-----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, Iu3PsXImFyM6xS99pfFVMvMbKot+NDXffs1mrJEeyLUQJBoYvcm4gB67udCMydox B1rq5gygyr3W9qYNnXihiw== 0000935226-03-000045.txt : 20031120 0000935226-03-000045.hdr.sgml : 20031120 20031120145743 ACCESSION NUMBER: 0000935226-03-000045 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20031012 FILED AS OF DATE: 20031120 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BENIHANA INC CENTRAL INDEX KEY: 0000935226 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 650538630 STATE OF INCORPORATION: DE FISCAL YEAR END: 0328 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-26396 FILM NUMBER: 031015377 BUSINESS ADDRESS: STREET 1: 8685 NW 53RD TERRACE CITY: MIAMI STATE: FL ZIP: 33166 BUSINESS PHONE: 3055930770 MAIL ADDRESS: STREET 1: 8685 NW 53RD TERRACE CITY: MIAMI STATE: FL ZIP: 33166 10-Q 1 form10q-08.txt 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 October 12, 2003 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 check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act.) 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, 3,166,479 shares outstanding at November 17, 2003 Class A Common Stock $.10 par value, 5,685,959 shares outstanding at November 17, 2003 BENIHANA INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND SEVEN PERIODS ENDED OCTOBER 12, 2003 TABLE OF CONTENTS PAGE PART I - Financial Information Condensed Consolidated Balance Sheets (unaudited) at October 12, 2003 and March 30, 2003 1 Condensed Consolidated Statements of Earnings (unaudited) for the Three and Seven Periods Ended October 12, 2003 and October 13, 2002 2 - 3 Condensed Consolidated Statement of Stockholders' Equity (unaudited) for the Seven Periods Ended October 12, 2003 4 Condensed Consolidated Statements of Cash Flows (unaudited) for the Seven Periods Ended October 12, 2003 and October 13, 2002 5 Notes to Condensed Consolidated Financial Statements (unaudited) 6 - 8 Management's Discussion and Analysis of Financial Condition and Results of Operations 9 - 14 PART II - Other Information Item 4. Results of Vote of Security Holders 15 - 16 Item 6. Exhibits and Reports on Form 8-K 16 Signature 17 Certifications 18 - 21 BENIHANA INC. AND SUBSIDIARIES PART I - Financial Information CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (In thousands, except share and per share information)
October 12, March 30, 2003 2003 - ----------------------------------------------------------------------------------------------------------- Assets Current Assets: Cash and cash equivalents $ 1,965 $ 2,299 Receivables 701 626 Inventories 5,894 5,328 Prepaid expenses 1,564 2,236 - ----------------------------------------------------------------------------------------------------------- Total current assets 10,124 10,489 Property and equipment, net 90,345 84,482 Deferred income taxes, net 941 1,172 Goodwill, net 27,131 27,131 Other assets 5,055 5,207 - ----------------------------------------------------------------------------------------------------------- $133,596 $128,481 - ----------------------------------------------------------------------------------------------------------- Liabilities and Stockholders' Equity Current Liabilities: Accounts payable and accrued expenses $19,252 $ 19,407 Current maturity of bank debt 3,000 3,000 Current maturities of obligations under capital leases 263 373 - ----------------------------------------------------------------------------------------------------------- Total current liabilities 22,515 22,780 Long-term debt - bank 19,350 19,000 Obligations under capital leases 157 299 Minority interest 1,109 771 Commitments and contingencies Stockholders' Equity: Common stock - $.10 par value; convertible into Class A Common stock; authorized - 12,000,000 shares; issued and outstanding - 3,166,479 and 3,184,479 shares, respectively 317 318 Class A Common stock - $.10 par value; authorized - 20,000,000 shares; issued and outstanding - 5,683,709 and 5,595,084 shares, respectively 568 560 Additional paid-in capital 48,857 48,444 Retained earnings 40,866 36,452 Treasury stock - 10,828 shares of Common and Class A Common stock at cost (143) (143) - ----------------------------------------------------------------------------------------------------------- Total stockholders' equity 90,465 85,631 - ----------------------------------------------------------------------------------------------------------- $133,596 $128,481 - -----------------------------------------------------------------------------------------------------------
See notes to condensed consolidated financial statements BENIHANA INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) (In thousands, except per share information)
Three Periods Ended -------------------------------- October 12, October 13, 2003 2002 - ------------------------------------------------------------------------------------------------------ Revenues Restaurant sales $43,925 $41,676 Franchise fees and royalties 310 282 - ------------------------------------------------------------------------------------------------------ Total revenues 44,235 41,958 - ------------------------------------------------------------------------------------------------------ Costs and Expenses Cost of food and beverage sales 11,232 10,323 Restaurant operating expenses 26,304 25,837 Restaurant opening costs 590 116 Marketing, general and administrative expenses 3,697 3,381 - ------------------------------------------------------------------------------------------------------ Total operating expenses 41,823 39,657 - ------------------------------------------------------------------------------------------------------ Income from operations 2,412 2,301 Interest expense, net 84 108 Minority interest 149 111 - ------------------------------------------------------------------------------------------------------ Income from operations before income taxes 2,179 2,082 Income tax provision 717 630 - ------------------------------------------------------------------------------------------------------ Net Income $1,462 $1,452 - ------------------------------------------------------------------------------------------------------ Earnings Per Share Basic earnings per common share $ .17 $ .17 Diluted earnings per common share $ .16 $ .16 - ------------------------------------------------------------------------------------------------------ Number of restaurants at end of period 65 61
See notes to condensed consolidated financial statements BENIHANA INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) (In thousands, except per share information)
Seven Periods Ended --------------------------------- October 12, October 13, 2003 2002 - ------------------------------------------------------------------------------------------------------ Revenues Restaurant sales $104,467 $98,399 Franchise fees and royalties 870 718 - ------------------------------------------------------------------------------------------------------ Total revenues 105,337 99,117 - ------------------------------------------------------------------------------------------------------ Costs and Expenses Cost of food and beverage sales 26,803 24,313 Restaurant operating expenses 61,787 59,589 Restaurant opening costs 833 264 Marketing, general and administrative expenses 8,710 8,177 - ------------------------------------------------------------------------------------------------------ Total operating expenses 98,133 92,343 - ------------------------------------------------------------------------------------------------------ Income from operations 7,204 6,774 Interest expense, net 233 225 Minority interest 338 268 - ------------------------------------------------------------------------------------------------------ Income from operations before income taxes 6,633 6,281 Income tax provision 2,219 2,039 - ------------------------------------------------------------------------------------------------------ Net Income $4,414 $4,242 - ------------------------------------------------------------------------------------------------------ Earnings Per Share Basic earnings per common share $ .50 $ .49 Diluted earnings per common share $ .49 $ .45 - ------------------------------------------------------------------------------------------------------ Number of restaurants at end of period 65 61
See notes to condensed consolidated financial statements BENIHANA INC AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED) (In thousands, except share information)
Class A Additional Total Common Common Paid-in Retained Treasury Stockholders' Stock Stock Capital Earnings Stock Equity - ------------------------------------------------------------------------------------------------------------------------------------ Balance, March 30, 2003 $318 $560 $48,444 $36,452 $(143) $85,631 Net income 4,414 4,414 Issuance of 12,000 shares of common stock under exercise of options 2 61 63 Issuance of 58,625 shares of Class A common stock under exercise of options 5 352 357 Conversion of 30,000 shares of common stock into 30,000 shares of Class A common stock (3) 3 - ------------------------------------------------------------------------------------------------------------------------------------ Balance, October 12, 2003 $317 $568 $48,857 $40,866 $(143) $90,465 - ------------------------------------------------------------------------------------------------------------------------------------
See notes to condensed consolidated financial statements BENIHANA INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands, except share information)
