UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the period ended June 29, 2002
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or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE OF 1934
For the transition period from _____________ to _____________
Commission File Number I-6836
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Flanigan's Enterprises, Inc.
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(Exact name of registrant as specified in its charter)
Florida 59-0877638
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5059 N.E. 18th Avenue, Fort Lauderdale, Florida 33334
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code, (954) 377-1961
-----------------------------
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months and
(2) has been the subject to such filing requirements for the past
90 days. Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the issuers
classes of Common Stock as of the latest practicable date 1,959,073
as of June 29, 2002.
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FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
JUNE 29, 2002
PART I. FINANCIAL INFORMATION
---------------------
1. UNAUDITED CONDENSED FINANCIAL STATEMENTS
Consolidated Summary of Earnings -- For the Thirteen Weeks
and Thirty Nine Weeks ended June 29, 2002 and June 30,
2001.
Consolidated Balance Sheets -- As of June 29, 2002 and
September 29, 2001.
Consolidated Statements of Cash Flows for the Thirty Nine
Weeks ended June 29, 2002 and June 30, 2001.
Notes to Consolidated Financial Statements
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
PART II. OTHER INFORMATION AND SIGNATURES
---------------------------------
6. Exhibits and Reports on Form 8-K
(a) Exhibits
(b) Reports on Form 8-K
- Page 2 -
FLANIGAN'S ENTERPRISES, INC.
UNAUDITED CONSOLIDATED SUMMARY OF EARNINGS
(In Thousands Except Per Share Amounts)
Thirteen Weeks Thirty Nine Weeks
Ended Ended
Jun. 29 Jun. 30 Jun. 29 Jun. 30
2002 2001 2002 2001
---- ---- ---- ----
REVENUES:
Restaurant food sales $ 3,322 $ 3,120 $ 10,186 $ 9,242
Restaurant bar sales 830 723 2,541 2,211
Package good sales 2,109 2,069 7,124 6,993
Franchise related revenues 297 243 952 847
Owners fee 54 50 199 208
Joint venture income 82 141 480 461
Other operating income 73 110 227 258
----- ----- ------ ------
6,767 6,456 21,709 20,220
----- ----- ------ ------
COSTS AND EXPENSES:
Cost of merchandise sold
restaurant and bar 1,406 1,467 4,325 4,279
Cost of merchandise sold
package goods 1,515 1,503 5,159 5,103
Payroll and related costs 2,359 1,924 6,316 5,365
Occupancy costs 230 294 803 783
Selling, general and
administrative expenses 1,119 949 3,591 2,941
----- ----- ------ ------
6,629 6,137 20,194 18,471
----- ----- ------ ------
Income from operations 138 319 1,515 1,749
----- ----- ------ ------
OTHER INCOME (EXPENSE):
Interest expense on obligations
under capital leases - (11) - (34)
Interest expense on long term
debt and damages payable (34) (30) (108) (103)
Abandoned fixed assets - - - (60)
Interest income 11 9 35 33
Recognition of deferred gains 1 1 3 3
Other, net 232 - 276 (2)
----- ----- ------ ------
210 (31) 206 (163)
----- ----- ------ ------
Income before income taxes 348 288 1,721 1,586
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FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
---------------------------------------------
UNAUDITED CONSOLIDATED SUMMARY OF EARNINGS
------------------------------------------
(In Thousands Except Per Share Amounts)
---------------------------------------
(Continued)
Thirteen Weeks Thirty Nine Weeks
Ended Ended
Jun. 29 Jun. 30 Jun. 29 Jun. 30
2002 2001 2002 2001
---- ---- ---- ----
PROVISION FOR INCOME TAXES $ 60 $ 66 $ 362 $ 344
------- ------ ------- ------
Net Income $ 288 $ 222 $ 1,359 $ 1,242
===== ===== ===== =====
For The Thirteen Weeks Ended
Jun. 29, 2002 Jun. 30, 2001
Numerator Denominator EPS Numerator Denominator EPS
-----------------------------------------------------
Basic EPS 288,000 1,972,843 $.15 222,000 1,922,478 $ .12
Effective/dilutive
Stock Options 40,277 16,989
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Diluted EPS 288,000 2,013,120 $.14 222,000 1,939,467 $ .11
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For The Thirty Nine Weeks Ended
Jun. 29, 2002 Jun. 30, 2001
Numerator Denominator EPS Numerator Denominator EPS
Basic EPS 1,359,000 1,964,194 $.69 1,242,000 1,896,097 $.66
Effective/dilutive
Stock Options 29,671 8,238
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Diluted EPS 1,359,000 1,993,865 $.68 1,242,000 1,904,335 $.65
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The accompanying notes to consolidated financial statements are an
integral part of these statements.
