Quarterly Report for Quarter Ending December 28, 2025 (Form 10-Q)

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

Forward-Looking Statements

Except for historical information contained in this news release, the matters discussed are forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve risks and uncertainties. Words such as "anticipate", "believe", "estimate", "expect", "intend", and similar expressions identify forward-looking statements, which are based on the current belief of the Company's management, as well as assumptions made by and information currently available to the Company's management. Among the factors that could cause actual results to differ materially include but are not limited to: the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement or the failure to satisfy the closing conditions; the possibility that the consummation of the proposed transaction is delayed or does not occur, including the failure of Nathan's stockholders to approve the proposed transaction; uncertainty as to whether the parties will be able to complete the proposed transaction on the terms set forth in the Merger Agreement; uncertainty regarding the timing of the receipt of required regulatory approvals for the proposed transaction and the possibility that the parties may be required to accept conditions that could reduce or eliminate the anticipated benefits of the proposed transaction as a condition to obtaining regulatory approvals or that the required regulatory approvals might not be obtained at all; the outcome of any legal proceedings that have been or may be instituted against the parties or others following announcement of the transactions contemplated by the Merger Agreement; challenges, disruptions and costs of integrating and achieving anticipated synergies, or that such synergies will take longer to realize than expected, risks that the proposed transaction and other transactions contemplated by the Merger Agreement disrupt current plans and operations that may harm Nathan's businesses; the amount of any costs, fees, expenses, impairments and charges related to the proposed transaction, and uncertainty as to the effects of the announcement or pendency of the proposed transaction on the market price of Nathan's common stock and/or on its financial performance; the impact of disease epidemics such as the COVID-19 pandemic; increases in the cost of food and paper products; the impact of price increases on customer visits; the status of our licensing and supply agreements, including our licensing revenue and overall profitability being substantially dependent on our agreement with Smithfield Foods, Inc.; the impact of our debt service and repayment obligations under our credit facility, including the effect on our ability to fund working capital, operations and make new investments; economic (including inflationary pressures like those currently being experienced); weather (including the impact on sales at our restaurants particularly during the summer months), and changes in the price of beef and beef trimmings; our ability to pass on the cost of any price increases in beef and beef trimmings; legislative and business conditions; potential changes in U.S. income tax or tariff policies; the collectability of receivables; changes in consumer tastes; the continued viability of Coney Island as a destination location for visitors; the ability to attract franchisees; the impact of the minimum wage legislation on labor costs in New York State or other changes in labor laws, including regulations which could render a franchisor as a "joint employer" or the impact of our union contracts; our ability to attract competent restaurant and managerial personnel; the enforceability of international franchising agreements; the future effects of any food borne illness, such as bovine spongiform encephalopathy, BSE and e coli; and the risk factors reported from time to time in the Company's SEC reports. The Company does not undertake any obligation to update such forward-looking statements.

Introduction

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

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

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

At December 28, 2025, our restaurant system, excluding virtual kitchens, was comprised of 225 locations, including 112 Branded Menu Program locations, as well as four Company-owned restaurants (including one seasonal unit), located in 18 states, and 12 foreign countries.

At December 29, 2024, our restaurant system, excluding virtual kitchens, consisted of 236 locations, including 128 Branded Menu Program locations, and four Company-owned restaurants (including one seasonal unit), located in 17 states, and 12 foreign countries.

Our primary focus is to expand the market penetration of the Nathan's Famous brand by increasing the number of distribution points for our products across all of our business platforms, including our Licensing Program for distribution of Nathan's Famous branded consumer packaged goods, our Branded Products Program for distribution of Nathan's Famous branded bulk products to the foodservice industry, and our namesake restaurant system comprised of both Company-owned restaurants and franchised locations, including virtual kitchens. The primary drivers of our growth have been our Licensing and Branded Product Programs which have been the largest contributors to the Company's revenues and profits.

While we do not expect to significantly increase the number of Company-owned restaurants, we may opportunistically and strategically invest in a small number of new units as showcase locations for prospective franchisees and master developers as we seek to grow our franchise system. We continue to seek opportunities to drive sales in a variety of ways as we adapt to the ever-changing consumer and business climate.

As described in our Annual Report on Form 10-K for the year ended March 30, 2025, our future results could be materially impacted by many developments including our dependence on Smithfield Foods, Inc. as our principal supplier and the dependence of our licensing revenue and overall profitability on our agreement with Smithfield Foods, Inc. In addition, our future operating results could be impacted by supply constraints on beef or by increased costs of beef, beef trimmings and other commodities due to inflationary pressures compared to earlier periods and our proposed transaction with Smithfield Foods, Inc. under the Merger Agreement.

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

Recent events

Merger Agreement

As previously announced, on January 20, 2026, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with Smithfield Foods, Inc., a Virginia corporation ("Buyer") and Boardwalk Merger Sub, Inc. a Delaware corporation and wholly owned subsidiary of Buyer ("Merger Sub").

Pursuant to the Merger Agreement, and upon the terms and subject to the conditions thereof and in accordance with the General Corporation Law of the State of Delaware ("DGCL"), Merger Sub shall merge with and into the Company (the "Merger," and the effective time of the Merger, the "Effective Time"). As a result of the Merger, at the Effective Time, the separate corporate existence of Merger Sub shall cease, the Company shall continue as the surviving corporation in the Merger (the "Surviving Corporation") and the Surviving Corporation shall become a wholly owned subsidiary of Buyer. After the Merger, the Company will cease to be publicly traded.

At the Effective Time, as a result of the Merger and without any action on the part of Buyer, Merger Sub, the Company or the holders of any of the following securities: (i) each share of common stock of the Company, par value $0.01 per share ("Company Shares"), issued and outstanding immediately prior to the Effective Time, other than shares to be cancelled in accordance with the terms of the Merger Agreement and shares owned by holders that have exercised their appraisal rights under the DGCL, shall be converted into the right to receive cash in an amount equal to $102.00 without interest (the "Per Share Merger Consideration"), less any applicable withholding tax, payable to the holder in accordance with the terms of the Merger Agreement, (ii) each share of common stock of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and become one fully paid, non-assessable share of common stock, par value $0.01 per share, of the Surviving Corporation, and (iii) any Company Shares owned or held in treasury by the Company and any Company Shares owned by Buyer, Merger Sub or any of their respective affiliates immediately prior to the Effective Time shall automatically be cancelled and shall cease to exist and no consideration shall be delivered in exchange for such cancellation or retirement. From and after the Effective Time, all Company Shares converted into the right to receive the Per Share Merger Consideration shall no longer be issued and outstanding and shall automatically be cancelled and cease to exist.

