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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 20, 2003
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
--------------
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.
Indicate by check mark whether the registrant is an accelerated
filer (as defined in Rule 12b-2 of the Act.) Yes X No
--- ---
Common Stock $.10 par value, 3,171,479 shares outstanding at August 22, 2003
Class A Common Stock $.10 par value, 5,621,209 shares outstanding at
August 22, 2003
BENIHANA INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE
FOUR PERIODS ENDED JULY 20, 2003
TABLE OF CONTENTS
PAGE
PART I - Financial Information
Condensed Consolidated Balance Sheets (unaudited)
at July 20, 2003 and March 30, 2003 1
Condensed Consolidated Statements of Earnings
(unaudited) for the Four Periods Ended
July 20, 2003 and July 21, 2002 2
Condensed Consolidated Statement of Stockholders'
Equity (unaudited) for the Four Periods Ended
July 20, 2003 3
Condensed Consolidated Statements of Cash Flows
(unaudited) for the Four Periods Ended
July 20, 2003 and July 21, 2002 4
Notes to Condensed Consolidated Financial Statements
(unaudited) 5 - 8
Management's Discussion and Analysis of
Financial Condition and Results of Operations 9 - 13
PART II - Other Information
Item 1. Legal Proceedings 14
Item 6. Exhibits and Reports on Form 8-K 14
Signature 15
Certifications 16 - 19
BENIHANA INC. AND SUBSIDIARIES
PART I - Financial Information
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands, except share and per share information)
July 20, March 30,
2003 2003
- ----------------------------------------------------------------------------------------------------------------
Assets
Current Assets:
Cash and cash equivalents $ 825 $ 2,299
Receivables 864 626
Inventories 5,810 5,328
Prepaid expenses 1,522 2,236
- ----------------------------------------------------------------------------------------------------------------
Total current assets 9,021 10,489
Property and equipment, net 86,401 84,482
Deferred income taxes, net 1,040 1,172
Goodwill, net 27,131 27,131
Other assets 5,002 5,207
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$128,595 $128,481
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Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable and accrued expenses $ 19,957 $ 19,407
Current maturity of bank debt 3,000 3,000
Current maturities of obligations
under capital leases 310 373
- ----------------------------------------------------------------------------------------------------------------
Total current liabilities 23,267 22,780
Long-term debt - bank 15,500 19,000
Obligations under capital leases 218 299
Minority interest 960 771
Commitments and contingencies
Stockholders' Equity:
Common stock - $.10 par value; convertible into Class
A Common stock; authorized - 12,000,000 shares;
issued and outstanding - 3,186,479 and 3,184,479
shares, respectively 319 318
Class A Common stock - $.10 par value; authorized -
20,000,000 shares; issued and outstanding -
5,606,209 and 5,595,084 shares, respectively 561 560
Additional paid-in capital 48,509 48,444
Retained earnings 39,404 36,452
Treasury stock - 10,828 shares of Common and
Class A Common stock at cost (143) (143)
- ----------------------------------------------------------------------------------------------------------------
Total stockholders' equity 88,650 85,631
- ----------------------------------------------------------------------------------------------------------------
$128,595 $128,481
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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 20, July 21,
2003 2002
- -----------------------------------------------------------------------------------------------------------
Revenues
Restaurant sales $60,542 $56,723
Franchise fees and royalties 560 436
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Total revenues 61,102 57,159
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Costs and Expenses
Cost of food and beverage sales 15,571 13,990
Restaurant operating expenses 35,484 33,752
Restaurant opening costs 243 148
Marketing, general and administrative expenses 5,013 4,796
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Total operating expenses 56,311 52,686
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Income from operations 4,791 4,473
Interest expense, net 148 117
Minority interest 189 157
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Income from operations before income taxes 4,454 4,199
Income tax provision 1,502 1,409
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Net Income $2,952 $2,790
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Earnings Per Share
Basic earnings per common share $ .34 $ .32
Diluted earnings per common share $ .33 $ .30
- -----------------------------------------------------------------------------------------------------------
Number of restaurants at end of period 64 61
See notes to condensed consolidated financial statements
BENIHANA INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
(In thousands, except share information)
Class A Additional Total
Common Common Paid-in Retained Treasury Stockholders'
Stock Stock Capital Earnings Stock Equity
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, March 30, 2003 $318 $560 $48,444 $36,452 $(143) $85,631
Net income 2,952 2,952
Issuance of 12,000 shares of common stock
under exercise of options 2 61 63
Issuance of 1,125 shares of Class A
common stock under exercise of options 4 4
Conversion of 10,000 shares of common stock
into 10,000 shares of Class A common stock (1) 1
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, July 20, 2003 $319 $561 $48,509 $39,404 $(143) $88,650
- ------------------------------------------------------------------------------------------------------------------------------------
