-----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, FQasHgl6maDQkMNDBz/zaos6s/MGm5bjKJyNOphw5qECLiEcHFvZvi2kkNfBap0z 3qOjCJ+9RCRE6YHymEgeFQ== 0000935226-99-000018.txt : 19990820 0000935226-99-000018.hdr.sgml : 19990820 ACCESSION NUMBER: 0000935226-99-000018 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990718 FILED AS OF DATE: 19990819 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: SEC FILE NUMBER: 000-26396 FILM NUMBER: 99695918 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 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended July 18, 1999 or, [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 0-12644 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, 3,576,616 shares outstanding at August 6, 1999 Class A Common Stock $.10 par value, 2,569,819 shares outstanding at August 6, 1999 BENIHANA INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS FOR THE FOUR PERIODS ENDED JULY 18, 1999 TABLE OF CONTENTS PAGE PART I - Financial Information Consolidated Balance Sheets at July 18, 1999 (unaudited) and March 28, 1999 1 Consolidated Statements of Operations (unaudited) for the Four Periods Ended July 18, 1999 2 - 3 Consolidated Statement of Stockholders' Equity (unaudited) for the Four Periods Ended July 18, 1999 4 Consolidated Statements of Cash Flows (unaudited) for the Four Periods Ended July 18, 1999 5 Notes to the Consolidated Financial Statements 6 - 8 Management's Discussion and Analysis of the Financial Condition and Results of Operations 9 - 11 PART II - Other Information 12 BENIHANA INC. AND SUBSIDIARIES PART I - Financial Information CONSOLIDATED BALANCE SHEETS (In thousands, except per share information)
(Unaudited) July 18, March 28, 1999 1999 - ------------------------------------------------------------------------------------------------------------------- (C> Assets Current assets: Cash and equivalents $ 1,107 $ 1,684 Receivables (net of allowance for doubtful accounts of $0 in July 1999 and $35 in March 1999) 340 269 Inventories 3,420 3,106 Prepaid expenses 708 635 - ------------------------------------------------------------------------------------------------------------------- Total Current Assets 5,575 5,694 Property and equipment, net 38,269 37,128 Deferred income taxes, net 3,269 3,385 Goodwill, net 11,993 12,150 Other assets 2,737 2,511 - ------------------------------------------------------------------------------------------------------------------- $61,843 $60,868 - ------------------------------------------------------------------------------------------------------------------- Liabilities and Stockholders' Equity Current liabilities: Accounts payable and accrued expenses $ 9,988 $10,497 Current maturities of long-term debt and obligations under capital leases 2,419 2,298 - ------------------------------------------------------------------------------------------------------------------- Total Current Liabilities 12,407 12,795 Long-term debt 9,813 10,646 Due to affiliates - long term 26 Obligations under capital leases 2,528 2,702 Stockholders' Equity: Preferred stock - $1.00 par value; authorized - 5,000,000 shares, issued and outstanding - 700 shares and 1,000 shares, respectively 1 1 Common stock - $.10 par value; convertible into Class A Common, authorized - 12,000,000 shares, issued and outstanding - 3,576,616 shares and 3,571,616 shares, respectively 358 357 Class A common stock - $.10 par value; authorized - 20,000,000 shares, issued and outstanding 2,569,819 shares and 2,563,443 shares, respectively 257 256 Additional paid-in capital 14,673 14,604 Retained earnings 21,922 19,597 Treasury stock - 9,177 shares at cost (116) (116) - ------------------------------------------------------------------------------------------------------------------- Total Stockholders' Equity 37,095 34,699 - ------------------------------------------------------------------------------------------------------------------- $61,843 $60,868 - -------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements -1- BENIHANA INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (In thousands, except per share information)
Four Periods Ended July 18, July 19, 1999 1998 - ------------------------------------------------------------------------------------------------------------------- Revenues Net restaurant food and beverage sales $39,392 $34,545 Other income 289 273 - ------------------------------------------------------------------------------------------------------------------- Total Revenues 39,681 34,818 Costs and Expenses Cost of restaurant food and beverage sales 10,662 9,156 Restaurant expenses 23,288 21,667 General and administrative expenses 1,870 1,784 Interest expense 319 541 - ------------------------------------------------------------------------------------------------------------------- Total Costs and Expenses 36,139 33,148 - ------------------------------------------------------------------------------------------------------------------- Income from operations before income taxes 3,542 1,670 Income tax provision 1,204 502 - ------------------------------------------------------------------------------------------------------------------- Net Income $ 2,338 $ 1,168 - ------------------------------------------------------------------------------------------------------------------- Earnings Per Share Basic earnings per common share $ .38 $ .19 Diluted earnings per common share $ .36 $ .18 - -------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements -2- BENIHANA INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED) (In thousands, except per share information)