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FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
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CONSOLIDATED BALANCE SHEETS
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JUNE 29, 2002 (UNAUDITED) and SEPTEMBER 29, 2001
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(In Thousands)
ASSETS
------
JUNE 29 SEPTEMBER 29
2002 2001
---- ----
Cash and cash equivalents $ 705 $ 1,396
Notes and mortgages receivable,
current maturities, net 83 120
Due from franchisees 1,249 683
Other receivables 68 311
Inventories 1,736 1,337
Prepaid expenses 331 349
Deferred tax asset 318 318
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Total Current Assets 4,490 4,514
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Property and Equipment 5,830 5,650
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Investments in Joint Ventures 2,084 1,684
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Other Assets:
Liquor licenses, net 334 266
Notes and mortgages receivable, net 171 71
Deferred tax asset 338 338
Other 64 234
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Total Other Assets 907 909
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Total Assets $ 13,311 $ 12,757
======== ======
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FLANIGAN'S ENTERPRISES, INC, AND SUBSIDIARIES
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CONSOLIDATED BALANCE SHEETS
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JUNE 29, 2002 (UNAUDITED) AND SEPTEMBER 29, 2001
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LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
(In Thousands)
JUNE 29 SEPTEMBER 29
2002 2001
---- ----
Current Liabilities:
Accounts payable and accrued expenses $ 1,676 $ 1,564
Due to franchisees 48 131
Current portion of long term debt 340 262
Damages payable on terminated or
rejected leases - 117
------ -------
Total Current Liabilities 2,064 2,074
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Long Term Debt, Net of Current
Maturities 1,395 1,715
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Stockholder's Equity:
Common stock, 5,000,000 shares
authorized, 4,197,642 shares issued 420 420
Capital in excess of par value 6,028 6,028
Retained earnings 8,723 7,863
Notes received on sale of common stock (266) (291)
Less: Treasury stock, at cost
2,341,164 shares at September 29, 2001
2,310,964 shares at June 29, 2002 (5,053) (5,052)
------- ------
Total Stockholder's Equity 9,852 8,968
------- ------
Total Liabilities and
Stockholder's Equity $ 13,311 $ 12,757
======== =======
See notes to consolidated financial statements.
- Page 6 -
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
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UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
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FOR THE THIRTY NINE WEEKS ENDED JUNE 29, 2002 AND JUNE 30, 2001
---------------------------------------------------------------
(In Thousands)
JUNE 29 JUNE 30
2002 2001
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,359 $ 1,242
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization of
property, equipment and capital
leases 548 513
Amortization of liquor licenses 3 4
Recognition of deferred gains and
other deferred income (3) (3)
Joint venture income (480) (461)
Loss on abandoned property & equipment 3 60
Deferred income tax benefit - (62)
Gain on sale of liquor license (8) -
Changes in assets and liabilities:
(Increase) decrease in:
Notes receivable 36 (2)
Inventories (399) (117)
Prepaid expenses 18 (61)
Due from franchises (648) (202)
Other receivables 243 5
Other assets 170 77
Increase (decrease) in:
Accounts payable and accrued
expenses 112 (40)
----- -----
Net cash provided by (used in)
operating activities 954 953
----- -----
(continued)
- Page 7 -
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
---------------------------------------------
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
----------------------------------------------
FOR THE THIRTY NINE WEEKS ENDED JUNE 29, 2002 AND JUNE 30, 2001
---------------------------------------------------------------
(In Thousands)
JUNE 29 JUNE 30
2002 2001
---- ----
CASH FLOWS FROM INVESTING ACTIVITIES:
Collections on notes and mortgages
receivable 50 76
Distributions from joint ventures 282 665
Additions to property and equipment (728) (954)
Receipt of security for long term lease - 200
Additions to notes and mortgages
receivable (150) (253)
Additional investment in joint ventures (202) -
Sale of liquor license 45 -
Acquisition of liquor licenses (108) -
----- -----
Net cash (used in) investing
activities (811) (266)
----- -----
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long term debt (242) (241)
Payments of obligations under capital
leases - (52)
Payment on damages payable on
terminated or rejected leases (117) (216)
Payment of cash dividend (499) (231)
Payment of notes receivable on sale
of common stock 25 10
Exercise of stock option 235 146
Purchase of treasury stock (236) 18
----- -----
Net cash (used in) financing
activities (834) (566)
----- -----
NET INCREASE (DECREASE) IN CASH AND
EQUIVALENTS (691) 121
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 1,396 739
----- -----
CASH AND EQUIVALENTS, END OF PERIOD $ 705 $ 860
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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
JUNE 29, 2002
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(1) PETITION IN BANKRUPTCY:
----------------------
On November 5, 1985, Flanigan's Enterprises, Inc. (Flanigan's), not
including any of its subsidiaries, filed a voluntary petition in the United
States Bankruptcy Court for the Southern District of Florida seeking to
reorganize under Chapter 11 of the Federal Bankruptcy Code. In fiscal 1986,
Flanigan's recorded damages of $4,278,000 in claims for losses as a result of
rejected leases. Because the damage payments were to be made over nine years,
the total amount due was discounted at a rate of 9.25%, Flanigan's then
effective borrowing rate. During fiscal years 1991 and 1992, Flanigan's
renegotiated the payment of this obligation to extend into fiscal 2002 which
effectively reduced the discount rate to 3.71%. Certain other bankruptcy related
liabilities including excise and property taxes, settlements and past rents,
were fixed as to amount and have been paid in full pursuant to the terms of
Flanigan's Plan of Reorganization, as amended and modified (Plan). On May 5,
1987 the Plan was confirmed by the Bankruptcy Court and on December 28, 1987,
Flanigan's was officially discharged from bankruptcy. During the third quarter
of fiscal year 2002, the remaining liabilities under the Plan were paid in full
during the third quarter of fiscal year 2002.
