SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarter Ended July 19, 1998
or,
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 0-12644
Benihana Inc.
(Exact name of registrant as specified in its charter)
Delaware 65-0538630
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8685 Northwest 53rd Terrace, Miami, Florida 33166
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (305) 593-0770
None
Former name, former address and former 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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common stock $.10 par value, 3,571,616 shares outstanding at August 4, 1998
Class A common stock $.10 par value, 2,517,463 shares outstanding at August 4,
1998
<PAGE>
BENIHANA INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS FOR THE
FOUR PERIODS ENDED JULY 19, 1998
TABLE OF CONTENTS
PAGE
PART I - Financial Information
Consolidated Balance Sheets at July 19, 1998
(unaudited) and March 29, 1998 1
Consolidated Statements of Operations
(unaudited) for the Four Periods Ended
July 19, 1998 2
Consolidated Statement of Stockholders' Equity
(unaudited) for the Four Periods Ended
July 19, 1998 3
Consolidated Statements of Cash Flows
(unaudited) for the Four Periods Ended
July 19, 1998 4
Notes to the Consolidated Financial
Statements 5 - 7
Management's Discussion and Analysis of the
Financial Condition and Results of
Operations 8 - 12
PART II - Other Information 13
<PAGE>
BENIHANA INC. AND SUBSIDIARIES
PART I - Financial Information
CONSOLIDATED BALANCE SHEETS
<TABLE>
(In thousands, except per share information)
<CAPTION>
(Unaudited)
July 19, March 29,
1998 1998
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and equivalents $ 472 $ 1,169
Receivables:
Trade 220 202
Other 101 183
- -------------------------------------------------------------------------------------------------------------------
Total Receivables 321 385
Inventories (Note 2) 3,792 3,768
Prepaid expenses (Note 3) 653 758
- -------------------------------------------------------------------------------------------------------------------
Total Current Assets 5,238 6,080
Property and equipment, net 33,420 32,998
Deferred income taxes, net 3,781 3,781
Goodwill, net 12,506 12,663
Other assets (Note 4) 2,587 2,635
- -------------------------------------------------------------------------------------------------------------------
$57,532 $58,157
===================================================================================================================
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $ 8,426 $ 9,323
Current maturities of long-term debt and
obligations under capital leases 2,205 1,939
- -------------------------------------------------------------------------------------------------------------------
Total Current Liabilities 10,631 11,262
Long-term debt 14,292 15,233
Due to affiliates - long term 126 174
Obligations under capital leases 3,109 3,265
Stockholders' Equity:
Preferred stock - $1.00 par value;
authorized - 5,000,000 shares, issued
and outstanding - 1,000 shares and
1,000 shares, respectively 1 1
Common stock - $.10 par value;
convertible into Class A Common, authorized -
12,000,000 shares, issued and outstanding -
3,571,616 shares and 3,571,116 shares,
respectively 357 357
Class A common stock - $.10 par value;
authorized - 20,000,000 shares, issued
and outstanding - 2,517,463 shares 252 252
Additional paid-in capital 14,602 14,600
Retained earnings 14,278 13,129
Treasury stock - 9,177 shares at cost (116) (116)
- -------------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 29,374 28,223
- -------------------------------------------------------------------------------------------------------------------
$57,532 $58,157
===================================================================================================================
</TABLE>
See notes to consolidated financial statements
-1-
<PAGE>
BENIHANA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
(In thousands, except per share information)
<CAPTION>
Four Periods Ended
July 19, July 20,
1998 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues
Net restaurant food and beverage sales $34,545 $27,400
Other income 273 189
- -------------------------------------------------------------------------------------------------------------------
Total Revenues 34,818 27,589
Costs and Expenses
Cost of restaurant food and beverage sales 9,156 7,030