Immediately prior to the Effective Time, (i) each option to purchase Company Shares outstanding under a Company Stock Plan (each a "Company Stock Option"), whether or not vested and exercisable, that is outstanding and unexercised immediately prior to the Effective Time, shall be automatically converted into the right to receive from Buyer or the Surviving Corporation an amount in cash (subject to applicable withholding taxes) equal to the product obtained by multiplying (A) the excess, if any, of the Per Share Merger Consideration over the per share exercise price of such Company Stock Option, by (B) the aggregate number of Company Shares that were issuable upon exercise of such Company Stock Option immediately prior to the Effective Time and (ii) each restricted stock unit of the Company granted and outstanding pursuant to a Company Stock Plan (each a "Company RSU") shall be deemed to have been earned and become fully vested (in the case of any performance based award, with the applicable performance metrics at the target level), shall be canceled and extinguished as of the Effective Time and, in exchange, each former holder of any such Company RSU shall have the right to receive from Buyer or the Surviving Corporation an amount in cash equal to the product obtained by multiplying (A) the number of Company Shares subject to such Company RSU by (B) the Per Share Merger Consideration (such amount, the "RSU Award Payment"). Any dividend equivalents earned prior to the Effective Time will be paid in cash as soon as administratively practicable following settlement of the Company RSUs. From and after the Effective Time, each Company RSU shall no longer represent the right to receive Company Shares by the former holder thereof, but shall only entitle such holder to the payment of the RSU Award Payment. The Compensation Committee of the Company Board will adopt resolutions to provide that all Company Stock Options and Company RSUs shall terminate conditioned upon, and effective immediately prior to, the Effective Time and the holders thereof will be entitled only to the amount, if any, specified herein in respect thereof.

The Merger Agreement contains representations, warranties and covenants by the parties customary for a transaction of this nature. Among other things, during the period between the execution of the Merger Agreement and the earlier of the consummation of the Merger or termination of the Merger Agreement, the Company has agreed to conduct its business in the ordinary course consistent with past practice and has agreed to certain other operating covenants, as set forth more fully in the Merger Agreement. Notwithstanding the foregoing, the Company will be permitted to declare and pay up to two regular quarterly cash dividends, each in the amount of $0.50 per Company Share.

The Company has also agreed not to, among other things, (i) solicit, initiate, knowingly encourage or knowingly facilitate any alternative competing transaction, (ii) participate in any discussions or negotiations with any third party with respect to any alternative competing transaction, (iii) approve or recommend any alternative competing transaction, (iv) enter into any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement, share purchase agreement, asset purchase agreement, share exchange agreement, option agreement or other similar definitive agreement relating to an alternative competing transaction or (v) propose or agree to do any of the foregoing.

Notwithstanding the foregoing customary "no-shop" restrictions, if prior to obtaining the Company Stockholder Approval (as defined in the Merger Agreement) the Company receives an unsolicited written Acquisition Proposal (as defined in the Merger Agreement) from a third party and the Company Board determines in good faith that (x) such Acquisition Proposal constitutes or could be reasonably expected to result in a Superior Proposal (as defined in the Merger Agreement) and (y) the failure to take the actions set forth in clauses (i) and (ii) of this paragraph would be inconsistent with its fiduciary duties under law, the Company may, in response to such Acquisition Proposal, (i) furnish Company information and access to the third party making such Acquisition Proposal and (ii) participate in discussions or negotiations with such third party with respect to such Acquisition Proposal, or otherwise cooperate with or assist or participate in, or facilitate, any such discussions or negotiations.

As soon as reasonably practicable after the execution of the Merger Agreement (and in any event within forty-five (45) days after the date of the Merger Agreement), the Company shall prepare and file with the Securities and Exchange Commission (the "SEC") a proxy statement (as amended or supplemented from time to time, the "Proxy Statement"), in preliminary form, relating to the Stockholders' Meeting (as defined below). The Company shall hold a meeting for the purpose of obtaining approval of the stockholders of the Company (the "Stockholders' Meeting") as promptly as reasonably practicable, and in no event more than thirty (30) days following the date on which the definitive Proxy Statement is mailed to stockholders of the Company, which mailing shall occur within ten (10) business days after the later of the date (i) on which the Company learns the SEC staff has no further comments on the Proxy Statement or (ii) (A) the applicable waiting period under any applicable Antitrust Law, including the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") has expired or has been terminated and (B) CFIUS Clearance (as defined in the Merger Agreement) has been obtained.

The consummation of the Merger is subject to certain closing conditions, including but not limited to (a) receipt of the Company Stockholder Approval, (b) that no law or governmental order prohibits, restrains, enjoins or makes illegal the consummation of the Merger, (c) that any waiting period (and any extension thereof) applicable to the Merger and the other transactions under the HSR Act have terminated or expired and (d) that the parties have obtained CFIUS Clearance for the Merger. Each of Buyer's, Merger Sub's, and the Company's obligation to consummate the Merger is also subject to certain additional conditions, including (i) subject to certain materiality standards, the accuracy of the representations and warranties of the other party or parties, (ii) performance in all material respects by the other party or parties of its or their obligations under the Merger Agreement and (iii) with respect to Buyer's and Merger Sub's obligations to consummate the Merger, the absence of a Company Material Adverse Effect (as defined in the Merger Agreement) with respect to the Company.

The Merger Agreement also contains certain termination provisions for the Company and Buyer, including the right of the Company, in certain circumstances, to terminate the Merger Agreement and accept a Superior Proposal. The Company will be required to pay Buyer a termination fee in cash equal to $10,581,814 if the Merger Agreement is terminated (a) by Buyer because the Company Board changed its recommendation of the Merger, (b) by Buyer or the Company if the approval of the Company's stockholders is not obtained at the Stockholders' Meeting and the Company Board previously changed its recommendation of the Merger or (c) (i) by Buyer or the Company following June 22, 2026, subject to extension to October 20, 2026 in accordance with the Merger Agreement (the "End Date"), (ii) by Buyer or the Company because of failure to obtain the approval of the stockholders at the Stockholders' Meeting or (iii) by Buyer because of certain breaches of the Merger Agreement by the Company, only if, in the case of clauses (i) to (iii), an Acquisition Proposal has been made publicly and within nine (9) months of the termination date the Company consummates or enters into a definitive agreement for an Acquisition Proposal.

