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 December 30, 1995
----------------------------
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
--------------------
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 934,608
----------------------------
<PAGE>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
INDEX TO FORM 10-QSB
December 30, 1995
PART I. FINANCIAL INFORMATION
1. UNAUDITED CONDENSED FINANCIAL STATEMENTS
Consolidated Summary of Earnings -- For the Thirteen Weeks ended
December 31, 1994 and December 30, 1995
Consolidated Balance Sheets -- as of September 30, 1995 and December
30, 1995
Consolidated Statements of Cash Flows for the Thirteen Weeks Ended
December 31, 1994 and December 30, 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>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THIRTEEN WEEKS ENDED
DECEMBER 31, 1994 and DECEMBER 30, 1995
(In Thousands Except Per Share Data)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30,
1994 1995
------- -------
<S> <C> <C>
REVENUES:
Restaurant food sales ................... $ 2,205 $ 2,291
Restaurant bar sales .................... 839 851
Non-restaurant bar sales ................ 131 120
Package goods sales ..................... 1,467 1,731
Franchise - related revenues ............ 127 152
Owner's fee ............................. -- 38
Other operating income .................. 48 56
------- -------
4,817 5,239
------- -------
COSTS AND EXPENSES:
Cost of merchandise sold
restaurant and lounges ................ 1,215 1,246
Cost of merchandise sold
package goods ......................... 1,108 1,311
Payroll and related costs ............... 1,244 1,429
Occupancy costs ......................... 187 258
Selling, general and
administrative expenses ............... 1,009 995
------- -------
4,763 5,186
------- -------
Income from operations .................. 54 53
------- -------
OTHER INCOME (EXPENSE):
Interest expense on obligations
under capital leases .................. (23) (15)
Interest expense on long-term
debt and damages payable .............. (22) (17)
Gain on sale of assets .................. 1 1
Interest income ......................... 8 12
Management fees from
Pennsylvania limited
partnership ........................... 55 33
Recognition of deferred gains ........... 7 32
Other, net .............................. 34 64
------- -------
60 110
------- -------
Income before income taxes .............. 114 163
</TABLE>
(continued)
<PAGE>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THIRTEEN WEEKS ENDED
DECEMBER 31, 1994 AND DECEMBER 30, 1995
(In Thousands Except Per Share Data)
(continued)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30,
1994 1995
------- --------
<S> <C> <C>
PROVISION FOR INCOME TAXES: ......................... $ -- $ --
------- --------
Net income ................................. $ 114 $ 163
======= ========
NET INCOME
PER COMMON SHARE:
Primary .................................... $ .12 $ .19
======= ========
Fully Diluted .............................. $ .12 $ .19
======= ========
WEIGHTED AVERAGE SHARES
AND EQUIVALENT SHARES OUTSTANDING:
Primary .................................... 936,000 972,000
======= ========
Fully Diluted .............................. 936,000 972,000
======= ========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
<PAGE>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1995 AND DECEMBER 30, 1995
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 30,
1995 1995
---------- ----------
<S> <C> <C>
CURRENT ASSETS:
Cash and equivalents ........................ $ 686,000 $ 809,000
Receivables, including current portion
of notes, and mortgages, less allowance
for uncollectible amounts and deferred
gains, including related party receivables
of $16,000 (before allowances and deferred
gains) both in 1995 and 1996 .............. 235,000 83,000
Inventories, at lower of cost (first-
in, first out) or market .................. 824,000 1,002,000
Prepaid expenses ............................ 373,000 242,000
---------- ----------
Total current assets ........................ 2,118,000 2,136,000
---------- ----------
PROPERTY AND EQUIPMENT, net .......................... 2,772,000 2,685,000
---------- ----------
LEASED PROPERTY UNDER CAPITAL LEASES,
less accumulated amortization of
$741,000 and $750,000 in 1995
and 1996 respectively ....................... 227,000 219,000
---------- ----------
OTHER ASSETS:
Liquor licenses, less accumulated
amortization of $95,000 in 1995 and
$97,000 in 1996 respectively .............. 338,000 366,000
Notes and mortgages receivable, less
allowance for uncollectible amounts and
deferred gains, and including related party
receivables of $70,000 and $66,000 (before
allowances and deferred gains)
in 1995 and 1996 respectively ............ 85,000 19,000
Other ....................................... 324,000 636,000
---------- ----------
Total other assets .......................... 747,000 1,021,000
