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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarter Ended July 21, 2002
or,
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 0-26396
Benihana Inc.
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(Exact name of registrant as specified in its charter)
Delaware 65-0538630
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8685 Northwest 53rd Terrace, Miami, Florida 33166
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (305) 593-0770
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None
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Former name, former address and former fiscal year, if changed since last report
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
-- --
Indicate by number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock $.10 par value, 3,244,479 shares outstanding at August 26, 2002
Class A Common Stock $.10 par value, 5,505,589 shares outstanding at
August 26, 2002
BENIHANA INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE
FOUR PERIODS ENDED JULY 21, 2002
TABLE OF CONTENTS
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PAGE
PART I - Financial Information
Condensed Consolidated Balance Sheets (unaudited)
at July 21, 2002 and March 31, 2002 1
Condensed Consolidated Statements of Earnings
(unaudited) for the Four Periods Ended
July 21, 2002 and July 22, 2001 2
Condensed Consolidated Statement of Stockholders'
Equity (unaudited) for the Four Periods Ended
July 21, 2002 3
Condensed Consolidated Statements of Cash Flows
(unaudited) for the Four Periods Ended
July 21, 2002 and July 22, 2001 4
Notes to Condensed Consolidated Financial Statements
(unaudited) 5 - 7
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8 - 12
PART II - Other Information 13 - 16
BENIHANA INC. AND SUBSIDIARIES
PART I - Financial Information
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands, except share and per share information)
July 21, March 31,
2002 2002
- --------------------------------------------------------------------------------
Assets
Current assets:
Cash and equivalents $ 1,044 $ 5,062
Receivables 373 990
Inventories 4,311 4,097
Prepaid expenses 1,904 2,530
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Total Current Assets 7,632 12,679
Property and equipment, net 76,764 61,971
Deferred income taxes, net 1,831 1,963
Goodwill, net 16,478 16,478
Other assets 5,161 5,210
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$107,866 $98,301
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Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $ 17,300 $16,921
Current maturity of bank debt 3,000 3,000
Current maturities of obligations
under capital leases 605 668
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Total Current Liabilities 20,905 20,589
Long-term debt - bank 7,250 3,000
Obligations under capital leases 554 705
Minority Interest 451 294
Commitments and Contingencies
Stockholders' Equity:
Series A redeemable convertible
preferred stock - $1.00 par value;
authorized - 5,000,000 shares, no shares issued
Common stock - $.10 par value;
convertible into Class A Common, authorized -
12,000,000 shares, issued and outstanding -
3,245,479 and 3,276,179 shares, respectively 325 328
Class A common stock - $.10 par value;
authorized - 20,000,000 shares, issued and outstanding
5,502,576 and 4,151,319 shares, respectively 550 415
Additional paid-in capital 48,201 26,926
Retained earnings 29,769 46,160
Treasury stock - 10,553 and 9,177 shares, respectively,
of Common and Class A stock at cost (139) (116)
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Total Stockholders' Equity 78,706 73,713
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$107,866 $98,301
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See notes to condensed consolidated financial statements
BENIHANA INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
(In thousands, except per share information)
Four Periods Ended
------------------------
July 21, July 22,
2002 2001
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Revenues
Restaurant sales $56,723 $50,466
Franchise fees and royalties 436 469
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Total Revenues 57,159 50,935
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Costs and Expenses
Cost of food and beverage sales 13,990 13,226
Restaurant operating expenses 33,752 28,711
Restaurant opening costs 148 687
Marketing, general and administrative expenses 4,796 4,351
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Total Operating Expenses 52,686 46,975
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Income from operations 4,473 3,960
Interest expense, net 117 339
Minority interest 157 (7)
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Income from operations before income taxes 4,199 3,628
Income tax provision 1,409 1,181
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Net Income $ 2,790 $ 2,447
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Earnings Per Share
Basic earnings per common share $ .32 $ .34
Diluted earnings per common share $ .30 $ .33
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Number of restaurants at end of period 61 58
See notes to condensed consolidated financial statements
BENIHANA INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
(In thousands, except share information)
Series A
Redeemable
Convertible Class A Additional Total
Preferred Common Common Paid-in Retained Treasury Stockholders'
Stock Stock Stock Capital Earnings Stock Equity
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, March 31, 2002 - $328 $415 $26,926 $46,160 ($116) $73,713
Net income 2,790 2,790
Issuance of 1,141,050 shares 114 19,090 (19,181) (23)
of class A common stock
for stock dividend
Issuance of 4,000 shares 13 13
of common stock
under exercise of options
Issuance of 175,357 shares 18 1,685 1,703
of class A common stock
