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 December 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
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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
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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 1,926,470
as of December 28, 2002.
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FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
---------------------------------------------
INDEX TO FORM 10-Q
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DECEMBER 28, 2002
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PART I. FINANCIAL INFORMATION
---------------------
1. UNAUDITED CONDENSED FINANCIAL STATEMENTS
Consolidated Summary of Earnings -- For the Thirteen Weeks
ended December 28, 2002 and December 29, 2001.
Consolidated Balance Sheets -- As of December 28, 2002 and
September 28, 2002.
Consolidated Statements of Cash Flows for the Thirteen
Weeks ended December 28, 2002 and December 29, 2001.
Notes to Consolidated Financial Statements
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
3. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- Page 2 -
4. CONTROLS AND PROCEDURES
PART II. OTHER INFORMATION AND SIGNATURES
--------------------------------
6. Exhibits and Reports on Form 8-K
(a) Exhibits
(b) Reports on Form 8-K
- Page 3 -
FLANIGAN'S ENTERPRISES, INC.
UNAUDITED CONSOLIDATED SUMMARY OF EARNINGS
(In Thousands Except Per Share Amounts)
Thirteen Weeks
Ended
Dec. 28 Dec. 29
2002 2001
------- -------
REVENUES:
Restaurant food sales $ 2,972 $ 3,249
Restaurant bar sales 731 830
Package good sales 2,680 2,435
Franchise related revenues 338 323
Owners fee 68 68
Joint venture income 88 150
Other operating income 70 87
------ ------
6,947 7,142
------ ------
COSTS AND EXPENSES:
Cost of merchandise sold
restaurant and bar 1,270 1,401
Cost of merchandise sold
package goods 1,952 1,760
Payroll and related costs 1,809 1,889
Occupancy costs 230 330
Selling, general and
administrative expenses 1,146 1,189
------ ------
6,407 6,569
------ ------
Income from operations 540 573
OTHER INCOME (EXPENSE)
Interest expense on long term
debt (31) (38)
Interest income 9 8
Recognition of deferred gains 1 1
Other, net 96 38
------ ------
Income before income taxes 615 582
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FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED SUMMARY OF EARNINGS
(In Thousands Except Per Share Amounts)
(Continued)
Thirteen Weeks
Ended
Dec. 28 Dec. 29
2002 2001
------- -------
PROVISION FOR INCOME TAXES $ 141 $ 134
-------- --------
Net Income $ 474 448
======== ========
For The Thirteen Weeks Ended
Dec. 28, 2002 Dec. 29, 2001
Numerator Denominator EPS Numerator Denominator EPS
Basic EPS 474,000 1,926,470 $.25 448,000 1,924,865 $ .23
Effective/dilutive
Stock Options 26,197 16,989
----------------------------------------------------
Diluted EPS 474,000 1,952,667 $.24 448,000 1,941,854 $ .23
----------------------------------------------------------------
The accompanying notes to consolidated financial statements are an
integral part of these statements.
- Page 5 -
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
---------------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
DECEMBER 28, 2002 (UNAUDITED) and SEPTEMBER 28, 2002
----------------------------------------------------
(In Thousands)
ASSETS
------
DECEMBER 28 SEPTEMBER 28
2002 2002
----------- ------------
Cash and cash equivalents $ 1,262 $ 871
Notes and mortgages receivable,
current maturities, net 55 85
Due from franchisees 489 355
Other receivables 324 311
Inventories 1,712 1,387
Refundable deposit, major supplier 1,037 708
Marketable securities 149 -
Prepaid expenses 400 436
Deferred tax asset 239 239
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Total Current Assets 5,667 4,392
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Property and Equipment 5,507 5,498
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Investments in Joint Ventures 2,462 2,414
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Other Assets:
Liquor licenses, net 331 333
Notes and mortgages receivable, net 163 92
Deferred tax asset 248 248
Other 174 215
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Total Other Assets 916 888
-------- -----
Total Assets $ 14,552 $ 13,192
======== ======
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FLANIGAN'S ENTERPRISES, INC, AND SUBSIDIARIES
---------------------------------------------
CONSOLIDATED BALANCE SHEETS
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DECEMBER 28, 2002 (UNAUDITED) AND SEPTEMBER 28, 2002
----------------------------------------------------
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
(In Thousands)
DECEMBER 28 SEPTEMBER 28
2002 2002
----------- ------------
Current Liabilities:
Accounts payable and accrued expenses $ 2,472 $ 1,431
Common stock dividend payable 520 -
Due to franchisees 105 196
Current portion of long term debt 267 259
------ -------
Total Current Liabilities 3,364 1,886
------ -------
Long Term Debt, Net of Current
Maturities 1,277 1,349
------ ------
Stockholder's Equity:
Common stock, 5,000,000 shares
authorized, 4,197,642 shares issued 420 420
Capital in excess of par value 6,103 6,103
Retained earnings 8,701 8,747
Less: Treasury stock, at cost
2,271,172 shares at December 28, 2002
2,271,172 shares at September 28, 2002 (5,313) (5,313)
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Total Stockholder's Equity 9,911 9,957
------- ------
Total Liabilities and
Stockholder's Equity $ 14,552 $ 13,192
======== =======
See notes to consolidated financial statements.