(2) BASIS OF PRESENTATION:
---------------------
The financial information for the periods ended June 29, 2002, and June 30,
2001 are unaudited. Financial information as of September 29, 2001 has been
derived from the audited financial statements of the Company, but does not
include all disclosures required by generally accepted accounting principles. In
the opinion of management, all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of the financial information for
the periods indicated have been included. For further information regarding the
Company's accounting policies, refer to the Consolidated Financial Statements
and related notes included in the Company's Annual Report on Form 10- KSB for
the year ended September 29, 2001. Operating results for interim periods are not
necessarily indicative of results to be expected for a full year.
(3) EARNINGS PER SHARE:
- ----------------------
Statements of Financial Accounting Standards ("SFAS") No. 128, Earnings per
share establishes standards for computing and presenting earnings per share
("EPS"). This statement requires the presentation of basic and diluted EPS.
- Page 9 -
The data on Page 4 shows the amounts used in computing earnings per share
and the effects on income and the weighted average number of shares of potential
dilutive common stock.
(3) RECLASSIFICATION:
-----------------
Certain amounts in the fiscal 2001 financial statements have been
reclassified to conform to the fiscal 2002 presentation.
(4) FRANCHISE PROGRAM:
-----------------
During fiscal year 1995, the Company completed a franchise agreement for a
franchisee to operate a restaurant under the "Flanigan's Seafood Bar and Grill"
servicemark pursuant to a license from the Company. The franchise agreement was
drafted jointly with existing franchisees with all modifications requested by
the franchisees incorporated therein. The franchise agreement provides the
Company with the ability to maintain a high level of food quality and service at
its franchised restaurants, which are essential to a successful franchise
operation. A franchisee is required to execute a franchise agreement for the
balance of the term of its lease for the business premises, extended by the
franchisee's continued occupancy of the business premises thereafter, whether by
lease or ownership. The franchise agreement provides for a royalty to the
Company in an amount of approximately 3% of gross sales, plus a contribution to
advertising in an amount of between 1-1/2% to 3% of gross sales. In most cases
the Company does not sublease the business premises to the franchisee and in
those cases where it does, the Company does not receive rent in excess of the
amount paid by the Company.
All existing franchisees who operate restaurants under the "Flanigan's
Seafood Bar and Grill" or other authorized service marks have executed franchise
agreements.
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(5) INVESTMENT IN JOINT VENTURES:
----------------------------
Miami, Florida
The Company operated a restaurant in Miami, Florida under the "Flanigan's
Seafood Bar and Grill" servicemark pursuant to a limited partnership agreement
through the end of the second quarter of fiscal year 2002. The Company acts as
the general partner and owns a fifty percent limited partnership interest. The
State of Florida, Department of Transportation, ("DOT") exercised its right of
eminent domain to "take" the hotel property upon which this restaurant was
located and the restaurant was closed as of the end of business on March 30,
2002. The Company, as general partner of the limited partnership, pursued a
claim for the "taking" of the restaurant, including its furniture, fixtures and
equipment, against the DOT. and an apportionment claim against the owner of the
hotel property. The limited partnership received the sum of $700,000 from the
owner of the hotel property as compensation for its possessory rights to the
restaurant premises and its share of the compensation paid by the DOT for its
furniture, fixtures and equipment pursuant to a Stipulated Final Judgment
between the DOT and the owner of the hotel property, ("Stipulated Final
Judgment"). The settlement resulted in $230,000 of income to the Company during
the third quarter of fiscal year 2002, which is included in "Other income, net"
on page 3 of this report. The limited partnership has reserved its right to seek
additional compensation from the DOT for (1) its claim for the value of its
furniture, fixtures and equipment located in the restaurant which were not paid
for in the Stipulated Final Judgement; (2) its claim for the value of its
furniture, fixtures and equipment above and beyond the value paid by the DOT in
the Stipulated Final Judgment; and (3) any other rights reserved to the limited
partnership in the Stipulated Final Judgment, which additional compensation will
belong solely to the Company. The amount of compensation, if any, cannot be
estimated as of this date.
