10-Q 1 0001.txt 10-Q 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 December 31, 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. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 65-0538630 ---------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 8685 Northwest 53rd Terrace, Miami, Florida 33166 ------------------------------------------- ----- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (305) 593-0770 ------------- None ------------------------------------------------------------------------------- Former name,former address and former fiscal year, if changed since last report Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock $.10 par value, 3,579,116 shares outstanding at February 5, 2001 Class A Common Stock $.10 par value, 2,589,213 shares outstanding at February 5, 2001 BENIHANA INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS FOR THE TEN PERIODS ENDED DECEMBER 31, 2000 TABLE OF CONTENTS ----------------- PAGE PART I - Financial Information Consolidated Balance Sheets at December 31, 2000 (unaudited) and March 26, 2000 1 Consolidated Statements of Earnings (unaudited) for the Three and Ten Periods Ended December 31, 2000 and January 2, 2000 2 - 3 Consolidated Statement of Stockholders' Equity (unaudited) for the Ten Periods Ended December 31, 2000 4 Consolidated Statements of Cash Flows (unaudited) for the Ten Periods Ended December 31, 2000 and January 2, 2000 5 Notes to Consolidated Financial Statements (unaudited) 6 - 7 Management's Discussion and Analysis of Financial Condition and Results of Operations 8 - 12 PART II - Other Information 13 BENIHANA INC. AND SUBSIDIARIES PART I - Financial Information CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share information) (Unaudited) December 31, March 26, 2000 2000 ------------------------------------------------------------------------------- Assets Current assets: Cash and equivalents $ 1,620 $ 1,165 Receivables 741 481 Inventories 4,396 3,613 Prepaid expenses 1,755 765 ------------------------------------------------------------------------------- Total Current Assets 8,512 6,024 Property and equipment, net 50,373 43,564 Deferred income taxes, net 3,000 3,290 Goodwill, net 16,685 17,302 Other assets 5,473 5,265 ------------------------------------------------------------------------------- $84,043 $75,445 ------------------------------------------------------------------------------- Liabilities and Stockholders' Equity Current liabilities: Accounts payable and accrued expenses $16,306 $14,552 Current maturity of bank debt 2,000 1,750 Current maturities of other long-term debt 205 251 Current maturities of obligations under capital leases 629 629 ------------------------------------------------------------------------------- Total Current Liabilities 19,140 17,182 Long-term debt - bank 13,500 12,500 Long-term debt - other 145 Obligations under capital leases 1,589 2,073 Stockholders' Equity: Series A redeemable convertible 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 - 3,579,116 and 3,576,616 shares, respectively 358 358 Class A common stock - $.10 par value; authorized - 20,000,000 shares, issued and outstanding 2,589,213 shares and 2,580,202 shares, respectively 259 258 Additional paid-in capital 14,843 14,756 Retained earnings 34,469 28,288 Treasury stock - 9,177 shares at cost (116) (116) ------------------------------------------------------------------------------- Total Stockholders' Equity 49,814 43,545 ------------------------------------------------------------------------------- $84,043 $75,445 ------------------------------------------------------------------------------- See notes to consolidated financial statements BENIHANA INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) (In thousands, except per share information) Three Periods Ended ---------------------- December 31, January 2, 2000 2000 ------------------------------------------------------------------------------- Revenues Restaurant sales $36,866 $31,853 Franchise fees and royalties 395 336 ------------------------------------------------------------------------------- Total Revenues 37,261 32,189 Costs and Expenses Cost of restaurant food and beverage sales 9,574 8,531 Restaurant expenses 21,875 18,246 Store opening costs 254 115 General and administrative expenses 1,986 1,527 Interest expense, net 132 334 Minority interest 47 18 ------------------------------------------------------------------------------- Total Costs and Expenses 33,868 28,771 ------------------------------------------------------------------------------- Income from operations before income taxes 3,393 3,418 Income tax provision 1,204 1,251 ------------------------------------------------------------------------------- Net Income $ 2,189 $ 2,167 ------------------------------------------------------------------------------- Earnings Per Share Basic earnings per common share $ .35 $ .35 Diluted earnings per common share $ .34 $ .32 ------------------------------------------------------------------------------- See notes to consolidated financial statements BENIHANA INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) (In thousands, except per share information) Ten Periods Ended ------------------------- December 31, January 2, 2000 2000 ------------------------------------------------------------------------------- Revenues Restaurant sales $120,017 $100,954 Franchise fees and royalties 1,010 849 ------------------------------------------------------------------------------- Total