UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period ended July 1, 1995
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________ to _________________
Commission File Number 1-6836
---------------------------------------------
Flanigan's Enterprises, Inc.
(Exact name of registrant as specified in its charter)
Florida 59-0877638
------------------------------- -------------------
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
2841 Cypress Creek Road, Fort Lauderdale, Florida 33309
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code, (305) 974-9003
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NA
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(Former name, address and fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days. Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the issuers classes of
Common Stock as of the latest practicable date 890,380
----------------------------
<PAGE>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
INDEX TO FORM 10-QSB
July 1, 1995
PART I. FINANCIAL INFORMATION
1. UNAUDITED CONDENSED FINANCIAL STATEMENTS
Consolidated Summary of Earnings -- For the Thirteen Weeks and
the Thirty-Nine weeks ended July 2, 1994 and July 1, 1995
Consolidated Balance Sheets -- as of October 1, 1994 and July
1, 1995
Consolidated Statements of Cash Flows for the Thirty-Nine
Weeks Ended July 2, 1994 and July 1, 1995
Notes to Consolidated Financial Statements
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
PART II. OTHER INFORMATION AND SIGNATURES:
6. Exhibits and Reports on Form 8-K
(a) Exhibits
(b) Reports on Form 8-K
<PAGE>
<TABLE>
<CAPTION>
FLANIGAN'S ENTERPRISES, INC., AND SUBSIDIARIES
UNAUDITED CONSOLIDATED SUMMARY OF EARNINGS
(In Thousands Except Per Share Amounts)
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
July 2, July 1, July 2, July 1,
1994 1995 1994 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Restaurant food sales ......................................... $ 2,321 $ 2,240 $ 6,978 $ 6,857
Restaurant bar sales .......................................... 748 803 2,596 2,529
Non-restaurant bar sales ...................................... 144 109 528 364
Package goods sales ........................................... 1,114 1,063 4,409 3,824
Franchise related revenues .................................... 68 112 280 352
----------- ----------- ----------- -----------
4,395 4,327 14,791 13,926
----------- ----------- ----------- -----------
COSTS AND EXPENSES:
Cost of merchandise sold restaurant and lounges ............... 1,284 1,187 3,923 3,656
Cost of merchandise sold package goods ........................ 864 773 3,332 2,833
Payroll and related costs ..................................... 1,278 1,299 3,938 3,863
Occupancy costs ............................................... 266 278 845 771
Selling, general and administrative expenses .................. 739 828 2,641 2,713
----------- ----------- ----------- -----------
4,431 4,365 14,679 13,836
----------- ----------- ----------- -----------
Income from operations ............................... (36) (38) 112 90
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense on obligations under capital leases .......... (28) (23) (84) (69)
Interest expense on long-term debt and damages payable ........ (24) (19) (82) (63)
Gain on sale of assets ........................................ -- -- -- 35
Interest income ............................................... 11 19 58 46
Management fees from Pennsylvania limited partnership ......... (37) 6 109 94
Recovery of amounts previously written off .................... -- -- 30 --
Owners fee .................................................... 38 38 113 113
Recognition of deferred gains ................................. 23 27 239 95
Other net ..................................................... 65 51 189 155
----------- ----------- ----------- -----------
48 99 572 406
----------- ----------- ----------- -----------
Income (loss) before income taxes ............................. 12 61 684 496
</TABLE>
(Continued)
<PAGE>
FLANIGAN'S ENTERPRISES, INC., AND SUBSIDIARIES
UNAUDITED CONSOLIDATED SUMMARY OF EARNINGS
(In Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
July 2, July 1, July 2, July 1,
1994 1995 1994 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
PROVISION FOR INCOME TAXES .................................... $ -- $ -- $ -- $ --
----------- ----------- ----------- -----------
Net income .................................................... $ 12 $ 61 $ 684 $ 496
=========== =========== =========== ===========
NET INCOME PER COMMON SHARE:
Primary ....................................................... $ .01 $ .07 $ .67 $ .54
=========== =========== =========== ===========
Fully Diluted ................................................. $ .01 $ .07 $ .70 $ .54
=========== =========== =========== ===========
WEIGHTED AVERAGE
SHARES OUTSTANDING:
Primary ....................................................... 1,052,549 891.343 1,018,508 917,781
=========== =========== =========== ===========
Fully Diluted ................................................. 1,052,125 891,000 982,521 917,781
=========== =========== =========== ===========
</TABLE>
Certain fiscal 1994 items have been reclassified to conform
to the fiscal 1995 presentation.
