UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB/A
Amendment No. 1
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period ended December 27, 1997
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, (954) 974-9003
NA
- --------------------------------------------------------------------------------
(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: 907,000
<PAGE>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
INDEX TO FORM 10-QSB
December 27, 1997
PART I. FINANCIAL INFORMATION
1. UNAUDITED CONDENSED FINANCIAL STATEMENTS
Consolidated Summary of Earnings -- For the Thirteen Weeks
ended December 28, 1996 and December 27, 1997
Consolidated Balance Sheets -- as of September 27, 1997 and
December 27, 1997
Consolidated Statements of Cash Flows for the Thirteen Weeks
Ended December 28, 1996 and December 27, 1997
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 STATEMENTS OF INCOME
FOR THE THIRTEEN WEEKS ENDED
DECEMBER 28, 1996 and DECEMBER 27, 1997
(In Thousands Except Per Share Data)
DECEMBER 28, DECEMBER 27,
1996 1997
--------- ---------
<S> <C> <C>
PROVISION FOR INCOME TAXES: .................... $ -- $ --
--------- ---------
Net income ............................ $ 201 $ 282
========= =========
</TABLE>
In March 1997, the Financial Standards Accounting Board issued
Statement of Financial Accounting Standards ("SFAS") NO. 128, "Earnings Per
Share" which establishes standards for computing and presenting earnings per
share ("EPS"). This Statement replaces primary and fully diluted EPS with basic
and diluted EPS.
The following data show the amounts used in computing earnings per
share and the effects on income and the weighted-average number of shares of
potential dilutive common stock.
<TABLE>
<CAPTION>
First Quarter Ended First Quarter Ended
DECEMBER 28, DECEMBER 27,
1996 1997
Income Shares Income Shares
Numerator Denom EPS Numerator Denom. EPS
--------- ----- --- --------- ------ ---
<S> <C> <C> <C> <C> <C> <C>
BASIC EPS 201,000 907,378 0.22 282,464 907,218 0.31
Stock Options - 74,746 - 97,568
------- ------- -------- --------
DILUTED EPS 201,000 982,124 0.20 282,464 1,004,786 0.28
------- ------- -------- ---------
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THIRTEEN WEEKS ENDED
DECEMBER 28, 1996 and DECEMBER 27, 1997
(In Thousands Except Per Share Data)
(continued)
DECEMBER 28, DECEMBER 27,
1996 1997
--------- ---------
<S> <C> <C>
NET INCOME
PER COMMON SHARE:
Primary ............................... $ .21 $ --
========= =========
Fully Diluted ......................... $ .21 $ --
========= =========
WEIGHTED AVERAGE SHARES
AND EQUIVALENT SHARES OUTSTANDING:
Primary ............................... 935,000 9,000
========= =========
Fully Diluted ......................... 935,000 9,000
========= =========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 27, 1997 AND DECEMBER 27, 1997
ASSETS
SEPTEMBER 27, DECEMBER 27,
1997 1997
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and equivalents ............................ $ 1,334,000 $ 1,008,000
Receivables, including current portion
of notes, and mortgages, less allowance
for uncollectible amounts and
deferred gains, including related party
receivables of $19,000 and $21,000 (before
allowances and deferred gains) in 1997 and 1998
respectively .................................. 80,000 120,000
Inventories, at lower of cost (first-
in, first out) or market ...................... 1,253,000 1,435,000
Prepaid expenses ................................ 333,000 212,000
----------- -----------
Total current assets ............................ 3,000,000 2,775,000
----------- -----------
PROPERTY AND EQUIPMENT, net .............................. 3,544,000 3,700,000
----------- -----------
LEASED PROPERTY UNDER CAPITAL LEASES,
less accumulated amortization of
$687,000 and $720,000 in 1997
and 1998 respectively ........................... 162,000 154,000
----------- -----------
OTHER ASSETS:
Liquor licenses, less accumulated
amortization of $90,000 in 1997 and
$93,000 in 1998 respectively .................. 358,000 355,000
Notes and mortgages receivable, less
allowance for uncollectible amounts and
deferred gains, and including related
party receivables of $84,000 and $66,000
(before allowances and deferred gains)
in 1997 and 1998 respectively ................ 168,000 154,000
Investment in joint ventures..................... 987,000 987,000
Other ........................................... 163,000 163,000
----------- -----------
Total other assets .............................. 1,676,000 1,659,000