Seven Periods Ended -------------------------------- October 12, October 13, 2003 2002 - ------------------------------------------------------------------------------------------------------------- Operating Activities: Net income $4,414 $4,242 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 4,414 3,563 Minority interest 338 268 Deferred income taxes 231 231 Loss on disposal of assets 61 74 Issuance of common stock for incentive compensation 3 Change in operating assets and liabilities that provided (used) cash: Receivables (75) 584 Inventories (566) (557) Prepaid expenses 672 332 Other assets (124) (231) Accounts payable and accrued expenses (155) 633 - ------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 9,210 9,142 - ------------------------------------------------------------------------------------------------------------- Investing Activities: Expenditures for property and equipment (10,062) (21,214) - ------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (10,062) (21,214) - ------------------------------------------------------------------------------------------------------------- Financing Activities: Borrowings under revolving line of credit 10,400 15,000 Proceeds from issuance of common stock under exercise of stock options 420 1,729 Repayment of long-term debt and obligations under capital leases (10,302) (8,377) Purchase of treasury stock (4) Tax benefit from stock option exercises 484 - ------------------------------------------------------------------------------------------------------------- Net cash provided by financing activities 518 8,832 - ------------------------------------------------------------------------------------------------------------- Net decrease in cash and cash equivalents (334) (3,240) Cash and cash equivalents, beginning of year 2,299 5,062 - ------------------------------------------------------------------------------------------------------------- Cash and cash equivalents, end of period $1,965 $1,822 - ------------------------------------------------------------------------------------------------------------- Supplemental Cash Flow Information: Cash paid during the seven periods: Interest $ 239 $ 254 Income taxes $ 389 $1,051 - ------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------
During the seven periods ended October 12, 2003, 30,000 shares of common stock were converted into 30,000 shares of Class A common stock. During the seven periods ended October 13, 2002, 41,700 shares of common stock were converted into 41,700 shares of Class A common stock. See notes to condensed consolidated financial statements. BENIHANA INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS THREE AND SEVEN PERIODS ENDED OCTOBER 12, 2003 AND OCTOBER 13, 2002 (UNAUDITED) 1. GENERAL The accompanying condensed consolidated financial statements are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) 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 three and seven periods (twelve and twenty-eight weeks) ended October 12, 2003 and October 13, 2002 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 accounting principles generally accepted in the United States of America have been condensed or omitted. These interim financial statements should be read in conjunction with the consolidated financial statements and accompanying notes thereto for the year ended March 30, 2003 appearing in Benihana Inc. and Subsidiaries (the "Company") Form 10-K filed with the Securities and Exchange Commission. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Certain prior period amounts have been reclassified to conform to the current period presentation. 2. STOCK-BASED COMPENSATION The Company accounts for stock options issued to employees under the intrinsic value method of accounting for stock-based compensation. The Company generally recognizes no compensation expense with respect to such awards because stock options are generally granted at the fair market value of the underlying shares on the date of the grant. Had the Company accounted for its stock-based awards under the fair value method, the table below shows the pro forma effect on net income and earnings per share for the three and seven periods ended:
Three Periods Ended Seven Periods Ended --------------------------------- ------------------------------- October 12, October 13, October 12, October 13, 2003 2002 2003 2002 ----------- ----------- ----------- ----------- Net Income As reported $1,462 $1,452 $4,414 $4,242 Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards (133) (174) (307) (406) ----------- ----------- ----------- ----------- Pro forma $1,329 $1,278 $4,107 $3,836 =========== =========== =========== =========== Basic earnings per share As reported $ .17 $ .17 $ .50 $ .49 ----------- ----------- ----------- ----------- Pro forma $ .15 $ .15 $ .47 $ .44 =========== =========== =========== =========== Diluted earnings per share As reported $ .16 $ .16 $ .49 $ .45 ----------- ----------- ----------- ----------- Pro forma $ .15 $ .14 $ .45 $ .41 =========== =========== =========== ===========
BENIHANA INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS THREE AND SEVEN PERIODS ENDED OCTOBER 12, 2003 AND OCTOBER 13, 2002 (UNAUDITED) 3. INVENTORIES Inventories consist of (in thousands):
October 12, March 30, 2003 2003 ----------- --------- Food and beverage $1,794 $1,612 Supplies 4,100 3,716 ----------- --------- $5,894 $5,328 =========== ========= 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. 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. Seven Periods Ended -------------------------------------------- October 12, October 13, 2003 2002 ----------- ----------- Net income for computation of basic and diluted earnings per common share $4,414 $4,242 =========== =========== Seven Periods Ended -------------------------------------------- October 12, October 13, 2003 2002 ----------- ----------- Weighted average number of common shares used in basic earnings per share 8,791 8,716 Effect of dilutive securities: Stock options and warrants 271 736 ----------- ----------- Weighted average number of common shares and dilutive potential common stock used in diluted earnings per share 9,062 9,452 =========== ===========
BENIHANA INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS THREE AND SEVEN PERIODS ENDED OCTOBER 12, 2003 AND OCTOBER 13, 2002 (UNAUDITED) 5. RESTAURANT OPERATING EXPENSES Restaurant operating expenses consist of the following (in thousands):
Three Periods Ended Seven Periods Ended ---------------------------------- --------------------------------- October 12, October 13, October 12, October 13, 2003 2002 2003 2002 ----------- ----------- ----------- ----------- Labor and related costs $15,928 $16,306 $37,695 $37,606 Restaurant supplies 875 902 2,029 1,968 Credit card discounts 741 721 1,813 1,690 Utilities 1,218 1,096 2,680 2,363 Occupancy costs 2,536 2,255 5,934 5,447 Depreciation and amortization 1,875 1,510 4,228 3,431 Other operating expenses 3,131 3,047 7,408 7,084 ----------- ----------- ----------- ----------- Total restaurant operating expenses $26,304 $25,837 $61,787 $59,589 =========== =========== =========== ===========
6. COMMITMENTS AND CONTINGENCIES In December 1999, the Company completed the acquisition of 80% of the equity of Haru Holding Corp. ("Haru"). The acquisition was accounted for using the purchase method of accounting. Pursuant to the purchase agreement, at any time during the period of July 1, 2005 through September 30, 2005, the holders of the balance of Haru's equity (the "Minority Stockholders") have a one-time option to sell their shares to the Company. In the event that the Minority Stockholders do not exercise their right to sell their shares, then the Company has a one-time option to purchase the shares of the Minority Stockholders between the period of October 1, 2005 and December 31, 2005. The price for both the put and call options will be determined based on a defined cash flow measure for the acquired business. In December 2002, the Company completed the acquisition of RA Sushi restaurants. The acquisition was accounted for using the purchase method of accounting. Pursuant to the purchase agreement, the Company is required to pay the seller contingent payments based on certain operating results of the acquired business for fiscal years ending 2004, 2005 and 2006. The Company will account for the contingent payments as an addition to the purchase price. BENIHANA INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Our revenues consist of sales of food and beverages at our restaurants and licensing fees from franchised restaurants. Cost of restaurant food and beverages sold represents the direct cost of the ingredients for the prepared food and beverages sold. Restaurant operating expenses consist of direct and indirect labor, occupancy costs, advertising and other costs that are directly attributed to each restaurant location. Restaurant 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, restaurant patronage and 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. Revenues increased 5.4% in the current three periods and increased 6.3% in the current seven periods when compared to the corresponding periods a year ago. Net income and earnings per diluted share remained constant in the current three periods when compared to the equivalent period of the prior year. Net income and earnings per fully diluted share increased in the current seven periods when compared to the equivalent period of the prior year. Both the current three and seven periods had negative comparable sales as well as increased commodity costs when compared to the equivalent periods a year ago. Net income and earnings per fully diluted share were positively affected in both the three and seven periods by an improved relationship of labor costs to sales when compared to the equivalent periods a year ago. REVENUES Three and seven periods ended October 12, 2003 compared to October 13, 2002 -- 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 (in thousands).
