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Note M - Stockholders' Equity, Stock Plans and Other Employee Benefit Plans | 12 Months Ended
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Mar. 29, 2020
Notes to Financial Statements |
Stockholders' Equity Note Disclosure [Text Block] | NOTE M - STOCKHOLDERS’ EQUITY, STOCK PLANS AND OTHER EMPLOYEE BENEFIT PLANS
| 1. | Dividend s
On May 31, 2018, Nathans’ Board of Directors authorized the commencement of a regular dividend of $1.00 per share per annum, payable at the rate of $0.25 per quarter. Through March 31, 2019, the Company declared and paid four regular quarterly dividends of $0.25 per common share aggregating $4,187. The Company also paid the remaining dividends payable of $150 from the previously declared special dividends. Effective June 14, 2019, the Board declared its first quarterly cash dividend of $0.35 per share for fiscal year 2020. Through March 29, 2020, the Company declared and paid four regular quarterly dividends of $0.35 per common share aggregating $5,912. Effective June 12, 2020, the Board declared its first quarterly cash dividend of $0.35 per share for fiscal year 2021 which is payable on June 26, 2020 to stockholders of record as of the close of business on June 22, 2020. On November 1, 2017, the Company’s Board of Directors declared a special cash dividend of $5.00 per share payable to stockholders of record as of December 22, 2017 of which approximately $20,923 was paid on January 4, 2018 to the stockholders. The Company also accrued $25 for the dividends payable on unvested restricted shares pursuant to the terms of the restricted stock agreement. The restricted stock vested, and the dividend was paid during the year ended March 31, 2019. On March 10, 2015, the Company’s Board of Directors declared a special cash dividend of $25.00 per share payable to stockholders of record as of March 20, 2015 of which approximately $115,100 was paid on March 27, 2015 to the stockholders. The Company accrued $1,000 for the expected dividends payable on unvested restricted shares pursuant to the terms of the restricted stock agreements. As unvested restricted stock vests, the declared dividend is paid. As of March 31, 2019 we had paid the entire accrued dividend on the restricted stock. Our ability to pay future dividends is limited by the terms of the Indenture with US Bank National Association, as trustee and collateral trustee. In addition to the terms of the Indenture, the declaration and 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.
| 2. | Stock Incentive Plans
On September 14, 2010, the Company’s shareholders approved the Nathan’s Famous, Inc. 2010 Stock Incentive Plan (the “2010 Plan”), which provides for the issuance of nonqualified stock options, restricted stock, restricted stock units, stock appreciation rights and other stock-based awards to directors, officers and key employees. The Company was initially authorized to issue up to 150,000 shares of common stock under the 2010 Plan, together with any shares which had not been previously issued under the Company’s previous stock option plans as of July 19, 2010 ( 171,000 shares), plus any shares subject to any outstanding options or restricted stock grants under the Company’s previous stock option plans that were outstanding as of July 19, 2010 and that subsequently expire unexercised, or are otherwise forfeited, up to a maximum of an additional 100,000 shares. On September 13, 2012, the Company amended the 2010 Plan increasing the number of shares available for issuance by 250,000 shares. Shares to be issued under the 2010 Plan may be made available from authorized but unissued stock, common stock held by the Company in its treasury, or common stock purchased by the Company on the open market or otherwise. The number of shares issuable and the grant, purchase or exercise price of outstanding awards are subject to adjustment in the amount that the Company’s Compensation Committee considers appropriate upon the occurrence of certain events, including stock dividends, stock splits, mergers, consolidations, reorganizations, recapitalizations, or other capital adjustments. In the event that the Company issues restricted stock awards pursuant to the 2010 Plan, each share of restricted stock would reduce the amount of available shares for issuance by either 3.2 shares for each share of restricted stock granted or 1 share for each share of restricted stock granted. As of March 29, 2020, there were up to 208,584 shares available to be issued for future option grants or up to 184,808 shares