2007  period.  International  franchise  fee 
income  was  $160,000  in  the  fiscal  2008  period,  as  compared  to 
$158,000  during  the  fiscal  2007  period.  During  the  fiscal  2008 
period,  46  new  franchised  units  opened,  including  28  Branded  
Menu  Program  outlets,  four  units  in  Kuwait  and  one  unit  in  the 
Dominican  Republic.  During  the  fiscal  2007  period,  21  new  fran-
chised units were opened including two test Branded Menu Program 
outlets, four units in Kuwait, and one unit in the Dominican Republic 
and  Japan.  We  also  recognized  $85,000  in  connection  with  a  for-
feited franchise agreement and a development agreement during the 
fiscal 2008 period.

  License royalties increased by $618,000 or 14.6% to $4,849,000 
in  the  fiscal  2008  period  as  compared  to  $4,231,000  in  the  fiscal 
2007  period.  Generally,  our  licensees  report  sales  and  royalties 
based on their own fiscal periods or a calendar basis. Therefore we 
do  not  believe  the  additional  week  in  the  fiscal  2008  period  had  a 
significant  impact  on  royalties.  Total  royalties  earned  on  sales  of  
hot  dogs  from  our  retail  and  foodservice  license  agreements  of 
$3,616,000  increased  by  $279,000  or  8.4%  as  a  result  of  higher 
licensee sales during the fiscal 2008 period. Royalties earned from 
SFG,  primarily  from  the  retail  sale  of  hot  dogs,  were  $3,154,000 
during the fiscal 2008 period as compared to $2,975,000 during the 
fiscal 2007 period. The fiscal 2007 period included approximately 
$168,000 relating to prior year pricing discrepancies, resulting from 
an internal review performed by our hot dog licensee of its reported 
sales. We also earned higher royalties of $219,000 from our agree-
ments for the sale of Nathan’s pet treats, hors d’oeuvres and sales of 
hot  dog  and  hamburger  rolls  at  retail.  Net  royalties  from  all  other 
license  agreements  in  the  fiscal  2008  period  were  $15,000  higher 
than the fiscal 2007 period.

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(continued)

Interest  income  was  $1,084,000  in  the  fiscal  2008  period  
versus $648,000 in the fiscal 2007 period, primarily due to higher 
interest  earned  on  the  increased  amount  of  marketable  securities 
owned during the fiscal 2008 period as compared to the fiscal 2007 
period. Interest income during the fiscal 2008 period also included 
$155,000 earned on the MSC Note held in connection with the sale 
of Miami Subs on June 7, 2007.

  Other  income  was  $71,000  in  the  fiscal  2008  period  versus 
$60,000 in the fiscal 2007 period. This increase was primarily due 
to  a  one-time  $30,000  consent  fee  earned  in  connection  with  a 
licensee’s refinancing.

Costs and Expenses from Continuing Operations

  Cost  of  sales  increased  by  $2,990,000  to  $27,070,000  in  the 
fiscal 2008 period from $24,080,000 in the fiscal 2007 period. Our 
gross  profit  (representing  the  difference  between  sales  and  cost  of 
sales)  was  $9,189,000  or  25.3%  during  the  fiscal  2008  period  as 
compared  to  $9,345,000  or  28.0%  during  the  fiscal  2007  period. 
This  reduced  margin  is  primarily  due  to  the  higher  cost  of  beef, 
especially in connection with the Branded Product Program, where 
the cost of our hot dogs was approximately 8.2% higher during the 
fiscal 2008 period than the fiscal 2007 period. Commodity costs of 
our  hot  dogs  during  the  fiscal  2007  period  had  decreased  until 
January 2007, when prices began to increase. During the first quar-
ter of the fiscal 2008 period, our cost of hot dogs continued to esca-
late, hitting a peak in May 2007. Since then, prices were lower, but 
were still higher than they were during the comparable fiscal 2007 
period.  In  addition,  during  the  second  quarter  of  the  fiscal  2008 
period,  we  implemented  a  price  increase  for  our  Branded  Product 
Program in an effort to mitigate the increased cost of beef. Overall, 
our Branded Product Program incurred higher costs totaling approx-
imately $2,402,000. This increase is the result of the increased cost 
of product and higher sales volume during the fiscal 2008 period as 
compared  to  the  fiscal  2007  period.  Beginning  with  the  second 
quarter of the fiscal 2008 period, we began to realize the effects of 
the  Branded  Products  price  increase  that  took  effect  on  June  15, 
2007. During the fiscal 2008 period, the cost of restaurant sales at 
our  six  Company-owned  units  was  $7,856,000  or  59.8%  of  restau-
rant sales as compared to $7,088,000 or 59.7% of restaurant sales in 
the  fiscal  2007  period.  During  the  fiscal  2008  period,  we  experi-
enced  higher  food  costs  which  were  partly  offset  by  lower  labor 
costs as a percentage of sales. During the first quarter of the fiscal 
2008 period, we increased select menu prices between 5% and 10% 
in an attempt to offset some of the increased cost of product in our 
Company-owned  restaurants.  Cost  of  sales  also  decreased  by 
$180,000 in the fiscal 2008 period primarily due to lower sales vol-
ume to our television retailer.

  Restaurant  operating  expenses  increased  by  $70,000  to 
$3,257,000  in  the  fiscal  2008  period  from  $3,187,000  in  the  fiscal 
2007  period.  The  increase  during  the  fiscal  2008  period  when  
compared to the fiscal 2007 period resulted primarily from higher  

marketing  costs  of  $40,000,  utility  costs  of  $32,000,  and  mainte-
nance costs of $21,000, which were partly offset by lower insurance 
costs  of  $50,000.  During  the  fiscal  2008  period  our  utility  costs 
were approximately 4.8% higher than the fiscal 2007 period.

  Depreciation and amortization was $764,000 in the fiscal 2008 

period as compared to $742,000 in the fiscal 2007 period.

  General  and  administrative  expenses  increased  by  $710,000  
to $8,926,000 in the fiscal 2008 period as compared to $8,216,000 
in  the  fiscal  2007  period.  The  difference  in  general  and  adminis-
trative expenses was due to higher legal fees of $280,000 during the 
fiscal  2008  period  primarily  associated  with  Nathan’s  litigation 
against SFG, higher compensation costs of $172,000 (approximately 
$82,000  relates  to  the  additional  week),  higher  business  develop-
ment  costs  of  $72,000  in  connection  with  franchising  and  the 
Branded  Product  Program  and  a  $64,000  increase  in  Nathan’s  
stock-based  compensation  expense.  These  cost  increases  were  
partly  offset  by  lower  accounting  fees.  We  incurred  $93,000  in  
costs related to compliance with SOX during the fiscal 2008 period 
compared  to  $172,000  incurred  in  the  fiscal  2007  period.  These  
savings  were  partly  offset  by  higher  audit  fees  in  the  fiscal  2008 
period,  related  to  Nathan’s  first  audit  under  SOX  Section  404, 
requiring  Nathan’s  auditor  to  audit  Nathan’s  internal  controls  over 
financial reporting.

Provision for Income Taxes from Continuing Operations

In  the  fiscal  2008  period,  the  income  tax  provision  was 
$2,427,000  or  33.7%  of  income  from  continuing  operations  before 
income taxes as compared to $2,306,000 or 35.1% of income from 
continuing operations before income taxes in the fiscal 2007 period. 
For the fifty-three weeks ended March 30, 2008, Nathan’s tax provi-
sion, excluding the effects of tax-exempt interest income, was 38.5% 
during the fiscal 2008 period as compared to 38.9% for the fifty-two 
weeks ended March 25, 2007 during the fiscal 2007 period.

Discontinued Operations

  On  June  7,  2007,  Nathan’s  completed  the  sale  of  its  wholly-
owned  subsidiary,  Miami  Subs  to  Miami  Subs  Capital  Partners  I, 
Inc. effective as of May 31, 2007. Pursuant to the 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 MSC Note in the 
principal amount of $2,400,000. Nathan’s realized a gain on the sale 
of  $983,000,  net  of  professional  fees  of  $37,000,  and  recorded 
income  taxes  of  $356,000  on  the  gain  during  the  fifty-three  week 
period ended March 30, 2008. The results of Miami Subs, including 
the fiscal 2008 period gain on disposal, have been included as dis-
continued operations for the fiscal 2008 and fiscal 2007 periods.

  On January 26, 2006, two of Nathan’s wholly-owned subsidiar-
ies  entered  into  a  Lease  Termination  Agreement  with  respect  to 
three leased properties in Fort Lauderdale, Florida, with its landlord 
and CVS to sell our leasehold interests to CVS for $2,000,000. As 
the  properties  were  subject  to  certain  sublease  and  management  

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agreements  between  Nathan’s  and  the  then-current  occupants, 
Nathan’s  made  payments  to,  or  forgave  indebtedness  of,  the  then-
current occupants of the properties and paid brokerage commissions 
of $494,000 in the aggregate. The properties were made available to 
the  buyer  by  May  29,  2007  and  we  received  the  sale  proceeds  on 
June 5, 2007. Nathan’s recognized a gain of $1,506,000 and recorded 
income taxes of $557,000 during the fiscal 2008 period. The results 
of  operations  for  these  properties,  including  the  gain  on  disposal, 
have  been  included  as  discontinued  operations  for  the  fiscal  2008 
and fiscal 2007 periods.

  During the fiscal 2007 period, income of $39,000 and a gain of 
$400,000 were recorded into income from discontinued operations 
resulting from the collection of proceeds from the sale of our lease-
hold interest and certain reimbursable operating expenses that were 
not reasonably assured as of March 26, 2006 in connection with the 
fiscal 2006 sale of vacant property at Coney Island.

Off-Balance Sheet Arrangements

  At  March  29,  2009,  we  were  not  a  party  to  any  off-balance 
sheet arrangements that have or are reasonably likely to have a cur-
rent or future effect on the Company’s financial condition, changes 
in  financial  condition,  revenues  or  expenses,  results  of  operations, 
liquidity, capital expenditures or capital resources that is material to 
investors. We previously guaranteed a severance agreement totaling 
$115,000 which had been recorded by Nathan’s on the accompany-
ing balance sheet. The severance agreement has been fully satisfied 
without any payments being made by Nathan’s under the guaranty. 
We have concluded our purchase commitment to acquire a total of 
1,785,000  pounds  of  hot  dogs  through  August  2008.  In  January 
2009, the Company entered into another commitment, as modified, 
to  purchase  approximately  2.6  million  pounds  of  hot  dogs  through 
September 2009.

Liquidity and Capital Resources

  Cash  and  cash  equivalents  at  March  29,  2009  aggregated 
$8,679,000, decreasing by $5,702,000 during the fiscal 2009 period. 
At  March  29,  2009,  marketable  securities  were  $25,670,000  com-
pared  to  $20,950,000  at  March  30,  2008  and  net  working  capital 
decreased to $35,303,000 from $35,650,000 at March 30, 2008.

  Cash  provided  by  operations  of  $4,101,000  in  the  fiscal  2009 
period  is  primarily  attributable  to  net  income  of  $7,482,000,  less 
gains  of  $3,906,000  from  the  sales  of  NF  Roasters  and  Miami  
Subs,  which  were  partly  offset  by  other  non-cash  items  of 
$1,688,000, net. Changes in Nathan’s operating assets and liabilities 
decreased  cash  by  $1,163,000,  resulting  primarily  from  increased 
accounts and other receivables of $1,211,000, which were partly off-
set  by  decreases  in  prepaid  expenses  of  $167,000  and  inventory  of 
$160,000. The net increase in accounts and other receivables relates 
primarily to a receivable of $516,000 for a property tax recovery and 
sales from the Branded Product Program of $595,000.

  Cash  used  in  investing  activities  was  $961,000  in  the  fiscal 
2009  period,  primarily  related  to  our  investment  of  $8,497,000  in 
available-for-sale  securities.  We  received  cash  proceeds  from  the 
sale of NF Roasters in the amount of $3,961,000, $3,682,000 from 
the  redemption  of  maturing  available-for-sale  securities  and 
$406,000  from  the  receipt  of  all  scheduled  payments  on  the  MSC 
Note receivable. We also incurred capital expenditures of $513,000.
  Cash was used in financing activities of $8,842,000 in the fis-
cal 2009 period, primarily for the purchase of 693,806 shares of the 
Company’s common stock at a cost of $9,712,000 pursuant to stock 
repurchase  plans  authorized  by  the  Board  of  Directors.  Cash  was 
received  from  the  proceeds  of  employee  stock  option  exercises  of 
$413,000 and the expected realization of the associated tax benefit 
of $457,000.

  For the thirteen weeks and fiscal year ended March 29, 2009, 
the  Company  repurchased  104,013  shares  at  a  cost  of  $1,269,000 
and  693,806  shares  at  a  cost  of  $9,712,000,  respectively.  Through 
March  29,  2009,  Nathan’s  purchased  a  total  of  2,693,806  shares  
of common stock at a cost of approximately $18,798,000 under all  
of  its  stock  repurchase  programs,  which  included  the  shares  pur-
chased  during  the  thirteen  weeks  and  fiscal  year  ended  March  29, 
2009,  as  well  as  completion  of  the  third  stock  repurchase  plan  
previously authorized by the Board of Directors. On November 13, 
2008, Nathan’s Board of Directors authorized a fourth stock repur-
chase plan for the purchase of up to 500,000 shares of its common 
stock  on  behalf  of  the  Company;  there  have  been  purchases  of 
193,806 shares at a cost of $2,400,000 under such plan as of March 
29,  2009.  There  are  306,194  remaining  shares  authorized  to  be 
repurchased under Nathan’s fourth stock repurchase plan. 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.

  On  February  5,  2009,  Nathan’s  and  Mutual  Securities,  Inc. 
(“MSI”)  entered  into  an  agreement  (the  “10b5-1  Agreement”)  pur-
suant  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  may  commence  on  March  16,  2009.  The 
10b5-1 Agreement shall terminate no later than March 15, 2010. 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 
purchase plan, for the purchase of up to 500,000 shares.

  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. Effective October 1, 2008, Nathan’s decided that it 
would  not  extend  its  $7,500,000  uncommitted  bank  line  of  credit, 
having never borrowed any funds under that line of credit.

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(continued)

  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  oppor-
tunities  which  might  present  themselves.  Nathan’s  believes  in  
the value of returning its cash to its shareholders through the repur-
chase  of  its  outstanding  common  stock  and  continuously  evaluates 
this opportunity. Nathan’s routinely assesses its investment manage-
ment  approach  with  respect  to  our  current  and  potential  capital 
requirements.

  We expect that we will continue the stock repurchase program, 
make  additional  investments  in  certain  existing  restaurants  and  

support  the  growth  of  the  Branded  Product  Program  in  the  future 
and fund those investments from our operating cash flow. We may 
also  incur  capital  expenditures  in  connection  with  opportunistic 
investments on a case-by-case basis.

  At  March  29,  2009,  there  were  four  restaurant  properties  that 
we lease from third parties which we sublease to franchisees and a 
non-franchisee.  We  remain  contingently  liable  for  all  costs  associ-
ated with these properties including rent, property taxes and insur-
ance.  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):

Cash Contractual Obligations(a)

Employment Agreements
Operating Leases

  Gross Cash Contractual Obligations
Sublease Income

  Net Cash Contractual Obligations

Payments Due by Period

Less than 
1 Year

$1,236
1,429

2,665
390

1–3 
Years

$ 1,375
1,410

2,785
502

3–5 
Years

$  500
1,085

1,585
286

More than 
5 Years

$   400
7,056

7,456
98

Total

$  3,511
10,980

14,491
1,276

$ 13,215

$2,275

$ 2,283

$ 1,299

$7,358

(a) In January 2009, Nathan’s entered into a purchase commitment, as amended, to acquire approximately 2,600,000 pounds of hot dogs at a cost of approximately $4,368,000.