Three Periods Ended Seven Periods Ended --------------------------------- -------------------------------- October 12, October 13, October 12, October 13, 2003 2002 2003 2002 ----------- ----------- ----------- ----------- Restaurant sales $43,925 $41,676 $104,467 $98,399 Franchise fees and royalties 310 282 870 718 ----------- ----------- ----------- ----------- Total revenues $44,235 $41,958 $105,337 $99,117 =========== =========== =========== =========== Three Periods Ended Seven Periods Ended --------------------------------- -------------------------------- October 12, October 13, October 12, October 13, 2003 2002 2003 2002 ----------- ----------- ----------- ----------- Amount of change in total revenues from previous year $2,277 $4,472 $6,220 $10,696 ----------- ----------- ----------- ----------- Percentage of change from the previous year 5.4% 11.9% 6.3% 12.1% =========== =========== =========== ===========
BENIHANA INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Restaurant revenues increased in the three and seven periods ended October 12, 2003 compared to the corresponding periods a year ago. Restaurant sales increased from acquired and newly opened restaurants by $3.0 million for the current three periods and by $7.3 million for the current seven periods as compared to the corresponding periods a year ago. The increase in restaurant sales was offset by negative comparable sales of 1.4%, a decrease of $0.6 million in the current three periods and 0.9%, a decrease of $1.0 million in the current seven periods when compared to the equivalent periods a year ago. Restaurant sales were also negatively impacted by temporary and permanent restaurant closures of $0.2 million for the current three periods and $0.3 million for the current seven periods when compared to the equivalent periods a year ago. The acquired RA Sushi restaurants are not included in comparable sales as they were acquired in the latter part of fiscal 2003. COSTS AND EXPENSES Three and seven periods ended October 12, 2003 compared to October 13, 2002 -- The following table reflects the proportion that the various elements of costs and expenses bore to restaurant sales and the changes in amounts and percentage changes in amounts from the previous year's three and seven periods.
Three Periods Ended Seven Periods Ended --------------------------------- --------------------------------- October 12, October 13, October 12, October 13, 2003 2002 2003 2002 ----------- ----------- ----------- ----------- COST AS A PERCENTAGE OF RESTAURANT SALES: Cost of food and beverage sales 25.6% 24.8% 25.7% 24.7% Restaurant operating expenses 59.9% 62.0% 59.1% 60.6% Restaurant opening costs 1.3% 0.3% .8% 0.3% Marketing, general and administrative expenses 8.4% 8.1% 8.3% 8.3% Three Periods Ended Seven Periods Ended ------------------------------- --------------------------------- October 12, October 13, October 12, October 13, 2003 2002 2003 2002 ----------- ----------- ----------- ----------- AMOUNT OF CHANGE FROM PREVIOUS COMPARABLE PERIOD (IN THOUSANDS): Cost of food and beverage sales $909 $ 763 $2,490 $1,527 Restaurant operating expenses $467 $2,425 $2,198 $7,466 Restaurant opening costs $474 $ (238) $ 569 $ (777) Marketing, general and administrative expenses $316 $ 177 $ 533 $ 622
BENIHANA INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Three Periods Ended Seven Periods Ended --------------------------------- ------------------------------- October 12, October 13, October 12, October 13, 2003 2002 2003 2002 ----------- ----------- ----------- ----------- PERCENTAGE CHANGE FROM PREVIOUS COMPARABLE PERIOD: Cost of food and beverage sales 8.8% 8.0% 10.2% 6.7% Restaurant operating expenses 1.8% 10.4% 3.7% 14.3% Restaurant opening costs 408.6% (67.2%) 215.5% (74.6%) Marketing, general and administrative expenses 9.3% 5.5% 6.5% 8.2%
The cost of food and beverage sales increased in total dollar amount and when expressed as a percentage of sales in the current three and seven periods when compared to the corresponding periods in the prior year. Costs of food and beverage sales, which are generally variable with sales, directly increased with changes in revenues for the three and seven periods ended October 12, 2003 as compared to the equivalent periods ended October 13, 2002. The increase was also a result of commodities price increases, principally beef and lobster costs, in the current three and seven periods as compared to the equivalent period in the prior year. Restaurant operating expenses increased in absolute amount in the current three and seven periods, but decreased when expressed as a percentage of sales compared to the corresponding periods a year ago. The increase in absolute amount was due to the acquisition of the four RA Sushi restaurants and the newly opened teppanyaki restaurants in the current three and seven periods when compared to the equivalent periods. The decrease when expressed as a percentage of sales is due to lower labor and related costs in the current year's three and seven periods when compared to the prior year's three and seven periods. Labor costs and related costs improved as a result of productivity increases and reduction of overtime wages in the current three and seven periods and from lower health insurance costs as a result of a decrease in the total dollar amount of health insurance claims coupled with increased employee contributions to health insurance costs. Restaurant opening costs increased in the current three and seven periods ended October 12, 2003 compared to the prior year corresponding periods. The increase is a result of the growth in restaurant development activity compared to the equivalent periods a year ago. Marketing, general and administrative costs increased in absolute amount in the current three and seven periods when compared to the equivalent periods a year ago. Marketing, general and administrative costs increased when expressed as a percentage of sales in the current three periods and remained constant in the current seven periods when compared to the equivalent periods a year ago. The increase in absolute amount is mainly attributable to increased salaries and benefits from additional management personnel who were hired by the Company in connection with the acquisition of the RA Sushi concept. Interest expense decreased in the current three periods but increased slightly in the current seven periods when compared to the corresponding periods of the prior year. The decrease in the current three periods was attributable to a decrease in the average interest rate in the current three periods. Our effective income tax rate increased in the seven periods to 33.5% from 32.5% in the prior year's seven periods. BENIHANA INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OUR FINANCIAL RESOURCES Cash flow from operations has historically been the primary source to fund our capital expenditures. Since we have accelerated our building program, we are relying more upon financing obtained from financial institutions. We have financed acquisitions principally through the use of borrowed funds. We have borrowings from Wachovia Bank, National Association ("Wachovia") under a term loan as well as a revolving line of credit facility. The line of credit facility allows us to borrow up to $15,000,000 through December 31, 2007 and at October 12, 2003, we had $8,600,000 outstanding under the revolving line of credit. We also had a $1,000,000 letter of credit outstanding against such facility in connection with our workers compensation insurance program. At October 12, 2003, we had $13,750,000 outstanding under the term loan which is payable in quarterly installments of $750,000 through December 2004 and $833,333 thereafter until the term loan matures in December 2007. The interest rate at October 12, 2003 of both the line of credit and the term loan was 2.12%. We have the option to pay interest at Wachovia's prime rate plus 1%. The interest rate may vary depending upon the ratio of the sum of earnings before interest, taxes, depreciation and amortization to our indebtedness. The loan agreements limit our capital expenditures to certain amounts, require that we maintain certain financial ratios and profitability amounts and prohibit the payment of cash dividends. Since restaurant businesses generally do not have large amounts of inventory and accounts receivable, there is no need to finance them. As a result, many restaurant businesses, including our own, operate with negative working capital. The following table summarizes the sources and uses of cash and cash equivalents (in thousands):
Seven Periods Ended ----------------------------------------- October 12, October 13, 2003 2002 ----------- ----------- Cash provided by operations $ 9,210 $ 9,142 Cash (used in) investing activities (10,062) (21,214) Cash provided by financing activities 518 8,832 ----------- ----------- Decrease in cash and cash equivalents $ (334) $ (3,240) =========== ===========