Restaurant expenses 21,667 16,528
General and administrative expenses 1,784 1,383
Interest expense 541 217
- -------------------------------------------------------------------------------------------------------------------
Total Costs and Expenses 33,148 25,158
- -------------------------------------------------------------------------------------------------------------------
Income from operations before income taxes 1,670 2,431
Income tax provision 502 791
- -------------------------------------------------------------------------------------------------------------------
Net Income $ 1,168 $ 1,640
===================================================================================================================
Earnings Per Share (Note 5)
Basic earnings per common share $ .19 $ .26
Diluted earnings per common share $ .18 $ .26
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements
-2-
<PAGE>
BENIHANA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
(In thousands, except per share information)
<CAPTION>
Class A Additional Total
Preferred Common Common Paid-in Retained Treasury Stockholders'
Stock Stock Stock Capital Earnings Stock Equity
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, March 29, 1998 $1 $357 $252 $14,600 $13,129 ($116) $28,223
Net income 1,168 1,168
Dividend on preferred stock (19) (19)
Exercise of stock options 2 2
- -------------------------------------------------------------------------------------------------------------------------------
Balance, July 19, 1998 $1 $357 $252 $14,602 $14,278 ($116) $29,374
===============================================================================================================================
</TABLE>
See notes to consolidated financial statements
-3-
<PAGE>
BENIHANA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
(In thousands)
<CAPTION>
Four Periods Ended
July 19, July 20,
1998 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operating Activities:
Net income $1,168 $1,640
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,202 764
Change in operating assets and liabilities that
provided (used) cash:
Accounts receivable 64 279
Inventories (25) 139
Prepaid expenses 104 105
Other assets (42) (239)
Accounts payable and accrued expenses (897) (251)
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 1,574 2,437
- -------------------------------------------------------------------------------------------------------------------
Investing activities:
Expenditures for property and equipment (1,376) (1,664)
- -------------------------------------------------------------------------------------------------------------------
Net cash (used in) investing activities (1,376) (1,664)
- -------------------------------------------------------------------------------------------------------------------
Financing Activities:
Proceeds from issuance of common stock 2
Repayment of long-term debt and obligations
under capital leases (878) (478)
Dividend paid on preferred stock (19 (32)
Preferred stock redeemed (500)
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (895) (1,010)
- -------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents (697) (237)
Cash and cash equivalents, beginning of year 1,169 7,043
- -------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 472 $6,806
===================================================================================================================
Supplemental Cash Flow Information:
Cash paid during the ten periods:
Interest $ 461 $ 215
Income taxes 1,283 1,007
</TABLE>
See notes to consolidated financial statements.
-4-
<PAGE>
BENIHANA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOUR PERIODS ENDED JULY 19, 1998 AND JULY 20, 1997
(UNAUDITED)
1. GENERAL
The accompanying consolidated financial statements are unaudited and reflect
all adjustments (consisting only of normal recurring adjustments at July 19,
1998) which are, in the opinion of management, necessary for a fair
presentation of financial position and results of operations. The results of
operations for the four periods (sixteen weeks) ended July 19, 1998 are not
necessarily indicative of the results to be expected for the full year.
Certain information and footnotes normally included in financial statements
prepared in accordance with generally accepted accounting principles have
been condensed or omitted. The Company's fiscal year consists of 13
four-week accounting periods.
