-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Dhq07yCPFTz+bwbwkzejL9XgO170t5rOvd4SgK3Msg8r94sqcQ0745mZdJz0Ywid 8+0uUUVsDNqur9+UXIHf2g== 0000914317-99-000305.txt : 19990517 0000914317-99-000305.hdr.sgml : 19990517 ACCESSION NUMBER: 0000914317-99-000305 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990403 FILED AS OF DATE: 19990514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FLANIGANS ENTERPRISES INC CENTRAL INDEX KEY: 0000012040 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 590877638 STATE OF INCORPORATION: FL FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 001-06836 FILM NUMBER: 99622004 BUSINESS ADDRESS: STREET 1: 2841 CYPRESS CREEK RD CITY: FORT LAUDERDALE STATE: FL ZIP: 33309 BUSINESS PHONE: 3059749003 MAIL ADDRESS: STREET 1: 2841 CYPRESS CREEK ROAD CITY: FORT LAUDERDALE STATE: FL ZIP: 33309 FORMER COMPANY: FORMER CONFORMED NAME: BIG DADDYS LOUNGES INC DATE OF NAME CHANGE: 19780309 FORMER COMPANY: FORMER CONFORMED NAME: CASTLEWOOD INTERNATIONAL CORP DATE OF NAME CHANGE: 19760222 FORMER COMPANY: FORMER CONFORMED NAME: MOSAM CORP DATE OF NAME CHANGE: 19690415 10QSB 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-QSB [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the period ended April 3, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________________ to _________________ Commission File Number 1-6836 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 NA - -------------------------------------------------------------------------------- (Former name, address and fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] Indicate the number of shares outstanding of each of the issuers classes of Common Stock as of the latest practicable date 1,864,000 FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES INDEX TO FORM 10-QSB April 3, 1999 PART I. FINANCIAL INFORMATION 1. UNAUDITED CONDENSED FINANCIAL STATEMENTS Consolidated Summary of Earnings -- For the Thirteen Weeks and the Twenty-Six Weeks ended March 28, 1998 and April 3, 1999 Consolidated Balance Sheets -- as of October 3, 1998 and April 3, 1999 Consolidated Statements of Cash Flows for the Twenty-Six Weeks ended March 28, 1998 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
FLANIGAN'S ENTERPRISES, INC., AND SUBSIDIARIES UNAUDITED CONSOLIDATED SUMMARY OF EARNINGS (In Thousands Except Per Share Amounts) THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED March 28, April 3, March 28, April 3, 1998 1999 1998 1999 -------- -------- -------- -------- REVENUES: Restaurant food sales $ 2,874 $ 2,917 $ 5,269 $ 5,483 Restaurant bar sales 784 717 1,519 1,385 Package goods sales 1,999 1,812 3,989 3,733 Franchise related revenues 177 215 336 417 Owners fee 51 38 88 75 Joint venture income 100 82 166 176 Other operating income 53 27 111 53 -------- -------- -------- -------- 6,038 5,808 11,478 11,322 -------- -------- -------- -------- COSTS AND EXPENSES: Cost of merchandise sold restaurant and 1,333 1,293 2,517 2,486 Cost of merchandise sold package goods 1,467 1,279 2,955 2,727 Payroll and related costs 1,528 1,500 2,968 2,937 Occupancy costs 284 272 527 521 Selling, general and administrative expenses 819 696 1,707 1,544 -------- -------- -------- -------- 5,431 5,040 10,674 10,215 -------- -------- -------- -------- Income from operations 607 768 804 1,107 -------- -------- -------- -------- OTHER INCOME (EXPENSE): Interest expense on obligations under capital leases (12) (12) (23) (23) Interest expense on long-term debt and damages payable (48) (30) (82) (66) Abandoned fixed assets -- (39) -- (39) Settlement of litigation -- -- 110 -- Interest income 22 8 35 21 Recovery on judgment -- -- -- 50 Recognition of deferred gains 3 1 4 2 Other net 7 25 13 23 -------- -------- -------- -------- (28) (47) 57 (32) -------- -------- -------- -------- Income before income taxes 579 721 861 1,075