Operating Activities Cash provided by operations increased slightly during the seven periods ended October 12, 2003 compared to the equivalent period in the previous year. The increase resulted mainly from increased depreciation and amortization offset by the change in cash provided by operating assets and liabilities in the current seven periods when compared to the previous comparable period. Investing Activities Expenditures for property and equipment decreased during the seven periods ended October 12, 2003 from the prior comparable period. The decrease is attributable to expenditures of approximately $13 million made in the prior year seven periods for the purchase of property and equipment of three teppanyaki restaurants previously financed under a master lease agreement which was terminated June 12, 2002. BENIHANA INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Financing Activities During the current seven periods there were stock option exercises with cash proceeds to the Company of $420,000 as compared to $1,729,000 in the previous comparable period a year ago. Our total indebtedness increased by $98,000 during the seven periods ended October 12, 2003 as compared to the end of fiscal 2003. We had net borrowings of $2,600,000 from the revolving line of credit, paid down $2,250,000 of the term loan and paid $252,000 under leases that are considered to be capital in nature. Forward-Looking Statements This quarterly report contains various "forward-looking statements" made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent our expectations or beliefs concerning future events, including unit growth, future capital expenditures, and other operating information. A number of factors could, either individually or in combination, cause actual results to differ materially from those included in the forward-looking statements, including changes in consumer dining preferences, fluctuations in commodity prices, availability of qualified employees, changes in the general economy, industry cyclicality, and in consumer disposable income, competition within the restaurant industry, availability of suitable restaurant locations, harsh weather conditions in areas in which we and our franchisees operate restaurants or plan to build new restaurants, acceptance of our concepts in new locations, changes in governmental laws and regulations affecting labor rates, employee benefits, and franchising, ability to complete new restaurant construction and obtain governmental permits on a reasonably timely basis and other factors that we cannot presently foresee. The Impact of Inflation Inflation has not been a significant factor in our business for the past several years. We have been able to keep increasing menu prices at a low level by strictly maintaining cost controls. A possible increase to the minimum wage is being considered by United States Congress; any such increase will affect us, as well as most other restaurant businesses. We do not know if or when the increase will take effect nor have we evaluated whether the increase would be material if enacted into law. Market Risks We are exposed to certain risks of increasing interest rates and commodity prices. The interest on our indebtedness is largely variable and is benchmarked to the prime rate in the United States or to the London interbank offering rate. We may protect ourselves from interest rate increases from time-to-time by entering into derivative agreements that fix the interest rate at predetermined levels. We have a policy not to use derivative agreements for trading purposes. We have no derivative agreements as of October 12, 2003. We purchase commodities such as chicken, beef, lobster and shrimp for our restaurants. The prices of these commodities may be volatile depending upon market conditions. We do not purchase forward commodity contracts because the changes in prices for them have historically been short-term in nature and, in our view, the cost of the contracts is in excess of the benefits. Seasonality of Our Business Our business is not highly seasonal although we do have more patrons coming to our restaurants for special holidays such as Mother's Day, Valentine's Day and New Year's. Mother's Day falls in our first fiscal quarter of each year, New Year's in the third quarter and Valentine's Day in the fourth quarter. BENIHANA INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Controls and Procedures As of the end of the period covered by this report, the Company conducted an evaluation, under the supervision and with the participation of the principal executive officer and principal financial officer, of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")). Based on this evaluation, the principal executive officer and principal financial officer concluded that the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. There was no change in the Company's internal control over financial reporting during the Company's most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. BENIHANA INC. AND SUBSIDIARIES PART II - Other Information Item 4. Results of Vote of Security Holders (a) We held our annual meeting of stockholders on August 21, 2003. (b) The following directors were elected at the meeting: John E. Abdo, Norman Becker, Darwin C. Dornbush, Robert B. Sturges and Yoshihiro Sano Other directors whose term of office continues after the meeting are set forth below: Joel A. Schwartz, Kevin Y. Aoki, Taka Yoshimoto and Max Pine (c) At the annual meeting, holders of our Common Stock voted to elect one Class I director for a term of two years and a Class II director and Class III director for a term of three years, respectively and holders of our Class A Common Stock voted to elect a Class I director for a term of one year and a Class III director for a term of three years. In addition, holders of our Common Stock and Class A Common Stock, voting together as a single class, voted for the approval of the 2003 Directors' Stock Option Plan and voted for the ratification of Deloitte & Touche LLP to serve as our independent certified public accountants for the fiscal year ending March 28, 2004. At the meeting, the following votes for and against, as well as the number of abstentions and broker non-votes were recorded for each matter as set for the below:
WITHHOLD NON- MATTER FOR AGAINST ABSTAIN AUTHORITY VOTES ----------------------------------------------------------------------------------------------------- Election of Directors: Class I Darwin C. Dornbush 2,976,201 120,796 Class II John E. Abdo 4,605,436 206,396 Class II Norman Becker 3,079,297 17,700 Class II Robert B. Sturges 3,087,697 9,300 Class III Yoshihiro Sano 4,704,900 106,932 Approval of the 2003 Directors" Stock Option Plan 2,462,492 217,019 69,095
BENIHANA INC. AND SUBSIDIARIES PART II - Other Information
WITHHOLD NON- MATTER FOR AGAINST ABSTAIN AUTHORITY VOTES ----------------------------------------------------------------------------------------------------- Ratification of Public Accountants: 3,574,683 3,137 360
Item 6. Exhibits and Reports on Form 8-K (a) On August 25, 2003 the Company filed a report Form 8-K covering its earnings press release for the fiscal quarter ended July 20, 2003. (b)(i) Exhibit 10.1 - Employment agreement dated September 1, 2003, between Michael R. Burris and the Company. (b)(ii) Exhibit 10.2 - Employment agreement dated September 1, 2003, between Kevin Aoki and the Company. (b)(iii) Exhibit 10.3 - Employment agreement dated September 1, 2003, between Juan C. Garcia and the Company. (b)(iv) Exhibit 31.1 - Chief Executive Officer's certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (b)(v) Exhibit 31.2 - Chief Financial Officer's certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (b)(vi) Exhibit 32.1 - Chief Executive Officer's certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (b)(vii) Exhibit 32.2 - Chief Financial Officer's certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 SIGNATURE 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 November 20, 2003 /s/ Joel A. Schwartz ----------------------- ---------------------------------- Joel A. Schwartz President and Chief Executive Officer and Director Exhibit 10.1 EMPLOYMENT AGREEMENT AGREEMENT dated this 1st day of September, 2003, by and between Benihana Inc., a Delaware corporation (the "Company") and Michael R. Burris (the "Employee"). R E C I T A L S : The Employee is, and has been for some years, employed by the Company as its Senior Vice President-Finance and Treasurer and Chief Financial Officer; and the Company is desirous of continuing such employment of Employee, and Employee is desirous of continuing to be employed by the Company on the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the mutual covenants herein contained, it is hereby agreed by and between the Company and Employee as follows: 1. Engagement and Term. The Company hereby continues to employ Employee and ------------------- Employee hereby accepts such continued employment by the Company on the terms and conditions set forth herein, for a period commencing on the date hereof (the "Effective Date"), and ending, unless sooner terminated in accordance with the provisions of Section 4 hereof, on August 31, 2006 (the "Employment Period"). 