under exercise of options
Conversion of 34,700 (3) 3
shares of common stock
into 34,700 shares of class
A common stock
Issuance of 150 shares 3 3
of class A common stock
for incentive compensation
Tax benefit from stock option exercises 484 484
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Balance, July 21, 2002 $0 $325 $550 $48,201 $29,769 ($139) $78,706
- -----------------------------------------------------------------------------------------------------------------------------------
See notes to condensed consolidated financial statements
BENIHANA INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands) Four Periods Ended
---------------------
July 21, July 22,
2002 2001
- --------------------------------------------------------------------------------
Operating Activities:
Net income $ 2,790 $ 2,447
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,997 1,537
Minority interest 157 (7)
Deferred income taxes 132 87
Loss on disposal of assets 75 140
Issuance of common stock for incentive compensation 3
Change in operating assets and liabilities that
provided (used) cash:
Receivables 617 (81)
Inventories (214) (8)
Prepaid expenses 626 (52)
Other assets (75) 5
Accounts payable and accrued expenses 379 (588)
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Net cash provided by operating activities 6,487 3,480
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Investing activities:
Expenditures for property and equipment (16,740) (4,886)
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Net cash used in investing activities (16,740) (4,886)
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Financing Activities:
Borrowings under revolving credit facility 5,000 6,500
Proceeds from issuance of common stock
under exercise of stock options 1,716 150
Repayment of long-term debt and obligations
under capital leases (965) (5,279)
Dividend paid on preferred stock (5)
Tax benefit from stock option exercises 484
- --------------------------------------------------------------------------------
Net cash provided by financing activities 6,235 1,366
- --------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (4,018) (40)
Cash and cash equivalents, beginning of year 5,062 935
- --------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 1,044 $ 895
- --------------------------------------------------------------------------------
Supplemental Cash Flow Information:
Cash paid during the four periods:
Interest $ 171 $ 302
Income taxes 60 980
- --------------------------------------------------------------------------------
See notes to condensed consolidated financial statements.
During the current four periods ended July 21, 2002, 34,700 shares of common
stock were converted into 34,700 shares of Class A common stock.
During the prior year four periods, 294,737 shares of common stock were
converted into 294,737 shares of Class A common stock and 700 shares of
preferred stock were converted into 105,263 shares of Class A common stock.
BENIHANA INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOUR PERIODS ENDED JULY 21, 2002 AND JULY 22, 2001
(UNAUDITED)
1. GENERAL
The accompanying condensed consolidated financial statements are unaudited
and reflect all adjustments (consisting only of normal recurring adjustments
at July 21, 2002 and July 22, 2001) which are, in the opinion of management,
necessary for a fair presentation of financial position and results of
operations. The results of operations for the four periods (sixteen weeks)
ended July 21, 2002 and July 22, 2001 are not necessarily indicative of the
results to be expected for the full year. Certain information and footnotes
normally included in financial statements prepared in accordance with
accounting principles generally accepted in the United States of America
have been condensed or omitted. These interim financial statements should be
read in conjunction with the consolidated financial statements and
accompanying notes thereto for the year ended March 31, 2002 appearing in
the Company's Form 10-K filed with the Securities and Exchange Commission.
2. RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board (the "FASB") issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities". SFAS No. 133, as amended by SFAS No. 137 and SFAS No. 138,
required that all derivative instruments be recorded on the balance sheet at
their fair value. Changes in the fair value of derivatives will be recorded
each period in current earnings or other comprehensive income, depending on
whether a derivative is designated as part of a hedge transaction and, if it
is, the type of hedge transaction. The adoption of this statement, as
amended, in the first quarter of fiscal 2002 did not have a material effect
on the Company's financial statements.
In July 2001, the FASB issued SFAS No. 141, "Business Combinations", and
SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS No. 141 requires
business combinations initiated after June 30, 2001 to be accounted for
using the purchase method of accounting, and broadens the criteria for
recording intangible assets separate from goodwill. For potential future
acquisitions, recorded goodwill and intangibles will be evaluated against
these new criteria and may result in certain intangibles being recorded as
goodwill, or alternatively, amounts previously recorded as goodwill may be
separately identified and recognized apart from goodwill. SFAS No. 142
requires the use of a nonamortization approach to account for purchased
goodwill and certain intangibles. Under a nonamortization approach, goodwill
and certain intangibles will not be amortized into results of operations,
but instead will be periodically reviewed for impairment and written down
and charged to results of operations only in the periods in which, and to
the extent, the recorded value of goodwill and certain intangibles is
determined to be more than their then fair value.