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
OCTOBER 1, 1994 AND July 1, 1995
ASSETS
OCTOBER 1, JULY 1,
1994 1995
---------- ----------
<S> <C> <C>
CURRENT ASSETS:
Cash and equivalents including
interest bearing deposits of
$ 0 and $10,000 in 1994 and 1995 .......... $ 868,000 $ 484,000
Receivables, including current portion
of notes, and mortgages, less allowance
for uncollectible amounts of $426,000
in 1994 and $299,000 in 1995 and
including related party receivables
of $281,000 and $90,000 (before
allowances and deferred gains)
in 1994 and 1995 .......................... 502,000 395,000
Inventories, at lower of cost (first-
in, first out) or market .................. 720,000 822,000
Prepaid expenses ............................ 300,000 444,000
---------- ----------
Total current assets ........................ 2,390,000 2,145,000
---------- ----------
PROPERTY AND EQUIPMENT, at cost, less
accumulated depreciation and amortization
of $6,194,000 and $6,299,000
in 1994 and 1995 ............................ 3,025,000 2,743,000
---------- ----------
LEASED PROPERTY UNDER CAPITAL LEASES,
less accumulated amortization of
$785,000 and $831,000 in 1994
and 1995 .................................... 356,000 310,000
---------- ----------
OTHER ASSETS:
Liquor licenses, less accumulated
amortization of $85,000 in 1994 and
$95,000 in 1995 ........................... 365,000 338,000
Notes and mortgages receivable, less
allowance for uncollectible amounts of
$66,000 in 1994 and $ 20,000 in 1995 and
including related party receivables
of $262,000 and $14,000 (before
allowances and deferred gains)
in 1994 and 1995 .......................... 61,000 219,000
Miscellaneous ............................... 173,000 164,000
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Total other assets .......................... 599,000 721,000
---------- ----------
$6,370,000 $5,919,000
========== ==========
(continued)
<PAGE>
<CAPTION>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
OCTOBER 1, 1994 AND JULY 1, 1995
LIABILITIES AND STOCKHOLDER'S INVESTMENT (DEFICIT)
(continued)
OCTOBER 1, JULY 1,
1994 1995
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<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable ................................ $ 775,000 $ 511,000
Accrued and other current liabilities ....... 1,106,000 885,000
Current portion of long-term debt ........... 128,000 227,000
Current obligations under capital
leases .................................... 61,000 61,000
Current portion of damages payable on
terminated or rejected leases
and other bankruptcy liabilities .......... 232,000 121,000
Due to Pennsylvania
limited partnership ....................... 125,000 59,000
---------- ----------
Total current liabilities ................... 2,427,000 1,864,000
---------- ----------
LONG TERM DEBT, net of current
portion ................................... 79,000 26,000
---------- ----------
OBLIGATIONS UNDER CAPITAL LEASES,
net of current portion .................... 623,000 530,000
---------- ----------
DAMAGES PAYABLE ON TERMINATED OR
REJECTED LEASES AND OTHER
BANKRUPTCY LIABILITIES,
net of current portion ...................... 1,702,000 1,640,000
---------- ----------
</TABLE>
(continued)
<PAGE>
<TABLE>
<CAPTION>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
OCTOBER 1, 1994 AND JULY 1, 1995
LIABILITIES AND STOCKHOLDER'S INVESTMENT (DEFICIT)
(continued)
OCTOBER 1, JULY 1,
1994 1995
----------- -----------
<S> <C> <C>
STOCKHOLDERS' INVESTMENT (DEFICIT)
Common stock, par value $.10
authorized 5,000,000 shares,
issued 2,099,000 shares ........... $ 210,000 $ 210,000
Capital in excess of par value ...... 6,685,000 6,685,000
Deficit ............................. (583,000) (87,000)
Less - Treasury stock, at cost,
1,168,000 shares in 1994 and
1,225,000 in 1995 ................. (4,773,000) (4,949,000)
----------- -----------
1,539,000 1,859,000
----------- -----------
$ 6,370,000 $ 5,919,000
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets
<PAGE>
<TABLE>
<CAPTION>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THIRTY-NINE WEEKS ENDED
JULY 2, 1994 AND JULY 1, 1995
(In Thousands)
JULY 2, JULY 1,
1994 1995
------ ------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ...................................... $ 684 $ 496
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization
of property, equipment and
capital leases ....................... 445 488
Amortization of liquor licenses ........ 8 7
Recognition of deferred gains
and other deferred income ............ (239) (95)
Accrual for potential
uninsured claims ..................... -- 90
Provision for uncollectible
receivables .......................... -- 125
Reversal of allowance for
uncollectible notes and
mortgages receivable ................. -- (122)
Changes in assets and liabilities:
(Increase) decrease in receivables ..... (19) 13
Increase in inventories ................ (43) (102)
Increase in prepaid expenses ........... (66) (144)
Decrease in other assets ............... 103 9
Decrease in accounts
payable .............................. (65) (264)
Decrease in accrued liabilities ........ (519) (311)
------ ------
Net cash provided by (used in)
operating activities ................. 289 190
------ ------
(continued)
<PAGE>
<CAPTION>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THIRTY-NINE WEEKS ENDED
JULY 2, 1994 AND JULY 1, 1995
(In Thousands)
JULY 2, JULY 1,
1994 1995
------ ------
<S> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from sale of property
and equipment ................................. $ 94 $ 14
Sale of liquor license .......................... -- 20
Collections on notes and
mortgages receivable .......................... 423 61
Additions to notes and
mortgages receivable .......................... -- (33)
Additions to property and equipment ............. (767) (174)
Change in due to Pennsylvania
limited partnership ........................... (25) (66)
Repurchase of common stock ...................... -- (176)
------ ------
Net cash used in