2. Scope of Duties. Employee shall be employed by the Company as its Senior Vice --------------- President-Finance and Treasurer and Chief Financial Officer. In such capacities, the Employee shall have such authority, powers and duties as are customarily attendant upon such position. If elected or appointed, Employee shall also serve, without additional compensation, in one or more offices and, if and when elected, as a director of the Company or any subsidiary or affiliate of the Company, provided that his duties and responsibilities are not inconsistent with those pertaining to his position as an executive. Employee shall faithfully devote his full business time and efforts so as to advance the best interests of the Company. During the Employment Period, Employee shall not be engaged in any other business activity, whether or not such business activity is pursued for profit or other pecuniary advantage, unless same is only incidental and is in no way, directly or indirectly, competitive with, or opposed to the best interests of the Company. 3. Compensation. ------------ 3.1. Basic Compensation. In respect of services to be performed by the Employee ------------------ during the Employment Period, the Company agrees to pay the Employee an annual salary of One Hundred Fifty-Seven Thousand, Five Hundred Dollars ($157,500) ("Basic Compensation"), payable in accordance with the Company's customary payroll practices for executive employees. 3.2. Discretionary Increases. The Employees shall also be entitled to such ----------------------- additional increments and bonuses as shall be determined from time to time by the Board of Directors of the Company. 3.3. Stock Options. The Employee will be eligible to receive stock options under ------------- the Company's stock option plans at the discretion of the Stock Option Committee of the Board of Directors of the Company in accordance with policies existing at the time of such grants. 3.4. Other Benefits. -------------- (a) Employees shall be entitled to participate, at Company's expense, in the major medical health insurance plan, and all other health, insurance or other benefit plan applicable generally to executive officers of the Company. (b) During the Employment Period, Employee will be entitled to paid vacations and holidays consistent with the Company's policy applicable to executives generally. All vacations shall be scheduled at the mutual convenience of the Company and the Employee. 4. Term of Employment. The provisions of Section 1 of this Agreement ------------------ notwithstanding, the Company may terminate this Agreement and Employee's employment hereunder in the manner and for the causes hereinafter set forth, in which event the Company shall be under no further obligation to Employee other than as specifically provided herein: (a) If Employee is absent from work or otherwise substantially unable to assume his normal duties for a period of sixty (60) successive days or an aggregate of ninety (90) business days during any consecutive twelve-month period during the Employment Period because of physical or mental disability, accident, illness, or any other cause other than vacation or approved leave of absence or disability still exists, the Company may terminate the employment of Employee hereunder upon ten (10) days' written notice to Employee. (b) In the event of the death of Employee, this Agreement shall immediately terminate on the date hereof. (c) If Employee materially breached or violates any material term of his employment hereunder, or commits any criminal act or an act of dishonesty or moral turpitude, in the reasonable judgment of the Company's Board of Directors, then the Company may, in addition to other rights and remedies available at law or equity, immediately terminate this Agreement upon written notice to Employee with the date of such notice being the termination date and such termination being deemed for "cause." (d) In the event Employee's employment shall be terminated by reason of the provisions of subparagraph (a) or (b) of this Section 4, then in such event, the Company shall pay to Employee, if living, or other person or persons as Employee may from time to time designate in writing as the beneficiary of such payment a sum, equal to the Basic Compensation in effect at the time which such death or disability occurred, such payment to continue for three months after such death or disability. 5. Change in Control. ----------------- 5.1. In the event at any time during the Employment Period, a majority of the Board of Directors is composed of persons who are not "Continuing Directors," as hereinafter defined, and Employee's employment is terminated by the Company other than for one of the reasons set forth in Section 4 hereof, Employee shall not be obligated to seek employment to mitigate his damages, if any, to which he may be entitled for breach of this Agreement. 5.2. "Continuing Directors" shall mean (i) the directors of the Company at the close of business on September 1, 2003 and (ii) any person who was or is recommended to (A) succeed a Continuing Director by the Company's Nominating Committee or (B) become a director as a result of an increase in the size of the Board by a majority of the Continuing Directors then on the Board. 6. Disclosure of Confidential Information and Covenant Not to Compete. Employee ------------------------------------------------------------------ agrees that his primary loyalty will be to the Company. Employee acknowledges that the Company possess confidential information, know-how, customer lists, purchasing, merchandising and selling techniques and strategies, and other information used in its operations of which Employee will obtain knowledge, and that the Company will suffer serious and irreparable damage and harm if this confidential information were disclosed to any other party or if Employee used this information to compete against the Company. Accordingly, Employee hereby agrees that except as required by Employee's duties to the Company, Employee without the consent of the Company's Board of Directors, shall not at any time during or after the term of this contract disclose or use any secret or confidential information of the Company, including, without limitation, such business opportunities, customer lists, trade secrets, formulas, techniques and methods of which Employee shall become informed during his employment, whether learned by him as an Employee of the Company, as a member of the Board of Directors or otherwise, and whether or not developed by the Employee, unless such information shall be or become public knowledge other than as a result of the Employee's direct or indirect disclosure of the same. Employee further agrees that for a period of two years following the termination of Employee's employment, except as a result of the breach by the Company of any material term or condition hereof, Employee will not, directly or indirectly, alone or with others, individually or through or by a corporate or other business entity in which he may be interested as a partner, shareholder, joint venturer, officer or director or otherwise, engaged in the United States in any "business which is competitive with that of the Company or any of its subsidiaries" as hereinafter defined; provided, however, that the foregoing shall not be deemed to prevent the ownership by Employee of up to five percent of any class of securities of any corporation which is regularly traded on any stock exchange or over-the-counter market. For the purpose of this Agreement, a "business which is competitive with the business of the Company or any of its subsidiaries," shall include only the operation of franchise restaurants selling Japanese, or other Asian food, or restaurants of a type then being operated by the Company, or any of its subsidiaries. 7. Reimbursement of Expenses; Use of Automobile. The Company shall further pay -------------------------------------------- directly, or reimburse the Employee, for all other reasonable and necessary expenses and disbursements incurred by him for and on behalf of the Company in the performance of his duties during the Employment Period upon submission of vouchers or other evidence thereof in accordance with the Company's usual policies of expense reimbursement. The Employee shall receive an allowance of $200 per month for automobile expenses, including the lease costs or purchase price, gasoline, oil and garaging. 8. Miscellaneous Provisions. ------------------------ 8.1. Section headings are for convenience only and shall not be deemed to govern, limit, modify or supersede the provisions of this Agreement. 8.2. This Agreement is entered into in the State of Florida and shall be governed pursuant to the laws of the State of Florida. If any provision of this Agreement shall be held by a court of competent jurisdiction to be invalid, illegal or unenforceable, the remaining provisions hereof shall continue to be fully effective. 