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 January 2, 1999
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.
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(Exact name of registrant as specified in its charter)
Florida 59-0877638
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(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
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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 930,000
<PAGE>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
INDEX TO FORM 10-QSB
January 2, 1999
PART I. FINANCIAL INFORMATION
1. UNAUDITED CONDENSED FINANCIAL STATEMENTS
Consolidated Summary of Earnings -- For the Thirteen Weeks
ended December 27, 1997 and January 2, 1999
Consolidated Balance Sheets -- as of October 3, 1998 and
January 2, 1999
Consolidated Statements of Cash Flows for the Thirteen Weeks
Ended December 27, 1997 and January 2, 1999
Notes to Consolidated Financial Statements
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OFOPERATIONS
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 27, 1997 and JANUARY 2, 1999
(In Thousands Except Per Share Data)
DECEMBER 27, JANUARY 2,
1997 1999
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<S> <C> <C>
REVENUES:
Restaurant food sales $ 2,395 $ 2,566
Restaurant bar sales 735 668
Package goods sales 1,990 1,921
Franchise - related revenues 159 202
Owner's fee 37 37
Joint venture income 66 94
Other operating income 58 26
------- -------
5,440 5,514
------- -------
COSTS AND EXPENSES:
Cost of merchandise sold
restaurant and lounges 1,184 1,193
Cost of merchandise sold
package goods 1,488 1,448
Payroll and related costs 1,440 1,437
Occupancy costs 243 249
Selling, general and
administrative expenses 888 848
------- -------
5,243 5,175
------- -------
Income from operations 197 339
------- -------
OTHER INCOME (EXPENSE):
Interest expense on obligations
under capital leases (11) (11)
Interest expense on long-term
debt and damages payable (34) (36)
Abandoned fixed assets -- --
Interest income 13 13
Settlement of litigation 110 --
Recovery on judgment -- 50
Recognition of deferred gains 1 1
Other, net 6 (2)
------- -------
85 15
------- -------
Income before income taxes 282 354
</TABLE>
(continued)
<PAGE>
<TABLE>
<CAPTION>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THIRTEEN WEEKS ENDED
DECEMBER 27, 1997 AND JANUARY 2, 1999
(In Thousands Except Per Share Data)
(continued)
DECEMBER 27, JANUARY 2,
1997 1999
---- ----
<S> <C> <C>
PROVISION FOR INCOME TAXES: $-- $ 8
---- ----
Net income $282 $346
==== ====
</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 27,1997 January 2, 1999
Income Shares Income Shares
Numerator Denom. EPS Numerator Denom. EPS
--------- ------ --- --------- ------ ---
<S> <C> <C> <C> <C> <C> <C>
BASIC EPS 282,464 907,218 0.31 346,129 930,000 0.37
--------- --------- ---- ------- --------- ------
Effect/dilutive
Stock Options -- 97,568 -- 82,164
--------- --------- ---- ------- --------- ------
DILUTED EPS 282,464 1,004,786 0.28 346,129 1,012,164 0.34
--------- --------- ---- ------- --------- ------
</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
OCTOBER 3, 1998 AND JANUARY 2, 1999
ASSETS
OCTOBER 3, JANUARY 2,
1998 1999
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<S> <C> <C>
CURRENT ASSETS:
Cash and equivalents $1,468,000 $1,313,000
Receivables, less allowance for
uncollectible amounts and deferred gains,
including related party receivables
of $25,000 and $26,000 (before allowances
and deferred gains) in 1998 and 1999
respectively 320,000 349,000
Inventories, at lower of cost (first-
in, first out) or market 1,237,000 1,417,000
Prepaid expenses 431,000 476,000
---------- ----------
Total current assets 3,456,000 3,555,000
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PROPERTY AND EQUIPMENT, net 3,717,000 3,789,000
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LEASED PROPERTY UNDER CAPITAL LEASES,
less accumulated amortization of
$720,000 and $752,000 in 1998
and 1999 respectively 129,000 121,000
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OTHER ASSETS:
Liquor licenses, less accumulated
amortization of $98,000 and $100,000
in 1998 and 1999 respectively 384,000 382,000
Notes and mortgages receivable, less
allowance for uncollectible amounts and
deferred gains, and including related
party receivables of $173,000 and $160,000
(before allowances and deferred gains)
in 1998 and 1999 respectively 161,000 150,000
Investment in joint venture 937,000 985,000
Other 259,000 308,000
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Total other assets 1,741,000 1,825,000
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TOTAL ASSETS $9,043,000 $9,290,000
========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
OCTOBER 3, 1998 AND JANUARY 2, 1999
LIABILITIES AND STOCKHOLDER'S INVESTMENT (DEFICIT)
(continued)