Upon the election of the Company, the Company and Smithfield Packaged Meats Corp., an affiliate of Buyer ("SPMC"), will enter into an amendment to the licensing and supply letter agreement, dated as of December 5, 2012 (the "Licensing Agreement"), by and between Nathan's Famous Systems, Inc., a subsidiary of the Company, and SPMC, which will extend the term of the Licensing Agreement for an additional four years to March 2, 2036 from the current expiration date of March 2, 2032, and Buyer will be required to pay the Company a termination fee in cash equal to $7,407,270 if the Merger Agreement is terminated (a) because of a CFIUS Turndown (as defined in the Merger Agreement) and the Company is not in material breach of the Merger Agreement at the time of termination or (b) following the End Date if, at such time, (i) a government order or other government action would have prevented the consummation of the Merger (solely as it relates to CFIUS) or the parties have not received CFIUS Clearance, (ii) certain other closing conditions have been satisfied, (iii) the Company's breach of the provisions of the Merger Agreement to obtain certain consents and approvals is not the primary cause of a government order or other government action that would prevent the consummation of the Merger and (iv) the Company is not in material breach of the Merger Agreement at the time of termination.

On January 20, 2026, the Company entered into letter agreements (each a "Retention Agreement") with each of Eric Gatoff, Chief Executive Officer of the Company, and Robert Steinberg, the Chief Financial Officer of the Company. Under the Retention Agreements, each such individual is entitled to a cash retention bonus payment if (1) such individual is actively employed by the Company or a subsidiary as of closing under the Merger Agreement and has not given notice of his intent to resign or (2) the individual is terminated by the Company for any reason and closing under the Merger Agreement later occurs. The retention bonus payment amount is $3,250,000 for Mr. Gatoff and $1,050,000 for Mr. Steinberg. As consideration for the retention bonus payment, Mr. Gatoff agreed to non-competition provisions that apply for one (1) year following the termination of his employment by the Company for any reason.

Inflationary Factors

Inflationary pressures negatively impacted our earnings during the thirty-nine week period ended December 28, 2025, most notably within our Branded Product Program segment, due primarily to commodity prices on beef and beef trimmings. We anticipate continued inflationary pressures on commodity prices, including beef and beef trimmings, as well as rising labor costs during the remainder of fiscal 2026. In general, we have been able to offset some of these cost increases resulting from inflation through various actions, such as increasing prices at our Company-owned restaurants and entering into sales agreements with our Branded Product Program customers that are correlated to our cost of beef and beef trimmings. We continue to monitor these inflationary pressures and may need to adjust our prices further to mitigate the impact of these inflationary pressures. Inherent volatility in commodity markets, including beef and beef trimmings, could have a significant impact on our results of operations. Delays in implementing price increases, competitive pressures, a decline in consumer spending levels and other factors may limit our ability to implement further price increases in the future.

Uncertainty in the current macroeconomic environment, including the potential impact of tariffs or other changes in U.S. tax policy, may have an adverse impact on our sales or increase our cost of goods sold.

Critical Accounting Policies and Estimates

As discussed in our Form 10-K for the fiscal year ended March 30, 2025, the discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America ("US GAAP"). The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the amounts of assets, liabilities, revenues and expenses reported in those condensed consolidated financial statements. These judgments can be subjective and complex, and consequently, actual results could differ from those estimates. Our most critical accounting estimates relate to impairment of intangible assets; impairment of long-lived assets; current expected credit losses; customer rebates and income taxes (including uncertain tax positions). There have been no changes to our critical accounting estimates from those disclosed in our Annual Report on Form 10-K for the fiscal year ended March 30, 2025.

New Accounting Standards Not Yet Adopted

Please refer to NOTE B - NEW ACCOUNTING STANDARDS NOT YET ADOPTED in the accompanying condensed consolidated financial statements for our discussion of New Accounting Standards Not Yet Adopted.

EBITDA and Adjusted EBITDA

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

Reconciliation of GAAP and Non-GAAP Measures

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

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

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

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

		Thirteen weeks ended								Thirty-nine weeks ended
		December 28, 2025				December 29, 2024				December 28, 2025				December 29, 2024
		(unaudited)								(unaudited)
Net income		$	3,084			$	4,484			$	17,211			$	19,791
Interest expense			707				842				2,204				3,343
Provision for income taxes			1,664				1,575				6,815				7,151
Depreciation and amortization			232				235				696				731
EBITDA			5,687				7,136				26,926				31,016
Loss on debt extinguishment			-				55				-				389
Share-based compensation			280				288				852				705
Adjusted EBITDA		$	5,967			$	7,479			$	27,778			$	32,110

Seasonality

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

Due to the above seasonal factors, as well as inflationary pressures, our results of operations for the thirteen and thirty-nine weeks ended December 28, 2025 are not necessarily indicative of those for a full fiscal year.

Results of Operations

Thirteen weeks ended December 28, 2025 compared to thirteen weeks ended December 29, 2024

Revenues

Total revenues increased by approximately 9% to $34,312,000 for the thirteen weeks ended December 28, 2025 ("third quarter fiscal 2026") as compared to $31,519,000 for the thirteen weeks ended December 29, 2024 ("third quarter fiscal 2025").

Foodservice sales from the Branded Product Program increased by approximately 13% to $23,749,000 for the third quarter fiscal 2026 as compared to $21,099,000 for the third quarter fiscal 2025. During the third quarter fiscal 2026, the total volume of hot dogs sold in the Branded Product Program decreased by approximately 3% as compared to the third quarter fiscal 2025. Our average selling price, which is partially correlated to the beef markets, increased by approximately 16% as compared to the third quarter fiscal 2025.

Total Company-owned restaurant sales decreased by approximately 9% to $1,646,000 during the third quarter fiscal 2026 as compared to $1,804,000 during the third quarter fiscal 2025. Restaurant sales were primarily impacted by a 9% decline in customer traffic due to unfavorable weather conditions.