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FLANIGAN'S ENTERPRISES, INC., AND SUBSIDIARIES UNAUDITED CONSOLIDATED SUMMARY OF EARNINGS (In Thousands Except Per Share Amounts) (Continued) THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED March 28, April 3, March 28, April 3, 1998 1999 1998 1999 -------- ------- ------- ------ PROVISION FOR INCOME TAXES $ -- $ -- $ -- $ 8 ------ ------ ------ ------ Net income $ 579 $ 721 $ 861 $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 -------------------------------------------------------------------------- March 28, 1998 April 3, 1999 ----------------------------------- ----------------------------------- Numerator Denom. EPS Numerator Denom. EPS --------- ------ --- --------- ------ --- BASIC EPS 578,117 1,814,436 0.32 721,000 1,868,440 0.39 ---- ---- Effect/dilutive Stock Options -- 185,072 -- 162,350 ------- --------- ------- --------- ---- DILUTED EPS 578,117 1,999,508 0.29 721,000 2,030,790 0.36 ------- --------- ---- ------- --------- ---- For The Twenty-six weeks ended ---------------------------------------------------------------------------- March 28, 1998 April 3, 1999 --------------------------------- ------------------------------------- Numerator Denom. EPS Numerator Denom. EPS --------- ------ --- --------- ------ --- BASIC EPS 861,581 1,814,436 0.47 1,067,000 1,864,220 0.57 ---- --------- --------- ------ Effect/dilutive Stock Options -- 169,468 -- 152,778 --------- --------- ------ DILUTED EPS 861,581 1,983,904 0.43 1,067,000 2,016,998 0.53 ------- --------- ---- --------- --------- ------
The accompanying notes to consolidated financial statements are an integral part of these statements.
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS OCTOBER 3, 1998 AND APRIL 3, 1999 ASSETS OCTOBER 3, APRIL 3, 1998 1999 ---------- ---------- CURRENT ASSETS: Cash and equivalents $1,468,000 $1,247,000 Receivables, including current portion of notes, and mortgages, less allowance for uncollectible amounts and deferred gains, including related party receivables of $25,000 and $-0- (before allowances and deferred gains) in 1998 and 1999 respectively 320,000 381,000 Inventories, at lower of cost (first- in, first out) or market 1,237,000 1,483,000 Prepaid expenses 431,000 471,000 ---------- ---------- Total current assets 3,456,000 3,582,000 ---------- ---------- PROPERTY AND EQUIPMENT, net 3,717,000 3,921,000 ---------- ---------- LEASED PROPERTY UNDER CAPITAL LEASES, less accumulated amortization of $744,000 and $761,000 in 1998 and 1999 respectively 129,000 112,000 ---------- ---------- OTHER ASSETS: Liquor licenses, less accumulated amortization of $98,000 in 1998 and $102,000 in 1999 respectively 384,000 380,000 Notes and mortgages receivable, less allowance for uncollectible amounts and deferred gains, and including related party receivables of $173,000 and $148,000 (before allowances and deferred gains) in 1998 and 1999 respectively 161,000 195,000 Investment in joint venture 937,000 1,018,000 Other 259,000 245,000 ---------- ---------- Total other assets 1,741,000 1,838,000 ---------- ---------- $9,043,000 $9,453,000 ========== ==========
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FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS OCTOBER 3, 1998 AND APRIL 3, 1999 LIABILITIES AND STOCKHOLDER'S INVESTMENT (DEFICIT) (continued) OCTOBER 3, APRIL 3, 1998 1999 ---------- ---------- CURRENT LIABILITIES: Accounts payable $ 850,000 $ 882,000 Accrued and other current liabilities 752,000 629,000 Current portion of long-term debt 241,000 248,000 Current obligations under capital leases 101,000 103,000 Current portion of damages payable on terminated or rejected leases and other bankruptcy liabilities 268,000 276,000 Due to Pennsylvania limited partnership 30,000 17,000 ---------- ---------- Total current liabilities 2,242,000 2,155,000 ---------- ---------- LONG TERM DEBT, net of current portion 793,000 582,000 ---------- ---------- OBLIGATIONS UNDER CAPITAL LEASES, net of current portion 218,000 179,000 ---------- ---------- DAMAGES PAYABLE ON TERMINATED OR REJECTED LEASES AND OTHER BANKRUPTCY LIABILITIES, net of current portion 685,000 551,000 ---------- ----------
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FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS OCTOBER 3, 1998 AND APRIL 3, 1999 LIABILITIES AND STOCKHOLDER'S INVESTMENT (DEFICIT) (continued) OCTOBER 3, APRIL 3, 1998 1999 ----------- ----------- STOCKHOLDERS' INVESTMENT (DEFICIT) Common stock, par value $.10 authorized 5,000,000 shares, issued 4,198,000 shares adjusted to account for 2 for 1 stock split to shareholders of record 3/17/1999 payable 4/1/1999 $ 210,000 $ 420,000 Capital in excess of par value 6,395,000 6,185,000 Retained earnings 3,234,000 4,036,000 Less - Treasury stock, at cost, 1,170,000 shares in 1998 and 2,203,000 in 1999 (4,734,000) (4,655,000) ----------- ----------- Total stockholders' investment 5,105,000 5,986,000 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT $ 9,043,000 $ 9,453,000