Revenues 121,027 101,803 Costs and Expenses Cost of restaurant food and beverage sales 32,529 27,212 Restaurant expenses 70,859 59,271 Store opening costs 1,178 185 General and administrative expenses 6,054 4,906 Interest expense, net 961 920 Minority interest 99 18 ------------------------------------------------------------------------------- Total Costs and Expenses 111,680 92,512 ------------------------------------------------------------------------------- Income from operations before income taxes 9,347 9,291 Income tax provision 3,134 3,257 ------------------------------------------------------------------------------- Net Income $ 6,213 $ 6,034 ------------------------------------------------------------------------------- Earnings Per Share Basic earnings per common share $ 1.00 $ .98 Diluted earnings per common share $ .94 .91 ------------------------------------------------------------------------------- See notes to consolidated financial statements BENIHANA INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED) (In thousands, except share information) Class A Additional Total Preferred Common Common Paid-in Retained Treasury Stockholders' Stock Stock Stock Capital Earnings Stock Equity ----------------------------------------------------------------------------------------------------------------------------------- Balance, March 26, 2000 $1 $358 $258 $14,756 $28,288 ($116) $43,545 Net income 6,213 6,213 Dividend on preferred stock (32) (32) Issuance of 9,011 shares of class A common stock under exercise of options 1 73 74 Issuance of 2,500 shares of common stock under exercise of options 14 14 ----------------------------------------------------------------------------------------------------------------------------------- Balance, December 31, 2000 $1 $358 $259 $14,843 $34,469 ($116) $49,814 ----------------------------------------------------------------------------------------------------------------------------------- See notes to consolidated financial statements
BENIHANA INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands) Ten Periods Ended ---------------------- December 31, January 2, 2000 2000 ------------------------------------------------------------------------------- Operating Activities: Net income $6,213 $6,034 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 3,903 3,328 Deferred income taxes 290 290 Change in operating assets and liabilities that provided (used) cash: Accounts receivable (260) (177) Inventories (783) (424) Prepaid expenses (990) (177) Other assets (491) (428) Accounts payable and accrued expenses 1,754 1,827 ------------------------------------------------------------------------------- Net cash provided by operating activities 9,636 10,273 ------------------------------------------------------------------------------- Investing activities: Payment for purchase of Haru restaurants, net of cash acquired (8,154) Expenditures for property and equipment (9,812) (6,818) Net cash used in investing activities (9,812) (14,972) Financing Activities: Borrowings under revolving credit facility 5,500 7,700 Proceeds from issuance of common stock 88 109 Repayment of long-term debt and obligations under capital leases (4,925) (3,242) Dividend paid on preferred stock (32) (28) ------------------------------------------------------------------------------- Net cash provided by financing activities 631 4,539 ------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents 455 (160) Cash and cash equivalents, beginning of year 1,165 1,684 ------------------------------------------------------------------------------- Cash and cash equivalents, end of period $1,620 $1,524 ------------------------------------------------------------------------------- Supplemental Cash Flow Information: Cash paid during the ten periods: Interest $1,060 $ 771 Income taxes 4,977 2,883 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 ------------------------------------------------------------------------------- See notes to consolidated financial statements. BENIHANA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TEN PERIODS ENDED DECEMBER 31, 2000 AND JANUARY 2, 2000 (UNAUDITED) 1. GENERAL The accompanying consolidated financial statements are unaudited and reflect all adjustments (consisting only of normal recurring adjustments at December 31, 2000 and 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 December 31, 2000 and 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 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 consolidated statements 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-year 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. RECLASSIFICATIONS Certain prior year amounts have been reclassified to conform to the current fiscal year presentation. 5. INVENTORIES Inventories consist of (in thousands): December 31, March 26, 2000 2000 ------------ --------- Food and beverage $1,815 $1,450 Supplies 2,581 2,163 ------ ------ $4,396 $3,613 ====== ====== BENIHANA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TEN PERIODS ENDED DECEMBER 31, 2000 AND JANUARY 2, 2000 (UNAUDITED) 6. 