Fort Lauderdale, Florida
The Company has a franchise agreement with a limited partnership which
operates a restaurant in Fort Lauderdale, Florida. The Company owns a twenty
five percent limited partnership interest in the franchise. Other related
parties, including, but not limited to, officers and directors of the Company
and their families are also investors.
Surfside, Florida
The Company operates a restaurant in Surfside, Florida under the
"Flanigan's Seafood Bar and Grill" servicemark, pursuant to a limited
partnership agreement. The Company acts as general partner and also owns a forty
two percent limited partnership interest. Other related parties, including, but
not limited to, officers and
directors of the Company and their families are also investors.
- Page 11 -
Kendall, Florida
The Company operates a restaurant in Kendall, Florida under the "Flanigan's
Seafood Bar and Grill" servicemark, pursuant to a limited partnership agreement.
The Company acts as general partner and also owns a forty percent limited
partnership interest. Other related parties, including, but not limited to
officers and directors of the Company, and their families are also investors.
West Miami, Florida
During the third quarter of fiscal year 2000, the Company, as agent for a
limited partnership to be formed, entered into a contract to purchase an
existing restaurant location in West Miami, Florida to renovate and operate
under the "Flanigan's Seafood Bar and Grill" servicemark. The funds necessary
for this joint venture were raised through a private offering. The Company acts
as general partner and also owns a twenty five percent limited partnership
interest. Of its twenty five percent limited partnership interest, the Company
received 6.36% of its limited partnership interest as a bonus and as
compensation for advancing funds prior to receiving zoning approval for its
intended use and its limited guaranty of the lease for the business premises.
Other related parties including, but not limited to officers and directors of
the Company and their families are also investors. The sale was closed during
the third quarter of fiscal year 2001, and the restaurant opened for business
during the first quarter of fiscal year 2002.
Weston, Florida
During the fourth quarter of fiscal year 2001, a limited partnership was
formed, with the Company as general partner, which limited partnership entered
into a sublease agreement to own and operate an existing restaurant in Weston,
Florida. The Company, as general partner, has been operating the restaurant
under its existing servicemark. The limited partnership plans to raise funds to
renovate the business premises for operation under the "Flanigan's Seafood Bar &
Grill" servicemark . The Company will continue to act as general partner and may
also own up to forty percent of the limited partnership. Other related partners,
including but not limited to officers and directors of the Company and their
families, may also be limited partners. The limited partnership agreement gives
the partnership the right to use the "Flanigan's Seafood Bar and Grill"
servicemark for a fee equal to 3% of its gross sales from the operation of the
restaurant while the Company acts as general partner only. The raising of funds
by the limited partnership and the renovations to the business premises will not
begin until the sublessor resolves various zoning and related matters. Exactly
how long it will take for the
sublessor to resolve the zoning and related matters is unknown.
- Page 12 -
In the interim, the Company operated the restaurant under its existing
servicemark, as a wholly-owned subsidiary. Subsequent to the end of the third
quarter of fiscal year 2002, the restaurant was closed pending the resolution of
the zoning matters and the renovation of the business premises.
(6) INCOME TAXES:
------------
Financial Accounting Standards Board Statement No. 109, Accounting for
Income Taxes, requires among other things, recognition of future tax benefits
measured at enacted rates attributable to deductible temporary differences
between financial statement and income tax basis of assets and liabilities and
to tax net operating loss carryforwards and tax credits to the extent that
realization of said tax benefits is more likely than not. The deferred tax asset
was $656,000 as of June 29, 2002 and $656,000 as of September 29, 2001.
(7) COMMITMENTS AND CONTINGENCIES:
-----------------------------
Guarantees
---------
The Company guarantees various leases for franchisees and locations sold in
prior years. Remaining rental commitments required under these leases are
approximately $1,500,000. In the event of a default under any of these
agreements, the Company will have the right to repossess the premises.
During the third quarter of fiscal 2001 and in order for the Company, as
general partner of a limited partnership, to close on the purchase of a
restaurant location in West Miami, Florida, the Company had to guaranty one (1)
year's minimum rent on the lease for the business premises, currently in the
amount of $80,000.
Litigation
----------
The Company is a party to various litigation matters incidental to its
business. Certain claims, suits and complaints arising in the ordinary course of
business have been filed or are pending against the Company.
Certain states have "liquor liability" laws which allow a person injured by
an "intoxicated person" to bring a civil suit against the business (or social
host) who served intoxicating liquors to an already "obviously intoxicated
person", known as "dram shop" claims. Florida has restricted its dram shop
claims by statute, permitting persons injured by an "obviously intoxicated
person" to bring a court action only against the business which had served
alcoholic beverages to a minor or to an individual known to be habitually
addicted to alcohol. The Company is generally self- insured for liability
claims, with major losses partially covered by third-party insurance carriers.
