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 April 1, 2000
---------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE OF 1934
For the transition period from to
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Commission File Number -6836
---------------------------
Flanigan's Enterprises, Inc.
---------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 59-0877638
- ---------------------------------- -----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2841 Cypress Creek Road, Fort Lauderdale, Florida 33309
- --------------------------------------------------- -----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code, (954) 974-9003
---------------
N/A
- ------------------------------------------------------------------
(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 1,929.000
Page -1-
<PAGE>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
---------------------------------------------
INDEX TO FORM 10-QSB
April 1, 2000
PART I. FINANCIAL INFORMATION
---------------------
1. UNAUDITED CONDENSED FINANCIAL STATEMENTS
Consolidated Summary of Earnings -- For the Thirteen Weeks ended April
1, 2000 and April 3, 1999
Consolidated Balance Sheets -- As of April 1, 2000 and
October 2, 1999
Consolidated Statements of Cash Flows for the Thirteen Weeks ended
April 1, 2000 and April 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>
<TABLE>
<CAPTION>
FLANIGAN'S ENTERPRISES, INC.
----------------------------
UNAUDITED CONSOLIDATED SUMMARY OF EARNINGS
------------------------------------------
(In Thousands Except Per Share Amounts)
Thirteen Weeks Twenty Six Weeks
Ended Ended
Apr. 1 Apr. 3 Apr. 1 Apr. 3
2000 1999 2000 1999
------ ------ ------ -----
<S> <C> <C> <C> <C>
REVENUES:
Restaurant food sales $ 3,040 $ 2,917 $ 5,714 $ 5,483
Restaurant bar sales 754 717 1,462 1,385
Package good sales 2,273 1,812 4,924 3,733
Franchise related revenues 223 215 432 417
Owners fee 68 38 105 75
Joint venture income 200 82 291 176
Other operating income 25 27 53 53
----- ----- ----- -----
6,583 5,808 12,981 11,322
----- ----- ----- -----
COSTS AND EXPENSES:
Cost of merchandise sold
restaurant and bar 1,363 1,293 2,520 2,486
Cost of merchandise sold
package goods 1,677 1,279 3,656 2,727
Payroll and related costs 1,827 1,500 3,342 2,937
Occupancy costs 241 272 526 521
Selling, general and
administrative expenses 805 696 1,698 1,544
----- ----- ----- -----
5,913 5,040 11,742 10,215
----- ----- ----- -----
Income from operations 670 768 1,239 1,107
----- ----- ----- -----
OTHER INCOME (EXPENSE):
Interest expense on obligations
under capital leases (13) (12) (23) (23)
Interest expense on long term
debt and damages payable (31) (30) (51) (66)
Abandoned fixed assets -- (39) -- (39)
Interest income 14 8 30 21
Recovery on judgement -- -- -- 50
Recognition of deferred gains 1 1 2 2
Other, net 23 25 30 23
----- ----- ----- -----
(6) (47) (12) (32)
----- ----- ----- -----
Income before taxes 664 721 1,227 1,075
</TABLE>
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<PAGE>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
---------------------------------------------
UNAUDITED CONSOLIDATED SUMMARY OF EARNINGS
------------------------------------------
(In Thousands Except Per Share Amounts)
(Continued)
Thirteen Weeks Twenty Six Weeks
Ended Ended
Apr. 1 Apr. 3 Apr. 1 Apr.3
2000 1999 2000 1999
------ ------ ------ -----
PROVISION FOR INCOME TAXES $ 91 $ -- $ 277 $ 8
----- ----- ----- -----
Net Income $ 573 $ 721 $ 950 $ 1,067
===== ===== ===== =====
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. 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
April 1, 2000 April 3, 1999
Numerator Denominator EPS Numerator Denominator EPS
Basic EPS 573,000 1,928,949 $ .30 721,000 1,868,440 $ .39
Effective/dilutive
Stock Options 117,031 162,350
--------------------------------------------
Diluted EPS 573,000 2,045,980 $ .28 721,000 2,030,790 $ .36
- ------------------------------------------------------------------
For The Twenty Six Weeks Ended
April 1, 2000 April 3, 1999
Numerator Denominator EPS Numerator Denominator EPS
-----------------------------------------------------
Basic EPS 950,000 1,928,949 $ .49 1,067,400 1,864,220 $.57
Effective/dilutive
Stock Options 117,667 152,778
-----------------------------------------------
Diluted EPS 950,000 2,046,616 $ .46 1,067,400 2,016,998 $ .53
-----------------------------------------------------
The accompanying notes to consolidated financial statements are an integral part
of these statements.