See notes to condensed consolidated financial statements
BENIHANA INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands, except share information)
Four Periods Ended
-----------------------------
July 20, July 21,
2003 2002
- ---------------------------------------------------------------------------------------------------------------
Operating Activities:
Net income $2,952 $2,790
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,460 1,997
Minority interest 189 157
Deferred income taxes 132 132
Loss on disposal of assets 40 75
Issuance of common stock for incentive compensation 3
Change in operating assets and liabilities that provided (used) cash:
Receivables (238) 617
Inventories (482) (214)
Prepaid expenses 714 626
Other assets 47 (75)
Accounts payable and accrued expenses 550 379
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Net cash provided by operating activities 6,364 6,487
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Investing activities:
Expenditures for property and equipment (4,261) (16,740)
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Net cash used in investing activities (4,261) (16,740)
- --------------------------------------------------------------------------------------------------------------
Financing Activities:
Borrowings under revolving line of credit 2,300 5,000
Proceeds from issuance of common stock under exercise of stock options 67 1,716
Repayment of long-term debt and obligations under capital leases (5,944) (965)
Tax benefit from stock option exercises 484
- --------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities (3,577) 6,235
- --------------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (1,474) (4,018)
Cash and cash equivalents, beginning of year 2,299 5,062
- --------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period 825 $1,044
- --------------------------------------------------------------------------------------------------------------
Supplemental Cash Flow Information:
Cash paid during the four periods:
Interest $ 220 $ 171
Income taxes 189 60
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
During the four periods ended July 20, 2003, 10,000 shares of common stock were
converted into 10,000 shares of Class A common stock.
During the four periods ended July 21, 2002, 34,700 shares of common stock were
converted into 34,700 shares of Class A common stock.
See notes to condensed consolidated financial statements.
BENIHANA INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOUR PERIODS ENDED JULY 20, 2003 AND JULY 21, 2002
(UNAUDITED)
1. GENERAL
The accompanying condensed consolidated financial statements are unaudited
and reflect all adjustments (consisting only of normal recurring
adjustments) 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 20, 2003 and July
21, 2002 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 30, 2003 appearing in Benihana Inc. and
Subsidiaries (the "Company") Form 10-K filed with the Securities and
Exchange Commission.
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 and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
2. RECENT ACCOUNTING PRONOUNCEMENTS AFFECTING THE COMPANY
In January 2003, the Financial Accounting Standard Board (the "FASB")
issued Interpretation No. 46 ("FIN 46"), "Consolidation of Variable
Interest Entities, an interpretation of ARB No. 51". FIN 46 provides
guidance on identifying variable interest entities and assessing whether or
not a variable interest entity should be consolidated. The provisions of
FIN 46 are to be applied immediately to variable interest entities created
after January 31, 2003. For variable interest entities created on or before
January 31, 2003, the provisions of FIN 46 are to be applied no later than
the beginning of the first interim period beginning after June 15, 2003.
The implementation of FIN 46 did not have a material impact on the
Company's interim condensed consolidated financial statements.
In April 2003, the FASB issued Statement of Financial Accounting Standards
("SFAS") No. 149, "Amendment of Statement 133 on Derivative Instruments and
Hedging Activities". This Statement amends and clarifies financial
accounting and reporting for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred
to as derivatives) and for hedging activities under SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". This
Statement is effective for contracts entered into or modified after June
30, 2003. The implementation of SFAS No. 149 did not have a material impact
on the Company's interim condensed consolidated financial statements.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity".
This Statement establishes standards for how an issuer classifies and
measures certain financial instruments with characteristics of both
liabilities and equity. It requires that an issuer classify a financial
instrument that is within its scope as a liability (or an asset in some
circumstances). This Statement is effective for financial instruments
entered into or modified after May 30, 2003, and otherwise is effective at
the beginning of the first interim period beginning after June 15, 2003.
The implementation of SFAS No. 150 did not have a material impact on the
Company's interim condensed consolidated financial statements.
BENIHANA INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOUR PERIODS ENDED JULY 20, 2003 AND JULY 21, 2002
(UNAUDITED)
3. STOCK-BASED COMPENSATION
The Company accounts for stock issued to employees under the intrinsic
value method of accounting for stock-based compensation. Therefore, the
Company generally recognizes no compensation expense with respect to such
awards because stock options are generally granted at the fair market value
of the underlying shares on the date of the grant.