-Page 13 -
The extent of this coverage varies by year. The Company currently has no
dram shop cases pending. For further discussion see the section headed Legal
Proceedings on page 14 of the Company's Annual Report on Form 10-KSB for the
fiscal year ended September 29, 2001. The Company accrues for potential
uninsured losses based upon estimates received from legal counsel and its
historical experience, when uninsured claims are pending. Such accrual is
included in the "Accounts payable and accrued expenses". See Note 5 in the
Company's Annual Report on Form 10-KSB for the fiscal year ended September 29,
2001.
During fiscal year 2000, the Company was served with several complaints
alleging violations of the American with Disabilities Act ("ADA"), at all of its
locations. The lawsuits included the restaurants owned by limited partnerships
and franchises. The sudden influx of lawsuits alleging ADA violations was due to
the fact that it was anticipated at the time that the ADA was going to be
amended to include a provision requiring plaintiffs to provide the potential
defendant with 90 days notice of ADA violations prior to filing suit, during
which time the violations may be corrected. The amendment has not yet been
enacted and as of now, the ADA still has no notice provision and the first time
the Company received notice of any ADA violations was when it was served with a
copy of the complaint. Of the law suits filed, only a few have been actively
pursued. The Company has retained an ADA expert who has inspected locations
involved in the active lawsuits, including the limited partnerships and
franchises, and provided a report setting forth ADA violations which need to be
corrected. It is the Company's intent to correct ADA violations noted by its ADA
expert and then vigorously defend the lawsuits arguing that the locations are in
compliance. During fiscal year 2001 and the first quarter of fiscal year 2002,
the Company, including three (3) of its franchises, settled all active lawsuits
alleging ADA violations with the exception of the plaintiff's attorney's fees
and costs which was still in dispute in one (1) such case. During the third
quarter of fiscal year 2002, the question of the plaintiff's attorney's fees and
costs was resolved by the court. The cost to correct the ADA violations is
included in the budget for capital improvements during fiscal year 2002.
- Page 14 -
(8) MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------------------------------------------------------------------
RESULTS OF OPERATIONS:
----------------------
The Company owns and/or operates full service restaurants, package liquor
stores and an entertainment oriented club (collectively the "units"). The
Company had interests in seven additional units which have been franchised by
the Company. The table below sets out the changes, if any, in the type and
number of units being operated.
Jun. 29 Sep. 29 Jun. 30 Note
2002 2001 2001 Numbers
---- ---- ---- -------
Combination package
and restaurant 4 4 4
Restaurant only 7 7 6 (1)(2)(3)
Package store only 4 3 3 (4)(5)(6)
Clubs 1 1 1
---- ---- ----
Total Company operated units 16 15 14
Franchised units 7 7 7 (7)
Notes:
- -----
(1) During the third quarter of fiscal year 2000, a limited partnership was
formed which raised funds through a private offering to purchase the assets of a
restaurant in West Miami, Florida, and renovate the same for operation under the
"Flanigan's Seafood Bar & Grill" servicemark. The Company is the general partner
and has a 25 percent ownership interest in the partnership. The restaurant
opened for business during the first quarter of fiscal year 2002.
(2) During the first quarter of fiscal year 2002, the State of Florida,
department of Transportation, ("DOT"), exercised its right of eminent domain to
"take" title to the hotel property upon which a restaurant operated by the
Company as general partner of a limited partnership was located. The restaurant
closed at the end of business on March 30, 3003 and is not included in the table
of units.
- Page 15 -
(3) During the fourth quarter of fiscal year 2001, a limited partnership was
formed with the Company as general partner, which limited partnership entered
into a sublease agreement to operate and own an existing restaurant in Weston,
Florida. The limited partnership plans to raise funds to renovate the business
premises for operation as a "Flanigan's Seafood Bar and Grill" restaurant. The
funds will not be raised, nor will renovations begin until the sublessor has
resolved several zoning and related matters and it is currently impossible to
determine when the renovations will begin. Until limited partnership units are
sold, the Company will own 100% of the limited partnership which has been
consolidated for financial reporting purposes. Subsequent to the end of the
third quarter of fiscal year 2002, the restaurant was closed pending the
resolution of the zoning matters and renovations to the business premises. The
restaurant is included in the table of units.
(4) During the fourth quarter of fiscal year 2000, the Company entered into a
lease agreement for the operation of a package liquor store in Hialeah, Florida.
This package liquor store opened for business during the first quarter of fiscal
year 2002.
(5) During the fourth quarter of fiscal year 2001, the Company entered into a
ground lease for an out parcel in Hollywood, Florida. The Company plans to
construct a building on the out parcel, one-half (1/2) of which will be used by
the Company for the operation of a package liquor store and the other one-half
(1/2) will be subleased by the Company as retail space. The Company plans to
file its building plans during the fourth quarter of fiscal year 2002 and
expects the building to be complete and the package store open for business
during the third quarter of fiscal year 2003. This unit is not included in the
table of units.