investing activities .......................... (275) (354)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to long-term debt ..................... 519 426
Payments of long-term debt ...................... (458) (380)
Payments of obligations under
capital leases ................................ (119) (93)
Payments of damages payable ..................... (187) (173)
------ ------
Net cash provided by (used in)
financing activities .......................... (245) (220)
------ ------
NET DECREASE IN CASH
AND EQUIVALENTS ................................. (231) (384)
CASH AND EQUIVALENTS, BEGINNING OF YEAR .................. 945 868
------ ------
CASH AND EQUIVALENTS, END OF QUARTER ..................... $ 714 $ 484
====== ======
</TABLE>
<PAGE>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JULY 1, 1995
(1) PETITION IN BANKRUPTCY:
On November 4, 1985, Flanigan's Enterprises, Inc. (Flanigan's), not
including any of its subsidiaries, filed a voluntary petition in the United
States Bankruptcy Court for the Southern District of Florida seeking to
reorganize under Chapter 11 of the Federal Bankruptcy Code. In fiscal 1986,
Flanigan's recorded damages of $4,278,000 for claims for losses as a result of
rejected leases. Because the damage payments were to be made over nine years,
the total amount due was discounted at a rate of 9.25%, Flanigan's then
effective borrowing rate. During fiscal 1991 and 1992, Flanigan's renegotiated
the payment of this obligation to extend through fiscal 2002 which effectively
reduced the discount rate to 3.71%. Certain other bankruptcy-related liabilities
including excise and property taxes, settlements and past rents, were fixed as
to amount and repayment terms in Flanigan's Plan of Reorganization, as amended
and modified (Plan). On May 5, 1987, the Plan was confirmed by the Bankruptcy
Court and on December 28, 1987, Flanigan's was officially discharged from
bankruptcy. All liabilities under the Plan have been properly accrued and
classified in the accompanying consolidated financial statements.
(2) ADJUSTMENTS:
The financial information presented as of any date other than October
1, 1994 has been prepared from the books and records without audit. Financial
information as of October 1, 1994 has been derived from the audited financial
statements of the Company, but does not include all disclosures required by
generally accepted accounting principles. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the financial information for the periods indicated have
been included. For further information regarding the Company's accounting
policies, refer to the Consolidated Financial Statements and related notes
included in the Company's Annual Report on Form 10-KSB for the year ended
October 1, 1994.
(3) Reclassification
Certain amounts in the fiscal 1994 financial statements have been
reclassified to conform to the 1995 presentation.
(4) FRANCHISE PROGRAM:
At October 1, 1994, and at July 1, 1995, eight stores were operated
under franchise agreements. Under the franchise agreements, the Company agrees
to provide guidance, advice and management assistance to the franchisees. The
Company also agrees to sponsor and manage cooperative buying groups on behalf of
the franchisees for the purchase of inventory. The franchise agreements provide
for fees to the Company of 2-1/2% to 3% of the gross sales. Of the eight
franchised stores, five are owned or operated by related parties.
(5) INCOME TAXES:
The Company has adopted, on a cumulative catch up basis, Financial
Accounting Standards Board Statement No. 109, Accounting for Income Taxes, which
requires among other things, recognition of future tax benefits measured at
enacted rates attributable to deductible temporary differences between financial
statement and income tax bases of assets and liabilities and to tax net
operating loss carryforwards to the extent that realization of said benefits is
more likely than not. Adoption of the Standard did not have a material impact on
the Company's financial position or results of operations principally as a
result of the Company's net operating loss position.
(6) COMMITMENTS AND CONTINGENCIES:
Guarantees
The Company has guaranteed approximately $150,000 of notes and
mortgages to lenders in connection with sales of stores to outside parties. In
addition, the Company is contingently liable for annual rentals in the amount of
approximately $882,000 at October 1, 1994, for lease obligations in connection
with the assignment of leases on stores sold. In the event of default under any
of these agreements, the Company will have the right to repossess the premises.
During fiscal 1993 and 1994, the Company paid the 1991, 1992 and 1993
real property taxes, in the aggregate amount of $40,242, as guarantor of the
sublease for a store sold in 1990. During fiscal 1994, the Company also paid a
non-related third party the sum of $14,991 as reimbursement of real property
taxes erroneously paid on a second folio number for the real property taxes for
the same store for 1990 through 1992. The payment of the 1991 and 1992 real
property taxes were evidenced by two promissory notes, one for each year, which
each provide that the entire principal balance and accrued interest, calculated
at the rate of nine percent per annum, will be due in full on January 1, 2010,
which is the date the sublease expires; a default under the sublease is a
default under the promissory note, entitling the Company to accelerate the
entire principal balance and all accrued interest; and if the assignee meets all
obligations of the sublease through its expiration date, (January 1, 2010) then
each promissory note will be forgiven. The Company's reimbursement of real
property taxes erroneously paid by a non-related third party ($14,991), is
secured by a mortgage on real property owned by an affiliated entity of the
assignee. The Company agreed to review financial records of the assignee each
year to see if the profitability thereof warranted the Company paying the real
property taxes to subsidize the same.