---------- ----------
$5,864,000 $6,061,000
========== ==========
</TABLE>
(continued)
<PAGE>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTIMBER 30, 1995 AND DECEMBER 30, 1995
LIABILITIES AND STOCKHOLDER'S INVESTMENT (DEFICIT)
(continued)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 30,
1995 1995
---------- ----------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable ................................ $ 756,000 $ 962,000
Accrued and other current liabilities ....... 865,000 714,000
Current portion of long-term debt ........... 60,000 36,000
Current obligations under capital
leases .................................... 54,000 54,000
Current portion of damages payable on
terminated or rejected leases
and other bankruptcy liabilities .......... 240,000 302,000
Due to Pennsylvania
limited partnership ....................... 106,000 97,000
---------- ----------
Total current liabilities ................... 2,081,000 2,165,000
---------- ----------
LONG TERM DEBT, net of current
portion ................................... 21,000 17,000
---------- ----------
OBLIGATIONS UNDER CAPITAL LEASES,
net of current portion .................... 448,000 434,000
---------- ----------
DAMAGES PAYABLE ON TERMINATED OR
REJECTED LEASES AND OTHER
BANKRUPTCY LIABILITIES,
net of current portion ...................... 1,462,000 1,400,000
---------- ----------
</TABLE>
(continued)
<PAGE>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1995 AND DECEMBER 30, 1995
LIABILITIES AND STOCKHOLDER'S INVESTMENT (DEFICIT)
(continued)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 30,
1995 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
Retained earnings (deficit) ................. (33,000) 130,000
Less - Treasury stock, at cost,
1,246,000 and 1,164,000 shares
in 1995 and 1996 respectively ............. (5,010,000) (4,980,000)
---------- ----------
1,852,000 2,045,000
---------- ----------
$5,864,000 $6,061,000
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets
<PAGE>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THIRTEEN WEEKS ENDED
DECEMBER 31, 1994 AND DECEMBER 30, 1995
(In Thousands)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30,
1994 1995
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ...................................... $ 114 $ 163
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization
of property, equipment and
capital leases ....................... 164 154
Amortization of liquor licenses ........ 2 2
Recognition of deferred gains
and other deferred income ............ (7) (32)
Provision for uncollectible notes
and mortgages receivable ............. 15 40
Changes in assets and liabilities:
Decrease in receivables ................ 353 152
Increase in inventories ................ (119) (178)
Decrease in prepaid expenses ........... 23 131
Increase in other assets ............... (17) (312)
Increase in accounts payable ........... 101 206
Decrease in accrued liabilities ........ (290) (151)
----- -----
Net cash provided by (used in)
operating activities ................. 339 175
----- -----
</TABLE>
(continued)
<PAGE>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THIRTEEN WEEKS ENDED
DECEMBER 31, 1994 AND DECEMBER 30, 1995
(In Thousands)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30,
1994 1995
------------ ------------
<S> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from sale of property
and equipment ................................. $ 20 $--
Collections on notes and
mortgages receivable .......................... 10 198
Additions to notes and
mortgages receivable .......................... (145) (140)
Additions to property and equipment ............. (34) (59)
Change in due to Pennsylvania
limited partnership ........................... (65) (9)
Acquisition of liquor license ................... -- (30)
----- -----
Net cash used in
investing activities .......................... (214) (40)
----- -----
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to long-term debt ..................... -- --
Payments of long-term debt ...................... (36) (14)
Payments of obligations under
capital leases ................................ (31) (28)
Purchase of treasury stock ...................... -- (51)
Sale of treasury stock .......................... -- 81
----- -----
Net cash provided by (used in)
financing activities .......................... (67) (12)
----- -----
NET INCREASE IN CASH AND EQUIVALENTS ..................... 58 123
CASH AND EQUIVALENTS, BEGINNING OF YEAR .................. 868 686
----- -----
CASH AND EQUIVALENTS, END OF QUARTER ..................... $ 926 $ 809
===== =====
</TABLE>
<PAGE>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 30, 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 September
30, 1995 has been prepared from the books and records without audit. Financial
information as of September 30, 1995 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
September 30, 1995.