OCTOBER 3, JANUARY 2,
1998 1999
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<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 850,000 $ 792,000
Accrued and other current liabilities 752,000 828,000
Current portion of long-term debt 241,000 245,000
Current obligations under capital
leases 101,000 103,000
Current portion of damages payable on
terminated or rejected leases
and other bankruptcy liabilities 268,000 271,000
Due to Pennsylvania
limited partnership 30,000 7,000
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Total current liabilities 2,242,000 2,246,000
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LONG TERM DEBT, net of current
portion 793,000 777,000
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OBLIGATIONS UNDER CAPITAL LEASES,
net of current portion 218,000 199,000
---------- ----------
DAMAGES PAYABLE ON TERMINATED OR
REJECTED LEASES AND OTHER
BANKRUPTCY LIABILITIES,
net of current portion 685,000 617,000
---------- ----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
OCTOBER 3, 1998 AND JANUARY 2, 1999
LIABILITIES AND STOCKHOLDER'S INVESTMENT (DEFICIT)
(continued)
OCTOBER 3, JANUARY 2,
1998 1999
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<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 6,395,000 6,395,000
Retained earnings 3,234,000 3,580,000
Less - Treasury stock, at cost,
1,192,000 shares in 1997 and
1,170,000 in 1998 (4,734,000) (4,734,000)
----------- -----------
Total stockholders' investment 5,105,000 5,451,000
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT $ 9,043,000 $ 9,290,000
=========== ===========
</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 27, 1997 AND JANUARY 2, 1999
(In Thousands)
DECEMBER 27, JANUARY 2,
1997 1999
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 282 $ 346
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization
of property, equipment and
capital leases 155 153
Amortization of liquor licenses 3 2
Recognition of deferred gains
and other deferred income (1) (1)
Recognition of recovery of judgment -- (50)
Changes in assets and liabilities:
(Increase) in receivables (40) (29)
(Increase) in inventories (182) (180)
Decrease (increase) in prepaid expenses 121 (45)
Increase (decrease) in accounts payable 384 (58)
(Decrease) increase in accrued liabilities (680) 76
----- -----
Net cash provided by operations 42 214
----- -----
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THIRTEEN WEEKS ENDED
DECEMBER 27, 1997 AND JANUARY 2, 1999
(In Thousands)
DECEMBER 27, JANUARY 2,
1997 1999
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<S> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Collections on notes and
mortgages receivable $ 15 $ 11
Additional investments
in joint ventures -- (48)
Additions to property and equipment (303) (278)
Change in due to Pennsylvania
limited partnership (44) (23)
------- -------
Net cash used in
investing activities (332) (338)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of long-term debt (19) (12)
Payments of obligations under
capital leases (17) (19)
------- -------
Net cash provided by (used in)
financing activities (36) (31)
------- -------
NET INCREASE IN CASH AND EQUIVALENTS (326) (155)
CASH AND EQUIVALENTS, BEGINNING OF YEAR 1,334 1,468
------- -------
CASH AND EQUIVALENTS, END OF QUARTER $ 1,008 $ 1,313
======= =======
</TABLE>
<PAGE>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 2, 1999
(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
3, 1998 has been prepared from the books and records without audit. Financial
information as of October 3, 1998 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 3, 1998.
(3) Reclassification
Certain amounts in the fiscal 1998 financial statements have been
reclassified to conform to the fiscal 1999 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
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.
<PAGE>
As of the end of fiscal year 1998, all existing franchisees who operate
restaurants under the "Flanigan's Seafood Bar and Grill" or other authorized
service marks have 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 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.
(5) Investment in Joint Ventures
During the first quarter of fiscal year 1996, the Company 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. The limited partnership agreement gives the limited
partnership the right to use the "Flanigan's Seafood Bar and Grill" servicemark
while the Company acts as general partner only.
During the third quarter of fiscal year 1997, a related party formed a
limited partnership to own a certain franchise in Fort Lauderdale, Florida,
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.
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-two 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.
This restaurant opened in the second quarter of fiscal year 1998.