The Company adopted the provisions of SFAS No. 142 effective the beginning
of the first quarter of fiscal 2002. These standards only permit prospective
application of the new accounting; accordingly adoption of these standards
will not affect previously reported financial information. The Company
reviewed goodwill for possible impairment at the end of fiscal 2002 and
determined that there was no impairment.
In September 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment of Disposal of Long-Lived Assets". SFAS No. 144 supersedes SFAS
No. 121. The new statement defines detailed criteria for assets being "held
for sale". The Company adopted the provisions of this statement effective
the beginning of the first quarter of fiscal 2003. Additionally, the
statement further defines the reporting of discontinued operations in
financial statements. The adoption of this statement in the first quarter
of fiscal 2003 did not have a material effect on the Company's financial
statements.
BENIHANA INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOUR PERIODS ENDED JULY 21, 2002 AND JULY 22, 2001
(UNAUDITED)
3. RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the current
fiscal year presentation.
4. INVENTORIES
Inventories consist of (in thousands):
July 21, March 31,
2002 2002
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Food and beverage $1,427 $1,568
Supplies 2,884 2,529
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$4,311 $4,097
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5. EARNINGS PER SHARE
Basic earnings per common share is computed by dividing net income available
to common shareholders by the weighted average number of common shares
outstanding during each period. The diluted earnings per common share
computation includes dilutive common share equivalents issued under the
Company's various stock option plans and dilutive convertible preferred
stock.
The following data shows the amounts (in thousands) used in computing
earnings per share and the effect on income and the weighted average number
of shares of dilutive potential common stock.
Four Periods Ended
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July 21, July 22,
2002 2001
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Net income $2,790 $2,447
Less preferred dividends - (5)
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Income for computation of basic 2,790 2,442
earnings per common share
Plus preferred dividends - 5
-------- --------
Income for computation of diluted
earnings per common share 2,790 $2,447
====== ======
BENIHANA INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOUR PERIODS ENDED JULY 21, 2002 AND JULY 22, 2001
(UNAUDITED)
Four Periods Ended
------------------------
July 21, July 22,
2002 2001
-------- --------
Weighted average number of 8,691 7,185
common shares used in basic
earnings per share
Effect of dilutive securities:
Stock options 751 46
Convertible preferred stock - 270
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Weighted average number of
common shares and dilutive
potential common stock used
in diluted earnings per share 9,442 7,501
======== ========
6. RESTAURANT OPERATING EXPENSES
Restaurant operating expenses consist of the following (in thousands):
Four Periods Ended
-------------------------
July 21, July 22,
2002 2001
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Labor and related costs $21,300 $17,931
Restaurant supplies 1,066 953
Credit card discounts 969 852
Utilities 1,267 1,173
Occupancy costs 3,192 2,783
Depreciation and amortization 1,921 1,446
Other operating expenses 4,037 3,573
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Total restaurant operating expenses $33,752 $28,711
======= =======
7. STOCK DIVIDEND
On June 7, 2002, the Board of Directors declared a 15% stock dividend in
Class A stock for both the Class A and common shares. The stock dividend
was paid on August 12, 2002 to holders of record July 15, 2002. As a
result, basic and diluted earnings per common share have been adjusted as
if the stock dividend had been in existence for each period presented.
8. SYNTHETIC LEASE
On June 12, 2002, the Company terminated its master lease agreement with
Wachovia Bank, N.A. and two other banks. The aforementioned master lease
agreement had enabled financing in new acquisition and construction. Upon
termination, the Company purchased at cost the three teppanyaki Benihana
restaurants previously financed under the agreement. A portion of the
purchase price was provided with replacement financing under the Company's
revolving credit facility.
BENIHANA INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Our revenues consist of sales of food and beverages at our restaurants and
licensing fees from franchised restaurants. Cost of restaurant food and
beverages sold represents the direct cost of the ingredients for the prepared
food and beverages sold. Restaurant operating expenses consist of direct and
indirect labor, occupancy costs, advertising and other costs that are directly
attributed to each restaurant location. Restaurant opening costs include rent
paid during the development period, as well as labor, training and certain other
pre-opening charges which are expensed as incurred.