2. INVENTORIES
<TABLE>
Inventories consist of (in thousands):
<CAPTION>
July 19, March 29,
1998 1998
-------- ---------
<S> <C> <C>
Food and beverage $1,630 $1,574
Supplies 2,162 2,194
------ ------
$3,792 $3,768
====== ======
</TABLE>
3. PREPAID EXPENSES
<TABLE>
Prepaid expenses consist of (in thousands):
<CAPTION>
July 19, March 29,
1998 1998
-------- ---------
<S> <C> <C>
Prepaid insurance $ 224 $ 445
Prepaid rent 135
Other 294 313
------ ------
$ 653 $ 758
====== ======
</TABLE>
4. OTHER ASSETS
<TABLE>
Other assets consist of (in thousands):
<CAPTION>
July 19, March 29,
1998 1998
-------- ---------
<S> <C> <C>
Lease acquisition costs $ 410 $ 429
Cash surrender value of officer's
life insurance 306 306
Premium on liquor licenses 923 923
Long-term note receivable 144 158
Deferred financing charges 366 386
Security deposits 171 172
Preopening expenses 104 84
Other 163 177
------ ------
$2,587 $2,635
====== ======
</TABLE>
-5-
<PAGE>
BENIHANA INC. AND SUBSIDIARIES
5. EARNINGS PER SHARE
Basic earnings per common share is computed by dividing net income
available to common shareholders by the weighted average number of common
shares outstanding during each period. The diluted earnings per common
share computation includes dilutive common share equivalents issued under
the Company's various stock option plans and dilutive convertible preferred
stock.
The following data shows the amounts (in thousands) used in computing
earnings per share and the effect on income and the weighted average number
of shares of dilutive potential common stock.
<TABLE>
<CAPTION>
Four Periods Ended
July 19, July 20,
1998 1997
-------- --------
<S> <C> <C>
Income from operations $1,168 $1,640
Less preferred dividends (19) (32)
------ ------
Income for computation of basic
earnings per common share 1,149 1,608
Convertible preferred stock 19 32
------ ------
Income for computation of diluted
earnings per common share $1,168 $1,640
====== ======
</TABLE>
<TABLE>
<CAPTION>
Four Periods Ended
July 19, July 20,
1998 1997
-------- --------
<S> <C> <C>
Weighted average number of common
shares used in basic EPS 6,089 6,074
Effect of dilutive securities:
Stock options 178 41
Convertible preferred stock 150 278
------- -------
Weighted number of common shares
and dilutive potential common stock
used in diluted EPS 6,417 6,393
======= =======
</TABLE>
-6-
<PAGE>
BENIHANA INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The Company's revenues consist of sales of food and beverages sold in each of
the owned restaurants and licensing fees received from licensees. Cost of
restaurant food and beverage sold represents the direct cost of the ingredients
for the prepared food and beverages sold. Restaurant expenses consist of direct
and indirect labor, occupancy costs, advertising and other costs that are
directly attributed to each restaurant location.
Restaurant revenues and expenses are dependent upon a number of factors
including the number of restaurants in operation and restaurant patronage.
Revenues are also dependent on the average check amount. Expenses are
additionally dependent upon the costs of food and beverages sold, average wage
rates, marketing costs and the costs of interest and administering restaurant
operations.
The Company's revenues continued to increase in the current four periods. The
increase in revenues was due in part to the purchase last year of nine Samurai
and Kyoto restaurant units acquired with the purchase of Rudy's Restaurant
Group, Inc. (Rudy's). Net income and earnings per share, diluted, declined when
compared to the previous comparable period. The decline in net income and
earnings per share in the current four periods is principally attributable to
higher average wage rates due to increases in minimum wage and health insurance
costs.
-7-
<PAGE>
BENIHANA INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
REVENUES
The amounts of sales and the changes in amount and percentage change in amount
of sales from the previous fiscal year are shown in the following tables.
<TABLE>
<CAPTION>
Four Periods Ended
July 19, July 20,
1998 1997
-------- --------
<S> <C> <C>
Net restaurant sales $34,545 $27,400
Other income 273 189
------- -------
Total Revenues $34,818 $27,589
======= =======
</TABLE>
<TABLE>
<CAPTION>
Four Periods Ended
July 19, July 20,
1998 1997
-------- --------
<S> <C> <C>
Amount of change in total revenues
from previous year $ 7,229 $ 1,996
Percentage of change from the
previous year 26.2% 7.9%
</TABLE>
Four Periods Ended July 19, 1998 compared to July 20, 1997 -- Restaurant
revenues continued to increase in the four periods ended July 19, 1998 as
compared to the equivalent periods ended July 20, 1997. The increase in revenues
attributable to the nine restaurants acquired from Rudy's represented $4,662,000
of the increase and an increase in customer counts and menu prices in restaurant
units opened longer than a year represented $2,414,000 of the increase.