of restricted stock that may be granted under the 2010 Plan. On September 18, 2019, the Company’s shareholders approved the Nathan’s Famous, Inc. 2019 Stock Incentive Plan (the “2019 Plan”). The 2019 Plan will be effective as of July 1, 2020 ( the "Effective Date"). Following the Effective Date, (i) no additional stock awards shall be granted under the 2010 Plan and (ii) all outstanding stock awards previously granted under the 2010 Plan shall remain subject to the terms of the 2010 Plan. All awards granted on or after the Effective Date of the 2019 Plan shall be subject to the terms of the 2019 Plan. Once effective, we will be able to issue up to: (a) 369,584 shares of common stock under the 2019 Plan which includes: (i) shares that have been authorized but not issued pursuant to the 2010 Plan as of July 1, 2020 up to a maximum of an additional 208,584 shares and (ii) any shares subject to any outstanding options or restricted stock grants under any plan of the Company that were outstanding as of July 1, 2020 and that subsequently expire unexercised, or are otherwise forfeited, up to a maximum of an additional 11,000 shares. In general, options granted under the Company’s stock incentive plans have terms of five or ten years and vest over periods of between three and five years. The Company has historically issued new shares of common stock for options that have been exercised and used the Black-Scholes option valuation model to determine the fair value of options granted at the grant date. During the fiscal year ended March 31, 2019, the Company granted options to purchase 10,000 shares at an exercise price of $89.90 per share, all of which expire five years from the date of grant. All such stock options vest ratably over a three -year period commencing September 12, 2019. 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 year ended March 31, 2019 were as follows:
Weighted-average option fair values |  | $ | 25.6314 |
Expected life (years) |  |  | 4.5 |
Interest rate |  |  | 2.87 | %
Volatility |  |  | 32.57 | %
Dividend Yield |  |  | 1.11 | %
The expected dividend yield is based on historical and projected yields for regular dividends. 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. During the fiscal year ended March 31, 2019, the Company granted 1,000 shares of restricted stock at a fair value of $89.90 per share representing the closing price on the date of grant, which will be fully vested three years from the date of grant. The restrictions on the shares lapse ratably over a three -year period on the annual anniversary of the date of grant. The compensation expense related to this restricted stock award is expected to be $90 and will be recognized, commencing on the grant date, over the next three years. The Company recognizes compensation cost for unvested stock-based incentive awards on a straight-line basis over the requisite service period. Compensation cost charged to expense under all stock-based incentive awards is as follows:
|  | March 29, 2020 |  |  | March 31, 2019 |
Stock options |  | $ | 85 |  |  | $ | 102 |
Restricted stock |  |  | 31 |  |  |  | 60 |
|  | $ | 116 |  |  | $ | 162 |
The tax benefit on stock-based compensation expense was $29 and $44 for the years ended March 29, 2020 and March 31, 2019, respectively. As of March 29, 2020, there was $169 of unamortized compensation expense related to stock-based incentive awards. The Company expects to recognize this expense over approximately seventeen months, which represents the remaining requisite service periods for such award. In connection with the Company’s special cash dividend, paid on January 4, 2018, to stockholders of record as of December 22, 2017, the Company performed an analysis, pursuant to the anti-dilution provisions of the 2010 Plan (the “2010 Plan”), and issued replacement options to purchase 68,498 shares at an exercise price of $33.438 for the unvested stock options outstanding as of the record date of December 22, 2017, cancelling 64,384 shares at an exercise price of $35.58 per share. Nathan’s performed its evaluation based on the closing price of its common stock on December 20, 2017, the day before the stock went ex-dividend, of $83.20 per share, or $78.20 per share excluding the dividend of $5.00 per share. No other terms or conditions of the outstanding options were modified. The anti-dilution provisions of the original award were structured to equalize the award’s fair value before and after the modification. In connection with the Company’s special cash dividend, paid on March 27, 2015, to stockholders of record