8.3. This Agreement contains the entire agreement of the parties regarding this subject matter. There are no contemporaneous oral agreements, and all prior understandings, agreements, negotiations and representations are merged herein. 8.4. This Agreement may be modified only by means of a writing signed by the party to be charged with such modification. 8.5. Notices or other communications required or permitted to be given hereunder shall be in writing and shall be deemed duly given upon the receipt by the party to whom sent at the respective addresses set forth below or to such other address as any party shall hereafter designate to the other in writing delivered in accordance herewith: If to the Company: Benihana Inc. 8685 Northwest 53rd Terrace Miami, Florida 33166-0120 Attention: President If to Employee: Michael R. Burris 276 Landings Boulevard Weston, Florida 33327 8.6. This Agreement shall inure to the benefit of, and shall be binding upon, the Company, its successors and assigns, including, without limitation, any entity that may acquire all or substantially all of the Company's assets and business or into which the Company may be consolidated or merged. This Agreement may not be assigned by Employee. 8.7. This Agreement may be executed in separate counterparts, each of which shall constitute the original thereof. 8.8. This Agreement supersedes and replaces all previous Employment Agreements between the Company and the Employee. IN WITNESS WHEREOF, the parties have set their hands as of the date first above written. BENIHANA INC. By: /s/ Joel A. Schwartz ------------------------------------ Joel A. Schwartz, President /s/ Michael R. Burris ------------------------------------- Michael R. Burris Exhibit 10.2 EMPLOYMENT AGREEMENT AGREEMENT dated as of September 1, 2003, by and between Benihana Inc., a Delaware corporation (the "Company") and Kevin Aoki (the "Employee"). R E C I T A L S : The Employee is, and has been for some years, employed by the Company as its Vice President-Marketing; and the Company is desirous of continuing such employment of Employee and Employee is desirous of continuing to be employed by the Company on the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the mutual covenants herein contained, it is hereby agreed by and between the Company and Employee as follows: 9. Engagement and Term. The Company hereby continues to employ Employee and ------------------- Employee hereby accepts such continued employment by the Company on the terms and conditions set forth herein, for a period commencing on the date hereof (the "Effective Date"), and ending, unless sooner terminated in accordance with the provisions of Section 4 hereof, on August 31, 2006 (the "Employment Period"). 10. Scope of Duties. Employee shall be employed by the Company in an executive --------------- capacity as determined by the President and the Board of Directors of the Company, and will report directly to the President of the Company. In such capacity, the Employee shall have such authority, powers and duties delegated to him by the President and the Board of Directors of the Company. If elected or appointed, Employee shall also serve, without additional compensation, in one or more offices and, if and when elected, as a director of the Company or any subsidiary or affiliate of the Company, provided that his duties and responsibilities are not inconsistent with those pertaining to his position as an executive. Employee shall faithfully devote his full business time and efforts so as to advance the best interests of the Company. During the Employment Period, Employee shall not be engaged in any other business activity, whether or not such business activity is pursued for profit or other pecuniary advantage, unless same is only incidental and is in no way, directly or indirectly, competitive with, or opposed to the best interests of the Company. 11. Compensation. ------------ 11.1. Basic Compensation. In respect of services to be performed by the Employee ------------------ during the Employment Period, the Company agrees to pay the Employee an annual salary of One Hundred Thirty-Two Thousand, Five Hundred Dollars ($132,500) ("Basic Compensation"), payable in accordance with the Company's customary payroll practices for executive employees. 11.2. Discretionary Increases. The Employees shall also be entitled to such ----------------------- additional increments and bonuses as shall be determined from time to time by the Board of Directors of the Company. 11.3. Stock Options. The Employee will be eligible to receive stock options ------------- under the Company's stock option plans at the discretion of the Stock Option Committee of the Board of Directors of the Company in accordance with policies existing at the time of such grants. 11.4. Other Benefits. -------------- (a) Employees shall be entitled to participate, at Company's expense, in the major medical health insurance plan, and all other health, insurance or other benefit plan applicable generally to executive officers of the Company. (b) During the Employment Period, Employee will be entitled to paid vacations and holidays consistent with the Company's policy applicable to executives generally. All vacations shall be scheduled at the mutual convenience of the Company and the Employee. 12. Term of Employment. The provisions of Section 1 of this Agreement ------------------ notwithstanding, the Company may terminate this Agreement and Employee's employment hereunder in the manner and for the causes hereinafter set forth, in which event the Company shall be under no further obligation to Employee other than as specifically provided herein: (a) If Employee is absent from work or otherwise substantially unable to assume his normal duties for a period of sixty (60) successive days or an aggregate of ninety (90) business days during any consecutive twelve-month period during the Employment Period because of physical or mental disability, accident, illness, or any other cause other than vacation or approved leave of absence or disability still exists, the Company may terminate the employment of Employee hereunder upon ten (10) days' written notice to Employee. (b) In the event of the death of Employee, this Agreement shall immediately terminate on the date hereof. (c) If Employee materially breached or violates any material term of his employment hereunder, or commits any criminal act or an act of dishonesty or moral turpitude, in the reasonable judgment of the Company's Board of Directors, then the Company may, in addition to other rights and remedies available at law or equity, immediately terminate this Agreement upon written notice to Employee with the date of such notice being the termination date and such termination being deemed for "cause." (d) In the event Employee's employment shall be terminated by reason of the provisions of subparagraph (a) or (b) of this Section 4, then in such event, the Company shall pay to Employee, if living, or other person or persons as Employee may from time to time designate in writing as the beneficiary of such payment a sum, equal to the Basic Compensation in effect at the time which such death or disability occurred, such payment to continue for three months after such death or disability. 13. Change in Control. ----------------- 13.1. In the event at any time during the Employment Period, a majority of the Board of Directors is composed of persons who are not "Continuing Directors," as hereinafter defined, and Employee's employment is terminated by the Company other than for one of the reasons set forth in Section 4 hereof, Employee shall not be obligated to seek employment to mitigate his damages, if any, to which he may be entitled for breach of this Agreement. 13.2. "Continuing Directors" shall mean (i) the directors of the Company at the close of business on September 1, 2003 and (ii) any person who was or is recommended to (A) succeed a Continuing Director by the Company's Nominating Committee or (B) become a director as a result of an increase in the size of the Board by a majority of the Continuing Directors then on the Board. 