In order to ensure that the Company had adequate cash reserves in view
of its investment in the restaurant discussed above, and for other improvements,
during the second quarter of fiscal year 1997, the Board of Directors authorized
the Company to borrow up to $1,200,000 at an interest rate of twelve (12%)
percent per annum and fully amortized over five (5) years. During the fourth
quarter of fiscal year 1997, the Company borrowed $375,000 from private
investors, in units of $5,000, which loan is fully secured with specific
receivables owned by the Company. During the first quarter of fiscal year 1998,
the Company closed on its loan from Barnett Bank in the amount of $500,000, with
interest at prime rate. Equal quarterly principal payments began March, 31, 1998
and will continue quarterly for three (3) years. Interest is payable monthly on
the outstanding principal balance. The loan is also fully secured with liquor
licenses owned by the Company.
<PAGE>
During the third quarter of fiscal year 1998, the Company entered into
a lease agreement for a restaurant in Kendall, Florida and a separate agreement
for the purchase of the furniture, fixtures and equipment of the existing
restaurant. The lease agreement and separate agreement were each contingent upon
the Company applying for and receiving zoning variances from Miami Dade County,
Florida. During the first quarter of fiscal year 1999, the Company submitted its
application for zoning variances to Miami Dade County, Florida, which zoning
variances were unanimously granted at a hearing on November 18, 1998. Upon the
expiration of the appeal period on December 28, 1998, the granting of the zoning
variances became final. At the same time, the Company raised funds through a
private offering for a limited partnership to be formed, to own and renovate the
restaurant for operation of the same under the "Flanigan's Seafood Bar and
Grill" servicemark. Subsequent to the end of the first quarter of fiscal year
1999, the limited partnership was formed. The Company acts as general partner of
the limited partnership and is 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 the gross sales from the operation of the restaurant,
while the Company acts as general partner only. It is anticipated that the
restaurant will be renovated and open for business by June 1, 1999.
(6) 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.
(7) COMMITMENTS AND CONTINGENCIES:
Guarantees
The Company is contingently liable for annual rentals in the amount of
approximately $450,000 at January 2, 1999, 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 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.
<PAGE>
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 during the first quarter of fiscal year
1997, 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, 1999. 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, which was ratified by the stockholders at the Company's 1997 Annual
Meeting. For fiscal year 1997, a bonus of $78,000 was earned under the amended
Employment Agreement and for fiscal year 1998, a bonus of $116,000 was earned
under the amended Employment Agreement. For fiscal year 1998, the Chairman
refused $30,000 of his bonus earned under the amended Employee Agreement to
offset salaries paid to other executives of the Company. 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. At the
Company's 1994 Annual Meeting, the stockholders approved this plan.
During fiscal year 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. 22,900 options were exercised during fiscal
year 1998. No options were exercised through the first quarter of fiscal year
1999.
Key Employee Incentive Stock Option Plan for Store Level Management
On December 10, 1998, the Board of Directors approved a Key Employee
Incentive Stock Option Plan for Store Level Management, which reserved and
authorized the issuance of 100,000 shares of the Company's common stock to
eligible employees. For purposes of this plan, eligible employees include store
managers and assistant managers (both restaurants and package liquor stores) and
kitchen managers (restaurants). The stockholders will vote to approve and ratify
this plan at the Company's 1999 Annual Meeting.
<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 October 3,
1998.
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 10 in the Company's Annual Report on Form
10-KSB for the fiscal year ended October 3, 1998.
Item 8. Managements Discussion and Analysis of Financial Condition and
Results of Operations.
The Company owns and/or operates restaurants with lounges, package
liquor stores and an entertainment oriented club (collectively the "units"). At
January 2, 1999, 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>
Dec. 27, Oct. 3, Jan. 2, NOTE
TYPES OF UNITS 1997 1998 1999 NUMBER
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Combination package and restaurant 4 4 4
Restaurant only 5 5 6 (1)(4)(5)(6)
Package store only 4 3 3 (2)(3)(7)
Clubs 1 1 1
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL - Company operated units 14 13 14 (6)(7)
FRANCHISED - units 7 7 7 (5)
</TABLE>
Notes:
(1) 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 and forty-two percent owner of the partnership. The restaurant
opened in the second quarter of fiscal year 1998.
<PAGE>
(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 and continues to
operate the package liquor store.
(3) During fiscal year 1996, one franchisee exercised the thirty day
cancellation clause under the 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. The Company
profitably operated the package liquor store of the franchised unit but did not
reopen the lounge. The lease agreement for the business premises expired on
December 31, 1995 and the Company occupied the same on an oral month to month
lease agreement, paying its prorata share of the real property taxes monthly and
insuring the property until April 1998 when the oral month to month lease
agreement was terminated and the package liquor store was closed.
