`
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 March 29, 2003
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
Flanigan's Enterprises, Inc.
(Exact name of registrant as specified in its charter)
Florida 59-0877638
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No. )
5059 N.E. 18th Avenue, Fort Lauderdale, Florida 33334
(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 1,926,470 as of March 29, 2003.
1
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
MARCH 29, 2003
PART I. FINANCIAL INFORMATION
1. UNAUDITED CONDENSED FINANCIAL STATEMENTS
Consolidated Summary of Earnings -- For the Thirteen and Twenty Six Weeks
ended March 29, 2003 and March 30, 2002.
Consolidated Balance Sheets -- As of March 29, 2003 and September 28,
2002.
Consolidated Statements of Cash Flows for the Twenty Six weeks ended March
29, 2003 and March 30, 2002.
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
4. CONTROLS AND PROCEDURES
PART II. OTHER INFORMATION AND SIGNATURES
5. Exhibits and Reports on Form 8-K
(a) Exhibits
(b) Reports on Form 8-K
2
FLANIGAN'S ENTERPRISES, INC.
UNAUDITED CONSOLIDATED SUMMARY OF EARNINGS
(In Thousands Except Per Share Amounts)
Thirteen Weeks Twenty Six Weeks
Ended Ended
Mar. 29 Mar. 30 Mar. 29 Mar. 30
2003 2002 2003 2002
---- ---- ---- ----
Restated Restated
REVENUES:
Restaurant food sales $ 6,202 $ 6,423 $ 11,134 $ 12,279
Restaurant bar sales 1,653 1,638 2,945 3,239
Package good sales 2,683 2,580 5,363 5,015
Franchise related revenues 162 231 400 464
Owners fee 67 77 135 145
Other operating income 78 75 165 178
-------- -------- -------- --------
10,845 11,024 20,142 21,320
-------- -------- -------- --------
COSTS AND EXPENSES:
Cost of merchandise sold
Restaurant and bar 2,677 2,695 4,813 5,285
Cost of merchandise sold
Package goods 2,034 1,884 3,986 3,644
Payroll and related costs 2,888 2,854 5,457 5,855
Occupancy costs 545 627 975 1,055
Selling, general and
administrative expenses 1,995 1,586 3,370 3,362
-------- -------- -------- --------
10,139 9,646 18,601 19,201
-------- -------- -------- --------
Income from operations 706 1,378 1,541 2,119
-------- -------- -------- --------
OTHER INCOME (EXPENSE)
Interest expense on long term
debt and damages payable (43) (36) (74) (74)
Minority interest in earnings of
consolidated joint ventures (152) (590) (464) (768)
Interest and dividend income 10 16 19 24
Joint venture income 5 16 22 26
Recognition of deferred revenue 2 1 3 2
Other, net 21 6 117 44
-------- -------- -------- --------
(157) (587) (377) (746)
-------- -------- -------- --------
Income before income taxes 549 791 1,164 1,373
3
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED SUMMARY OF EARNINGS
(In Thousands Except Per Share Amounts)
(Continued)
Thirteen Weeks Twenty Six Weeks
Ended Ended
Mar. 29 Mar. 30 Mar. 29 Mar 30
2003 2002 2003 2002
---- ---- ---- ----
PROVISION FOR INCOME TAXES $ 127 $ 168 $ 268 $ 302
----- ----- ----- ------
Net Income $ 422 $ 623 $ 896 $ 1071
===== ===== ===== ======
For The Thirteen Weeks Ended
Mar. 29, 2003 Mar. 30, 2002
Numerator Denominator EPS Numerator Denominator EPS
--------- ----------- ---- --------- ----------- -----
Basic EPS 422,000 1,926,470 $.22 623,000 1,959,869 $.32
Effective/ dilutive
Stock Options 35,412 37,564
------- --------- ---- ------- --------- ----
Diluted EPS 422,000 1,961,882 $.22 623,000 1,997,433 $.31
------- --------- ---- ------- --------- ----
For The Twenty Six Weeks Ended
Mar. 29, 2003 Mar. 30, 2002
Numerator Denominator EPS Numerator Denominator EPS
--------- ----------- ---- --------- ----------- ----
Basic EPS 896,000 1,926,470 .47 1,071,000 1,959,869 $.55
Effective/dilutive
Stock Options 33,130 27,173
------- --------- --- --------- --------- ----
Diluted EPS 896,000 1,959,600 .46 1,071,000 1,987,042 $.54
------- --------- --- --------- --------- ----
The accompanying notes to consolidated financial statements are an integral part
of these statements.