During the second quarter of the current fiscal year, the Company
learned that the assignee was five months in arrears in the payment of rent to
the sublessors ($35,527) and had failed to pay the annual ground rent which was
due January 1, 1995 ($19,400), notwithstanding promises that all rental payments
would be current by January 1, 1995.
The Company demanded payment of all arrearages or the return the store.
While negotiating the return of the store, the assignee closed the retail liquor
package store and removed all inventory. The Company filed suit for eviction and
was granted immediate possession of the business premises including furniture,
fixtures, equipment and liquor license, to reopen and preserve the business of
the retail liquor package store. As a result of the default of the sublease, the
two promissory notes given the Company for paying the 1991 and 1992 real
property taxes for this store are immediately due in full. During the quarter
ended April 1, 1995, the Company paid the annual ground rent which was due
January 1, 1995 ($19,460), and began making monthly rental payments to the
sublessors commencing February 1, 1995. During the quarter ended July 1, 1995,
the Company also began paying an additional one half month's rent to the
sublessors along with current monthly rent on account of the rental arrearages.
The Company continues to operate the retail liquor package store and anticipates
doing so throughout the litigation and after acquiring ownership thereof through
the litigation. The obligations of the assignee are secured by the assets of the
assignee, the personal guarantee of a principal of the assignee and cross
collateralized with the assets of an entity affiliated with the assignee, which
is discussed below.
In addition to the above store, during fiscal year 1994, the Company
paid the 1991 and 1992 real property taxes in the aggregate amount of $13,987,
as guarantor of the lease of another store sold in prior years. During fiscal
year 1994, the rental payments for this store decreased to a point where they
did not even equal the current rent and the Company instituted eviction
proceedings. The Company, through a wholly owned subsidiary, was appointed
receiver of the assignee's business and continues to operate the same.
Subsequent to the end of the third quarter of the current fiscalyear, the Court
entered a Final Judgment in favor of the Company foreclosing the statutory
landlord lien subrogated to the Company. The Company expects to acquire
ownership of the assets of the assignee at the foreclosure sale, including the
liquor license. To date, the Company has been unable to operate the assignee's
business profitably and continues to fund operating losses as guarantor of the
lease. The Company is actively seeking a buyer for the business and real
property in conjunction with the landlord. The Company's guarantee of the lease
for this store expires on August 10, 1997.
During the fiscal quarter ended July 1, 1995, the Company paid the
monthly rent due June 1, 1995, as guarantor of the lease of another store sold
in prior years. The assignee of the business vacated the business premises
during the third quarter of the current fiscal year and the landlord is actively
seeking a new tenant. Subsequent to the end of the third quarter of the current
fiscal year the Company has continued to pay the monthly rent, although the
lease expires September 30, 1995. The obligations of the assignee are secured by
the assignee, the personal guarantee of a principal of the assignee and cross
collateralized with the assets of an entity affiliated with the assignee, which
is discussed above.
Employment Agreement
On June 3, 1987, the Company entered into an employment agreement with
the Chairman of the Board, which was ratified by the stockholders at the
Company's 1988 Annual Meeting. The agreement provides, among other things, for
annual compensation of $150,000 through December 31, 1995, renewable annually,
as well as a bonus based on the Company's cash flow, as defined. During fiscal
1993 a bonus in the amount of $170,000 was earned. No bonus was earned under the
agreement in fiscal 1994. The agreement further provides that in the event of
termination, the Chairman of the Board would be entitled to a maximum payment of
$450,000.
The agreement also provides for the issuance of stock options to
purchase up to 93,092 shares of the Company's stock. On December 12, 1989, the
Chairman's option exercise prices were reduced from a range of $4.00 to $4.125
to $.875, 110% of the then fair market value of the Company's common stock. At
October 1, 1994, options to purchase 93,092 shares of common stock at an
exercise price of $.875 per share were outstanding. The options expire December
31, 1995.
During fiscal 1992, options to purchase up to 46,540 shares were
granted at an exercise price of $2.25 per share which expire February 27, 1997.
Exercise prices at the dates of grant equaled the fair market value of the
Company's common stock, therefore no related compensation was recorded. By
written resolution, dated January 12, 1994, the Board of Directors approved an
amendment to the stock option, increasing the option exercise price to $6.50 per
share, which reflects in excess of 110% of the then fair market value of the
Company's common stock. The expiration date of the stock option was also
extended through February 27, 2002. This action was approved by the stockholders
at the Company's 1994 Annual Meeting.
The Company currently provides no post retirement benefits to any of
its employees.
Key Employee Incentive Stock Option Plan
On December 10, 1993, the Company's Board of Directors approved the
Flanigan's Enterprises, Inc. Key Employee Incentive Stock Option Plan ("Stock
Option Plan"), which reserved and authorized the issuance of 100,000 shares of
the Company's common stock pursuant to the Stock Option Plan. The Stock Option
Plan is administered by a Key Employee Incentive Stock Option Plan Committee
("Committee"), as appointed by the Board of Directors. The Chairman, Chief
Executive Officer and President, Joseph G. Flanigan is a member of the
Committee, but not an eligible employee under the Stock Option Plan. The
stockholders of the Company approved the Stock Option Plan at the Company's
Annual Meeting on February 25, 1994.