(4) During the third quarter of fiscal year 1998, the Company closed a
restaurant in North Miami, Florida. During the first quarter of fiscal year 1999
the location was sub-leased to an unaffiliated third party who is operating the
location as a lounge, not affiliated with or under the "Flanigan's Seafood Bar
and Grill" servicemark.
(5) During the first quarter of fiscal year 1999, the Company purchased
the Management Agreement of a franchisee, which includes the right to manage the
franchised restaurant, effective December 1, 1998. The franchise includes a
package liquor store, which is still operated exclusively by the franchisee.
(6) During the third quarter of fiscal year 1998, the Company entered
into a lease agreement for a restaurant in Kendall, Florida, and a separate
agreement for the purchase of the furniture, fixtures and equipment of the
existing restaurant. During the first quarter of fiscal year 1999, the zoning
variances required from Miami-Dade County, Florida were unanimously granted and
became final with the expiration of the applicable appeal period. Subsequent to
the end of the first quarter of fiscal year 1999, the Company formed a limited
partnership, through which it raised funds through a private offering to
renovate the restaurant for operation under the "Flanigan's Seafood Bar and
Grill" servicemark. The Company acts as general partner and forty percent owner
of the partnership. It is anticipated that the renovated restaurant will be open
for business during the third quarter of fiscal year 1999. This unit is not yet
included in the table.
(7) Subsequent to the end of the first quarter of fiscal year 1999, the
Company entered into a lease agreement for a new package liquor store in Fort
Lauderdale, Florida. It is anticipated that the package liquor store will be
open for business during the second quarter of fiscal year 1999. This unit is
not yet included in the table.
<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 1998 and 1999.
<TABLE>
<CAPTION>
Three months ended
----------------------------
Dec. 27, Jan. 2,
1997 1999
------- --------
(in thousands)
<S> <C> <C>
Net cash provided by
operating activities $ 42 $ 214
Net cash used in
investing activities (332) (338)
Net cash used in
financing activities (36) (31)
------- -------
Net increase (decrease) in
cash and cash equivalents (326) (155)
Cash and cash equivalents:
Beginning of year 1,334 1,468
------- -------
End of period $ 1,008 $ 1,313
======= =======
</TABLE>
Improvements
The Company had additions to fixed assets of $278,000 during the
quarter ended January 2, 1999 compared to $303,000 for the same quarter last
year and $808,000 for the fiscal year ended October 3, 1998. The capital
expenditures were for upgrading existing units serving food, improvements to
package liquor stores and upgrading the corporate computer system.
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 1998.
The budget for fiscal 1999 includes $255,000 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 27, 1997 and January 2, 1999 and
for the fiscal year ended October 3, 1998.
December January October
Item 27, 1997 2, 1999 3, 1998
- --------------------- -------- -------- -------
(in thousands)
Current assets $2,770 $3,555 $3,456
Current liabilities 2,388 2,246 2,242
Working capital 382 1,309 1,214
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.
Dividend
During the first quarter of fiscal year 1999, the Board of Directors
declared a dividend of 20 cents per share to stockholders of record on January
4, 1999, which dividend was paid on February 1, 1999.
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 3, 1998
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 October 3, 1998 for the current payment schedule of bankruptcy
damages.
Other Legal Matters
During fiscal year 1996, the Company was forced to continue its lawsuit
against the assignee of a store sold in 1990 when the assignee failed to
amicably return the package liquor store in order to regain possession of the
<PAGE>
business premises, including furniture, fixtures, equipment and liquor
license and for damages for unpaid real property taxes, rent and damages to the
business premises. During the first quarter of fiscal year 1997, the parties
entered into a Stipulation whereby the Court entered an Agreed Summary Final
Judgment for Eviction, Damages and Foreclosure of Security Agreement, ("Summary
Final Judgment") through which the furniture, fixtures, equipment and liquor
license at this location were sold at foreclosure sale to the Company and
through which the Company also received an award of damages. During the first
quarter of fiscal year 1999, the Company settled the damages awarded in its
favor in the Summary Final Judgment upon its receipt of a cash payment of
$15,000 and the assignment of a liquor license, with a fair market value of
$35,000.
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 October 3, 1998 for a discussion of other legal proceedings
resolved in prior years.