----------- -----------
$ 8,382,000 $ 8,288,000
=========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 27, 1997 AND DECEMBER 27, 1997
LIABILITIES AND STOCKHOLDER'S INVESTMENT (DEFICIT)
SEPTEMBER 27, DECEMBER 27,
1997 1997
----------- -----------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable .................................... $ 859,000 $ 1,243,000
Accrued and other current liabilities ........... 1,304,000 624,000
Current portion of long-term debt ............... 84,000 88,000
Current obligations under capital
leases ........................................ 70,000 70,000
Current portion of damages payable on
terminated or rejected leases
and other bankruptcy liabilities .............. 259,000 325,000
Due to Pennsylvania
limited partnership ........................... 82,000 38,000
----------- -----------
Total current liabilities ....................... 2,658,000 2,388,000
----------- -----------
LONG TERM DEBT, net of current
portion ....................................... 812,000 789,000
----------- -----------
OBLIGATIONS UNDER CAPITAL LEASES,
net of current portion ........................ 319,000 302,000
----------- -----------
DAMAGES PAYABLE ON TERMINATED OR
REJECTED LEASES AND OTHER
BANKRUPTCY LIABILITIES,
net of current portion .......................... 954,000 888,000
----------- -----------
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 .................. 6,395,000 6,395,000
Retained earnings ............................... 1,846,000 2,128,000
Less - Treasury stock, at cost,
1,192,000 shares in 1997
and 1998 respectively ......................... (4,812,000) (4,812,000)
----------- -----------
3,639,000 3,921,000
----------- -----------
$ 8,382,000 $ 8,288,000
</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 THIRTEEN WEEKS ENDED
DECEMBER 28, 1996 AND DECEMBER 27, 1997
(In Thousands)
DECEMBER 28, DECEMBER 27,
1996 1997
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ..................................... $ 201 $ 282
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization
of property, equipment and
capital leases ...................... 158 155
Amortization of liquor licenses ....... 1 3
Recognition of deferred gains
and other deferred income ........... (1) (1)
Provision for uncollectible notes
and mortgages receivable ............ 50 --
(Gain) loss on property, equipment
and liquor licenses ................. 19 --
Changes in assets and liabilities:
Decrease in receivables ............... 306 (40)
Increase in inventories ............... (172) (182)
Decrease (increase) in prepaid expenses (54) 121
(Increase) decrease in other assets ... 10 --
Increase in accounts payable .......... 469 384
Decrease in accrued liabilities ....... (92) (680)
------- -------
Net cash provided by (used in)
operating activities ................ 895 42
------- -------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THIRTEEN WEEKS ENDED
DECEMBER 28, 1996 AND DECEMBER 27, 1997
(In Thousands)
(continued)
DECEMBER 28, DECEMBER 27,
1996 1997
------- -------
<S> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from sale of property
equipment and liquor licenses ................ $ 20 $ --
Collections on notes and
mortgages receivable ......................... 82 15
Additions to notes and
mortgages receivable ......................... (159) --
Additions to property and equipment ............ (134) (303)
Change in due to Pennsylvania
limited partnership .......................... (199) (44)
------- -------
Net cash used in
investing activities ......................... (390) (332)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of long-term debt ..................... (4) (19)
Payments of obligations under
capital leases ............................... (15) (17)
------- -------
Net cash provided by (used in)
financing activities ......................... (19) (36)
------- -------
NET INCREASE IN CASH AND EQUIVALENTS .................... 486 (326)
CASH AND EQUIVALENTS, BEGINNING OF YEAR ................. 797 1,334
------- -------
CASH AND EQUIVALENTS, END OF QUARTER .................... $ 1,283 $ 1,008
======= =======
</TABLE>
<PAGE>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 27, 1997
(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
27, 1997 has been prepared from the books and records without audit. Financial
information as of September 27, 1997 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 27, 1997.
(3) Reclassification
Certain amounts in the fiscal 1997 financial statements have been
reclassified to conform to the fiscal 1998 presentation.