Restaurant revenues and expenses are dependent upon a number of factors
including the number of restaurants in operation, restaurant patronage and the
average check amount. Expenses are additionally dependent upon commodity costs,
average wage rates, marketing costs and the costs of interest and administering
restaurant operations.
Revenues and net income were higher for the four periods ended July 21, 2002
compared to the corresponding period a year ago. For the current four periods,
revenues increased 12.2% and net income increased by 14.0% as compared to the
corresponding four periods a year ago. Earnings per diluted share amounted to
$0.30, based on 9.4 million average shares and equivalents outstanding, compared
with $0.33, based on 7.5 million average shares and equivalents in the
comparable period a year ago. Per share figures are adjusted for the 15% stock
dividend of Class A shares declared during the current four periods. The greater
number of outstanding average shares and equivalents reflects a 1 million Class
A common share public offering in December 2001, as well as option exercises and
the effect of a higher stock price on the computation.
The increase in net income was tempered by higher labor and related costs. Labor
costs increased due to increases in minimum wages not fully offset by price
increases during the current four periods. Benefits costs also increased during
the current four periods as a result of unusually large increases in both the
number and amounts of claims in the Company's self-insured health plan.
We have instituted menu price increases in selected markets to compensate for
the wage increases, and have increased the share of health care premiums
contributed by employees.
REVENUES
Four periods ended July 21, 2002 compared to July 22, 2001 -- The amounts of
sales and the changes in amount and percentage change in amount of revenues from
the previous fiscal year are shown in the following tables.
Four Periods Ended
--------------------------
July 21, July 22,
2002 2001
-------- --------
Net restaurant sales $56,723 $50,466
Franchise fees and royalties 436 469
------- -------
Total Revenues $57,159 $50,935
======= =======
Four Periods Ended
-------------------------
July 21, July 22,
2002 2001
-------- --------
Amount of change in total
revenues from previous year $ 6,224 $ 3,866
Percentage of change from the
previous year 12.2% 8.2%
BENIHANA INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Restaurant revenues increased in the four periods ended July 21, 2002 as
compared to the equivalent periods ended July 22, 2001. Revenues increased for
the current four periods due to increases from new restaurants of $5,224,000.
Additionally, comparable sales increased approximately 5% for the current four
periods compared to the comparable equivalent period. Sales growth in the
current four periods was negatively affected by the closing of the Marina del
Rey teppanyaki restaurant in August 2001 after its lease expired and the closing
of a Doraku restaurant in March 2002 principally due to poor traffic at the mall
in which it was located.
COSTS AND EXPENSES
Four periods ended July 21, 2002 compared to July 22, 2001 -- Costs of food and
beverage sales, which are generally variable with sales, directly increased with
changes in revenues for the four periods ended July 21, 2002 as compared to the
equivalent periods ended July 22, 2001. The following table reflects the
proportion that the various elements of costs and expenses bore to sales and the
changes in amounts and percentage changes in amounts from the previous year's
four periods.
Four Periods Ended
-------------------------
July 21, July 22,
2002 2001
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COST AS A PERCENTAGE OF
RESTAURANT SALES:
Cost of food and beverage sales 24.7% 26.2%
Restaurant operating expenses 59.5% 56.9%
Restaurant opening costs .3% 1.4%
Marketing, general and
administrative expenses 8.5% 8.6%
AMOUNT OF CHANGE FROM
PREVIOUS COMPARABLE PERIOD
(IN THOUSANDS):
Cost of food and beverage sales $ 764 $ 164
Restaurant operating expenses $5,041 $3,277
Restaurant opening costs $ (539) $ 92
Marketing, general and
administrative expenses $ 445 $ 390
PERCENTAGE CHANGE FROM
PREVIOUS COMPARABLE PERIOD:
Cost of food and beverage sales 5.8% 1.3%
Restaurant operating expenses 17.6% 12.9%
Restaurant opening costs (78.5%) 15.5%
Marketing, general and
administrative expenses 10.2% 9.8%
BENIHANA INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The cost of food and beverage sales increased in total dollar amount in the
current four periods and decreased when expressed as a percentage of sales
compared to the equivalent period in the prior year. The decrease in the
percentage of cost of food and beverage to sales resulted from lower commodities
costs, principally shrimp costs, in the current four periods compared to the
prior year equivalent period.