14. Disclosure of Confidential Information and Covenant Not to Compete. Employee ------------------------------------------------------------------ agrees that his primary loyalty will be to the Company. Employee acknowledges that the Company possess confidential information, know-how, customer lists, purchasing, merchandising and selling techniques and strategies, and other information used in its operations of which Employee will obtain knowledge, and that the Company will suffer serious and irreparable damage and harm if this confidential information were disclosed to any other party or if Employee used this information to compete against the Company. Accordingly, Employee hereby agrees that except as required by Employee's duties to the Company, Employee without the consent of the Company's Board of Directors, shall not at any time during or after the term of this contract disclose or use any secret or confidential information of the Company, including, without limitation, such business opportunities, customer lists, trade secrets, formulas, techniques and methods of which Employee shall become informed during his employment, whether learned by him as an Employee of the Company, as a member of the Board of Directors or otherwise, and whether or not developed by the Employee, unless such information shall be or become public knowledge other than as a result of the Employee's direct or indirect disclosure of the same. Employee further agrees that for a period of two years following the termination of Employee's employment, except as a result of the breach by the Company of any material term or condition hereof, Employee will not, directly or indirectly, alone or with others, individually or through or by a corporate or other business entity in which he may be interested as a partner, shareholder, joint venturer, officer or director or otherwise, engage in the United States in any "business which is competitive with that of the Company or any of its subsidiaries" as hereinafter defined or which business hires any persons who were employed by the Company or a subsidiary of the Company at the time of Employee's termination of employment with the Company; provided, however, that the foregoing shall not be deemed to prevent the ownership by Employee of up to five percent of any class of securities of any corporation which is regularly traded on any stock exchange or over-the-counter market. For the purpose of this Agreement, a "business which is competitive with the business of the Company or any of its subsidiaries," shall include only the operation of franchise restaurants selling Japanese, or other Asian food, or restaurants of a type then being operated by the Company, or any of its subsidiaries. 15. Reimbursement of Expenses; Use of Automobile. The Company shall further pay -------------------------------------------- directly, or reimburse the Employee, for all other reasonable and necessary expenses and disbursements incurred by him for and on behalf of the Company in the performance of his duties during the Employment Period upon submission of vouchers or other evidence thereof in accordance with the Company's usual policies of expense reimbursement. The Employee shall receive an allowance of $200 per month for automobile expenses, including the lease costs or purchase price, gasoline, oil and garaging. 16. Miscellaneous Provisions. ------------------------ 16.1. Section headings are for convenience only and shall not be deemed to govern, limit, modify or supersede the provisions of this Agreement. 16.2. This Agreement is entered into in the State of Florida and shall be governed pursuant to the laws of the State of Florida. If any provision of this Agreement shall be held by a court of competent jurisdiction to be invalid, illegal or unenforceable, the remaining provisions hereof shall continue to be fully effective. 16.3. This Agreement contains the entire agreement of the parties regarding this subject matter. There are no contemporaneous oral agreements, and all prior understandings, agreements, negotiations and representations are merged herein. 16.4. This Agreement may be modified only by means of a writing signed by the party to be charged with such modification. 16.5. Notices or other communications required or permitted to be given hereunder shall be in writing and shall be deemed duly given upon the receipt by the party to whom sent at the respective addresses set forth below or to such other address as any party shall hereafter designate to the other in writing delivered in accordance herewith: If to the Company: Benihana Inc. 8685 Northwest 53rd Terrace Miami, Florida 33166-0120 Attention: President If to Employee: Kevin Aoki 1000 Quaysite Terrace, Apt. 1611 Miami, Florida 33138 16.6. This Agreement shall inure to the benefit of, and shall be binding upon, the Company, its successors and assigns, including, without limitation, any entity that may acquire all or substantially all of the Company's assets and business or into which the Company may be consolidated or merged. This Agreement may not be assigned by Employee. 16.7. This Agreement may be executed in separate counterparts, each of which shall constitute the original thereof. 16.8. This Agreement supersedes and replaces the Employment Agreement dated October 19, 1998, as amended on January 25, 2000 and April 1, 2001, between the Company and the Employee. IN WITNESS WHEREOF, the parties have set their hands as of the date first above written. BENIHANA INC. By: /s/ Joel A. Schwartz ------------------------------------------ Joel A. Schwartz, President /s/ Kevin Aoki ------------------------------------------ Kevin Aoki Exhibit 10.3 EMPLOYMENT AGREEMENT AGREEMENT dated this 1st day of September, 2003, by and between Benihana Inc., a Delaware corporation (the "Company") and Juan C. Garcia (the "Employee"). R E C I T A L S : The Employee is, and has been for some years, employed by the Company as its Vice President/Comptroller; and the Company is desirous of continuing such employment of Employee, and Employee is desirous of continuing to be employed by the Company on the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the mutual covenants herein contained, it is hereby agreed by and between the Company and Employee as follows: 17. Engagement and Term. The Company hereby continues to employ Employee and ------------------- Employee hereby accepts such continued employment by the Company on the terms and conditions set forth herein, for a period commencing on the date hereof (the "Effective Date"), and ending, unless sooner terminated in accordance with the provisions of Section 4 hereof, on August 31, 2006 (the "Employment Period"). 18. Scope of Duties. Employee shall be employed by the Company as its Vice --------------- President/Comptroller. In such capacity, the Employee shall have such authority, powers and duties as are customarily attendant upon such position. If elected or appointed, Employee shall also serve, without additional compensation, in one or more offices and, if and when elected, as a director of the Company or any subsidiary or affiliate of the Company, provided that his duties and responsibilities are not inconsistent with those pertaining to his position as an executive. Employee shall faithfully devote his full business time and efforts so as to advance the best interests of the Company. During the Employment Period, Employee shall not be engaged in any other business activity, whether or not such business activity is pursued for profit or other pecuniary advantage, unless same is only incidental and is in no way, directly or indirectly, competitive with, or opposed to the best interests of the Company. 19. Compensation. ------------ 19.1. Basic Compensation. In respect of services to be performed by the Employee ------------------ during the Employment Period, the Company agrees to pay the Employee an annual salary of One Hundred Fifteen Thousand Dollars ($115,000) ("Basic Compensation"), payable in accordance with the Company's customary payroll practices for executive employees. 19.2. Discretionary Increases. The Employees shall also be entitled to such ----------------------- additional increments and bonuses as shall be determined from time to time by the Board of Directors of the Company. 19.3. Stock Options. The Employee will be eligible to receive stock options ------------- under the Company's stock option plans at the discretion of the Stock Option Committee of the Board of Directors of the Company in accordance with policies existing at the time of such grants. 19.4. Other Benefits. -------------- (a) Employees shall be entitled to participate, at Company's expense, in the major medical health insurance plan, and all other health, insurance or other benefit plan applicable generally to executive officers of the Company. (b) During the Employment Period, Employee will be entitled to paid vacations and holidays consistent with the Company's policy applicable to executives generally. All vacations shall be scheduled at the mutual convenience of the Company and the Employee. 20. Term of Employment. The provisions of Section 1 of this Agreement ------------------ notwithstanding, the Company may terminate this Agreement and Employee's employment hereunder in the manner and for the causes hereinafter set forth, in which event the Company shall be under no further obligation to Employee other than as specifically provided herein: (a) If Employee is absent from work or otherwise substantially unable to assume his normal duties for a period of sixty (60) successive days or an aggregate of ninety (90) business days during any consecutive twelve-month period during the Employment Period because of physical or mental disability, accident, illness, or any other cause other than vacation or approved leave of absence or disability still exists, the Company may terminate the employment of Employee hereunder upon ten (10) days' written notice to Employee. (b) In the event of the death of Employee, this Agreement shall immediately terminate on the date hereof. (c) If Employee materially breached or violates any material term of his employment hereunder, or commits any criminal act or an act of dishonesty or moral turpitude, in the reasonable judgment of the Company's Board of Directors, then the Company may, in addition to other rights and remedies available at law or equity, immediately terminate this Agreement upon written notice to Employee with the date of such notice being the termination date and such termination being deemed for "cause." (d) In the event Employee's employment shall be terminated by reason of the provisions of subparagraph (a) or (b) of this Section 4, then in such event, the Company shall pay to Employee, if living, or other person or persons as Employee may from time to time designate in writing as the beneficiary of such payment a sum, equal to the Basic Compensation in effect at the time which such death or disability occurred, such payment to continue for three months after such death or disability. 