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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 October 12, 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 check mark whether the registrant is an accelerated
filer (as defined in Rule 12b-2 of the Act.) 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, 3,166,479 shares outstanding at November 17, 2003
Class A Common Stock $.10 par value, 5,685,959 shares outstanding at November
17, 2003
BENIHANA INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE
THREE AND SEVEN PERIODS ENDED OCTOBER 12, 2003
TABLE OF CONTENTS
PAGE
PART I - Financial Information
Condensed Consolidated Balance Sheets (unaudited)
at October 12, 2003 and March 30, 2003 1
Condensed Consolidated Statements of Earnings
(unaudited) for the Three and Seven Periods Ended
October 12, 2003 and October 13, 2002 2 - 3
Condensed Consolidated Statement of Stockholders'
Equity (unaudited) for the Seven Periods Ended
October 12, 2003 4
Condensed Consolidated Statements of Cash Flows
(unaudited) for the Seven Periods Ended
October 12, 2003 and October 13, 2002 5
Notes to Condensed Consolidated Financial Statements
(unaudited) 6 - 8
Management's Discussion and Analysis of
Financial Condition and Results of Operations 9 - 14
PART II - Other Information
Item 4. Results of Vote of Security Holders 15 - 16
Item 6. Exhibits and Reports on Form 8-K 16
Signature 17
Certifications 18 - 21
BENIHANA INC. AND SUBSIDIARIES
PART I - Financial Information
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands, except share and per share information)
October 12, March 30,
2003 2003
- -----------------------------------------------------------------------------------------------------------
Assets
Current Assets:
Cash and cash equivalents $ 1,965 $ 2,299
Receivables 701 626
Inventories 5,894 5,328
Prepaid expenses 1,564 2,236
- -----------------------------------------------------------------------------------------------------------
Total current assets 10,124 10,489
Property and equipment, net 90,345 84,482
Deferred income taxes, net 941 1,172
Goodwill, net 27,131 27,131
Other assets 5,055 5,207
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$133,596 $128,481
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Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable and accrued expenses $19,252 $ 19,407
Current maturity of bank debt 3,000 3,000
Current maturities of obligations
under capital leases 263 373
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Total current liabilities 22,515 22,780
Long-term debt - bank 19,350 19,000
Obligations under capital leases 157 299
Minority interest 1,109 771
Commitments and contingencies
Stockholders' Equity:
Common stock - $.10 par value; convertible into Class
A Common stock; authorized - 12,000,000 shares;
issued and outstanding - 3,166,479 and 3,184,479
shares, respectively 317 318
Class A Common stock - $.10 par value; authorized -
20,000,000 shares; issued and outstanding -
5,683,709 and 5,595,084 shares, respectively 568 560
Additional paid-in capital 48,857 48,444
Retained earnings 40,866 36,452
Treasury stock - 10,828 shares of Common and
Class A Common stock at cost (143) (143)
- -----------------------------------------------------------------------------------------------------------
Total stockholders' equity 90,465 85,631
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$133,596 $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)
Three Periods Ended
--------------------------------
October 12, October 13,
2003 2002
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Revenues
Restaurant sales $43,925 $41,676
Franchise fees and royalties 310 282
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Total revenues 44,235 41,958
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Costs and Expenses
Cost of food and beverage sales 11,232 10,323
Restaurant operating expenses 26,304 25,837
Restaurant opening costs 590 116
Marketing, general and administrative expenses 3,697 3,381
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Total operating expenses 41,823 39,657
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Income from operations 2,412 2,301
Interest expense, net 84 108
Minority interest 149 111
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Income from operations before income taxes 2,179 2,082
Income tax provision 717 630
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Net Income $1,462 $1,452
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Earnings Per Share
Basic earnings per common share $ .17 $ .17
Diluted earnings per common share $ .16 $ .16
- ------------------------------------------------------------------------------------------------------
Number of restaurants at end of period 65 61
See notes to condensed consolidated financial statements
BENIHANA INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
(In thousands, except per share information)
Seven Periods Ended
---------------------------------
October 12, October 13,
2003 2002
- ------------------------------------------------------------------------------------------------------
Revenues
Restaurant sales $104,467 $98,399
Franchise fees and royalties 870 718
- ------------------------------------------------------------------------------------------------------
Total revenues 105,337 99,117
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Costs and Expenses
Cost of food and beverage sales 26,803 24,313
Restaurant operating expenses 61,787 59,589
Restaurant opening costs 833 264
Marketing, general and administrative expenses 8,710 8,177
- ------------------------------------------------------------------------------------------------------
Total operating expenses 98,133 92,343
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Income from operations 7,204 6,774
Interest expense, net 233 225
Minority interest 338 268
- ------------------------------------------------------------------------------------------------------
Income from operations before income taxes 6,633 6,281
Income tax provision 2,219 2,039
- ------------------------------------------------------------------------------------------------------
Net Income $4,414 $4,242
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Earnings Per Share
Basic earnings per common share $ .50 $ .49
Diluted earnings per common share $ .49 $ .45
- ------------------------------------------------------------------------------------------------------
Number of restaurants at end of period 65 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 4,414 4,414
Issuance of 12,000 shares of common stock
under exercise of options 2 61 63
Issuance of 58,625 shares of Class A
common stock under exercise of options 5 352 357
Conversion of 30,000 shares of common stock
into 30,000 shares of Class A common stock (3) 3
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, October 12, 2003 $317 $568 $48,857 $40,866 $(143) $90,465
- ------------------------------------------------------------------------------------------------------------------------------------
See notes to condensed consolidated financial statements
BENIHANA INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands, except share information)
Seven Periods Ended
--------------------------------
October 12, October 13,
2003 2002
- -------------------------------------------------------------------------------------------------------------
Operating Activities:
Net income $4,414 $4,242
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 4,414 3,563
Minority interest 338 268
Deferred income taxes 231 231
Loss on disposal of assets 61 74
Issuance of common stock for incentive compensation 3
Change in operating assets and liabilities that provided (used) cash:
Receivables (75) 584
Inventories (566) (557)
Prepaid expenses 672 332
Other assets (124) (231)
Accounts payable and accrued expenses (155) 633
- -------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 9,210 9,142
- -------------------------------------------------------------------------------------------------------------
Investing Activities:
Expenditures for property and equipment (10,062) (21,214)
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Net cash used in investing activities (10,062) (21,214)
- -------------------------------------------------------------------------------------------------------------
Financing Activities:
Borrowings under revolving line of credit 10,400 15,000
Proceeds from issuance of common stock under exercise of stock options 420 1,729
Repayment of long-term debt and obligations under capital leases (10,302) (8,377)
Purchase of treasury stock (4)
Tax benefit from stock option exercises 484
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Net cash provided by financing activities 518 8,832
- -------------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (334) (3,240)
Cash and cash equivalents, beginning of year 2,299 5,062
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Cash and cash equivalents, end of period $1,965 $1,822
- -------------------------------------------------------------------------------------------------------------
Supplemental Cash Flow Information:
Cash paid during the seven periods:
Interest $ 239 $ 254
Income taxes $ 389 $1,051
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
During the seven periods ended October 12, 2003, 30,000 shares of common stock
were converted into 30,000 shares of Class A common stock.
