and seasonings, the sale of condiments sold under the Nathan’s brand and royalties earned under a new license agreement in connection with the Branded Product Program. Interest income decreased by $208,000 to $292,000 in the fiscal 2003 period versus $500,000 in the fiscal 2002 period due to lower interest income on its investments in marketable securities and its notes receivable. Investment and other income decreased by $1,412,000 to $156,000 in the fiscal 2003 period versus $1,568,000 in the fiscal 2002 period. During the fiscal 2003 period, Nathan’s investment loss was approximately $206,000 greater than in the fiscal 2002 period due primarily to differences in performance of the financial markets during the time that Nathan’s maintained its investments in “trading securities,” which “trading securities” were substantially liquidated in October 2002, as compared to being held for the entire fiscal 2002 period. Nathan’s loss from sub-leasing was approximately $28,000 more than in the fiscal 2002 period. In the fiscal 2003 period, Nathan’s realized a gain of $135,000 in connection with the early ter- mination of a Branded Product Program sales agreement. During the fiscal 2003 period, Nathan’s earned approximately $126,000 less mis- cellaneous income than in the fiscal 2002 period principally in con- nection with its ice cream sales. During the fiscal 2002 period, Nathan’s recognized net gains of $1,226,000 which included  $850,000 from the successful appeal of a condemnation award from the State of Florida and gains primarily in connection with the sale of two Company-owned restaurants and one non-restaurant property. Cost of sales from continuing operations decreased by $1,677,000 to $16,592,000 in the fiscal 2003 period from $18,269,000 in the fis- cal 2002 period. During the fiscal 2003 period, restaurant cost of sales were lower than the fiscal 2002 period by approximately $2,661,000. Cost of sales were lower by approximately $2,237,000 as a result of operating fewer Company-owned restaurants. The cost of restaurant sales at our comparable units as a percentage of restaurant sales was 62.6% in the fiscal 2003 period as compared to 61.5% in the fiscal 2002 period due primarily to higher labor costs. Higher prod- uct and other direct costs of approximately $984,000 were incurred in connection with the growth of our Branded Product Program which was partially offset by lower commodity costs during the fiscal 2003 period. During the fiscal 2003 period, commodity prices of our primary meat products were in line with historical norms as com- pared to being at their highest levels in recent years through most of the twenty-six weeks ended September 23, 2001. Restaurant operating expenses from continuing operations decreased by $938,000 to $5,621,000 in the fiscal 2003 period from $6,559,000 in the fiscal 2002 period. Restaurant operating costs were lower in the fiscal 2003 period by approximately $1,105,000, as compared to the fiscal 2002 period as a result of operating fewer restaurants. The reduction in restaurant operating expenses from operating fewer restaurants was partially offset by higher occupancy and current insurance costs net of lower marketing and utility costs during the fiscal 2003 period. Costs and Expenses from Continuing Operations Depreciation and amortization from continuing operations decreased by $81,000 to $1,314,000 in the fiscal 2003 period from $1,395,000 in the fiscal 2002 period due to our additional capital spending. Amortization of intangibles decreased by $610,000 to $278,000 in the fiscal 2003 period from $888,000 in the fiscal 2002 period. Amortization of intangibles decreased as a result of the adoption of SFAS No. 142, “Goodwill and Other Intangible Assets” in the first quarter of fiscal 2003. Pursuant to SFAS No. 142, we have dis- continued the amortization of Goodwill, Trademarks, Trade Names and Recipes. General and administrative expenses decreased by $692,000 to $8,600,000 in the fiscal 2003 period as compared to $9,292,000 in the fiscal 2002 period. The decrease in general and administrative expenses was due primarily to lower litigation expense of approxi- mately $450,000, lower bad debts expense of approximately $185,000, lower compensation and related expenses of approximately $106,000 and lower travel expenses of $106,000 which were partly offset by higher insurance costs of approximately $172,000. Interest expense was $132,000 during the fiscal 2003 period as compared to $256,000 during the fiscal 2002 period. The reduction in interest expense relates primarily to the repayment of outstanding bank debt between the two periods.  Impairment charge on long-lived assets of $1,367,000 during the fiscal 2003 period represents the write-down relating to seven underperforming stores, three of which are expected to continue operating.  Impairment charge on notes receivable of $1,425,000 during the fiscal 2003 period relates to the write-down of nine notes receivable.  Other expense in the fiscal 2003 period represents lease reserves relating to four vacant properties. Other income of $210,000 in the fiscal 2002 period represents the reversal of a previously recorded  litigation provision for an award that was settled, upon appeal, in  our favor. In the fiscal 2003 period, the income tax benefit from continuing operations was $283,000 or 15.8% of loss from continuing operations before income taxes as compared to a provision for income taxes of $1,057,000 or 43.2% of income from continuing operations before income taxes in the fiscal 2002 period. 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 amortization was not tax deductible by Nathan’s which increased the effective tax rate in prior years. During the fiscal 2003 period, discontinued operations included eight Company-owned restaurants, all of which were abandoned, including seven which were abandoned in connection with the Home Depot early lease terminations. Revenues generated by these eight restaurants were $3,543,000 during the fiscal 2003 period as compared to $4,857,000 during the fiscal 2002 period. Losses before income taxes from these restaurants were $206,000 during the fiscal Discontinued Operations (Benefit) Provision for Income Taxes from Continuing Operations 2004 Annual Report  Nathan’s Famous, Inc. & Subsidiaries page nine