- Page 7 -
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
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UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
----------------------------------------------
FOR THE THIRTEEN WEEKS ENDED DECEMBER 28 2002 AND DECEMBER 28, 2001
-------------------------------------------------------------------
(In Thousands)
DECEMBER 28 DECEMBER 29
2002 2001
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 474 $ 448
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization of
property, equipment and capital
leases 183 179
Amortization of liquor licenses 2 1
Recognition of deferred gains and
other deferred income (1) (1)
Joint venture income (88) (150)
Gain on sale of liquor license - (8)
Changes in assets and liabilities:
(Increase) decrease in:
Notes receivable 12 7
Inventories (325) (395)
Prepaid expenses 36 89
Due from franchises (134) (58)
Deposit with major supplier (329) -
Other receivables (13) (168)
Other assets 41 80
Increase (decrease) in:
Accounts payable and accrued
expenses 1,041 (121)
Due to franchises (91) (26)
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Net cash provided by (used in)
operating activities 808 (123)
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(continued)
- Page 8 -
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
---------------------------------------------
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
----------------------------------------------
FOR THE THIRTEEN WEEKS ENDED DECEMBER 28 2002 AND DECEMBER 29 2001
------------------------------------------------------------------
(In Thousands)
DECEMBER 28 DECEMBER 29
2002 2001
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Collections on notes and mortgages
receivable 4 46
Distributions from joint ventures 137 98
Additions to property and equipment (191) (183)
Additions to notes and mortgages
receivable (57) (39)
Additional investment in joint ventures (97) (148)
Sale of liquor license - 45
Acquisition of marketable securities (149) -
----- -----
Net cash (used in) investing
activities (353) (181)
----- -----
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long term debt (64) (75)
Payment on damages payable on
terminated or rejected leases - (30)
Exercise of stock option - 235
Payment of notes receivable on sale
of common stock - 7
----- -----
Net cash (used in) financing
activities (64) 137
----- -----
NET INCREASE (DECREASE) IN CASH AND
EQUIVALENTS 391 (167)
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 871 1,396
----- ------
CASH AND EQUIVALENTS, END OF PERIOD $ 1,262 $ 1,229
====== ======
- Page 9 -
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
DECEMBER 28, 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.
(2) BASIS OF PRESENTATION:
----------------------
The financial information for the periods ended December 28,
2002, and December 29, 2001 are unaudited. Financial information
as of September 28, 2002 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-K
for the year ended September 28, 2002. 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 10 -
The data on Page 5 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 2002 financial statements have
been reclassified to conform to the fiscal 2003 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.
- Page 11 -
(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. 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 12 -
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, operated this restaurant under its existing
service mark from August, 2001 through July, 2002. During the
fourth quarter of fiscal year 2002, the limited partnership began
raising funds to renovate the business premises for operation as a
"Flanigan's Seafood Bar and Grill" restaurant. The restaurant
opened for business during the second quarter of fiscal year 2003.