Class A Additional Total Preferred Common Common Paid-in Retained Treasury Stockholders' Stock Stock Stock Capital Earnings Stock Equity - ---------------------------------------------------------------------------------------------------------------------------------- Balance, March 28, 1999 $1 $357 $256 $14,604 $19,597 ($116) $34,699 Net income 2,338 2,338 Dividend on preferred stock (13) (13) Issuance of 6,376 shares of class A common stock under exercise of options 1 53 54 Issuance of 5,000 shares of common stock under exercise of options 1 16 17 - --------------------------------------------------------------------------------------------------------------------------------- Balance, July 18, 1999 $1 $358 $257 $14,673 $21,922 ($116) $37,095 - ---------------------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements -3- BENIHANA INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands)
Four Periods Ended July 18, July 19, 1999 1998 - ------------------------------------------------------------------------------------------------------------------- Operating Activities: Net income $2,338 $1,168 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,317 1,202 Deferred income taxes 116 Change in operating assets and liabilities that provided (used) cash: Accounts receivable (70 64 Inventories (314) (25) Prepaid expenses (73) 104 Other assets (292) (42) Accounts payable and accrued expenses (509) (897) - ------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 2,513 1,574 - ------------------------------------------------------------------------------------------------------------------- Investing activities: Expenditures for property and equipment (2,235) (1,376) - ------------------------------------------------------------------------------------------------------------------- Net cash (used in) investing activities (2,235) (1,376) - ------------------------------------------------------------------------------------------------------------------- Financing Activities: Proceeds from issuance of common stock 70 2 Repayment of long-term debt and obligations under capital leases (912) (878) Dividend paid on preferred stock (13) (19) - ------------------------------------------------------------------------------------------------------------------- Net cash provided by (used in) financing activities (855) (895) - ------------------------------------------------------------------------------------------------------------------- Net (decrease)increase in cash and cash equivalents (577) (697) Cash and cash equivalents, beginning of year 1,684 1,169 - ------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents, end of period $1,107 $ 472 - ------------------------------------------------------------------------------------------------------------------- Supplemental Cash Flow Information: Cash paid during the four periods: Interest $ 392 $ 461 Income taxes 1,022 1,283
See notes to consolidated financial statements. -4- BENIHANA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOUR PERIODS ENDED JULY 18, 1999 AND JULY 19, 1998 (UNAUDITED) 1. GENERAL The accompanying consolidated financial statements are unaudited and reflect all adjustments (consisting only of normal recurring adjustments at July 18, 1999) which are, in the opinion of management, necessary for a fair presentation of financial position and results of operations. The results of operations for the four periods (sixteen weeks) ended July 18, 1999 are not necessarily indicative of the results to be expected for the full year. Certain information and footnotes normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. The Company's fiscal year consists of 13 four-week accounting periods. 2. INVENTORIES Inventories consist of (in thousands): July 18, March 28, 1999 1999 -------- --------- Food and beverage $ 936 $1,147 Supplies 2,484 1,959 ------ ------ $3,420 $3,106 ====== ====== 3. 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. -5- BENIHANA INC. AND SUBSIDIARIES The following data shows the amounts (in thousands) used in computing earnings per share and the effect on income and the weighted average number of shares of dilutive potential common stock.