The accompanying notes to consolidated financial statements are an integral part of these balance sheets
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE TWENTY-SIX WEEKS ENDED MARCH 28, 1998 AND APRIL 3, 1999 (In Thousands) MARCH 28, APRIL 3, 1998 1999 ------- ------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 860 $ 1,067 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization of property, equipment and capital leases 323 326 Amortization of liquor licenses 5 5 Leasehold improvements written off from closed store -- 40 Recognition of deferred gains and other deferred income (5) (2) Changes in provision for uncollectible notes and mortgages receivable (30) -- Changes in assets and liabilities: Increase in receivables (106) (61) Increase in inventories (43) (246) Increase in prepaid expenses (13) (40) Increase in accounts payable 327 31 Decrease in accrued liabilities (334) (123) ------- ------- Net cash provided by (used in) operating activities 984 997 ------- -------
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FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE TWENTY-SIX WEEKS ENDED MARCH 28, 1998 AND APRIL 3, 1999 (In Thousands) MARCH 28, APRIL 3, 1998 1999 ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Collections on notes and mortgages receivable $ 77 $ (34) Additions to notes and mortgages receivable -- -- Additions to property and equipment (467) (510) Change in due to Pennsylvania limited partnership (42) (25) ------- ------- Net cash used in investing activities (432) (569) ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Increase in long-term debt 500 -- Payments of long-term debt (83) (211) Payments of obligations under capital leases (35) (39) Payment of damages payable (64) (134) Purchase of treasury stock -- (79) Payment of cash dividend -- (186) ------- ------- Net cash provided by (used in) financing activities 318 (649) ------- ------- NET INCREASE IN CASH AND EQUIVALENTS 870 (221) CASH AND EQUIVALENTS, BEGINNING OF YEAR 1,334 1,468 ------- ------- CASH AND EQUIVALENTS, END OF QUARTER $ 2,204 $ 1,247 ======= =======
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS APRIL 3, 1999 (1) PETITION IN BANKRUPTCY: On November 4, 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 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 consolidated financial statements. (2) ADJUSTMENTS: The financial information presented as of any date other than October 3, 1998 has been prepared from the books and records without audit. Financial information as of October 3, 1998 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 only 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 3, 1998. (3) Reclassification Certain amounts in the fiscal 1998 financial statements have been reclassified to conform to the fiscal 1999 presentation. (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" service mark 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 franchisee 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 the amount of approximately 3% of gross sales, plus a contribution to advertising in an amount 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. As of the end of fiscal year 1996, all existing franchisees who operate restaurants under the "Flanigan's Seafood Bar and Grill" or other authorized service marks had executed new franchise agreements. During fiscal year 1996, the Company's franchise agreement with a member of Mr. Flanigan's family expired and the Company declined to offer the franchisee the option of executing its new franchise agreement. During the first quarter of fiscal year 1997, the Company filed suit against the franchisee for servicemark infringement, seeking injunctive relief and monetary damages. During the first quarter of 1998 a Stipulated Agreed Order of Dismissal Upon Mediation was issued whereby the Company received $110,000 and the former franchisee agreed to cease all use of the "Flanigan's" servicemark and other trade dress features common to the Company owned and/or franchised restaurants. (5) Investment in Joint Ventures During the first quarter of fiscal year 1996, the Company began operating a restaurant under the "Flanigan's Seafood