License royalties increased by approximately 4% to $7,385,000 in the third quarter fiscal 2026 as compared to $7,105,000 in the third quarter fiscal 2025. Total royalties earned on sales of hot dogs from our license agreement with Smithfield Foods, Inc. at retail and foodservice increased 5% to $6,462,000 for the third quarter fiscal 2026 as compared to $6,146,000 in the third quarter fiscal 2025. The increase is due to a 15% increase in net selling price which was offset, in part, by a 7% decrease in retail volume. The price increases year over year led to a reduction in promotional activities contributing to the decline in volume. The royalties earned on the foodservice business decreased by $37,000 as compared to the third quarter fiscal 2025. Royalties earned from all other licensing agreements for the manufacture and sale of Nathan's products decreased by $36,000 during the third quarter fiscal 2026 as compared to the third quarter fiscal 2025 primarily due to lower royalties earned on sales of proprietary spices and French fries offset, in part, by higher royalties earned on beef sticks.

Franchise fees and royalties were $1,020,000 in the third quarter fiscal 2026 as compared to $991,000 in the third quarter fiscal 2025. Total royalties were $906,000 in the third quarter fiscal 2026 as compared to $897,000 in the third quarter fiscal 2025. Royalties earned under the Branded Menu Program were $162,000 in the third quarter fiscal 2026 as compared to $182,000 in the third quarter fiscal 2025. Royalties earned under the Branded Menu Program are not based upon a percentage of restaurant sales but are based upon product purchases. Virtual kitchen royalties were $46,000 in the third quarter fiscal 2026 as compared to $16,000 in the third quarter fiscal 2025. Traditional franchise royalties were $698,000 in the third quarter fiscal 2026 as compared to $699,000 in the third quarter fiscal 2025. Franchise restaurant sales decreased to $15,962,000 in the third quarter fiscal 2026 as compared to $16,066,000 in the third quarter fiscal 2025 principally due to lower sales at malls and casino locations, primarily in Las Vegas, Nevada. Comparable domestic franchise sales (consisting of 61 Nathan's outlets, excluding sales under the Branded Menu Program) were $12,354,000 in the third quarter fiscal 2026 as compared to $13,018,000 in the third quarter fiscal 2025.

At December 28, 2025, 225 franchised locations, including domestic, international and Branded Menu Program units were operating as compared to 236 franchised locations, including domestic, international and Branded Menu Program units at December 29, 2024. Total franchise fee income was $114,000 in the third quarter fiscal 2026 as compared to $94,000 in the third quarter fiscal 2025. Domestic franchise fee income was $23,000 in the third quarter fiscal 2026 as compared to $25,000 in the third quarter fiscal 2025. International franchise fee income was $53,000 in the third quarter fiscal 2026 as compared to $59,000 in the third quarter fiscal 2025.

We recognized $38,000 and $10,000 in forfeited fees in the third quarter fiscal 2026 and the third quarter fiscal 2025, respectively. During the third quarter fiscal 2026, four franchise locations opened and six franchise locations closed. During the third quarter fiscal 2025, three franchise locations opened and ten franchise locations closed.

Advertising fund revenue, after eliminating Company contributions, was $512,000 during the third quarter fiscal 2026 as compared to $520,000 during the third quarter fiscal 2025 period.

Costs and Expenses

Overall, our cost of sales increased by approximately 18% to $23,138,000 in the third quarter fiscal 2026 as compared to $19,571,000 in the third quarter fiscal 2025. Our gross profit (calculated as total Branded Products sales plus total Company-owned restaurant sales less cost of sales) was $2,257,000 or 9% of sales during the third quarter fiscal 2026 as compared to $3,332,000 or 15% of sales during the third quarter fiscal 2025.

Cost of sales in the Branded Product Program increased by approximately 20% to $21,943,000 in the third quarter fiscal 2026 as compared to $18,336,000 in the third quarter fiscal 2025, primarily due to a 25% increase in the average cost per pound of our hot dogs which was offset, in part, by a 3% decline in the volume of hot dogs sold. A shrinking supply of cattle due to drought conditions and high input costs, combined with strong industry demand and inflationary pressures have resulted in higher commodity prices, including beef and beef trimmings, contributing to the increase in the average cost per pound of our hot dogs. We did not make any purchase commitments of beef during the third quarter fiscal 2026 or the third quarter fiscal 2025. If the cost of beef and beef trimmings increases and we are unable to pass on these higher costs through price increases or otherwise reduce any increase in our costs through the use of purchase commitments, our margins will be adversely impacted. With respect to Company-owned restaurants, our cost of sales during the third quarter fiscal 2026 was $1,195,000 or 73% of restaurant sales as compared to $1,235,000 or 68% of restaurant sales in the third quarter fiscal 2025. Food and paper costs as a percentage of Company-owned restaurant sales were 27%, up from 26% in the comparable period of the prior year. Labor and related expenses as a percentage of Company-owned restaurant sales were 46% up from 42% in the comparable period of the prior year primarily as a result of legislative increases in the New York State minimum wage which became effective January 1, 2025.

Restaurant operating expenses were $907,000 in the third quarter fiscal 2026 as compared to $991,000 in the third quarter fiscal 2025. The decrease is due primarily to lower credit card processing fees of $59,000, and lower occupancy expenses of $16,000. As a percentage of Company-owned restaurant sales, restaurant operating expenses were 55% in the third quarter fiscal 2026 which was comparable to the third quarter fiscal 2025.

Depreciation and amortization, which primarily consists of the depreciation of fixed assets, including leasehold improvements and equipment, and the amortization of a definite-lived intangible asset, was $232,000 in the third quarter fiscal 2026 as compared to $235,000 in the third quarter fiscal 2025.

General and administrative expenses increased by $946,000 or 27% to $4,396,000 in the third quarter fiscal 2026 as compared to $3,450,000 in the third quarter fiscal 2025. The increase in general and administrative expenses was primarily attributable to higher professional fees of $852,000 related to our pending acquisition with Buyer pursuant to the Merger Agreement. Refer to NOTE S - SUBSEQUENT EVENTS in the accompanying condensed consolidated financial statements and "Recent Events - Merger Agreement" above for further information.

Advertising fund expense, after eliminating Company contributions, was $512,000 during the third quarter fiscal 2026 as compared to $520,000 in the third quarter fiscal 2025. The Company projects that the Advertising Fund normal seasonal deficit will not be fully recovered during the remainder of the fiscal 2026 period and has reflected the projected deficit of $121,000 in the fiscal 2026 period results of operations.

Other Items

Interest expense of $707,000 in the third quarter fiscal 2026 represented interest expense of $690,000 on the Secured Overnight Financing Rate ("SOFR") Term Loan borrowings and amortization of debt issuance costs of $17,000.