Comparable per unit sales increased 6.8% in the current four periods. Also,
contributing to the increase is the opening in June 1998 of Sushi Doraku by
Benihana, a kaiten sushi restaurant operating in Ft. Lauderdale, Florida.
-8-
<PAGE>
BENIHANA INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
COSTS AND EXPENSES
Costs of restaurant sales, which are generally variable with sales, directly
increased with changes in revenues for the four periods. The following table
reflects the proportion that the various elements of costs and expenses bore to
sales and the changes in amounts and percentage changes in amounts from the
previous year's four periods.
<TABLE>
<CAPTION>
Four Periods Ended
July 19, July 20,
1998 1997
-------- --------
<S> <C> <C>
COST AS A PERCENTAGE OF
RESTAURANT SALES:
Cost of restaurant food and
beverage sales 26.5% 25.7%
Restaurant expenses 62.7% 60.3%
General and administrative expenses 5.2% 5.1%
AMOUNT OF CHANGE FROM
PREVIOUS YEAR (IN THOUSANDS):
Cost of restaurant food and
beverage sales $2,126 $511
Restaurant expenses $5,139 $985
General and administrative expenses $ 401 $57
PERCENTAGE CHANGE FROM
PREVIOUS YEAR:
Cost of restaurant food and
beverage sales 30.2% 7.8%
Restaurant expenses 31.1% 6.3%
General and administrative expenses 29.0% .4%
</TABLE>
Four Periods Ended July 19, 1998 compared to July 20, 1997 -- The cost of food
and beverage sales increased in dollar amount and when expressed as a percentage
of sales in the current four periods compared to equivalent periods in the prior
year. The nine restaurants acquired from Rudy's represented $1,254,000 of the
increase, increased restaurant traffic represented $620,000 of the increase and
commodity cost increases, principally higher seafood costs, represented
approximately $192,000 of the increased cost of sales.
Restaurant expenses increased in dollar amount and when expressed as a
percentage of sales in the current four periods. The increase is attributable to
the impact of higher labor costs and employee benefit costs. Higher labor costs
were due to increased minimum wage rates, particularly in California, where the
Company operates 12 restaurants. The higher employee benefit costs resulted from
unusual amount of claims that were submitted under the Company's self-insured
health benefit plan in the current four periods.
-9-
<PAGE>
BENIHANA INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
General and administrative costs increased in total dollar amount and when
expressed as a percentage of sales. The increase is principally due to the
amortization of goodwill of $158,000 associated with Rudy's in the current four
periods.
Interest costs increased in the current four periods when compared to the
comparable period of the prior year. The increase is attributable to additional
interest expense associated with increased borrowings used for the acquisition
of Rudy's.
The Company's effective income tax rate decreased in the four periods to 30.1%
from 32.5% in the prior year's four periods. The decrease is due to an increased
FICA tip credit in the current four periods compared to the comparable period in
the prior year.
LIQUIDITY AND CAPITAL RESOURCES
The Company does not require significant amounts of inventory or receivables,
and, as is typical of many restaurant companies, the Company does not have to
provide financing for such assets and operates with a minimum amount or deficit
of working capital.