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<PAGE>
<TABLE>
<CAPTION>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
---------------------------------------------
UNAUDITED CONSOLIDATED BALANCE SHEETS
-------------------------------------
APRIL 1, 2000 and OCTOBER 2, 1999
---------------------------------
ASSETS
------
APRIL 1 OCTOBER 2
2000 1999
------- -------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 1,286,000 $ 1,752,000
Notes and mortgages receivable,
current maturities, net 93,000 212,000
Inventories 1,502,000 1,428,000
Prepaid expenses 458,000 402,000
Deferred tax asset 169,000 281,000
--------- ---------
Total Current Assets 3,508,000 4,075,000
--------- ---------
Property and Equipment 5,282,000 4,004,000
--------- ---------
Leased Property Under Capital
Leases, net 77,000 93,000
--------- --------
Other Assets:
Liquor licenses, net 300,000 303,000
Notes and mortgages receivable, net 248,000 171,000
Investments in joint ventures 1,637,000 1,471,000
Deferred tax asset 349,000 349,000
Other 225,000 306,000
--------- ---------
Total Other Assets 2,759,000 2,600,000
--------- ---------
Total Assets $ 11,626,000 $ 10,772,000
========== ==========
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
FLANIGAN'S ENTERPRISES, INC, AND SUBSIDIARIES
---------------------------------------------
UNAUDITED CONSOLIDATED BALANCE SHEETS
-------------------------------------
APRIL 1, 2000 AND OCTOBER 2, 1999
---------------------------------
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
APRIL 1 OCTOBER 2
2000 1999
------- -------
<S> <C> <C>
Current Liabilities:
Accounts payable and accrued expenses $ 1,578,000 $ 1,594,000
Due franchisees 147,000 699,000
Current portion of long term debt 245,000 84,000
Current obligations under capital leases 40,000 38,000
Current portion of damages payable on
terminated or rejected leases 350,000 278,000
--------- ---------
Total Current Liabilities 2,360,000 2,693,000
--------- ---------
Long Term Debt, Net of Current
Maturities 1,297,000 500,000
--------- ---------
Obligations Under Capital Leases,
Net of Current Portion 168,000 205,000
--------- ---------
Damages Payable On Terminated or Rejected
Leases, Net of Current Portion 253,000 394,000
--------- --------
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 6,150,000 5,416,000
Notes received on sale of common stock (170,000) (192,000)
Less: Treasury stock, at cost
2,278,693 shares (4,910,000) (4,722,000)
--------- ---------
Total Stockholder's Equity 7,548,000 6,980,000
--------- ---------
Total Liabilities and
Stockholder's Equity $ 11,626,000 $ 10,772,000
========== ==========
</TABLE>
See notes to consolidated financial statements.