Had the Company accounted for its stock-based awards under the fair value
method, the table below shows the pro forma effect on net income and
earnings per share for the four periods ended:
July 20, July 21,
2003 2002
-------- --------
Net Income
As reported $2,952 $2,790
Add: Stock-based employee
compensation expense included
in reported net income 0 3
Deduct: Total stock based
employee compensation expense
determined under fair value
based method for all awards (178) (232)
-------- --------
Pro forma $2,774 $2,561
======= ========
Basic earnings per share
As reported $ .34 $ .32
-------- --------
Pro forma $ .32 $ .29
======== ========
Diluted earnings per share
As reported $ .33 $ .30
-------- -------
Pro forma $ .31 $ .27
======== =======
4. RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the current
fiscal year presentation.
5. INVENTORIES
Inventories consist of (in thousands):
July 20, March 30,
2003 2003
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Food and beverage $1,743 $1,612
Supplies 4,067 3,716
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$5,810 $5,328
======== ========
BENIHANA INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOUR PERIODS ENDED JULY 20, 2003 AND JULY 21, 2002
(UNAUDITED)
6. 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.
The following data shows the amounts (in thousands) used in computing
earnings per share and the effect on income and the weighted average number
of shares of dilutive potential common stock.
Four Periods Ended
--------------------------
July 20, July 21,
2003 2002
-------- --------
Net income for computation of basic and
diluted earnings per common share $2,952 $2,790
======== ========
Four Periods Ended
---------------------------
July 20, July 21,
2003 2002
-------- --------
Weighted average number of
common shares used in basic
earnings per share 8,781 8,691
Effect of dilutive securities:
Stock options and warrants 240 751
-------- --------
Weighted average number of
common shares and dilutive
potential common stock used
in diluted earnings per share 9,021 9,442
======== =======
7. RESTAURANT OPERATING EXPENSES
Restaurant operating expenses consist of the following (in thousands):
Four Periods Ended
--------------------------
July 20, July 21,
2003 2002
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Labor and related costs $21,766 $21,300
Restaurant supplies 1,155 1,066
Credit card discounts 1,073 969
Utilities 1,462 1,267
Occupancy costs 3,398 3,192
Depreciation and amortization 2,353 1,921
Other operating expenses 4,277 4,037
--------- --------
Total restaurant operating expenses $35,484 $33,752
========= ========
BENIHANA INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOUR PERIODS ENDED JULY 20, 2003 AND JULY 21, 2002
(UNAUDITED)
8. COMMITMENTS AND CONTINGENCIES
In December 1999, the Company completed the acquisition of 80% of the equity
of Haru Holding Corp. ("Haru"). The acquisition was accounted for using the
purchase method of accounting. Pursuant to the purchase agreement, at any
time during the period of July 1, 2005 through September 30, 2005, the
holders of the balance of Haru's equity (the "Minority Stockholders") have a
one-time option to sell their shares to the Company. In the event that the
Minority Stockholders do not exercise their right to sell their shares, then
the Company has a one-time option to purchase the shares of the Minority
Stockholders between the period of October 1, 2005 and December 31, 2005.
The price for both the put and call options will be determined based on a
defined cash flow measure for the acquired business.
In December 2002, the Company completed the acquisition of RA Sushi
restaurants. The acquisition was accounted for using the purchase method of
accounting. Pursuant to the purchase agreement, the Company is required to
pay the seller contingent payments based on certain operating results of the
acquired business for fiscal years ending 2004, 2005 and 2006. The Company
will account for the contingent payments as an addition to the purchase
price.
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, net income and earnings per diluted share increased in the current
four periods when compared to the corresponding period a year ago. Revenues
increased mostly from the four acquired RA Sushi restaurants and from the
opening of a new teppanyaki restaurant. Net income and earnings per diluted
share increased despite negative comparable sales and increased commodity costs
in the current four periods when compared to the previous comparable period. Net
income increased due to lower labor and related costs in the current four
periods compared to the equivalent period in the prior year. Earnings per
diluted share increased primarily from the effect that the lower average share
price had on the calculation of common share equivalents.
REVENUES
Four periods ended July 20, 2003 compared to July 21, 2002 -- 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 (in thousands).