During fiscal year 1994, the Committee granted 52,000 stock options to
eligible employees under the Stock Option Plan at an exercise price of $3.50 per
share, which expire April 19, 1999. No additional stock options were granted
during the first three quarters of fiscal 1995 and no options were exercised
during fiscal 1994 or the first three quarters of fiscal 1995.
For the full text of the Stock Option Plan see the Proposal to Approve
Company Key Employee Incentive Stock Option Plan set forth in the Company's
Proxy Statement, dated January 26, 1994.
Litigation
The Company is a party to various litigation matters incidental to its
business. Certain claims, suits and complaints arising in the ordinary course of
business have been filed or are pending against the Company.
Certain states have "liquor liability" laws which allow a person
injured by an "intoxicated person" to bring a civil suit against the business
(or social host) who had served intoxicating liquors to an already "obviously
intoxicated person", known as "dram shop" claims. The Company is generally
self-insured for liability claims, with major losses partially covered by
third-party insurance carriers. The extent of this coverage varies by year.
Subsequent to the end of the third quarter of the current fiscal year,
the Company favorably settled one uninsured "dram shop" claim without material
adverse impact to the Company. See Note 6 and page two of the letter to
shareholders in the Company's Annual Report on Form 10-KSB for the fiscal year
ended October 1, 1994.
The Company has accrued for potential uninsured losses based on
estimates received from legal counsel and historical experience. Such accrual is
included in "Accrued and other liabilities - potential uninsured claims". See
Note 6 and page two of the letter to shareholders in the Company's Annual Report
on Form 10-KSB for the fiscal year ended October 1, 1994.
Item 7. Managements Discussion and Analysis of Financial Condition and
Results of Operations.
At fiscal yearend, the Company was operating 14 units and had interests
in an additional eight units which had been franchised by the Company. At July
1, 1995, the Company was operating 15 units and had interests in an additional
eight units which had been franchised by the Company.
During fiscal year 1994, the Company closed one unit which it had
operated marginally as a combination restaurant and retail liquor package store
due to the expiration of the lease for the business premises and its inability
to renew the same at a reasonable rental. Also during fiscal year 1994, a wholly
owned subsidiary of the Company was appointed by Court as receiver of a lounge
previously sold by the Company.
During the second quarter of the current fiscal year, the Company was
granted exclusive use of the business premises, furniture, fixtures, equipment
and liquor license of another store previously sold by the Company. The Company
is operating a retail liquor package store pursuant to Court Order, raising the
number of units operated by the Company to 15.
Liquidity and Capital Resources
Cash Flows
The following table is a summary of the Company's cash flows for the
third quarter of fiscal years 1994 and 1995 and for the fiscal year ended
October 1, 1994.
<TABLE>
<CAPTION>
July 2, July 1, Oct. 1,
1994 1995 1994
----- ----- -----
(in thousands)
<S> <C> <C> <C>
Net cash provided by
operating activities ..................... $ 289 $ 190 $ 902
Net cash used in
investing activities ..................... (275) (354) (482)
Net cash provided by (used in)
financing activities ..................... (245) (220) (497)
----- ----- -----
Net increase (decrease) in cash ............ $(231) $(384) $ (77)
===== ===== =====
</TABLE>
The Company had liquid assets of $484,000 at July 1, 1995. During the
first thirty-nine weeks of fiscal 1995, cash flow from operating activities
decreased by $99,000 when compared to the first thirty-nine weeks of the prior
fiscal year.
Adjustments to net income to reconcile to cash flows from operating
activities in the first nine months of fiscal 1994 included the recognition of
$239,000 in deferred gain, $190,000 of which resulted from the prepayment of
mortgages receivable from the sales of stores to franchisees from which the gain
was deferred. The comparable nine months of fiscal 1995 included $95,000 in
deferred gain, of which $62,000 resulted from payments on the settlement of a
lawsuit filed against the Company by the Company's former Vice Chairman of the
Board. (See page 31 of the Company's 1994 Annual Report for further discussion
of this matter.)
Improvements
The Company had additions to fixed assets of $60,000 and $174,000
during the quarter and the nine months ended July 1, 1995 compared to $245,000
and $767,000 for the same periods last year and $913,000 for the year ended
October 1, 1994. The additions were for the continuation of the program to
refurbish lounges, upgrade existing units serving food, improvements to package
stores, upgrading the corporate computer system and other improvements. Except
as otherwise noted all of the funds for additions came from operations.
During fiscal year 1994, the Company completed the conversion of its
Store #27, which is located in North Miami, and opened under its new "Flanigan's
Cafe" concept. This new concept involved the conversion of a "Big Daddy's
Lounge" into a cafe by installing kitchen facilities, booths and tables to
accommodate diners, decorating the dining area consistent with the Company's
other restaurants and offering a limited food menu including primarily baby back
ribs, chicken and hamburger items. This change in concept increased both food
and beverage revenue from this unit, although the Company believes that it will
take time for this new concept to catch on and reach its full potential.
