UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-QSB
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the period ended July 1, 2000
--------------------------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE OF 1934
For the transition period from to
-----------------------------------
Commission File Number I-6836
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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
---------------
N/A
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(Former name, address and fiscal year, if changed from 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 the 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 1,856,478
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<PAGE>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
---------------------------------------------
INDEX TO FORM 10-QSB
--------------------
JULY 1, 2000
------------
PART I. FINANCIAL INFORMATION
---------------------
1. UNAUDITED CONDENSED FINANCIAL STATEMENTS
Consolidated Summary of Earnings -- For the Thirteen Weeks
and Thirty Nine Weeks ended July 1, 2000 and July 3, 1999
Consolidated Balance Sheets -- As of July 1, 2000 and
October 2, 1999
Consolidated Statements of Cash Flows for the Thirteen Weeks and Thirty
Nine Weeks ended July 1, 2000 and July 3, 1999.
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
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<PAGE>
FLANIGAN'S ENTERPRISES, INC.
----------------------------
UNAUDITED CONSOLIDATED SUMMARY OF EARNINGS
------------------------------------------
(In Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
Thirteen Weeks Thirty Nine Weeks
Ended Ended
Jul. 1 Jul. 3 Jul. 1 Jul. 3
2000 1999 2000 1999
------ ------ ------ ------
REVENUES:
<S> <C> <C> <C> <C>
Restaurant food sales $ 2,916 $ 2,683 $ 8,630 $ 8,166
Restaurant bar sales 700 673 2,162 2,058
Package good sales 2,028 1,680 6,952 5,413
Franchise related revenues 257 225 689 642
Owners fee 75 62 180 137
Joint venture income 159 160 450 336
Other operating income 21 12 74 65
----- ----- ----- -----
6,156 5,495 19,137 16,817
----- ----- ----- -----
COSTS AND EXPENSES:
Cost of merchandise sold
restaurant and bar 1,349 1,217 3,869 3,703
Cost of merchandise sold
package goods 1,498 1,218 5,154 3,945
Payroll and related costs 1,751 1,445 5,093 4,382
Occupancy costs 258 221 784 742
Selling, general and
administrative expenses 946 859 2,644 2,403
----- ----- ----- -----
5,802 4,960 17,544 15,175
----- ----- ----- -----
Income from operations 354 535 1,593 1,642
----- ----- ----- -----
OTHER INCOME (EXPENSE):
Interest expense on obligations
under capital leases (11) (11) (34) (34)
Interest expense on long term
debt and damages payable (42) (27) (93) (93)
Abandoned fixed assets (1) - (1) (39)
Interest income 14 13 44 34
Recovery on judgement - - - 50
Recognition of deferred gains 1 - 3 2
Y2K Costs - (107) - (107)
Other, net 22 33 52 56
----- ----- ----- -----
(17) (99) (29) (131)
----- ----- ----- -----
Income before taxes 337 436 1,564 1,511
</TABLE>
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<PAGE>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
---------------------------------------------
UNAUDITED CONSOLIDATED SUMMARY OF EARNINGS
------------------------------------------
(In Thousands Except Per Share Amounts)
(Continued)
<TABLE>
<CAPTION>
Thirteen Weeks Thirty Nine Weeks
Ended Ended
Jul. 1 Jul. 3 Jul. 1 Jul.3
2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
PROVISION FOR INCOME TAXES $ 64 $ 16 $ 341 $ 24
----- ----- ----- -----
Net Income $ 273 $ 420 $ 1,223 $ 1,487
===== ===== ===== =====
</TABLE>
Statement of Financial Accounting Standards ("SFAS") No., 128, Earnings Per
Share establishes standards for computing and presenting earnings per share
("EPS"). This statement requires the presentation of 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. All computations reflect the 2 for 1 stock split paid
April 1, 1999 to shareholders of record on March 17, 1999.