Inflationary Impact

  We do not believe that general inflation has materially impacted 
earnings during the fiscal years ended March 29, 2009, March 30, 
2008 and March 25, 2007. However, during the fiscal 2009 period, 
we  have  experienced  significant  cost  increases  for  certain  food 
products,  distribution  costs  and  utilities.  Our  commodity  costs  for 
beef have been very volatile since fiscal 2004 and the cost of beef 
continued  to  set  new  highs  during  the  summer  of  2008,  before 
declining  during  the  third  quarter  fiscal  2009.  These  costs  have 
declined by approximately 17.5% from September 2008 through the 
end of the fiscal 2009 period. Nathan’s was able to partly mitigate 
some  of  the  increase  by  entering  into  a  purchase  commitment  in 
January  2008  for  approximately  35%  of  its  projected  hot  dog  
purchases during the period from April through August 2008. As a 
result of the purchase commitment, Nathan’s actual cost of hot dogs 
for  its  Branded  Product  Program  was  approximately  10.7%  higher 
than its cost during the fiscal 2008 period, instead of being approxi-
mately 13.5% higher. In addition, the cost of beef for our fiscal 2008 
period  was  approximately  8.2%  higher  than  our  prior  fiscal  year. 
Although we are unable to predict the future cost of our hot dogs, we 
expect to experience continued price volatility for our beef products 
during  fiscal  2010.  Since  January  2008,  we  have  experienced  cost 
increases  for  a  number  of  our  other  food  products.  We  expect  to 
incur higher commodity costs for poultry, fish and potatoes during 
fiscal 2010. In January 2009, we entered into an additional purchase 
commitment  to  acquire  approximately  2,600,000  pounds  of  hot 

dogs,  as  amended,  at  a  cost  of  approximately  $4,368,000  for  the 
period April to September 2009. We are presently unable to deter-
mine  if  the  existing  purchase  commitment  will  reduce  our  costs  
during the fiscal 2010 period. Historically, Nathan’s increased beef 
prices in  response to the  increased commodity costs and  will seek  
to  do  so  in  future  periods  to  the  extent  commercially  feasible.  In 
addition, notwithstanding the decline in the price of oil over the past 
nine months, for the past four years we have continued to experience 
the  impact  of  higher  oil  prices  in  the  form  of  higher  distribution 
costs for our food products and higher utility costs in our Company-
owned restaurants.

  From time to time, various Federal and New York State legisla-
tors have proposed changes to the minimum wage requirements. On 
May  25,  2007,  former  President  Bush  signed  legislation  which 
increased  the  Federal  minimum  wage  to  $5.85  per  hour,  effective 
July  24,  2007,  with  increases  to  $6.55  per  hour  effective  July  24, 
2008 and to $7.25 per hour effective July 24, 2009. The New York 
State  minimum  wage,  where  our  Company-owned  restaurants  are 
located, was increased to $7.15 per hour on January 1, 2007 and will 
increase to $7.25 per hour on July 24, 2009. These wage increases 
have not had a material impact on our results of operations or finan-
cial position as the vast majority of our employees are paid at a rate 
higher than the minimum wage. Although we currently 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. 

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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 strat-
egy 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 dis-
cussion identifying additional risk factors and important factors that 
could  cause  actual  results  to  differ  materially  from  those  antici-
pated,  also  see  the  discussions  in  “Forward-Looking  Statements,” 
“Risk  Factors”  and  “Notes  to  Consolidated  Financial  Statements”  
in  this  annual  report  and  on  Nathan’s  Form  10-K  filed  with  the 
Securities and Exchange Commission.

Quantitative and Qualitative Disclosures  
About Market Risk

Cash and Cash Equivalents

  We  have  historically  invested  our  cash  and  cash  equivalents  
in  money  market  funds  or  short-term,  fixed  rate,  highly  rated  and 
highly  liquid  instruments  which  are  reinvested  when  they  mature. 
Although these existing investments are not considered at risk with 
respect to changes in interest rates or markets for these instruments, 
our rate of return on short-term investments could be affected at the 
time of reinvestment as a result of intervening events. As of March 
29, 2009, Nathan’s cash and cash equivalents aggregated $8,679,000. 
Earnings  on  these  cash  and  cash  equivalents  would  increase  or 
decrease  by  approximately  $22,000  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 invest-
ments  are  subject  to  fluctuations  in  interest  rates.  As  of  March  29,  2009,  the  market  value  of  Nathan’s  marketable  securities  aggregated 
$25,670,000. Interest income on these marketable securities would increase or decrease by approximately $64,000 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 
March 29, 2009 that are sensitive to interest rate fluctuations:

Valuation of Securities Given an  
Interest Rate Decrease of X Basis Points

(150BPS)

(100BPS)

(50BPS)

Fair
Value

Valuation of Securities Given an  
Interest Rate Increase of X Basis Points

+50BPS

+100BPS

+150BPS

Municipal notes and bonds

$26,728,000

$26,484,000

$26,116,000

$25,670,000

$25,215,000

$24,756,000

$24,301,000

Borrowings

  The interest rate on our prior borrowings was generally deter-
mined based upon the prime rate and was subject to market fluctua-
tion as the prime rate changed, as determined within each specific 
agreement. At March 29, 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.  We  maintained  a  $7,500,000  credit  line  at 
the prime rate, which we decided to let expire as of October 1, 2008. 
We  never  borrowed  any  funds  under  this  credit  line.  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.  In 
January  2008,  we  entered  into  a  purchase  commitment  to  acquire 
approximately  1,785,000  pounds  of  hot  dogs  at  $1.535  per  pound 
through  August  2008.  In  January  2009,  we  entered  an  additional 
purchase commitment, as amended, to acquire 2,600,000 pounds of 
hot  dogs  through  September  2009.  We  may  attempt  to  enter  into  

similar arrangements in the future. With the exception of those com-
mitments, 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  cus-
tomers,  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  fifty-two  weeks  ended 
March 29, 2009 would have increased or decreased our cost of sales 
by approximately $2,306,000.

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.

N AT H A N ’ S  FA M O U S ,  I N C .  &  S U B S I D I A R I E S  2 0 0 9  A N N U A L   R E P O R T— p a g e  17

 
 
 
 
 
 
 
 
 
 
 
 
 
 
M a n a g e M e n t ’ S   d i S c u S S ion and analySiS oF 
F i n a n c i a l   c o n d i t i o n   a n d  ReSultS oF opeRationS

(continued)

Forward-Looking Statements

  Statements  in  this  annual  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 projec-
tions  about  our  business  based,  in  part,  on  assumptions  made  by 
management. These statements are not guarantees of future perfor-
mance  and  involve  risks,  uncertainties  and  assumptions  that  are  
difficult to predict. These risks and uncertainties, many of which are 
not  within  our  control,  include  but  are  not  limited  to:  economic, 
weather,  legislative  and  business  conditions;  the  collectibility  of 
receivables;  changes  in  consumer  tastes;  the  ability  to  continue  to  

attract franchisees; no material increases in the minimum wage; our 
ability  to  attract  competent  restaurant  and  managerial  personnel; 
and  the  future  effects  of  bovine  spongiform  encephalopathy,  BSE, 
first identified in the United States on December 23, 2003; as well 
as those risks discussed from time to time in this 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 gen-
erally 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 annual report.

c o n S o l i d at e d   Bal ance SHeetS

N AT H A N ’ S  FA M O U S ,  I N C .  &  S U B S I D I A R I E S  2 0 0 9  A N N U A L  R E P O R T— p a g e  18

 
 
 
 
 
 
 
 
 
M a n a g e M e n t ’ S   d i S c u S S ion and analySiS oF 

F i n a n c i a l   c o n d i t i o n   a n d  ReSultS oF opeRationS

c o n S o l i d at e d   Bal ance SHeetS

(in thousands, except share and per share amounts)

ASSETS
Current Assets
  Cash and cash equivalents
  Marketable securities
  Accounts and other receivables, net
  Note receivable
Inventories

  Prepaid expenses and other current assets
  Deferred income taxes
  Current assets held for sale

  Total current assets

  Note receivable
  Property and equipment, net
  Goodwill

Intangible asset, net
  Deferred income taxes
  Other assets
  Non-current assets held for sale

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
  Accounts payable
  Accrued expenses and other current liabilities
  Deferred franchise fees
  Current liabilities held for sale

  Total current liabilities

  Other liabilities
  Non-current liabilities held for sale

  Total liabilities

Commitments and Contingencies (Note L)
Stockholders’ Equity

 Common stock, $.01 par value; 30,000,000 shares authorized; 8,305,683 and 8,180,683 shares issued;  
  and 5,611,877 and 6,180,683 shares outstanding at March 29, 2009 and March 30, 2008, respectively

  Additional paid-in capital
  Deferred compensation
  Retained earnings
  Accumulated other comprehensive income

  Treasury stock, at cost, 2,693,806 and 2,000,000 shares at March 29, 2009 and March 30, 2008, respectively

  Total stockholders’ equity

The accompanying notes are an integral part of these statements.

N AT H A N ’ S   FA M O U S ,  I N C .  &  S U B S I D I A R I E S  2 0 0 9  A N N U A L  R E P O R T— p a g e  19

March 29, 
2009

March 30, 
2008

$     8,679
25,670
4,869
290
668
1,326
696
—

42,198
1,466
4,126
95
1,353
428
158
—

$14,371
20,950
3,830
606
822
1,493
697
13

42,782
1,305
4,428
95
1,353
436
150
653

$   49,824

$51,202

$     2,857
3,867
171
—

6,895
1,080
—

7,975

$  2,805
4,014
284
29

7,132
1,137
325

8,594

83
49,001
—
11,228
335

60,647
(18,798)

41,849

82
47,704
(63)
3,746
225

51,694
(9,086)

42,608

$   49,824

$51,202

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
c o n S o l i d at e d   S tat e MentS oF eaRningS

c o n S o l i d a t e d   S tat e M e n t S  oF StocKHoldeRS’ eQuity

(in thousands, except share and per share amounts)

Revenues
  Sales
  Franchise fees and royalties
  License royalties
Interest income

  Other income

  Total revenues

Costs and Expenses
  Cost of sales
  Restaurant operating expenses
  Depreciation and amortization
  General and administrative expenses
  Recovery of property taxes

  Total costs and expenses

Income from continuing operations before provision for income taxes
Provision for income taxes

Income from continuing operations

Income from discontinued operations, including gains on disposal of discontinued  
  operations before income taxes of $3,906 in 2009, $2,489 in 2008 and $400 in 2007
Provision for income taxes

Income from discontinued operations

  Net income

Per Share Information
  Basic income per share:

Income from continuing operations
Income from discontinued operations

  Net income

  Diluted income per share:

Income from continuing operations
Income from discontinued operations

  Net income

Weighted average shares used in computing income per share:
  Basic

  Diluted

The accompanying notes are an integral part of these statements.

Fifty-Two 
Weeks Ended

Fifty-Three 
Weeks Ended

Fifty-Two 
Weeks Ended

March 29, 
2009

March 30, 
2008

March 25, 
2007

$37,480
4,613
6,009
1,056
63

49,221

28,774
3,361
809
9,299
(441)

41,802

7,419
2,461

4,958

3,914
1,390

2,524

$36,259
4,962
4,849
1,084
71

47,225

27,070
3,257
764
8,926
—

40,017

7,208
2,427

4,781

2,824
1,050

1,774

$33,425
4,439
4,231
648
60

42,803

24,080
3,187
742
8,216
—

36,225

6,578
2,306

4,272

2,104
833

1,271

$  7,482

$  6,555

$  5,543

$    0.84
0.43

$    1.27

$    0.80
0.41

$    1.21

$    0.79
0.29

$    1.08

$    0.74
0.27

$    1.01

$    0.73
0.22

$    0.95

$    0.67
0.20

$    0.87

5,898,000

6,085,000

5,836,000

6,180,000

6,502,000

6,341,000

N AT H A N ’ S   FA M O U S ,  I N C .  &  S U B S I D I A R I E S  2 0 0 9  A N N U A L  R E P O R T— p a g e  2 0

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
c o n S o l i d at e d   S tat e MentS oF eaRningS

c o n S o l i d a t e d   S tat e M e n t S  oF StocKHoldeRS’ eQuity

(in thousands, except share amounts)

Balance, March 26, 2006
Shares issued in connection with exercise of 

employee stock options

Income tax benefit on stock option exercises
Share-based compensation
Amortization of deferred compensation relating 

to restricted stock

Unrealized gains on marketable securities,  

net of deferred income tax of $80

Net income

Comprehensive income

Balance, March 25, 2007

Shares issued in connection with exercise of 
employee stock options and warrants

Repurchase of common stock
Income tax benefit on stock option exercises
Share-based compensation
Amortization of deferred compensation relating 

to restricted stock

Unrealized gains on marketable securities,  
net of deferred income tax of $184

Cumulative effect of the adoption of FIN No. 48 

as of March 26, 2007 (Note J)

Net income

Comprehensive income

Balance, March 30, 2008

Shares issued in connection with exercise of 
employee stock options and warrants

Repurchase of common stock
Income tax benefit on stock option exercises
Share-based compensation
Amortization of deferred compensation relating 

to restricted stock

Unrealized gains on marketable securities,  

net of deferred income tax of $71

Net income

Comprehensive income

Balance, March 29, 2009

Fifty-Two Weeks Ended March 29, 2009, Fifty-Three Weeks Ended March 30, 2008 and Fifty-Two Weeks Ended March 25, 2007

Common Common
Shares

Stock

Additional 
Paid-in
Capital Compensation

Deferred

Accumulated 
(Deficit) 
Retained
Earnings

Accumulated 
Other 
Comprehensive
 (Loss) Income

Treasury Stock,  
at Cost

Total 

Stockholders’ Comprehensive

Shares

Amount

 Equity

Income

7,600,399

$76

$43,699

$(208)

$ (8,197)

$(164)

1,891,100 $  (7,158)

$28,048

308,784
—
—

—

—
—

—

3
—
—

—

—
—

—

719
1,079
295

—

—
—

—

—
—
—

72

—
—

—

—
—
—

—

—
5,543

—

—
—
—

—

120
—

—

—
—
—

—

—
—

—

—
—
—

—

—
—

—

722
1,079
295

72

120
5,543

—

7,909,183

$79

$45,792

$(136)

$ (2,654)

$  (44)

1,891,100 $  (7,158)

$35,879

271,500
—
—
—

—

—

—
—

—

3
—
—
—

—

—

—
—

—

921
—
632
359

—

—

—
—

—

—
—
—
—

73

—

—
—

—

—
—
—
—

—

—

(155)
6,555

—

—
—
—
—

—

269

—
—

—

—
108,900
—
—

—
(1,928)
—
—

—

—

—
—

—

—

—

—
—

—

924
(1,928)
632
359

73

269

(155)
6,555

—

8,180,683

$82

$47,704

$  (63)

$  3,746

$   225

2,000,000 $  (9,086)

$42,608

125,000
—
—
—

—

—
—

—

1
—
—
—

—

—
—

—

412
—
457
428

—

—
—

—

—
—
—
—

63

—
—

—

—
—
—
—

—

—
7,482

—

—
—
—
—

—

110
—

—

—
693,806
—
—

—
(9,712)
—
—

—

—
—

—

—

—
—

—

413
(9,712)
457
428

63

110
7,482

—

8,305,683

$83

$49,001

$     —

$11,228

$   335

2,693,806 $(18,798)

$41,849

$   120
5,543

$5,663

$   269

6,555

$6,824

$   110
7,482

$7,592

Disclosure of reclassification amount:
  Unrealized gain on marketable securities
  Less: reclassification adjustments for (loss) included in net income

  Net unrealized gain on marketable securities, net of tax

The accompanying notes are an integral part of these statements.

N AT H A N ’ S   FA M O U S ,  I N C .  &  S U B S I D I A R I E S  2 0 0 9  A N N U A L  R E P O R T— p a g e  21

Year Ended

March 29, 
2009

March 30, 
2008

$120
(10)

$110

$269
—

$269

 
 
 
 
c o n S o l i d at e d   S tat e M entS oF caSH FlowS

n o t e S   t o   c o n S o l i dat e d  Financial StateMentS

(in thousands)

Cash Flows from Operating Activities:
  Net income
  Adjustments to reconcile net income to net cash provided by operating activities

  Depreciation and amortization
  Amortization of intangible assets
  Amortization of bond premium
  Amortization of deferred compensation
  Gain on sale of subsidiary and leasehold interests
  Gain on disposal of fixed assets
  Loss on sale of available-for-sale securities
  Share-based compensation expense
  Provision for doubtful accounts
  Deferred income taxes

  Changes in operating assets and liabilities:
  Accounts and other receivables, net

Inventories

  Prepaid expenses and other current assets
  Other assets
  Accounts payable, accrued expenses and other current liabilities
  Deferred franchise fees
  Other liabilities

  Net cash provided by operating activities

Cash Flows from Investing Activities:
  Proceeds from sale of available-for-sale securities
  Purchase of available-for-sale securities
  Purchase of intellectual property
  Purchase of property and equipment
  Payments received on notes receivable
  Proceeds from sale of subsidiaries and leasehold interests

  Net cash (used in) provided by investing activities

Cash Flows from Financing Activities:
  Principal repayments of notes payable and capitalized lease obligations
  Repurchase of treasury stock

Income tax benefit on stock option exercises

  Proceeds from the exercise of stock options and warrant

  Net cash (used in) provided by financing activities

Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents, beginning of year

Cash and cash equivalents, end of year

Cash paid during the year for:

Interest

Income taxes

Noncash Financing Activities:
  Loan made in connection with the sale of subsidiary

The accompanying notes are an integral part of these statements.

