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 16, 2000
or,
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 0-26396
Benihana Inc.
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(Exact name of registrant as specified in its charter)
Delaware 65-0538630
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8685 Northwest 53rd Terrace, Miami, Florida 33166
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (305) 593-0770
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None
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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, 3,576,616 shares outstanding at August 9, 2000
Class A Common Stock $.10 par value, 2,588,214 shares outstanding
at August 9, 2000
<PAGE>
BENIHANA INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS FOR THE
FOUR PERIODS ENDED JULY 16, 2000
TABLE OF CONTENTS
PAGE
PART I - Financial Information
Consolidated Balance Sheets at July 16, 2000
(unaudited) and March 26, 2000 1
Consolidated Statements of Earnings
(unaudited) for the Four Periods Ended
July 16, 2000 and July 18, 1999 2
Consolidated Statement of Stockholders' Equity
(unaudited) for the Four Periods Ended
July 16, 2000 3
Consolidated Statements of Cash Flows
(unaudited) for the Four Periods Ended
July 16, 2000 and July 18, 1999 4
Notes to Consolidated Financial Statements
(unaudited) 5 - 6
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7 - 11
PART II - Other Information 12
<PAGE>
BENIHANA INC. AND SUBSIDIARIES
PART I - Financial Information
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share information)
(Unaudited)
July 16, March 26,
2000 2000
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Assets
Current assets:
Cash and equivalents $ 1,968 $ 1,165
Receivables 406 481
Inventories 3,564 3,613
Prepaid expenses 715 765
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Total Current Assets 6,653 6,024
Property and equipment, net 46,981 43,564
Deferred income taxes, net 3,174 3,290
Goodwill, net 17,099 17,302
Other assets 5,300 5,265
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$79,207 $75,445
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Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $14,857 $14,552
Current maturity of bank debt 2,000 1,750
Current maturities of other long-term debt 230 251
Current maturities of obligations
under capital leases 629 629
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Total Current Liabilities 17,716 17,182
Long-term debt - bank 13,500 12,500
Long-term debt - other 82 145
Obligations under capital leases 1,879 2,073
Stockholders' Equity:
Preferred stock - $1.00 par value;
authorized - 5,000,000 shares, issued
and outstanding - 700 shares 1 1
Common stock - $.10 par value;
convertible into Class A Common, authorized -
12,000,000 shares, issued and outstanding -
3,576,616 shares 358 358
Class A common stock - $.10 par value;
authorized - 20,000,000 shares, issued and outstanding
2,588,214 shares and 2,580,202 shares, respectively 259 258
Additional paid-in capital 14,819 14,756
Retained earnings 30,709 28,288
Treasury stock - 9,177 shares at cost (116) (116)
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Total Stockholders' Equity 46,030 43,545
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$79,207 $75,445
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See notes to consolidated financial statements
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BENIHANA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
(In thousands, except per share information)
Four Periods Ended
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July 16, July 18,
2000 1999
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Revenues
Net restaurant food and beverage sales $46,718 $39,392
Other income, principally franchise fees and royalties 351 289
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Total Revenues 47,069 39,681
Costs and Expenses
Cost of restaurant food and beverage sales 13,062 10,662
Restaurant expenses 27,240 23,253
Store opening costs 595 35
General and administrative expenses 2,155 1,870
Interest expense 462 319
Minority interest 26
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Total Costs and Expenses 43,540 36,139
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Income from operations before income taxes 3,529 3,542
Income tax provision 1,094 1,204
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Net Income $ 2,435 $ 2,338
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Earnings Per Share
Basic earnings per common share $ .39 $ .38
Diluted earnings per common share $ .37 $ .36
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See notes to consolidated financial statements
<PAGE>
BENIHANA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
(In thousands, except share information)
<TABLE>
<CAPTION>
Class A Additional Total
Preferred Common Common Paid-in Retained Treasury Stockholders'
Stock Stock Stock Capital Earnings Stock Equity
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<S> <C> <C> <C> <C> <C> <C> <C>
Balance, March 26, 2000 $1 $358 $258 $14,756 $28,288 ($116) $43,545
Net income 2,435 2,435
Dividend on preferred stock (14) (14)
Issuance of 8,012 shares of
class A common stock under
exercise of options 1 63 64
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Balance, July 16, 2000 $1 $358 $259 $14,819 $30,709 ($116) $46,030
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</TABLE>
See notes to consolidated financial statements
<PAGE>
BENIHANA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
Four Periods Ended
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July 16, July 18,
2000 1999
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Operating Activities:
Net income $2,435 $2,338
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,471 1,317
Deferred income taxes 116 116
Change in operating assets and liabilities that
provided (used) cash:
Accounts receivable 75 (70)
Inventories 48 (314)
Prepaid expenses 50 (73)
Other assets (191) (292)
Accounts payable and accrued expenses 304 (509)
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Net cash provided by operating activities 4,308 2,513
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Investing activities:
Expenditures for property and equipment (4,529) (2,235)
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Net cash used in investing activities (4,529) (2,235)
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Financing Activities:
Borrowings under revolving credit facility 2,000
Proceeds from issuance of common stock 64 70
Repayment of long-term debt and obligations
under capital leases (1,026) (912)
Dividend paid on preferred stock (14) (13)
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Net cash provided by (used in) financing activities 1,024 (855)
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Net increase (decrease) in cash and cash equivalents 803 (577)
Cash and cash equivalents, beginning of year 1,165 1,684
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Cash and cash equivalents, end of period $1,968 $1,107
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Supplemental Cash Flow Information:
Cash paid during the four periods:
Interest $ 414 $ 392
Income taxes 1,031 1,022
See notes to consolidated financial statements.
