fiscal 2003 representing the write-down relating to seven under- performing restaurants. Other expense of $45,000 in fiscal 2004 represents lease reserves relating to two vacant properties. Other expense of $232,000 in fiscal 2003 represents lease reserves relating to four vacant properties. In fiscal 2004, the income tax provision on income from con- tinuing operations was $1,100,000 or 36.7% of income from contin- uing operations as compared to the income tax (benefit) from continuing operations of ($283,000) or 15.8% of loss from continuing operations before income taxes in fiscal 2003. The effective income tax rate was positively impacted in fiscal 2004 as a result of a tax refund received of $62,000 as a result of filing an amended fiscal 2002 tax return. The effective income tax rate was lower in the fiscal 2003 period due in part to the adoption of SFAS No. 142 which requires that goodwill no longer be amortized. Such goodwill amor- tization was not tax deductible by Nathan’s which increased the effective tax rate in prior years. No restaurants have been accounted for as discontinued opera- tions during fiscal 2004. Fiscal 2003 included the results of operations of eight Company-owned restaurants, all of which were abandoned by March 30, 2003, including seven which were abandoned in con- nection with the Home Depot early lease terminations. Revenues generated by these eight restaurants were $3,543,000 during fiscal 2003. Loss before income taxes from these restaurants was $206,000 during fiscal 2003. The fiscal 2003 loss before tax included $428,000 of additional depreciation expense due to a change in the estimated useful lives of the restaurants operating within Home Depot Improvement Centers for which Nathan’s received early lease termi- nation notifications during the second quarter of fiscal 2003.  In the first quarter fiscal 2003, we adopted SFAS No. 142, “Accounting for Goodwill and Other Intangibles.” In connection with the implementation of this new standard, Goodwill, Trademarks, Trade Names and Recipes were deemed to be impaired and their carrying value was written down by $13,192,000, or $12,338,000, net of tax. Total sales from continuing operations decreased by 9.7% or $2,663,000 to $24,762,000 for the fifty-two weeks ended March 30, 2003 (“fiscal 2003 period”) as compared to $27,425,000 for the fifty- three weeks ended March 31, 2002 (“fiscal 2002 period”). Sales from the Branded Product Program increased by 32.4% to $6,351,000 for the fiscal 2003 period as compared to sales of $4,797,000 in the fiscal 2002 period. Company-owned restaurant sales decreased 18.6% or $4,217,000 to $18,411,000 from $22,628,000 primarily due to the operation of five fewer Company-owned stores as compared to the prior fiscal year and an overall 5.3% sales decrease at our comparable restaurants (consisting of eight Nathan’s and four Miami Subs restau- rants). The reduction in Company-owned stores is the result of our franchising three restaurants and selling two restaurants, one of which was to the State of Florida pursuant to an order of condemnation. The financial impact associated with these five restaurants lowered restaurant sales by $3,294,000 and improved restaurant operating profits by $52,000 versus the fiscal 2002 period. During the fiscal 2002 period, approximately $341,000 in restaurant sales were gener- ated during the additional week of operations. Franchise fees and royalties decreased by 24.8% or $1,967,000 to $5,977,000 in the fiscal 2003 period compared to $7,944,000 in the fiscal 2002 period. Franchise royalties decreased by $1,409,000 or 20.8% to $5,352,000 in the fiscal 2003 period as compared to $6,761,000 in the fiscal 2002 period. The majority of this decline is due to the decrease in the amount of franchise sales, primarily within the South Florida marketplace for the Miami Subs brand, causing an increase in the amount of royalties deemed unrealizable during the fiscal 2003 period as compared to the fiscal 2002 period. Royalty income was not recorded from 59 domestic franchised locations dur- ing the fiscal 2003 period as compared to 48 domestic franchised locations during the fiscal 2002 period as a result of determining that collectibility of the royalties was not reasonably assured. Domestic franchise restaurant sales decreased by 12.8% to $161,740,000 in the fiscal 2003 period as compared to $185,389,000 in the fiscal 2002 period. At March 30, 2003, 343 franchised or licensed restaurants were operating as compared to 364 franchised or licensed restaurants at March 31, 2002. Franchise fee income derived from new open- ings, co-branding activities and forfeitures was $625,000 in the fiscal 2003 period as compared to $1,183,000 in the fiscal 2002 period. This decrease was attributable to lower franchise fees earned of $247,000, the reduction in co-branding fees earned of $210,000 and lower forfeitures of $101,000 between the two periods. Revenues from new unit openings were lower during the fiscal 2003 period as compared to the fiscal 2002 period although 24 new franchised restaurants were opened, including our first Nathan’s unit in China and nine Kenny Rogers Roasters units in foreign countries, as com- pared to 18 new franchised restaurants during the fiscal 2002 period. Franchise fees attributable to new Kenny Rogers Roasters restaurants is recognized upon payment by the franchisee, which payments have not been received. During the fiscal 2002 period, the one-time co- branding initiative was substantially concluded. During the fiscal 2003 period, we earned $207,000 in connection with the termina- tion of two Master Development Agreements in accordance with their terms due to non-compliance by the franchisees as compared to $308,000 during the fiscal 2002 period in connection with forfeited area development fees.  License royalties were $2,585,000 in the fiscal 2003 period as compared to $2,038,000 in the fiscal 2002 period. This increase is attributable to higher royalties earned from sales made by SFG, Inc., Nathan’s licensee for the sale of Nathan’s frankfurters within super- markets and club stores, the manufacture of certain proprietary spices Revenues from Continuing Operations Cumulative Effect of Change in Accounting Principle Discontinued Operations Provision (Benefit) for Income Taxes from Continuing Operations 2004 Annual Report  Nathan’s Famous, Inc. & Subsidiaries page eight Fiscal Year Ended March 30, 2003 Compared to Fiscal Year Ended March 31, 2002