During the seven periods ended October 13, 2002, 41,700 shares of common stock
were converted into 41,700 shares of Class A common stock.
See notes to condensed consolidated financial statements.
BENIHANA INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SEVEN PERIODS ENDED OCTOBER 12, 2003 AND OCTOBER 13, 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 three and seven periods (twelve and twenty-eight weeks)
ended October 12, 2003 and October 13, 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. Certain prior period amounts have been
reclassified to conform to the current period presentation.
2. STOCK-BASED COMPENSATION
The Company accounts for stock options issued to employees under the
intrinsic value method of accounting for stock-based compensation. 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 three and seven periods ended:
Three Periods Ended Seven Periods Ended
--------------------------------- -------------------------------
October 12, October 13, October 12, October 13,
2003 2002 2003 2002
----------- ----------- ----------- -----------
Net Income
As reported $1,462 $1,452 $4,414 $4,242
Deduct: Total stock-based
employee compensation
expense determined under
fair value based method
for all awards (133) (174) (307) (406)
----------- ----------- ----------- -----------
Pro forma $1,329 $1,278 $4,107 $3,836
=========== =========== =========== ===========
Basic earnings per share
As reported $ .17 $ .17 $ .50 $ .49
----------- ----------- ----------- -----------
Pro forma $ .15 $ .15 $ .47 $ .44
=========== =========== =========== ===========
Diluted earnings per share
As reported $ .16 $ .16 $ .49 $ .45
----------- ----------- ----------- -----------
Pro forma $ .15 $ .14 $ .45 $ .41
=========== =========== =========== ===========
BENIHANA INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SEVEN PERIODS ENDED OCTOBER 12, 2003 AND OCTOBER 13, 2002
(UNAUDITED)
3. INVENTORIES
Inventories consist of (in thousands):
October 12, March 30,
2003 2003
----------- ---------
Food and beverage $1,794 $1,612
Supplies 4,100 3,716
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$5,894 $5,328
=========== =========
4. 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.
Seven Periods Ended
--------------------------------------------
October 12, October 13,
2003 2002
----------- -----------
Net income for computation of basic and
diluted earnings per common share $4,414 $4,242
=========== ===========
Seven Periods Ended
--------------------------------------------
October 12, October 13,
2003 2002
----------- -----------
Weighted average number of
common shares used in basic
earnings per share 8,791 8,716
Effect of dilutive securities:
Stock options and warrants 271 736
----------- -----------
Weighted average number of
common shares and dilutive
potential common stock used
in diluted earnings per share 9,062 9,452
=========== ===========
BENIHANA INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SEVEN PERIODS ENDED OCTOBER 12, 2003 AND OCTOBER 13, 2002
(UNAUDITED)
5. RESTAURANT OPERATING EXPENSES
Restaurant operating expenses consist of the following (in thousands):
Three Periods Ended Seven Periods Ended
---------------------------------- ---------------------------------
October 12, October 13, October 12, October 13,
2003 2002 2003 2002
----------- ----------- ----------- -----------
Labor and related costs $15,928 $16,306 $37,695 $37,606
Restaurant supplies 875 902 2,029 1,968
Credit card discounts 741 721 1,813 1,690
Utilities 1,218 1,096 2,680 2,363
Occupancy costs 2,536 2,255 5,934 5,447
Depreciation and amortization 1,875 1,510 4,228 3,431
Other operating expenses 3,131 3,047 7,408 7,084
----------- ----------- ----------- -----------
Total restaurant operating expenses $26,304 $25,837 $61,787 $59,589
=========== =========== =========== ===========
6. 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 increased 5.4% in the current three periods and increased 6.3% in the
current seven periods when compared to the corresponding periods a year ago. Net
income and earnings per diluted share remained constant in the current three
periods when compared to the equivalent period of the prior year. Net income and
earnings per fully diluted share increased in the current seven periods when
compared to the equivalent period of the prior year. Both the current three and
seven periods had negative comparable sales as well as increased commodity costs
when compared to the equivalent periods a year ago. Net income and earnings per
fully diluted share were positively affected in both the three and seven periods
by an improved relationship of labor costs to sales when compared to the
equivalent periods a year ago.
REVENUES
Three and seven periods ended October 12, 2003 compared to October 13, 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).
Three Periods Ended Seven Periods Ended
--------------------------------- --------------------------------
October 12, October 13, October 12, October 13,
2003 2002 2003 2002
----------- ----------- ----------- -----------
Restaurant sales $43,925 $41,676 $104,467 $98,399
Franchise fees and royalties 310 282 870 718
----------- ----------- ----------- -----------
Total revenues $44,235 $41,958 $105,337 $99,117
=========== =========== =========== ===========
Three Periods Ended Seven Periods Ended
--------------------------------- --------------------------------
October 12, October 13, October 12, October 13,
2003 2002 2003 2002
----------- ----------- ----------- -----------
Amount of change in total
revenues from previous year $2,277 $4,472 $6,220 $10,696
----------- ----------- ----------- -----------
Percentage of change from the
previous year 5.4% 11.9% 6.3% 12.1%
=========== =========== =========== ===========
BENIHANA INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Restaurant revenues increased in the three and seven periods ended October 12,
2003 compared to the corresponding periods a year ago. Restaurant sales
increased from acquired and newly opened restaurants by $3.0 million for the
current three periods and by $7.3 million for the current seven periods as
compared to the corresponding periods a year ago. The increase in restaurant
sales was offset by negative comparable sales of 1.4%, a decrease of $0.6
million in the current three periods and 0.9%, a decrease of $1.0 million in the
current seven periods when compared to the equivalent periods a year ago.