Interest expense of $842,000 in the third quarter fiscal 2025 represented interest expense of $825,000 on the SOFR Term Loan borrowings and amortization of debt issuance costs of $17,000.

The reduction in interest expense of $135,000 is due primarily to lower outstanding long-term debt and a lower interest rate associated with our Credit Agreement.

In the third quarter fiscal 2025, the Company made a voluntary prepayment of $8,000,000 on its Term Loan borrowings under the Credit Agreement and recorded a loss on extinguishment of debt of $55,000 related to the write-off of a portion of previously recorded debt issuance costs on the Term Loan borrowings.

Interest and dividend income of $206,000 in the third quarter fiscal 2026 represented amounts earned by the Company on its interest bearing money market accounts and money market funds as compared to $183,000 in the third quarter fiscal 2025. The increase is due to a higher level of invested cash earning interest at higher rates in the third quarter fiscal 2026 as compared to the third quarter of fiscal 2025.

Other income, net was $122,000 in the third quarter of fiscal 2026 which primarily relates to sublease income and includes $84,000 of settlement income received in connection with the termination of a lease for certain premises located at 281 Walt Whitman Road, Huntington Station, New York on November 4, 2025. Other income, net was $21,000 in the third quarter of fiscal 2025 which primarily relates to sublease income.

Provision for Income Taxes

The effective income tax rate for the third quarter fiscal 2026 was 35.0% as compared to 26.0% in the third quarter fiscal 2025. The effective income tax rate for the third quarter fiscal 2026 reflected income tax expense of $1,664,000 recorded on $4,748,000 of pre-tax income. The effective income tax rate for the third quarter fiscal 2025 reflected income tax expense of $1,575,000 recorded on $6,059,000 of pre-tax income. The effective tax rates are higher than the U.S. Federal statutory rates primarily due to state and local taxes, as well as non-deductible executive compensation under the Internal Revenue Code Section 162(m). The effective income tax rate for the third quarter fiscal 2026 included an unfavorable discrete tax adjustment of 5.3% for non-deductible transaction costs.

The American Rescue Plan Act of 2021 ("ARPA"), among other things, includes provisions to expand the IRC Section 162(m) disallowance for deduction of certain compensation paid by publicly held corporations. Effective for tax years starting after December 31, 2026 (March 29, 2027 for the Company), ARPA expands the limitations to cover the next five most highly compensated employees. We continue to evaluate the potential impact ARPA may have on our operations and condensed consolidated financial statements in future periods.

On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted in the United States. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The OBBBA did not have a material impact to our provision for income taxes for the third quarter fiscal 2026.

The amount of unrecognized tax benefits at December 28, 2025 was $491,000 all of which would impact the Company's effective tax rate, if recognized. As of December 28, 2025, the Company had approximately $438,000 accrued for the payment of interest and penalties in connection with unrecognized tax benefits.

Nathan's estimates that its unrecognized tax benefit excluding accrued interest and penalties could be further reduced by up to $55,000 during the fiscal year ending March 26, 2026 due primarily to the lapse of statutes of limitations which would favorably impact the Company's effective tax rate, although no assurances can be given in this regard.

Results of Operations

Thirty-nine weeks ended December 28, 2025 compared to thirty-nine weeks ended December 29, 2024

Revenues

Total revenues increased by approximately 8% to $126,997,000 for the thirty-nine weeks ended December 28, 2025 ("fiscal 2026 period") as compared to $117,395,000 for the thirty-nine weeks ended December 29, 2024 ("fiscal 2025 period").

Foodservice sales from the Branded Product Program increased by approximately 14% to $81,871,000 for the fiscal 2026 period as compared to $71,781,000 for the fiscal 2025 period. During the fiscal 2026 period, the total volume of hot dogs sold in the Branded Product Program increased by approximately 1% as compared to the fiscal 2025 period. Our average selling price, which is partially correlated to the beef markets, increased by approximately 12% as compared to the fiscal 2025 period.

Total Company-owned restaurant sales decreased by approximately 1% to $11,256,000 during the fiscal 2026 period as compared to $11,351,000 during the fiscal 2025 period. Restaurant sales were primarily impacted by a 2% decline in customer traffic offset, in part, by a 1% increase in average check.

License royalties decreased by approximately 2% to $28,993,000 in the fiscal 2026 period as compared to $29,517,000 in the fiscal 2025 period. Total royalties earned on sales of hot dogs from our license agreement with Smithfield Foods, Inc. at retail and foodservice, decreased 2% to $26,315,000 for the fiscal 2026 period as compared to $26,751,000 in the fiscal 2025 period. The decrease is due to a 15% decrease in retail volume which was offset, in part, by a 15% increase in net selling price. The price increases year over year led to a reduction in promotional activities contributing to the decline in volume. The foodservice business earned higher royalties of $72,000 as compared to the fiscal 2025 period. Royalties earned from all other licensing agreements for the manufacture and sale of Nathan's products decreased by $88,000 during the fiscal 2026 period as compared to the fiscal 2025 period primarily due to lower royalties earned on sales of pickles and proprietary spices offset, in part, by higher royalties earned on beef sticks.

Franchise fees and royalties were $3,372,000 in the fiscal 2026 period as compared to $3,238,000 in the fiscal 2025 period. Total royalties were $3,045,000 in the fiscal 2026 period as compared to $2,944,000 in the fiscal 2025 period. Royalties earned under the Branded Menu Program were $587,000 in the fiscal 2026 period as compared to $604,000 in the fiscal 2025 period. Royalties earned under the Branded Menu Program are not based upon a percentage of restaurant sales but are based upon product purchases. Virtual kitchen royalties were $82,000 in the fiscal 2026 period as compared to $42,000 in the fiscal 2025 period. Traditional franchise royalties were $2,376,000 in the fiscal 2026 period as compared to $2,298,000 in the fiscal 2025 period. Franchise restaurant sales increased to $54,278,000 in the fiscal 2026 period as compared to $52,400,000 in the fiscal 2025 period principally due to higher sales at travel plazas and international venues offset by lower sales at malls and casino locations primarily in Las Vegas, Nevada. Comparable domestic franchise sales (consisting of 61 Nathan's units, excluding sales under the Branded Menu Program) were $41,030,000 in the fiscal 2026 period as compared to $42,009,000 in the fiscal 2025 period.