Fifty-Two 
Weeks Ended

Fifty-Three 
Weeks Ended

Fifty-Two 
Weeks Ended

March 29, 
2009

March 30, 
2008

March 25, 
2007

$  7,482

$  6,555

$   5,543

809
2
259
63
(3,906)
—
17
428
173
(63)

(1,211)
160
167
(8)
(104)
(113)
(54)

4,101

3,682
(8,497)
—
(513)
406
3,961

(961)

—
(9,712)
457
413

(8,842)

(5,702)
14,381

766
78
278
73
(2,489)
—
—
359
—
682

(362)
(32)
(526)
(2)
(904)
(76)
452

4,852

3,100
(1,089)
—
(972)
239
1,691

2,969

—
(1,928)
632
924

(372)

7,449
6,932

791
262
269
72
(400)
(29)
—
295
(6)
(180)

(117)
27
243
32
1,374
156
(141)

8,191

—
(5,972)
(7)
(539)
88
400

(6,030)

(39)
—
1,079
722

1,762

3,923
3,009

$  8,679

$14,381

$   6,932

$       —

$  3,190

$       —

$  2,942

$          1

$   1,353

$     250

$  2,150

$        —

N AT H A N ’ S  FA M O U S ,  I N C .  &  S U B S I D I A R I E S  2 0 0 9  A N N U A L   R E P O R T— p a g e  22

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
c o n S o l i d at e d   S tat e M entS oF caSH FlowS

n o t e S   t o   c o n S o l i dat e d  Financial StateMentS

(in thousands, except share and per share amounts)
March 29, 2009, March 30, 2008 and March 25, 2007

Note A—Description and Organization of Business

  Nathan’s  Famous,  Inc.  and  subsidiaries  (collectively  the 
“Company” or “Nathan’s”) has historically operated or franchised a 
chain  of  retail  fast  food  restaurants  featuring  the  Nathan’s  World 
Famous  Beef  Hot  Dog,  crinkle-cut  French-fried  potatoes  and  a  
variety  of  other  menu  offerings.  Nathan’s  has  also  established  a 
Branded  Product  Program,  which  enables  foodservice  retailers  to 
sell  select  Nathan’s  proprietary  products  outside  of  the  realm  of  a 
traditional franchise relationship. The Company is also the owner of 
the  Arthur  Treacher’s  brand.  Arthur  Treacher’s  main  product  is  its 
“Original  Fish  &  Chips”  product  consisting  of  fish  fillets  coated 
with  a  special  batter  prepared  under  a  proprietary  formula,  deep-
fried  golden  brown,  and  served  with  English-style  chips  and  corn 
meal “hush puppies.” The Company, through wholly-owned subsid-
iaries, was also the franchisor of Kenny Rogers Roasters (“Roasters”) 
and Miami Subs through April 23, 2008 and May 30, 2007, respec-
tively. (See Note G for discussion of the sales of these subsidiaries.) 
The Company considers itself to be in the foodservice industry, and 
has  pursued  co-branding  and  co-hosting  initiatives;  accordingly, 
management has evaluated the Company as a single reporting unit.
  At March 29, 2009, the Company’s restaurant system included 
five Company-owned units in the New York City metropolitan area 
(including  one  seasonal  location)  and  249  franchised  or  licensed 
units, located in 25 states and four foreign countries.

Note B—Summary of Significant Accounting Policies

  The following significant accounting policies have been applied 

in the preparation of the consolidated financial statements:

1. Principles of Consolidation

  The  consolidated  financial  statements  include  the  accounts  of 
the  Company  and  all  of  its  wholly-owned  subsidiaries.  All  signifi-
cant inter-company balances and transactions have been eliminated 
in consolidation.

2. Fiscal Year

  The Company’s fiscal year ends on the last Sunday in March, 
which  results  in  a  52-  or  53-week  reporting  period.  The  results  of 
operations and cash flows for the fiscal year ended March 29, 2009 
are on the basis of a 52-week reporting period, the results of opera-
tions and cash flows for the fiscal year ended March 30, 2008 are on 
the basis of a 53-week reporting period and the results of operations 
and cash flows for the fiscal year ended March 25, 2007 are on the 
basis of a 52-week reporting period.

3. Use of Estimates

  The  preparation  of  financial  statements  in  conformity  with 
accounting  principles  generally  accepted  in  the  United  States  of  

America  requires  management  to  make  estimates  and  assumptions 
that affect the reported amounts of assets and liabilities and disclo-
sure  of  contingent  assets  and  liabilities  at  the  date  of  the  financial 
statements  and  the  reported  amounts  of  revenues  and  expenses  
during  the  reporting  period.  Actual  results  could  differ  from  those 
estimates. Significant estimates made by management in preparing 
the  consolidated  financial  statements  include  revenue  recognition, 
the  allowance  for  doubtful  accounts,  valuation  of  notes  receivable, 
valuation of stock-based compensation, income taxes, and the valua-
tion of goodwill, other intangible assets and other long-lived assets.

4. Cash and Cash Equivalents

  The  Company  considers  all  highly  liquid  instruments  pur-
chased with an original maturity of three months or less to be cash 
equivalents.  Cash  equivalents  amounted  to  $5,352  and  $11,100  at 
March 29, 2009 and March 30, 2008, respectively. The majority of 
cash  and  cash  equivalents  are  in  excess  of  government  insurance. 
Included  in  cash  and  cash  equivalents  is  cash  restricted  for  unten-
dered shares associated with the acquisition of Nathan’s in 1987 of 
$54 at March 29, 2009 and March 30, 2008.

5. Impairment of Notes Receivable

  Nathan’s  follows  the  guidance  in  Statement  of  Financial 
Accounting  Standards  (“SFAS”)  No.  114  (“SFAS  No.  114”) 
“Accounting by Creditors for Impairment of a Loan,” as amended. 
Pursuant to SFAS No. 114, a loan is impaired when, based on cur-
rent  information  and  events,  it  is  probable  that  a  creditor  will  be 
unable to collect all amounts due according to the contractual terms 
of the loan agreement. When evaluating a note for impairment, the 
factors considered include: (a) indications that the borrower is expe-
riencing business problems such as late payments, operating losses, 
marginal  working  capital,  inadequate  cash  flow  or  business  inter-
ruptions, (b) loans secured by collateral that is not readily market-
able,  or  (c)  loans  that  are  susceptible  to  deterioration  in  realizable 
value.  When  determining  impairment,  management’s  assessment 
may  include  its  intention  to  extend  its  lease  beyond  the  minimum 
lease  term  and  the  debtor’s  ability  to  meet  its  obligation  over  any 
extended  term.  The  Company  records  interest  income  on  its 
impaired notes receivable on a cash basis, based on the present value 
of the estimated cash flows of identified impaired notes receivable. 
Based  on  the  Company’s  analysis,  it  has  determined  that  its  note 
receivable  is  not  impaired  at  March  29,  2009  or  March  30,  2008. 
(See Note G.)

6. Inventories

Inventories,  which  are  stated  at  the  lower  of  cost  or  market 
value, consist primarily of food items and supplies. Inventories also 
include  equipment  and  marketing  items  in  connection  with  the 
Branded  Product  Program.  Cost  is  determined  using  the  first-in, 
first-out method.

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(continued)

7. Marketable Securities

10. Goodwill and Intangible Asset

In  accordance  with  SFAS  No.  115,  “Accounting  for  Certain 
Investments  in  Debt  and  Equity  Securities,”  the  Company  deter-
mines  the  appropriate  classification  of  securities  at  the  time  of  
purchase and reassesses the appropriateness of the classification at 
each  reporting  date.  At  March  29,  2009  and  March  30,  2008,  all 
marketable  securities  held  by  the  Company  have  been  classified  
as available-for-sale and, as a result, are stated at fair value, based 
upon quoted market prices for similar assets as determined in active 
markets or model-derived valuations in which all significant inputs 
are  observable,  for  substantially  the  full-term  of  the  asset,  in  the 
accompanying  consolidated  balance  sheets,  with  unrealized  gains 
and  losses  included  as  a  component  of  accumulated  other  compre-
hensive income. Realized gains and losses on the sale of securities, 
as determined on a specific identification basis, are included in the 
accompanying consolidated statements of earnings (See Note E.)

8. Sales of Restaurants

  The  Company  observes  the  provisions  of  SFAS  No.  66, 
“Accounting  for  Sales  of  Real  Estate,”  (“SFAS  No.  66”)  which 
establishes  accounting  standards  for  recognizing  profit  or  loss  on 
sales of real estate. SFAS No. 66 provides for profit recognition by 
the full accrual method, provided (a) the profit is determinable, that 
is,  the  collectibility  of  the  sales  price  is  reasonably  assured  or  
the amount that will not be collectible can be estimated, and (b) the 
earnings  process  is  virtually  complete,  that  is,  the  seller  is  not 
obliged  to  perform  significant  activities  after  the  sale  to  earn  the 
profit. Unless both conditions exist, recognition of all or part of the 
profit  shall  be  postponed  and  other  methods  of  profit  recognition 
shall  be  followed.  In  accordance  with  SFAS  No.  66,  the  Company 
recognizes  profit  on  sales  of  restaurants  under  the  full  accrual 
method, the installment method and the deposit method, depending 
on the specific terms of each sale. The Company records deprecia-
tion expense on the property subject to the sales contracts  that  are 
accounted  for  under  the  deposit  method  and  records  any  principal 
payments received as a deposit until such time that the transaction 
meets the sales criteria of SFAS No. 66.

9. Property and Equipment

  Property  and  equipment  are  stated  at  cost  less  accumulated 
depreciation and amortization. Major improvements are capitalized 
and  minor  replacements,  maintenance  and  repairs  are  charged  to 
expense  as  incurred.  Depreciation  and  amortization  are  calculated 
on  the  straight-line  basis  over  the  estimated  useful  lives  of  the  
assets.  Leasehold  improvements  are  amortized  over  the  shorter  of 
the estimated useful life or the lease term of the related asset. The 
estimated useful lives are as follows:

Building and improvements
Machinery, equipment, furniture and fixtures
Leasehold improvements

5–25 years
3–15 years
5–20 years

  Goodwill and intangible assets primarily consist of (i) goodwill 
of  $95  resulting  from  the  acquisition  of  Nathan’s  in  1987;  and  
(ii)  trademarks,  trade  names  and  other  intellectual  property  of 
$1,353 in connection with Arthur Treacher’s as of March 29, 2009 
and March 30, 2008.

  The  Company’s  goodwill  and  intangible  assets  are  deemed  to 
have  indefinite  lives  and,  accordingly,  are  not  amortized,  but  are 
evaluated for impairment at least annually, but more often whenever 
changes  in  facts  and  circumstances  occur  which  may  indicate  that 
the  carrying  value  may  not  be  recoverable.  As  of  March  29,  2009 
and  March  30,  2008,  the  Company  has  performed  its  required 
annual  impairment  test  of  goodwill  and  intangible  assets  and  has 
determined no impairment is deemed to exist.

  Total  amortization  expense  for  intangible  assets  included 
within discontinued operations was $2, $77 and $261, respectively, 
for each of the fiscal years ended March 29, 2009, March 30, 2008 
and  March  25,  2007.  As  a  result  of  the  April  23,  2008  sale  of 
Roasters  (Note  G),  the  Company  will  no  longer  have  any  amor-
tizable  intangibles  and,  as  a  result,  no  amortization  expense  is  
currently expected in the next five years.

11. Long-Lived Assets

  Long-lived assets are reviewed for impairment whenever events 
or changes in circumstances indicate that the carrying value may not 
be recoverable. Impairment is measured by comparing the carrying 
value  of  the  long-lived  assets  to  the  estimated  undiscounted  future 
cash  flows  expected  to  result  from  use  of  the  assets  and  their  ulti-
mate  disposition.  In  instances  where  impairment  is  determined  to 
exist, the Company writes down the asset to its fair value based on 
the present value of estimated future cash flows.

Impairment  losses  are  recorded  on  long-lived  assets  on  a  
restaurant-by-restaurant  basis  whenever  impairment  factors  are 
determined  to  be  present.  The  Company  considers  a  history  of  
restaurant  operating  losses  to  be  its  primary  indicator  of  potential 
impairment  for  individual  restaurant  locations.  No  units  were 
deemed  impaired  during  the  fiscal  years  ended  March  29,  2009, 
March 30, 2008 and March 25, 2007.

12. Self-Insurance

  The Company is self-insured for portions of its general liability 
and its medical benefits coverage. As part of Nathan’s risk manage-
ment  strategy,  its  general  liability  insurance  programs  include 
deductibles for each incident and in the aggregate for a policy year. 
As  such,  Nathan’s  accrues  estimates  of  its  ultimate  self-insurance 
costs throughout the policy year. These estimates have been devel-
oped  based  upon  historical  trends  and  expectations,  however,  the 
final  cost  of  some  of  these  liability  claims  may  not  be  known  for 
five  years  or  longer.  Accordingly,  Nathan’s  annual  self-insurance 
costs may be subject to adjustment from previous estimates as facts 
and circumstances change. The self-insurance accruals at March 29, 
2009 and March 30, 2008 were $51 and $107, respectively, and are 

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included  in  “Accrued  expenses  and  other  current  liabilities”  in  the 
accompanying consolidated balance sheets.

  During the fiscal years ended March 29, 2009, March 30, 2008 
and March 25, 2007, the Company reversed approximately $61, $61, 
and  $53  respectively,  of  previously  recorded  insurance  accruals  to 
reflect the revised estimated cost of claims.

13. Fair Value of Financial Instruments

In September 2006, the Financial Accounting Standards Board 
(“FASB”) issued SFAS No. 157, “Fair Value Measurements” (“SFAS 
No. 157”), to eliminate the diversity in practice that existed due to 
the  different  definitions  of  fair  value.  SFAS  No.  157  retained  the 
exchange price notion in earlier definitions of fair value, but clari-
fied  that  the  exchange  price  is  the  price  in  an  orderly  transaction 
between market participants to sell an asset or liability in the princi-
pal or most advantageous market for the asset or liability. SFAS No. 
157  stated  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  mea-
surement 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). SFAS No. 157 also established 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  issued  FASB  Staff  Position  No. 
157-2, “Effective Date of FASB Statement No. 157,” which delayed 
the effective date of SFAS No. 157 for all non-financial assets and 
non-financial  liabilities,  except  for  items  that  are  recognized  or  
disclosed  at  fair  value  in  the  financial  statements  on  a  recurring 
basis  (at  least  annually).  Nathan’s  adopted  the  provisions  of  SFAS 
No.  157  on  March  31,  2008  and  elected  the  deferral  option  for  
non-financial  assets  and  liabilities.  The  effect  on  our  consolidated 
financial position and results of operations of adopting this standard 
was not significant.

In  October  2008,  the  FASB  issued  FASB  Staff  Position  No. 
157-3, “Determining the Fair Value of a Financial Asset When the 
Market  for  That  Asset  Is  Not  Active”  (“FSP  No.  157-3”).  FSP  
No. 157-3 applies to financial assets within the scope of accounting 
pronouncements  that  require  or  permit  fair  value  measurements  in 
accordance with SFAS No. 157. FSP No. 157-3 clarifies the applica-
tion of SFAS No. 157 in a market that is not active and provides an 
example to illustrate key conditions in determining the fair value of 
a  financial  asset  when  the  market  for  that  financial  asset  is  not 
active.  FSP  No.  157-3  became  effective  upon  issuance,  including 
prior  periods  for  which  financial  statements  have  not  been  issued. 
Nathan’s  adopted  the  provisions  of  FSP  No.  157-3  effective 
September  28,  2008.  The  effect  on  our  consolidated  financial  
position  and  results  of  operations  of  adopting  this  standard  was  
not significant.

In April 2009, the FASB issued FASB Staff Position No. 157-4, 
“Determining  Fair  Value  When  the  Volume  and  Level  of  Activity 
for  the  Asset  or  Liability  Have  Significantly  Decreased  and 
Identifying Transactions That Are Not Orderly,” (“FSP No. 157-4”), 
which  provides  guidelines  for  a  broad  interpretation  of  when  to 
apply  market-based  fair  value  measurements.  FSP  No.  157-4  
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.  FSP  No.  157-4  is 
effective for interim and annual periods ending after June 15, 2009, 
but may be early adopted for the interim and annual periods ending 
after  March  15,  2009.  Nathan’s  will  adopt  the  provisions  of  FSP  
No. 157-4 on March 30, 2009. We do not expect the adoption of FSP 
No.  157-4  to  have  a  material  effect  on  our  consolidated  financial 
position and results of operations.

  The effect on our consolidated financial position and results of 

operations of adopting these standards was not significant.

  The valuation hierarchy established by SFAS No. 157 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 unobserv-
able  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 March 29, 2009 by SFAS No. 
157 valuation hierarchy:

Level 1

Level 2

Level 3

Marketable securities

Total assets at fair value

$—

$—

$25,670

$25,670

$—

$—

Carrying 
Value

$25,670

$25,670

  Nathan’s  marketable  securities,  which  primarily  represent 
municipal  bonds,  are  not  actively  traded.  The  valuation  of  such 
bonds  is  based  upon  quoted  market  prices  for  similar  bonds  cur-
rently 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 receiv-
able 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.