Depending upon the ultimate success of this conversion, the Company will
determine whether it will be profitable to extend the "Flanigan's Cafe" concept
to other "Big Daddy's Lounges".
All of the Company's units require periodic refurbishing in order to
remain competitive. During fiscal 1992, as cash flow improved, the Company
embarked upon a refurbishing program which continued through fiscal 1994. The
budget for fiscal 1995 includes $350,000 for this program. The Company believes
that improved operations will provide the cash to continue the refurbishing
program.
Working Capital
The table below summarizes the current assets, current liabilities and
working capital for the quarters ended July 2, 1994 and July 1, 1995 and for the
fiscal year ended October 1, 1994.
<TABLE>
<CAPTION>
July July October
Item 2, 1994 1, 1995 1, 1994
------------------------------------- ------- ------- -------
(in thousands)
<S> <C> <C> <C>
Current assets ...................... $ 2,070 $ 2,145 $ 2,390
Current liabilities ................. 2,065 1,864 2,427
Working capital (deficit) ........... 5 281 (37)
</TABLE>
The Company increased its working capital for the current period by
$276,000 compared to the same period last year, and increased it by $318,000 as
compared to October 1, 1994.
During the first quarter of fiscal 1994, the Company received
prepayments of mortgages receivable in the amount of $250,000 and early in the
second quarter an additional $100,000 was received. The Company gave no
discounts for these prepayments. There were no prepayments in the first three
quarters of fiscal 1995. The Company believes that continued improvement in
income from operations will enable the Company to adequately fund operations,
reduce debt and fund planned capital expenditures in fiscal 1995.
As noted in Note 1 to the consolidated statements above, during fiscal
1991 and 1992, the Company extended the payment schedule under the Plan for
damages as a result of rejected leases through fiscal 2002 thereby reducing the
payments from $500,000 per year to $200,000 per year for two years (fiscal 1991
and 1992), and thereafter to $300,000 per year until paid, but without reducing
the total amount of bankruptcy damages.
Bankruptcy Proceedings
As noted above and in Note 1 to the consolidated financial statements,
on November 4, 1985, Flanigan's Enterprises, Inc., not including any of its
subsidiaries, filed a voluntary petition in the United States Bankruptcy Court
for the Southern District of Florida seeking to reorganize under Chapter 11 of
the Federal Bankruptcy Code. The primary purposes of the petition were to reject
leases which were significantly above market rates and to reject leases on
closed units which had been repossessed by or returned to the Company. During
the bankruptcy proceedings, the Company terminated or rejected 34 leases and
renegotiated many of its remaining leases. As a result of the rejection of
leases, the Company agreed to bankruptcy damages of $4,278,000 to the landlords
of such rejected leases, payable pursuant to the Company's Plan. The Plan was
approved by the Bankruptcy Court on May 5, 1987 and the Company was officially
discharged from bankruptcy on December 28, 1987. See Item 3 and Item 7 of Part I
of the Company's Annual Report on Form 10-KSB for the year ended October 1, 1994
for further discussion of the Company's bankruptcy proceedings. See Note 1 to
the consolidated financial statements of the Annual Report on Form 10-KSB for
the year ended October 1, 1994 for the current payment schedule of bankruptcy
damages.
Other Legal Matters
During fiscal 1991, the Company was forced to close its club in Marina
Del Rey, California due to continuing harassment and discrimination by the Los
Angeles Police Department. This club catered to a black clientele in a
predominately white shopping center. Thereafter, attempts to sell the assets of
the club fell through when the ground lessor unreasonably withheld its consent
to assignment of the lease and then attached unreasonable conditions to its
consent. The Los Angeles Police Department also notified the buyer of
unreasonable conditions to the re-opening of the club. The Company retained an
attorney and during fiscal 1992 instituted suit against the Los Angeles Police
Department, its police captain and the ground lessor.
During fiscal 1993, the Company elected to settle with the ground
lessor for $100,000 as it became apparent through documents produced and
depositions taken in the litigation that the Company would not be able to prove
any involvement by the ground lessor in a racially motivated conspiracy to close
the club. The settlement is payable with an initial installment of $35,000,
which was received by the Company during the fourth quarter of fiscal 1994, and
the balance in seven annual installments. In the event the balance is paid by
October 13, 1995, the ground lessor will receive a $15,000 discount. The Company
has agreed that the funds from this settlement will be paid to the sublessors as
they are received and in accordance therewith, the initial installment of
$35,000 received by the Company was forwarded to the sublessors during fiscal
1994. The first annual installment of $9,286 was received by the Company during
the second quarter of the current fiscal year and has been forwarded to the
sublessors.