Bar and Grill" servicemark as general partner and fifty percent owner of a limited partnership established for such purpose. The limited partnership agreement gives the limited partnership the right to use the "Flanigan's Seafood Bar and Grill" servicemark while the Company acts as general partner only. During the third quarter of fiscal year 1997, a related party formed a limited partnership to purchase an existing franchise in Fort Lauderdale, Florida, and through which it raised the necessary funds to renovate the restaurant. The Company is a twenty-five percent owner of the limited partnership as are other related parties, including but not limited to officers and directors of the Company and their families. The Company also continues to receive the same franchise fees as it received from the non-related franchisee. During the fourth quarter of fiscal year 1997, the Company formed a limited partnership and raised funds through a private offering to purchase the assets of a restaurant in Surfside, Florida and renovate the same for operation under the "Flanigan's Seafood Bar and Grill" servicemark. The Company acts as general partner of the limited partnership and is also a forty-two percent owner of the same, as are other related parties, including but not limited to officers and directors of the Company and their families. The limited partnership agreement gives the limited partnership the right to use the "Flanigan's Seafood Bar and Grill" servicemark for a fee equal to 3% of gross sales from the operation of the restaurant, while the Company acts as general partner only. This restaurant opened in the second quarter of fiscal year 1998. In order to ensure that the Company had adequate cash reserves in view of its investment in the restaurant discussed above, and for other improvements, during the second quarter of fiscal year 1997, the Board of Directors authorized the Company to borrow up to $1,200,000 at an interest rate of twelve (12%) percent per annum and fully amortized over five (5) years. During the fourth quarter of fiscal year 1997, the Company borrowed $375,000 from private investors, in units of $5,000, which loan is fully secured with specific receivables owned by the Company. During the first quarter of fiscal year 1998, the Company closed on its loan from Barnett Bank in the amount of $500,000, with interest at prime rate. Equal quarterly principal payments began March, 31, 1998 and will continue quarterly for three (3) years. Interest is payable monthly on the outstanding principal balance. The loan is also fully secured with liquor licenses owned by the Company. During the third quarter of fiscal year 1998, the Company entered into a lease agreement for a restaurant in Kendall, Florida and a separate agreement for the purchase of the furniture, fixtures and equipment of the existing restaurant. The lease agreement and separate agreement were each contingent upon the Company applying for and receiving zoning variances from Miami Dade County, Florida. During the first quarter of fiscal year 1999, the Company submitted its application for zoning variances to Miami Dade County, Florida, which zoning variances were unanimously granted at a hearing on November 18, 1998. Upon the expiration of the appeal period on December 28, 1998, the granting of the zoning variances became final. At the same time, the Company raised funds through a private offering for a limited partnership to be formed, to own and renovate the restaurant for operation of the same under the "Flanigan's Seafood Bar and Grill" servicemark. During the second quarter of fiscal year 1999, the limited partnership was formed. The Company acts as general partner of the limited partnership and is a forty percent owner of the same, as are other related parties, including but not limited to officers and directors of the Company and their families. The limited partnership agreement gives the limited partnership the right to use the "Flanigan's Seafood Bar and Grill" servicemark for a fee equal to 3% of the gross sales from the operation of the restaurant, while the Company acts as general partner only. While it was originally anticipated that the restaurant would be renovated and open for business by June 1, 1999, the issuance of building permits has been delayed due to circumstances beyond the Company's control. The Company