For The Thirteen Weeks Ended
July 1, 2000 July 3, 1999
Numerator Denominator EPS Numerator Denominator EPS
-----------------------------------------------------------------
Basic EPS 273,000 1,856,478 $.15 420,000 1,975,831 $ .21
Effective/dilutive
Stock Options 71,768 115,956
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Diluted EPS 273,000 1,928,246 $.14 420,000 2,091,787 $ .20
------------------------------------------------------------------------------
For The Thirteen Weeks Ended
July 1, 2000 July 3, 1999
Numerator Denominator EPS Numerator Denominator EPS
-----------------------------------------------------------------
Basic EPS 1,223,000 1,856,478 $ .66 1,487,000 1,975,831 $ .75
Effective/dilutive
Stock Options 80,870 121,199
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Diluted EPS 1,223,000 1,937,348 $ .63 1,487,000 2,097,030 $ .71
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The accompanying notes to consolidated financial statements are an integral part
of these statements.
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<PAGE>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
---------------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
JULY 1, 2000 (UNAUDITED) and OCTOBER 2, 1999
----------------------------------------------
ASSETS
------
<TABLE>
<CAPTION>
JULY 1 OCTOBER 2
2000 1999
------- ---------
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 138,000 $ 1,752,000
Due from franchisees 885,000 -
Notes and mortgages receivable,
current maturities, net 244,000 212,000
Inventories 1,545,000 1,428,000
Prepaid expenses 380,000 402,000
Deferred tax asset 305,000 281,000
--------- ---------
Total Current Assets 3,497,000 4,075,000
--------- ---------
Property and Equipment 5,563,000 4,004,000
--------- ---------
Leased Property Under Capital
Leases, net 69,000 93,000
--------- --------
Other Assets:
Liquor licenses, net 269,000 303,000
Notes and mortgages receivable, net 238,000 171,000
Investments in joint ventures 1,558,000 1,471,000
Deferred tax asset 349,000 349,000
Other 445,000 306,000
--------- ---------
Total Other Assets 2,859,000 2,600,000
--------- ---------
Total Assets $ 11,988,000 $ 10,772,000
========== ==========
</TABLE>
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<PAGE>
FLANIGAN'S ENTERPRISES, INC, AND SUBSIDIARIES
---------------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
JULY 1, 2000 (UNAUDITED) AND OCTOBER 2, 1999
--------------------------------------------
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
<TABLE>
<CAPTION>
JULY 1 OCTOBER 2
2000 1999
------- ----------
Current Liabilities:
<S> <C> <C>
Accounts payable and accrued expenses $ 1,545,000 $ 1,594,000
Due franchisees 692,000 699,000
Current portion of long term debt 192,000 84,000
Current obligations under capital leases 41,000 38,000
Current portion of damages payable on
terminated or rejected leases 356,000 278,000
--------- ---------
Total Current Liabilities 2,826,000 2,693,000
--------- ---------
Long Term Debt, Net of Current
Maturities 1,278,000 500,000
--------- ---------
Obligations Under Capital Leases,
Net of Current Portion 150,000 205,000
--------- ---------
Damages Payable On Terminated or Rejected
Leases, Net of Current Portion 191,000 394,000
--------- --------
Stockholder's Equity:
Common stock, 5,000,000 shares
authorized, 4,197,642 shares issued 420,000 420,000
Capital in excess of par value 6,058,000 6,058,000
Retained earnings 6,424,000 5,416,000
Notes received on sale of common stock (170,000) (192,000)
Less: Treasury stock, at cost
2,341,164 shares (5,189,000) (4,722,000)
--------- ---------
Total Stockholder's Equity 7,543,000 6,980,000
--------- ---------
Total Liabilities and
Stockholder's Equity $ 11,988,000 $ 10,772,000
========== ==========
</TABLE>
See notes to consolidated financial statements.