4
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 29, 2003 (UNAUDITED) AND SEPTEMBER 28, 2002
(In Thousands)
ASSETS
MARCH 29 SEPTEMBER 28
2003 2002
-------- ------------
(Restated)
Cash and cash equivalents $ 2,194 $ 1,143
Notes and mortgages receivable,
current maturities, net 55 85
Due from franchisees 130 156
Other receivables 186 795
Inventories 1,506 1,422
Refundable deposit, major supplier 1,209 979
Marketable securities 149 --
Prepaid expenses 756 535
Deferred tax asset 239 239
------- -------
Total Current Assets 6,424 5,354
------- -------
Property and Equipment 11,643 10,514
------- -------
Investments in Joint Ventures 148 142
------- -------
Other Assets:
Liquor licenses, net 341 347
Notes and mortgages receivable, net 158 167
Deferred tax asset 248 248
Other 277 595
------- -------
Total Other Assets 1,024 1,357
------- -------
Total Assets $19,239 $17,367
======= =======
5
FLANIGAN'S ENTERPRISES, INC, AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 29, 2003 (UNAUDITED) AND SEPTEMBER 28, 2002
LIABILITIES AND STOCKHOLDERS' EQUITY
(In Thousands)
MARCH 29 SEPTEMBER 28,
2003 2002
-------- -------------
(Restated)
Current Liabilities:
Accounts payable and accrued expenses $ 2,840 $ 1,905
Due to franchisees 185 49
Current portion of long term debt 311 345
Deferred revenue 73 75
-------- --------
Total Current Liabilities 3,409 2,374
-------- --------
Long Term Debt, Net of Current
Maturities 1,437 1,593
-------- --------
Minority Interest in Consolidated
Joint Ventures 4,060 3,443
-------- --------
Stockholders' 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 9,123 8,747
Less: Treasury stock, at cost
2,271,172 shares at September 28, 2002
and March 29, 2003 (5,313) (5,313)
-------- --------
Total Stockholders' Equity 10,333 9,957
-------- --------
Total Liabilities and
Stockholders' Equity $ 19,239 $ 17,367
======== ========
See notes to consolidated financial statements.
6
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE TWENTY SIX WEEKS ENDED MARCH 29, 2003 AND MARCH 30, 2002
(In Thousands)
Mar. 29 Mar. 30
2003 2002
------- -------
(Restated)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 896 $ 1,071
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization of
property, equipment and capital
leases 635 526
Minority interest in earnings of
consolidated joint venture 464 768
Recognition of deferred revenue (2) (2)
Joint venture income (22) (26)
Gain on sale of liquor license -- (8)
Changes in assets and liabilities:
(Increase) decrease in:
Inventories (84) (146)
Prepaid expenses (221) 74
Due from franchises 26 (385)
Deposit with supplier (230) --
Other receivables 609 642
Other assets 304 (117)
Increase (decrease) in:
Accounts payable and accrued expenses 935 43
Due to franchises 136 (49)
------- -------
Net cash provided by
operating activities 3,446 2,391
(continued)
7
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE 26 WEEKS ENDED MARCH 29, 2003 AND MARCH 30, 2002
(In Thousands)
MARCH 29 MARCH 30
2003 2002
-------- --------
(Restated)
CASH FLOWS FROM INVESTING ACTIVITIES:
Collections on notes and mortgages
receivable 39 (2)
Distributions from joint ventures 16 --
Additions to property and equipment (1,744) (1,282)
Additions to notes and mortgages
receivable -- (158)
Acquisition of marketable securities (149) --
Sale of liquor license -- 45
Acquisition of liquor license -- (109)
------- -------
Net cash (used in) investing
activities (1,838) (1,506)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long term debt (190) (184)
Proceeds from joint venture interest 1,149 1,485
Payment on damages payable on
terminated or rejected leases -- (105)
Payment of cash dividend (520) (499)
Distributions to joint venture
minority partners (996) (1,891)
Exercise of stock option -- 235
Payment of notes receivable on sale
of common stock -- 19
------- -------
Net cash (used in) financing
activities (557) (940)
------- -------
NET INCREASE (DECREASE) IN CASH AND
EQUIVALENTS 1,051 (55)
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 1,143 1,549
------- -------
CASH AND EQUIVALENTS, END OF PERIOD $ 2,194 $ 1,494
======= =======
8
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 29, 2003
(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 March 29, 2003, and March
30, 2002 is 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 Amended Annual Report on Form 10- KA
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. 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.
