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 1, 2000
---------------
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
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Flanigan's Enterprises, Inc.
- --------------------------------------------------------------------------------
(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 1,950.000
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<PAGE>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
INDEX TO FORM 10-QSB
January 1, 2000
PART I. FINANCIAL INFORMATION
---------------------
1. UNAUDITED CONDENSED FINANCIAL STATEMENTS
Consolidated Summary of Earnings -- For the Thirteen Weeks ended
January 1, 2000 and January 2, 1999
Consolidated Balance Sheets -- As of January 1, 2000 and October 2,
1999
Consolidated Statements of Cash Flows for the Thirteen Weeks ended
January 1, 2000 and January 2, 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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<TABLE>
<CAPTION>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THIRTEEN WEEKS ENDED
JANUARY 1, 2000 and JANUARY 2, 1999
(In Thousands Except Per Share Data)
JANUARY 1 JANUARY 2
2000 1999
------- -------
<S> <C> <C>
REVENUES:
Restaurant food sales $ 2,674 $ 2,566
Restaurant bar sales 708 668
Package goods sales 2,651 1,921
Franchise related revenues 209 192
Owners fee 37 37
Joint venture income 91 94
Other operating income 28 36
------- -------
6,398 5,514
------- -------
COSTS AND EXPENSES:
Cost of merchandise sold
restaurant and lounges 1,087 1,193
Cost of merchandise sold
package goods 1,979 1,448
Payroll and related costs 1,585 1,437
Occupancy costs 285 249
Selling, general and
administrative expenses 893 848
------- -------
5,829 5,175
------- -------
Income from Operations 569 339
------- -------
OTHER INCOME (EXPENSE):
Interest expense on obligations
under capital leases (10) (11)
Interest expense on long term
debt and damages payable (20) (36)
Interest income 16 13
Recovery on judgment -- 50
Recognition of deferred gains 1 1
Other, net 7 (2)
------- -------
(6) 15
------- -------
Income before income taxes 563 354
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THIRTEEN WEEKS ENDED
JANUARY 1, 2000 and JANUARY 2, 1999
(continued)
JANUARY 1 JANUARY 2
2000 1999
------ ----
<S> <C> <C>
PROVISION FOR INCOME TAXES $186 $ 8
---- ----
Net Income 377 $346
==== ====
</TABLE>
The Company follows the Financial Standards Accounting Board issued
Statement of Financial Accounting Standard ("SFAS") No. 128, "Earnings Per
Share" which establishes standards for computing and presenting basic and
diluted earnings per share ("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.
The following has been adjusted to reflect the 2 for 1 stock split
effective April 1, 1999 to shareholders of record on March 17, 1999.
<TABLE>
<CAPTION>
First Quarter Ended First Quarter Ended
January 1, 2000 January 2, 1999
Income Shares Income Shares
Numerator Denom. EPS Numerator Denom. EPS
--------- ------ --- --------- ------ ---
<S> <C> <C> <C> <C> <C> <C>
Basic EPS 377,000 1,940,000 .19 346,000 1,860,000 .19
--- ---
Effect dilutive
stock options - 160,000 - 164,000
------- --------- ------- ---------
Diluted EPS 377,000 2,100,000 .18 346,000 2,024,000 .17
------- --------- --- ------- --------- ---
</TABLE>
See notes to consolidated financial statements.
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<PAGE>
<TABLE>
<CAPTION>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
JANUARY 1, 2000 AND OCTOBER 2, 1999
ASSETS
JANUARY 1 OCTOBER 2
2000 1999
----------- -----------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 1,040,000 $ 1,752,000
Notes and mortgages receivable,
current maturities, net 214,000 212,000
Inventories 1,559,000 1,428,000
Prepaid expenses 449,000 402,000
Deferred tax asset 249,000 281,000
----------- -----------
Total Current Assets 3,511,000 4,075,000
Property and Equipment 5,037,000 4,004,000
----------- -----------
Leased Property Under Capital
Leases, net 84,000 93,000
----------- -----------
Other Assets:
Liquor licenses, net 301,000 303,000
Notes and mortgages receivable, net 136,000 171,000
Investments in joint ventures 1,507,000 1,471,000
Deferred tax asset 349,000 349,000
Other 304,000 306,000
----------- -----------
Total Other Assets 2,597,000 2,600,000
----------- -----------
Total Assets $11,229,000 $10,772,000
=========== ===========
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
JANUARY 1, 2000 and OCTOBER 2, 1999
LIABILITIES AND STOCKHOLDERS' EQUITY
JANUARY 1 OCTOBER 2
2000 1999
------------ ------------
<S> <C> <C>
Current Liabilities:
Accounts payable and accrued
expenses $ 1,770,000 $ 1,594,000
Due franchisees 786,000 699,000
Current portion of long term debt 87,000 84,000
Current obligations under capital leases 39,000 38,000
Current portion of damages payable
on terminated or rejected leases 280,000 278,000
------------ ------------
Total Current Liabilities 2,962,000 2,693,000
Long-Term Debt, Net of Current
Maturities 476,000 500,000
------------ ------------
Obligations Under Capital Leases,
Net of Current Portion 187,000 205,000
------------ ------------
Damages Payable on Terminated or
Rejected Leases, Net of Current
Portion 323,000 394,000
------------ ------------
Stockholders' Equity:
Common stock, $.10 par value,
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 5,793,000 5,416,000
Notes receivable on sale
of common stock (185,000) (192,000)
Less - treasury stock, at cost,
2,267,193 shares (4,805,000) (4,722,000)
------------ ------------
Total stockholders' equity 7,281,000 6,980,000
------------ ------------
Total liabilities and
stockholder's equity $ 11,229,000 $ 10,772,000
============ ============
</TABLE>
See notes to consolidated financial statements.