(3) RECLASSIFICATION:
Certain amounts in the fiscal 1995 financial statements have been
reclassified to conform to the fiscal 1996 presentation.
(4) FRANCHISE PROGRAM:
At September 30, 1995, nine units were operated under Franchise
Agreements, while at December 30, 1995, eight units were operated under
Franchise Agreements. During the first quarter of fiscal 1996, one franchisee
exercised the thirty day cancellation clause under the original Franchise
Agreement and related documents and returned its franchised unit to the Company.
The franchisee had operated a package liquor store and lounge under the "Big
Daddy's" servicemark. In addition, during the same fiscal quarter, one
additional franchisee agreed to a termination of its Franchise Agreement and
while its restaurant did not formerly operate under the "Flanigan's Seafood Bar
and Grill" servicemark, the franchisee agreed to de-identify the same to avoid
any confusion with the Company's restaurants. This franchisee will continue
<PAGE>
operating its package liquor store under a License Agreement with the Company
licensing the use of the "Big Daddy's" servicemark only. This franchisee still
has the right to terminate the Licensing Agreement and return the franchised
unit to the Company upon thirty days advance written notice. Similarly, after
January 1, 1997, the Company has the right to terminate the Licensing Agreement
and request that the franchised unit be returned to the Company.
At September 30, 1995 there were four franchised units operating under
the Company's original Franchise Agreement, while at December 30, 1995, there
were only two franchised units operating under the original Franchise Agreement.
While the original Franchise Agreement was prepared for the operation of a
lounge, the new Franchise Agreement, which was drafted jointly with existing
franchisees, was prepared for the operation of a restaurant and provides the
Company with the ability to maintain a high level of food quality and service at
its franchised restaurants. Under either Franchise Agreement, the Company agrees
to provide guidance, advice and management assistance to the franchisee. The
Company also agrees to sponsor and manage cooperative buying groups on behalf of
the franchisees for the purchase of inventory. Under the original Franchise
Agreement, the Company received fees of 2-1/2% to 3% of gross sales, while under
the new Franchise Agreement, the Company receives fees of 4-1/2% to 6% of gross
sales, including contributions to advertising. Of the eight franchised units,
five are owned or operated by related parties.
(5) INCOME TAXES:
Financial Accounting Standards Board Statement No. 109, Accounting for
Income Taxes, 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.
(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 $777,000 at September 30, 1995, 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), was
<PAGE>
secured by a mortgage on real property owned by an affiliated entity of the
assignee, which mortgage was paid in full during the current fiscal quarter. 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 fiscal year 1995 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 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 liquor package store. As the 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 fiscal year 1995, the
Company paid the annual ground rent which was due January 1, 1995 and began
making monthly payments to the sublessors commencing February 1, 1995. During
fiscal year 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 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 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. During fiscal year 1995, the Court entered
a Final Judgment in favor of the Company foreclosing the statutory landlord lien
subrogated to the Company. The Company acquired ownership of the assets of the
assignee at the foreclosure sale, including the liquor license. The Company's
guarantee of the lease for this store expires on August 10, 1997. Currently the
Company is operating this store as a restaurant under the "Flanigan's Cafe"
concept.
During fiscal year 1995, the Company paid the monthly rent due June 1,
1995 through September 30, 1995, as guarantor of the lease of another store sold
in prior years. The assignee of the business vacated the business premises
during the fiscal year and the landlord actively sought a new tenant but was
unable to find a new tenant prior to September 30, 1995, the date the lease
expired. 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 above. During the first quarter of fiscal 1996, the Company filed
suit against the assignee to recoup funds paid as guarantor of the lease and to
foreclose its security interest in the assets of the assignee.