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<PAGE>
<TABLE>
<CAPTION>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
---------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE TWENTY SIX WEEKS ENDED APRIL 1, 2000 AND APRIL 3, 1999
--------------------------------------------------------------
(In Thousands)
APRIL 1 APRIL 3
2000 1999
------- -----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 950 $ 1,067
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization of
property, equipment and capital
leases 334 326
Deferred income taxes benefit 112 -
Amortization of liquor licenses 3 5
Leasehold improvements written off
closed store - 40
Recognition of deferred gains and
other deferred income (2) (2)
Changes in assets and liabilities:
Decrease (increase) in receivables 119 (61)
Increase in inventories (74) (246)
Increase in prepaid expenses (56) (40)
Decrease in accounts payable and
accrued expenses (16) (92)
Decrease in amounts due franchisees (552) -
Decrease in other assets 81 -
----- -----
Net cash provided by operating
activities 899 997
----- -----
</TABLE>
(continued)
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<PAGE>
<TABLE>
<CAPTION>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
---------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE TWENTY SIX WEEKS ENDED APRIL 1, 2000 AND APRIL 3, 1999
--------------------------------------------------------------
(In Thousands)
April 1 April 3
2000 1999
------- -------
<S> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Collections on notes and mortgages
receivable (77) (34)
Additions to property and equipment (1,571) (510)
Additions to investments in joint
ventures (166) (25)
----- -----
Net cash used in
investing activities (1,814) (569)
----- -----
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in long term debt 1,000 -
Payments on long term debt (42) (211)
Payments of obligations under capital
leases (37) (39)
Payment on damages payable (69) (134)
Purchase of treasury stock (188) (79)
Payment of cash dividend (215) (186)
----- -----
Net cash provided (used in)
financing activities 449 (649)
----- -----
NET DECREASE IN CASH AND EQUIVALENTS (466) (221)
CASH AND EQUIVALENTS, BEGINNING OF YEAR 1,752 1,468
----- -----
CASH AND EQUIVALENTS, END OF QUARTER $ 1,286 $ 1,247
===== =====
</TABLE>
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<PAGE>
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
APRIL 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 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 have 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 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.
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<PAGE>
Kendall, Florida
During fiscal year 1999, 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 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".
(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 $518,000 as of April 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 $1,500,000. 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.
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<PAGE>
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 and 62,200 options were exercised during
fiscal year 1999. No options have been exercised during fiscal year 2000 through
the end of the second 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.
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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 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 through the second quarter of the same. 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
April 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.
Apr. 1 Oct. 2 Apr. 3 Note
2000 1999 1999 Numbers
------ ------ ------ -------
Combination package
and restaurant 4 4 4
Restaurant only 5 5 6 (1)(2)(3)
Package store only 4 4 3 (4)
Clubs 1 1 1
------ ------ ---
Total Company operated units 14 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.
(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 on April 9, 2000
and is not 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 1999, the Company opened a package
liquor store in Fort Lauderdale, Florida.
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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
six months of fiscal years 2000 and 1999.
<TABLE>
<CAPTION>
Six Months Ended
Apr. 1, Apr. 3,
2000 1999
----------------
(In Thousands)
<S> <C> <C>
Net cash provided by operating
activities $ 899 $ 997
Net cash used in investing
activities (1,814) (569)
Net cash used in financing
activities 449 (649)
------ -------
Net Decrease in Cash and
Cash Equivalents (466) (221)
Cash and Cash Equivalents, Beginning 1,752 1,468
------ -----
Cash and Cash Equivalents, Ending $ 1,286 $ 1,247
</TABLE>
===== =====
Capital Expenditures
The Company had additions to fixed assets of $1,571,000 during the six
months ended April 1, 2000 as compared to $510,000 for the six months ended
April 3, 1999 and $934,000 for the fiscal year ended October 2, 1999. The
additions for the first six months 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 $721,000 for the six months 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 $850,000 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 April 1, 2000 and April 3, 1999
and the fiscal year ended October 2, 1999.
<TABLE>
<CAPTION>
Apr. 1, Apr. 3, Oct. 2,
Item 2000 1999 1999
---- ------- ------- -----
(In Thousands)
<S> <C> <C> <C>
Current Assets $ 3,508 $ 3,582 $ 4,075
Current Liabilities 2,360 2,155 2,693
Working Capital 1,148 1,427 1,382
</TABLE>
The lower working capital as of the end of the first six months of fiscal
year 2000, (April 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 the expenditure of $721,000 in capital improvements to upgrade the
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.
