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 January 2, 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
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, 3,576,616 shares outstanding at January 31, 2000
Class A Common Stock $.10 par value, 2,578,037 shares
outstanding at January 31, 2000
<PAGE>
BENIHANA INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS FOR THE
TEN PERIODS ENDED JANUARY 2, 2000
TABLE OF CONTENTS
PAGE
PART I - Financial Information
Consolidated Balance Sheets at January 2, 2000
(unaudited) and March 28, 1999 1
Consolidated Statements of Earnings
(unaudited) for the Three and Ten Periods
Ended January 2, 2000 2 - 3
Consolidated Statement of Stockholders' Equity
(unaudited) for the Ten Periods Ended
January 2, 2000 4
Consolidated Statements of Cash Flows
(unaudited) for the Ten Periods Ended
January 2, 2000 5
Notes to the Consolidated Financial
Statements 6 - 7
Management's Discussion and Analysis of the
Financial Condition and Results of
Operations 8 - 11
PART II- Other Information 12
<PAGE>
BENIHANA INC. AND SUBSIDIARIES
PART I - Financial Information
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share information)
<TABLE>
<CAPTION>
(Unaudited)
January 2, March 28,
2000 1999
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and equivalents $ 1,524 $ 1,684
Receivables (net of allowance for doubtful accounts of $0
in January 2000 and $35 in March 1999) 446 269
Inventories 3,530 3,106
Prepaid expenses 812 635
- ------------------------------------------------------------------------------------------------------------
Total Current Assets 6,312 5,694
Property and equipment, net 41,207 37,128
Deferred income taxes, net 3,095 3,385
Goodwill, net 17,498 12,150
Other assets 5,157 2,511
- ------------------------------------------------------------------------------------------------------------
$73,269 $60,868
============================================================================================================
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $12,325 $10,497
Current maturity of bank debt 1,750 1,000
Current maturities of other long-term debt and
obligations under capital leases 929 1,298
- ------------------------------------------------------------------------------------------------------------
Total Current Liabilities 15,004 12,795
Long-term debt - bank 15,000 10,250
Long-term debt - other 183 396
Due to affiliates - long term 26
Obligations under capital leases 2,268 2,702
Stockholders' Equity:
Preferred stock - $1.00 par value;
authorized - 5,000,000 shares, issued
and outstanding - 700 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 - 3,576,616 shares and 3,571,616 shares,
respectively 358 357
Class A common stock - $.10 par value;
authorized - 20,000,000 shares, issued and outstanding
2,574,611 shares and 2,563,443 shares, respectively 257 256
Additional paid-in capital 14,711 14,604
Retained earnings 25,603 19,597
Treasury stock - 9,177 shares at cost (116) (116)
- ------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 40,814 34,699
- ------------------------------------------------------------------------------------------------------------
$73,269 $60,868
============================================================================================================
</TABLE>
See notes to consolidated financial statements
-1-
<PAGE>
BENIHANA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
(In thousands, except per share information)
<TABLE>
<CAPTION>
Three Periods Ended
-----------------------------
January 2, January 3,
2000 1999
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues
Net restaurant food and beverage sales $31,853 $27,723
Other income, principally franchise fees and royalties 336 176
- ---------------------------------------------------------------------------------------------------------------
Total Revenues 32,189 27,899
Costs and Expenses
Cost of restaurant food and beverage sales 8,531 7,211
Restaurant expenses 18,244 16,119
Store opening costs 117 3
General and administrative expenses 1,545 1,413
Interest expense 334 370
- ---------------------------------------------------------------------------------------------------------------
Total Costs and Expenses 28,771 25,116
- ---------------------------------------------------------------------------------------------------------------
Income from operations before income taxes 3,418 2,783
Income tax provision 1,251 1,030
- ---------------------------------------------------------------------------------------------------------------
Net Income $ 2,167 $ 1,753
===============================================================================================================
Earnings Per Share
Basic earnings per common share $ .35 $ .29
Diluted earnings per common share $ .32 $ .28
===============================================================================================================
</TABLE>
See notes to consolidated financial statements
-2-
<PAGE>
BENIHANA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
(In thousands, except per share information)
<TABLE>
<CAPTION>
Ten Periods Ended
-----------------------------
January 2, January 3,