<PAGE>
During fiscal year 1995, a lawsuit was filed against the Company
alleging age discrimination in its hiring of restaurant assistant managers
during fiscal year 1994. During the first quarter of fiscal 1996, the Company,
without admitting any wrongdoing, settled the claim on terms which do not have a
material adverse impact upon the Company's financial position.
Subsequent to the end of fiscal year 1995, two claims were filed
against the Company with the Equal Employment Opportunity Commission alleging
sexual discrimination. In the first claim, an employee alleges that the Company
permitted sexual harassment to continue at one of its restaurants, while in the
second claim, a former employee alleges that her position with the Company was
terminated due to her pregnancy. The Company disputes both claims and is
vigorously defending the same.
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. For the fiscal
years ended 1994 and 1995 no bonus was earned under the agreement. 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 provided 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, which would have expired
December 31, 1995. During the fiscal quarter, the Chairman exercised all of his
stock options under the agreement and purchased 93,092 shares of the Company's
common stock.
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.
<PAGE>
Key Employee Incentive Stock Option Plan
In December 1993, the Board of Directors approved a Key Employee
Incentive Stock Option Plan, which reserved and authorized the issuance of
100,000 shares of the Company's common stock to eligible employees.
During fiscal 1994, 52,000 stock options were granted at an exercise
price of $3.50 per share which expire April 19, 1999. During the first quarter
of fiscal year 1996, an additional 30,000 stock options were granted at an
exercise price of $3.25 per share which expire December 21, 2000. Exercise
prices at the date of grant exceeded the fair market value of the Company's
common stock; therefore, no related compensation expense was recorded. No
options were exercised during fiscal 1994, 1995 or 1996.
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 first quarter of fiscal year 1996, the
Company settled the two dram shop cases filed against the Company in Florida in
fiscal years 1994 and 1995, respectively, arising out of an automobile accident
in which two individuals died and a third was seriously injured. The settlement
of these two cases was within Flanigan's insurance coverage and therefore had no
adverse material impact upon the Company's financial position. With the
settlement of these two dram shop cases, the Company continues to defend one
remaining uninsured dram shop case against one of the limited partnerships in
Pennsylvania and the Company as general partner. See Note 6 in the Company's
Annual Report on Form 10-KSB for the fiscal year ended September 30, 1995,
The Company has accrued for potential uninsured losses based on
estimates received from legal counsel and its historical experience. Such
accrual is included in the "Accrued and other liabilities - potential uninsured
claims". See Note 6 in the Company's Annual Report on Form 10-KSB for the fiscal
year ended September 30, 1995,
<PAGE>
Item 7. Managements Discussion and Analysis of Financial Condition and
Results of Operations.
At December 31, 1994, the Company was operating 14 units and had
interests in an additional eight units which had been franchised by the Company.
At fiscal yearend 1995, the Company was operating 15 units and had interests in
an additional nine units which had been franchised by the Company.
During the first quarter of fiscal 1996 one franchisee exercised the
thirty day cancellation clause under the Franchise Agreement and returned its
franchised unit to the Company, which the Company is operating as a "Big
Daddy's" package store. The Company also began operating a restaurant under the
"Flanigan's Seafood Bar and Grill" servicemark as general partner and fifty
percent owner of a limited partnership established for such purpose, bringing
the total number of stores operated by the Company to 17 and reducing the number
of franchises to eight.
Liquidity and Capital Resources
Cash Flows
The following table is a summary of the Company's cash flows for the
first quarter of fiscal years 1995 and 1996.