(4) Franchise Program
During fiscal year 1995, the Company completed its new franchise
agreement for a franchisee to operate a restaurant under the "Flanigan's Seafood
Bar and Grill" service mark pursuant to a license from the Company. The new
franchise agreement was drafted jointly with existing franchisees with all
modifications requested by the franchisees incorporated therein. The new
franchise agreement provides the Company with the ability to maintain a high
level of food quality and service at its franchised restaurants, which are
essential to a successful franchise operation. A franchisee is required to
execute a new franchise agreement for the balance of the term of its lease for
the business premises, extended by the franchisee's continued occupancy of the
<PAGE>
business premises thereafter, whether by lease or ownership. The new franchise
agreement provides for a royalty to the Company in the amount of approximately
3% of gross sales, plus a contribution to advertising in an amount between 1-1/2
to 3% of gross sales. In most cases, the Company does not sublease the business
premises to the franchisee and in those cases where it does, the Company no
longer receives rent in excess of the amount paid by the Company.
As of the end of fiscal year 1996, all existing franchisees who operate
restaurants under the "Flanigan's Seafood Bar and Grill" or other authorized
service marks had executed new franchise agreements.
During fiscal year 1996, the Company's franchise agreement with a
member of Mr. Flanigan's family expired and the Company declined to offer the
franchisee the option of executing its new franchise agreement. During the first
quarter of fiscal year 1997, the Company filed suit against the franchisee for
servicemark infringement, seeking injunctive relief and monetary damages. During
the first quarter of fiscal year 1998 a Stipulated Agreed Order of Dismissal
Upon Mediation was issued whereby the Company received $110,000 and the former
franchisee agreed to cease all use of the "Flanigan's" servicemark and other
trade dress features common to the Company owned and/or franchised restaurants.
During the first quarter of fiscal year 1997, the Company entered into
a Licensing Agreement with a member of Mr. Flanigan's family, licensing the
non-exclusive use of the "Flanigan's' servicemark in the Commonwealth of
Pennsylvania only. The Company receives no royalty fee or other compensation
under this Licensing Agreement. During the first quarter of fiscal year 1997,
the Company also entered into a Franchise Agreement with an unrelated franchisee
in the Commonwealth of Pennsylvania, which Franchise Agreement includes the
non-exclusive use of the "Flanigan's" servicemark at one franchised restaurant
within the Commonwealth of Pennsylvania only. Under this Franchise Agreement,
the Company receives a royalty fee equal to one percent of gross sales from the
franchised restaurant, payable on a monthly basis.
During the third quarter of fiscal year 1996, another unaffiliated
franchisee expressed its intent to terminate its new franchise agreement
(package liquor store only) and to return its unit, including restaurant, to the
Company. In order to induce the franchisee to continue operating its franchise
through the end of the fiscal year, the Company agreed to reduce the weekly
sublease rent and suspend all weekly payments on account of its purchase money
chattel mortgage. In the interim, the Company determined that the cost necessary
to convert this unit to a "Flanigan's Seafood Bar and Grill" restaurant exceeded
the funds available to the Company and on September 30, 1996, during the first
quarter of fiscal year 1997, the franchise was sold to a related third party, in
lieu of its return to the Company. The initial shareholder interest of all
officers and directors, which was comprised of the Chairman and a member of is
family, represented one hundred percent of the initial invested capital. It was
also agreed that the Company would manage the franchise for the related third
party, pursuant to a management agreement. Subsequent to the closing of the sale
of the franchise, another related franchisee, who is also a member of the Board
of Directors of the Company, paid the Company the sum of $150,000 to approve his
purchase of this franchise from the related third party and for the Company to
relinquish its right to act as manager of the franchise. As part of this
transaction, the Company agreed to continue the reduced sublease rent, the
waiver of any franchise royalties and the suspension of mortgage payments
<PAGE>
through March 1997. Since April 1, 1997 the Company has received the same weekly
payment as previously paid by the former franchisee during fiscal year 1996.
During the third quarter of fiscal year 1997 this related party formed a limited
partnership to own this franchise and through which it raised the necessary
funds to renovate the restaurant. The Company is a twenty-five percent owner of
the limited partnership, as are other related parties, including but not limited
to officers and directors of the Company and their families.
The units that continue to be franchised are doing well and continue to
generate income for the Company. Many of the units that were originally offered
as franchises have been sold outright and are no longer being operated as
Flanigan's or Big Daddy's stores.
During the first quarter of fiscal year 1996, the Company began
operating a restaurant under the "Flanigan's Seafood Bar and Grill" service mark
as general partner and fifty percent owner of a limited partnership established
for such purpose. The limited partnership agreement gives the limited
partnership the right to use the "Flanigan's Seafood Bar and Grill" service mark
while the Company acts as general partner only. No franchise agreement was
executed and the Company does not consider this unit one of its franchises.