as of March 20, 2015, the Company performed an analysis, pursuant to the anti-dilution provisions of the 2010 Plan, and issued replacement options to purchase 75,745 shares at an exercise price of $35.58 for the unvested stock options outstanding as of March 29, 2015, canceling 50,000 shares at an exercise price of $53.89. Nathan’s performed its evaluation based on the closing price of its common stock on March 27, 2015 of $73.56 per share, or $48.56 per share excluding the dividend of $25.00 per share. No other terms or conditions of the outstanding options were modified. The anti-dilution provisions of the original award were structured to equalize the award’s fair value before and after the modification. A summary of the status of the Company’s stock options at March 29, 2020 and March 31, 2019 and changes during the fiscal years then ended is presented in the tables below:
|  | 2020 |  |  | 2019 |
|  |  |  |  |  | Weighted- |  |  |  |  |  |  | Weighted- |
|  |  |  |  |  | Average |  |  |  |  |  |  | Average |
|  |  |  |  |  | Exercise |  |  |  |  |  |  | Exercise |
|  | Shares |  |  | Price |  |  | Shares |  |  | Price |
Options outstanding – beginning of year |  |  | 42,234 |  |  | $ | 46.807 |  |  |  | 68,498 |  |  | $ | 33.438 |
Granted |  |  | - |  |  |  | - |  |  |  | 10,000 |  |  |  | 89.90 |
Expired |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Exercised |  |  | (32,234 | ) |  |  | 33.438 |  |  |  | (36,264 | ) |  |  | 33.438 |
Options outstanding - end of year |  |  | 10,000 |  |  | $ | 89.90 |  |  |  | 42,234 |  |  | $ | 46.807 |
Options exercisable - end of year |  |  | 3,333 |  |  | $ | 89.90 |  |  |  | 32,234 |  |  | $ | 33.438 |
The exercise price of outstanding options at March 29, 2020 was $89.90. During the fiscal years ended March 29, 2020 and March 31, 2019, options to purchase 32,234 and 36,264 shares were exercised which aggregated proceeds of $1,078 and $134, respectively, to the Company. The aggregate intrinsic values of the stock options exercised during the fiscal years ended March 29, 2020 and March 31, 2019 was $1,134 and $1,488, respectively. The following table summarizes information about outstanding stock options at March 29, 2020:
|  |  |  |  |  | Weighted- |  |  | Weighted- |  |  |  |  |
|  |  |  |  |  | Average |  |  | Average |  |  | Aggregate |
|  |  |  |  |  | Exercise |  |  | Remaining |  |  | Intrinsic |
|  | Shares |  |  | Price |  |  | Contractual Life |  |  | Value |
Options outstanding at March 29, 2020 |  |  | 10,000 |  |  | $ | 89.90 |  |  |  | 3.45 |  |  | $ | - |
Options exercisable at March 29, 2020 |  |  | 3,333 |  |  | $ | 89.90 |  |  |  | 3.45 |  |  | $ | - |
The exercise price of outstanding options at March 29, 2020 was $89.90. Restricted stock: Transactions with respect to restricted stock for the fiscal year ended March 29, 2020 are as follows:
|  |  |  |  |  | Weighted- |
|  |  |  |  |  | Average |
|  |  |  |  |  | Grant-date Fair value |
|  | Shares |  |  | Per share |
Unvested restricted stock at March 31, 2019 |  |  | 1,000 |  |  | $ | 89.90 |
Granted |  |  | - |  |  | $ | - |
Vested |  |  | 333 |  |  | $ | 89.90 |
Unvested restricted stock at March 29, 2020 |  |  | 667 |  |  | $ | 89.90 |
The aggregate fair value of restricted stock vested during the fiscal years ended March 29, 2020 and March 31, 2019 was $23 and $434, respectively.
| 3. | Common Stock Purchase Rights
On June 5, 2013, Nathan’s adopted a new stockholder rights plan (the “2013 Rights Plan”) under which all stockholders of record as of June 17, 2013 received rights to purchase shares of common stock. The 2013 Rights were distributed as a dividend. Initially, the 2013 Rights will attach to, and trade with, the Company’s common stock. Subject to the terms, conditions and limitations of the 2013 Rights Plan, the 2013 Rights would 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 $100.00 (the “2013 Right Purchase Price”), each 2013 Right (except those held by the acquiring person or group) would have entitled 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 then current 2013 Right Purchase Price, a number of shares of the Company’s common stock which at the time of the transaction had a market value equal to the then current 2013 Right Purchase Price at a purchase price per share equal to the then current market price of the Company’s Common Stock. On June 14, 2018, the Company and American Stock Transfer and Trust Company, LLC, the Rights Agent, amended the 2013 Rights Plan. The Amendment postponed the expiration date to September 30, 2018, at which time the 2013 Rights Plan expired.