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<PAGE>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
---------------------------------------------
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
----------------------------------------------
FOR THE THIRTY NINE WEEKS ENDED JULY 1, 2000 AND JULY 3, 1999
-------------------------------------------------------------
(In Thousands)
<TABLE>
<CAPTION>
JULY 1 JULY 3
2000 1999
------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 1,223 $ 1,487
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization of
property, equipment and capital
leases 520 456
Deferred income taxes benefit (24) -
Amortization of liquor licenses 4 12
Leasehold improvements written off
closed store - 57
Abandoned fixed assets 1
Recognition of deferred gains and
other deferred income (3) (2)
Changes in assets and liabilities:
Decrease (increase) in due from
franchisees (885) -
Decrease (increase) in receivables (32) 60
(Increase) in inventories (117) (377)
Decrease in prepaid expenses 22 126
Increase (decrease) in accounts
payable and accrued expenses (49) 66
(Decrease) in amounts due franchisees (7) -
Increase in other assets (139) -
----- -----
Net cash provided by operating
activities 514 1,885
----- -----
</TABLE>
(continued)
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<PAGE>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
---------------------------------------------
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
----------------------------------------------
FOR THE THIRTY NINE WEEKS ENDED JULY 1, 2000 AND JULY 3, 1999
-------------------------------------------------------------
(In Thousands)
<TABLE>
<CAPTION>
July 1 July 3
2000 1999
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
<S> <C> <C>
Collections on notes and mortgages
receivable 48 80
Sale of liquor license 30 75
Additions to notes and mortgages
receivable (93) (224)
Additions to property and equipment (2,053) (624)
Distribution to Pennsylvania Ltd Ptr - (13)
Additions to investments in joint
ventures (87) -
----- -----
Net cash used in
investing activities (2,155) (706)
----- -----
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in long term debt 1,000 -
Payments on long term debt (114) (401)
Payments of obligations under capital
leases (52) (61)
Payment on damages payable (125) (201)
Purchase of treasury stock (467) (95)
Exercise of stock option - 60
Payment of cash dividend (215) (186)
----- -----
Net cash provided (used in)
financing activities 27 (884)
----- -----
NET INCREASE (DECREASE) IN CASH AND
EQUIVALENTS (1,614) 295
CASH AND EQUIVALENTS, BEGINNING OF YEAR 1,752 1,468
----- -----
CASH AND EQUIVALENTS, END OF QUARTER $ 138 $ 1,763
===== =====
</TABLE>
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<PAGE>
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
JULY 1, 2000
(1) PETITION IN BANKRUPTCY:
-----------------------
On November 5, 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 years 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 have been paid in full pursuant to the terms of
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 financial
statements.
(2) ADJUSTMENTS:
------------
The financial information presented as of any date other than October 2,
1999 has been prepared from the books and records without audit. Financial
information as of October 2, 1999 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 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 2, 1999.
(3) RECLASSIFICATION:
-----------------
Certain amounts in the fiscal 1999 financial statements have been
reclassified to conform to the fiscal 2000 presentation.
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<PAGE>
(4) FRANCHISE PROGRAM:
------------------
During fiscal year 1995, the Company completed a franchise agreement for a
franchisee to operate a restaurant under the "Flanigan's Seafood Bar and Grill"
servicemark pursuant to a license from the Company. The franchise agreement was
drafted jointly with existing franchisees with all modifications requested by
the franchisees incorporated therein. The 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 franchise is required to execute a 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 franchise agreement provides for a royalty to the
Company in an amount of approximately 3% of gross sales, plus a contribution to
advertising in an amount of 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.
All existing franchisees who operate restaurants under the "Flanigan's
Seafood Bar and Grill" or other authorized service marks have executed franchise
agreements.
(5) INVESTMENT IN JOINT VENTURES:
-----------------------------
Miami, Florida
The Company operates a restaurant in Miami, Florida under the "Flanigan's
Seafood Bar and Grill" servicemark pursuant to a limited partnership agreement.
The Company acts as the general partner and owns a fifty percent limited
partnership interest.
Fort Lauderdale, Florida
The Company has entered into a franchise agreement with a limited
partnership which operates a restaurant in Fort Lauderdale, Florida. The Company
owns a twenty five percent limited partnership interest in the franchise. Other
related parties, including, but not limited to, officers and directors of the
Company and their families are also investors.
Surfside, Florida
The Company operates a restaurant in Surfside, Florida under the "Flanigan's
Seafood Bar and Grill" servicemark, pursuant to a limited partnership agreement.
The Company acts as general partner and also owns a forty two percent interest.
Other related parties, including, but not limited to, officers and directors of
the Company and their families are also investors.
- Page 10 -
<PAGE>
Kendall, Florida
During fiscal year 1998, the Company formed and invested in a limited
partnership to construct and operate a restaurant under the "Flanigan's Seafood
Bar and Grill" servicemark in Kendall, Florida. Construction began in late 1999
and the restaurant opened for business April 9, 2000. The Company acts as
general partner and has a forty percent limited partnership interest. Other
related parties, including, but not limited to officers and directors of the
Company, and their families are also investors.