2000 1999
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues
Net restaurant food and beverage sales $100,954 $88,452
Other income, principally franchise fee and royalties 849 612
- ---------------------------------------------------------------------------------------------------------------
Total Revenues 101,803 89,064
Costs and Expenses
Cost of restaurant food and beverage sales 27,212 23,333
Restaurant expenses 59,269 53,770
Store opening costs 187 3
General and administrative expenses 4,924 4,535
Interest expense 920 1,295
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Total Costs and Expenses 92,512 82,936
- ---------------------------------------------------------------------------------------------------------------
Income from operations before income taxes 9,291 6,128
Income tax provision 3,257 2,062
- ---------------------------------------------------------------------------------------------------------------
Net Income $ 6,034 $ 4,066
===============================================================================================================
Earnings Per Share
Basic earnings per common share $ .98 $ .66
Diluted earnings per common share $ .91 $ .64
</TABLE>
See notes to consolidated financial statements
-3-
<PAGE>
BENIHANA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
(In thousands, except per share information)
<TABLE>
<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 28, 1999 $1 $357 $256 $14,604 $19,597 ($116) $34,699
Net income 6,034 6,034
Dividend on preferred stock (28) (28)
Issuance of 10,518 shares of
class A common stock under
exercise of options 1 91 92
Issuance of 5,000 shares of
common stock under
exercise of options 1 16 17
- -------------------------------------------------------------------------------------------------------------------------------
Balance, January 2, 2000 $1 $358 $257 $14,711 $25,603 ($116) $40,814
===============================================================================================================================
</TABLE>
See notes to consolidated financial statements
-4-
<PAGE>
BENIHANA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
Ten Periods Ended
-------------------------------
January 2, January 3,
2000 1999
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operating Activities:
Net income $ 6,034 $ 4,066
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 3,328 3,042
Deferred income taxes 290 330
Change in operating assets and liabilities that provided (used) cash:
Accounts receivable (177) (224)
Inventories (424) 603
Prepaid expenses (177) (580)
Other assets (428) 38
Accounts payable and accrued expenses 1,827 1,277
- ----------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 10,273 8,552
- ----------------------------------------------------------------------------------------------------------------
Investing activities:
Payment for purchase of Haru restaurants, net of
cash acquired (8,154)
Expenditures for property and equipment (6,818) (5,556)
- ----------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (14,972) (5,556)
- ----------------------------------------------------------------------------------------------------------------
Financing Activities:
Borrowings under revolving credit facility 7,700
Proceeds from issuance of common stock 109 2
Repayment of long-term debt and obligations
under capital leases (3,242) (2,206)
Dividend paid on preferred stock (28) (43)
- ----------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 4,539 (2,247)
- ----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (160) 749
Cash and cash equivalents, beginning of year 1,684 1,169
- ----------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $1,524 $1,918
================================================================================================================
Supplemental Cash Flow Information:
Cash paid during the ten periods:
Interest $ 771 $1,095
Income taxes 2,883 2,212
Business Acquisitions, Net of Cash Acquired:
Fair value of assets acquired, other than cash $2,539
Liabilities assumed (157)
Purchase price in excess of the net assets acquired 5,772
------
$8,154
======
</TABLE>
See notes to consolidated financial statements.
-5-
<PAGE>
BENIHANA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TEN PERIODS ENDED JANUARY 2, 2000 AND JANUARY 3, 1999
(UNAUDITED)
1. GENERAL
The accompanying consolidated financial statements are unaudited and reflect
all adjustments (consisting only of normal recurring adjustments at January
2, 2000) 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 ten periods (forty weeks) ended January 2, 2000 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. 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 $8.2 million. The acquisition has been accounted for using the
purchase method 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 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. INVENTORIES
Inventories consist of (in thousands):
January 2, March 28,
2000 1999
---------- ---------
Food and beverage $1,124 $1,147
Supplies 2,406 1,959
------ ------
$3,530 $3,106
====== ======
4. 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.