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. Ten Periods Ended --------------------------- December 31, January 2, 2000 2000 ------------ ---------- Net income $6,213 $6,034 Less preferred dividends (32) (28) ------- ------- Income for computation of basic earnings per common share 6,181 6,006 Convertible preferred stock 32 28 -------- ------- Income for computation of diluted earnings per common share $6,213 $6,034 ====== ====== Ten Periods Ended --------------------------- December 31, January 2, 2000 2000 ------------ ---------- Weighted average number of common shares used in basic earnings per share 6,166 6,145 Effect of dilutive securities: Stock options 358 373 Convertible preferred stock 105 105 ----- ----- Weighted average number of common shares and dilutive potential common stock used in diluted earnings per share 6,629 6,623 ===== ===== 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. Store opening costs include rent paid during the development period, as well as labor, training and certain other pre-opening charges which are expensed as incurred. 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 increase was achieved despite increased store opening costs, principally attributable to the three Haru restaurants under construction in New York City, one of the nation's highest cost real estate development markets. Store opening costs related to these Haru units include rent paid during the development period, a factor not typically incurred in other markets, as well as other usual pre-opening type expenses. The Company incurred operating losses of approximately $290,000 in the third quarter and approximately $600,000 for the first ten periods related to two new recently opened Sushi Doraku restaurants; one in Miami Beach, Florida and the other in Chicago, Illinois. Sushi Doraku by Benihana is a relatively new restaurant concept and those units are in the early start-up phase. No new Sushi Doraku restaurants are currently planned. 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. Three Periods Ended Ten Periods Ended ------------------------- -------------------------- December 31, January 2, December 31, January 2, 2000 2000 2000 2000 ------------ ---------- ------------ ---------- Net restaurant sales $36,866 $31,853 $120,017 $100,954 Other income, principally franchise fees and royalties 395 336 1,010 849 ------- ------- -------- -------- Total Revenues $37,261 $32,189 $121,027 $101,803 ======= ======= ======== ======== Three Periods Ended Ten Periods Ended ------------------------- -------------------------- December 31, January 2, December 31, January 2, 2000 2000 2000 2000 ------------ ---------- ------------ ---------- Amount of change in total revenues from previous year $ 5,072 $ 4,290 $ 19,224 $ 12,739 Percentage of change from the previous year 15.8% 15.4% 18.9% 14.3%
BENIHANA INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Three and ten periods ended December 31, 2000 compared to January 2, 2000 -- Restaurant revenues continued to increase in the three and ten periods ended December 31, 2000 as compared to the equivalent periods ended January 2, 2000. The increase in revenues is attributable to increased customer traffic of 10.7% for the current three periods and 13.6% for the current ten periods when compared to the comparable prior year periods. Haru operations acquired in December 1999 contributed $1,400,000 to the three periods increase and $6,100,000 to the ten periods increase. Comparable restaurant sales increased $2,700,000 or 9.5% in the current three periods and $9,000,000 or 11.2% in the current ten periods when compared to the prior equivalent periods. Other income increased in the current three periods and in the current ten periods when compared to the equivalent periods of the prior year as a result of increased franchise royalties and the initial franchise fees from the opening of two franchises in Venezuela and one in Milwaukee, Wisconsin. 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 ended December 31, 2000 as compared to the equivalent periods ended January 2, 2000. 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. Three Periods Ended Ten Periods Ended ------------------------- -------------------------- December 31, January 2, December 31, January 2, 2000 2000 2000 2000 ------------ ---------- ------------ ---------- COST AS A PERCENTAGE OF RESTAURANT SALES: Cost of restaurant food and beverage sales 26.0% 26.8% 27.1% 27.0% Restaurant expenses 59.3% 57.3% 59.0% 58.7% Store opening costs .7% .4% 1.0% .2% General and administrative expenses 5.4% 4.8% 5.1% 4.9% AMOUNT OF CHANGE FROM PREVIOUS YEAR (IN THOUSANDS): Cost of restaurant food and beverage sales $1,043 $1,320 $ 5,317 $3,879 Restaurant expenses $3,629 $2,125 $11,588 $5,499 Store opening costs $ 139 $ 114 $ 993 $ 184 General and administrative expenses $ 459 $ 139 $ 1,148 $ 389 PERCENTAGE CHANGE FROM PREVIOUS YEAR: Cost of restaurant food and beverage sales 12.2% 18.3% 19.5% 16.6% Restaurant expenses 19.9% 13.2% 19.6% 10.6% Store opening costs 120.9% 3800.0% 536.8% 6133.3% General and administrative expenses 30.1% 9.3% 23.3% 8.6%