Restaurant operating expenses increased in absolute amount and when expressed as
a percentage of sales in the current four periods when compared to the
comparable period a year ago. The increase was primarily attributable to an
increase in labor and related costs. Labor increased largely as a result of
increased sales volume, but also as a result of labor rate increases. The
increase in rate was attributable to a legislated minimum wage increase in
California and normal labor inefficiencies in the opening of new restaurants.
Payroll taxes and benefits also increased in the current four periods when
compared to the comparable periods a year ago. The increase was attributable to
an increase in both a rise in the number and amounts of claims in the Company's
self-insured health plan. Additionally, higher insurance rates caused an
increase in property and casualty insurance costs in the current four periods
compared to the comparable period a year ago.
Restaurant opening costs decreased in the current four periods ended July 21,
2002 compared to the prior year equivalent periods. The decrease was
attributable to pre-opening expenses in the prior year relating to three Haru
restaurants and two Benihana Teppanyaki restaurants which opened during the
prior fiscal year. Restaurant opening costs associated with opening the two
Benihana Teppanyaki restaurants in the current fiscal year were substantially
less than the prior year comparable period.
Marketing, general and administrative costs increased in absolute amount, but
decreased when expressed as a percentage of sales in the current four periods
compared to the comparable period a year ago. The increase is mainly
attributable to planned advertising expenditures in the current four periods
when compared to the comparable period a year ago.
Interest expense decreased in the current four periods when compared to the
comparable periods of the prior year. The decrease in the current four periods
was attributable to a decrease in the interest rates on our borrowings under our
credit facility as well as a decrease in the average outstanding borrowings in
the current four periods compared to the previous comparable periods.
Our effective income tax rate increased in the four periods to 33.6% from 32.6%
in the prior year's four periods. The increase was due to a increase in net
income in the current four periods coupled with a constant amount of net federal
tax credit for FICA taxes paid on reported tip income in both the current and
prior year four periods.
OUR FINANCIAL RESOURCES
Cash flow from operations had been the primary source to fund our capital
expenditures before we accelerated the development of new restaurants. Since we
have accelerated our building program, we are relying more upon financing
obtained from financial institutions. We have financed acquisitions principally
through the use of borrowed funds.
BENIHANA INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
We have borrowings from Wachovia Bank, N.A. under a term loan and we have a
revolving line of credit facility. The line of credit allows us to borrow up to
$15,000,000 through March 31, 2004 and at July 21, 2002, we had available
$10,000,000 under the revolving line available. We had $5,250,000 outstanding at
the end of July 21, 2002 under the term loan which is payable in quarterly
installments of $750,000 until the term loan matures in March 2004. The interest
rate at July 21, 2002 of both the line of credit and the term loan was 2.87%. We
have the option to pay interest at Wachovia's prime rate plus 1%. The interest
rate may vary depending upon the ratio of the sum of earnings before interest,
taxes, depreciation and amortization to our indebtedness. The loan agreements
limit our capital expenditures to certain amounts, require that we maintain
certain financial ratios and profitability amounts and prohibit the payment of
cash dividends.
To finance our new restaurant development, we had entered into a master lease
agreement with Wachovia Bank, N.A. and two other banks. The master lease
agreement enabled financing for up to $25,000,000 in new restaurant acquisition
and construction. Management determined that more favorable rates were available
under our line of credit and accordingly we terminated this arrangement on June
12, 2002 by borrowing $5,000,000 from the line of credit and using $8,000,000 in
cash to pay off the outstanding facility balance and acquiring the three
restaurants financed under the facility.
Since restaurant businesses generally do not have large amounts of inventory and
accounts receivable, there is no need to finance them. As a result, many
restaurant businesses, including our own, operate with negative working capital.
The following table summarizes the sources and uses of cash and cash equivalents
(in thousands):
Four Periods Ended
----------------------
July 21, July 22,
2002 2001
-------- --------
Cash provided by operations $ 6,487 $ 3,480
Cash (used in) investing activities (16,740) (4,886)
Cash provided by financing activities 6,235 1,366
--------- --------
Increase in cash and cash equivalents $ (4,018) $ (40)
========= ========
Operating Activities
Cash provided by operations increased during the four periods ended July 21,
2002 compared to equivalent periods in the previous year. The increase resulted
mainly from an increase in net income and from the change in cash provided by
operating assets and liabilities in the current four periods when compared to
the previous comparable period.