The Company recognized a loss on the equity method relating to this
partnership of $106,000 in fiscal year 1999, $12,000 during the first quarter of
fiscal year 2000 and $18,000 during the second quarter of fiscal year 2000, due
primarily to the expensing of start-up costs as required by SOP 98-5, "Reporting
on the Costs of Start-up Activities". This restaurant became profitable during
the third quarter of fiscal year 2000, so no loss was recognized relating to
this partnership.
West Miami, Florida
During the third quarter of fiscal year 2000, the Company, as agent for a
limited partnership to be formed, entered into a contract to purchase an
existing restaurant location in West Miami, Florida to renovate and operate a
restaurant under the "Flanigan's Seafood Bar and Grill" servicemark. The Company
will raise the funds necessary for this joint venture through a private offering
by the limited partnership. The Company will act as general partner and own up
to forty percent of the limited partnership. The contract is contingent upon the
Company applying for and receiving the necessary zoning approvals and variances
for the contemplated use. The restaurant is expected to open for business during
the third quarter of fiscal year 2001.
(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 and tax credits to the extent that
realization of said tax benefits is more likely than not. The deferred tax asset
was $654,000 as of July 1, 2000 and $630,000 as of October 2, 1999.
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<PAGE>
(7) COMMITMENTS AND CONTINGENCIES:
------------------------------
Guarantees
----------
The Company guarantees various leases for franchisees and locations sold in
prior years. Remaining rental commitments required under these leases are
approximately $1,500,000. In the event of a default under any of these
agreements, the Company will have the right to repossess the premises.
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 upon the Company's cash flow, as defined.
The Employment Agreement is renewable annually and was renewed through
December 31, 2000.
The 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 1999, a bonus of $165,000 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 presently 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 200,000 shares
of the Company's common stock to eligible employees. At the Company's 1994
Annual Meeting, the stockholders approved this plan.
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<PAGE>
During fiscal year 1994, 104,000 stock options were granted at an option
price of $1.75 per share, all of which were exercised prior to their expiration
on April 19, 1999. During fiscal year 1996, an additional 60,000 stock options
were granted at an option price of $1.625 per share (20,000 shares have been
exercised) which will expire on December 21, 2000 and an additional 36,000 stock
options were granted at an option price of $2.19 per share which expire March
21, 2001. Option prices on the date of the grant equaled or exceeded the fair
market value of the Company's common stock; therefore, no related compensation
expense was recorded. 45,800 options were exercised during fiscal year 1998,
62,200 options were exercised during fiscal year 1999 and 16,000 options were
exercised during fiscal year 2000 through the end of the third quarter. All
stock options and option prices stated reflect the 2 for 1 stock split which was
paid April 1, 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 200,000 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 voted to approve and ratify this plan
at the Company's 1999 Annual Meeting. Approximately 89,600 options were granted
as of the first day of the fourth quarter of fiscal year 1999. No options have
been granted during fiscal year 2000. All stock options reflect the 2 for 1
stock split which was paid April 1, 1999.
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.
- Page 13 -
<PAGE>
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 served intoxicating liquors to an already "obviously intoxicated
person", known as "dram shop" claims. Florida has restricted its dram shop
claims by statute, permitting persons injured by an "obviously intoxicated
person" to bring a court action only against the business which had served
alcoholic beverages to a minor or to an individual known to be habitually
addicted to alcohol. 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. The Company currently has no dram
shop cases pending. For further discussion see the section headed Legal
Proceedings on page 14 of the Company's Annual Report on Form 10- KSB for the
fiscal year ended October 2, 1999.
The Company accrues for potential uninsured losses based upon estimates
received from legal counsel and its historical experience, when uninsured claims
are pending. Such accrual is included in the "Accrued expenses". See Note 5 in
the Company's Annual Report on Form 10-KSB for the fiscal year ended October 2,
1999.
(8) MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
--------------------------------------------------------------
RESULTS OF OPERATIONS:
----------------------
The Company owns and/or operates full service restaurants, package liquor
stores and an entertainment oriented club (collectively the "units"). As of July
1, 2000, the Company was operating 15 units. The Company 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.