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In  February  2007,  the  FASB  issued  SFAS  No.  159,  “The  Fair 
Value  Option  for  Financial  Assets  and  Financial  Liabilities—
Including  an  amendment  of  FASB  Statement  No.  115”  (“SFAS  
No.  159”).  This  standard  amends  SFAS  No.  115,  “Accounting  for 
Certain  Investments  in  Debt  and  Equity  Securities,”  with  respect  
to  accounting  for  a  transfer  to  the  trading  category  for  all  entities 
with available-for-sale and trading securities electing the fair value 
option. SFAS No. 159 allows companies to elect fair value account-
ing for many financial instruments and other items that currently are 
not  required  to  be  accounted  for  as  such,  allows  different  applica-
tions for electing the option for a single item or groups of items, and 
requires  disclosures  to  facilitate  comparisons  of  similar  assets  and 
liabilities  that  are  accounted  for  differently  in  relation  to  the  fair 
value option. Nathan’s adopted the provisions of SFAS  No.  159  on 
March  31,  2008.  The  adoption  of  SFAS  No.  159  had  no  impact  
on  our  consolidated  financial  position  and  results  of  operations  as 
Nathan’s  did  not  elect  the  fair  value  option  to  report  its  financial 
assets and liabilities at fair value and elected to continue the treat-
ment of its marketable securities as available-for-sale securities with 
unrealized gains and losses recorded in accumulated other compre-
hensive income.

14. Start-up Costs

  Pre-opening and similar costs are expensed as incurred.

15. Revenue Recognition—Branded Products Operations

  The  Company  recognizes  revenue  from  the  Branded  Product 
Program when it is determined that the products have been delivered 
via  third  party  common  carrier  to  Nathan’s  customers.  Rebates  
provided to customers are classified as a reduction of revenues.

16. Revenue Recognition—Company-owned Restaurants

  Sales by Company-owned restaurants, which are typically paid 
in cash or credit card by the customer, are recognized upon the per-
formance of services. Sales are presented, net of sales tax, pursuant 
to  EITF  Issue  06-3,  “How  Taxes  Collected  from  Customers  and 
Remitted  to  Governmental  Authorities  Should  Be  Presented  in  the 
Income Statement (That Is, Gross versus Net Presentation).”

17. Revenue Recognition—Franchising Operations

In  connection  with  its  franchising  operations,  the  Company 
receives  initial  franchise  fees,  development  fees,  royalties,  and  in 
certain  cases,  revenue  from  sub-leasing  restaurant  properties  to 
franchisees.

  Franchise  and  area  development  fees,  which  are  typically 
received prior to completion of the revenue recognition process, are 
initially recorded as deferred revenue. Initial franchise  fees, which 
are  non-refundable,  are  initially  recognized  as  income  when  sub-
stantially  all  services  to  be  performed  by  Nathan’s  and  conditions 
relating to the sale of the franchise have been performed or satisfied, 
which generally occurs when the franchised restaurant commences 
operations.

  The following services are typically provided by the Company 

prior to the opening of a franchised restaurant:

•   Approval of all site selections to be developed.
•   Provision of architectural plans suitable for restaurants to be 

developed.

•   Assistance  in  establishing  building  design  specifications, 
reviewing  construction  compliance  and  equipping  the 
restaurant.

•   Provision of appropriate menus to coordinate with the restau-

rant design and location to be developed.

•   Provide  management  training  for  the  new  franchisee  and 

selected staff.

•   Assistance with the initial operations of restaurants being 

developed.

  At  March  29,  2009  and  March  30,  2008,  $171  and  $284, 
respectively,  of  deferred  franchise  fees  are  included  in  the  accom-
panying  consolidated  balance  sheets.  For  the  fiscal  years  ended 
March 29, 2009, March 30, 2008 and March 25, 2007, the Company 
earned  franchise  fees  of  $647,  $831  and  $488,  respectively,  from 
new unit openings, transfers, co-branding and forfeitures.

  Development  fees  are  nonrefundable  and  the  related  agree-
ments require the franchisee to open a specified number of restau-
rants  in  the  development  area  within  a  specified  time  period  or  
the  agreements  may  be  canceled  by  the  Company.  Revenue  from 
development agreements is deferred and recognized ratably over the 
term  of  the  agreement,  or,  as  restaurants  in  the  development  area 
commence operations on a pro rata basis to the minimum number of 
restaurants  required  to  be  open,  or  at  the  time  the  development 
agreement is effectively canceled. At March 29, 2009 and March 30, 
2008,  $193  and  $214,  respectively,  of  deferred  development  fee  
revenue  is  included  in  “Other  liabilities”  in  the  accompanying  
consolidated balance sheets.

  The following is a summary of franchise openings and closings 
for  the  Nathan’s  Franchise  restaurant  system  for  the  fiscal  years 
ended March 29, 2009, March 30, 2008 and March 25, 2007:

Franchised restaurants operating 
at the beginning of the period

New franchised restaurants 
opened during the period
Franchised restaurants closed 

March 29, 
2009

March 30, 
2008

March 25, 
2007

224

46

196

46

192

21

during the period

(21)

(18)

(17)

Franchised restaurants operating 

at the end of the period

249

224

196

  The  Company  recognizes  franchise  royalties,  which  are  gen-
erally  based  upon  a  percentage  of  sales  made  by  the  Company’s 
franchisees,  when  they  are  earned  and  deemed  collectible.  The 
Company  recognizes  revenue  from  its  Branded  Menu  Program 
directly from its product manufacturers upon their sales of Nathan’s 

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products.  Franchise  fees  and  royalties  that  are  not  deemed  to  be  
collectible are not recognized as revenue until paid by the franchisee 
or until collectibility is deemed to be reasonably assured.  Revenue 
from sub-leasing properties is recognized in income as the revenue 
is earned and becomes receivable and deemed collectible. Sub-lease 
rental income is presented net of associated lease costs in the accom-
panying consolidated statements of operations.

18. Revenue Recognition—License Royalties

  The Company earns revenue from royalties on the licensing of 
the use of its name on certain products produced and sold by outside 
vendors.  The  use  of  the  Company  name  and  symbols  must  be 
approved  by  the  Company  prior  to  each  specific  application  to 
ensure proper quality and project a consistent image. Revenue from 
license  royalties  is  recognized  when  it  is  earned  and  deemed 
collectible.

19. Interest Income

Interest income is recorded when it is earned and deemed real-

izable by the Company.

20. Other Income

  The  Company  recognizes  gains  on  the  sale  of  fixed  assets 
under the full accrual method, installment method or deposit method 
in accordance with provisions of SFAS No. 66 (See Note B-8).

  Deferred  revenue  associated  with  supplier  contracts  is  gener-
ally  amortized  into  income  on  a  straight-line  basis  over  the  life  of 
the contract.

  Other income for the fiscal years ended March 29, 2009, March 

30, 2008 and March 25, 2007 consists of the following:

Amortization of supplier  
  contributions
Other income

March 29, 
2009

March 30, 
2008

March 25, 
2007

$41
  22

$63

$34
  37

$71

$52
    8

$60

21.  Business Concentrations and Geographical 

Information

  The  Company’s  accounts  receivable  consist  principally  of 
receivables  from  franchisees  for  royalties  and  advertising  contri-
butions,  from  sales  under  the  Branded  Product  Program,  and  
for  royalties  from  retail  licensees.  At  March  29,  2009,  one  retail 
licensee  and  two  Branded  Products  distributors  each  represented 
12%, 15% and 15%, respectively, of accounts receivable. At March 
30, 2008, one retail licensee and three Branded Product customers 
each represented 19%, 15%, 11% and 10%, respectively, of accounts 
receivable.  No  franchisee,  retail  licensee  or  Branded  Product  cus-
tomer accounted for 10% or more of revenues during the fiscal years 
ended March 29, 2009, March 30, 2008 and March 25, 2007.

  The  Company’s  primary  supplier  of  frankfurters  represented 
81%, 77% and 74% of product purchases for the fiscal years ended 
March 29, 2009, March 30, 2008 and March 25, 2007, respectively. 
The Company’s distributor of product to its Company-owned restau-
rants represented 12%, 15%, and 16% of product purchases for the 
fiscal years ended March 29, 2009, March 30, 2008 and March 25, 
2007, respectively.

  The Company’s revenues for the fiscal years ended March 29, 
2009,  March  30,  2008  and  March  25,  2007  were  derived  from  the 
following geographic areas:

Domestic (United States)
Non-domestic

March 29, 
2009

March 30, 
2008

March 25, 
2007

$48,423
       798

$46,489
       736

$41,705
    1,098

$49,221

$47,225

$42,803

22. Advertising

  The Company administers an advertising fund on behalf of its 
franchisees  to  coordinate  the  marketing  efforts  of  the  Company. 
Under  this  arrangement,  the  Company  collects  and  disburses  fees 
paid by manufacturers, franchisees and Company-owned stores for 
national  and  regional  advertising,  promotional  and  public  relations 
programs. Contributions to the advertising funds are based on spec-
ified  percentages  of  net  sales,  generally  ranging  up  to  2%.  Net 
Company-owned  store  advertising  expense  was  $188,  $224,  and 
$184,  for  the  fiscal  years  ended  March  29,  2009,  March  30,  2008 
and March 25, 2007, respectively.

23. Stock-Based Compensation

  At  March  29,  2009,  the  Company  had  several  stock-based 
employee  compensation  plans  in  effect  which  are  more  fully 
described  in  Note  K.  As  of  the  beginning  of  fiscal  2007,  Nathan’s 
adopted  SFAS  No.  123R,  “Share-based  Payment,”  (“SFAS  No. 
123R”) using the modified prospective method.

  SFAS No. 123R requires the cost of all share-based payments 
to  employees,  including  grants  of  employee  stock  options,  to  be  
recognized  in  the  financial  statements  based  on  their  fair  values 
measured at the grant date, or the date of later modification, over the 
requisite  service  period.  The  Company  utilizes  the  straight-line 
attribution method to recognize the expense associated with awards 
with graded vesting terms. In addition, under the modified prospec-
tive approach, SFAS No. 123R requires unrecognized cost (based on 
the amounts previously disclosed in pro forma footnote disclosures) 
related  to  awards  vesting  after  the  date  of  initial  adoption  to  be  
recognized  by  the  Company  in  the  financial  statements  over  the 
remaining requisite service period.

  Stock-based  compensation,  including  amortization  of  deferred 
compensation  relating  to  restricted  stock,  recognized  during  the  
fiscal years ended March 29, 2009, March 30, 2008 and March 25, 
2007 was $492, $432 and $367 respectively, is included in general 
and  administrative  expense  in  the  accompanying  Consolidated 

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(continued)

Statements  of  Earnings.  As  of  March  29,  2009,  there  was  $899  of 
unamortized  compensation  expense  related  to  stock  options.  The 
Company expects to recognize this expense over approximately two 
years, six months, which represents the remaining requisite service 
periods for such awards.

•   The cost of labor and associated costs of in-store restaurant 

management and crew.

•   The  cost  of  paper  products  used  in  Company-operated 

restaurants.

•   Other  direct  costs  such  as  fulfillment,  commissions,  freight 

  No  stock-based  awards  were  granted  during  the  fiscal  year 

and samples.

ended March 29, 2009.

  During  the  fiscal  year  ended  March  30,  2008,  the  Company 
granted  110,000  stock  options  having  an  exercise  price  of  $17.43  
per  share,  all  of  which  expire  five  years  from  the  date  of  grant. 
60,000 of the options granted will be vested as follows: 25% on the 
first  anniversary  of  the  grant,  50%  on  the  second  anniversary  of  
the  grant,  75%  on  the  third  anniversary  of  the  grant  and  100%  on 
the  fourth  anniversary  of  the  grant.  50,000  of  the  options  granted 
will  be  vested  as  follows:  33.3%  on  the  first  anniversary  of  the 
grant,  66.7%  on  the  second  anniversary  of  the  grant  and  100%  on 
the third anniversary of the grant.

  During  the  fiscal  year  ended  March  25,  2007,  the  Company 
granted  197,500  stock  options  having  an  exercise  price  of  $13.08  
per  share,  all  of  which  expire  ten  years  from  the  date  of  grant.  
All 197,500 options granted will be vested as follows: 20% on the 
first  anniversary  of  the  grant,  40%  on  the  second  anniversary  of  
the  grant,  60%  on  the  third  anniversary  of  the  grant,  80%  on  the 
fourth anniversary of the grant and 100% on the fifth anniversary of 
the grant.

  The  weighted-average  option  fair  values,  as  determined  using 
the Black-Scholes option valuation model, and the assumptions used 
to estimate these values for stock options granted during the fiscal 
years ended March 30, 2008 and March 25, 2007 are as follows:

Weighted-average option fair values
Expected life (years)
Interest rate
Volatility
Dividend yield

Fiscal Year Ended

March 30, 
2008

March 25, 
2007

$5.8270
4.25
4.21%
32.93%
0%

$6.1686
7.0
5.21%
34.33%
0%

  The  expected  dividend  yield  is  based  on  historical  and  pro-
jected  dividend  yields.  The  Company  estimates  expected  volatility 
based  primarily  on  historical  monthly  price  changes  of  the 
Company’s stock equal to the expected life of the option. The risk 
free interest rate is based on the U.S. Treasury yield in effect at the 
time of the grant. The expected option term is the number of years 
the  Company  estimates  the  options  will  be  outstanding  prior  to  
exercise based on expected employment termination behavior.

24. Classification of Operating Expenses
Cost of sales consists of the following:

•   The  cost  of  products  sold  by  the  Company-operated  res-
taurants,  through  the  Branded  Product  Program  and  other 
distribution channels.

  Restaurant operating expenses consist of the following:
•   Occupancy costs of Company-operated restaurants.
•   Utility costs of Company-operated restaurants.
•   Repair and maintenance expenses of the Company-operated 

restaurant facilities.

•   Marketing  and  advertising  expenses  done  locally  and  con-
tributions  to  advertising  funds  for  Company-operated 
restaurants.

•   Insurance  costs  directly  related  to  Company-operated 

restaurants.

25. Income Taxes

  The  Company’s  current  provision  for  income  taxes  is  based 
upon  its  estimated  taxable  income  in  each  of  the  jurisdictions  in 
which it operates, after considering the impact on taxable income of 
temporary  differences  resulting  from  different  treatment  of  items 
such as depreciation, estimated self-insurance liabilities, allowance 
for  doubtful  accounts  and  any  tax  credits  or  net  operating  losses 
(“NOL”)  for  tax  and  reporting  purposes.  Deferred  tax  assets  and 
liabilities  are  recognized  for  the  future  tax  consequences  attribut-
able to differences between the financial statement carrying amounts 
of  existing  assets  and  liabilities  and  their  respective  tax  bases  and 
any  operating  loss  or tax credit carryforwards. Deferred  tax  assets 
and  liabilities  are  measured  using  enacted  tax  rates  expected  to 
apply to taxable income in the year in which those temporary differ-
ences are expected to be recovered or settled.

uncertain tax positions

  The  Financial  Accounting  Standards  Board  issued  Interpre-
tation  No.  48,  “Accounting  for  Uncertainty  in  Income  Taxes—an 
interpretation  of  FASB  Statement  No.  109,  Accounting  for  Income 
Taxes”  (“FIN  No.  48”)  which  was  adopted  by  the  Company  on 
March 26, 2007. FIN No. 48 addresses the determination of whether 
tax  benefits  claimed  or  expected  to  be  claimed  on  a  tax  return 
should be recorded in the financial statements. Under FIN No. 48, 
the Company may recognize the tax benefit from an uncertain tax 
position only if it is more likely than not that the tax position will be 
sustained  on  examination  by  the  taxing  authorities  based  on  the 
technical merits of the position. The tax benefits recognized in the 
financial  statements  from  such  position  should  be  measured  based 
on the largest benefit that has a greater than fifty percent likelihood 
of  being  realized  upon  ultimate  settlement.  FIN  No.  48  also  
provides  guidance  on  derecognition,  classification,  interest  and  
penalties,  accounting  in  interim  periods  and  disclosure  require-
ments. (See Note J.)

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26. Reclassifications

  Certain prior years’ balances related to discontinued operations 
(See  Note  G)  have  been  reclassified  to  conform  with  Nathan’s  
current year presentation.

27.  Recently Issued Accounting Standards Not  

Yet Adopted
In December 2007, the Financial Accounting Standards Board 
(“FASB”)  issued  SFAS  No.  141  (revised  2007),  “Business 
Combinations”  (“SFAS  No.  141R”),  which  establishes  principles 
and  requirements  for  how  an  acquirer  recognizes  and  measures  
in  its  financial  statements  the  identifiable  assets  acquired,  the  lia-
bilities  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 issued FASB Staff Position No. 141R-1, 
“Accounting  for  Assets  Acquired  and  Liabilities  Assumed  in  a 
Business Combination That Arises from Contingencies” (“FSP No. 
141R-1”),  which  provides  guidelines  on  the  initial  recognition  and 
measurement, subsequent measurement and accounting, and disclo-
sure of assets and liabilities arising from contingencies in a business 
combination. FSP No. 141R-1 provides that an acquirer shall recog-
nize an asset acquired or a liability assumed in a business combina-
tion  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. FSP No. 141R-1 pro-
vides guidance in the event that the fair value of an asset acquired or 
liability  assumed  cannot  be  determined  during  the  measurement 
period.  FSP  No.  141R-1  provides  that  an  acquirer  shall  develop  a 
systematic  and  rational  basis  for  subsequently  measuring  and 
accounting for assets and liabilities arising from contingencies and 
also  provides  for  the  disclosure  requirements.  FSP  No.  141R-1  is 
effective for assets or liabilities arising from contingencies in busi-
ness  combinations  for  which  the  acquisition  date  is  on  or  after  the 
beginning of the first annual reporting period beginning on or after 
December 15, 2008.