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.
- Page 16 -
<PAGE>
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>
<TABLE>
<CAPTION>
Results of Operation
- ---------------------
Thirteen Weeks Ended
April 1, April 3,
2000 1999
Amount Percent Amount Percent
--------------- ---------------
(In Thousands)
<S> <C> <C> <C> <C>
Restaurant food sales $ 3,040 50.1 $ 2,917 53.6
Restaurant bar sales 754 12.4 717 13.2
Package goods sales 2,273 37.5 1,812 33.2
------------ ------------
Total sales 6,067 100.0 5,446 100.0
Franchise related revenues 223 215
Owners fee 68 38
Joint venture income 200 82
Other operating income 25 27
----- -----
Total Revenue $ 6,583 $ 5,808
===== =====
</TABLE>
<TABLE>
<CAPTION>
Twenty Six Weeks Ended
April 1, April 3
2000 1999
Amount Percent Amount Percent
--------------- ---------------
(In Thousands)
<S> <C> <C> <C> <C>
Restaurant food sales $ 5,714 47.2 $ 5,483 51.7
Restaurant bar sales 1,462 12.1 1,385 13.1
Package good sales 4,924 40.7 3,733 35.2
------------ ------------
Total sales 12,100 100.0 10,601 100.0
Franchise revenues 432 417
Owners fee 105 75
Joint venture income 291 176
Other operating income 53 53
------ -----
Total revenues $ 12,981 $ 11,322
</TABLE>
Restaurant food sales represented 50.1% and 47.2% of total sales in the
thirteen and twenty six weeks of fiscal year 2000, respectively as compared to
53.6% and 51.7% of total sales in the thirteen and twenty six weeks of fiscal
year 1999, respectively. The weekly average of same store restaurant food sales
were $219,769 and $196,024 for the twenty six weeks ended April 1, 2000 and
April 3, 1999 respectively, an increase of 12.1%. The weekly average of same
store restaurant food sales were $233,758 and $208,306 for the thirteen weeks
ended April 1, 2000 and April 3, 1999 respectively, an increase of 12.2%.
- Page 18 -
<PAGE>
Restaurant bar sales represented 12.4% and 12.1% of total sales in the
thirteen and twenty six weeks of fiscal year 2000, respectively as compared to
13.2% and 13.1% of total sales in the thirteen and twenty six weeks of fiscal
year 1999, respectively. The weekly average of same store restaurant bar sales
were $56,235 and $49,422 for the twenty six weeks ended April 1, 2000 and April
3, 1999 respectively, an increase of 13.8%. The weekly average of same store bar
sales were $58,035 and $51,005 for the thirteen weeks ended April 1, 2000 and
April 3, 1999 respectively, an increase of 13.8%
Package good sales represented 37.5% and 40.7% of total sales in the thirteen
and twenty six weeks of fiscal year 2000, respectively, as compared to 33.3% and
36.5% of total sales in the thirteen and twenty six weeks of fiscal year 1999,
respectively. The weekly average of same store package good sales were $164,498
and $129,766 for the twenty six weeks ended April 1, 2000 and April 3, 1999
respectively, an increase of 26.8%. The weekly average of same store package
good sales were $152,190 and $139,482 for the thirteen weeks ended April 1, 2000
and April 3, 1999 respectively, an increase of 9.1%.
The gross profit margin for restaurant sales were 64.1% and $64.4% for the
thirteen weeks ended April 1, 2000 and April 3, 1999 respectively. The gross
profit margin for restaurant sales were 64.8% and 63.8% for the twenty six weeks
ended April 1, 2000 and April 3, 1999 respectively.
The gross profit margin for package good stores were 26.2% and 26.4% for the
thirteen weeks ended April 1, 2000 and April 3, 1999, respectively. The gross
profit margin for package good stores were 25.7% and 26.9% for the twenty six
weeks ended April 1, 2000 and April 3, 1999 respectively.