BENIHANA INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Three and ten periods ended December 31, 2000 compared to January 2, 2000 -- The cost of food and beverage sales increased in dollar amount in the current three and ten periods compared to equivalent periods in the prior year. The cost of food and beverage sales decreased in the current three periods and increased slightly in the current ten periods when expressed as percentage of sales. The decrease in the current three periods, when expressed as a percentage of sales resulted from lower commodities costs, principally shrimp and beef costs in the current three periods compared to the prior year equivalent periods. The increase when expressed as a percentage of sales in the current ten periods is immaterial. Restaurant expenses increased in dollar amount when expressed as a percentage of sales in the current three and ten periods. The increase in absolute dollar amount is mostly attributable to the aforementioned increase in sales. The increase when expressed as a percentage of sales is attributable to restaurant expenses relating to two new recently opened Sushi Doraku restaurants which have not achieved the expected sales volume and thus not producing the anticipated margins. Store opening costs increased in the current three and ten periods from the prior year equivalent periods as a result of more restaurants under development. The increase is attributable to pre-opening type expenses relating to the three Haru restaurants under development in New York City, the two Sushi Doraku restaurants opened earlier in the current year and the other traditional teppanyaki restaurants under development. Store opening costs are expected to fluctuate depending on the market and upon the number of new restaurant properties under development. General and administrative costs increased in total dollar amount when expressed as a percentage of sales in the current three and ten periods when compared to the prior equivalent periods. The increase is attributable to the amortization of goodwill from the Haru acquisition, from additional administrative expenses relating to the Haru operations and from increases in corporate infrastructure to support greater store development efforts. Interest costs decreased in the current three periods and increased in the current ten periods when compared to the comparable period of the prior year. The decrease in the current three periods is attributable to construction interest costs capitalized during the current three periods. The increase in the current ten periods is attributable to the additional borrowings relating to the Haru acquisition as well as higher interest rates in the current periods when compared to the equivalent periods in the prior year. The Company's effective income tax rate decreased in the ten periods to 33.5% from 35.1% in the prior year's ten 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 as well as operating cash flow. 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. BENIHANA INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Operating Activities Net cash provided by operating activities totaled $9,636,000 in the current ten periods ended December 31, 2000 as compared to $10,273,000 in the previous comparable period ended January 2, 2000. The decrease is mostly attributable to changes in operating assets and liabilities that used more cash in the current ten periods than in the previous comparable period. Principally, cash was used to pay estimated federal and state income taxes. Investing Activities Expenditures for property and equipment increased over the comparable period in the previous year as a result of new restaurants under development. The Company currently has seven new restaurants under development. Four of the new restaurants will operate as traditional Benihana restaurants in Las Colinas, Texas, Santa Monica, California, Westbury, New York and Wheeling, Illinois. Three of the new traditional restaurants will be financed under a master lease facility described below. The remaining cost to develop these new restaurant units is being financed from operating cash flow and the Company's revolving line of credit. Financing Activities During the current ten periods ended December 31, 2000, the Company increased its borrowings under the revolving line of credit facility by $5,500,000 and made repayments of long-term debt and obligations under capital leases of $4,925.00. Included in repayments of long-term debt and obligations under capital leases are scheduled payments under each agreement as well as payments made under the revolving line of credit facility. The Company has a Credit Agreement with First Union National Bank consisting of a term loan with an original balance of $12,000,000 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 of up to 1.0% or at LIBOR plus a margin of 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 December 31, 2000, the Company had available $8,000,000 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. BENIHANA INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company has a master lease arrangement with its principal lender, First Union National Bank and two other banks, for the financing up to $25,000,000 of land acquisitions and the construction of new restaurants. Under the agreement, a grantor trust purchases land selected by the Company, finances all of the construction costs pursuant to a facility 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 other credit facilities. As of December 31, 2000, $23,000,000 remained available under this arrangement. 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 December 31, 2000, the Company had a financial derivative with a notional amount of $3,930,000 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 December 31, 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. 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 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 13, 2001 /s/ Joel A. Schwartz ------------------------ --------------------- Joel A. Schwartz President /s/ Michael R. Burris ---------------------- Michael R. Burris Chief Financial Officer