<TABLE>
<CAPTION>
Three months ended
-----------------------
Dec. 31, Dec. 30,
1994 1995
-------- --------
(in thousands)
<S> <C> <C>
Net cash provided by
operating activities ........................... $ 339 $ 175
Net cash (used in) provided by
investing activities ............................ (214) (40)
Net cash used in
financing activities ............................ (67) (12)
----- -----
Net increase in cash
and cash equivalents ........................... 58 123
Cash and cash equivalents:
Beginning of year .............................. 868 686
----- -----
End of year .................................... $ 926 $ 809
===== =====
</TABLE>
Adjustments to net income to reconcile to cash flows from operating
activities in the first quarter of fiscal 1995 include the provision for $15,000
of allowances for uncollectible notes and mortgages receivable.
Adjustments to net income to reconcile to cash flows from operating
activities in the first quarter of fiscal 1996 include a provision for
uncollectible notes and mortgages of $40,000 and the recognition of $32,000 in
deferred gain.
<PAGE>
Improvements
The Company had additions to fixed assets of $59,000 during the quarter
ended December 30, 1995 compared to $34,000 for the same quarter last year and
$348,000 for the year ended September 30, 1995 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 the fiscal year 1995, the Company became the owner, through
foreclosure, of a lounge previously sold by the Company, which lounge had been
operated by a wholly owned subsidiary of the Company as a receiver appointed by
the Court since fiscal year 1994. After acquiring ownership of the lounge, the
Company converted the same to its "Flanigan's Cafe" concept. Sales from this
unit have increased since its conversion to the "Flanigan's Cafe" concept and
the Company believes that this unit can be operated profitably.
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 1995. The
budget for fiscal 1996 includes $300,000 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 and working capital deficit for the quarters ended December 31,
1994 and December 30, 1995 and for the fiscal year ended September 30, 1995.
<TABLE>
<CAPTION>
December December September
Item 31, 1994 30, 1995 30, 1995
- --------------------------------------- -------- -------- ---------
(in thousands)
<S> <C> <C> <C>
Current assets ........................ $ 2,176 $ 2,136 $ 2,118
Current liabilities ................... 2,217 2,165 2,081
Working capital (deficit) ............. (41) (29) 37
</TABLE>
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.
<PAGE>
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 September 30,
1995 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 September 30, 1995 for the current payment schedule of bankruptcy
damages.
Other Legal Matters
In addition to the above, see "Litigation" on page 14 of this report
and see Item 3 and Item 7 to Part I of the Annual Report on Form 10-KSB for the
fiscal year ended September 30, 1995 for a discussion of other legal proceedings
resolved in prior years.
Results of Operation
<TABLE>
<CAPTION>
REVENUES:
December 31, December 30,
1994 1995
Amount Percent Amount Percent
----------------------- -----------------------
<S> <C> <C> <C> <C>
Restaurant food sales $ 2,205 47.5 $ 2,291 45.9
Restaurant bar sales 839 18.1 851 17.1
Non-Restaurant bar sales 131 2.8 120 2.4
Package goods sales 1,467 31.6 1,731 34.6
---------------------- ----------------------
Total sales 4,642 100.0 4,993 100.0
Franchise related revenues 127 152
Owner's fee - 38
Other operating income 48 56
----- -----
4,817 5,239
</TABLE>
Restaurant food sales have increased in the first quarter of fiscal
1996 when compared to the first quarter of fiscal 1995, restaurant food sales
represented 47.5% of total sales in the first quarter of fiscal 1995 as compared
to 45.9% in the first quarter of fiscal 1996. The decrease in percentage of food
sales to total sales is a result of the increase in the percentage of package
goods sales. The weekly average of same store restaurant food sales was $168,515
in 1995 and $171,593 in 1996, an increase of two percent.
The same store weekly average for restaurant bar sales was $64,654 for
the first quarter of fiscal 1995 compared to $62,536 for the first quarter of
the current fiscal year, a decrease of three percent.
Package goods sales have reversed the decline of prior years going from
a weekly average of same store sales of $112,873 for the first quarter of fiscal
1995 to $116,622 for the first quarter of fiscal 1996. The improvement in
package goods sales is attributed to three factors. The Company has improved its
wine selections and made its pricing more competitive, while the decline in the
liquor market appears to have reached a plateau.