is now confident that the building permits will be issued by June 1, 1999, and the restaurant will be renovated and open for business prior to the end of fiscal year 1999. (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 to the extent that realization of said benefits is more likely than not. (7) COMMITMENTS AND CONTINGENCIES: Guarantees The Company is contingently liable for annual rentals in the amount of approximately $420,000 at April 3, 1999, for lease obligations in connection with the assignment of leases on stores sold. In the event of default under any of these agreements, the Company will have the right to repossess the premises. During fiscal year 1996, a claim was filed against the Company with the Equal Employment Opportunity Commission ("EEOC") alleging sexual discrimination. A former employee alleged that her position with the Company was changed due to her pregnancy. The Equal Employment Opportunity Commission failed to make a determination on this claim within one hundred eighty (180) days of its filing and during the first quarter of fiscal year 1997, this claimant filed suit against the Company. The Company disputed this claim and vigorously defended the same. During the fourth quarter of fiscal year 1997, the former employee's attorney withdrew and during the first quarter of fiscal year 1998 the lawsuit was dismissed due to the failure of the former employee to retain substitute counsel. 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 on the Company's cash flow, as defined. The Employment Agreement is renewable annually and was renewed through December 31, 1999. 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 1997, a bonus of $78,000 was earned under the amended Employment Agreement and for fiscal year 1998, a bonus of $116,000 was earned under the amended Employment Agreement. For fiscal year 1998, the Chairman refused $30,000 of his bonus earned under the amended Employee Agreement to offset salaries paid to other executives of the Company. 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 currently 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 which expire April 19, 1999. During fiscal year 1996, an additional 60,000 stock options were granted at an option price of $1.625 per share which expire December 21, 2000, and an additional 36,000 stock options were granted at an option price of $2.19 per share which expire March 14, 2001. Option prices on the date of grant equaled or exceeded the fair market value of the Company's common stock; therefore, no related compensation expense was recorded. 45,800 options were exercised during fiscal year 1998. 24,200 options were exercised during the second quarter of fiscal year 1999 and 38,000 options were exercised subsequent to the end of the second quarter of fiscal year 1999. The difference between the fair market value and the exercise price was charged to retained earnings on the date the options were exercised. 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. 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. As of the end of the second quarter of fiscal year 1999, no stock options had been granted under this plan. All stock options reflect the 2 for 1 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. 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. During fiscal year 1997, the Company settled its one remaining uninsured dram shop case against one of the limited partnerships in Pennsylvania and the Company as general partner, and currently has no dram shop cases pending. For further discussion see the section headed Insurance on page 12 of the Company's Annual Report on Form 10-KSB for the fiscal year ended October 3, 1998. The Company accrues for potential uninsured losses based on estimates received from legal counsel and its historical experience, when uninsured claims are pending. Such accrual is included in the "Accrued and other liabilities - potential uninsured claims". See Note 10 in the Company's Annual Report on Form 10-KSB for the fiscal year ended October 3, 1998. Item 8. Managements Discussion and Analysis of Financial Condition and Results of Operations. The Company owns and/or operates restaurants with lounges, package liquor stores and an entertainment oriented club (collectively the "units"). At April 3, 1999, 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.