The Company continues to act as general partner and also owns a
twenty eight percent limited partnership interest. Other related
parties, including but not limited to officers and directors of the
Company and their families are also investors. The results of
operations of this restaurant were consolidated with the Company's
operations for the fiscal year ended September 28, 2002.
- Page 13 -
(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 $487,000 as of December 28, 2002 and
$487,000 as of September 28, 2002.
(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 $7,265,000. In the
event of a default under any of these agreements, the Company will
have the right to repossess the premises.
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. 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-K
for the fiscal year ended September 28, 2002. 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 6 in the Company's Annual Report on
Form 10-K for the fiscal year ended September 28, 2002.
- Page 14 -
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 fiscal year 2002,
the Company, including three (3) of its franchises, settled all
active lawsuits alleging ADA violations.
(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.
Dec. 28 Sep. 28 Dec. 29 Note
2002 2002 2001 Numbers
------- ------- ------- -------
Combination package
and restaurant 4 4 4
Restaurant only 7 7 8 (1)(2)(3)
Package store only 4 4 4 (4)(5)(6)
Clubs 1 1 1
------- ------- -------
Total Company operated units 16 16 17
Franchised units 7 7 7 (7)
(9) INVESTMENTS
Investmenst in equity securities that have readily determinable fair values are
classified and accounted for as available-for-sale. Available-for-sale
securities are carried at fair value with unrealized gains and losses recorded
as a separate component of accumulative other comprehensive income. Realized
gains and losses are calculated based on the specific identification method and
recorded in "other income" on the income statement. At December 28, 2002 fair
value approximated cost.
- Page 15 -
Notes:
- ------
(1) During the third quarter of fiscal year 2001, 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, 2002 and is not included in the table of
units.
(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 own and
operate an existing restaurant in Weston, Florida. During the
fourth quarter of fiscal year 2002, the limited partnership raised
funds to renovate the business premises for operation as a
"Flanigan's Seafood Bar and Grill" restaurant. The Company owned
100% of the limited partnership from July 29, 2001 through August
31, 2002 and the operating results were consolidated for financial
reporting purposes for fiscal year 2001. Renovations were
completed and the restaurant opened for business during the first
quarter of fiscal year 2003. This unit 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
expects to receive the required building permits by the end of the
second quarter of fiscal year 2003. This unit is not included in
the table of units.
- Page 16 -
(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 and expects to have the permits issued by the end of the
second quarter of fiscal year 2003. This 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.
Liquidity and Capital Resources
- -------------------------------
Cash Flows
----------
The following table is a summary of the Company's cash flows
for the first thirteen weeks of fiscal years 2003 and 2002.
Thirteen Weeks Ended
Dec. 28, Dec. 29,
2002 2001
--------------------
(In Thousands)
Net cash provided by
operating activities $ 808 $ (123)
Net cash used in
investing activities (353) (181)
Net cash used in
financing activities (64) 137
Net Increase (Decrease) in Cash
and Cash Equivalents 391 (167)
Cash and Cash Equivalents, Beginning 871 1,396
Cash and Cash Equivalents, Ending $ 1,262 $ 1,229
===== =====
On December 19, 2002, the Company declared a cash dividend of
27 cents per share payable on January 30, 2003 to shareholders of
record on January 17, 2003.
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.
- Page 17 -
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 $191,000 during
the thirteen weeks ended December 28, 2002 as compared to $183,000
for the thirteen weeks ended December 29, 2001 and $558,000 for the
fiscal year ended September 28, 2002.
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 2003. The budget for fiscal year
2003 is $425,000.
Working Capital
- ---------------
The table below summarizes the current assets, current
liabilities, and working capital for the fiscal quarters ended
December 28, 2002, and December 29, 2001 and the fiscal year ended
September 28, 2002.
Dec. 28, Dec. 29, Sep. 28,
Item 2002 2001 2002
---- ------- ------- -------
(In Thousands)
Current Assets $ 5,667 $ 4,883 $ 4,392
Current Liabilities 3,364 2,595 1,886
Working Capital 2,303 2,288 2,506
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 earned 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 would have been due in full. The promissory
note was secured by a security interest in all assets of the
Company, including the office building purchased by the Company.