  The  requirements  of  SFAS  No.  141R  and  FSP  No.  141R-1  are 
effective  for  fiscal  years  beginning  on  or  after  December  15,  
2008, which for us is fiscal 2010. Earlier adoption is prohibited. The 
adoption  of  SFAS  No.  141R  and  FSP  No.  141R-1  will  impact  our 
accounting for future business combinations, if any.

In December 2007, the FASB issued SFAS No. 160, “Noncon-
trolling Interests in Consolidated Financial Statements—an amend-
ment  of  ARB  No.  51”  (“SFAS  No.  160”).  SFAS  No.  160  amends 
ARB No. 51 to establish 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  statement  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. SFAS No. 160 is effective for fiscal years and interim peri-
ods  within  those  fiscal  years,  beginning  on  or  after  December  15, 
2008, which for us is the first quarter of fiscal 2010. Earlier adoption 
is  prohibited.  Based  upon  Nathan’s  current  organization  structure, 
we  do  not  expect  the  implementation  of  SFAS  No.  160  to  have  
any  impact  on  our  consolidated  financial  position  and  results  
of operations.

In April 2008, the FASB issued FASB Staff Position No. 142-3 
(“FSP No. 142-3”), “Determination of the Useful Life of Intangible 
Assets,”  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  under  SFAS  No.  142, 
“Goodwill and Other Intangible Assets.” FSP No. 142-3 is effective 
for fiscal years beginning after December 15, 2008, which for us is 
the first quarter of fiscal 2010. We do not expect the adoption of FSP 
No.  142-3  to  have  a  material  effect  on  our  consolidated  financial 
position and results of operations.

In  June  2008,  the  FASB  ratified  Emerging  Issues  Task  Force 
08-3  (“EITF  08-3”),  “Accounting  by  Lessees  for  Maintenance 
Deposits,” which provides guidance for accounting for maintenance 
deposits paid by a lessee to a lessor. EITF 08-3 is effective for fiscal 
years beginning after December 15, 2008, which for us is the first 
quarter of fiscal 2010. We do not expect the adoption of EITF 08-3 
to  have  a  significant  impact  on  our  consolidated  financial  position 
and results of operations.

In April 2009, the FASB issued FASB Staff Position Nos. FAS 
115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-
Temporary  Impairments,”  (“FSP  No.  115-2  and  FSP  No.  124-2”) 
which segregates 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. 
The  FSPs  also  require  some  additional  disclosures  regarding 
expected  cash  flows,  credit  losses,  and  an  aging  of  securities  with 
unrealized  losses.  These  FSPs  are  effective  for  interim  and  annual 
periods ending after June 15, 2009, but may be early adopted for the 
interim  and  annual  periods  ending  after  March  15,  2009.  Nathan’s 
will  adopt  the  provisions  of  FSP  No.  115-2  and  FSP  No.  124-2  on 
March  30,  2009.  We  do  not  expect  the  adoption  of  FSP  No.  115-2 
and  FSP  No.  124-2  to  have  a  material  effect  on  our  consolidated 
financial position and results of operations.

In April 2009, the FASB issued FASB Staff Position Nos. FAS 
107-1  and  APB  28-1,  “Interim  Disclosures  about  Fair  Value  of 
Financial  Instruments,”  which  increase  the  frequency  of  fair  value 
disclosures  to  a  quarterly  basis  instead  of  annually.  The  guidance 
relates to fair value disclosures for any financial instruments that are 
not  currently  reflected  on  the  balance  sheet  at  fair  value.  Prior  to  

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(continued)

this  FSP,  fair  values  for  these  assets  and  liabilities  were  only  dis-
closed once a year. These FSPs are effective for interim and annual 
periods ending after June 15, 2009, but may be early adopted for the 
interim  and  annual  periods  ending  after  March  15,  2009.  Nathan’s 
will  adopt  the  provisions  of  FSP  No.  107-1  and  APB  No.  28-1  on 
March  30,  2009.  We  do  not  expect  the  adoption  of  FSP  No.  107-1 
and  APB  No.  28-1  to  have  a  material  effect  on  our  consolidated 
financial position and results of operations.

Note C—Income Per Share

  Basic  income  per  common  share  is  calculated  by  dividing 
income  by  the  weighted-average  number  of  common  shares  out-
standing  and  excludes  any  dilutive  effects  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, using the treasury stock method.

  The  following  chart  provides  a  reconciliation  of  information  used  in  calculating  the  per  share  amounts  for  the  fiscal  years  ended  

March 29, 2009, March 30, 2008 and March 25, 2007, respectively:

Income from  
Continuing Operations

2009

2008

2007

2009

Shares

2008

Income Per Share from 
Continuing Operations

2007

2009

2008

2007

Basic EPS
  Basic calculation
  Effect of dilutive employee stock options and warrants

Diluted EPS
  Diluted calculation

$4,958
—

$4,781
—

$4,272
—

5,898,000
282,000

6,085,000
417,000

5,836,000
505,000

$  .84
(.04)

$  .79
(.05)

$  .73
(.06)

$4,958

$4,781

$4,272

6,180,000

6,502,000

6,341,000

$  .80

$  .74

$  .67

  Options and warrants to purchase 196,833, 55,000 and 98,750 
shares of common stock for the years ended March 29, 2009, March 
30,  2008  and  March  25,  2007,  respectively,  were  not  included  in  
the computation of diluted earnings per share because the exercise 
prices exceeded the average market price of common shares during 
the respective periods.

Note D—Accounts and Other Receivables, Net

  Accounts and other receivables, net, consist of the following:

Franchise and license royalties
Branded product sales
Real estate tax refund, net
Other

Less: allowance for doubtful accounts

March 29, 
2009

March 30, 
2008

$1,672
2,686
516
200

5,074
205

$1,721
2,118
—
95

3,934
104

Accounts and other receivables, net

$4,869

$3,830

  Accounts  receivable  are  due  within  30  days  and  are  stated  at 
amounts due from franchisees, retail licensees and Branded Product 
Program customers, net of an allowance for doubtful accounts.

  March 29, 2009, March 30, 2008 and March 25, 2007 accounts 
outstanding  longer  than  the  contractual  payment  terms  are  consid-
ered  past  due.  The  Company  determines  its  allowance  by  consid-
ering  a  number  of  factors,  including  the  length  of  time  accounts 
receivable  are  past  due,  the  Company’s  previous  loss  history,  the 
customer’s current and expected future ability to pay its obligation  
to the Company, and the condition of the general economy and the 
industry  as  a  whole.  The  Company  writes  off  accounts  receivable 
when they are deemed to be uncollectible.
  Real  estate  tax  refund,  net  represents  the  settlement  of  a  multi-
year  certiorari  proceeding  at  a  Company-owned  restaurant,  net  of 
associated fees.

  Changes  in  the  Company’s  allowance  for  doubtful  accounts  
for  the  fiscal  years  ended  March  29,  2009,  March  30,  2008  and 
March 25, 2007 are as follows:

Beginning balance
  Bad debt expense

 Uncollectible marketing  
fund contributions
  Accounts written off

March 29, 
2009

March 30, 
2008

March 25, 
2007

$104
173

27
(99)

$  94
—

20
(10)

$128
—

—
(34)

Ending balance

$205

$104

$  94

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Note E—Marketable Securities

Note F—Property and Equipment, Net

  The  cost,  gross  unrealized  gains,  gross  unrealized  losses  and 
fair market value for  marketable securities, which consists entirely 
of municipal bonds which are classified as available-for-sale securi-
ties are as follows:

Gross 
Unrealized 
Gains

Gross 
Unrealized 
Losses

$625

$365

$(85)

$  (5)

Fair 
Market 
Value

$25,670

$20,950

Cost

$25,130

$20,590

March 29, 2009

March 30, 2008

  As  of  March  29,  2009,  there  were  four  securities  in  an  
unrealized  loss  position.  Management  has  evaluated  the  securities, 
individually and in the aggregate, for other than temporary impair-
ment.  No  such  impairment  existed  at  March  29,  2009  based  on  
management’s  intent  and  ability  to  hold  the  securities  until  market 
conditions  recover  and  the  market  value  of  the  securities  is  at  a  
minimum equal to their cost basis. As of March 29, 2009, all secu-
rities in an unrealized loss position have been in an unrealized loss 
position for less than one year.

  As  of  March  29,  2009,  the  bonds  mature  at  various  dates 
between  April  2009  and  October  2019.  The  following  represents  
the bond maturities by period as follows:

Fair Value of Bonds

Total

Less than 
1 Year

1–5 
Years

5–10 
Years

After  
10 Years

March 29, 2009

$25,670

$1,049

$15,795

$7,577

$1,249

March 30, 2008

$20,950

$2,235

$11,124

$6,346

$1,245

  Proceeds  from  the  sale  of  available-for-sale  securities  and  the 
resulting gross realized gains and losses included in the determina-
tion of net income are as follows:

March 29, 
2009

March 30, 
2008

March 25, 
2007

Available-for-sale securities:
  Proceeds
  Gross realized losses

$3,681
(17)

$3,100
—

—
—

  The change in net unrealized gains on available-for-sale secu-
rities  for  the  fiscal  years  ended  March  29,  2009,  March  30,  2008  
and March 25, 2007, of $120, $269, and $120, respectively, which is 
net of deferred income taxes, have been included as a component of 
comprehensive income.

  Property and equipment consists of the following:

Land
Building and improvements
Machinery, equipment, furniture  
  and fixtures
Leasehold improvements
Construction-in-progress

Less: accumulated depreciation  
  and amortization

March 29, 
2009

March 30, 
2008

$  1,094
2,164

$  1,094
2,130

6,290
3,834
3

5,931
3,817
18

13,385

12,990

9,259

8,562

$  4,126

$  4,428

  Depreciation and amortization expense on property and equip-
ment was $809, $764 and $742 for the fiscal years ended March 29, 
2009, March 30, 2008, and March 25, 2007, respectively.

Note G—Discontinued Operations

  The  Company  follows  the  provisions  of  SFAS  No.  144, 
“Accounting for the Impairment or Disposal of Long-Lived Assets” 
(“SFAS  No.  144”),  related  to  the  accounting  and  reporting  for  
components  of  a  business  to  be  disposed  of.  In  accordance  with 
SFAS  No.  144,  the  definition  of  discontinued  operations  includes 
components  of  an  entity  whose  cash  flows  are  clearly  identifiable. 
SFAS  No.  144  requires  the  Company  to  classify  as  discontinued 
operations any restaurant, property or business outlet that Nathan’s 
sells,  abandons  or  otherwise  disposes  of  where  the  Company  will 
have  no  further  involvement  in  the  operation  of,  or  cash  flows  
from, such restaurant, property or business outlet operations.

1. Sale of NF Roasters Corp.

  On April 23, 2008, Nathan’s completed the sale of its wholly-
owned subsidiary, NF Roasters Corp. (“NF Roasters”), the franchi-
sor 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 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.

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  The  following  is  a  summary  of  the  assets  and  liabilities  of  

NF Roasters, as of the date of sale, that were sold:

Cash
Accounts receivable, net
Deferred income taxes, net
Intangible assets, net
Other assets

  Total assets sold

Accrued expenses
Other liabilities

  Total liabilities sold

Net assets sold

$    8(a)
1
230
391
30

660

27(b)
328

355

$305

(a)   Represents unexpended marketing funds.
(b)   Includes unexpended marketing funds of $8.

  Nathan’s realized a gain on the sale of NF Roasters of $3,656 
net of professional fees of $39 and recorded income taxes of $1,289 
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  all  periods  presented.  The  accompanying  balance  sheet  for  the 
fiscal  year  ended  March  30,  2008  has  been  revised  to  reflect  the 
assets  and  liabilities  of  NF  Roasters  that  were  subsequently  sold,  
as held for sale as of that date.

2. Sale of Miami Subs Corporation

  On  June  7,  2007,  Nathan’s  completed  the  sale  of  its  wholly-
owned  subsidiary,  Miami  Subs  Corporation  (“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,  consisting  of 
$850  in  cash  and  the  Purchaser’s  promissory  note  in  the  principal 
amount of $2,400 (the “MSC Note”). The MSC Note bears interest 
at  8%  per  annum  and  is  secured  by  a  lien  on  all  of  the  assets  of 
Miami Subs 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.  Due  to  the  ability  to  prepay  the  loan  and  reduce  the 
amount  due,  the  recognition  of  $250  was  initially  deferred.  The 
MSC  Note  was  not  prepaid  within  the  requisite  timeframe  and 
Nathan’s recognized the deferred amount of $250 as additional gain 
and  recorded  income  taxes  of  $97  during  the  fiscal  year  ended 
March 29, 2009.

  Effective August 31, 2008, Nathan’s and the Purchaser agreed 
to  extend  the  due  date  of  the  MSC  Note  from  its  initial  four-year 
term until April 2014, to reduce the monthly payment and to settle 
certain  claims  under  the  MSC  Agreement.  At  that  time,  manage-
ment evaluated the restructured MSC Note for impairment by com-
paring the present value of the future cash flows on the MSC Note 
to  the  current  carrying  value  and  determined  that  no  impairment 
existed. The current and long-term portions of the MSC Note as of 
March 29, 2009 reflect the terms of the restructured MSC Note.

In  accordance  with  the  MSC  Agreement,  Nathan’s  retained 
ownership  of  Miami  Subs’  then-owned  corporate  office  in  Fort 
Lauderdale, Florida.

  The  following  is  a  summary  of  the  assets  and  liabilities  of 

Miami Subs, as of the date of sale, that were sold:

Cash
Accounts receivable, net
Notes receivable, net
Prepaid expenses and other current assets
Deferred income taxes, net
Property and equipment, net
Intangible assets, net
Other assets, net

  Total assets sold

Accounts payable
Accrued expenses
Other liabilities

  Total liabilities sold

Net assets sold

$   674(a)
213
153
119
719
48
1,803
46

3,775

27
1,373(a)
395

1,795

$1,980

(a)   Includes unexpended marketing funds of $565.

In  connection  with  the  MSC  Agreement,  the  Purchaser  may 
continue  to  sell  Nathan’s  Famous  and  Arthur  Treacher’s  products 
within the existing restaurant system in exchange for a royalty pay-
ment of $6 per month.

  Nathan’s initially realized a gain on the sale of Miami Subs of 
$983,  net  of  professional  fees  of  $37,  and  recorded  income  taxes  
of  $356  on  the  gain  during  the  fiscal  year  ended  March  30,  2008. 
Nathan’s also recognized an additional gain of $250, or $153 net of 
tax, during the fiscal year ended March 29, 2009, resulting from the 
contingent  consideration  which  was  deferred  at  the  time  of  sale. 
Nathan’s  has  determined  that  it  will  not  have  any  significant  cash 
flows  or  continuing  involvement  in  the  ongoing  operations  of  
Miami  Subs.  Therefore,  the  results  of  operations  for  Miami  Subs, 
including the gains on disposal, have been presented as discontinued 
operations for all periods presented.

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n o t e S   t o   c o n S o l i dat e d  Financial StateMentS

3. Sale of Leasehold Interest

  The following is a summary of the assets and liabilities held for 

  During  the  fiscal  year  ended  March  30,  2008,  Nathan’s  com-
pleted a Lease Termination Agreement with respect to three leased 
properties  in  Fort  Lauderdale,  Florida,  with  its  landlord,  and  
CVS 3285 FL, L.L.C., (“CVS”) to sell its leasehold interests to CVS 
for  $2,000.  As  the  properties  were  subject  to  certain  sublease  and 
management  agreements  between  Nathan’s  and  the  then-current 
occupants, Nathan’s made payments to, or forgave indebtedness of, 
the  then-current  occupants  of  the  properties  and  paid  brokerage 
commissions of $494 in the aggregate. Nathan’s made the properties 
available to CVS by May 29, 2007, and Nathan’s received the pro-
ceeds  of  the  sale  on  June  5,  2007.  Nathan’s  recognized  a  gain  
of  $1,506  and  recorded  income  taxes  of  $557  during  the  fiscal  
year  ended  March  30,  2008.  The  results  of  operations  for  these  
properties,  including  the  gain  on  disposal,  have  been  included  as 
discontinued operations for all periods presented.