<PAGE>
BENIHANA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOUR PERIODS ENDED JULY 16, 2000 AND JULY 18, 1999
(UNAUDITED)
1. GENERAL
The accompanying consolidated financial statements are unaudited and reflect
all adjustments (consisting only of normal recurring adjustments at July 16,
2000 and July 18, 1999) 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 16,
2000 and July 18, 1999 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 is a 52/53-week year.
2. BASIS OF PRESENTATION AND ACQUISITION
The Company's financial statements and the discussion and data presented
below reflect the acquisition by the Company of 80% of the equity of Haru
Holding Corp. ("Haru") on December 6, 1999. Haru owns and operates two sushi
restaurants in New York City. The purchase price paid in cash at closing was
approximately $8.4 million. The acquisition has been accounted for using the
purchase method of accounting and the operating results of Haru have been
included in the Company's current fiscal year consolidated statement of
operations since the date of acquisition. The ownership of the minority
interest including attributable income and losses is reflected as minority
interest. The excess of the purchase price over the acquired tangible and
intangible net assets of approximately $5.8 million has been allocated to
goodwill and is being amortized on a straight-line basis over 15 years.
Additionally, lease acquisition costs of $2.1 million relating to a lease
for a Haru restaurant under construction in the Times Square area of New
York City were included in the purchase price. The costs to acquire this
lease will be amortized on a straight-line basis over the remaining 14 years
balance of the lease term.
3. NEW ACCOUNTING STANDARDS NOT YET ADOPTED
In June 1998, FAS 133, "Accounting for Derivative Instruments and Hedging
Activities" was issued. The new statement requires all derivatives to be
recorded on the balance sheet at fair value and establishes new accounting
rules for hedging instruments. The statement is effective for years
beginning after June 15, 2000. Company management is assessing the impact
this statement will have on the consolidated financial statements, but does
not currently believe it will be material.
4. INVENTORIES
Inventories consist of (in thousands):
July 16, March 26,
2000 2000
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Food and beverage $1,500 $1,450
Supplies 2,064 2,163
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$3,564 $3,613
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<PAGE>
BENIHANA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOUR PERIODS ENDED JULY 16, 2000 AND JULY 18, 1999
(UNAUDITED)
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.
Four Periods Ended
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July 16, July 18,
2000 1999
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Net income $2,435 $2,338
Less preferred dividends (14) (13)
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Income for computation of basic
earnings per common share 2,421 2,325
Convertible preferred stock 14 13
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Income for computation of diluted
earnings per common share $2,435 $2,338
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Four Periods Ended
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July 16, July 18,
2000 1999
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Weighted average number of
common shares used in basic
earnings per share 6,164 6,142
Effect of dilutive securities:
Stock options 376 320
Convertible preferred stock 105 105
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Weighted average number of
common shares and dilutive
potential common stock used
in diluted earnings per share 6,645 6,567
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<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 franchise fees received from franchisees. Cost of
restaurant food and beverages 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 commodity costs, average wage rates, marketing costs
and the costs of interest and administering restaurant operations.
The Company's revenues, net income and diluted earnings per share increased in
the current four periods when compared to the equivalent periods in the prior
year. The improved results reflect a continued increase in sales for restaurants
opened longer than one year and the addition of the two Haru restaurants in
Manhattan. The increased revenues combined with the fixed nature of certain
costs and expenses increased net income to $2,435 from $2,338 for the four
periods ended July 16, 2000. Diluted earnings per share also increased to $.37
from $.36 from the previous comparable periods.