The promissory note was prepaid in full during the fourth quarter
of fiscal year 2002.
During the fourth quarter of fiscal year2002, the Company closed on
a $456,000 loan from Bank Atlantic, which loan was used to prepay the
Company's loan with Bank of America discussed above. The promissory
note earns interest at prime rate per annum and is fully amortized
over 19 months with equal monthly payments of principal and interest,
each with an amount of $19,020.86, commencing August 3, 2002. The
promissory note is unsecured and may be prepaid in whole or in part
at any time, without penalty, with any prepayments applying against
the payments last due on the promissory note.
- Page 18 -
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.
The $489,000 due from franchises represents funds advanced to
the franchises for capital expenditures to the franchised units.
The Company expects these funds to be repaid to the Company prior
to the end of fiscal year 2003.
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-K for the fiscal year
ended September 28, 2002 for a discussion of other legal
proceedings resolved in prior years.
Results of Operation
- --------------------
Thirteen Weeks Ended
Dec. 28, Dec. 29,
2002 2001
Amount Percent Amount Percent
--------------- ---------------
(In Thousands)
Restaurant food sales $ 2,972 46.56 $ 3,249 49.88
Restaurant bar sales 731 11.45 830 12.74
Package goods sales 2,680 41.99 2,435 37.38
----- ----- ----- -----
Total sales 6,383 100.00 6,514 100.00
Franchise related revenues 338 323
Owners fee 68 68
Joint venture income 88 150
Other operating income 70 87
----- -----
Total Revenue $ 6,947 $ 7,142
===== =====
- Page 19 -
Restaurant food sales represented 46.56% of total sales in the
thirteen weeks of fiscal year 2003 as compared to 49.88% of total
sales in the thirteen weeks of fiscal year 2002. The percentage
decrease is accounted for by the consolidation of food sales from
the restaurant in Weston, Florida for the thirteen weeks ended
December 29, 2001, which did not occur in the thirteen weeks ended
December 28, 2002. The weekly average of same store restaurant food
sales were $213,535 and $212,634 for the thirteen weeks ended
December 28, 2002 and December 29, 2001, respectively, an increase
of less than 1%.
Restaurant bar sales represented 11.45% of total sales in the
thirteen weeks of fiscal year 2003 as compared to 12.74% of total
sales in the thirteen weeks of fiscal year 2002. The percentage
decrease is accounted for by the consolidation of restaurant bar
sales from the restaurant in Weston, Florida for the thirteen weeks
ended December 29, 2001, which did not occur in the thirteen weeks
ended December 28, 2002. The weekly average of same store
restaurant bar sales were $56,212 and $52,898 for the thirteen
weeks ended December 28, 2002 and December 29, 2001, respectively,
an increase of 6.3%.
Package goods sales represented 41.99% of total sales in the
thirteen weeks of fiscal year 2003, as compared to 37.38% of total
sales in the thirteen weeks of fiscal year 2001. The percentage
increase is attributed to the consolidation of the restaurant food
and bar sales of the Weston, Florida location for the thirteen
weeks ended December 29, 2001, which did not occur in the thirteen
weeks ended December 28, 2002. and the operation of an additional
package goods store for the entire thirteen weeks of the fiscal
year ended December 28, 2002 as compared with only three weeks for
the thirteen weeks ended December 29, 2001. The weekly average of
same store package goods sales were $194,032 and $185,987 for the
thirteen weeks ended December 28, 2002 and December 29, 2001,
respectively, an increase of 4.3%
The gross profit margin for restaurant sales was 65.70% and
65.65% for the thirteen weeks ended December 28, 2002 and December
29, 2001, respectively.
The gross profit margin for package goods stores was 27.16% and
27.69% for the thirteen weeks ended December 28, 2002 and December
29, 2001, respectively.
Franchise related revenues were $338,000 and $323,000 for the
thirteen weeks ended December 28, 2002 and December 29, 2001
respectively, an increase of 4.6%.
The owners fee was $68,000 and $68,000 for the thirteen weeks
ended December 28, 2002 and December 29, 2001 respectively.