At December 28, 2025, 225 franchised locations, including domestic, international and Branded Menu Program units were operating as compared to 236 franchised locations, including domestic, international and Branded Menu Program franchise units at December 29, 2024. Total franchise fee income was $327,000 in the fiscal 2026 period as compared to $294,000 in the fiscal 2025 period. Domestic franchise fee income was $73,000 in the fiscal 2026 period as compared to $83,000 in the fiscal 2025 period. International franchise fee income was $160,000 in the fiscal 2026 period as compared to $178,000 during the fiscal 2025 period. We recognized $94,000 and $33,000 in forfeited fees in the fiscal 2026 period and fiscal 2025 period, respectively. During the fiscal 2026 period, eighteen franchise locations opened and twenty-three franchise locations closed. During the fiscal 2025 period, twenty-four franchise locations opened and eighteen franchise locations closed.

Advertising fund revenue, after eliminating Company contributions, was $1,505,000 in the fiscal 2026 period, as compared to $1,508,000 during the fiscal 2025 period.

Costs and Expenses

Overall, our cost of sales increased by approximately 18% to $83,939,000 in the fiscal 2026 period as compared to $70,841,000 in the fiscal 2025 period. Our gross profit (calculated as total Branded Products sales plus total Company-owned restaurant sales less cost of sales) was $9,188,000 or 10% of sales during the fiscal 2026 period as compared to $12,291,000 or 15% of sales during the fiscal 2025 period.

Cost of sales in the Branded Product Program increased by 20% to $77,766,000 during the fiscal 2026 period as compared to $64,626,000 during the fiscal 2025 period, primarily due to a 1% increase in the volume of hot dogs sold, as well as a 19% increase in the average cost per pound of our hot dogs. A shrinking supply of cattle due to drought conditions and high input costs, combined with strong industry demand and inflationary pressures have resulted in higher commodity prices, including beef and beef trimmings, contributing to the increase in the average cost per pound of our hot dogs. We did not make any purchase commitments of beef during the fiscal 2026 and 2025 periods. If the cost of beef and beef trimmings increases and we are unable to pass on these higher costs through price increases or otherwise reduce any increase in our costs through the use of purchase commitments, our margins will be adversely impacted. With respect to Company-owned restaurants, our cost of sales during the fiscal 2026 period was $6,173,000 or 55% of restaurant sales which was comparable to the fiscal 2025 period. Food and paper costs as a percentage of Company-owned restaurant sales were 24%, down from 25% in the comparable period of the prior year. Labor and related expenses as a percentage of Company-owned restaurant sales were 31% up from 29% primarily as a result of legislative increases in the New York State minimum wage which became effective January 1, 2025.

Restaurant operating expenses were $3,518,000 in the fiscal 2026 period as compared to $3,509,000 in the fiscal 2025 period. The increase is due primarily to higher repairs and maintenance expenses of $39,000, higher utilities expenses of $19,000 and higher delivery fees of $19,000 which were offset, in part, by lower credit card processing fees of $11,000 and lower occupancy expenses of $21,000. As a percentage of Company-owned restaurant sales, restaurant operating expenses were 31% in the fiscal 2026 period which was comparable to the fiscal 2025 period.

Depreciation and amortization, which primarily consists of the depreciation of fixed assets, including leasehold improvements and equipment, and the amortization of a definite-lived intangible asset, was $696,000 in the fiscal 2026 period as compared to $731,000 in the fiscal 2025 period.

General and administrative expenses increased by $1,121,000 or 10% to $11,798,000 in the fiscal 2026 period as compared to $10,677,000 in the fiscal 2025 period. The increase in general and administrative expenses was primarily attributable to higher share-based compensation expense of $147,000 and higher professional fees of $972,000 related to our pending acquisition with Buyer pursuant to the Merger Agreement. Refer to NOTE S - SUBSEQUENT EVENTS in the accompanying condensed consolidated financial statements and "Recent Events - Merger Agreement" for further information.

Advertising fund expense, after eliminating Company contributions, was $1,626,000 in the fiscal 2026 period, as compared to $1,508,000 in the fiscal 2025 period. The Company projects that the Advertising Fund normal seasonal deficit will not be fully recovered during the remainder of the fiscal 2026 period and has reflected the projected deficit of $121,000 in the fiscal 2026 results of operations.

Other Items

Interest expense of $2,204,000 in the fiscal 2026 period represented interest expense of $2,151,000 on the SOFR Term Loan borrowings and amortization of debt issuance costs of $53,000.

Interest expense of $3,343,000 in the fiscal 2025 period represented interest expense of $1,449,000 and $1,755,000 on the 2025 Notes and the SOFR Term Loan borrowings, respectively, and amortization of debt issuance costs of $104,000 and $35,000 on the 2025 Notes and the SOFR Term Loan borrowings, respectively.

The reduction in interest expense of $1,139,000 is due primarily to lower outstanding long-term debt and a lower interest rate associated with our Credit Agreement.

During the fiscal 2025 period, the Company refinanced and redeemed its outstanding 2025 Notes. In connection with this transaction, the Company recorded a loss on extinguishment of debt of $334,000 that reflected the write-off of the remainder of previously recorded debt issuance costs. Additionally, the Company made a voluntary prepayment of $8,000,000 of its Term Loan borrowings under the Credit Agreement and recorded an additional loss on debt extinguishment of $55,000 related to the write-off of a portion of previously recorded debt issuance costs on the Term Loan borrowings.

Interest and dividend income of $645,000 in the fiscal 2026 period represented amounts earned by the Company on its interest bearing money market accounts and money market fund as compared to $480,000 in the fiscal 2025 period. The increase is due to a higher levels of invested cash earning interest at higher rates in the fiscal 2026 period as compared to the fiscal 2025 period.

Other income, net was $165,000 in the fiscal 2026 period which primarily relates to sublease income and includes $84,000 of settlement income received in connection with the termination of a lease for certain premises located at 281 Walt Whitman Road, Huntington Station, New York on November 4, 2025. Other income, net was $65,000 in the fiscal 2025 period which primarily relates to sublease income.

Provision for Income Taxes

The effective income tax rate for the fiscal 2026 period was 28.4% compared to 26.5% in the fiscal 2025 period. The effective income tax rate for the fiscal 2026 period reflected income tax expense of $6,815,000 recorded on $24,026,000 of pre-tax income. The effective income tax rate for the fiscal 2025 period reflected income tax expense of $7,151,000 recorded on $26,942,000 of pre-tax income. The effective tax rates are higher than the U.S. Federal statutory rates primarily due to state and local taxes, as well as non-deductible compensation under the Internal Revenue Code Section 162(m). The effective income tax rate for the fiscal 2026 period included an unfavorable discrete tax adjustment of 1.0% for non-deductible transaction costs.