Mar. 28, Oct. 3, Apr. 3, NOTE TYPES OF UNITS 1998 1998 1999 NUMBER - ----------------------------------------------------------------------------------------------------------------------------- Combination package and restaurant 4 4 4 Restaurant only 6 5 6 (1)(4)(5)(6)(8) Package store only 4 3 3 (2)(3)(7) Clubs 1 1 1 - ----------------------------------------------------------------------------------------------------------------------------- TOTAL - Company operated units. 15 13 14 (6)(7) FRANCHISED - units 7 7 7 (5)
Notes: (1) During the fourth quarter of fiscal year 1997, the Company formed a limited partnership and raised funds through a private offering to purchase the assets of a restaurant in Surfside, Florida and renovate the same for operation under the "Flanigan's Seafood Bar and Grill" servicemark. The Company acts as general partner and forty-two percent owner of the partnership. The restaurant opened during the second quarter of fiscal year 1998. (2) During fiscal year 1995, the Company was granted possession of a store previously sold by the Company and began operating the package liquor store pursuant to Court Order. During the first quarter of fiscal year 1997 the Company acquired ownership of this store through foreclosure and continues to operate the package liquor store. (3) During fiscal year 1996, one franchisee exercised the thirty day cancellation clause under the franchise agreement and related documents and returned its franchised unit to the Company. The franchisee had operated a package liquor store and lounge under the "Big Daddy's" servicemark. The Company profitably operated the package liquor store of the franchised unit but did not reopen the lounge. The lease agreement for the business premises expired on December 31, 1995 and the Company occupied the same on an oral month to month lease agreement, paying its prorata share of the real property taxes monthly and insuring the property until April 1998 when the oral month to month lease agreement was terminated and the package liquor store was closed. (4) During the third quarter of fiscal year 1998, the Company closed a restaurant in North Miami, Florida. During the first quarter of fiscal year 1999 the location was sub-leased to an unaffiliated third party who is operating the location as a lounge, not affiliated with or under the "Flanigan's Seafood Bar and Grill" servicemark. (5) During the first quarter of fiscal year 1999, the Company purchased the Management Agreement of a franchisee, 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. (6) During the third quarter of fiscal year 1998, the Company entered into a lease agreement for a restaurant in Kendall, Florida, and a separate agreement for the purchase of the furniture, fixtures and equipment of the existing restaurant. During the first quarter of fiscal year 1999, the zoning variances required from Miami-Dade County, Florida were unanimously granted and became final with the expiration of the applicable appeal period. During the second quarter of fiscal year 1999, the Company formed a limited partnership, through which it raised funds through a private offering to renovate the restaurant for operation under the "Flanigan's Seafood Bar and Grill" servicemark. The Company acts as general partner and forty percent owner of the partnership. It is anticipated that the renovated restaurant will be open for business during the fourth quarter of fiscal year 1999. This unit is not yet included in the table. (7) During the second quarter of fiscal year 1999, the Company entered into a lease agreement for a new package liquor store in Fort Lauderdale, Florida. It is anticipated that the package liquor store will be open for business during the third quarter of fiscal year 1999. This unit is not yet included in the table. (8) Subsequent to the end of the second quarter of fiscal year 1999, the Company closed a restaurant whose lease will expire on May 31, 1999. This unit has not yet been deleted from the table. Liquidity and Capital Resources Cash Flows The following table is a summary of the Company's cash flows for the second quarter of fiscal years 1998 and 1999.
Six months ended Mar. 28, Apr. 3, 1998 1999 -------- ------- (in thousands) Net cash provided by operating activities $ 984 $ 997 Net cash used in investing activities (432) (569) Net cash used in financing activities 318 (649) ------- ------- Net increase (decrease) in cash and cash equivalents 870 (221) Cash and cash equivalents: Beginning of year 1,334 1,468 ------- ------- End of period $ 2,204 $ 1,247 ======= =======
Improvements The Company had additions to fixed assets of $522,000 during the six months ended April 3, 1999 compared to $467,000 for the six months ended March 28, 1998 and $808,000 for the fiscal year ended October 3, 1998. The capital expenditures were for upgrading existing units serving food, improvements to package liquor stores, upgrading the corporate computer system to be Y2K compliant and the purchase of the management agreement of an existing franchisee. 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 upon a refurbishing program which continued through fiscal year 1998. The budget for fiscal 1999 includes $439,000 for this program. The Company believes that improved operations will provide the cash to continue the refurbishing program. Year 2000 The Company and its subsidiaries are proceeding on schedule with efforts to convert its computer systems to be Y2K compliant. As of the end of the second quarter of fiscal year 1999, the conversion was substantially completed and the Company expects its computer systems to be fully Y2K compliant during the third quarter of fiscal year 1999. Working Capital The table below summarizes the current assets, current liabilities and working capital for the twenty-six weeks ended March 28, 1998 and April 3, 1999 and for the fiscal year ended October 3, 1998.