-6-
<PAGE>
BENIHANA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TEN PERIODS ENDED JANUARY 2, 2000 AND JANUARY 3, 1999
(UNAUDITED)
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>
Three Periods Ended Ten Periods Ended
---------------------------- ---------------------------
January 2, January 3, January 2, January 3,
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income $2,167 $1,753 $6,034 $4,066
Less preferred dividends (8) (10) (28) (43)
------ ------ ------ ------
Income for computation of basic
earnings per common share 2,159 1,743 6,006 4,023
Convertible preferred stock 8 10 28 43
------ ------ ------ ------
Income for computation of diluted
earnings per common share $2,167 $1,753 $6,034 $4,066
====== ====== ====== ======
Three Periods Ended Ten Periods Ended
---------------------------- ---------------------------
January 2, January 3, January 2, January 3,
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Weighted average number of common
shares used in basic EPS 6,150 6,113 6,145 6,094
Effect of dilutive securities:
Stock options 441 79 373 151
Convertible preferred stock 105 143 105 143
----- ----- ----- -----
Weighted number of common shares
and dilutive potential common stock
used in diluted EPS 6,696 6,335 6,623 6,388
===== ===== ===== =====
</TABLE>
-7-
<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 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 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 three and ten 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, operating results of a new restaurant
in Ontario, California and the addition of the two Haru restaurants in New York,
New York. The increased revenues combined with the fixed nature of certain costs
and expenses increased net income by 23.6% to $2,167 from $1,753 for the three
periods and by 48.4% for the ten periods to $6,034 from $4,066 from the previous
equivalent periods. Diluted earnings per share also increased by 14.3% for the
three periods and 42.2% for the ten periods over the previous comparable
periods.
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>
Three Periods Ended Ten Periods Ended
----------------------------- ---------------------------
January 2, January 3, January 2, January 3,
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net restaurant sales $31,853 $27,723 $100,954 $88,452
Other income, principally
franchise fees and royalties 336 176 849 612
------- ------- -------- -------
$32,189 $27,899 $101,803 $89,064
======= ======= ======== =======
Three Periods Ended Ten Periods Ended
----------------------------- ---------------------------
January 2, January 3, January 2, January 3,
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Amount of change in total
revenues from previous year $ 4,290 $ 3,803 $ 12,739 $16,187
Percentage of change from the
previous year 15.4% 15.8% 14.3% 22.2%
</TABLE>
-8-
<PAGE>
BENIHANA INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Three and Ten Periods Ended January 2, 2000 compared to January 3, 1999 --
Restaurant revenues continued to increase in the three and ten periods ended
January 2, 2000 as compared to the equivalent periods ended January 3, 1999. The
increase in revenues is attributable to increased customer traffic for
restaurants opened longer than one year of 9.0% for the current three periods
and 8.6% for the current ten periods when compared to the comparable prior year
periods. Also, the opening of a traditional restaurant opened in December 1998
operating in Ontario, California contributed $789 to the increase for the three
periods and $2,755 for the ten periods. Haru operations acquired in December
1999 contributed $612 to the increase for both the three and ten periods.
Comparable restaurant sales increased 9.9% in the three periods and 10.2% in the
ten periods when compared to the prior equivalent periods. Other income
increased in the three and ten periods of the current year as compared to the
equivalent periods of the prior year as a result of the initial franchise fee of
$100 earned for the new franchise in Lima, Peru.
COSTS AND EXPENSES
Costs of restaurant sales, which are generally variable with sales, directly
increased with changes in revenues for the three and ten 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 three and ten periods.
<TABLE>
<CAPTION>
Three Periods Ended Ten Periods Ended
January 2, January 3, January 2, January 3,
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
COST AS A PERCENTAGE OF
RESTAURANT SALES:
Cost of restaurant food and
beverage sales 26.8% 26.0% 27.0% 26.4%
Restaurant expenses 57.3% 53.2% 58.7% 60.8%
Store opening costs .4% 0.0% .2% 0.0%
General and administrative
expenses 4.9% 5.1% 4.9% 5.1%
AMOUNT OF CHANGE FROM
PREVIOUS YEAR (IN THOUSANDS):
Cost of restaurant food and
beverage sales $1,320 $ 858 $3,879 $ 4,482
Restaurant expenses $2,125 $2,376 $5,499 $10,655
Store opening costs $ 114 $ 184
General and administrative expenses $ 139 $ 29 $ 389 $ 617
PERCENTAGE CHANGE FROM
PREVIOUS YEAR:
Cost of restaurant food and
beverage sales 18.3% 13.5% 16.6% 23.8%
Restaurant expenses 13.2% 10.2% 10.6% 24.7%
Store opening costs 3800.0% 6133.3%
General and administrative expenses 9.3% .2% 8.6% 15.7%
</TABLE>
-9-
<PAGE>
BENIHANA INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Three and Ten Periods Ended January 2, 2000 compared to January 3, 1999 -- The
cost of food and beverage sales increased in dollar amount and when expressed as
a percentage of sales in the current three and ten periods compared to
equivalent periods in the prior year. The increase resulted from higher
commodities costs, principally beef costs, in the current three and ten 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 three and ten periods. The increase in
absolute dollar amount is attributable to the aforementioned increase in sales.