During the fourth quarter of fiscal year 1997, the Company formed a
limited partnership and raised funds through a private offering to purchase the
assets of a restaurant in Surfside, Florida and renovate the same for operation
under the "Flanigan's Seafood Bar and Grill" servicemark. The Company acts as
general partner of the limited partnership and is also a forty percent owner of
the same, as are other related parties, including but not limited to officers
and directors of the Company and their families. The limited partnership
agreement gives the limited partnership the right to use the "Flanigan's Seafood
Bar and Grill" servicemark for a fee equal to 3% of gross sales from the
operation of the restaurant, while the Company acts as general partner only. No
franchise agreement was executed and the Company does not consider this unit one
of its franchises. The Company projects that the renovation to the restaurant
will be complete and the restaurant open for business in mid March 1998.
(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 is contingently liable for annual rentals in the amount of
approximately $556,000 at September 27, 1997, 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.
<PAGE>
During fiscal year 1996, two claims were filed against the Company with
the Equal Employment Opportunity Commission ("EEOC") alleging sexual harassment
and/or discrimination. In the first claim, a former employee initially alleged
that the Company permitted sexual harassment to continue at one of its
restaurants. After the former employee was transferred to another restaurant,
she resigned, and thereafter amended her complaint to allege that she was forced
to resign due to retaliatory conduct on the part of the Company. During the
first quarter of fiscal year 1997, the EEOC closed its files on these claims
taking no action. From the date the EEOC closed its file, the former employee
had ninety days to file suit in Federal Court, which she failed to do.
Similarly, an action under Florida law is barred by a one year statute of
limitations.
In the second claim, a former employee alleged that her position with
the Company was changed due to her pregnancy. The Equal Employment Opportunity
Commission failed to make a determination on this claim within one hundred
eighty (180) days of its filing and subsequent to the end of the fiscal year
1996, this claimant filed suit against the Company. The Company disputed this
claim and vigorously defended the same. During the fourth quarter of fiscal year
1997, the former employee's attorney withdrew and during the first quarter of
fiscal year 1998 the lawsuit was dismissed due to the failure of the former
employee to retain substitute counsel.
Employment Agreement
On June 3, 1987, the Company entered into an employment agreement (the
"Employment Agreement") with the Chairman of the Board, which was ratified by
the stockholders at the Company's 1988 annual meeting. The Employment Agreement
provides, among other things, for annual compensation of $150,000, as well as a
bonus based on the Company's cash flow, as defined. The Employment Agreement is
renewable annually and was renewed through December 31, 1998. This Employment
Agreement was amended in January 1997 to redefine a bonus equal to 15% of the
Company's annual pre-tax income in excess of $650,000 and to grant stock options
(discussed in Note 13), which was ratified by the stockholders at the Company's
1997 Annual Meeting. For fiscal year 1996, no bonus was earned under the
Employment Agreement. For fiscal year 1997, a bonus of $78,000 was earned under
the amended Employment Agreement. The Employment 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 Company currently provides no post retirement benefits to any of
its employees.
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 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, and an additional 18,000 stock options
were granted at an exercise price of $4.38 per share which expire March 14,
2001. Exercise prices at the date of grant equaled or exceeded the fair market
value of the Company's common stock; therefore, no related compensation expense
was recorded. No options have been exercised through the first quarter of fiscal
year 1998.
<PAGE>
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.
During fiscal year 1997, the Company settled its one remaining
uninsured dram shop case against one of the limited partnerships in Pennsylvania
and the Company as general partner, and currently has no dram shop cases
pending. for further discussion see the section headed Insurance on page 12 of
the Company's Annual Report on Form 10-KSB for the fiscal year ended September
27, 1997.
The Company accrues for potential uninsured losses based on estimates
received from legal counsel and its historical experience, when uninsured claims
are pending. Such accrual is included in the "Accrued and other liabilities -
potential uninsured claims". See Note 8 in the Company's Annual Report on Form
10-KSB for the fiscal year ended September 27, 1997.
<PAGE>
Item 7. Managements Discussion and Analysis of Financial Condition and Results
of Operations.
Flanigan's Enterprises, Inc., (the "Company") owns and/or operates
restaurants with lounges, package liquor stores and an entertainment oriented
club (collectively the "units"). At September 27, 1997, the Company was
operating 14 units. The Company acquired ownership of the assets of the unit
formerly operated by the Company pursuant to Court Order, and had interests in
seven additional units which have been franchised by the Company. The table
below sets out the changes, if any, in the type and number of units being
operated.