Restaurant sales were also negatively impacted by temporary and permanent
restaurant closures of $0.2 million for the current three periods and $0.3
million for the current seven periods when compared to the equivalent periods a
year ago. The acquired RA Sushi restaurants are not included in comparable sales
as they were acquired in the latter part of fiscal 2003.
COSTS AND EXPENSES
Three and seven periods ended October 12, 2003 compared to October 13, 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 three and seven periods.
Three Periods Ended Seven Periods Ended
--------------------------------- ---------------------------------
October 12, October 13, October 12, October 13,
2003 2002 2003 2002
----------- ----------- ----------- -----------
COST AS A PERCENTAGE OF
RESTAURANT SALES:
Cost of food and beverage sales 25.6% 24.8% 25.7% 24.7%
Restaurant operating expenses 59.9% 62.0% 59.1% 60.6%
Restaurant opening costs 1.3% 0.3% .8% 0.3%
Marketing, general and
administrative expenses 8.4% 8.1% 8.3% 8.3%
Three Periods Ended Seven Periods Ended
------------------------------- ---------------------------------
October 12, October 13, October 12, October 13,
2003 2002 2003 2002
----------- ----------- ----------- -----------
AMOUNT OF CHANGE FROM
PREVIOUS COMPARABLE PERIOD
(IN THOUSANDS):
Cost of food and beverage sales $909 $ 763 $2,490 $1,527
Restaurant operating expenses $467 $2,425 $2,198 $7,466
Restaurant opening costs $474 $ (238) $ 569 $ (777)
Marketing, general and
administrative expenses $316 $ 177 $ 533 $ 622
BENIHANA INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Three Periods Ended Seven Periods Ended
--------------------------------- -------------------------------
October 12, October 13, October 12, October 13,
2003 2002 2003 2002
----------- ----------- ----------- -----------
PERCENTAGE CHANGE FROM
PREVIOUS COMPARABLE PERIOD:
Cost of food and beverage sales 8.8% 8.0% 10.2% 6.7%
Restaurant operating expenses 1.8% 10.4% 3.7% 14.3%
Restaurant opening costs 408.6% (67.2%) 215.5% (74.6%)
Marketing, general and
administrative expenses 9.3% 5.5% 6.5% 8.2%
The cost of food and beverage sales increased in total dollar amount and when
expressed as a percentage of sales in the current three and seven periods when
compared to the corresponding periods in the prior year. Costs of food and
beverage sales, which are generally variable with sales, directly increased with
changes in revenues for the three and seven periods ended October 12, 2003 as
compared to the equivalent periods ended October 13, 2002. The increase was also
a result of commodities price increases, principally beef and lobster costs, in
the current three and seven periods as compared to the equivalent period in the
prior year.
Restaurant operating expenses increased in absolute amount in the current three
and seven periods, but decreased when expressed as a percentage of sales
compared to the corresponding periods a year ago. The increase in absolute
amount was due to the acquisition of the four RA Sushi restaurants and the newly
opened teppanyaki restaurants in the current three and seven periods when
compared to the equivalent periods. The decrease when expressed as a percentage
of sales is due to lower labor and related costs in the current year's three and
seven periods when compared to the prior year's three and seven periods. Labor
costs and related costs improved as a result of productivity increases and
reduction of overtime wages in the current three and seven 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.
Restaurant opening costs increased in the current three and seven periods ended
October 12, 2003 compared to the prior year corresponding periods. The increase
is a result of the growth in restaurant development activity compared to the
equivalent periods a year ago.
Marketing, general and administrative costs increased in absolute amount in the
current three and seven periods when compared to the equivalent periods a year
ago. Marketing, general and administrative costs increased when expressed as a
percentage of sales in the current three periods and remained constant in the
current seven periods when compared to the equivalent periods a year ago. The
increase in absolute amount 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.
Interest expense decreased in the current three periods but increased slightly
in the current seven periods when compared to the corresponding periods of the
prior year. The decrease in the current three periods was attributable to a
decrease in the average interest rate in the current three periods.
Our effective income tax rate increased in the seven periods to 33.5% from 32.5%
in the prior year's seven periods.
BENIHANA INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OUR FINANCIAL RESOURCES
Cash flow from operations has historically been the primary source to fund our
capital expenditures. 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 as well as 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
October 12, 2003, we had $8,600,000 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
October 12, 2003, we had $13,750,000 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
October 12, 2003 of both the line of credit and the term loan was 2.12%. 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.
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):
Seven Periods Ended
-----------------------------------------
October 12, October 13,
2003 2002
----------- -----------
Cash provided by operations $ 9,210 $ 9,142
Cash (used in) investing activities (10,062) (21,214)
Cash provided by financing activities 518 8,832
----------- -----------
Decrease in cash and cash equivalents $ (334) $ (3,240)
=========== ===========
Operating Activities
Cash provided by operations increased slightly during the seven periods ended
October 12, 2003 compared to the equivalent period in the previous year. The
increase resulted mainly from increased depreciation and amortization offset by
the change in cash provided by operating assets and liabilities in the current
seven periods when compared to the previous comparable period.
Investing Activities
Expenditures for property and equipment decreased during the seven periods ended
October 12, 2003 from the prior comparable period. The decrease is attributable
to expenditures of approximately $13 million made in the prior year seven
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.
BENIHANA INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Financing Activities
During the current seven periods there were stock option exercises with cash
proceeds to the Company of $420,000 as compared to $1,729,000 in the previous
comparable period a year ago. Our total indebtedness increased by $98,000 during
the seven periods ended October 12, 2003 as compared to the end of fiscal 2003.