Four Periods Ended July 18, July 19, 1999 1998 -------- -------- Income from operations $2,338 $1,168 Less preferred dividends (13) (18) ------ ------ Income for computation of basic earnings per common share 2,325 1,150 Convertible preferred stock 13 18 ------ ------ Income for computation of diluted earnings per common share $2,338 $1,168 ====== ======
Four Periods Ended July 18, July 19, 1999 1998 -------- -------- Weighted average number of common shares used in basic EPS 6,142 6,089 Effect of dilutive securities: Stock options 320 178 Convertible preferred stock 105 150 -------- ------- Weighted number of common shares and dilutive potential common stock used in diluted EPS 6,567 6,417 ======== ======
-6- BENIHANA INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW The Company's revenues consist of sales of food and beverages sold in each of the owned restaurants and franchise fees received from franchisees. Cost of restaurant food and beverage sold represents the direct cost of the ingredients for the prepared food and beverages sold. Restaurant expenses consist of direct and indirect labor, occupancy costs, advertising and other costs that are directly attributed to each restaurant location. Restaurant revenues and expenses are dependent upon a number of factors including the number of restaurants in operation and restaurant patronage. Revenues are also dependent on the average check amount. Expenses are additionally dependent upon commodity costs, average wage rates, marketing costs and the costs of interest and administering restaurant operations. The Company's revenues, net income and diluted earnings per share increased sharply in the current four periods when compared to the equivalent four periods in the prior year. The improved results reflect a continued increase in sales for restaurants opened longer than one year. The increased revenues combined with tighter control on restaurant expenses and lower interest costs doubled net income and diluted earnings per share during the current four periods over the prior comparable four periods. REVENUES The amounts of sales and the changes in amount and percentage change in amount of sales from the previous fiscal year are shown in the following tables. Four Periods Ended July 18, July 19, 1999 1998 -------- -------- Net restaurant sales $39,392 $34,545 Other income 289 273 ------- ------- $39,681 $34,818 ======= ======= Four Periods Ended July 18, July 19, 1999 1998 -------- -------- Amount of change in total revenues from previous year $ 4,863 $ 7,229 Percentage of change from the previous year 14.0% 26.2% -7- BENIHANA INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Four Periods Ended July 18, 1999 compared to July 19, 1998 -- Restaurant revenues continued to increase in the four periods ended July 18, 1999 as compared to the equivalent periods ended July 19, 1998. The increase in revenues is attributable to increased customer traffic of over 7% for restaurants opened longer than one year in the current four periods when compared to the comparable prior year four periods. Also, contributing to the increase is the opening of a traditional restaurant opened in December 1998 operating in Ontario, California. COSTS AND EXPENSES Costs of restaurant sales, which are generally variable with sales, directly increased with changes in revenues for the four periods. The following table reflects the proportion that the various elements of costs and expenses bore to sales and the changes in amounts and percentage changes in amounts from the previous year's four periods. Four Periods Ended July 18, July 19, 1999 1998 -------- -------- COST AS A PERCENTAGE OF RESTAURANT SALES: Cost of restaurant food and beverage sales 27.1% 26.5% Restaurant expenses 59.1% 62.7% General and administrative expenses 4.8% 5.2% AMOUNT OF CHANGE FROM PREVIOUS YEAR (IN THOUSANDS): Cost of restaurant food and beverage sales $1,506 $2,126 Restaurant expenses $1,621 $5,139 General and administrative expenses $ 86 $ 401 PERCENTAGE CHANGE FROM PREVIOUS YEAR: Cost of restaurant food and beverage sales 16.4% 30.2% Restaurant expenses 7.5% 31.1% General and administrative expenses 4.8% 29.0% Four Periods Ended July 18, 1999 compared to July 19, 1998 -- The cost of food and beverage sales increased in dollar amount when expressed as a percentage of sales in the current four periods and compared to equivalent periods in the prior year. The increase resulted from higher commodities costs, principally beef costs, in the current four periods compared to the prior year equivalent periods. -8- BENIHANA INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Restaurant expenses increased in dollar amount and decreased when expressed as a percentage of sales in the current four periods. The increase in absolute dollar amount is attributable to the aforementioned increase in sales. Restaurant expenses decreased when expressed as a percentage of sales due to higher labor costs and employee benefit costs in the prior four periods as compared to the current four periods. The Company experienced higher labor costs in the prior year due to increases in the minimum wage rates during that period. The higher employee benefit costs resulted from unusual amount of claims that were submitted under the Company's self-insured health benefit plan in the previous four periods. General and administrative costs increased in total dollar amount and decreased when expressed as a percentage of sales for four periods. Management does not consider the increase in absolute amount to be material. The decrease when expressed as a percentage of sales is due to the aforementioned increase in sales. Interest costs decreased in the current four periods when compared to the comparable period of the prior year. The decrease is attributable to the decrease in total borrowings outstanding from the prior year. The Company's effective income tax rate increased in the four periods to 34.0% from 30.1 % in the prior year's four periods. The increase reflects increased state income taxes. LIQUIDITY AND CAPITAL RESOURCES The Company does not require significant amounts of inventory or receivables, and, as is typical of many restaurant companies, the Company does not have to provide financing for such assets and operates with a minimum amount or deficit of working capital. 