Investing Activities
Expenditures for property and equipment increased during the four periods ended
July 21, 2002 by $11,854,000 over the prior comparable period to $16,740,000.
Approximately $13 million of the expenditures were for the purchase of property
and equipment of three teppanyaki restaurants previously financed under the
master lease agreement which was terminated June 12, 2002.
BENIHANA INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Financing Activities
During the current four periods there were stock options exercises with cash
proceeds to the Company of $1,716,000 as compared to $150,000 in the previous
comparable period a year ago. Our total indebtedness increased by $4,035,000
during the four periods ended July 21, 2002 as compared to the end of fiscal
2002. We borrowed $5,000,000 under the revolving line of credit, paid down
$750,000 of the term loan and repaid $215,000 of leases that are considered to
be capital in nature.
Forward-Looking Statements
This quarterly report contains various "forward-looking statements" made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements represent our expectations
or beliefs concerning future events, including unit growth, future capital
expenditures, and other operating information. A number of factors could, either
individually or in combination, cause actual results to differ materially from
those included in the forward-looking statements, including changes in consumer
dining preferences, fluctuations in commodity prices, availability of qualified
employees, changes in the general economy, industry cyclicality, and in consumer
disposable income, competition within the restaurant industry, availability of
suitable restaurant locations, harsh weather conditions in areas in which we and
our franchisees operate restaurants or plan to build new restaurants, acceptance
of our concepts in new locations, changes in governmental laws and regulations
affecting labor rates, employee benefits, and franchising, ability to complete
new restaurant construction and obtain governmental permits on a reasonably
timely basis and other factors that we cannot presently foresee.
The Impact of Inflation
Inflation has not been a significant factor in our business for the past several
years. We have been able to keep increasing menu prices at a low level by
strictly maintaining cost controls. A possible increase to the minimum wage is
being considered by United States Congress; any such increase will affect us, as
well as most other restaurant businesses. We do not know if or when the increase
will take effect nor have we evaluated whether the increase would be material if
enacted into law.
Market Risks
We are exposed to certain risks of increasing interest rates and commodity
prices. The interest on our indebtedness is largely variable and is benchmarked
to the prime rate in the United States or to the London interbank offering rate.
We may protect ourselves from interest rate increases from time-to-time by
entering into derivative agreements that fix the interest rate at predetermined
levels. We have a policy not to use derivative agreements for trading purposes.
We had a derivative agreement which expired May 1, 2002 without further
obligation by the Company.
We purchase commodities such as chicken, beef, lobster and shrimp for our
restaurants. The prices of these commodities may be volatile depending upon
market conditions. We do not purchase forward commodity contracts because the
changes in prices for them have historically been short-term in nature and, in
our view, the cost of the contracts is in excess of the benefits.
Seasonality of Our Business
Our business is not highly seasonal although we do have more patrons coming to
our restaurants for special holidays such as Mother's Day, Valentine's Day and
New Year's. Mother's Day falls in our first fiscal quarter of each year, New
Year's in the third quarter and Valentine's Day in the fourth quarter.
BENIHANA INC. AND SUBSIDIARIES
PART II - Other Information
Item 1. Legal Proceedings
Reference is hereby made to our Annual Report on Form 10-K for the fiscal year
ended March 31, 2002 for a description of certain legal proceedings.
Item 6. Exhibits and Reports on Form 8-K
(a) Reports on Form 8-K - None
(b)(i) Exhibit 99.1 - Officer's Certification
(b)(ii) Exhibit 99.2 - Officer's Certification
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Benihana Inc.
-------------------------------
(Registrant)
Date August 29, 2002 /s/ Joel A. Schwartz
------------------------ -------------------------------
Joel A. Schwartz
President and
Chief Executive Officer
Exhibit 99.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Benihana Inc. (the "Company") on
Form 10- Q for the period ended July 21, 2002 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, Joel A. Schwartz,
President and 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. The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
/s/ Joel A. Schwartz
- -----------------------------------
Joel A. Schwartz
President and
Chief Executive Officer
August 29, 2002
Exhibit 99.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Benihana Inc. (the "Company") on
Form 10-Q for the period ended July 21, 2002 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, Michael R. Burris,
Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350,
as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
/s/ Michael R. Burris
- ------------------------------------
Michael R. Burris
Chief Financial Officer
August 29, 2002