March April October Item 28, 1998 3, 1999 3, 1998 ------------------------- -------- ------- ------- (in thousands) Current assets $ 4,032 $ 3,582 $ 3,456 Current liabilities 2,984 2,155 2,242 Working capital (deficit) 1,048 1,427 1,214
As noted in Note 1 to the consolidated financial statements, during fiscal 1991 and 1992, the Company extended the payment schedule under the Plan for damages as a result of rejected leases through fiscal 2002 thereby reducing the payments from $500,000 per year to $200,000 per year for two years (fiscal 1991 and 1992), and thereafter to $300,000 per year until paid, but without reducing the total amount of bankruptcy damages. Dividend During the first quarter of fiscal year 1999, the Board of Directors declared a dividend of 20 cents per share to shareholders of record on January 4, 1999, which dividend was paid on February 1, 1999. On February 26, 1999, the Board of Directors declared a 2 for 1 stock split to shareholders of record on March 17, 1999 and payable April 1, 1999. Bankruptcy Proceedings As noted above and in Note 1 to the 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 its remaining leases. As a result of the rejection of leases, the Company agreed to bankruptcy damages of $4,278,000 to the landlords of such rejected leases, payable pursuant to the Company's Plan. The Plan was approved by the Bankruptcy Court on May 5, 1987 and the Company was officially discharged from bankruptcy on December 28, 1987. See Item 3 and Item 7 of Part I of the Company's Annual Report on Form 10-KSB for the year ended October 3, 1998 for further discussion of the Company's bankruptcy proceedings. See Note 2 to the consolidated financial statements of the Annual Report on Form 10-KSB for the year ended October 3, 1998 for the current payment schedule of bankruptcy damages. 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 property 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 14 of this report and see Item 3 and Item 7 to Part I of the Annual Report on Form 10-KSB for the fiscal year ended October 3, 1998 for a discussion of other legal proceedings resolved in prior years. Results of Operation
REVENUES: Thirteen Weeks Ended Twenty-Six Weeks Ended Sales March 28, 1998 April 3, 1999 March 28, 1998 April 3, 1999 - ----- ------------------ ------------------ -------------------- --------------- Restaurant, food $2,874 50.8% $2,917 53.6% $ 5,269 48.9% $ 5,483 51.7% Restaurant, bar 784 13.8% 717 13.2% 1,519 14.1% 1,385 13.1% Package goods 1,999 35.4% 1,812 33.3% 3,989 37.0% 3,733 35.2% ------ ---- ------ ---- ------- ---- ------- ---- Total 5,657 100. % 5,446 100.% 10,777 100.% 10,601 100. % Franchise revenues 177 215 336 417 Owner's fee 51 38 88 75 Joint venture income 100 82 166 176 Other operating income 53 27 111 53 ----- ------ ------- ------- Total revenues $6,038 $5,808 $11,478 $11,322
Restaurant food sales represented 50.8% and 48.9% of total sales in the thirteen and twenty-six weeks ended March 28, 1998 as compared to 53.6% and 51.7% in the comparable periods of fiscal 1999. The weekly average of same store restaurant food sales was $196,697 and $210,885 for the twenty-six week period of fiscal years 1998 and 1999 respectively, an increase of 7.2%. The same store weekly average for restaurant bar sales declined from $54,467 for the twenty-six week period of fiscal 1998 compared to $53,264 for the same period of the current fiscal year, a decline of 2.2%. Package goods sales have reversed the decline of prior years going from a weekly average of same store sales of $137,371 for the twenty-six weeks of fiscal year 1998 to $143,731 for the twenty-six weeks of fiscal year 1999, an increase of 4.6%. The improvement in package goods sales indicates that the decline in the liquor market has stabilized. Franchise related revenues were $336,000 for the