Jul. 1 Oct. 2 Jul. 3 Note
2000 1999 1999 Numbers
------ ------ ------ -------
Combination package
and restaurant 4 4 4
Restaurant only 6 5 5 (1)(2)(3)(4)
Package store only 4 4 4 (5)(6)
Clubs 1 1 1
------ ------ -------
Total Company operated
units 15 14 14
Franchised units 7 7 7 (3)
Notes:
------
(1) During the third quarter of fiscal year 1999, the lease for a restaurant
operated by the Company in Fort Lauderdale, Florida expired and the Company
elected not to renew the same. The furniture, fixture, equipment and liquor
license used by the Company at this restaurant were sold to an unrelated third
party.
- Page 14 -
<PAGE>
(2) During the third quarter of fiscal year 1998 the Company formed a limited
partnership and raised funds through a private offering to purchase a restaurant
in Kendall, Florida and renovate the same for operation under the "Flanigan's
Seafood Bar and Grill" servicemark. The Company acts as general partner and
forty percent owner of the partnership. The restaurant opened for business on
April 9, 2000 and is included in the table.
(3) During the first quarter of fiscal year 1999, the Company purchased the
Management Agreement of a franchise, 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. The
Company retains its interest in the franchise and continues to receive the same
royalties and rent as it received prior to its purchase of the Management
Agreement.
(4) During the third quarter of fiscal year 2000, the Company, as agent for a
limited partnership to be formed, entered into a contract to purchase an
existing restaurant location in West Miami, Florida to renovate and operate a
restaurant under the "Flanigan's Seafood Bar and Grill" servicemark. The Company
will act as general partner and own up to forty percent of the limited
partnership. The restaurant is expected to open for business during the third
quarter of fiscal 2001 and is not included in the table.
(5) During the third quarter of fiscal year 1999, the Company opened a package
liquor store in Fort Lauderdale, Florida.
(6) During the third quarter of fiscal year 2000, the Company entered into a
lease agreement to own and operate a package liquor store in Hialeah, Florida.
The lease agreement is contingent upon the Company applying for and receiving
the necessary zoning variances for its contemplated use. The package liquor
store is expected to open for business during the second quarter of fiscal year
2001 and is not included in the table.
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<PAGE>
Liquidity and Capital Resources
-------------------------------
Cash Flows
----------
The following table is a summary of the Company's cash flows for the first
nine months of fiscal years 2000 and 1999.
<TABLE>
<CAPTION>
Thirty Nine Weeks Ended
Jul. 1, Jul. 3,
2000 1999
-----------------------
(In Thousands)
<S> <C> <C>
Net cash provided by operating
activities $ 514 $ 1,885
Net cash used in investing
activities (2,155) (706)
Net cash used in financing
activities 27 (884)
------ -------
Net Increase (Decrease) in Cash
and Cash Equivalents (1,614) 295
Cash and Cash Equivalents, Beginning 1,752 1,468
------ ------
Cash and Cash Equivalents, Ending $ 138 $ 1,763
====== ======
</TABLE>
Capital Expenditures
--------------------
The Company had additions to fixed assets of $2,053,000 during the thirty
nine weeks ended July 1, 2000 as compared to $624,000 for the thirty nine weeks
ended July 3, 1999 and $934,000 for the fiscal year ended October 2, 1999. The
additions for the first thirty nine weeks of fiscal year 2000 include the
acquisition of a two story office building in Fort Lauderdale, Florida for
$850,000 paid in cash. The Company intends to re-locate its corporate
headquarters to this building as well as building a package liquor store on the
ground floor. The balance of $1,203,000 for the thirty nine weeks represented
expenditures for upgrading existing units serving food and improvements to the
package liquor stores.
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 on a refurbishing program which continues through the fiscal year 2000.
The budget for fiscal year 2000, as adjusted, includes $1,300,000 for this
program, excluding the acquisition of the two story office building in Fort
Lauderdale, Florida. The Company believes that improved operations will provide
the cash to continue the refurbishing program.
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<PAGE>
Working Capital
---------------
The table below summarizes the current assets, current liabilities, and
working capital for the fiscal quarters ended July 1, 2000 and July 3, 1999 and
the fiscal year ended October 2, 1999.