(6) During the second quarter of fiscal year 2001, the Company completed
renovations to its new corporate offices and relocated to the same. The new
corporate offices consist of a two (2) story building, with space set aside on
the ground floor for a package liquor store. The Company filed the application
for its building permits during the third quarter of fiscal year 2002 and
expects the package liquor store to be open for business during fiscal year
2003. The package liquor store is not included in the table of units.
(7) Since the fourth quarter of 1999, the Company has managed the restaurant for
a franchisee. The franchised restaurant is included in the table of units as a
restaurant operated by the Company and the franchise is also included as a unit
franchised by the Company and in which the Company has an interest.
- Page 16 -
Liquidity and Capital Resources
- -------------------------------
Cash Flows
----------
The following table is a summary of the Company's cash flows for the first
thirty nine weeks of fiscal years 2002 and 2001.
Thirty Nine Weeks Ended
Jun. 29, Jun. 30,
2002 2001
-----------------------
(In Thousands)
Net cash provided by $ 954 953
operating activities
Net cash used in
investing activities (811) (266)
Net cash used in
financing activities (834) (566)
------- -----
Net Increase (Decrease) in Cash
and Cash Equivalents (691) 121
Cash and Cash Equivalents, Beginning 1,396 739
------- -----
Cash and Cash Equivalents, Ending $ 705 $ 860
======= =====
On December 13, 2001, the Company declared a cash dividend of 25 cents per
share payable on January 17, 2002 to shareholders of record on December 30,
2001.
On February 14, 2001, the Company declared a cash dividend of 12 cents per
share payable on March 17, 2001 to shareholders of record on March 1, 2001.
On April 30 2002, the Company purchased 36,000 shares of the Company's
common stock from the Company's Chief Executive Officer at $6.60 per share which
was the fair market price as of that date.
Capital Expenditures
- --------------------
The Company had additions to fixed assets of $728,000 during the thirty
nine weeks ended June 29, 2002 as compared to $954,000 for the thirty nine weeks
ended June 30, 2001 and $1,091,000 for the fiscal year ended September 29, 2001.
All of the Company's units require periodic refurbishing in order to remain
competitive. During fiscal year 1992, as cash flow improved, the Company
embarked on a refurbishing program which continues through fiscal year 2002. The
budget for fiscal year 2002 is $950,000 and includes the estimated cost to
correct ADA violations.
- Page 17 -
Working Capital
- ---------------
The table below summarizes the current assets, current liabilities, and
working capital for the fiscal quarters ended June 29, 2002, June 30, 2001 and
the fiscal year ended September 29, 2001.
Jun. 29, Jun. 30, Sep. 29,
Item 2002 2001 2001
---- ---- ---- ----
(In Thousands)
Current Assets $ 4,490 $ 3,979 $ 4,514
Current Liabilities 2,064 2,022 2,074
Working Capital 2,426 1,957 2,440
In January of fiscal year 2000, the Company borrowed the sum of $1,000,000
from Bank of America, d/b/a Nations Bank. The promissory note earns interest at
prime rate, payable monthly on the outstanding principal balance, with quarterly
payments of principal commencing July 1, 2000 at the rate of $50,000 per quarter
for 8 quarters, and then at the rate of $75,000 per quarter for 8 quarters, at
which time any outstanding principal balance and all accrued interest shall be
due in full. The promissory note is secured by a security interest in all assets
of the Company, including the office building purchased by the Company. The
promissory note may be prepaid at any time, in whole or in part, with any
prepayments applying against the quarterly payment or payments of principal next
due.
During the fourth quarter of fiscal year 2001, the Company borrowed the sum
of $895,000 from the Bank of America, d/b/a Nations Bank. The promissory note
earns interest at the rate of 8.62% per annum, amortized over 20 years with
principal and interest payable monthly, with the entire unpaid principal balance
and all accrued interest due on August 1, 2008. The promissory note is secured
by a mortgage on the office building purchased by the Company for its corporate
offices, which office building was released from the lien granted by the Company
to Bank of America, d/b/a Nations Bank, as collateral for the loan in January of
fiscal year 2000. In order to receive the fixed interest rate, the Company
entered into an ISDA Master Agreement with Bank of America, ("SWAP Agreement"),
and in the event the Company elects to prepay the promissory note, there may be
a prepayment penalty associated therewith.
During the third quarter of fiscal year 2002, the Company decided to
transfer its primary bank accounts from Bank of America. d/b/a Nations Bank, to
Bank Atlantic. As a result of the transfer of its primary bank accounts, the
Company had to satisfy the loan from Bank of America from January of fiscal year
2000 which was done subsequent to the end of the third quarter through a loan
from
Bank Atlantic.