4. Sale of Real Estate

  On July 13, 2005, Nathan’s sold all of its right, title and interest 
in and to a vacant real estate parcel previously utilized as a parking 
lot, adjacent to a Company-owned restaurant, located in Brooklyn, 
New  York.  Nathan’s  also  entered  into  an  agreement  pursuant  to 
which  an  affiliate  of  the  buyer  assumed  all  of  Nathan’s  rights  and 
obligations under a lease for an adjacent property and agreed to pay 
$500 to Nathan’s for its leasehold interest on the earlier of (i) three 
years after closing or (ii) six months after the closing of the adjacent 
property. On January 17, 2006, the adjacent property was sold. The 
Company received $100 during fiscal 2006 and the remaining bal-
ance of $400 was received in October 2006 and is included as a gain 
from discontinued operations during fiscal 2007.

5. Summary Financial Information

  The  following  is  a  summary  of  all  discontinued  operations  
for fiscal years ended March 29, 2009, March 30, 2008 and March 
25, 2007:

March 29, 
2009

March 30, 
2008

March 25, 
2007

Revenues (excluding gains  

from dispositions)

Gain from dispositions before  

income taxes

Income before income taxes

$     10

$   593

$3,086

$3,906

$3,914

$2,489

$2,824

$   400

$2,104

sale as of March 30, 2008:

Cash
Accounts receivable, net
Deferred income taxes
Intangible assets, net
Other assets, net

  Total assets held for sale

Accrued expenses
Other liabilities

  Total liabilities held for sale

Net assets held for sale

(a)   Includes unexpended marketing funds of $8.

$  10(a)
3
230
393
30

666

29(a)
325

354

$312

Note H—Accrued Expenses, Other Current Liabilities and 
Other Liabilities

  Accrued  expenses  and  other  current  liabilities  consist  of  the 

following:

Payroll and other benefits
Accrued operating expenses
Professional and legal costs
Self-insurance costs
Rent and occupancy costs
Taxes payable
Unexpended advertising funds
Deferred revenue
Other

  Other liabilities consist of the following:

Deferred income—supplier contracts
Deferred development fees
Reserve for uncertain tax positions (Note J)
Deferred rental liability
Deferred royalty

March 29, 
2009

March 30, 
2008

$1,770
926
137
51
119
50
46
634
134

$3,867

$1,803
1,029
234
107
153
60
236
188
204

$4,014

March 29, 
2009

March 30, 
2008

$       4
193
841
24
18

$1,080

$     38
214
773
81
31

$1,137

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n o t e S   t o   c o n S o l i dat e d  Financial StateMentS

(continued)

Note I—Indebtedness

  The  Company  maintained  a  $7,500  line  of  credit  with  its  pri-
mary banking institution. Borrowings under the line of credit were 
intended to be used to meet the normal short-term working capital 
needs  of  the  Company.  The  line  of  credit  was  not  a  commitment 
and,  therefore,  credit  availability  was  subject  to  ongoing  approval. 
The  line  of  credit  expired  on  October  1,  2008,  as  the  Company 
elected  not  to  renew  the  line  of  credit.  There  were  no  borrowings 
outstanding under this line of credit as of March 30, 2008.

Note J—Income Taxes

Income  tax  provision  (benefit)  consists  of  the  following  for  
the fiscal years ended March 29, 2009, March 30, 2008, and March 
25, 2007:

March 29, 
2009

March 30, 
2008

March 25, 
2007

Federal
  Current
  Deferred

State and local
  Current
  Deferred

$2,012
(53)

1,959

511
(9)

502

$1,314
523

1,837

497
93

590

$1,954
(329)

1,625

739
(58)

681

$2,461

$2,427

$2,306

  The  tax  effects  of  temporary  differences  that  give  rise  to  sig-
nificant portions of the deferred tax assets and deferred tax liabili-
ties are presented below:

March 29, 
2009

March 30, 
2008

Deferred tax assets
  Accrued expenses
  Allowance for doubtful accounts
  Deferred revenue
  Depreciation expense
  Expenses not deductible until paid
  Deferred stock compensation
  Excess of straight line over actual rent
  Other

  Total gross deferred tax assets

Deferred tax liabilities

 Difference in tax bases of installment  
  gains not yet recognized
  Deductible prepaid expense
  Unrealized gain on marketable securities
  Other

  Total gross deferred tax liabilities

  Net deferred tax asset

Less current portion

Long-term portion

$   180
82
404
752
21
433
32
7

$1,911

282
172
224
109

787

$   331
37
275
894
43
261
63
10

$1,914

347
209
152
73

781

1,124

(696)

1,133

(697)

$   428

$   436

  Total income tax provision (benefit) for the fiscal years ended 
March 29, 2009, March 30, 2008 and March 25, 2007 differs from 
the amounts computed by applying the United States Federal income 
tax  rate  of  34%  to  income  before  income  taxes  as  a  result  of  the 
following:

Computed “expected” tax expense
State and local income taxes, net  
of Federal income tax benefit
Tax-exempt investment earnings
Nondeductible meals and enter-

tainment and other

March 29, 
2009

March 30, 
2008

March 25, 
2007

$2,522

$2,450

$2,237

314
(305)

(70)

360
(309)

(74)

245
(220)

44

$2,461

$2,427

$2,306

  A valuation allowance is provided when it is more likely than 
not that some portion, or all, of the deferred tax assets will not be 
realized.  Based  upon  anticipated  taxable  income,  management 
believes that it is more likely than not that the Company will realize 
the  benefit  of  this  net  deferred  tax  asset  of  $1,124  and  $1,333  at 
March 29, 2009 and March 30, 2008, respectively.

In  July  2006,  the  FASB  issued  FASB  Interpretation  No.  48, 
“Accounting  for  Uncertainty  in  Income  Taxes”  (“FIN  No.  48”), 
which  clarified  the  accounting  and  disclosures  for  uncertainty  in 
income  taxes  recognized  in  the  financial  statements  in  accordance 
with  SFAS  No.  109,  “Accounting  for  Income  Taxes.”  FIN  No.  48 
also provided guidance on the derecognition of uncertain tax posi-
tions, financial statement classification, accounting for interest and 
penalties, accounting for interim periods and added new disclosure 
requirements.

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n o t e S   t o   c o n S o l i dat e d  Financial StateMentS

In  May  2007,  the  FASB  issued  FASB  Staff  Position  (“FSP”) 
No. FIN 48-1, “Definition of Settlement in FASB Interpretation No. 
48,” an amendment of FASB Interpretation FIN No. 48, “Accounting 
for Uncertainty in Income Taxes,” (“FIN No. 48-1”) to clarify that  
a  tax  position  is  effectively  settled  for  the  purpose  of  recognizing 
previously unrecognized tax benefits in accordance with paragraph 
10(b) of that Interpretation if (a) the taxing authority has completed 
all of its required or expected examination procedures, (b) the enter-
prise  does  not  intend  to  appeal  or  litigate  any  aspect  of  the  tax  
position,  and  (c)  it  is  considered  remote  that  the  taxing  authority 
would  reexamine  the  tax  position.  FIN  No.  48-1  also  conforms  to 
the  terminology  used  in  FIN  No.  48  to  describe  measurement  and 
recognition to the conclusions reached in the FSP. FIN No. 48-1 is 
effective  as  of  the  same  dates  as  FIN  No.  48,  with  retrospective 
application required for entities that have not applied FIN No. 48 in 
a manner consistent with the provisions of the FSP.

  Nathan’s  adopted  the  provisions  of  FIN  No.  48  and  FIN  No. 
48-1  on  March  26,  2007  which  resulted  in  a  $155  adjustment  to 
increase  tax  liabilities  and  decrease  opening  retained  earnings  in 
connection  with  a  cumulative  effect  of  a  change  in  accounting 
principle.

  The following is a tabular reconciliation of the total amounts of 
unrecognized  tax  benefits  excluding  interest  and  penalties  for  the 
fiscal years ended March 29, 2009 and March 30, 2008.

Balance at beginning of year
Increases based on tax positions taken in  

prior years

Decreases based on tax positions taken in  

prior years

Increase based on tax positions taken in  

current year

Reductions of tax positions taken in  

prior years

March 29, 
2009

March 30, 
2008

$466

$517

14

—

21

—

—

—

21

(72)

$466

Unrecognized tax benefits, end of year

$501

  The  amount  of  unrecognized  tax  benefits  at  March  29,  2009 
and March 30, 2008 was $501 and $466, respectively, all of which 
would  impact  Nathan’s  effective  tax  rate,  if  recognized.  Nathan’s 
recognizes  accrued  interest  and  penalties  associated  with  unrecog-
nized tax benefits as part of the income tax provision. As of March 
29,  2009  and  March  30,  2008,  the  Company  had  $370  and  $307, 
respectively, accrued for the payment of interest and penalties. The 
Company  does  not  expect  its  unrecognized  tax  benefits  to  change 
significantly over the next 12 months.

  Nathan’s is subject to tax in the U.S. and various state and local 
jurisdictions. The Company is currently under audit by the Internal 
Revenue  Service  for  the  fiscal  year  ended  March  25,  2007.  New 
York State completed an examination of fiscal years ending March 
2005 through March 2007, resulting in no changes to the returns as 
filed. The earliest tax years’ that are subject to examination by tax-
ing authorities by major jurisdictions are as follows:

Jurisdiction

Federal
New York State
New York City

Fiscal Year

2006
2008
2006

Note K— Stockholders’ Equity, Stock Plans and Other Employee 

Benefit Plans

1. Stock Option Plans

  On December 15, 1992, the Company adopted the 1992 Stock 
Option  Plan  (the  “1992  Plan”),  which  provided  for  the  issuance  of 
incentive  stock  options  (“ISOs”)  to  officers  and  key  employees  
and nonqualified stock options to directors, officers and key employ-
ees.  Up  to  525,000  shares  of  common  stock  were  reserved  for  
issuance  for  the  exercise  of  options  granted  under  the  1992  Plan. 
The  1992  Plan  expired  with  respect  to  granting  of  new  options  on 
December 2, 2002.

In April 1998, the Company adopted the Nathan’s Famous, Inc. 
1998  Stock  Option  Plan  (the  “1998  Plan”),  which  provides  for  the 
issuance of nonqualified stock options to directors, officers and key 
employees.  Up  to  500,000  shares  of  common  stock  were  reserved 
for  issuance  upon  the  exercise  of  options  granted  under  the  1998 
Plan. The 1998 Plan expired with respect to granting of new options 
on April 5, 2008.

In June 2001, the Company adopted the Nathan’s Famous, Inc. 
2001  Stock  Option  Plan  (the  “2001  Plan”),  which  provides  for  the 
issuance of nonqualified stock options to directors, officers and key 
employees. Up to 350,000 shares of common stock were originally 
reserved  for  issuance  upon  the  exercise  of  options  granted  and  for 
future  issuance  in  connection  with  awards  under  the  2001  Plan.  
On  September  12,  2007,  Nathan’s  shareholders  approved  certain 
modifications  to  the  2001  Plan,  which  increased  the  number  of 
options available for future grant by 275,000 shares. On September 
17,  2007,  110,000  stock  options  were  granted  and  as  of  March  29, 
2009,  there  were  168,500  shares  available  to  be  issued  for  future 
grants under the 2001 Plan.

In June 2002, the Company adopted the Nathan’s Famous, Inc. 
2002 Stock Incentive Plan (the “2002 Plan”), which provides for the 
issuance  of  nonqualified  stock  options  or  restricted  stock  awards  
to  directors,  officers  and  key  employees.  Up  to  300,000  shares  of 
common  stock  have  been  reserved  for  issuance  in  connection  with 
awards under the 2002 Plan. As of March 29, 2009, there were 2,500 
shares available to be issued for future grants under the 2002 Plan.

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(continued)

  The 2001 Plan and the 2002 Plan expire on June 13, 2011 and 
June 17, 2012, respectively, unless terminated earlier by the Board of 
Directors under conditions specified in the respective Plan.

new  shares  of  common  stock  for  options  that  have  been  exercised 
and  determined  the  grant  date  fair  value  of  options  and  warrants 
granted using the Black-Scholes option valuation model.

  The Company has outstanding 222,558 of stock options previ-
ously  issued  upon  the  acquisition  of  Miami  Subs  during  the  fiscal 
year ended March 26, 2000. These options have an exercise price of 
$3.1875 and expire on September 30, 2009.

In  general,  options  granted  under  the  Company’s  stock  incen-
tive  plans  have  terms  of  five  or  ten  years  and  vest  over  periods  of 
between three and five years. The Company has historically issued 

2. Warrant

  On July 17, 1997, the Company granted its Chairman and then 
Chief Executive Officer a warrant to purchase 150,000 shares of the 
Company’s  common  stock  at  an  exercise  price  of  $3.25  per  share, 
representing  the  market  price  of  the  Company’s  common  stock  on 
the date of grant. The warrant was exercised in July 2007.

  A summary of the status of the Company’s stock options and warrants  at March 29,  2009,  March 30, 2008 and  March  25, 2007  and 

changes during the fiscal years then ended is presented in the tables below:

Options outstanding—beginning of year
  Granted
  Expired
  Exercised

Options outstanding—end of year

Options exercisable—end of year

Weighted-average fair value of options granted

Warrants outstanding—beginning of year
Exercised

Warrants outstanding—end of year

Warrants exercisable—end of year

2009

2008

2007

Weighted-
Average 
Exercise 
Price

$6.54
—
—
3.30

$6.94

$5.07

$   —

$   —
—

$   —

$   —

Weighted-
Average 
Exercise 
Price

$  5.21
17.43
6.20
3.59

Shares

1,332,024
197,500
(4,000)
(353,216)

Shares

1,172,308
110,000
(8,500)
(121,500)

1,152,308

$  6.54

1,172,308

884,306

150,000
(150,000)

—

—

$  4.02

$  5.83

$  3.25
(3.25)

$     —

$     —

943,141

150,000
—

150,000

150,000

Weighted-
Average 
Exercise 
Price

$  3.78
13.08
6.20
3.69

$  5.21

$  3.48

$  6.16

$  3.25
—

$  3.25

$  3.25

Shares

1,152,308
—
—
125,000

1,027,308

830,475

—
—

—

—

  During the fiscal years ended March 29, 2009, March 30, 2008 and March 25, 2007, 125,000, 271,500 and 308,784 stock options and 

warrants were exercised which aggregated proceeds of $413, $924 and $722, respectively, to the Company.

  The aggregate intrinsic values of the stock options exercised during the fiscal years ended March 29, 2009, March 30, 2008 and March 

25, 2007 were $1,250, $3,169 and $2,658 respectively.

  The following table summarizes information about stock options at March 29, 2009:

Options outstanding at March 29, 2009

Options exercisable at March 29, 2009

Exercise prices range from $3.19 to $17.43

Weighted-Average 
Exercise Price

Weighted-Average 
Remaining  
Contractual Life

$6.94

$5.07

2.93

2.26

Aggregate 
Intrinsic 
Value

$6,723,000

$6,723,000

Shares

1,027,308

830,475

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n o t e S   t o   c o n S o l i dat e d  Financial StateMentS

3. Common Stock Purchase Rights

  On June 20, 1995, the Board of Directors declared a dividend 
distribution of one common stock purchase right (the “Rights”) for 
each outstanding share of common stock of the Company. The dis-
tribution was paid on June 20, 1995 to the shareholders of record on 
June  20,  1995.  The  terms  of  the  Rights  were  amended  on  April  6, 
1998, December 8, 1999, June 15, 2005 and June 4, 2008. Pursuant 
to  the  June  4,  2008  amendment,  the  final  expiration  date  of  the 
Rights  was  accelerated  to  June  4,  2008  thereby  terminating  the 
Rights.  Each  Right,  as  amended,  entitled  the  registered  holder 
thereof  to  purchase  from  the  Company  one  share  of  the  common 
stock  at  a  price  of  $4.00  per  share,  subject  to  adjustment  for  anti-
dilution. New Common Stock certificates issued after June 20, 1995 
upon  transfer  or  new  issuance  of  the  common  stock  contained  a 
notation incorporating the Rights Agreement by reference.

  The  Rights  were  not  exercisable  until  the  Distribution  Date. 
The  Distribution  Date  was  the  earlier  to  occur  of  (i)  ten  days  fol-
lowing a public announcement that a person or group of affiliated or 
associated  persons  (an  “Acquiring  Person”)  acquired,  or  obtained 
the  right  to  acquire,  beneficial  ownership  of  15%  or  more  of  the 
outstanding  shares  of  the  common  stock,  as  amended,  or  (ii)  ten 
business days (or such later date as may be determined by action of 
the Board of Directors prior to such time as any person becomes an 
Acquiring Person) following the commencement, or announcement 
of an intention to make a tender offer or exchange offer by a person 
(other  than  the  Company,  any  wholly-owned  subsidiary  of  the 
Company  or  certain  employee  benefit  plans)  which,  if  consum-
mated, would result in such person becoming an Acquiring Person. 
Prior to the June 4, 2008 amendment, the Rights were scheduled to 
expire on June 19, 2010.