Jul. 1, Jul. 3, Oct. 2,
Item 2000 1999 1999
---- ------- ------- -------
(In Thousands)
Current Assets $ 3,497 $ 3,942 $ 4,075
Current Liabilities 2,826 2,139 2,693
Working Capital 671 1,803 1,382
The lower working capital as of the end of the first thirty nine weeks of
fiscal year 2000, (July 1, 2000), reflects the expenditure of $850,000, in cash
to close on the purchase of the two story office building in Fort Lauderdale,
Florida, and an expenditure of $1,203,000 in capital improvements to upgrade the
office building and stores as discussed in the above section entitled "Capital
Expenditures".
In January of fiscal year 2000, the Company borrowed the sum of $1,000,000
from Bank of America, d/b/a Nations Bank. The promissory note earns interest at
prime rate, payable monthly on the outstanding principal balance, with quarterly
payments of principal commencing July 1, 2000 at the rate of $50,000 per quarter
for 8 quarters, and then at the rate of $75,000 per quarter for 8 quarters, at
which time any outstanding principal balance and all accrued interest shall be
due in full. The promissory note is secured by a security interest in all assets
of the Company, including the office building purchased by the Company. The
promissory note may be prepaid at any time, in whole or in part, with any
prepayments applying against the quarterly payment or payments of principal next
due.
The $885,000 due from franchisees represents monies used for capital
expenditures of the franchised units. The Company expects these monies will be
repaid to the Company within the next six months.
- Page 16 -
<PAGE>
Bankruptcy Proceedings
----------------------
As noted in Note 1 of the unaudited 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 the 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 1 and Item 7 of Part I of the Company's Annual Report on Form
10-KSB for the year ended October 2, 1999 for further discussion of the
Company's bankruptcy proceedings. See Note 6 to the Consolidated Financial
Statements of the Annual Report on Form 10-KSB for the year ended October 2,
1999 for the current payment schedule of bankruptcy charges.
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
business premises, including furniture, fixtures, equipment and liquor license
and for damages for unpaid real estate 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
Item 3 and Item 7 to Part 1 of the Annual Report on Form 10-KSB for the fiscal
year ended October 2, 1999 for a discussion of other legal proceedings resolved
in prior years.
- Page 17 -
<PAGE>
Results of Operation
--------------------
<TABLE>
<CAPTION>
Thirteen Weeks Ended
July 1, July 3,
2000 1999
Amount Percent Amount Percent
--------------- ---------------
(In Thousands)
<S> <C> <C> <C> <C>
Restaurant food sales $ 2,916 51.7 $ 2,683 53.3
Restaurant bar sales 700 12.4 673 13.4
Package goods sales 2,028 35.9 1,680 33.3
------------ ------------
Total sales 5,644 100.0 5,036 100.0
Franchise related revenues 257 225
Owners fee 75 62
Joint venture income 159 160
Other operating income 21 12
----- -----
Total Revenue $ 6,156 $ 5,495
===== =====
<CAPTION>
Thirty Nine Six Weeks Ended
July 1, July 3
2000 1999
Amount Percent Amount Percent
--------------- ---------------
(In Thousands)
<S> <C> <C> <C> <C>
Restaurant food sales $ 8,630 48.6 $ 8,166 52.2
Restaurant bar sales 2,162 12.2 2,058 13.2
Package good sales 6,952 39.2 5,413 34.6
------------ ------------
Total sales 17,744 100.0 15,637 100.0
Franchise revenues 689 642
Owners fee 180 137
Joint venture income 450 336
Other operating income 74 65
------ -----
Total revenues $ 19,137 $ 16,817
</TABLE>
Restaurant food sales represented 51.7% and 48.6% of total sales in the
thirteen and thirty nine weeks of fiscal year 2000, respectively as compared to
53.3% and 52.2% of total sales in the thirteen and thirty nine weeks of fiscal
year 1999, respectively. The decrease reflects the operation of one additional
package liquor store during the entire thirty nine week period of fiscal year
2000, as opposed to a portion of the thirty nine week period of fiscal year
1999, only. The weekly average of same store restaurant food sales were $207,085
and $186,046 for the thirty nine weeks ended July 1, 2000 and July 3, 1999
respectively, an increase of 11.3%. The weekly average of same store food sales
were $209,554 and $190,243 for the thirteen weeks ended July 1, 2000 and July 3,
1999 respectively, an increase of 10.2%.