We had net borrowings of $2,600,000 from the revolving line of credit, paid down
$2,250,000 of the term loan and paid $252,000 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.
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 October 12, 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.
BENIHANA INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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 4. Results of Vote of Security Holders
(a) We held our annual meeting of stockholders on August
21, 2003.
(b) The following directors were elected at the meeting:
John E. Abdo, Norman Becker, Darwin C. Dornbush, Robert
B. Sturges and Yoshihiro Sano
Other directors whose term of office continues after the
meeting are set forth below:
Joel A. Schwartz, Kevin Y. Aoki, Taka Yoshimoto and Max
Pine
(c) At the annual meeting, holders of our Common Stock voted to
elect one Class I director for a term of two years and a
Class II director and Class III director for a term of
three years, respectively and holders of our Class A Common
Stock voted to elect a Class I director for a term of one
year and a Class III director for a term of three years. In
addition, holders of our Common Stock and Class A Common
Stock, voting together as a single class, voted for the
approval of the 2003 Directors' Stock Option Plan and voted
for the ratification of Deloitte & Touche LLP to serve as
our independent certified public accountants for the fiscal
year ending March 28, 2004.
At the meeting, the following votes for and against, as
well as the number of abstentions and broker non-votes were
recorded for each matter as set for the below:
WITHHOLD NON-
MATTER FOR AGAINST ABSTAIN AUTHORITY VOTES
-----------------------------------------------------------------------------------------------------
Election of Directors:
Class I
Darwin C. Dornbush 2,976,201 120,796
Class II
John E. Abdo 4,605,436 206,396
Class II
Norman Becker 3,079,297 17,700
Class II
Robert B. Sturges 3,087,697 9,300
Class III
Yoshihiro Sano 4,704,900 106,932
Approval of the
2003 Directors"
Stock Option Plan 2,462,492 217,019 69,095
BENIHANA INC. AND SUBSIDIARIES
PART II - Other Information
WITHHOLD NON-
MATTER FOR AGAINST ABSTAIN AUTHORITY VOTES
-----------------------------------------------------------------------------------------------------
Ratification of
Public Accountants: 3,574,683 3,137 360
Item 6. Exhibits and Reports on Form 8-K
(a) On August 25, 2003 the Company filed a report Form
8-K covering its earnings press release for the
fiscal quarter ended July 20, 2003.
(b)(i) Exhibit 10.1 - Employment agreement dated September 1,
2003, between Michael R. Burris and the Company.
(b)(ii) Exhibit 10.2 - Employment agreement dated September 1,
2003, between Kevin Aoki and the Company.
(b)(iii) Exhibit 10.3 - Employment agreement dated September 1,
2003, between Juan C. Garcia and the Company.
(b)(iv) Exhibit 31.1 - Chief Executive Officer's certification
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
(b)(v) Exhibit 31.2 - Chief Financial Officer's certification
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
(b)(vi) Exhibit 32.1 - Chief Executive Officer's certification
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
(b)(vii) 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 November 20, 2003 /s/ Joel A. Schwartz
----------------------- ----------------------------------
Joel A. Schwartz
President and
Chief Executive Officer
and Director
Exhibit 10.1
EMPLOYMENT AGREEMENT
AGREEMENT dated this 1st day of September, 2003, by and between
Benihana Inc., a Delaware corporation (the "Company") and Michael R. Burris
(the "Employee").
R E C I T A L S :
The Employee is, and has been for some years, employed by the Company
as its Senior Vice President-Finance and Treasurer and Chief Financial Officer;
and the Company is desirous of continuing such employment of Employee, and
Employee is desirous of continuing to be employed by the Company on the terms
and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, it is hereby agreed by and between the Company and Employee as
follows:
1. Engagement and Term. The Company hereby continues to employ Employee and
-------------------
Employee hereby accepts such continued employment by the Company on the terms
and conditions set forth herein, for a period commencing on the date hereof (the
"Effective Date"), and ending, unless sooner terminated in accordance with the
provisions of Section 4 hereof, on August 31, 2006 (the "Employment Period").
2. Scope of Duties. Employee shall be employed by the Company as its Senior Vice
---------------
President-Finance and Treasurer and Chief Financial Officer. In such capacities,
the Employee shall have such authority, powers and duties as are customarily
attendant upon such position. If elected or appointed, Employee shall also
serve, without additional compensation, in one or more offices and, if and when
elected, as a director of the Company or any subsidiary or affiliate of the
Company, provided that his duties and responsibilities are not inconsistent with
those pertaining to his position as an executive. Employee shall faithfully
devote his full business time and efforts so as to advance the best interests of
the Company. During the Employment Period, Employee shall not be engaged in any
other business activity, whether or not such business activity is pursued for
profit or other pecuniary advantage, unless same is only incidental and is in no
way, directly or indirectly, competitive with, or opposed to the best interests
of the Company.
3. Compensation.
------------
3.1. Basic Compensation. In respect of services to be performed by the Employee
------------------
during the Employment Period, the Company agrees to pay the Employee an annual
salary of One Hundred Fifty-Seven Thousand, Five Hundred Dollars ($157,500)
("Basic Compensation"), payable in accordance with the Company's customary
payroll practices for executive employees.
3.2. Discretionary Increases. The Employees shall also be entitled to such
-----------------------
additional increments and bonuses as shall be determined from time to time by
the Board of Directors of the Company.
3.3. Stock Options. The Employee will be eligible to receive stock options under
-------------
the Company's stock option plans at the discretion of the Stock Option Committee
of the Board of Directors of the Company in accordance with policies existing at
the time of such grants.
3.4. Other Benefits.
--------------
(a) Employees shall be entitled to participate,
at Company's expense, in the major medical health insurance
plan, and all other health, insurance or other benefit plan
applicable generally to executive officers of the Company.
(b) During the Employment Period, Employee will
be entitled to paid vacations and holidays consistent with
the Company's policy applicable to executives generally.
All vacations shall be scheduled at the mutual convenience
of the Company and the Employee.