REVENUES
The amounts of sales and the changes in amount and percentage change in amount
of revenues from the previous fiscal year are shown in the following tables.
Four Periods Ended
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July 16, July 18,
2000 1999
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Net restaurant sales $46,718 $39,392
Other income, principally
franchise fees and royalties 351 289
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Total Revenues $47,069 $39,681
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Four Periods Ended
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July 16, July 18,
2000 1999
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Amount of change in total
revenues from previous year $ 7,388 $ 4,863
Percentage of change from the
previous year 18.6% 14.0%
<PAGE>
BENIHANA INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Four Periods Ended July 16, 2000 compared to July 18, 1999 -- Restaurant
revenues continued to increase in the four periods ended July 16, 2000 as
compared to the equivalent periods ended July 18, 1999. The increase in revenues
is attributable to increased customer traffic for restaurants opened longer than
one year of 9.9% for the current four periods when compared to the comparable
prior year periods. Haru operations acquired in December 1999 contributed $2,591
to the increase. Comparable restaurant sales increased 11.3% in the four periods
when compared to the prior equivalent periods. Other income increased 21.5% in
the four periods of the current year as compared to the equivalent periods of
the prior year as a result of increased franchise royalties.
COSTS AND EXPENSES
Costs of restaurant sales, which are generally variable with sales, directly
increased with changes in revenues for the four periods ended July 16, 2000 as
compared to the equivalent periods ended July 18, 1999. 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.
Four Periods Ended
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July 16, July 18,
2000 1999
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COST AS A PERCENTAGE OF
RESTAURANT SALES:
Cost of restaurant food and
beverage sales 28.0% 27.1%
Restaurant expenses 58.3% 59.0%
Store opening costs 1.3% 0.1%
General and administrative expenses 4.6% 4.8%
AMOUNT OF CHANGE FROM
PREVIOUS YEAR (IN THOUSANDS):
Cost of restaurant food and
beverage sales $2,400 $1,506
Restaurant expenses $3,987 $1,621
Store opening costs $ 560 $ 0
General and administrative expenses $ 285 $ 86
PERCENTAGE CHANGE FROM
PREVIOUS YEAR:
Cost of restaurant food and
beverage sales 22.5% 16.4%
Restaurant expenses 17.1% 7.5%
Store opening costs 1600.0% -
General and administrative expenses 15.2% 4.8%
<PAGE>
BENIHANA INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Four Periods Ended July 16, 2000 compared to July 18, 1999 -- 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 increase resulted from higher commodities costs in the current four
periods compared to the prior year equivalent periods.
Restaurant expenses increased in dollar amount and decreased when expressed as a
percentage of sales in the current four periods. The increase in absolute dollar
amount is attributable to the aforementioned increase in sales. Restaurant
expenses for the current four periods decreased when expressed as a percentage
of sales. The decrease in restaurant expenses when expressed as a percentage of
sales is attributable to the fixed nature of certain costs and expenses coupled
with the increase in sales.
Store opening costs increased in the current four periods when compared to the
prior year equivalent periods as a result of costs relating to new restaurant
properties under development. Store opening costs are expected to increase as
the Company continues to develop new restaurant properties.
General and administrative costs increased in total dollar amount and decreased
when expressed as a percentage of sales in the current four periods. Management
does not consider the increase in absolute amount to be material. The decrease
when expressed as a percentage of sales is due to the aforementioned increase in
sales.
Interest costs increased in the current four periods when compared to the
comparable period of the prior year. The increase is attributable to the
additional borrowings relating to the Haru acquisition.
The Company's effective income tax rate decreased in the four periods to 31.0%
from 34.0 % in the prior year's four periods.
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 working capital deficit.
Cash flow provided from operations has been sufficient to meet the Company's
financial obligations as they come due. Cash required to provide for expansion
either through acquisition or new store development has been met by borrowings
on the Company's existing line of credit or its master lease facility. 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.
Operating Activities
Net cash provided by operating activities totaled $4,308 in the current four
periods ended July 16, 2000 as compared to $2,513 in the previous comparable
period ended July 18, 1999. The increase is mostly attributable to changes in
operating assets and liabilities that provided cash in the current four periods
and used cash in the previous comparable period.
<PAGE>
BENIHANA INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Investing Activities
Expenditures for property and equipment increased over the comparable period in
the previous year as a result of new restaurants under development.