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<PAGE>
<TABLE>
<CAPTION>
FLANIGAN'S ENTERPRISES, INC. and SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THIRTEEN WEEKS ENDED
JANUARY 1, 2000 and JANUARY 2, 1999
(In Thousands)
JANUARY 1 JANUARY 2
2000 1999
------- -------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 377 $ 346
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 163 153
Amortization of liquor licenses 2 2
Recognition of deferred gains and
other deferred income (1) (1)
Recognition of recovery of judgment -- (50)
Joint venture income (91)
Changes in operating assets and liabilities:
(Increase) decrease in:
Receivables (2) (29)
Inventories (131) (180)
Prepaid expenses (47) (45)
Deferred tax asset 32
Increase (decrease) in:
Accounts payable and accrued expenses 176 18
Due franchisees 87 --
------- -------
Net cash provided by
operating activities 565 214
------- -------
Cash Flows from Investing Activities:
Collections on notes and
mortgages receivable 35 11
Additional investments in
joint ventures -- (48)
Distributions from joint ventures 55
Additions to property and
equipment (1,184) (278)
Purchase of treasury stock (83)
------- -------
Net cash used in
investing activities (1,177) (315)
------- -------
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THIRTEEN WEEKS ENDED
JANUARY 1, 2000 and JANUARY 2, 1999
JANUARY 1 JANUARY 2
2000 1999
------- -------
<S> <C> <C>
Cash Flows from Financing Activities:
Payments of long term debt $ (21) $ (12)
Payments of obligations under
capital leases (17) (19)
Payments on damages payable on
terminated or rejected leases (69) --
Due Pennsylvania limited partnership (23)
Payment of notes receivable on
sale of common stock 7
------- -------
Net cash used in
financing activities (100) (54)
------- -------
Net Decrease in Cash and
Cash Equivalents (712) (155)
Cash and Cash Equivalents, Beginning 1,752 1,468
------- -------
Cash and Cash Equivalents, Ending $ 1,040 $ 1,313
======= =======
</TABLE>
See notes to consolidated financial statements.
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<PAGE>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 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 bankrupt 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 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 its new 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 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 franchise 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 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 had executed new
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 joint venture agreement. The
Company is the general partner and has 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
is a twenty five percent limited partner 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 has an investment in a limited partnership which purchased the
assets in a restaurant in Surfside, Florida and renovated it for operation under
the "Flanigan's Seafood Bar and Grill" servicemark.
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<PAGE>
The Company acts as general partner of the limited partnership and is also a
forty two percent limited partner. Other related parties, including, but not
limited to, officers and directors of the Company and their families are also
investors.
Kendall, Florida
During fiscal year 1999, the Company formed and invested in a limited
partnership which will construct and operate a restaurant under the "Flanigan's
Seafood Bar and Grill" servicemark in Kendall, Florida. Construction was begun
in late 1999 and the restaurant is expected to open in March 2000. The Company
acts as the 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 and $12,000 during the first quarter of fiscal 2000, due
primarily to the expensing of start-up costs as required by SOP 98-5, "Reporting
on the Costs of Start-up Activities".
(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 $598,000 as of January 1, 2000 and $630,000 as of October 2, 1999.
(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 $1,550,000. 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.
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<PAGE>
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 1998, a bonus of $116,000 was earned under
the amended Employment Agreement. The Chairman refused $30,000 of his bonus
earned under the amended Employee Agreement to offset salaries paid to other
executives of the Company. 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.