- Page 18 -
<PAGE>
Restaurant bar sales represented 12.4% and 12.2% of total sales in the
thirteen and thirty nine weeks of fiscal year 2000, respectively as compared to
13.4% and 13.2% of total sales in the thirteen and thirty nine weeks of fiscal
year 1999, respectively. The decrease reflects the operation of one additional
package liquor store during the entire thirty nine week period of fiscal year
2000, as opposed to a portion of the thirty nine week period of fiscal year 1999
only. The weekly average of same store restaurant bar sales were $55,424 and
$49,929 for the thirty nine weeks ended July 1, 2000 and July 3, 1999
respectively, an increase of 11.0%. The weekly average of same store bar sales
were $53,801 and $50,902 for the thirteen weeks ended July 1, 2000 and July 3,
1999 respectively, an increase of 5.7%.
Package good sales represented 35.9% and 39.2% of total sales in the thirteen
and thirty nine weeks of fiscal year 2000, respectively, as compared to 33.3%
and 34.6% of total sales in the thirteen and thirty nine weeks of fiscal year
1999, respectively. The increase is attributed to the operation of one
additional package liquor store during the entire thirty nine week period of
fiscal year 2000, as opposed to a portion of the thirty nine week period of
fiscal year 1999, and in general, the increase in same store sales. The weekly
average of same store package good sales were $154,004 and $136,642 for the
thirty nine weeks ended July 1, 2000 and July 3, 1999 respectively, an increase
of 12.7%. The weekly average of same store package good sales were $133,017 and
$122,748 for the thirteen weeks ended July 1, 2000 and July 3, 1999
respectively, an increase of 8.4%.
The gross profit margin for restaurant sales was 62.7% and $63.7% for the
thirteen weeks ended July 1, 2000 and July 3, 1999 respectively. The gross
profit margin for restaurant sales was 64.1% and 63.8% for the thirty nine weeks
ended July 1, 2000 and July 3, 1999 respectively.
The gross profit margin for package good stores was 26.1% and 27.5% for the
thirteen weeks ended July 1, 2000 and July 3, 1999, respectively. The gross
profit margin for package good stores was 26.7% and 27.1% for the thirty nine
weeks ended July, 2000 and July 3, 1999 respectively.
Franchise related revenues were $257,000 and $225,000 for the thirteen weeks
ended July 1, 2000 and July 3, 1999 respectively, an increase of 14.2%.
Franchise related revenues were $689,000 and $642,000 for the thirty nine weeks
ended July 1, 2000 and July 3, 1999, respectively, an increase of 7.3%.
The owners fee was $75,000 and $62,000 for the thirteen weeks ended July 1,
2000 and July 3, 1999 respectively. The owners fee was $180,000 and $137,000 for
the thirty nine weeks ended July 1, 2000 and July 3, 1999 respectively. The
increase is due to the increased volume of sales at the club.
- Page 19 -
<PAGE>
Joint venture income was $159,000 and $160,000 for the thirteen weeks ended
July 1, 2000 and July 3, 1999 respectively. Joint venture income was $450,000
and $336,000 for the thirty nine weeks ended July 1, 2000 and July 3, 1999
respectively, an increase of 33.9%. The increase is due to the joint venture in
Surfside, Florida, having been open for business during the entire thirty nine
week period of fiscal year 2000, as opposed to a portion of the thirty nine week
period of fiscal 1999 only, and in general, increased sales and profitably of
all joint ventures.
Operating Costs and Expenses
----------------------------
Operating costs and expenses were $5,802,000 and $4,960,000 for the thirteen
weeks ended July 1, 2000 and July 3, 1999 respectively, an increase of 17.0%
Operating costs and expenses were $17,544,000 and $15,175,000 for the thirty
nine weeks ended July 1, 2000 and July 3, 1999 respectively, an increase of
15.6%. The increase was due to higher payroll costs.