  At  any  time  prior  to  the  time  at  which  a  person  or  group  or 
affiliated  or  associated  persons  acquired  beneficial  ownership  of 
15% or more of the outstanding shares of the common stock of the 
Company, the Board of Directors of the Company had the ability to 
redeem the Rights in whole, but not in part, at a price of $.001 per 
Right.  In  addition,  the  Rights  Agreement,  as  amended,  permitted 
the  Board  of  Directors,  following  the  acquisition  by  a  person  or 
group of beneficial ownership of 15% or more of the common stock 
(but  before  an  acquisition  of  50%  or  more  of  common  stock),  to 
exchange the Rights (other than Rights owned by such 15% person 
or  group),  in  whole  or  in  part,  for  common  stock,  at  an  exchange 
ratio of one share of common stock per Right.

  Until a Right was exercised, the holder thereof, as such, had no 
rights  as  a  shareholder  of  the  Company,  including,  without  limita-
tion,  the  right  to  vote  or  to  receive  dividends.  The  Company  had 
reserved  9,501,491  shares  of  common  stock  for  issuance  upon  
exercise of the Rights.

  On  June  4,  2008,  Nathan’s  approved  the  amendment  of  its  
then-existing shareholder rights plan to accelerate the final expira-
tion  date  of  the  common  stock  purchase  rights  to  June  4,  2008, 
thereby terminating the then-existing Rights, as well as the adoption 
of  a  new  stockholder  rights  plan  (the  “New  Rights  Plan”)  under 

which all stockholders of record as of June 5, 2008 received rights to 
purchase  shares  of  common  stock  (the  “New  Rights”).  The  New 
Rights Plan replaced and updated the Company’s previously existing 
Rights plan.

  The  New  Rights  were  distributed  as  a  dividend.  Initially,  the 
New Rights will attach to, and trade with, the Company’s common 
stock.  Subject  to  the  terms,  conditions  and  limitations  of  the  New 
Rights  Plan,  the  New  Rights  will  become  exercisable  if  (among 
other  things)  a  person  or  group  acquires  15%  or  more  of  the 
Company’s common stock. Upon such an event and payment of the 
purchase price of $30 (the “New Right Purchase Price”), each New 
Right  (except  those  held  by  the  acquiring  person  or  group)  will  
entitle  the  holder  to  acquire  one  share  of  the  Company’s  common 
stock  (or  the  economic  equivalent  thereof)  or,  if  the  then-current 
market price is less than the New Right Purchase Price, a number of 
shares  of  the  Company’s  common  stock  which  at  the  time  of  the 
transaction  has  a  market  value  equal  to  the  New  Right  Purchase 
Price. Based  on the market price  of the Company’s common stock 
on  June  4,  2008,  the  date  the  New  Rights  Plan  was  adopted,  of 
$13.41 per share, and due to the fact that the Company is not required 
to issue fractional shares, the current exchange ratio is two shares of 
common stock per New Right. The Company’s Board of Directors 
may  redeem  the  New  Rights  prior  to  the  time  they  are  triggered. 
Upon  adoption  of  the  New  Rights  Plan,  the  Company  reserved 
16,589,516 shares of common stock for issuance upon exercise of the 
New Rights. At March 29, 2009, the Company reserved 15,727,910 
shares  of  common  stock,  based  upon  the  closing  market  price  per 
share  on  Friday,  March  27,  2009  of  $12.99.  The  New  Rights  will 
expire  on  June  5,  2013  unless  earlier  redeemed  or  exchanged  by  
the Company.

4. Stock Repurchase Program

  Through  March  29,  2009,  Nathan’s  purchased  a  total  of 
2,693,806  shares  of  common  stock  at  a  cost  of  approximately 
$18,798 in completion of the first, second and third stock repurchase 
plans  previously  authorized  by  the  Board  of  Directors.  Of  these 
repurchased  shares,  693,806  shares  were  repurchased  at  a  cost  of 
$9,712  during  the  year  ended  March  29,  2009.  On  November  5, 
2007,  Nathan’s  Board  of  Directors  authorized  a  third  stock  repur-
chase plan for the purchase of up to 500,000 shares of the Company’s 
common  stock,  under  which  500,000  shares  were  repurchased  at  
a  cost  of  $7,312  during  the  fiscal  year  ended  March  29,  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 193,806 shares 
were  repurchased  at  a  cost  of  $2,400  during  the  fiscal  year  ended 
March 29, 2009.

  On June 11, 2008, 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, par value $.01 per share (“Common Stock”) having  

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a value of up to an aggregate $6 million. The Company completed 
its purchases under the 10b5-1 Agreement in November 2008.

  On  February  5,  2009,  Nathan’s  and  MSI  entered  into  another 
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  may  commence  on  March  16,  2009.  Both  the  first  and 
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 purchase plans, in each case for the purchase of up 
to 500,000 shares. The second 10b5-1 Agreement shall terminate no 
later than March 15, 2010.

  Purchases may be made from time to time, depending on mar-
ket 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  stock  repur-
chase plan.

5. Employment Agreements

  Effective  January  1,  2007,  Howard  M.  Lorber,  previously 
Chairman  of  the  Board  and  Chief  Executive  Officer,  assumed  the 
newly-created  position  of  Executive  Chairman  of  the  Board  of 
Nathan’s and Eric Gatoff, previously Vice President and Corporate 
Counsel, became Chief Executive Officer of Nathan’s.

In connection with the foregoing, the Company entered into an 
employment  agreement  with  each  of  Messrs.  Lorber  (as  amended, 
the  “Lorber  Employment  Agreement”)  and  Gatoff  (the  “Gatoff 
Employment  Agreement”).  Under  the  terms  of  the  Lorber 
Employment  Agreement,  Mr.  Lorber  will  serve  as  Executive 
Chairman  of  the  Board  from  January  1,  2007  until  December  31, 
2012,  unless  his  employment  is  terminated  in  accordance  with  the 
terms of the Lorber Employment Agreement. Pursuant to the Lorber 
Employment Agreement, Mr. Lorber receives a base salary of $400, 
and  will  not  receive  a  contractually-required  bonus.  The  Lorber 
Employment Agreement provides for a three-year consulting period 
after the termination of employment during which Mr. Lorber will 
receive a consulting fee of $200 per year in exchange for his agree-
ment to provide no less than 15 days of consulting services per year, 
provided, Mr. Lorber is not required to provide more than 50 days of 
consulting services per year.

  The  Lorber  Employment  Agreement  provides  Mr.  Lorber  
with  the  right  to  participate  in  employment  benefits  offered  to  
other  Nathan’s  executives.  During  and  after  the  contract  term,  
Mr. Lorber is subject to certain confidentiality, non-solicitation and 
non-competition provisions in favor of the Company.

In the event that Mr. Lorber’s employment is terminated with-
out  cause,  he  is  entitled  to  receive  his  salary  and  bonus  for  the 
remainder of the contract term. The employment agreement further 
provides that in the event there is a change in control, as defined in 
the  agreement,  Mr.  Lorber  has  the  option,  exercisable  within  one 
year after such event, to terminate his employment agreement. Upon  

such  termination,  he  has  the  right  to  receive  a  lump  sum  cash  
payment  equal  to  the  greater  of  (A)  his  salary  and  annual  bonuses 
for  the  remainder  of  the  employment  term  (including  a  prorated 
bonus for any partial fiscal year), which bonus shall be equal to the 
average  of  the  annual  bonuses  awarded  to  him  during  the  three  
fiscal  years  preceding  the  fiscal  year  of  termination;  or  (B)  2.99 
times  his  salary  and  annual  bonus  for  the  fiscal  year  immediately 
preceding the fiscal year of termination, as well as a lump sum cash 
payment  equal  to  the  difference  between  the  exercise  price  of  any 
exercisable  options  having  an  exercise  price  of  less  than  the  then 
current market price of the Company’s common stock and such then 
current market price. In addition, Nathan’s will provide Mr. Lorber 
with a tax gross-up payment to cover any excise tax due. In the event 
of termination due to Mr. Lorber’s death or disability, he is entitled 
to  receive  an  amount  equal  to  his  salary  and  annual  bonuses  for  
a  three-year  period,  which  bonus  shall  be  equal  to  the  average  of  
the  annual  bonuses  awarded  to  him  during  the  three  fiscal  years 
preceding the fiscal year of termination.

In  connection  with  Mr.  Lorber’s  prior  employment  agreement 
dated  January  1,  2005,  we  issued  to  Mr.  Lorber  50,000  shares  of 
restricted  common  stock,  which  vest  ratably  over  the  5  years.  A 
charge  of  $363  based  on  the  fair  market  value  of  the  Company’s 
common stock of $7.25 on grant date has been charged to earnings 
ratably  over  the  vesting  period.  As  of  March  29,  2009,  March  30, 
2008 and March 25, 2007, 50,000, 40,000 and 30,000 shares have 
been  vested  with  none,  10,000  and  20,000  shares  non-vested,  at 
March 29, 2009, March 30, 2008 and March 25, 2007, respectively.
  Under  the  terms  of  the  Gatoff  Employment  Agreement,  
Mr.  Gatoff  will  serve  as  Chief  Executive  Officer  from  January  1, 
2007  until  December  31,  2008,  which  period  shall  extend  for  
additional  one-year  periods  unless  either  party  delivers  notice  of 
non-renewal no less than 180 days prior to the end of the term then 
in  effect.  Consequently,  the  Gatoff  Employment  Agreement  has 
been  extended  through  December  31,  2009,  based  on  the  original 
terms, and no non-renewal notice has been given as of June 9, 2009. 
Pursuant to the agreement, Mr. Gatoff will receive a base salary of 
$225 and an annual bonus equal in an amount of up to 100% of his 
base salary, depending upon the Company’s achievement of perfor-
mance  goals  established  and  agreed  to  by  the  Compensation 
Committee and Mr. Gatoff for each fiscal year during the employ-
ment  term,  and  further,  that  Mr.  Gatoff  will  be  entitled  to  a  mini-
mum bonus of 50% of his base salary for the first two years of the 
Gatoff Employment Agreement. The Gatoff agreement provides for 
an automobile allowance and the right of Mr. Gatoff to participate in 
employment  benefits  offered  to  other  Nathan’s  executives.  During  
and  after  the  contract  term,  Mr.  Gatoff  is  subject  to  certain  confi-
dentiality,  non-solicitation  and  non-competition  provisions  in  favor 
of the Company.

  The  Company  and  its  President  and  Chief  Operating  Officer 
entered into an employment agreement on December 28, 1992 for a 
period  commencing  on  January  1,  1993  and  ending  on  December  

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31,  1996.  The  employment  agreement  automatically  extends  for  
successive one-year periods unless notice of non-renewal is provided 
in  accordance  with  the  agreement.  Consequently,  the  employment 
agreement has been extended annually through December 31, 2009, 
based  on  the  original  terms,  and  no  non-renewal  notice  has  been 
given as of June 9, 2009. The agreement provides for annual com-
pensation of $275, which has been increased to $289 as a result of 
pay  raises,  plus  certain  other  benefits.  In  November  1993,  the 
Company  amended  this  agreement  to  include  a  provision  under 
which  the  officer  has  the  right  to  terminate  the  agreement  and 
receive payment equal to approximately three times annual compen-
sation upon a change in control, as defined.

  As  a  result  of  the  sale  of  Miami  Subs,  the  employment  
agreement  between  Miami  Subs  and  its  then  President  and  Chief 
Operating  Officer  (who  also  serves  as  an  executive  officer  of 
Nathan’s)  was  cancelled  and  a  new  employment  agreement  was 
entered  into  with  Nathan’s  effective  May  31,  2007.  The  agreement 
provides for annual compensation of $210 plus certain other benefits 
and  automatically  renews  annually  unless  180  days  prior  written 
notice  is  given  to  the  employee.  No  non-renewal  notice  has  been 
given as of June 9, 2009. Consequently, the employment agreement 
has  been  extended  through  September  30,  2010.  The  agreement 
includes a provision under which the officer has the right to termi-
nate  the  agreement  and  receive  payment  equal  to  approximately 
three  times  his  annual  compensation  upon  a  change  in  control,  as 
defined. In the event a non-renewal notice is delivered, the Company 
must pay the officer an amount equal to the employee’s base salary 
as then in effect.

  The  Company  and  one  employee  of  Nathan’s  entered  into  a 
change  of  control  agreement  effective  May  31,  2007  for  annual  
compensation of $136 per year. The agreement additionally includes 
a provision under which the employee has the right to terminate the 
agreement and receive payment equal to approximately three times 
his annual compensation upon a change in control, as defined.

  Each  employment  agreement  terminates  upon  death  or  volun-
tary  termination  by  the  respective  employee  or  may  be  terminated 
by  the  Company  on  up  to  30-days’  prior  written  notice  by  the 
Company  in  the  event  of  disability  or  “cause,”  as  defined  in  each 
agreement.

6. 401(k) Plan

  The Company has a defined contribution retirement plan under 
Section 401(k) of the Internal Revenue Code covering all nonunion 
employees over age 21 who have been employed by the Company for 
at  least  one  year.  Employees  may  contribute  to  the  plan,  on  a  tax-
deferred basis, up to 20% of their total annual salary. The Company 
matches contributions at a rate of $.25 per dollar contributed by the 
employee on up to a maximum of 3% of the employee’s total annual 
salary. Employer contributions for the fiscal years ended March 29, 
2009, March 30, 2008 and March 25, 2007 were $27, $29, and $32, 
respectively.

7. Other Benefits

  The Company provides, on a contributory basis, medical bene-
fits  to  active  employees.  The  Company  does  not  provide  medical 
benefits to retirees.

Note L—Commitments and Contingencies

1. Commitments

  The Company’s operations are principally conducted in leased 
premises. The leases generally have initial terms ranging from 5 to 
20 years and usually provide for renewal options ranging from 5 to 
20 years. Most of the leases contain escalation clauses and common 
area  maintenance  charges  (including  taxes  and  insurance).  Certain 
of the leases require additional (contingent) rental payments if sales 
volumes at the related restaurants exceed specified limits.

  As  of  March  29,  2009,  the  Company  has  noncancelable  oper-
ating lease commitments, net of certain sublease rental income,  
as follows:

Lease 
Commitments

Sublease 
Income

Net Lease 
Commitments

2010
2011
2012
2013
2014
Thereafter

$  1,429
809
601
544
541
7,056

$10,980

$   390
282
220
190
96
98

$1,276

$1,039
527
381
354
445
6,958

$9,704

  Aggregate  rental  expense,  net  of  sublease  income,  under  all 
current leases amounted to $1,215, $1,204, and $1,174 for the fiscal 
years ended March 29, 2009, March 30, 2008, and March 25, 2007, 
respectively.  Sublease  rental  income  was  $203,  $194  and  $140  for 
the fiscal years ended March 29, 2009, March 30, 2008 and March 
25, 2007, respectively.

  Contingent  rental  payments  on  building  leases  are  typically 
made based on the percentage of gross sales on the individual res-
taurants that exceed predetermined levels. The percentage of gross 
sales to be paid and related gross sales level vary by unit. Contingent 
rental  expense,  which  is  inclusive  of  common  area  maintenance 
charges,  was  approximately  $147,  $59  and  $70  for  the  fiscal  years 
ended  March  29,  2009,  March  30,  2008,  and  March  25,  2007 
respectively.

  The  Company  leases  three  sites,  which  it  in  turn  subleases  to 
franchisees, which expire on various dates through 2018 exclusive of 
renewal  options.  The  Company  remains  liable  for  all  lease  costs 
when properties are subleased to franchisees.

  The  Company  also  subleases  a  restaurant  location  to  a  third 
party. This sub-lease provides for minimum annual rental payments 
by  the  Company  aggregating  approximately  $102  and  expires  in 
2013 exclusive of renewal options.

  The  Company  leases  the  majority  of  its  Corporate  office  in 
Florida  to  the  purchaser  of  Miami  Subs,  which  lease  provides  for 

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lease payments of $108 per annum and charges for Common Area 
expenses. The lease expires in 2014 exclusive of renewal options.

In January 2009, the Company entered into a commitment, as 
amended, to purchase 2,592,000 pounds of hot dogs for $4,368 from 
its  primary  hot  dog  manufacturer.  Nathan’s  has  the  right  to  order 
this product between April through September 2009. The hot dogs 
to be purchased represent approximately 43% of Nathan’s estimated 
usage during the period of the commitment.

2. Contingencies

  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,  individu-
ally or in the aggregate,  will  not have  a material adverse  effect on 
the  Company’s  financial  position,  cash  flows  or  results  of  opera-
tions. 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  responsi-
bility. 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.

  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 super-
markets,  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  restau-
rant  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 prop-
erly 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  con-
tinue  to  perform  under  the  License  Agreement  for  an  additional 
period of up to six months to ensure an orderly transition of the busi-
ness to a new licensee/supplier. The parties are currently proceeding 
with the process of the litigation.