Results of Operation
<TABLE>
<CAPTION>
REVENUES:
December 27, January 2,
1997 1999
Amount Percent Amount Percent
------ ------- ------ -------
<S> <C> <C> <C> <C>
Restaurant food sales $ 2,395 46.7 $ 2,566 49.8
Restaurant bar sales 735 14.3 668 13.0
Package goods sales 1,990 39.0 1,921 37.2
------ ----- ------- -----
Total sales 5,120 100.0 5,155 100.0
Franchise related revenues 159 202
Owner's fee 37 37
Joint venture income 66 94
Other operating income 58 26
----- -----
5,440 5,514
</TABLE>
Restaurant food sales represented 46.7% of total sales in the first
quarter of fiscal year 1998 as compared to 49.8% in the first quarter of fiscal
year 1999. The weekly average of same store restaurant food sales was $173,867
in fiscal year 1998 and $197,420 in fiscal year 1999, an increase of 13.6%.
The same store weekly average for restaurant bar sales had a small
increase from $50,804 for the first quarter of fiscal year 1998 to $51,360 for
the first quarter of fiscal year 1999, an increase of 1.1%. The Company's
emphasis during the past few years has been towards increasing its restaurant
food sales, which caters to a family oriented business. This accounts for the
minimal change in the weekly average of same store restaurant bar sales.
<PAGE>
Package goods sales have reversed the decline of prior years going from
a weekly average of same store sales of $119,941 for the first quarter of fiscal
year 1998 to $147,743 for the first quarter of fiscal year 1999, an increase of
23.2%. The large increase in weekly package goods sales is mainly attributed to
the fact that in fiscal year 1999 the New Years holiday fell in the first
quarter, while in fiscal year 1998 the holiday fell in the second quarter.
The gross profit margin for restaurant sales were 62.2% and 63.1% for
the first quarter of fiscal years 1998 and 1999 respectively. The increase is
due to a lower cost of ribs as well as a change in menu mix, emphasizing the
promotion of lower cost menu items.
The gross profit margin for package goods sales during the first
quarter of fiscal year 1998 was 25.2% compared to 25.2% for the first quarter of
fiscal year 1999.
Overall gross profits were 47.8% for the first quarter of fiscal year
1998 compared to 48.8% for the first quarter of fiscal year 1999. The increase
is due to a combination of lower food cost and a lower percentage of package
goods sales as compared to total sales.
Operating Costs and Expenses
Operating costs and expenses for the first quarter of fiscal year 1998
were $5,243,000 compared to $5,175,000 for the same quarter in fiscal year 1999.
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 $1,440,000 and $1,437,000 for the first quarter of fiscal years
1998 and 1999 respectively. The decrease is attributed to the closing of one
restaurant and one package goods store during the third quarter of fiscal year
1998. Without the closing of one restaurant and one package goods store during
the third quarter of fiscal year 1998, the payroll costs actually increased due
to raises given to certain restaurant employees.
Occupancy costs, which include rent, common area maintenance, repairs
and taxes were $243,000 and $249,000 for the first quarter of fiscal years 1998
and 1999 respectively. The increase is accounted for primarily by an increase in
real property taxes.
Selling, general and administrative expenses were $888,000 for the
first quarter of fiscal year 1998 and $848,000 for the first quarter of fiscal
year 1999. Management has focused on controlling expenses and has been
accomplishing its goal despite rising costs.
Other Income and Expense
During the first quarter of fiscal year 1998, the Company received
$110,000 in the settlement of litigation. This transaction is discussed further
on page 11, paragraph 2.
During the first quarter of fiscal year 1999, the Company received
$50,000, in cash and its equivalent, from the settlement of a judgment. This
transaction is discussed further in "Other Legal Matters" on page 16 of this
report.
<PAGE>
Interest expense on long term debt and Chapter 11 damages payable
increased from $34,000 in the first quarter of fiscal year 1998 to $36,000 in
the first quarter of fiscal year 1999. The increase is attributed to the
increased borrowing of long term debt.
Other net was $6,000 for the first quarter of fiscal year 1998, as
compared to ($2,000) for the first quarter of fiscal year 1999.
Trends
During the next twelve months management expects continued increases in
restaurant and package goods sales and income from investments in joint ventures
and anticipates that expenses will remain constant.
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 2/12/1999
/s/Edward A. Doxey
------------------
EDWARD A. DOXEY, Chief Financial Officer
Date 2/12/1999