Four of the new restaurants will operate as traditional Benihana restaurants in
Irving, Texas, Santa Monica, California, Westbury, New York and Wheeling,
Illinois. One new restaurant will be operated as a Sushi Doraku by Benihana in
Chicago, Illinois and is scheduled to open in the summer of 2000. Three new
restaurants under the newly acquired Haru concept are currently under
construction in Manhattan. The total estimated costs to construct these
restaurants is $14,300,000, of which $7,500,000 is to be financed under the
master lease facility described below. The remaining cost to develop these new
restaurant units is expected to be financed from operating cash flow.
Financing Activities
During the current four periods ended July 16, 2000, the Company had borrowings
under the revolving line of credit facility of $2,000,000 and repayments of
long-term debt and obligations under capital leases of $1,026,000.
In December 1997, the Company entered into a Credit Agreement with First Union
National Bank 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
up 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 $250,000 per quarter through March 31,
2000; $500,000 per quarter beginning June 30,2000 through March 31, 2002; and
$750,000 per quarter beginning June 30, 2002 through March 31, 2004. The
revolving line of credit is payable in 2004. The Credit Agreement restricts the
company from making dividend payments and purchases of the Company's common
equity and limits the amount of annual capital expenditures. Furthermore, the
Credit Agreement also requires the Company to achieve certain ratios of
operating cash flow to debt and other financial benchmarks.
As of July 16, 2000, the Company had available $9,000,000 under the revolving
line of credit facility. Management believes that the amount available under the
revolving facility, together with amounts available under the master lease
facility described below as well as internally generated funds from operations
provide sufficient cash resources for anticipated capital improvements as well
as construction of new restaurants.
In September 1999, the Company entered into a master lease pursuant to an
agreement with its principal bank lender, First Union National Bank and two
other banks, for the purpose of financing property and construction of new
restaurants. Under the agreement, a grantor trust purchases properties selected
by the Company, finances all of the construction costs pursuant to a facility
which provides $25,000,000 in available financing and leases the properties to
the Company upon their completion. The initial term of the master lease is for
five years. The Company accounts for the leases as operating leases. Upon
maturity, if the lease is not renewed, the Company retains the option to
purchase all of the properties owned by the trust for a purchase price equal to
the outstanding financing including certain equity contributions made by the
lender. The Company must also maintain compliance with financial covenants
similar to its credit facilities. As of July 16, 2000, $23,000,000 remained
available under this agreement.
<PAGE>
BENIHANA INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FORWARD LOOKING INFORMATION
Statements in this report concerning the Company's business outlook or future
economic performance, anticipated profitability, revenues, expenses or other
financial items, together with other statements that are not historical facts,
are "forward-looking statements" as that term is defined under Federal
Securities Laws. "Forward-looking statements" are subject to risks,
uncertainties and other factors which could cause actual results to differ
materially from those stated in such statements. Such risks, uncertainties and
factors include, but are not limited to, changes in customers' tastes and
preferences, acceptance of the Company's concepts in new locations, industry
cyclicality, fluctuations in customer demand, the seasonal nature of the
business, fluctuations on commodities costs, the ability to complete
construction of new units in a timely manner, obtaining governmental permits on
a reasonably timely basis, and general economic conditions, as well as other
risks detailed in the Company's filings with the Securities and Exchange
Commission.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk from changes in interest rates on debt and
changes in commodity prices. A discussion of the Company's accounting policy for
derivative financial instruments is included in the Summary of Significant
Accounting Policies in the notes to the consolidated financial statements
included in the Company's Annual Report on Form 10K filed with the Securities
and Exchange Commission.
The Company's net exposure to interest rate risk consists of floating rate
borrowings that are benchmarked to US and European short-term interest rates.
The Company may from time-to-time utilize interest rate swaps to manage overall
borrowing costs and reduce exposure to adverse fluctuations in interest rates.
The Company does not use derivative instruments for trading purposes and the
Company has a policy to that effect. At July 16, 2000, the Company had a
financial derivative with a notional amount of $4,302,000 against floating rate
debt of $15,500,000. A one percentage point interest charge on the outstanding
balance of the variable rate debt as of July 16, 2000 would not be material.
The Company purchases certain commodities such as beef, chicken and seafood.
These commodities are purchased based upon spot market prices established with
vendors. The Company does not use financial instruments to hedge commodity
prices because cost aberrations have historically been short term in nature.
<PAGE>
BENIHANA INC. AND SUBSIDIARIES
PART II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K - None
<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.
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(Registrant)
Date August 22, 2000 /s/ Joel A. Schwartz
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Joel A. Schwartz
President
/s/ Michael R. Burris
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Michael R. Burris
Chief Financial Officer