| 4. | Stock Repurchase Program s
During the period from October 2001 through March 29, 2020, Nathan’s purchased 5,227,405 shares of common stock at a cost of approximately $83,269 pursuant to various stock repurchase plans previously authorized by the Board of Directors. During the fiscal year ended March 29, 2020, Nathan’s repurchased 85,642 shares of its common stock at a cost of approximately $4,966 pursuant to its sixth stock repurchase program. In 2016, the Company’s Board of Directors authorized increases to the sixth stock repurchase plan for the purchase of up to 1,200,000 shares of its common stock on behalf of the Company. As of March 29, 2020, Nathan’s had repurchased 1,039,774 shares at a cost of $35,607 under the sixth stock repurchase plan. At March 29, 2020, there were 160,226 shares remaining to be repurchased pursuant to the sixth stock repurchase plan. The plan does not have a set expiration date. Purchases under the Company’s stock repurchase program may be made from time to time, depending on market conditions, in open market or privately-negotiated transactions, at prices deemed appropriate by management. There is no set time limit on the repurchases. On March 13, 2020, the Company's Board of Directors approved a 10b5 - 1 stock plan ( "10b5 - 1 Plan") which will expire on the earlier of (a) August 12, 2020 or (b) the earlier of when (i) the aggregate purchase price of all shares of common stock purchased under the 10b5 - 1 Plan equals $5,550 and (ii) the aggregate purchases under the 10b5 - 1 Plan equals 100,000 shares unless terminated earlier by the Company's Board of Directors. During the fiscal year ended March 29, 2020, the Company repurchased in open market transactions 50,918 shares of the Company's common stock at an average share price of $53.54 for a total cost of $2,727 under the 10b5 - 1 Plan. At March 29, 2020, $2,823 or 49,082 shares were available for repurchase under the 10b5 - 1 Plan. Through June 5, 2020, the Company repurchased an additional 26,676 shares of the Company’s common stock at an average share price of $56.26 for a total cost of $1,502. At June 5, 2020, $1,316 or 22,406 shares were available for repurchase under the 10b5 - 1 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 (as amended, the “Gatoff Employment Agreement”). Under the terms of the Lorber Employment Agreement, Mr. Lorber would 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. On November 1, 2012, the Company amended its employment agreement with Mr. Lorber, extending the term of the employment agreement to December 31, 2017 and increasing the base compensation of Mr. Lorber to $600 per annum. In addition, Mr. Lorber received a grant of 50,000 shares of restricted stock subject to vesting as provided in a Restricted Stock Agreement between Mr. Lorber and the Company. Mr. Lorber will not receive a contractually-required bonus. On December 6, 2017, the Company amended its employment agreement with Mr. Lorber, extending the term of the employment agreement from December 31, 2017 to December 31, 2022 and increasing the base compensation of Mr. Lorber to $1,000 per annum. 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 agreement 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 without cause, he is entitled to receive his salary and bonus for the remainder of the contract term. The Lorber 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 the 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, in each case together with 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. Under the terms of the Gatoff Employment Agreement, Mr. Gatoff initially served as Chief Executive Officer from January 1, 2007 until December 31, 2008, which period automatically extends 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 is expected to be extended through December 31, 2021, based on the original terms, and no non-renewal notice has been given. Pursuant to the agreement, Mr. Gatoff will receive a base salary, currently $500 effective June 1, 2016, and an annual bonus based on his performance measured against the Company’s financial, strategic and operating objectives as determined by the Compensation Committee pursuant to the terms of the 2018 Management Incentive Plan approved by shareholders on September 12, 2018. The Gatoff Employment Agreement provides for an automobile allowance and the right of Mr. Gatoff to participate in employment benefits offered to other Nathan’s executives. The employment agreement automatically extends for successive one -year periods unless notice of non-renewal is provided in accordance with the agreement. During and after the contract term, Mr. Gatoff is subject to certain confidentiality, non-solicitation and non-competition provisions in favor of the Company. On June 4, 2013, Mr. Gatoff received a grant of 25,000 shares of restricted stock at a fair value of $49.80 per share representing the closing price on the date of grant, subject to vesting as provided in a Restricted Stock Agreement between Mr. Gatoff and the Company. The compensation expense related to this restricted stock award was $1,245 and was recognized, commencing on the grant date, over the next five years. 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 voluntary 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 . | Defined Contribution and Union Pension Plans
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. Historically, the Company has matched 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, 2020 and March 31, 2019 were $44 and $42, respectively. The Company participates in a noncontributory, multi-employer, defined benefit pension plan (the “Union Plan”) covering substantially all of the Company’s union-represented employees. The risks of participating in the Union Plan are different from a single-employer plan in the following aspects: (a) assets contributed to the Union Plan by one employer may be used to provide benefits to employees of other participating employers; (b) if a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers; and (c) if the Company chooses to stop participating in the Union Plan, the Company may be required to pay the Union Plan an amount based on the underfunded status of the Union Plan, referred to as a withdrawal liability. The most recent estimate of our potential withdrawal liability is $396 as of December 31, 2019. The Company has no plans or intentions to stop participating in the plan as of March 29, 2020 and does not believe that there is a reasonable possibility that a withdrawal liability will be incurred. Any adjustment for withdrawal liability will be recorded only when it is probable that a liability exists and can be reasonably estimated, in accordance with U.S. GAAP. Contributions to the Union Plan were $6 and $7 for the fiscal years ended March 29, 2020 and March 31, 2019, respectively.
| 7. | Other Benefits
The Company provides, on a contributory basis, medical benefits to active employees. The Company does not provide medical benefits to retirees.

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