3. Guarantees

  At the time of the sale of Miami Subs, a severance agreement, 
previously  entered  into  between  Miami  Subs  and  one  executive  of 
Miami Subs, remained in force along with the guaranty by Nathan’s 
of  Miami  Subs’  obligations  under  that  agreement.  The  agreement 
provided for a severance payment of $115 payable in six (6) monthly 
installments  and  payment  for  post-employment  health  benefits  for 
the  employee  and  dependants  for  the  maximum  period  permitted 
under Federal Law. The executive terminated his employment with 
Miami  Subs,  effective  October  5,  2007  and  agreed  to  receive  his 
severance payment over a 56-week period. Nathan’s had the right to 
seek reimbursement from Miami Subs in the event that Nathan’s was 
required to make payments under the guarantee of the agreement.

  Nathan’s initially recorded a liability of $115 at the date of sale 
in  connection  with  this  guarantee.  The  severance  obligation  was 
fully  satisfied  by  Miami  Subs  during  the  fiscal  year  ended  March 
29,  2009.  Nathan’s  was  not  required  to  make  any  payments  under 
this guarantee.

Note M—Related Party Transactions

  An  accounting  firm  of  which  Charles  Raich,  who  serves  on 
Nathan’s  Board  of  Directors  serves  as  Managing  Partner,  received 
ordinary  tax  preparation  and  other  consulting  fees  of  $146,  $182, 
and $128 for the fiscal years ended March 29, 2009, March 30, 2008 
and March 25, 2007, respectively.

  A firm which Mr. Lorber serves as a consultant to (and, prior to 
January  2005,  was  the  Chairman  of),  and  the  firm’s  affiliates, 
received ordinary and customary insurance commissions aggregat-
ing  approximately  $15,  $12,  and  $23  for  the  fiscal  years  ended 
March 29, 2009, March 30, 2008, and March 25, 2007, respectively.

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Note N—Quarterly Financial Information (Unaudited)

Fiscal Year 2009
Total revenues
Gross profit(b)
Net income
Per share information
Net income per share
  Basic(c)

  Diluted(c)

Shares used in computation of net income per share
  Basic(c)

  Diluted(c)

Fiscal Year 2008
Total revenues(a)
Gross profit(a)(b)
Net income
Per share information
Net income per share
  Basic(c)

  Diluted(c)

Shares used in computation of net income per share
  Basic(c)

  Diluted(c)

First  
Quarter

Second 
Quarter

Third 
Quarter

Fourth 
Quarter

$14,040(a)
2,684
3,822(d)

$14,523
2,817
1,859

$10,619
1,652
857

$10,039
1,553
944

$      .62

$      .59

$      .31

$      .15

$      .17

$      .29

$      .14

$      .16

6,165,000

5,984,000

5,756,000

5,685,000

6,473,000

6,309,000

6,022,000

5,915,000

$12,737
2,393
3,152(e)

$14,019
3,274
1,774

$10,240
1,892
877

$10,229
1,630
752

$      .52

$      .48

$      .29

$      .14

$      .12

$      .27

$      .14

$      .12

6,018,000

6,119,000

6,092,000

6,109,000

6,499,000

6,562,000

6,492,000

6,457,000

(a)    Total revenues and gross profit were adjusted from amounts previously reported on Forms 10-Q to reflect a reclassification of continuing operations to discontinued operations in the fiscal years shown.
(b)   Gross profit represents the difference between sales and cost of sales.
(c)    The sum of the quarters may not equal the full year per share amounts included in the accompanying consolidated statements of earnings due to the effect of the weighted average number of shares  

outstanding during the fiscal years as compared to the quarters.

(d)   Includes gains of disposal of discontinued operations, net of tax, of $2,519.
(e)   Includes gains of disposal of discontinued operations, net of tax, of $1,568.

N AT H A N ’ S  FA M O U S ,  I N C .  &  S U B S I D I A R I E S  2 0 0 9  A N N U A L   R E P O R T— p a g e  41

R e p o R t   o F   i n d e p e n dent RegiSteRed 
p u B l i c   ac co u nting FiRM

R e p o R t   o F   i n d e p e n dent RegiSteRed 

p u B l i c   ac co u nting FiRM

Board of Directors and Shareholders
Nathan’s Famous, Inc. and Subsidiaries

  We have audited the accompanying consolidated balance sheets 
of Nathan’s Famous, Inc. (a Delaware Corporation) and subsidiaries 
(the “Company”) as of March 29, 2009 and March 30, 2008, and the 
related  consolidated  statements  of  earnings,  stockholders’  equity 
and  cash  flows  for  the  fifty-two  weeks  ended  March  29,  2009,  the 
fifty-three  weeks  ended  March  30,  2008  and  the  fifty-two  weeks 
ended March 25, 2007. These financial statements are the responsi-
bility  of  the  Company’s  management.  Our  responsibility  is  to 
express an opinion on these financial statements based on our audits. 
  We  conducted  our  audits  in  accordance  with  the  standards  of 
the  Public  Company  Accounting  Oversight  Board  (United  States). 
Those standards require that we plan and perform the audit to obtain 
reasonable assurance about whether the financial statements are free 
of material misstatement. An audit also includes examining, on a test 
basis, evidence supporting the amounts and disclosures in the finan-
cial  statements.  An  audit  also  includes  assessing  the  accounting 
principles  used  and  significant  estimates  made  by  management,  as 
well  as  evaluating  the  overall  financial  statement  presentation.  We 
believe that our audits provide a reasonable basis for our opinion.

In  our  opinion,  the  consolidated  financial  statements  referred 
to above present fairly, in all material respects, the financial position 
of  Nathan’s  Famous,  Inc.  and  subsidiaries  as  of  March  29,  2009 
and  March  30,  2008,  and  the  results  of  their  operations  and  their 
cash  flows  for  the  fifty-two  weeks  ended  March  29,  2009,  the 

fifty-three  weeks  ended  March  30,  2008  and  the  fifty-two  weeks 
ended  March  25,  2007  in  conformity  with  accounting  principles 
generally accepted in the United States of America. 

  As  discussed  in  Note  B  of  the  notes  to  consolidated  financial 
statements, on March 27, 2006 the Company has adopted Financial 
Accounting  Standards  Board  Statement  No.  123(R),  Share-Based 
Payment  and  on  March  26,  2007  the  Company  adopted  Financial 
Accounting Standards Board Interpretation No. 48, “Accounting for 
Uncertainty in Income Taxes—an interpretation of FASB Statement 
No. 109, Accounting for Income Taxes”.

  We  also  have  audited,  in  accordance  with  the  standards  of  
the  Public  Company  Accounting  Oversight  Board  (United  States), 
Nathan’s  Famous,  Inc.’s  internal  control  over  financial  reporting  
as  of  March  29,  2009,  based  on  criteria  established  in  Internal 
Control—Integrated  Framework  issued  by  the  Committee  of 
Sponsoring  Organizations  of  the  Treadway  Commission  (COSO) 
and our report dated June 9, 2009 expressed an unqualified opin-
ion thereon.

GRANT THORNTON LLP
Melville, New York
June 9, 2009

N AT H A N ’ S   FA M O U S ,  I N C .  &  S U B S I D I A R I E S  2 0 0 9  A N N U A L  R E P O R T— p a g e  4 2

 
 
 
 
 
 
R e p o R t   o F   i n d e p e n dent RegiSteRed 

p u B l i c   ac co u nting FiRM

R e p o R t   o F   i n d e p e n dent RegiSteRed 
p u B l i c   ac co u nting FiRM

Board of Directors and Shareholders
Nathan’s Famous, Inc. and Subsidiaries

  We  have  audited  Nathan’s  Famous,  Inc.  (a  Delaware  Cor-
poration)  and  subsidiaries’  (the  “Company”)  internal  control  over 
financial  reporting  as  of  March  29,  2009,  based  on  criteria  estab-
lished  in  Internal  Control—Integrated  Framework  issued  by  the 
Committee of Sponsoring Organizations of the Treadway Commission 
(COSO).  The  Company’s  management  is  responsible  for  maintain-
ing  effective  internal  control  over  financial  reporting  and  for  its 
assessment  of  the  effectiveness  of  internal  control  over  financial 
reporting,  included  in  the  accompanying  Management’s  Annual 
Report on Internal Control Over Financial Reporting. Our responsi-
bility  is  to  express  an  opinion  on  the  Company’s  internal  control 
over financial reporting based on our audit.

  We conducted our audit in accordance with the standards of the 
Public  Company  Accounting  Oversight  Board  (United  States). 
Those standards require that we plan and perform the audit to obtain 
reasonable  assurance  about  whether  effective  internal  control  over 
financial  reporting  was  maintained  in  all  material  respects.  Our 
audit  included  obtaining  an  understanding  of  internal  control  over 
financial  reporting,  assessing  the  risk  that  a  material  weakness 
exists, testing and evaluating the design and operating effectiveness 
of internal control based on the assessed risk, and performing such 
other procedures as we considered necessary in the circumstances. 
We believe that our audit provides a reasonable basis for our opinion.
  A company’s internal control over financial reporting is a proc-
ess designed to provide reasonable assurance regarding the reliabil-
ity of financial reporting and the preparation of financial statements 
for  external  purposes  in  accordance  with  generally  accepted 
accounting  principles.  A  company’s  internal  control  over  financial 
reporting includes those policies and procedures that (1) pertain to 
the maintenance of records that, in reasonable detail, accurately and 
fairly  reflect  the  transactions  and  dispositions  of  the  assets  of  the 
company;  (2)  provide  reasonable  assurance  that  transactions  are 
recorded as necessary to permit preparation of financial statements 
in  accordance  with  generally  accepted  accounting  principles,  and 
that receipts and expenditures of the company are being made only 

in  accordance  with  authorizations  of  management  and  directors  of 
the  company;  and  (3)  provide  reasonable  assurance  regarding  pre-
vention or timely detection of unauthorized acquisition, use, or dis-
position of the company’s assets that could have a material effect on 
the financial statements.

  Because of its inherent limitations, internal control over finan-
cial reporting may not prevent or detect misstatements. Also, projec-
tions of any evaluation of effectiveness to future periods are subject 
to the risk that controls may become inadequate because of changes 
in conditions, or that the degree of compliance with the policies or 
procedures may deteriorate. 

In our opinion, Nathan’s Famous, Inc. maintained, in all mate-
rial respects, effective internal control over financial reporting as of 
March 29, 2009, based on criteria established in Internal Control—
Integrated Framework issued by COSO.

  We also have audited, in accordance with the standards of the 
Public  Company  Accounting  Oversight  Board  (United  States),  the 
consolidated  balance  sheets  as  of  March  29,  2009  and  March  30, 
2008,  and  the  related  consolidated  statements  of  earnings,  stock-
holders’ equity and cash flows for the fifty-two weeks ended March 
29, 2009, the fifty-three weeks ended March 30, 2008 and the fifty-
two weeks ended March 25, 2007 and our report dated June 9, 2009 
expressed an unqualified opinion thereon and contains an explana-
tory  paragraph  related  to  the  adoption  of  Financial  Accounting 
Standards  Board  Statement  No.  123(R),  Share-Based  Payment  on 
March  27,  2006  and  Financial  Accounting  Standards  Board 
Interpretation No. 48, “Accounting for Uncertainty in Income Taxes 
—an  interpretation  of  FASB  Statement  No.  109,  Accounting  for 
Income Taxes” on March 26, 2007.

GRANT THORNTON LLP
Melville, New York
June 9, 2009

N AT H A N ’ S   FA M O U S ,  I N C .  &  S U B S I D I A R I E S  2 0 0 9  A N N U A L  R E P O R T— p a g e  4 3

 
 
 
 
 
 
 
M a R K e t   F o R   R e g i S t R a nt’S coMMon eQuity, 
R e l a t e d   S t o c K H o ldeR MatteRS and 
i S S u e R   p u R c H a S e S   o F  eQuity SecuRitieS

Common Stock Prices

Dividend Policy

  Our common stock began trading on the over-the-counter mar-
ket  on  February  26,  1993  and  is  quoted  on  the  Nasdaq  National 
Market System (“Nasdaq”) under the symbol “NATH.” The follow-
ing  table  sets  forth  the  high  and  low  closing  sales  prices  per  share 
for the periods indicated:

Fiscal year ended March 29, 2009
  First quarter
  Second quarter
  Third quarter
  Fourth quarter

Fiscal year ended March 30, 2008
  First quarter
  Second quarter
  Third quarter
  Fourth quarter

High

Low

$15.00
16.04
15.89
13.98

$15.79
19.20
17.87
17.86

$12.96
14.25
12.34
11.56

$14.16
15.01
16.25
13.03

  At  June  4,  2009,  the  closing  price  per  share  for  our  common 

stock, as reported by Nasdaq, was $13.25.

  We have not declared or paid a cash dividend on our common 
stock since our initial public offering and do not anticipate that we 
will pay any dividends in the foreseeable future. It is our Board of 
Directors’ policy to retain all available funds to finance the develop-
ment and growth of our business and to purchase stock pursuant to 
our stock buyback program. The payment of any cash dividends in 
the  future  will  be  dependent  upon  our  earnings  and  financial 
requirements.

Shareholders

  As of June 4, 2009, we had approximately 728 shareholders of 
record, excluding shareholders whose shares were held by brokerage 
firms, depositories and other institutional firms in “street name” for 
their customers.

Annual Shareholders’ Meeting

  The Annual Meeting of Shareholders of the Company will be 
held  at  10:00  a.m.,  EST  on  Thursday,  September  10,  2009,  in  the 
Conference  Room  on  the  lower  level  of  1400  Old  Country  Road, 
Westbury, New York.

co M pa R i So n  o F   5 -y e a R  c u M u l ati v e  tota l  R e t u R n *

Among Nathan’s Famous, Inc., The S&P 500 Index and The S&P Restaurants Index

$300

250

200

150

100

50

0

3/28/04

3/27/05

3/26/06

3/25/07

3/30/08

3/29/09

Nathan’s Famous, Inc.

S&P 500

S&P Restaurants

*$100 invested on 3/28/04 in stock or 3/31/04 in index, including reinvestment of dividends.
Indexes calculated on month-end basis.

Copyright © 2009 S&P, a division of The McGraw-Hill Companies Inc. All rights reserved.

N AT H A N ’ S   FA M O U S ,  I N C .  &  S U B S I D I A R I E S  2 0 0 9  A N N U A L  R E P O R T— p a g e  4 4

300

250

200

150

100

50

0

 
 
 
 
 
 
 
 
 
c o r p o r at e  directory

List of Directors
Howard M. Lorber
Executive Chairman of the Board, 
Nathan’s Famous, Inc.

List of Officers
Howard M. Lorber
Executive Chairman of the Board, 
Nathan’s Famous, Inc.

Eric Gatoff
Chief Executive Officer,  
Nathan’s Famous, Inc.

Eric Gatoff
Chief Executive Officer,  
Nathan’s Famous, Inc.

Wayne Norbitz
President & Chief Operating Officer, 
Nathan’s Famous, Inc.

Donald L. Perlyn
Executive Vice President,  
Nathan’s Famous, Inc.

Robert J. Eide
Chairman & Chief Executive Officer, 
AEGIS Capital Corp.

Barry Leistner
President & Chief Executive Officer, 
Koenig Iron Works, Inc.

Brian S. Genson
President, Motorsport Investments

A.F. Petrocelli
Chairman, President &  
Chief Executive Officer,  
United Capital Corp.

Charles Raich
Managing Partner,  
Raich, Ende, Malter & Co. LLP

Wayne Norbitz
President & Chief Operating Officer

Donald L. Perlyn
Executive Vice President

Ronald G. DeVos
Vice President—Finance,  
Chief Financial Officer & Secretary

Randy K. Watts
Vice President—Franchise Operations

Donald P. Schedler
Vice President—Development, 
Architecture & Construction

Independent Registered Public 
Accounting Firm
Grant Thornton LLP
445 Broadhollow Road
Melville, New York 11747

Corporate Counsel
Farrell, Fritz, PC
1320 RexCorp Plaza
Uniondale, New York 11556

Transfer Agent
American Stock Transfer  
& Trust Company
59 Maiden Lane
New York, New York 10038

Form 10-K
The COmPAny’s AnnuAL  
RePORT On FORm 10-K As FILeD 
wITh The seCuRITIes AnD 
exChAnge COmmIssIOn, Is 
AvAILAbLe wIThOuT ChARge 
uPOn wRITTen RequesT:
  seCReTARy
  nAThAn’s FAmOus, InC.
  1400 OLD COunTRy ROAD
  wesTbuRy, new yORK 11590

quarterly shareholder Letter
Will be available on our website.  
Copies will be provided upon request.

Corporate headquarters
1400 Old Country Road
Westbury, New York 11590
516-338-8500 Telephone
516-338-7220 Facsimile

Company website
www.nathansfamous.com

Designed by Curran & Connors, Inc.
www.curran-connors.com

1400 old country road, Suite 400
Westbury, New york 11590

www.nathansfamous.com