- Page 18 -
The promissory note, in the principal amount of $456,500 earns interest at prime
rate, payable monthly on the outstanding principal balance, with monthly
payments of principal, each in the amount of $19,020.86 commencing August 3,
2002 and monthly thereafter for 24 months at which time the loan will be paid in
full. The promissory note is unsecured and may be prepaid at any time, in whole
or part, with any prepayments applying against the payments last due on the
promissory note. The loan from Bank of America, d/b/a Nations Bank, from the
fourth quarter of fiscal year 2001 does not need to be satisfied due to the
transfer of the Company's primary bank accounts to Bank Atlantic.
The $1,249,000 due from franchisees represents funds advanced to the
franchises for capital expenditures to the franchised units. The Company expects
these funds will be repaid to the Company prior to the end of fiscal year 2002
Legal Matters
-------------
See "Litigation" on page 13 of this report and Item 1 and Item 3 to Part 1
of the Annual Report on Form 10-KSB for the fiscal year ended September 29, 2001
for a discussion of other legal proceedings resolved in prior years.
Results of Operation
- --------------------
Thirteen Weeks Ended
Jun. 29, Jun. 30,
2002 2001
Amount Percent Amount Percent
--------------- ---------------
(In Thousands)
Restaurant food sales $ 3,322 53.06 $ 3,120 52.77
Restaurant bar sales 830 13.26 723 12.23
Package goods sales 2,109 33.68 2,069 35.00
----- ----- ----- -----
Total sales 6,261 100.00 5,912 100.00
Franchise related revenues 297 243
Owners fee 54 50
Joint venture income 82 141
Other operating income 73 110
----- -----
Total Revenue $ 6,767 $ 6,456
===== =====
- Page 19 -
Thirty Nine Weeks Ended
Jun. 29, Jun. 30,
2002 2001
Amount Percent Amount Percent
---------------- ---------------
(In Thousands)
Restaurant food sales $ 10,186 51.31 $ 9,242 50.10
Restaurant bar sales 2,541 12.80 2,211 11.99
Package goods sales 7,124 35.89 6,993 37.91
------ ------ ------ ------
Total sales 19,851 100.00 18,446 100.00
Franchise related revenues 952 847
Owners fee 199 208
Joint venture income 480 461
Other operating income 227 258
------ ------
Total Revenue 21,709 20,220
====== ======
Restaurant food sales represented 53.06% and 51.31% of total sales in the
thirteen weeks and thirty nine weeks of fiscal year 2002, respectively as
compared to 52.77% and 50.10% of total sales in the thirteen weeks and thirty
nine weeks of fiscal year 2001, respectively. The weekly average of same store
restaurant food sales were $239,242 and $236,974 for the thirty nine weeks ended
June 29, 2002 and June 30, 2001, respectively, an increase of 1.0%. The weekly
average of same store restaurant food sales were $236,022 and $239,999 for the
thirteen weeks ended June 29, 2002 and June 30, 2001, respectively, a decrease
of 1.7%.
Restaurant bar sales represented 13.26% and 12.80% of total sales in the
thirteen weeks and thirty nine weeks of fiscal year 2002, as compared to 12.23%
and 11.99% of total sales in the thirteen weeks and thirty nine weeks of fiscal
year 2001. The weekly average of same store restaurant bar sales were $54,315
and $56,680 for the thirty nine weeks ended June 29, 2002 and June 30, 2001
respectively, a decrease of 4.2%. The weekly average of same store restaurant
bar sales were $53,481 and $55,562 for the thirteen weeks ended June 29, 2002
and June 30, 2001 respectively, a decrease of 3.8%.
Package goods sales represented 33.68% and 35.89% of total sales in the
thirteen weeks and thirty nine weeks of fiscal year 2002, respectively, as
compared with 35.00% and 37.91% of total sales in the thirteen weeks and thirty
nine weeks of fiscal year 2001, respectively. The weekly average of same store
package good sales were $177,479 and $174,292 for the thirty nine weeks ended
June 29, 2002 and June 30, 2001 respectively, an increase of 1.8%. The weekly
average of same store package good sales were $154,462 and $159,131 for the
thirteen weeks ended June 29, 2002 and June 30, 2001 respectively, a decrease of
2.9%
- Page 20 - The gross profit margin for restaurant sales was 66.1% and
61.8% for the thirteen weeks ended June 29, 2002 and June 30, 2001,
respectively. The gross profit margin for restaurant sales was 66.0% and 63.5%
for the thirty nine six weeks ended June 29, 2002 and June 30, 2001,
respectively. The increase in the gross profit margin is attributed to the
consolidation of the restaurant and bar sales of the Weston, Florida location
during the thirteen and thirty nine weeks of fiscal year 2002, which operates at
a higher gross profit margin than the other Company restaurants and a decrease
in the cost of the Company's signature item, ribs.