4. Term of Employment. The provisions of Section 1 of this Agreement
------------------
notwithstanding, the Company may terminate this Agreement and Employee's
employment hereunder in the manner and for the causes hereinafter set forth, in
which event the Company shall be under no further obligation to Employee other
than as specifically provided herein:
(a) If Employee is absent from work or otherwise
substantially unable to assume his normal duties for a
period of sixty (60) successive days or an aggregate of
ninety (90) business days during any consecutive
twelve-month period during the Employment Period because of
physical or mental disability, accident, illness, or any
other cause other than vacation or approved leave of
absence or disability still exists, the Company may
terminate the employment of Employee hereunder upon ten
(10) days' written notice to Employee.
(b) In the event of the death of Employee, this
Agreement shall immediately terminate on the date hereof.
(c) If Employee materially breached or violates
any material term of his employment hereunder, or commits
any criminal act or an act of dishonesty or moral
turpitude, in the reasonable judgment of the Company's
Board of Directors, then the Company may, in addition to
other rights and remedies available at law or equity,
immediately terminate this Agreement upon written notice to
Employee with the date of such notice being the termination
date and such termination being deemed for "cause."
(d) In the event Employee's employment shall be
terminated by reason of the provisions of subparagraph (a)
or (b) of this Section 4, then in such event, the Company
shall pay to Employee, if living, or other person or
persons as Employee may from time to time designate in
writing as the beneficiary of such payment a sum, equal to
the Basic Compensation in effect at the time which such
death or disability occurred, such payment to continue for
three months after such death or disability.
5. Change in Control.
-----------------
5.1. In the event at any time during the Employment Period, a majority of the
Board of Directors is composed of persons who are not "Continuing Directors," as
hereinafter defined, and Employee's employment is terminated by the Company
other than for one of the reasons set forth in Section 4 hereof, Employee shall
not be obligated to seek employment to mitigate his damages, if any, to which he
may be entitled for breach of this Agreement.
5.2. "Continuing Directors" shall mean (i) the directors of the Company at the
close of business on September 1, 2003 and (ii) any person who was or is
recommended to (A) succeed a Continuing Director by the Company's Nominating
Committee or (B) become a director as a result of an increase in the size of the
Board by a majority of the Continuing Directors then on the Board.
6. Disclosure of Confidential Information and Covenant Not to Compete. Employee
------------------------------------------------------------------
agrees that his primary loyalty will be to the Company. Employee acknowledges
that the Company possess confidential information, know-how, customer lists,
purchasing, merchandising and selling techniques and strategies, and other
information used in its operations of which Employee will obtain knowledge, and
that the Company will suffer serious and irreparable damage and harm if this
confidential information were disclosed to any other party or if Employee used
this information to compete against the Company. Accordingly, Employee hereby
agrees that except as required by Employee's duties to the Company, Employee
without the consent of the Company's Board of Directors, shall not at any time
during or after the term of this contract disclose or use any secret or
confidential information of the Company, including, without limitation, such
business opportunities, customer lists, trade secrets, formulas, techniques and
methods of which Employee shall become informed during his employment, whether
learned by him as an Employee of the Company, as a member of the Board of
Directors or otherwise, and whether or not developed by the Employee, unless
such information shall be or become public knowledge other than as a result of
the Employee's direct or indirect disclosure of the same.
Employee further agrees that for a period of two years following the
termination of Employee's employment, except as a result of the breach by the
Company of any material term or condition hereof, Employee will not, directly or
indirectly, alone or with others, individually or through or by a corporate or
other business entity in which he may be interested as a partner, shareholder,
joint venturer, officer or director or otherwise, engaged in the United States
in any "business which is competitive with that of the Company or any of its
subsidiaries" as hereinafter defined; provided, however, that the foregoing
shall not be deemed to prevent the ownership by Employee of up to five percent
of any class of securities of any corporation which is regularly traded on any
stock exchange or over-the-counter market. For the purpose of this Agreement, a
"business which is competitive with the business of the Company or any of its
subsidiaries," shall include only the operation of franchise restaurants selling
Japanese, or other Asian food, or restaurants of a type then being operated by
the Company, or any of its subsidiaries.
7. Reimbursement of Expenses; Use of Automobile. The Company shall further pay
--------------------------------------------
directly, or reimburse the Employee, for all other reasonable and necessary
expenses and disbursements incurred by him for and on behalf of the Company in
the performance of his duties during the Employment Period upon submission of
vouchers or other evidence thereof in accordance with the Company's usual
policies of expense reimbursement. The Employee shall receive an allowance of
$200 per month for automobile expenses, including the lease costs or purchase
price, gasoline, oil and garaging.
8. Miscellaneous Provisions.
------------------------
8.1. Section headings are for convenience only and shall not be deemed to
govern, limit, modify or supersede the provisions of this Agreement.
8.2. This Agreement is entered into in the State of Florida and shall be
governed pursuant to the laws of the State of Florida. If any provision of this
Agreement shall be held by a court of competent jurisdiction to be invalid,
illegal or unenforceable, the remaining provisions hereof shall continue to be
fully effective.
8.3. This Agreement contains the entire agreement of the parties regarding this
subject matter. There are no contemporaneous oral agreements, and all prior
understandings, agreements, negotiations and representations are merged herein.
8.4. This Agreement may be modified only by means of a writing signed by the
party to be charged with such modification.
8.5. Notices or other communications required or permitted to be given hereunder
shall be in writing and shall be deemed duly given upon the receipt by the party
to whom sent at the respective addresses set forth below or to such other
address as any party shall hereafter designate to the other in writing delivered
in accordance herewith:
If to the Company:
Benihana Inc.
8685 Northwest 53rd Terrace
Miami, Florida 33166-0120
Attention: President
If to Employee:
Michael R. Burris
276 Landings Boulevard
Weston, Florida 33327
8.6. This Agreement shall inure to the benefit of, and shall be binding upon,
the Company, its successors and assigns, including, without limitation, any
entity that may acquire all or substantially all of the Company's assets and
business or into which the Company may be consolidated or merged. This Agreement
may not be assigned by Employee.
8.7. This Agreement may be executed in separate counterparts, each of which
shall constitute the original thereof.
8.8. This Agreement supersedes and replaces all previous Employment Agreements
between the Company and the Employee.