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 which will expire on December 21, 2000
and an additional 36,000 stock options were granted at a 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. 24,200 options were exercised during the
second quarter of fiscal year 1999 and 38,000 options were exercised during the
third quarter of fiscal year 1999. 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.
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<PAGE>
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 115,900 options were granted
as of the first day of the fourth quarter of 1999. 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.
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.
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<PAGE>
(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
January 1, 2000, the Company was operating 14 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.
Jan. 1 Oct. 2 Jan. 2 Note
2000 1999 1999 Numbers
------ ------ ------ -------
Combination package
and restaurant 4 4 4
Restaurant only 5 5 6 (1)(2)(3)(4)
Package store only 4 4 3 (5)(6)
Clubs 1 1 1
------ ------ ---
Total Company operated units 14 14 14
Franchised units 7 7 7 (4)
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 1998.
(2) 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.
(3) 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. Due to delays beyond control of the
Company, the restaurant is currently being renovated and is expected to be open
for business during the second quarter of fiscal year 2000.
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<PAGE>
(4) 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.
(5) During the third quarter of fiscal year 1999, the Company opened a package
liquor store in Fort Lauderdale, Florida.
(6) 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.
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 2000 and 1999.
<TABLE>
<CAPTION>
Three Months Ended
Jan. 1, Jan. 2,
2000 1999
------- -------
(In Thousands)
<S> <C> <C>
Net cash provided by operating
activities $ 565 $ 214
Net cash used in investing
activities (1,177) (315)
Net cash used in financing
activities (100) (54)
------- -------
Net Decrease in Cash and
Cash Equivalents (712) (155)
Cash and Cash Equivalents, Beginning 1,752 1,468
------- -------
Cash and Cash Equivalents, Ending $ 1,040 $ 1,313
======= =======
</TABLE>
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<PAGE>
Capital Expenditures
--------------------
The Company had additions to fixed assets of $1,184,000 during the fiscal
quarter ended January 1, 2000 as compared to $278,000 for the fiscal quarter
ended January 2, 1999 and $934,000 for the fiscal year ended October 2, 1999.
The additions for the first quarter of fiscal year 2000 quarter 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 $334,000 for the quarter 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 includes $532,000 for this program. The Company
believes that improved operations will provide the cash to continue the
refurbishing program.
Working Capital
---------------
The table below summarizes the current assets, current liabilities, and
working capital for the fiscal quarters ended January 1, 2000, January 2, 1999
and the fiscal year ended October 2, 1999.
Jan. 1, Jan. 2, Oct. 2,
Item 2000 1999 1999
---- ------- ------- -----
(In Thousands)
Current Assets $ 3,511 $ 3,789 $ 4,075
Current Liabilities 2,962 2,246 2,693
Working Capital 549 1,543 1,382
The lower working capital as of the end of the first quarter of fiscal year
2000, (January 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, as
discussed in the above section entitled "Capital Expenditures".
Subsequent to the end of the first quarter of fiscal year 2000, the Company
borrowed the sum of $1,000,000 from Bank of America, d/b/a Nations Bank. For
further discussion, see the section entitled "Subsequent Events" on page 20 of
this report.
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<PAGE>
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.
- 17 -
<PAGE>
Results of Operation
--------------------
January 1, January 2
2000 1999
Amount Percent Amount Percent
--------------- ---------------
(In Thousands)
Restaurant food sales $ 2,674 44.3 $ 2,566 49.8
Restaurant bar sales 708 11.7 668 13.0
Package goods sales 2,651 44.0 1,921 37.2
------------ ------------
Total sales 6,033 100.0 5,155 100.0
Franchise related revenues 209 202
Owners fee 37 37
Joint venture income 91 94
Other operating income 28 26
----- -----
Total Revenue $ 6,398 $ 5,514
======= =======
Restaurant food sales represented 44.3% of total sales in the first quarter
of fiscal year 2000 as compared with 49.8% in the first quarter of fiscal year
1999. This decrease reflects the operation of one additional package liquor
store during the fiscal quarter ended January 1, 2000 which was not operating
during the fiscal quarter ended January 2, 1999. The weekly average of same
store restaurant sales were $192,647 for the first quarter of fiscal 2000 as
compared with $172,355 for the first quarter of fiscal year 1999, an increase of
11.8%.
Restaurant bar sales represented 11.7% of total sales in the first quarter
of fiscal year 2000 as compared with 13.0% in the first quarter of fiscal year
1999. This decrease reflects the operation of one additional package liquor
during the fiscal quarter ended January 1, 2000 which was not operating during
the fiscal quarter ended January 2, 1999. The weekly average of same store bar
sales were $54,424 for the first quarter of fiscal year 2000 as compared with
$47,792 for the first quarter of fiscal year 1999, an increase of 13.9%.