The Company requires capital principally for the construction and development of
new restaurants, acquisitions of other restaurant businesses, and the
refurbishment of existing restaurant units. On December 1, 1997, the Company
completed the acquisition of Rudy's for approximately $20,000,000 of cash. In
addition, a warrant for 200,000 shares of the Company's Class A Stock was issued
at an exercise price of $8.00 per share. The acquisition was financed, in part,
with the proceeds of a new credit agreement (the "Credit Agreement") consisting
of a $12,000,000 term loan and a $15,000,000 revolving line of credit. Interest
under the Credit Agreement accrues at the Company's option at either prime rate
plus a margin up to 1.0% or at LIBOR plus a margin of 1.0% to 2.25%. The
applicable interest rate margin varies with the Company's leverage ratio
(defined as Ebitda divided by funded indebtedness). Principal of the term loan
is payable at a rate of $1,000,000 annually through March 2000, $2,000,000
annually through March 2002, and $3,000,000 annually through March 2004. The
revolving line of credit is payable in 2004. The proceeds under the Credit
Agreement were also used to retire outstanding borrowings under a previous loan
agreement in the approximate amount of $5,700,000. The Credit Agreement
restricts the Company from making dividend payments and purchases of the
Company's common equity and limits capital expenditures to $8,600,000 for fiscal
1999 and $8,000,000 annually thereafter plus amounts in excess of certain
operating cash flow targets and amounts of cash provided from offerings of
common equity, if any. The Company is restricted by the Credit Agreement as to
the aggregate amount of its redeemable preferred stock that it can redeem to an
amount not to exceed $1,000,000 in fiscal year ending 1999 only. The Credit
Agreement also requires the Company to achieve certain ratios of operating cash
flow to debt and other financial benchmarks.
As of July 19, 1998, the Company had available $12,250,000 under the revolving
line of credit facility. Management believes that the amount available under the
revolving facility together with internally generated funds from operations
provide sufficient cash resources for anticipated capital improvements as well
as construction of new restaurants.
The Company has signed leases for two new restaurants. One of the new
restaurants will be operated under the Company's new sushi concept, Sushi Doraku
by Benihana in Chicago, Illinois. The second restaurant will operate as a
traditional Benihana in Ontario, California. Both restaurants are projected to
open in the winter of 1998.
-10-
<PAGE>
BENIHANA INC. AND SUBSIDIARIES
PART II - Other Information
Item 5. Other
In accordance with the requirements of Rule 14a-4(c) promulgated
under the Securities Exchange Act of 1934 (the "Exchange Act"), in
order for shareholder proposals submitted outside Rule 14a-8
(which includes proposals that the regulations under the Exchange
Act generally do not require to be included in the Company's
definitive proxy statement for its annual meeting of shareholders)
to be timely within the meaning of Rule 14a-4(c) under the
Exchange Act and for purposes of the Company's By-Laws, such
proposals must be received by the Company no later than the close
of business on May 25, 1999.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K - None
-11-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Benihana Inc.
(Registrant)
Date August 28, 1998 /s/ Joel A. Schwartz
------------------- ------------------------
Joel A. Schwartz
President
/s/ Michael R. Burris
------------------------
Michael R. Burris
Chief Financial Officer
-12-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the July 19,
1998 Financial Statements and is qualified in its entirety by reference to such
Financial Statements.
</LEGEND>
<CIK> 0000935226
<NAME> BENIHANA INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-28-1999
<PERIOD-START> MAR-30-1998
<PERIOD-END> JUL-19-1998
<EXCHANGE-RATE> 1
<CASH> 472
<SECURITIES> 0
<RECEIVABLES> 321
<ALLOWANCES> 0
<INVENTORY> 3,792
<CURRENT-ASSETS> 5,238
<PP&E> 33,420
<DEPRECIATION> 31,577
<TOTAL-ASSETS> 57,532
<CURRENT-LIABILITIES> 10,631
<BONDS> 17,527
0
1
<COMMON> 609
<OTHER-SE> 28,764
<TOTAL-LIABILITY-AND-EQUITY> 57,532
<SALES> 34,545
<TOTAL-REVENUES> 34,818
<CGS> 9,156
<TOTAL-COSTS> 21,667
<OTHER-EXPENSES> 1,784
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 541
<INCOME-PRETAX> 1,670
<INCOME-TAX> 502
<INCOME-CONTINUING> 1,168
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,168
<EPS-PRIMARY> .19
<EPS-DILUTED> .18
</TABLE>