IN WITNESS WHEREOF, the parties have set their hands as of the date
first above written.
BENIHANA INC.
By: /s/ Joel A. Schwartz
------------------------------------
Joel A. Schwartz, President
/s/ Michael R. Burris
-------------------------------------
Michael R. Burris
Exhibit 10.2
EMPLOYMENT AGREEMENT
AGREEMENT dated as of September 1, 2003, by and between Benihana
Inc., a Delaware corporation (the "Company") and Kevin Aoki (the "Employee").
R E C I T A L S :
The Employee is, and has been for some years, employed by the Company
as its Vice President-Marketing; and the Company is desirous of continuing such
employment of Employee and Employee is desirous of continuing to be employed by
the Company on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, it is hereby agreed by and between the Company and Employee as
follows:
9. Engagement and Term. The Company hereby continues to employ Employee and
-------------------
Employee hereby accepts such continued employment by the Company on the terms
and conditions set forth herein, for a period commencing on the date hereof (the
"Effective Date"), and ending, unless sooner terminated in accordance with the
provisions of Section 4 hereof, on August 31, 2006 (the "Employment Period").
10. Scope of Duties. Employee shall be employed by the Company in an executive
---------------
capacity as determined by the President and the Board of Directors of the
Company, and will report directly to the President of the Company. In such
capacity, the Employee shall have such authority, powers and duties delegated to
him by the President and the Board of Directors of the Company. If elected or
appointed, Employee shall also serve, without additional compensation, in one or
more offices and, if and when elected, as a director of the Company or any
subsidiary or affiliate of the Company, provided that his duties and
responsibilities are not inconsistent with those pertaining to his position as
an executive. Employee shall faithfully devote his full business time and
efforts so as to advance the best interests of the Company. During the
Employment Period, Employee shall not be engaged in any other business activity,
whether or not such business activity is pursued for profit or other pecuniary
advantage, unless same is only incidental and is in no way, directly or
indirectly, competitive with, or opposed to the best interests of the Company.
11. Compensation.
------------
11.1. Basic Compensation. In respect of services to be performed by the Employee
------------------
during the Employment Period, the Company agrees to pay the Employee an annual
salary of One Hundred Thirty-Two Thousand, Five Hundred Dollars ($132,500)
("Basic Compensation"), payable in accordance with the Company's customary
payroll practices for executive employees.
11.2. Discretionary Increases. The Employees shall also be entitled to such
-----------------------
additional increments and bonuses as shall be determined from time to time by
the Board of Directors of the Company.
11.3. Stock Options. The Employee will be eligible to receive stock options
-------------
under the Company's stock option plans at the discretion of the Stock Option
Committee of the Board of Directors of the Company in accordance with policies
existing at the time of such grants.
11.4. Other Benefits.
--------------
(a) Employees shall be entitled to participate,
at Company's expense, in the major medical health insurance
plan, and all other health, insurance or other benefit plan
applicable generally to executive officers of the Company.
(b) During the Employment Period, Employee will
be entitled to paid vacations and holidays consistent with
the Company's policy applicable to executives generally.
All vacations shall be scheduled at the mutual convenience
of the Company and the Employee.
12. Term of Employment. The provisions of Section 1 of this Agreement
------------------
notwithstanding, the Company may terminate this Agreement and Employee's
employment hereunder in the manner and for the causes hereinafter set forth, in
which event the Company shall be under no further obligation to Employee other
than as specifically provided herein:
(a) If Employee is absent from work or otherwise
substantially unable to assume his normal duties for a
period of sixty (60) successive days or an aggregate of
ninety (90) business days during any consecutive
twelve-month period during the Employment Period because of
physical or mental disability, accident, illness, or any
other cause other than vacation or approved leave of
absence or disability still exists, the Company may
terminate the employment of Employee hereunder upon ten
(10) days' written notice to Employee.
(b) In the event of the death of Employee, this
Agreement shall immediately terminate on the date hereof.
(c) If Employee materially breached or violates
any material term of his employment hereunder, or commits
any criminal act or an act of dishonesty or moral
turpitude, in the reasonable judgment of the Company's
Board of Directors, then the Company may, in addition to
other rights and remedies available at law or equity,
immediately terminate this Agreement upon written notice to
Employee with the date of such notice being the termination
date and such termination being deemed for "cause."
(d) In the event Employee's employment shall be
terminated by reason of the provisions of subparagraph (a)
or (b) of this Section 4, then in such event, the Company
shall pay to Employee, if living, or other person or
persons as Employee may from time to time designate in
writing as the beneficiary of such payment a sum, equal to
the Basic Compensation in effect at the time which such
death or disability occurred, such payment to continue for
three months after such death or disability.
13. Change in Control.
-----------------
13.1. In the event at any time during the Employment Period, a majority of the
Board of Directors is composed of persons who are not "Continuing Directors," as
hereinafter defined, and Employee's employment is terminated by the Company
other than for one of the reasons set forth in Section 4 hereof, Employee shall
not be obligated to seek employment to mitigate his damages, if any, to which he
may be entitled for breach of this Agreement.
13.2. "Continuing Directors" shall mean (i) the directors of the Company at the
close of business on September 1, 2003 and (ii) any person who was or is
recommended to (A) succeed a Continuing Director by the Company's Nominating
Committee or (B) become a director as a result of an increase in the size of the
Board by a majority of the Continuing Directors then on the Board.
14. Disclosure of Confidential Information and Covenant Not to Compete. Employee
------------------------------------------------------------------
agrees that his primary loyalty will be to the Company. Employee acknowledges
that the Company possess confidential information, know-how, customer lists,
purchasing, merchandising and selling techniques and strategies, and other
information used in its operations of which Employee will obtain knowledge, and
that the Company will suffer serious and irreparable damage and harm if this
confidential information were disclosed to any other party or if Employee used
this information to compete against the Company. Accordingly, Employee hereby
agrees that except as required by Employee's duties to the Company, Employee
without the consent of the Company's Board of Directors, shall not at any time
during or after the term of this contract disclose or use any secret or
confidential information of the Company, including, without limitation, such
business opportunities, customer lists, trade secrets, formulas, techniques and
methods of which Employee shall become informed during his employment, whether
learned by him as an Employee of the Company, as a member of the Board of
Directors or otherwise, and whether or not developed by the Employee, unless
such information shall be or become public knowledge other than as a result of
the Employee's direct or indirect disclosure of the same.