- Page 20 -
Joint venture income was $88,000 and $150,000 for the thirteen
weeks ended December 28, 2002 and December 29, 2001 respectively,
a decrease of 41.3%. The decrease for the thirteen week period is
the result of the closing of a joint venture restaurant on March
30, 2002 due to eminent domain proceedings.
Operating Costs and Expenses
- ----------------------------
Operating costs and expenses were $6,407,000 and $6,569,000 for
the thirteen weeks ended December 28, 2002 and December 29, 2001
respectively, an decrease of 2.5%. The decrease is accounted for
by the consolidation of the restaurant located in Weston, Florida
for the thirteen weeks ended December 29, 2001, which did not occur
in the thirteen weeks ended December 28, 2002.
Payroll and related costs, which includes workers compensation
insurance and health insurance were $1,809,000 and $1,889,000 for
the thirteen weeks ended December 28, 2002 and December 29, 2001
respectively, an decrease of 4.2%. The decrease is accounted for
by the consolidation of the restaurant located in Weston, Florida
for the thirteen weeks ended December 29, 2001 which did not occur
in the thirteen weeks ended December 28, 2002.
Occupancy costs which include rent, common area maintenance,
repairs and taxes were $230,000 and $330,000 for the thirteen weeks
ended December 28, 2002 and December 29, 2001 respectively, a
decrease of 30.3%. The decrease in the thirteen weeks ended
December 28, 2002 is accounted for by to the consolidation of the
restaurant located in Weston, Florida for the thirteen weeks ended
December 31, 2001 and additional percentage rent paid on two stores
during the thirteen weeks ended December 29, 2001, which did not
occur in the thirteen weeks ended December 28, 2002.
Selling, general and administrative expenses were $1,146,000 and
$1,189,000 for the thirteen weeks ended December 28, 2002 and
December 29, 2001 respectively, a decrease of 3.6%. The decrease
in selling, general and administrative expenses is accounted for by
the consolidation of the restaurant located in Weston, Florida for
the thirteen weeks ended December 29, 2001, which did not occur in
the thirteen weeks ended December 28, 2002.
- Page 21 -
The Company's significant accounting policies are more fully
described in Note 1 to the Company's consolidated financial
statements located in Item 8 of the Annual Report on Form 10-K.
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, liabilities, revenues, and
expenses, and the related disclosures of contingent assets and
liabilities. Actual results could differ from those estimates
under different assumptions or conditions. The Company believes
that the following critical accounting policy is subject to
estimates and judgments used in the preparation of its consolidated
financial statements;
Deferred tax assets result primarily from timing differences
relating to depreciation and tip credits. The calculations are
reviewed periodically by management and are adjusted as the
assumptions or conditions indicate.
QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company does hold market risk sensitive instruments for investment
purposes. The Company also recognizes market risk from interest rate exposure.
Market Risk - Investments
- -------------------------
In the quarter ended December 28, 2002, the Company began an investment
program to accumulate funds to satisfy debt in the future. The Company made an
investment in an equity security which is subject to market risk. To the extent
that market price declines will have a negative impact of the value of the
investment. There is no assurance that market price will increase or decrease in
the next year.
At September 28, 2002, the Company's cash resources earn interest at
variable rates. Accordingly, the Company's return on these funds is affected by
fluctuations in interest rates. Any decrease in interest rates will have
negative effect on the Company's earnings. In addition, the Company incurs
interest charges on debt at variable rates, which to the extent the Company that
the Company has not entered into interest rate swap agreements to hedge this
risk. could negatively impact the Company's earnings. There is no assurance that
interest rates will increase or decrease over the next fiscal year.
CONTROLS AND PROCEDURES
We maintain controls and procedures that are designed to ensure (1) that
information required to be disclosed by us in the reports we file or submit
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is
recorded, processed, summarized, and reported within the time periods specified
in the Securities and Exchange Commission ("SEC") rules and forms, and (2) that
this information is accumulated and communicated to our management including the
Chief Executive Officer, as appropriate, to allow timely decisions regarding
required disclosure. In designing and evaluating the disclosure controls and
procedures, management recognizes that any controls and procedures, no matter
how well designed and operated, can provide only reasonable assurance of
achieving the desired control objectives, and management necessarily was
required to apply its judgment in evaluating the cost benefit relationship of
possible controls and procedures.