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. As of July 18, 1999, the Company had available $15,000,000 under a revolving line of credit facility. Management believes that the amount available under the revolving facility together with internally generated funds from operations provide sufficient cash resources for anticipated capital improvements as well as construction of new restaurants. The Company has signed leases for four new restaurants. Estimated remaining expenditures to complete construction and open these new restaurants are expected to be $4,600,000. Two of the new restaurants will operate as traditional Benihana restaurants in Monterey and Santa Monica, California and are projected to open in the spring of 2000. The other two will be operated under the Company's new sushi concept, Sushi Doraku by Benihana in Miami Beach, Florida and Chicago, Illinois and are scheduled to open in the winter of 1999. 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, -9- BENIHANA INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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 filed with the Securities and Exchange Commission. The Company's net exposure to interest rate risk consists of floating rate borrowings that are benchmarked to US and European short-term interest rates. The Company may from time-to-time utilize interest rate swaps to manage overall borrowing costs and reduce exposure to adverse fluctuations in interest rates. The Company does not use derivative instruments for trading purposes and the Company has a policy to that effect. At July 18, 1999, the Company had a financial derivative with a notional amount of $5,266,000 against floating rate debt of $10,750,000. A one percentage point interest charge on the outstanding balance of the variable rate debt as of July 18, 1999 would not be material. The Company purchases certain commodities such as beef, chicken and seafood. These commodities are purchased based upon market prices established with vendors. The Company does not use financial instruments to hedge commodity prices because these purchase arrangements help to control the ultimate cost paid and any cost aberrations have historically been short term in nature. Year 2000 The year 2000 (Y2K) issue is the result of computer programs using two digits, as opposed to four digits, to indicate the year. Computer systems that cannot interpret data beyond 1999 may fail and cause critical business processes to be materially disrupted. Such failures may occur not only within our own systems, but also in the systems of vendors in the supply chain, credit card processors and the financial institutions upon which we rely. The Company has implemented a plan to address the Y2K issue in steps to mitigate risks in our proprietary systems and to identify Y2K risks in our supply chain. The risks in the Company's own systems were identified to include point-of-sale systems at the restaurants and systems upon which management relies to provide information to control and guide operations and prepare financial information. The Company has tested the point-of-sale systems used in the restaurants and management has determined that they were compliant with Y2K. The Company's management information system were not incompliance with Y2K. Management evaluated various courses of action to make the information systems Y2K compliant. Management determined that the system could have been made Y2K compliant, but they were not sufficient to support future growth. Management decided to replace existing financial systems and after conducting interviews with several software vendors, management contracted with a major supplier of enterprise resource planning systems to improve our core financial information and restaurant logistical capabilities beyond the capabilities of the previously existing financial systems. The new system has been installed and is operating. Management believes that these systems are Y2K compliant and -10- BENIHANA INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS are reliable. The external costs associated with implementing these systems are approximately $425,000, including the cost of software applications, the hardware necessary to support the new applications software and contracted services used to augment internal staff implementing the new system. The Company's most significant vendors were formally contacted to determine whether there would be material disruptions in the supply chain. The Company has no significant system interfaces with vendors. The Company's supply chain is composed of numerous different suppliers throughout the country. Each of the restaurants purchase food, beverages and supplies local to their markets, therefore, the Company is not materially reliant on a few suppliers and the Company believes that the risk is minimal due to the failure of any one vendor. However, there may be unidentifiable Y2K problems further up the supply chain, the effects of which cannot be predicted. Additionally, the Company relies upon utility service for electricity, gas and water and may incur disruption in specific market areas. Our significant vendors indicated to us that they are either Y2K compliant or are currently taking measures to become Y2K compliant before disruptions that might impact the Company would occur. Letters have been sent to all banks and the credit card processors with which the Company has significant relationships and Company management has reviewed and evaluated their responses. The bank's and the credit card processing companies' responses to the Company were that they are Y2K compliant. -11- BENIHANA INC. AND SUBSIDIARIES PART II - Other Information Item 5. None Item 6. Exhibits and Reports on Form 8-K (a) Exhibit 27 Financial Data Schedule (b) Reports on Form 8-K - None -12- 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 August 18, 1999 /s/ Joel A. Schwartz --------------------- ---------------------------- Joel A. Schwartz President /s/ Michael R. Burris ---------------------------- Michael R. Burris Chief Financial Officer -13- EX-27 2 FDS --
5 This schedule contains summary financial information extracted from the July 18, 1999 Financial Statements and is qualified in its entirety by reference to such Financial Statements. 0000935226 BENIHANA INC. 1,000 U.S. DOLLARS 3-MOS MAR-26-2000 MAR-29-1999 JUL-18-1999 1 1,107 0 340 0 3,420 5,575 38,269 40,713 61,843 12,407 12,341 0 1 615 36,479 61,843 39,392 39,681 10,662 23,288 1,870 0 319 3,542 1,204 2,338 0 0 0 2,338 .38 .36
-----END PRIVACY-ENHANCED MESSAGE-----