The gross profit margin for restaurant and lounge sales remained level
at 61.7% to 61.8% for the first quarter of fiscal years 1995 and 1996
respectively.
The gross profit margin for package goods sales during the first
quarter of fiscal year 1995 was 24.5% and remained constant at 24.4% for the
first quarter of the current fiscal year.
Overall gross profits were 49.9% in the first quarter of fiscal year
1995 compared to 48.8% for the first quarter of fiscal year 1996. The decrease
of 1.07% is a result of a lower ratio of restaurant sales to total sales.
Operating Costs and Expenses
All discussion below of operating costs, payroll costs and occupancy
costs for the first quarter of fiscal year 1996 includes costs from the unit
that the Company received through foreclosure and the unit that was returned to
the Company by its franchisee.
Operating costs and expenses for the first quarter of fiscal year 1995
were $4,763,000 compared to $5,186,000 for the same quarter in the current
fiscal year. 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 $1,244,000 and $1,429,000 for the first quarter of fiscal years
1995 and 1996 respectively, an increase of $185,000. Although the Company
experienced an increase in restaurant payroll in general, there were three other
factors involved in the increase in payroll and related costs. Supervisors'
bonuses were accrued in the first quarter of the current fiscal year, but were
accrued or paid in the second quarter of fiscal 1995. The payrolls from the two
recently acquired units were responsible for some added payroll expense,and the
Company hired an attorney at the beginning of fiscal year 1996, which attorney
is also a member of the Board of Directors. The increase from adding the
attorney to the payroll will be offset by an equivalent reduction in legal
expense.
Occupancy costs, which include rent, common area maintenance, repairs
and taxes were $187,000 and $258,000 for the first quarter of fiscal years 1995
and 1996 respectively, with the increase of $70,000 primarily accounted for
because of the addition of the previously mentioned units and a decrease in the
reduction from capital leases to expense.
Selling, general and administrative expenses were $1,009,000 for the
first quarter of fiscal year 1995 and $995,000 for the first quarter of fiscal
year 1996. Despite the selling, general and administrative expense generated by
the two units that the Company has this fiscal year that it did not have in the
first quarter of fiscal 1995, management has been able to accomplish savings
primarily in utilities and telephone that resulted in a net decrease in selling
and general expenses.
Other Income and Expense
The decline of $5,000 in interest expense on long-term debt which was
$22,000 and $17,000 for the first quarter of fiscal 1995 and 1996 respectively,
is attributed to the reduction of long-term debt. The decline of $8,000 in
interest expense on obligations under capital leases which was $23,000 and
$15,000 for the first quarter of fiscal 1995 and 1996 respectively is the result
of the expiration of a capital lease late in fiscal year 1995.
Management fees from the Pennsylvania limited partnership were $55,000
and $33,000 for the first quarter of fiscal years 1995 and 1996, respectively. A
reduction in revenues caused by the severe weather in Pennsylvania is
responsible for this decline.
Other net was $34,000 for the first quarter of fiscal 1995 and $64,000
for the first quarter of fiscal year 1996. The increase reflects a prior period
adjustment of $20,000 and $9,500 of income from a settlement.
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.
<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.
/s/Joseph G. Flanigan
-------------------------------------------
JOSEPH G. FLANIGAN, Chief Executive Officer
Date 2/13/1996
--------------
/s/Mary C. Reymann
-------------------------------------------
MARY C. REYMANN, Chief Financial Officer
Date 2/13/1996
--------------
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> DEC-30-1995
<CASH> 809
<SECURITIES> 0
<RECEIVABLES> 354
<ALLOWANCES> (271)
<INVENTORY> 1,002
<CURRENT-ASSETS> 2,136
<PP&E> 9,276
<DEPRECIATION> (6,591)
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<CURRENT-LIABILITIES> 2,165
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0
0
<COMMON> 210
<OTHER-SE> 1,835
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<SALES> 4,993
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