The action against the Los Angeles Police Department and its
captain went to non-binding arbitration on March 25, 1994 and on March 30, 1994
the arbitrator issued his non-binding decision in favor of the Company in the
amount of $4,500,000, less the amount paid to the Company by any other defendant
previously dismissed from this action ie: the shopping center. Since the award
was non-binding, the Los Angeles Police Department noticed the case for jury
trial, which was originally scheduled to commence on July 25, 1994 but was
continued by the Court until October 11, 1994. In the interim, the Los Angeles
Police Department questioned the damages which the Company may claim,
specifically the required notice which had to be given to the Los Angeles Police
Department prior to suit being filed. The Los Angeles Police Department wanted
to preclude the introduction of any evidence of damages resulting from the
closing of the business in May, 1991, arguing that the closing of the business
and the interference with the Company's attempt to sell the club were two
separate and distinct claims, contrary to the Company's position that all of the
actions of the Los Angeles Police Department constituted one conspiracy to close
the business and prevent its sale. At a hearing on September 8, 1994, the Court
agreed with the Company's position and entered its ruling in accordance
therewith. Unfortunately, on September 20, 1994 the Court, on its own
initiative, reversed its previous ruling and precluded the Company from
introducing any evidence of damages resulting from the closing of the club in
May, 1991. In effect this ruling eliminated the Company's damages other than
what the shopping center has already agreed to pay on account of its
interference with the attempt to sell the club. The re-scheduled jury trial was
once again continued, this time at the Company's request, and at a hearing on
October 11, 1994, the Court refused to reconsider the reversal of its earlier
ruling, but agreed to stay the proceedings while the Company appealed the
ruling.
During the first quarter of the current fiscal year, the Appellate
Court affirmed the ruling of the Trial Court, without explanation. While this
was not encouraging, the Company's California counsel recommended continuing the
appeal to the California Supreme Court and was optimistic that the Trial Court's
ruling would be reversed. Unfortunately, during the second quarter of fiscal
1995, the California Supreme Court refused to review the Trial Court's ruling,
thereby concluding this action with no compensation to the Company and no
further compensation to the sublessors.
In addition to the above, see Item 3 and Item 7 to Part I of the Annual
Report on Form 10-KSB for the fiscal year ended October 1, 1994 for a discussion
of other legal proceedings resolved in prior years.
<PAGE>
Results of Operation
Revenues
All discussion below of total food sales, restaurant bar sales and
package goods sales for the thirty-nine weeks of fiscal year 1994 includes six
months of sales from the unit that was closed March 31, 1994.
Net sales for the quarter and thirty-nine weeks ended July 2, 1994 were
$4,395,000 and $14,791,000 compared with $4,327,000 and $13,926,000 for the
period ended July 1, 1995. Restaurant food sales were $2,321,000 and $6,978,000
for the quarter and the thirty-nine weeks ended July 2, 1994 compared to
$2,240,000 and $6,857,000 for the same period in the current fiscal year.
Restaurant bar sales were $748,000 and $2,596,000 for the third quarter and the
nine months in fiscal 1994 and $803,000 and $2,529,000 for the comparable
periods in fiscal year 1995. Package goods sales were $1,114,000 and $4,409,000
for the quarter and the nine months ended July 2, 1994 and $1,063,000 and
$3,824,000 for the third quarter and nine months ended July 1, 1995.
Restaurant food sales represented 53% and 52% of total sales in the
third quarter of fiscal 1994 and 1995 respectively, and 47% and 49% of total
sales for the first nine months of fiscal 1994 and 1995 respectively. The weekly
average of same store sales was $168,292 for the nine months ended July 2, 1994
and $175,785 for the nine months ended July 1, 1995, an increase of 4%.
The same store weekly average for restaurant bar sales remained level
with $75,122 for the nine months ended July 2, 1994 and $74,892 for the same
nine months of the current fiscal year.
Package goods sales continue to decline on a store to store basis,
going from a weekly average of same store sales of $109,557 for the first nine
months of fiscal 1994 to a weekly average of $98,068 for the first nine months
of fiscal 1995, a decrease of 10.5%. The decline in package goods sales is
attributed to the decline in the liquor market.
The gross profit margin for restaurant and lounge sales increased from
60.8% to 62.5% for the first nine months of fiscal years 1994 and 1995
respectively. The improvement is attributable to revised promotional programs.
The gross profit margin for package goods sales during the first nine
months of fiscal 1994 was 25.2% and increased to 26.0% for the first nine months
of the current fiscal year. The increase is due to better purchasing
opportunities.
Overall gross profits were 49.9% for first nine months ended July 2,
1994 compared to 52.2% for the nine months ended July 1, 1995. The increase of
2% is a result of increased prices, revised promotional programs and a higher
ratio of restaurant sales to total sales.
Operating Costs and Expenses
All discussion below of operating costs, payroll costs and occupancy
costs for the thirty-nine weeks of fiscal year 1994 includes six months of costs
from the unit that was closed March 31, 1994.
Operating costs and expenses for the third quarter of fiscal year 1994
were $4,431,000 compared to $4,365,000 for the same quarter in the current
fiscal year and were $14,679,000 and $13,836,000 for the nine months ended July
2, 1994 and July 1, 1995 respectively. Operating expenses are comprised of the
cost of merchandise sold, payroll and related costs, occupancy costs and
selling, general and administrative expenses.