twenty-six week period of fiscal 1998 and $417,000 for the same period of fiscal 1999, an increase of 24.1%. This increase is due to royalty fees generated from the restaurant in Surfside, Florida which was open the entire twenty-six week period of fiscal year 1999 and increased franchise gross sales. The gross profit margin for restaurant sales increased from 62.9% for the first six months of fiscal year 1998 to 63.1% for the first six months of fiscal year 1999. The gross profit margin for package goods sales for the twenty-six weeks ended March 28, 1998 was 25.9% and increased to 26.9% for the twenty-six weeks ended April 3, 1999. Overall gross profit was 49.2% for the twenty-six weeks ended March 28, 1998 and remained unchanged at 49.2% for the same period in fiscal 1999. Operating Costs and Expenses Operating costs and expenses for the twenty-six weeks ended March 28, 1998 were $5,202,000 compared to $5,002,000 for the same period in the current fiscal year, a decrease of 3.8%. Operating expenses are comprised of the payroll and related costs, occupancy costs and selling, general and administrative expenses. Payroll and related costs, which include workers compensation insurance premiums, were $2,968,000 and $2,937,000 for the first six months of fiscal years 1998 and 1999 respectively, a decrease of 1.0%. Occupancy costs, which include rent, common area maintenance, repairs and taxes were $527,000 and $521,000 for the first six months of fiscal years 1998 and 1999 respectively, a decrease of 1.1%. Selling, general and administrative expenses were $1,707,000 for the twenty-six weeks ended March 28, 1998 and $1,544,000 for the twenty-six weeks ended April 3, 1999, a decrease of 9.5%. Other Income and Expense Other income declined from $57,000 to ($32,000) for the twenty-six weeks of fiscal 1998 and 1999 respectively. The decline is accounted for by the extraordinary $110,000 settlement of litigation in the twenty-six weeks ended March 28, 1998 and the $39,000 write off of leasehold improvements in the twenty-six weeks ended April 3, 1999 for the restaurant which closed in April 1999. Trends During the next twelve months management expects continued increases in restaurant and package sales and income from investments in joint ventures and anticipates that expenses will remain constant. (9) Change in Certifying Accountant. On February 26, 1999, the Audit Committee recommended and the Board of Directors adopted a resolution authorizing management (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 & Holtz, LLP, ("RCH"), as the Company's independent accountant for the fiscal year ending October 2, 1999. 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 and during the subsequent interim period preceding the decision to change independent accountant, neither the Company nor anyone on its behalf consulted RCH regarding either the application of 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 auditor's 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, 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 and 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 - dated March 5, 1999, filed with the Securities and Exchange Commission on March 12, 1999. 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 thereunto duly authorized. The information furnished reflects all adjustments to the statement of the results for the interim periods. FLANIGAN'S ENTERPRISES, INC. /s/Joseph G. Flanigan --------------------- JOSEPH G. FLANIGAN, Chief Executive Officer Date 5/14/1999 /s/Edward A. Doxey ------------------ EDWARD A. DOXEY, Chief Financial Officer Date 5/14/1999 EX-27 2
5 6-MOS OCT-2-1999 APR-3-1999 1,247 0 381 0 1,483 3,582 10,513 6,592 9,453 2,155 1,312 0 0 420 5,566 9,453 10,601 11,322 5,213 10,215 32 0 0 1,075 8 0 0 0 0 1,067 .57 .53
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