Restaurant expenses for the current three and ten 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. The decrease is
also attributable to higher employee benefits costs from unusual amount of
claims that were submitted under the Company's self-insured health benefit plan
in the previous three and ten periods.
Store opening costs increased in the current three and ten periods when compared
to the prior year equivalent periods as a result of costs relating to new
restaurant properties under construction. 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 three and ten 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 decreased in the current three and ten periods when compared to
the comparable period of the prior year. The decrease is attributable to the
decrease in total borrowings outstanding from the prior year. Interest costs are
expected to be higher in future periods as a result of the additional borrowings
relating to the Haru acquisition.
The Company's effective income tax rate increased in the ten periods to 35.1%
from 33.6 % in the prior year's ten periods. The increase reflects increased
state income taxes.
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 increased in the current ten periods
by $1,721 over the prior year equivalent periods. The increase is mostly
attributable to an increase in net income.
-10-
<PAGE>
BENIHANA INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Investing Activities
During the current year, the Company purchased 80% of Haru Holding Corp. for a
cash purchase price of $8.2 million. The acquisition was financed largely from a
draw-down on a line of credit.
Expenditures for property and equipment increased in the current ten periods
when compared to the equivalent periods in the prior year as a result of new
restaurants under development.
Four of the new restaurants will operate as traditional Benihana restaurants in
Monterey and Santa Monica, California; Westbury, New York and Wheeling,
Illinois. Two new restaurants will be operated under the Company's Sushi Doraku
by Benihana concept in Miami Beach, Florida and Chicago, Illinois and are
scheduled to open in the spring of 2000. A new restaurant under the newly
acquired Haru concept is currently under construction in New York, New York. The
total estimated costs to construct these restaurants is $12,000,000, of which
$4,000,000 is to be financed under a master lease facility. The remaining costs
to develop these new restaurant units is expected to be financed from operating
cash flow.
Financing Activities
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 January 2, 2000, the Company had available $8,500,000 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, 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 First Union lead 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 will account for the lease as an operating lease. 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 January 2, 2000, $330,000 has been drawn
down to pay for transaction costs relating to the master lease.
-11-
<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 January 2, 2000, the Company had a
financial derivative with a notional amount of $4,820,033 against floating rate
debt of $16,750,000. A one percentage point interest charge on the outstanding
balance of the variable rate debt as of January 2, 2000 would not be material.
The Company purchases certain commodities such as beef, chicken and seafood.
These commodities are purchased based upon 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.
-12-
<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
-13-
<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 February 14, 2000 /s/ Joel A. Schwartz
------------------------ -----------------------------
Joel A. Schwartz
President
/S/ Michael R. Burris
-----------------------------
Michael R. Burris
Chief Financial Officer
-14-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the January
2, 2000 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> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> MAR-26-2000 MAR-26-2000
<PERIOD-START> OCT-11-1999 MAR-29-1999
<PERIOD-END> JAN-02-2000 JAN-02-2000
<EXCHANGE-RATE> 1 1
<CASH> 1,524 1,524
<SECURITIES> 0 0
<RECEIVABLES> 446 446
<ALLOWANCES> 0 0
<INVENTORY> 3,530 3,530
<CURRENT-ASSETS> 6,312 6,312
<PP&E> 41,207 41,207
<DEPRECIATION> 41,190 41,190
<TOTAL-ASSETS> 73,269 73,269
<CURRENT-LIABILITIES> 15,004 15,004
<BONDS> 17,451 17,451
0 0
1 1
<COMMON> 615 615
<OTHER-SE> 40,198 40,198
<TOTAL-LIABILITY-AND-EQUITY> 73,269 73,269
<SALES> 31,853 100,954
<TOTAL-REVENUES> 32,189 101,803
<CGS> 8,531 27,212
<TOTAL-COSTS> 18,361 59,456
<OTHER-EXPENSES> 1,545 4,924
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 334 920
<INCOME-PRETAX> 3,418 9,291
<INCOME-TAX> 1,251 3,257
<INCOME-CONTINUING> 2,167 6,034
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 2,167 6,034
<EPS-BASIC> .35 .98
<EPS-DILUTED> .32 .91
</TABLE>