Payroll and related costs, which include workers compensation insurance
premiums, were $1,278,000 and $1,299,000 for the third quarter of fiscal years
1994 and 1995 respectively, and $3,938,000 and $3,863,000 for the thirty-nine
weeks of fiscal 1994 and 1995 respectively. Workers compensation premiums
decreased due to a reduction in the modification factor used to adjust the basic
premium up or down based upon claims history. The net decrease in payroll costs
of the current year compared to the prior year is attributed to the
afore-mentioned unit that was closed at the end of the second quarter in fiscal
1994.
Occupancy costs, which include rent, common area maintenance, repairs
and taxes were $266,000 and $278,000 for the third quarter of fiscal years 1994
and 1995 respectively, and $845,000 and $771,000 for the thirty-nine weeks ended
July 2, 1994 and July 1, 1995 respectively, with the decrease primarily due to
the closing of the previously mentioned unit and a reduction in personal
property taxes.
Selling, general and administrative expenses were $739,000 for the
third quarter of fiscal year 1994 and $828,000 for the third quarter of fiscal
year 1995. For the thirty-nine weeks ended July 2, 1994 and July 1, 1995
selling, general and administrative expenses were $2,641,000 and $2,713,000
respectively. Selling, general and administrative expense for the thirty-nine
weeks of the prior year include expense for a unit which was closed March 31,
1994 and which amounted to $101,000. The Company has also achieved other expense
reductions as it continues to evaluate and improve operations. The above
decreases were offset by increases in reserves which resulted in a net increase
of $72,000. As discussed on page 12 of this report, the Company is operating two
units for which the Company is the guarantor of the leases. This has made it
necessary to fund operating losses. For this reason, the Company found it
necessary to increase reserves for potentially uncollectible amounts by
$125,000. In addition, the Company, after careful review of incidents and
lawsuits that might result in a liability for the Company, has increased its
reserves against potential liability by $90,000.
Other Income and Expense
The decline of $19,000 in interest expense on long-term debt which was
$82,000 and $63,000 for the thirty-nine weeks ended July 2, 1994 and July 1,
1995 respectively, is attributable to the reduction of long-term debt. Interest
income, which was $58,000 and $46,000 for the thirty-nine weeks ended July 2,
1994 and July 1, 1995 respectively, declined during the current year as the
result of a large reduction in mortgage receivable balances during fiscal year
1994.
In the third quarter of fiscal year 1995, the Company received $37,500
as an owners fee from the unit located in Atlanta, Georgia, which is level with
the prior year. As of the end of the first quarter of fiscal year 1995, no
owners fee had been received, however, all arrearages have now been brought
current.
During the thirty-nine weeks ended July 2, 1994, large pre-payments
were made on three mortgages which resulted in realization of $190,000 in
deferred gain, increasing the total deferred gain to $239,000. The mortgages
represented sales of assets in prior periods on which the gains or portions of
the gains were deferred. During the comparable period in fiscal 1995, $95,000 in
deferred gain was realized. Of the total deferred gains realized, $63,000 came
from the payment of arrearages on the settlement of a lawsuit filed against the
Company by the Company's former Vice Chairman of the Board. (See page 31 of the
Company's Annual Report for further discussion of this matter.)
Other net was $64,687 for the third quarter of fiscal 1994 and $51,387
for the third quarter of fiscal year 1995. For the thirty-nine weeks ended July
2, 1994 and July 1, 1995, other net was $173,362 and $155,673 respectively. The
decline in vending income that the Company was experiencing at the end of fiscal
year 1994 has continued and is reflected in the decline of other net.
Trends
During the next twelve months management expects a continued increase
in restaurant food and beverage sales and anticipates that expenses will remain
constant, thereby increasing overall profits. Management also expects the
decline in package goods sales to continue.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits - None
b. Reports on Form 8-K - None
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. The information furnished reflects all
adjustments to the statement of the results for the interim periods.
FLANIGAN'S ENTERPRISES, INC.
Joseph G. Flanigan
-------------------------------------------
JOSEPH G. FLANIGAN, Chief Executive Officer
Date 8/15/95
-----------
Mary C. Reymann
-------------------------------------------
MARY C. REYMANN, Chief Financial Officer
Date 8/15/95
-----------
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-1-1995
<PERIOD-END> JUL-1-1995
<CASH> 484
<SECURITIES> 0
<RECEIVABLES> 694
<ALLOWANCES> 299
<INVENTORY> 822
<CURRENT-ASSETS> 2,145
<PP&E> 10,183
<DEPRECIATION> 7,130
<TOTAL-ASSETS> 5,919
<CURRENT-LIABILITIES> 1,864
<BONDS> 2,196
<COMMON> 210,000
0
0
<OTHER-SE> 1,649
<TOTAL-LIABILITY-AND-EQUITY> 5,919
<SALES> 13,574
<TOTAL-REVENUES> 13,926
<CGS> 6,489
<TOTAL-COSTS> 2,713
<OTHER-EXPENSES> 4,634
<LOSS-PROVISION> 125
<INTEREST-EXPENSE> 132
<INCOME-PRETAX> 496
<INCOME-TAX> 0
<INCOME-CONTINUING> 496
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 496
<EPS-PRIMARY> .54
<EPS-DILUTED> .54
</TABLE>