Four Periods Ended
----------------------------
July 20, July 21,
2003 2002
-------- --------
Restaurant sales $60,542 $56,723
Franchise fees and royalties 560 436
--------- ---------
Total Revenues $61,102 $57,159
========= =========
Four Periods Ended
-----------------------------
July 20, July 21,
2003 2002
-------- --------
Amount of change in total
revenues from previous year $3,943 $ 6,224
Percentage of change from the
previous year 6.9% 12.2%
BENIHANA INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Restaurant revenues increased in the four (sixteen week) period ended July 20,
2003 compared to the corresponding period a year ago. Restaurant revenues
increased from newly opened and acquired restaurants by $4.3 million for the
current four periods as compared to the corresponding period a year ago. The
increases in restaurant sales were offset by negative comparable sales of 0.5%,
a decrease of $0.3 million. Our teppanyaki business had negative comparable
sales of 1.9%, a decrease of $1.0 million, our Haru had positive comparable
sales of 8.3%, an increase of $0.5 million and our one restaurant Doraku concept
had positive comparable sales of 40.1%, or $0.1 million. The acquired
restaurants are not included in comparable sales as they were acquired in the
latter part of fiscal 2003.
COSTS AND EXPENSES
Four periods ended July 20, 2003 compared to July 21, 2002 -- The following
table reflects the proportion that the various elements of costs and expenses
bore to restaurant sales and the changes in amounts and percentage changes in
amounts from the previous year's four periods.
Four Periods Ended
------------------------------
July 20, July 21,
2003 2002
-------- --------
COST AS A PERCENTAGE OF
RESTAURANT SALES:
Cost of food and beverage sales 25.7% 24.7%
Restaurant operating expenses 58.6% 59.5%
Restaurant opening costs 0.4% 0.3%
Marketing, general and
administrative expenses 8.3% 8.5%
AMOUNT OF CHANGE FROM
PREVIOUS COMPARABLE PERIOD
(IN THOUSANDS):
Cost of food and beverage sales $1,581 $ 764
Restaurant operating expenses $1,732 $5,041
Restaurant opening costs $ 95 $ (539)
Marketing, general and
administrative expenses $ 217 $ 445
PERCENTAGE CHANGE FROM
PREVIOUS COMPARABLE PERIOD:
Cost of food and beverage sales 11.3% 5.8%
Restaurant operating expenses 5.1% 17.6%
Restaurant opening costs 64.2% (78.5%)
Marketing, general and
administrative expenses 4.5% 10.2%
The cost of food and beverage sales increased in total dollar amount and when
expressed as a percentage of sales in the current four periods when compared to
the corresponding period in the prior year. Costs of food and beverage sales,
which are generally variable with sales, directly increased with changes in
revenues for the four periods ended July 20, 2003 as compared to the equivalent
period ended July 21, 2002. The increase was also a result of commodities price
increases, principally beef and lobster costs, in the current four periods as
compared to the equivalent period in the prior year.
BENIHANA INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Restaurant operating expenses increased in absolute amount in the current four
periods, but decreased when expressed as a percentage of sales compared to the
corresponding period a year ago. The increase in absolute amount was due to the
acquisition of the four RA Sushi restaurants and the newly opened teppanyaki
restaurant in the current four periods when compared to the equivalent period.
The decrease when expressed as a percentage of sales is due to higher labor and
related costs in the prior year four periods when compared to the current year
four periods. Labor costs and related costs improved as a result of productivity
increases in the current four periods and from lower health insurance costs as a
result of a decrease in the total dollar amount of health insurance claims
coupled with increased employee contributions to health insurance costs in the
current four periods when compared to the equivalent period in the prior year.
Restaurant opening costs increased in the current four periods ended July 20,
2003 compared to the prior year corresponding period. The increase in the
current four periods is related to opening expenses of a teppanyaki restaurant
in Westbury, New York and to pre-opening costs of other teppanyaki and RA Sushi
restaurants under development in the current year.
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 equivalent period a year ago. The increase is mainly
attributable to increased salaries and benefits from additional management
personnel who were hired by the Company in connection with the acquisition of
the RA Sushi concept in the current four periods when compared to the comparable
period a year ago.
Interest expense increased in the current four periods when compared to the
corresponding period of the prior year. The increase in the current four periods
was attributable to an increase in the average outstanding borrowings in the
current four periods compared to the previous comparable period.
Our effective income tax rate increased slightly in the four periods to 33.7%
from 33.6% in the prior year's four periods. The increase was immaterial.
OUR FINANCIAL RESOURCES
Cash flow from operations has historically 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.
We have borrowings from Wachovia Bank, National Association ("Wachovia") under a
term loan and we have a revolving line of credit facility. The line of credit
facility allows us to borrow up to $15,000,000 through December 31, 2007 and at
July 20, 2003, we had $4,000,000 outstanding under the revolving line of credit.