Payroll and related costs, which includes workers compensation insurance were
$1,751,000 and $1,445,000 for the thirteen weeks ended July 1, 2000 and July 3,
1999 respectively, an increase of 21.2%. Payroll and related costs which
includes workers compensation insurance were $5,093,000 and $4,382,000 for the
thirty nine weeks ended July 1, 2000 and July 3, 1999 respectively, an increase
of 16.2% The increase is the result of selective salary increases to restaurant
managers and cooks, which the Company felt was necessary to remain competitive,
plus a bonus of one week's pay to all non-tipped employees and an extraordinary
insurance credit for the quarter ended July 3, 1999. In addition, effective
September 1, 1999, the Company established a health insurance plan for its
employees, whereby the Company pays a portion of the premium on behalf of its
employees.
Occupancy costs which include rent, common area maintenance, repairs and
taxes were $258,000 and $221,000 for the thirteen weeks ended July 1, 2000 and
July 3, 1999 respectively, an increase of 16.7%. Occupancy costs which include
rent, common area maintenance, repairs and taxes were $784,000 and $742,000 for
the thirty nine weeks ended July 1, 2000 and July 3, 1999 respectively, an
increase of 5.7%. The increase in primarily due to increases in property
maintenance and real property taxes.
Selling, general and administrative expenses were $946,000 and $859,000 for
the thirteen weeks ended July 1, 2000 and July 3, 1999 respectively, an increase
of 10.1%. Selling, general and administrative expenses were $2,644,000 and
$2,403,000 for the thirty nine weeks ended July 1, 2000 and July 3, 1999
respectively, an increase of 10.0%. Management, which has focused on controlling
expenses, believes the increase is due to the general rising cost of doing
business.
- Page 20 -
<PAGE>
Trends
------
During the next twelve months management expects continued increases in
restaurant and package sales with increases in income from joint ventures.
Management also anticipates moderate increases in expenses.
Change in Certifying Accountant
-------------------------------
On February 26, 1999, the Audit Committee recommended and the Board of
Directors adopted a resolution authorizing management to (i) to dismiss Arthur
Andersen, LLP ("AA"), as the Company's independent accountant , effective upon
management's notification to AA of such dismissal, and (ii) concurrently with
such dismissal, to engage Rachlin Cohen and Holtz LLP ("RCH"). as the Company's
independent accountant for the fiscal year ended October 2, 1999. On March 4,
1999, the Company notified AA of its dismissal. Also on March 4, 1999, the
Company engaged RCH as the Company's independent accountants, effective
immediately. During the two (2) most recent fiscal years (prior to March 4,
1999) and during the subsequent interim period preceding the decision to change
independent accountant, neither the Company or anyone on its behalf consulted
RCH regarding either the application or accounting principles to a specified
transaction, either completed or proposed, or the type of audit opinion that
might be rendered on the Company's financial statements, and neither a written
report nor oral advice was provided to the Company by RCH with respect to any
such consultation.
AA audited the Company's annual consolidated financial statements as of and for
each of the fiscal years from the date of the Company's initial public offering
in 1969 through the fiscal year ended October 3, 1998, ("Historical Financial
Statements"). AA's auditors reports for at least the past seven (7) years on
these Historical Financial Statements did not contain any adverse opinion or
disclaimer of opinion and were not qualified or modified as to uncertainty audit
scope or accounting principles.
By a current report on Form 8-K, dated March 5, 1999 and filed with the
Securities and Exchange Commission on March 12, 1999, in connection with AA's
dismissal, the Company reported that during the two (2) most recent fiscal
years,(prior to March 4, 1999) and in the subsequent interim period, there had
been no disagreements between the Company's management and AA on any matters of
accounting principles or practices, financial statement disclosure or auditing
scope and procedures, which, if not resolved to the satisfaction of AA, would
have caused AA to make reference to the matters in an auditor's report. By
letter, dated March 5, 1999 and filed with the Securities Exchange Commission,
AA agreed with the Company's report.
- Page 21 -
<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 thereto duly authorized. The information furnished reflects all
adjustments to the statement of the results for the interim period.
FLANIGAN'S ENTERPRISES, INC.
Date 8/14/00 /s/ JOSEPH G. FLANIGAN
----------- -------------------------------------------
JOSEPH G. FLANIGAN, Chief Executive Officer
Date 8/14/00 /s/ EDWARD A. DOXEY
----------- ------------------------------------------
EDWARD A. DOXEY, Chief Financial Officer
- Page 22 -