Employee further agrees that for a period of two years following the
termination of Employee's employment, except as a result of the breach by the
Company of any material term or condition hereof, Employee will not, directly or
indirectly, alone or with others, individually or through or by a corporate or
other business entity in which he may be interested as a partner, shareholder,
joint venturer, officer or director or otherwise, engage in the United States in
any "business which is competitive with that of the Company or any of its
subsidiaries" as hereinafter defined or which business hires any persons who
were employed by the Company or a subsidiary of the Company at the time of
Employee's termination of employment with the Company; provided, however, that
the foregoing shall not be deemed to prevent the ownership by Employee of up to
five percent of any class of securities of any corporation which is regularly
traded on any stock exchange or over-the-counter market. For the purpose of this
Agreement, a "business which is competitive with the business of the Company or
any of its subsidiaries," shall include only the operation of franchise
restaurants selling Japanese, or other Asian food, or restaurants of a type then
being operated by the Company, or any of its subsidiaries.
15. Reimbursement of Expenses; Use of Automobile. The Company shall further pay
--------------------------------------------
directly, or reimburse the Employee, for all other reasonable and necessary
expenses and disbursements incurred by him for and on behalf of the Company in
the performance of his duties during the Employment Period upon submission of
vouchers or other evidence thereof in accordance with the Company's usual
policies of expense reimbursement. The Employee shall receive an allowance of
$200 per month for automobile expenses, including the lease costs or purchase
price, gasoline, oil and garaging.
16. Miscellaneous Provisions.
------------------------
16.1. Section headings are for convenience only and shall not be deemed to
govern, limit, modify or supersede the provisions of this Agreement.
16.2. This Agreement is entered into in the State of Florida and shall be
governed pursuant to the laws of the State of Florida. If any provision of this
Agreement shall be held by a court of competent jurisdiction to be invalid,
illegal or unenforceable, the remaining provisions hereof shall continue to be
fully effective.
16.3. This Agreement contains the entire agreement of the parties regarding this
subject matter. There are no contemporaneous oral agreements, and all prior
understandings, agreements, negotiations and representations are merged herein.
16.4. This Agreement may be modified only by means of a writing signed by the
party to be charged with such modification.
16.5. Notices or other communications required or permitted to be given
hereunder shall be in writing and shall be deemed duly given upon the receipt by
the party to whom sent at the respective addresses set forth below or to such
other address as any party shall hereafter designate to the other in writing
delivered in accordance herewith:
If to the Company:
Benihana Inc.
8685 Northwest 53rd Terrace
Miami, Florida 33166-0120
Attention: President
If to Employee:
Kevin Aoki
1000 Quaysite Terrace, Apt. 1611
Miami, Florida 33138
16.6. This Agreement shall inure to the benefit of, and shall be binding upon,
the Company, its successors and assigns, including, without limitation, any
entity that may acquire all or substantially all of the Company's assets and
business or into which the Company may be consolidated or merged. This Agreement
may not be assigned by Employee.
16.7. This Agreement may be executed in separate counterparts, each of which
shall constitute the original thereof.
16.8. This Agreement supersedes and replaces the Employment Agreement dated
October 19, 1998, as amended on January 25, 2000 and April 1, 2001, between the
Company and the Employee.
IN WITNESS WHEREOF, the parties have set their hands as of the date
first above written.
BENIHANA INC.
By: /s/ Joel A. Schwartz
------------------------------------------
Joel A. Schwartz, President
/s/ Kevin Aoki
------------------------------------------
Kevin Aoki
Exhibit 10.3
EMPLOYMENT AGREEMENT
AGREEMENT dated this 1st day of September, 2003, by and between
Benihana Inc., a Delaware corporation (the "Company") and Juan C. Garcia (the
"Employee").
R E C I T A L S :
The Employee is, and has been for some years, employed by the Company
as its Vice President/Comptroller; and the Company is desirous of continuing
such employment of Employee, and Employee is desirous of continuing to be
employed by the Company on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, it is hereby agreed by and between the Company and Employee as
follows:
17. Engagement and Term. The Company hereby continues to employ Employee and
-------------------
Employee hereby accepts such continued employment by the Company on the terms
and conditions set forth herein, for a period commencing on the date hereof (the
"Effective Date"), and ending, unless sooner terminated in accordance with the
provisions of Section 4 hereof, on August 31, 2006 (the "Employment Period").
18. Scope of Duties. Employee shall be employed by the Company as its Vice
---------------
President/Comptroller. In such capacity, the Employee shall have such authority,
powers and duties as are customarily attendant upon such position. If elected or
appointed, Employee shall also serve, without additional compensation, in one or
more offices and, if and when elected, as a director of the Company or any
subsidiary or affiliate of the Company, provided that his duties and
responsibilities are not inconsistent with those pertaining to his position as
an executive. Employee shall faithfully devote his full business time and
efforts so as to advance the best interests of the Company. During the
Employment Period, Employee shall not be engaged in any other business activity,
whether or not such business activity is pursued for profit or other pecuniary
advantage, unless same is only incidental and is in no way, directly or
indirectly, competitive with, or opposed to the best interests of the Company.
19. Compensation.
------------
19.1. Basic Compensation. In respect of services to be performed by the Employee
------------------
during the Employment Period, the Company agrees to pay the Employee an annual
salary of One Hundred Fifteen Thousand Dollars ($115,000) ("Basic
Compensation"), payable in accordance with the Company's customary payroll
practices for executive employees.
19.2. Discretionary Increases. The Employees shall also be entitled to such
-----------------------
additional increments and bonuses as shall be determined from time to time by
the Board of Directors of the Company.
19.3. Stock Options. The Employee will be eligible to receive stock options
-------------
under the Company's stock option plans at the discretion of the Stock Option
Committee of the Board of Directors of the Company in accordance with policies
existing at the time of such grants.