<TABLE>
<CAPTION>
FISCAL YEAR
Dec. 28, Dec. 27, NOTE
TYPES OF UNITS 1996 1997 1997 NUMBER
- -------------- ---- ---- ---- ------
<S> <C> <C> <C>
Combination package and restaurant 4 4 4
Restaurant only 5 5 5
Package store only 4 4 4 (1)(2)
Clubs 1 1 1
TOTAL - Company operated units 14 14 14
FRANCHISED - units 7 7 7
</TABLE>
Notes:
(1) During the first quarter of fiscal year 1996 one franchisee
terminated its franchise agreement and returned its franchised unit to the
Company. The Company immediately began operating the package liquor store of the
returned franchise unit.
(2) During fiscal year 1995, the Company was granted possession of a
store previously sold by the Company and began operating the package liquor
store, pursuant to Court Order. During the first quarter of fiscal year 1997 the
Company acquired ownership of this store through foreclosure.
<PAGE>
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 1997 and 1998.
<TABLE>
<CAPTION>
Three months ended
Dec. 28, Dec. 27,
1996 1997
------- --------
(in thousands)
<S> <C> <C>
Net cash provided by
operating activities ..................... $ 895 $ 42
Net cash used in
investing activities ...................... (390) (332)
Net cash used in
financing activities ...................... (19) (36)
------- -------
Net increase (decrease) in cash
and cash equivalents ..................... 486 (326)
Cash and cash equivalents:
Beginning of year ........................ 797 1,334
------- -------
End of period ............................ $ 1,283 $ 1,008
======= =======
</TABLE>
Improvements
The Company had additions to fixed assets of $303,000 during the
quarter ended December 27, 1997 compared to $134,000 for the same quarter last
year and $1,468,000 for the fiscal year ended September 27, 1997. The additions
were to continue upgrading existing units serving food, improvements to package
stores, upgrading the corporate computer system and other improvements. During
the third quarter of fiscal year 1997, the Company closed on its purchase of the
real property adjacent to its restaurant at 4 N. Federal Highway, Hallandale,
for a purchase price of $620,000, with the seller holding a purchase money
mortgage in the amount of $485,000. The purchase of and the improvements to this
property are included in the capital expenditures of $1,468,000 for the fiscal
year ended September 27, 1997. Except as otherwise noted all of the funds for
additions came from operations.
All of the Company's units require periodic refurbishing in order to
remain competitive. During fiscal year 1992, as cash flow improved, the Company
embarked upon a refurbishing program which continued through fiscal year 1997.
The budget for fiscal 1998 includes $500,000 for this program. The Company
believes that improved operations will provide the cash to continue the
refurbishing program.
<PAGE>
Working Capital
The table below summarizes the current assets, current liabilities and
working capital for the quarters ended December 28 1996 and December 27, 1997
and for the fiscal year ended September 27, 1997.
<TABLE>
<CAPTION>
December December September
Item 28, 1996 27, 1997 27, 1997
---- -------- -------- --------
(in thousands)
<S> <C> <C> <C>
Current assets ....................... $2,928 $2,770 $3,000
Current liabilities .................. 2,397 2,388 2,658
Working capital (deficit) ............ 531 382 342
</TABLE>
As noted in Note 1 to the consolidated financial statements, 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 September 27,
1997 for further discussion of the Company's bankruptcy proceedings. See Note 2
to the consolidated financial statements of the Annual Report on Form 10-KSB for
the year ended September 27, 1997 for the current payment schedule of bankruptcy
damages.
Other Legal Matters
In addition to the above, see "Litigation" on page 13 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 27, 1997 for a discussion of other legal proceedings
resolved in prior years.
<PAGE>
Results of Operation
<TABLE>
<CAPTION>
REVENUES:
December 28, December 27,
1996 1997
------------------- -----------------
Amount Percent Amount Percent
------ ------- ------ -------
<S> <C> <C> <C> <C>
Restaurant food sales ............ $2,303 47.9 $2,395 46.7
Restaurant bar sales ............. 731 15.2 735 14.3
Package goods sales .............. 1,773 36.9 1,990 39.0
Total sales ...................... 4,807 100.0 5,120 100.0
Franchise related revenues ....... 132 159
Owner's fee ...................... 37 37
Joint venture income ............. 45 66
Other operating income ........... 33 58
------ ------
5,052 5,440
</TABLE>
Restaurant food sales represented 47.9% of total sales in the first
quarter of fiscal 1997 as compared to 46.7% in the first quarter of fiscal 1998.