Package goods sales represented 44.0% of total sales in the first quarter of
fiscal year 2000 as compared with 39.0% in the first quarter of fiscal year
1999. This increase of 6.8% is attributed both to the operation of one
additional package liquor store during the fiscal quarter ended January 1, 2000
which was not operating during the fiscal quarter ended January 2, 1999, and the
increase in same store sales. The weekly average of same store package goods
sales were $176,806 for the first quarter of fiscal year 2000 as compared with
$147,742 for the first quarter of fiscal year 1999, an increase of 19.7%.
- 18 -
<PAGE>
The gross profit margin for restaurant sales was 67.9% for the first quarter
ended January 1, 2000 as compared with 63.1% for the quarter ended January 2,
1999. The increase is due to the lower price of ribs, a change of menu mix,
promoting lower cost menu items, as well as a slightly higher percentage of bar
sales as compared to overall restaurant sales.
The gross profit for the package goods sales for the first quarter of fiscal
year 2000 was 25.3% as compared with 25.2% for the first quarter of fiscal year
1999.
Overall gross profits were 49.2% for the first quarter of fiscal year 2000
as compared with 48.8% for the first quarter of fiscal year 1999.
Operating Costs and Expenses
----------------------------
Operating costs and expenses for the first quarter of fiscal year 2000
increased to $5,829,000 as compared with $5,175,000 for the first quarter of
fiscal year 1999, an increase of 12.6%. Operating costs and 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 and health insurance premiums were $1,585,000 for the first quarter of
fiscal year 2000 as compared with $1,437,000 for the first quarter of fiscal
year 1999, an increase of 10.3%. The increase is the result of selective salary
increases to restaurant managers and cooks which the Company felt was necessary
to remain competitive in the present "tight" labor market. In addition,
effective September 1, 1999, the Company established a health insurance plan for
its employees whereby the Company pays a portion of the premiums on behalf of
the employees.
Occupancy costs, which include rent, common area maintenance, repairs and
taxes were $285,000 for the quarter ended January 1, 2000 as compared with
$249,000 for the quarter ended January 2, 1999, an increase of 14.5%. The
increase is primarily due to an increase in the property maintenance and the
real property taxes.
Selling, general and administrative expenses were $893,000 for the fiscal
quarter ended January 1, 2000 as compared with $848,000 for the fiscal quarter
ended January 2, 1999, an increase of 5.3%. Management, which has focused on
controlling expenses, believes the increase is due to the general rising cost of
doing business.
Cost of merchandise sold were $3,066,000 for the fiscal quarter ended
January 1, 2000 as compared with $2,641,000 for the fiscal quarter ended January
2, 1999, an increase of 16.1%. The increase is attributed to the operation of
one additional package liquor store in the fiscal quarter ended January 1, 2000
as compared with the fiscal quarter ended January 2, 1999, and the increase in
same store sales.
- 19 -
<PAGE>
Other Income and Expenses
-------------------------
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 17 of this report.
Interest expense on long term debt and Chapter 11 damages payable decreased
to $20,000 in the first quarter of fiscal year 2000 from $36,000 in the first
quarter of fiscal year 1999. This is due to the reduction of long term debt.
Interest income increased to $16,000 in the fiscal quarter ended January 1,
2000 from $13,000 in the fiscal quarter ended January 2, 1999 due to the sale of
a store in the third quarter of fiscal year 1999 on which the Company took back
a mortgage on the sale of the liquor license and equipment.
Other net was $7,000 for the fiscal quarter ended January 1, 2000 as
compared to $(2,000) for the fiscal quarter ended January 2, 1999.
The Company exhausted its net operating loss carryforward during the first
quarter of fiscal year 2000. Provision for income taxes for the fiscal quarter
ended January 1, 2000 were $186,000 as compared of $8,000 for the first quarter
of fiscal year 1999, the latter representing the provision for the Federal
Alternative Minimum Tax.
Trends
------
During the next twelve months management expects continued increases in
restaurant and package goods sales as well as income from investments in joint
ventures and anticipates that expenses will remain constant.
Subsequent Events
-----------------
Subsequent to the end of the first quarter of fiscal year 2000, the Company
borrowed the sum of $1,000,000 from Bank of America (f/k/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.
- 20 -
<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.
/s/Joseph G. Flanigan
---------------------
JOSEPH G. FLANIGAN,
Chief Executive Officer
Date 2/14/2000
---------
/s/Edward A. Doxey
------------------
EDWARD A. DOXEY,
Chief Financial Officer
Date 2/14/2000
---------
- 21 -
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