21. Change in Control. ----------------- 21.1. In the event at any time during the Employment Period, a majority of the Board of Directors is composed of persons who are not "Continuing Directors," as hereinafter defined, and Employee's employment is terminated by the Company other than for one of the reasons set forth in Section 4 hereof, Employee shall not be obligated to seek employment to mitigate his damages, if any, to which he may be entitled for breach of this Agreement. 21.2. "Continuing Directors" shall mean (i) the directors of the Company at the close of business on September 1, 2003 and (ii) any person who was or is recommended to (A) succeed a Continuing Director by the Company's Nominating Committee or (B) become a director as a result of an increase in the size of the Board by a majority of the Continuing Directors then on the Board. 22. Disclosure of Confidential Information and Covenant Not to Compete. Employee ------------------------------------------------------------------ agrees that his primary loyalty will be to the Company. Employee acknowledges that the Company possess confidential information, know-how, customer lists, purchasing, merchandising and selling techniques and strategies, and other information used in its operations of which Employee will obtain knowledge, and that the Company will suffer serious and irreparable damage and harm if this confidential information were disclosed to any other party or if Employee used this information to compete against the Company. Accordingly, Employee hereby agrees that except as required by Employee's duties to the Company, Employee without the consent of the Company's Board of Directors, shall not at any time during or after the term of this contract disclose or use any secret or confidential information of the Company, including, without limitation, such business opportunities, customer lists, trade secrets, formulas, techniques and methods of which Employee shall become informed during his employment, whether learned by him as an Employee of the Company, as a member of the Board of Directors or otherwise, and whether or not developed by the Employee, unless such information shall be or become public knowledge other than as a result of the Employee's direct or indirect disclosure of the same. Employee further agrees that for a period of two years following the termination of Employee's employment, except as a result of the breach by the Company of any material term or condition hereof, Employee will not, directly or indirectly, alone or with others, individually or through or by a corporate or other business entity in which he may be interested as a partner, shareholder, joint venturer, officer or director or otherwise, engaged in the United States in any "business which is competitive with that of the Company or any of its subsidiaries" as hereinafter defined; provided, however, that the foregoing shall not be deemed to prevent the ownership by Employee of up to five percent of any class of securities of any corporation which is regularly traded on any stock exchange or over-the-counter market. For the purpose of this Agreement, a "business which is competitive with the business of the Company or any of its subsidiaries," shall include only the operation of franchise restaurants selling Japanese, or other Asian food, or restaurants of a type then being operated by the Company, or any of its subsidiaries. 23. Reimbursement of Expenses; Use of Automobile. The Company shall further pay -------------------------------------------- directly, or reimburse the Employee, for all other reasonable and necessary expenses and disbursements incurred by him for and on behalf of the Company in the performance of his duties during the Employment Period upon submission of vouchers or other evidence thereof in accordance with the Company's usual policies of expense reimbursement. The Employee shall receive an allowance of $200 per month for automobile expenses, including the lease costs or purchase price, gasoline, oil and garaging. 24. Miscellaneous Provisions. ------------------------ 24.1. Section headings are for convenience only and shall not be deemed to govern, limit, modify or supersede the provisions of this Agreement. 24.2. This Agreement is entered into in the State of Florida and shall be governed pursuant to the laws of the State of Florida. If any provision of this Agreement shall be held by a court of competent jurisdiction to be invalid, illegal or unenforceable, the remaining provisions hereof shall continue to be fully effective. 24.3. This Agreement contains the entire agreement of the parties regarding this subject matter. There are no contemporaneous oral agreements, and all prior understandings, agreements, negotiations and representations are merged herein. 24.4. This Agreement may be modified only by means of a writing signed by the party to be charged with such modification. 24.5. Notices or other communications required or permitted to be given hereunder shall be in writing and shall be deemed duly given upon the receipt by the party to whom sent at the respective addresses set forth below or to such other address as any party shall hereafter designate to the other in writing delivered in accordance herewith: If to the Company: Benihana Inc. 8685 Northwest 53rd Terrace Miami, Florida 33166-0120 Attention: President If to Employee: Juan C. Garcia 5900 SW 112th Street Pine Crest, Florida 33156 24.6. This Agreement shall inure to the benefit of, and shall be binding upon, the Company, its successors and assigns, including, without limitation, any entity that may acquire all or substantially all of the Company's assets and business or into which the Company may be consolidated or merged. This Agreement may not be assigned by Employee. 24.7. This Agreement may be executed in separate counterparts, each of which shall constitute the original thereof. 24.8. This Agreement supersedes and replaces all previous Employment Agreements between the Company and the Employee. IN WITNESS WHEREOF, the parties have set their hands as of the date first above written. BENIHANA INC. By: /s/ Joel A. Schwartz ------------------------------------------- Joel A. Schwartz, President /s/Juan C. Garcia ------------------------------------------- Juan C. Garcia Exhibit 31.1 CERTIFICATION I, Joel A. Schwartz, President and Chief Executive Officer and Director, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Benihana Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) disclosed in this report any change in the registrant's internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 20, 2003 /s/ Joel A. Schwartz -------------------------------- Joel A. Schwartz President and Chief Executive Officer and Director Exhibit 31.2 CERTIFICATION I, Michael R. Burris, Senior Vice President - Finance and Chief Financial Officer, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Benihana, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) disclosed in this report any change in the registrant's internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 20, 2003 /s/ Michael R. Burris ----------------------------------- Michael R. Burris Senior Vice President - Finance and Chief Financial Officer Exhibit 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Benihana Inc. (the "Company") on Form 10- Q for the period ended October 12, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Joel A. Schwartz, President and Chief Executive Officer and Director of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Joel A. Schwartz - ----------------------------- Joel A. Schwartz President and Chief Executive Officer and Director November 20, 2003 Exhibit 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Benihana Inc. (the "Company") on Form 10-Q for the period ended October 12, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Michael R. Burris, Senior Vice President - Finance and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Michael R. Burris - -------------------------------- Michael R. Burris Senior Vice President - Finance and Chief Financial Officer November 20, 2003 -----END PRIVACY-ENHANCED MESSAGE-----