The American Rescue Plan Act of 2021 ("ARPA"), among other things, includes provisions to expand the IRC Section 162(m) disallowance for deduction of certain compensation paid by publicly held corporations. Effective for tax years starting after December 31, 2026 (March 29, 2027 for the Company), ARPA expands the limitations to cover the next five most highly compensated employees. We continue to evaluate the potential impact ARPA may have on our operations and condensed consolidated financial statements in future periods.

On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted in the United States. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The OBBBA did not have a material impact to our provision for income taxes for the fiscal 2026 period.

The amount of unrecognized tax benefits at December 28, 2025 was $491,000 all of which would impact the Company's effective tax rate, if recognized. As of December 28, 2025, the Company had approximately $438,000 accrued for the payment of interest and penalties in connection with unrecognized tax benefits.

Nathan's estimates that its unrecognized tax benefit excluding accrued interest and penalties could be further reduced by up to $55,000 during the fiscal year ending March 29, 2026 due primarily to the lapse of statutes of limitations which would favorably impact the Company's effective tax rate, although no assurances can be given in this regard.

Off-Balance Sheet Arrangements

At December 28, 2025 and December 29, 2024, Nathan's did not have any open purchase commitments for hot dogs. Nathan's may enter into purchase commitments in the future as favorable market conditions become available.

Liquidity and Capital Resources

Sources and uses of cash

Cash and cash equivalents at December 28, 2025 aggregated $24,545,000, a $3,257,000 decrease during the fiscal 2026 period as compared to cash of $27,802,000 at March 30, 2025. Net working capital decreased to $27,849,000 at December 28, 2025 as compared to $28,371,000 at March 30, 2025.

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

Cash flows for the fiscal year 2026 will be impacted by various factors, including, (i) mandatory debt repayments on our Term Loan borrowings under our Credit Agreement, (ii) interest payments on our Term Loan borrowings under our Credit Agreement and (iii) expected dividend payments.

Summary of Cash Flows

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

(In thousands)		Thirty-nine weeks ended
		December 28,				December 29,
		2025				2024
Net cash provided by operating activities		$	15,692			$	18,450
Net cash used in investing activities			(332	)			(171	)
Net cash used in financing activities			(18,617	)			(15,595	)
Net (decrease) increase in cash and cash equivalents		$	( 3,257	)		$	2,684

Operating activities

Cash provided by operations of $15,692,000 in the fiscal 2026 period is primarily attributable to net income of $17,211,000 in addition to other non-cash operating items of $1,575,000, offset by changes in other operating assets and liabilities of $3,094,000. Non-cash operating expenses consist principally of depreciation and amortization of $696,000, amortization of debt issuance costs of $53,000, share-based compensation expense of $852,000, and a provision for credit losses of $63,000. In the fiscal 2026 period, accounts and other receivables increased by $3,725,000 due primarily to higher Branded Product Program receivables of $3,576,000, and higher receivables due to the Advertising Fund of $612,000. Prepaid expenses and other current assets decreased by $1,053,000 due principally to a decrease in prepaid income taxes of $493,000, and a decrease in prepaid marketing and other expenses of $545,000. Accounts payable, accrued expenses and other current liabilities decreased by $593,000 due primarily to the recognition of $1,642,000 of deferred revenue, net of new deferrals, and a reduction in accrued payroll and other benefits of $739,000 resulting from the payment of year-end compensation. Offsetting these decreases was an increase in accrued professional fees of $768,000, an increase in accrued rebates of $247,000 and an increase in accrued corporate taxes of $539,000 due to the timing of estimated tax payments.

Investing activities

Cash used in investing activities was $332,000 in the fiscal 2026 period primarily attributable to capital expenditures incurred for our Branded Product Program and our Coney Island restaurants.

Financing activities

During fiscal 2026, we made $1,800,000 of mandatory principal repayments on our Term Loan borrowings under the Credit Agreement.

Additionally, the Company paid its first, second and third quarterly cash dividends of $0.50 per share, along with a special cash dividend of $2.50 per share totaling $16,358,000.

The Company also paid $459,000 for withholding taxes on the net share vesting of 10,000 restricted stock units.

Subsequent to the fiscal 2026 period, we paid our next quarterly mandatory principal repayment on our Term Loan borrowings of $600,000 on December 31, 2025.

Credit Agreement

On July 10, 2024 (the "Effective Date"), the Company entered into a five-year unsecured Credit Agreement (the "Credit Agreement") among the Company, as borrower, direct and indirect subsidiaries of the Company, as guarantors, the lenders from time to time party thereto (the "Lenders") and Citibank, N.A., as administrative agent, swing line lender, L/C issuer and a Lender.

The Credit Agreement provides for a term loan facility ("Term Loan") of $60,000,000 and a revolving credit facility ("Revolving Loan") of up to $10,000,000. The Credit Agreement also provides that the Company has the right from time to time during the term of the Credit Agreement to request the Lenders for incremental revolving loan borrowing increases of up to an additional $10,000,000 in the aggregate, subject to, among other items, the Lenders agreeing to lend any such additional amounts and compliance with terms specified in the Credit Agreement. The Credit Agreement matures on July 10, 2029.

The Company borrowed $60,000,000 in Term Loan borrowings on the Effective Date to refinance and redeem its 2025 Notes. The Company will use any Revolving Loan borrowings under the Credit Agreement for working capital and general corporate purposes. As of December 28, 2025, there were no outstanding borrowings under the Revolving Loan. See NOTE P - LONG TERM DEBT in the accompanying condensed consolidated financial statements for additional information on the Credit Agreement.

Share Repurchases

In 2016, the Board authorized increases to the sixth stock repurchase plan for the purchase of up to 1,200,000 shares of its common stock on behalf of the Company. As of December 28, 2025, Nathan's has repurchased 1,101,884 shares at a cost of $39,000,000 under the sixth stock repurchase plan. At December 28, 2025, there were 98,116 shares remaining to be repurchased pursuant to the sixth stock repurchase plan. The plan does not have a set expiration date. Purchases under the Company's stock repurchase program may be made from time to time, depending on market conditions, in open market or privately negotiated transactions, at prices deemed appropriate by management. There is no set time limit on the repurchases. There were no stock repurchases during the fiscal 2026 period and the fiscal 2025 period. We may return capital to our stockholders through stock repurchases, subject to any restrictions in our Credit Agreement, although there is no assurance that the Company will make any repurchases under its existing stock repurchase plan.