In January 2003, under the supervision and review of our Chief Executive
Officer and Chief Financial Officer, we conducted an evaluation of the
effectiveness of our disclosure controls and procedures. Based on that
evaluation, our Chief Executive Officer and Chief Financial Officer have
concluded that our disclosure controls and procedures are effective in alerting
them in a timely manner to material information regarding us (including our
consolidated subsidiaries) that is required to be included in our periodic
reports to the SEC.
In addition, there have been no significant changes in our internal
controls or in other factors that could significantly affect those controls
since our January 2003 evaluation. We cannot assure you, however, that our
system of disclosure controls and procedures will always achieve its stated
goals under all future conditions, no matter how remote.
Trends
- ------
During the next twelve months management expects same store
sales to remain level with an increase in gross profit due to
improved terms in the Company's contract with its major supplier.
With the opening of the joint venture restaurant in the second
quarter of fiscal year 2003, management expects an increase in
joint venture income for the balance of fiscal year 2003.
Management also expects a moderate increase in operating expenses
for the balance of fiscal year 2003, resulting in a modest increase
in the Company's earnings for fiscal year 2003.
PART II, OTHER INFORMATION
- --------------------------
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits - None
b. Reports on Form 8-K - None
- Page 22 -
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 2/11/03
-------
/s/Edward A. Doxey
-------------------------------------------
EDWARD A. DOXEY, Chief Financial Officer
Date 2/11/03
-------
- Page 23 -
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 Flanigan's Enterprises,
Inc. (the "Company") on Form 10-Q for the period ended December 28,
2002 as filed with the Securities and Exchange Commission on the
date hereof (the "Report"), I, Joseph G. Flanigan, Chief Executive
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.) This 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 for the periods presented.
/s/ Joseph G. Flanigan
- ----------------------
Joseph G. Flanigan
Chief Executive Officer
February 11, 2003
CERTIFICATION PURSUANT TO
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Flanigan's Enterprises,
Inc. (the "Company") on Form 10-Q for the period ended December 28,
2002 as filed with the Securities and Exchange Commission on the
date hereof (the "Report"), I, Edward A. Doxey, 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 for the periods presented.
/s/ Edward A. Doxey
- --------------------
Edward A. Doxey
Chief Financial Officer
February 11, 2003
- Page 24 -
CERTIFICATION PURSUANT TO
18 U. S. C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Joseph G. Flanigan, certify that:
1. I have reviewed this quarterly report on Form 10-Q of
Flanigan's Enterprises, Inc. for the period ended December
28, 2002;
2. Based on my knowledge, this quarterly 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
quarterly report;
3. Based on my knowledge, the consolidated financial statements,
and other financial information included in this quarterly
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
quarterly report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-
14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures 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 quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within 45
days prior to the filing date of this quarterly report (the
"Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
function);
- Page 25 -
a) all significant deficiencies in the design or operation
of internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
6. The registrant's other certifying officers and I have
indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors
that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and
material weaknesses.
/s/Joseph G. Flanigan
------------------------
Name: Joseph G. Flanigan
Chief Executive Officer
Date: February 11, 2003
- Page 26 -
CERTIFICATION PURSUANT TO
18 U. S. C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Edward A. Doxey, certify that:
1. I have reviewed this quarterly report on Form 10-Q of
Flanigan's Enterprises, Inc. for the period ended December
28, 2002;
2. Based on my knowledge, this quarterly 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
quarterly report;
3. Based on my knowledge, the consolidated financial statements,
and other financial information included in this quarterly
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
quarterly report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-
14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures 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 quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within 45
days prior to the filing date of this quarterly report (the
"Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
function);
- Page 27 -
a) all significant deficiencies in the design or operation
of internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
6. The registrant's other certifying officers and I have
indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors
that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and
material weaknesses.
/s/Edward A. Doxey
-----------------------
Name: Edward A. Doxey
Chief Financial Officer
Date: February 11, 2003
- Page 28 -