The gross profit margin for package goods stores was 28.2% and 27.4% for
the thirteen weeks ended June 29, 2002 and June 30, 2001, respectively. The
gross profit margin for package good sales was 27.6% and 27.0%. for the thirty
nine weeks ended June 29, 2002 and June 30, 2001, respectively.
Franchise related revenues were $297,000 and $243,000 for the thirteen
weeks ended June 29, 2002 and June 30, 2001 respectively, an increase of 22.2%.
Franchise related revenues were $952,000 and $847,000 for the thirty nine weeks
ended June 29, 2002 and June 30, 2001 respectively, an increase of 12.4%. The
increase is attributed to the Company's latest joint venture which opened for
business during the first month of fiscal year 2002
The owners fee was $54,000 and $50,000 for the thirteen weeks ended June
29, 2002 and June 30, 2001 respectively, an increase of 8.0%. The owners fee was
$199,000 and $208,000 for the thirty nine weeks ended June 29, 2002 and June 30,
2001 respectively, a decrease of 4.3%.
Joint venture income was $82,000 and $141,000 for the thirteen weeks ended
June 29, 2002 and June 30, 2001 respectively, a decrease of 72.0%. Joint venture
income was $480,000 and $461,000 for the thirty nine weeks ended June 29, 2002
and June 30, 2001 respectively, an increase of 4.1%. The decrease for the
thirteen week period is the result of the closing of the joint venture
restaurant on March 30, 2002 due to the eminent domain proceedings. The opening
of the latest joint venture restaurant during the first quarter of fiscal year
2002 offset any decrease in joint venture income for the thirty nine week period
ended June 29, 2002, due to the closing of the joint venture restaurant on March
30, 2002 due to the eminent domain proceedings.
Operating Costs and Expenses
- ----------------------------
Operating costs and expenses were $6,629,000 and $6,137,000 for the
thirteen weeks ended June 29, 2002 and June 30, 2001 respectively, an increase
of 8.0%. Operating costs and expenses were $20,194,000 and $18,471,000 for the
thirty nine weeks ended June 29, 2002 and June 30, 2001, respectively, an
increase of 9.3%.
- Page 21 -
Payroll and related costs, which includes workers compensation insurance
and health insurance were $2,359,000 and $1,924,000 for the thirteen weeks ended
June 29, 2002 and June 30, 2001 respectively, an increase of 22.6%. Payroll and
related costs which includes workers compensation insurance and health insurance
were $6,316,000 and $5,365,000 for the thirty nine weeks ended June 29, 2002 and
June 30, 2001 respectively, an increase of 17.7%. The increase is attributed to
higher workers compensation and health insurance costs and expanded management
and employee training programs.
Occupancy costs which include rent, common area maintenance, repairs and
taxes were $230,000 and $294,000 for the thirteen weeks ended June 29, 2002 and
June 30, 2001 respectively, a decrease of 21.8%. Occupancy costs which include
rent, common area maintenance, repairs and taxes were $803,000 and $793,000 for
the thirty nine weeks ended June 29, 2002 and June 30, 2001, respectively, an
increase of 1.3%. The increase in the thirty nine weeks ended June 29, 2002 is
attributed to a one time rent charge during the thirteen weeks ended December
30, 2001, as well as the consolidation of the Weston location. The decrease in
the thirteen weeks ended June 29, 2002 is the result of the Company's ownership
of the corporate office building as opposed to leasing of the corporate offices
during the thirteen weeks ended June 30, 2001.
Selling, general and administrative expenses were $1,119,000 and $949,000
for the thirteen weeks ended June 29, 2002 and June 30, 2001 respectively, an
increase of 17.9%. Selling, general and administrative expenses were $3,591,000
and $2,941,000 for the thirty nine weeks ended June 29, 2002 and June 30, 2001
respectively, an increase of 22.1 %. The increase in selling, general and
administrative expenses is attributed to the expenses incurred at the Weston
location and higher casualty and general liability insurance costs subsequent to
the events of September 11, 2001.
Trends
- ------
During the next twelve months management expects same store sales to remain
stable with an increase in gross profit. However, due to the closing of one
joint venture on March 30, 2002, joint venture income will decline. Management
also projects moderate increases in operating expenses, and for operating
expenses associated with the renovation of the Weston location which are no
longer capitalized.
- Page 22 -
PART II, OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
99.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
99.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
b. Reports on Form 8-K - None
SIGNATURES
----------
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized. The information furnished reflects all
adjustments to the statement of the results for the interim period.
FLANIGAN'S ENTERPRISES, INC.
/s/ Joseph G.Flanigan
----------------------------------------------------------
JOSEPH G. FLANIGAN, Chief Executive Officer
Date 8/13/02
- ----------------
/s/ Edward A. Doxey
----------------------------------------------------------
EDWARD A. DOXEY, Chief Financial Officer
Date 8/13/02
- ----------------
- Page 24 -