9
(4) RECLASSIFICATION:
Certain amounts in the fiscal 2002 financial statements have been
reclassified to conform to the fiscal 2003 presentation.
(5) 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.
(6) INVESTMENT IN JOINT VENTURES:
Subsequent to September 28, 2002, the Company determined that all but one
joint venture discussed below should be consolidated by virtue of control as
evidenced by general partnership interests held by the Company. As a result, the
Company has restated the accompanying consolidated financial statements to
reflect the joint ventures in which they have a general partnership interest on
a consolidated basis rather than utilizing the equity method as previously
filed. The restatement resulted in no change to net income or the related
earnings per share information.
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 owned 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 a gain on disposition of approximately
$459,000 during the third quarter of fiscal year 2002. The unrelated joint
venture partner received $350,000 in full settlement of their interest and the
Company now controls 100% of the partnership. The limited partnership reserved
its right to
10
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 Judgment; (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. During the second quarter
of fiscal year 2003, the Company settled its claim for additional compensation
from the DOT for $27,000, including statutory relocation expenses and
anticipates receiving an award of $10,000 from the DOT as reimbursement of
expenses incurred by the Company during the eminent domain proceedings. The
Company expects to receive the final payment, ($37,000), during the third
quarter of fiscal 2003. The results of operations of this restaurant have been
consolidated with the Company's operations for the periods ended March 29, 2003
and March 30, 2002.
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. The results of operations of its
restaurant have not been consolidated with the Company operations for the
periods ended March 29, 2003 and March 30, 2002.
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. The results of operations of this restaurant have been
consolidated with the Company's operations for the periods ended March 29, 2003
and March 30, 2002.
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. The results of operations of this restaurant have been consolidated
with the Company's operations for the periods ended March 29, 2003 and March 30,
2002.
11
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. The results of operations of this
restaurant have been consolidated with the Company's operations for the periods
ended March 29, 2003 and March 30, 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 servicemark 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, have been consolidated with the Company's operations for the periods
ended March 30, 2002 and March 29, 2003.
(7) 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 March 29, 2003 and September 28, 2002.
12
(8) 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", know as "dram shop" claims. Florida has restricted its dram shop claims
by statute, permitting persons injured by an "obviously intoxicated person" to
bring 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 Amended Annual Report on Form 10-KA 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 Amended Annual Report on Form
10-KA for the fiscal year ended September 28, 2002.
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 lawsuits 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.
13
(9) INVESTMENTS
-----------
Investments 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 accumulated 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
March 29, 2003 fair value approximated cost.
2. 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.
Mar.29 Sept. 28 Mar 30 Note
2003 2002 2002 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)
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 and 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.
14
(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 received the
required building permits subsequent to the end of the second quarter of fiscal
year 2003, and anticipates the package liquor store opening for business prior
to the end 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 an 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.
Results of Operations
Thirteen Weeks Ended
Mar. 29, Mar. 30,
2003 2002
Amount Percent Amount Percent
------- ------ ------ -------
(In Thousands) (In Thousands)
Restaurant food sales $ 6,202 58.85 $ 6,423 60.36
Restaurant bar sales 1,653 15.69 1,638 15.39
Package goods sales 2,683 25.46 2,580 24.25
------- ------ ------- ------
Total sales $10,538 100.00 $10,641 100.00
Franchise related revenues 162 231
Owners fee 67 77
Other operating income 78 75
------- -------
Total Revenue $10,845 $11,024
======= =======
Twenty Six Weeks Ended
Mar. 29, Mar. 30,
2003 2002
Amount Percent Amount Percent
------- ------- ------- --------
(In Thousands) (In Thousands)
Restaurant food sales $11,134 57.27 $12,279 59.80
Restaurant bar sales 2,945 15.15 3,239 15.78
Package goods sales 5,363 27.58 5,015 24.42
------- ------ ------- ------
Total sales $19,442 100.00 $20,533 100.00
Franchise related revenues 400 464
Owners fee 135 145
Other operating income 165 178
------- -------
Total Revenue $20,142 $21,320
======= =======
Restaurant food sales represented 58.85% and 57.27% of total sales in the
thirteen weeks and twenty six weeks of fiscal year 2003, respectively as
compared to 60.36% and 59.80% of total sales in the thirteen weeks and twenty
six weeks of fiscal year 2002 respectively. The weekly average of same store
restaurant food sales were $397,962 and $396,222 for the twenty six weeks, ended
March 29, 2003 and March 30. 2002, respectively, an increase of less than 1.0%.