Franchise related revenues were $223,000 and 215,000 for the thirteen weeks
ended April 1, 2000 and April 3, 1999 respectively, an increase of 3.7%.
Franchise related revenues were $432,000 and $417,000 for the twenty six weeks
ended April 1, 2000 and April 3, 1999, respectively, an increase of 3.6%.
The owners fee was $68,000 and $38,000 for the thirteen weeks ended April 1,
2000 and April 3, 1999 respectively. The owners fee was $105,000 and $75,000 for
the twenty six weeks ended April 1, 2000 and April 3, 1999 respectively. The
increase is due to the increased volume of sales at the club.
Joint venture income was $200,000 and $82,000 for the thirteen weeks ended
April 1, 2000 and April 3, 1999 respectively. Joint venture income was $291,000
and $176,000 for the twenty six weeks ended April 1, 2000 and April 3, 1999
respectively. The increase was due to better performances of all of the
operating joint ventures.
- Page 19 -
<PAGE>
Operating Costs and Expenses
- ----------------------------
Operating costs and expenses were $2,873,000 and $2,468,000 for the thirteen
weeks ended April 1, 2000 and April 3, 1999 respectively, an increase of 16.4%
Operating costs and expenses were $5,566,000 and $5,002,000 for the twenty six
weeks ended April 1, 2000 and April 3, 1999 respectively, an increase of 11.3%.
The increase was due to higher payroll costs in the twenty six weeks ended April
1, 2000 and an extraordinary insurance credit for the twenty six weeks ended
April 3, 1999.
Payroll and related costs, which includes workers compensation insurance were
$1,827,000 and $1,500,000 for the thirteen weeks ended April 1, 2000 and April
3, 1999 respectively, an increase of 21.8%. Payroll and related costs which
includes workers compensation insurance were $3,342,000 and $2,937,000 for the
twenty six weeks ended April 1, 2000 and April 3, 1999 respectively, an increase
of 13.8%
Occupancy costs which include rent, common area maintenance, repairs and
taxes were $241,000 and $272,000 for the thirteen weeks ended April 1, 2000 and
April 3, 1999 respectively, a decrease of 11.4%. Occupancy costs which include
rent, common area maintenance, repairs and taxes were $526,000 and $521,000 for
the twenty six weeks ended April 1, 2000 and April 3, 1999 respectively, an
increase of 1%.
Selling, general and administrative expenses were $805,000 and $696,000 for
the thirteen weeks ended April 1, 2000 and April 3, 1999 respectively, an
increase of 15.7%. Selling, general and administrative expenses were $1,698,000
and $1,544,000 for the twenty six weeks ended April 1, 2000 and April 3, 1999
respectively, an increase of 10.0%.
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.
- Page 20 -
<PAGE>
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.
PART II, OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits - None
b. Reports on Form 8-K - None
- Page 21 -
<PAGE>
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
-----------------
/s/ Edward A. Doxey
--------------------
EDWARD A. DOXEY, Chief Financial Officer
Date
-----------------
- Page 22 -
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-END> APR-01-2000
<CASH> 1,286
<SECURITIES> 0
<RECEIVABLES> 93
<ALLOWANCES> 0
<INVENTORY> 1,502
<CURRENT-ASSETS> 3,508
<PP&E> 12,068
<DEPRECIATION> 6,786
<TOTAL-ASSETS> 11,626
<CURRENT-LIABILITIES> 2,360
<BONDS> 0
0
0
<COMMON> 420
<OTHER-SE> 7,128
<TOTAL-LIABILITY-AND-EQUITY> 11,626
<SALES> 12,100
<TOTAL-REVENUES> 12,981
<CGS> 6,176
<TOTAL-COSTS> 11,680
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 74
<INCOME-PRETAX> 1,227
<INCOME-TAX> 277
<INCOME-CONTINUING> 950
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 950
<EPS-BASIC> .57
<EPS-DILUTED> .53
</TABLE>