The weekly average of same store restaurant food sales was $172,420 in 1997 and
$179,076 in 1998, an increase of 3.8%.
The same store weekly average for restaurant bar sales remained almost
level at $56,228 for the first quarter of fiscal 1997 compared to $56,497 for
the first quarter of fiscal year 1998. The Company's emphasis during the past
few years has been toward increasing its restaurant food sales, which caters to
a family oriented business.
Package goods sales have reversed the decline of prior years going from
a weekly average of same store sales of $136,153 for the first quarter of fiscal
1997 to $137,558 for the first quarter of fiscal 1998. 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 went from 62.7%
to 62.2% for the first quarter of fiscal years 1997 and 1998 respectively, a
decrease of .5%. This decrease in gross profit is a result of price increases
for ribs that were not passed on to the consumer.
The gross profit margin for package goods sales during the first
quarter of fiscal year 1997 was 23.5% compared to 25.2% for the first quarter of
fiscal year 1998. The increase reflects the higher percentage of wine sales to
the total package sales. Wine sells at a higher percentage of profit.
Overall gross profits were 48.2% in the first quarter of fiscal year
1997 compared to 47.8% for the first quarter of fiscal year 1998. The decrease
is a result of the increased ratio of package sales to total sales.
<PAGE>
Operating Costs and Expenses
Operating costs and expenses for the first quarter of fiscal year 1997
were $4,964,000 compared to $5,245,000 for the same quarter in fiscal year 1998.
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 $1,375,000 and $1,440,000 for the first quarter of fiscal years
1997 and 1998 respectively. The increase of $65,000 resulted from an increase in
package payroll and commissions related to the increase in package sales, with
some slight increase in restaurant payroll.
Occupancy costs, which include rent, common area maintenance, repairs
and taxes were $227,000 and $243,000 for the first quarter of fiscal years 1997
and 1998 respectively, with the increase accounted for primarily by an increase
in property taxes.
Selling, general and administrative expenses were $876,000 for the
first quarter of fiscal year 1997 and $888,000 for the first quarter of fiscal
year 1998. Management has focused on controlling expenses and appears to be
accomplishing its goal despite rising costs.
Other Income and Expense
In the first quarter of fiscal year 1997, the Company received $150,000
for its right to manage a franchise location. Refer to the discussion of this
transaction on page 11, paragraph 4, for further information.
During the current quarter the Company received $110,000 in the
settlement of litigation. This transaction is further discussed on page 11,
paragraph 2.
Interest expense on long term debt and Chapter 11 damages payable
increased from $17,000 in the first quarter of fiscal year 1997 to $34,000 in
the first quarter of fiscal year 1998. The increase is attributable to the
increased borrowing of long term debt.
Other net was $9,000 for the first quarter of fiscal year 1997. Other
net for the first quarter of fiscal year 1998 is $6,000.
Trends
During the next twelve months management expects to maintain its level
of sales and anticipates that expenses will remain constant.
<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.
Date 2/10/1998 /s/Joseph G. Flanigan
---------------------
JOSEPH G. FLANIGAN,
Chief Executive Officer
Date 2/10/1998 /s/Mary C. Reymann
------------------
MARY C. REYMANN,
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-28-1997
<PERIOD-END> DEC-27-1997
<CASH> 1,008,000
<SECURITIES> 0
<RECEIVABLES> 398,000
<ALLOWANCES> (124,000)
<INVENTORY> 1,435,000
<CURRENT-ASSETS> 2,775,000
<PP&E> 10,701,000
<DEPRECIATION> (7,002,000)
<TOTAL-ASSETS> 8,288,000
<CURRENT-LIABILITIES> 2,388,000
<BONDS> 2,462,000
0
0
<COMMON> 0
<OTHER-SE> 3,921,000
<TOTAL-LIABILITY-AND-EQUITY> 8,288,000
<SALES> 5,120,000
<TOTAL-REVENUES> 5,440,000
<CGS> 2,672,000
<TOTAL-COSTS> 2,571,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 45,000
<INCOME-PRETAX> 0
<INCOME-TAX> 0
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<DISCONTINUED> 0
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<NET-INCOME> 282,000
<EPS-PRIMARY> .31
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