The weekly average of same store restaurant food sales were $417,338 and
$419,892 for the thirteen weeks ended March 29, 2003 and March 30, 2002,
respectively, a decrease of less than 1.0%.
15
Restaurant bar sales represented 15.69% and 15.15% of total sales in the
thirteen weeks and twenty six weeks of fiscal year 2003, respectively, as
compared to 15.39% and 15.78% of total sales in the thirteen weeks and twenty
six weeks of fiscal year 2002, respectively. The weekly average of same store
restaurant bar sales were $104,436 and $101,549 for the twenty six weeks ended
March 29, 2003 and March 30, 2002, respectively, an increase of 2.8%. The weekly
average of same store restaurant bar sales were $109,979 and $ 102,085 for the
thirteen weeks ended March 29, 2003 and March 30, 2002 respectively, an increase
of 7.7%.
Package goods sales represented 25.46% and 27.58% of total sales in the
thirteen weeks and twenty six weeks of fiscal year 2003, respectively, as
compared to 24.25% and 24.42% of total sales in the thirteen weeks and twenty
six weeks of fiscal year 2002, respectively. The weekly average of same store
package goods sales were $192,057 and $180,888 for the twenty six weeks ended
March 29, 2003 and March 30, 2002, respectively, an increase of 6.2%. The weekly
average of same store package good sales were $188,602 and $181,873 for the
thirteen weeks ended March 29, 2002 and March 30, 2002 respectively, an increase
of 3.7%.
The gross profit margin for restaurant sales was 65.92% and 66.57% for the
thirteen weeks ended March 29, 2003 and March 30, 2002, respectively. The gross
profit margin for the restaurant sales was 65.82% and 65.94% for the twenty six
weeks ended March 29, 2003 and March 30, 2002, respectively.
The gross profit margin for package goods stores was 24.2% and 27.0% for
the thirteen weeks ended March 29, 2003 and March 30, 2002, respectively. The
gross profit margin for package good sales was 25.7% and 27.3% for the twenty
six weeks ended March 29, 2003 and March 30, 2002, respectively.
Franchise related revenues were $162,000 and $231,000 for the thirteen
weeks ended March 30, 2003 and March 30, 2002 respectively, a decrease of 29.9%.
Franchise related revenues were $400,000 and $464,000 for the twenty six weeks
ended March 29, 2003 and March 30, 2002 respectively, a decrease of 13.8%.
The owners fee was $67,000 and $77,000 for the thirteen weeks ended March
29, 2003 and March 30, 2002 respectively, a decrease of 13.0%. The owners fee
was $135,000 and $145,000 for the twenty six weeks ended March 29, 2003 and
March 30, 2002 respectively, a decrease of 6.9%.
Joint venture income was $5,000 and $16,000 for the thirteen weeks ended
March 29, 2003 and March 30, 2002 respectively, a decrease of 68.8%. Joint
venture income was $22,000 and $26,000 for the twenty six weeks ended March 29,
2003 and March 30, 2002 respectively, a decrease of 15.4%.
Operating Costs and Expenses
Operating costs and expenses were $ 10,139,000 and $9,646,000 for the
thirteen weeks ended March 29, 2003 and March 30, 2002 respectively, an increase
of 5.1%. Operating costs
16
and expenses were $18,601,000 and $19,201,000 for the twenty six weeks ended
March 29, 2003 and March 30, 2002, a decrease of 3.1%.