Common Stock Dividends

As discussed above, we had cash and cash equivalents at December 28, 2025 aggregating $24,545,000. Our Board routinely monitors and assesses its cash position and our current and potential capital requirements. The Company paid its first, second and third quarterly cash dividends of $0.50 per share on July 1, 2025, September 5, 2025, and December 5, 2025, as well as a special cash dividend of $2.50 per share on December 5, 2025 aggregating $16,358,000.

Effective February 5, 2026, as permitted under the Merger Agreement, the Company declared its fourth quarter dividend of $0.50 per common share to stockholders of record as of the close of business on February 17, 2026, which is payable on February 27, 2026.

If the Company pays regular quarterly cash dividends for the remainder of fiscal 2026 at the same rate as declared in the first, second and third quarter of fiscal 2026, the Company's total cash requirement for dividends for all of fiscal 2026, inclusive of the special cash dividend of $2.50 per share, would be approximately $18,405,000 based on the number of shares of common stock outstanding at February 2, 2026. The Company intends to declare and pay quarterly cash dividends; however, there can be no assurance that any additional quarterly dividends will be declared or paid or of the amount or timing of such dividends, if any. Additionally, pursuant to the Merger Agreement, the Company is permitted to declare and pay two quarterly cash dividends each in the amount of $0.50 per share of the Company's common stock during the period pending the closing of the proposed transaction with Smithfield Foods, Inc.

Our ability to pay future dividends is limited by the terms of our Credit Agreement. In addition, the payment of any cash dividends in the future are subject to final determination of the Board and will be dependent upon our earnings and financial requirements and the terms of our Credit Agreement.

Cash Flow Outlook

We expect that in the future we will make investments in certain existing restaurants, support the growth of the Branded Product and Branded Menu Programs, service the principal and interest obligations under the Credit Agreement, fund our dividend program and may continue our stock repurchase programs, funding those investments from our operating cash flow. We may also incur capital and other expenditures or engage in investing activities in connection with opportunistic situations that may arise on a case-by-case basis. While our Credit Agreement bears interest at a fluctuating interest rate based on the SOFR plus a spread adjustment, if the Company makes cash interest payments on the Term Loan borrowings at the interest rate effective at February 5, 2026, then for the remainder of the fiscal year ended March 29, 2026, we expect to make cash interest payments of approximately $650,000 on the Term Loan borrowings.

We may from time to time seek to make voluntary prepayments of our Term Loan borrowings under our Credit Agreement. Such voluntary prepayments, if any, will depend on market conditions, our liquidity requirements, satisfactory compliance of covenants and conditions pursuant to our Credit Agreement and other factors.

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

Contractual Obligations

At December 28, 2025, our contractual obligations primarily consist of the Term Loan borrowings under our Credit Agreement and the mandatory debt principal repayments and the related interest payments, operating leases, and employment agreements with certain executive officers. These contractual obligations impact our short-term and long-term liquidity and capital resource needs. See NOTE P - LONG TERM DEBT and NOTE Q - LEASES in the accompanying condensed consolidated financial statements included in Part I, Item 1. for additional information and as disclosed in our Form 10-K for the fiscal year ended March 30, 2025 as filed with the SEC on June 10, 2025.

Inflationary Pressures

Inflationary pressures on labor and rising commodity prices, most notably for beef and beef trimmings, have impacted our consolidated results of operations during the fiscal 2026 period, and this trend may continue through the remainder of fiscal year 2026.

Our average cost of hot dogs during the fiscal 2026 period was approximately 19% higher than during the fiscal 2025 period. Our average cost of hot dogs during the fiscal year ended March 30, 2025 was approximately 7% higher than during the fiscal year ended March 31, 2024. Inherent volatility experienced in certain commodity markets, such as those for beef and beef trimmings due to seasonal shifts, climate conditions, industry demand, inflationary pressures and other macroeconomic factors could have an adverse effect on our results of operations. This impact will depend on our ability to manage such volatility through price increases and product mix. We are unable to predict the future cost of our hot dogs and expect to experience price volatility for our beef products during the remainder of fiscal 2026. To the extent that beef prices increase as compared to earlier periods, it could impact our results of operations. In the past, we entered into purchase commitments for a portion of our hot dogs to reduce the impact of increasing market prices. We may attempt to enter into similar purchase arrangements for hot dogs and other products in the future.

We have experienced competitive pressure on labor rates as a result of the increase in the minimum hourly wage for fast food workers where our Company-owned restaurants are located. On January 1, 2026, the minimum wage increased from $16.50 to $17.00 in New York City, Long Island and Westchester. Further, beginning in 2027, the minimum wage across New York State will increase annually according to the Consumer Price Index. There has also been an increased demand for labor at all levels which has resulted in greater challenges retaining adequate staffing levels at our Company-owned restaurants; our franchised restaurants and Branded Menu Program locations; as well as for certain vendors in our supply chain that we depend on for our commodities. We remain in contact with our major suppliers and to date we have not experienced significant disruptions in our supply chain.

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

We expect to continue experiencing volatility in oil and gas prices on our distribution costs for food products and utility costs in the Company-owned restaurants and volatile insurance costs resulting from rising rates.

Continued increases in labor costs, commodity prices and other operating expenses, including health care, could adversely affect our operations. We attempt to manage inflationary pressure, and rising commodity costs, at least in part, through raising prices. Delays in implementing price increases, competitive pressures, consumer spending levels and other factors may limit our ability to offset these rising costs. Volatility in commodity prices, including beef and beef trimmings, could have a significant adverse effect on our results of operations.

The Company's business, financial condition, operating results and cash flows can be impacted by a number of factors, including but not limited to those set forth above in "Management's Discussion and Analysis of Financial Condition and Results of Operations," any one of which could cause our actual results to vary materially from recent results or from our anticipated future results. For a discussion identifying additional risk factors and important factors that could cause actual results to differ materially from those anticipated, also see the discussions in "Risk Factors", "Forward-Looking Statements" and "Notes to Condensed Consolidated Financial Statements" in this Form 10-Q and "Risk Factors" in our Form 10-K for our fiscal year ended March 30, 2025.