We also had a $1,000,000 letter of credit outstanding against such facility in
connection with our workers compensation insurance program. At July 20, 2003, we
had $14,500,000 outstanding under the term loan which is payable in quarterly
installments of $750,000 through December 2004 and $833,333 thereafter until the
term loan matures in December 2007. The interest rate at July 20, 2003 of both
the line of credit and the term loan was 2.29%. 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.
BENIHANA INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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 20, July 21,
2003 2002
-------- --------
Cash provided by operations $6,364 $6,487
Cash (used in) investing activities (4,261) (16,740)
Cash (used in) provided by financing activities (3,577) 6,235
--------- ---------
Decrease in cash and cash equivalents $(1,474) $(4,018)
========= =========
Operating Activities
Cash provided by operations decreased slightly during the four periods ended
July 20, 2003 compared to the equivalent period in the previous year. The
decrease resulted mainly 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 decreased during the four periods ended
July 20, 2003 from the prior comparable period. The decrease is attributable to
expenditures of approximately $13 million made in the prior year four periods
for the purchase of property and equipment of three teppanyaki restaurants
previously financed under a master lease agreement which was terminated June 12,
2002.
Financing Activities
During the current four periods there were stock options exercises with cash
proceeds to the Company of $67,000 as compared to $1,716,000 in the previous
comparable period a year ago. Our total indebtedness decreased by $3,644,000
during the four periods ended July 20, 2003 as compared to the end of fiscal
2003. We paid down $2,000,000 of the revolving line of credit, paid down
$1,500,000 of the term loan and paid $144,000 under 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.
BENIHANA INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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 have no derivative agreements as of July 20, 2003.
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.
Controls and Procedures
As of the end of the period covered by this report, the Company conducted an
evaluation, under the supervision and with the participation of the principal
executive officer and principal financial officer, of the Company's disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934 (the "Exchange Act")). Based on this evaluation,
the principal executive officer and principal financial officer concluded that
the Company's disclosure controls and procedures are effective to ensure that
information required to be disclosed by the Company in reports that it files or
submits under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in Securities and Exchange Commission rules
and forms. There was no change in the Company's internal control over financial
reporting during the Company's most recently completed fiscal quarter that has
materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.
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 30, 2003 for a description of certain legal proceedings. During the
quarter covered by this report, the final settlement of the Zhao and Yip action
described in the Form 10-K were approved by the court.
Item 6. Exhibits and Reports on Form 8-K
(a) On May 20, 2003 the Company filed a report Form 8-K
covering its earnings press release for the fiscal
year ended March 30, 2003.
(b)(i) Exhibit 31.1 - Chief Executive Officer's certification
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
(b)(ii) Exhibit 31.2 - Chief Financial Officer's certification
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
(b)(iii) Exhibit 32.1 - Chief Executive Officer's certification
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
(b)(iv) Exhibit 32.2 - Chief Financial Officer's certification
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
SIGNATURE
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 28, 2003 /s/ Joel A. Schwartz
----------------------- -------------------------------
Joel A. Schwartz
President and
Chief Executive Officer
and Director
Exhibit 31.1
CERTIFICATION
I, Joel A. Schwartz, President and Chief Executive Officer and Director, certify
that:
1. I have reviewed this quarterly report on Form 10-Q of Benihana Inc.;
2. Based on my knowledge, this 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 report;
3. Based on my knowledge, the financial statements, and other financial
information included in this 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 report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision,
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
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation;
and
c) disclosed in this report any change in the registrant's internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over
financial reporting.
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
control over financial reporting.
Date: August 28, 2003
/s/ Joel A. Schwartz
---------------------------
Joel A. Schwartz
President and
Chief Executive Officer
and Director
Exhibit 31.2
CERTIFICATION
I, Michael R. Burris, Senior Vice President - Finance and Chief Financial
Officer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Benihana, Inc.;
2. Based on my knowledge, this 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 report;
3. Based on my knowledge, the financial statements, and other financial
information included in this 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 report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision,
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
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation;
and
c) disclosed in this report any change in the registrant's internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over
financial reporting.
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
control over financial reporting.
Date: August 28, 2003
/s/ Michael R. Burris
-------------------------------
Michael R. Burris
Senior Vice President -
Finance and Chief Financial
Officer
Exhibit 32.1
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 20, 2003 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, Joel A. Schwartz,
President and Chief Executive Officer and Director 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
and Director
August 28, 2003
Exhibit 32.2
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 20, 2003 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, Michael R. Burris,
Senior Vice President - Finance and 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
Senior Vice President -
Finance and Chief Financial
Officer
August 28, 2003