Payroll and related costs, which includes workers compensation insurance
and health insurance were $2,888,000 and $2,854,000 for the thirteen weeks ended
March 29, 2003 and March 30, 2002 respectively, an increase of 1.2%. Payroll and
related costs which includes workmens compensation insurance and health
insurance were $5,457,000 and $5,855,000 for the twenty six weeks ended March
29, 2003 and March 30, 2002, respectively, a decrease of 6.8%.
Occupancy costs which include rent, common area maintenance, repairs and
taxes were $545,000 and $627,000 for the thirteen weeks ended March 29, 2003 and
March 30, 2002 respectively, a decrease of 13.17%. Occupancy costs which include
rent, common area maintenance, repairs and taxes were $975,000 and $1,055,000
for the twenty six weeks ended March 29, 2003 and March 30, 2002, respectively,
a decrease of 7.6%
Selling, general and administrative expenses were $1,995,000 and
$1,586,000 for the thirteen weeks ended March 29, 2003 and March 30, 2002,
respectively, an increase of 25.8%. Selling, general and administrative expenses
were $3,370,000 and $3,362,000 for the twenty six weeks ended March 29, 2003 and
March 30, 2002 respectively, an increase of less than 1%.
17
Liquidity and Capital Resources
Cash Flows
The following table is a summary of the Company's cash flows for the
twenty six weeks of fiscal years 2003 and 2002.
Twenty Six Weeks Ended
Mar. 29 Mar. 30
2003 2002
------- -------
(In Thousands)
Net cash provided by
operating activities $ 3,446 $ 2,391
Net cash used in
investing activities (1,838) (1,506)
Net cash used in
financing activities (557) (940)
------- -------
Net Increase (Decrease) in Cash
and Cash Equivalents 1,051 (55)
Cash and Cash Equivalents, Beginning 1,143 1,549
------- -------
Cash and Cash Equivalents, Ending $ 2,194 $ 1,494
======= =======
On December 27, 2002, the Company declared a cash dividend of 27 cents per
share payable on January 30, 2003 to shareholders of record on January 13, 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.
Capital Expenditures
The Company had additions to fixed assets of $1,744,000 during the twenty
six weeks ended March 29, 2003 as compared to $1,282,000 for the twenty six
weeks ended March 30, 2002 and $ 975,000 for the fiscal year ended September 28,
2002.
All of the Company's units require periodic refurbishing in order to
remain competitive. During the 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 March 29, 2003, and March 30, 2002
and the fiscal year ended September 28, 2002.
Mar. 29, Mar. 30, Sept. 28,
Item 2003 2002 2002
------- ------- --------
(In Thousands)
Current Assets $6,424 $4,945 $5,354
Current Liabilities 3,409 2,477 2,374
Working Capital 3,015 2,468 2,980
18
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 year 2002, 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 in the amount of $19,021, 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.
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 $130,000 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 Amended Annual Report on Form 10-K A for the fiscal year ended September
28, 2002 for a discussion of other legal proceedings resolved in prior years.
19
`
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. 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.
CRITICAL ACCOUNTING POLICIES
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 Amended Annual Report on Form 10-KA. 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.
20
3. 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. At March 29, 2003, the fair value of the
equity security was approximately equal to its costs. 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.
The Company has two debt arrangements which have variable interest rates.
One of these instruments, which is a mortgage note the Company has etered
into for an interest rate swap agreement to hedge the interest rate risk.
The other debt instrument has an outstanding principal balance at
September 28, 2002 of $418,000. Even if interest rates increased by 10%,
results of operations would be reduced by only $2,000, an amount
management considers immaterial.
4. 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
21
(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.
PART II, OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits - None
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.
-------------------------------------------
JOSEPH G. FLANIGAN, Chief Executive Officer
Date 5/19/03
------------------------------------------
EDWARD A. DOXEY, Chief Financial Officer
Date 5/19/03
22
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 March 29, 2003;
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 of 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- 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
or registrant's board of directors (or persons performing the equivalent
function);
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/
-------------------------------------
Name: Joseph G. Flanigan
Chief Executive Officer
Date: May 19, 2003
23
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 March 29, 2003;
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- 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
24
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);
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 date 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/
-------------------------------
Name: Edward A. Doxey
Chief Financial Officer
Date: May 19, 2003