19.4. Other Benefits.
--------------
(a) Employees shall be entitled to participate,
at Company's expense, in the major medical health insurance
plan, and all other health, insurance or other benefit plan
applicable generally to executive officers of the Company.
(b) During the Employment Period, Employee will
be entitled to paid vacations and holidays consistent with
the Company's policy applicable to executives generally.
All vacations shall be scheduled at the mutual convenience
of the Company and the Employee.
20. Term of Employment. The provisions of Section 1 of this Agreement
------------------
notwithstanding, the Company may terminate this Agreement and Employee's
employment hereunder in the manner and for the causes hereinafter set forth, in
which event the Company shall be under no further obligation to Employee other
than as specifically provided herein:
(a) If Employee is absent from work or otherwise
substantially unable to assume his normal duties for a
period of sixty (60) successive days or an aggregate of
ninety (90) business days during any consecutive
twelve-month period during the Employment Period because of
physical or mental disability, accident, illness, or any
other cause other than vacation or approved leave of
absence or disability still exists, the Company may
terminate the employment of Employee hereunder upon ten
(10) days' written notice to Employee.
(b) In the event of the death of Employee, this
Agreement shall immediately terminate on the date hereof.
(c) If Employee materially breached or violates
any material term of his employment hereunder, or commits
any criminal act or an act of dishonesty or moral
turpitude, in the reasonable judgment of the Company's
Board of Directors, then the Company may, in addition to
other rights and remedies available at law or equity,
immediately terminate this Agreement upon written notice to
Employee with the date of such notice being the termination
date and such termination being deemed for "cause."
(d) In the event Employee's employment shall be
terminated by reason of the provisions of subparagraph (a)
or (b) of this Section 4, then in such event, the Company
shall pay to Employee, if living, or other person or
persons as Employee may from time to time designate in
writing as the beneficiary of such payment a sum, equal to
the Basic Compensation in effect at the time which such
death or disability occurred, such payment to continue for
three months after such death or disability.
21. Change in Control.
-----------------
21.1. In the event at any time during the Employment Period, a majority of the
Board of Directors is composed of persons who are not "Continuing Directors," as
hereinafter defined, and Employee's employment is terminated by the Company
other than for one of the reasons set forth in Section 4 hereof, Employee shall
not be obligated to seek employment to mitigate his damages, if any, to which he
may be entitled for breach of this Agreement.
21.2. "Continuing Directors" shall mean (i) the directors of the Company at the
close of business on September 1, 2003 and (ii) any person who was or is
recommended to (A) succeed a Continuing Director by the Company's Nominating
Committee or (B) become a director as a result of an increase in the size of the
Board by a majority of the Continuing Directors then on the Board.
22. Disclosure of Confidential Information and Covenant Not to Compete. Employee
------------------------------------------------------------------
agrees that his primary loyalty will be to the Company. Employee acknowledges
that the Company possess confidential information, know-how, customer lists,
purchasing, merchandising and selling techniques and strategies, and other
information used in its operations of which Employee will obtain knowledge, and
that the Company will suffer serious and irreparable damage and harm if this
confidential information were disclosed to any other party or if Employee used
this information to compete against the Company. Accordingly, Employee hereby
agrees that except as required by Employee's duties to the Company, Employee
without the consent of the Company's Board of Directors, shall not at any time
during or after the term of this contract disclose or use any secret or
confidential information of the Company, including, without limitation, such
business opportunities, customer lists, trade secrets, formulas, techniques and
methods of which Employee shall become informed during his employment, whether
learned by him as an Employee of the Company, as a member of the Board of
Directors or otherwise, and whether or not developed by the Employee, unless
such information shall be or become public knowledge other than as a result of
the Employee's direct or indirect disclosure of the same.
Employee further agrees that for a period of two years following the
termination of Employee's employment, except as a result of the breach by the
Company of any material term or condition hereof, Employee will not, directly or
indirectly, alone or with others, individually or through or by a corporate or
other business entity in which he may be interested as a partner, shareholder,
joint venturer, officer or director or otherwise, engaged in the United States
in any "business which is competitive with that of the Company or any of its
subsidiaries" as hereinafter defined; provided, however, that the foregoing
shall not be deemed to prevent the ownership by Employee of up to five percent
of any class of securities of any corporation which is regularly traded on any
stock exchange or over-the-counter market. For the purpose of this Agreement, a
"business which is competitive with the business of the Company or any of its
subsidiaries," shall include only the operation of franchise restaurants selling
Japanese, or other Asian food, or restaurants of a type then being operated by
the Company, or any of its subsidiaries.
23. Reimbursement of Expenses; Use of Automobile. The Company shall further pay
--------------------------------------------
directly, or reimburse the Employee, for all other reasonable and necessary
expenses and disbursements incurred by him for and on behalf of the Company in
the performance of his duties during the Employment Period upon submission of
vouchers or other evidence thereof in accordance with the Company's usual
policies of expense reimbursement. The Employee shall receive an allowance of
$200 per month for automobile expenses, including the lease costs or purchase
price, gasoline, oil and garaging.
24. Miscellaneous Provisions.
------------------------
24.1. Section headings are for convenience only and shall not be deemed to
govern, limit, modify or supersede the provisions of this Agreement.
24.2. This Agreement is entered into in the State of Florida and shall be
governed pursuant to the laws of the State of Florida. If any provision of this
Agreement shall be held by a court of competent jurisdiction to be invalid,
illegal or unenforceable, the remaining provisions hereof shall continue to be
fully effective.
24.3. This Agreement contains the entire agreement of the parties regarding this
subject matter. There are no contemporaneous oral agreements, and all prior
understandings, agreements, negotiations and representations are merged herein.
24.4. This Agreement may be modified only by means of a writing signed by the
party to be charged with such modification.
24.5. Notices or other communications required or permitted to be given
hereunder shall be in writing and shall be deemed duly given upon the receipt by
the party to whom sent at the respective addresses set forth below or to such
other address as any party shall hereafter designate to the other in writing
delivered in accordance herewith:
If to the Company:
Benihana Inc.
8685 Northwest 53rd Terrace
Miami, Florida 33166-0120
Attention: President
If to Employee:
Juan C. Garcia
5900 SW 112th Street
Pine Crest, Florida 33156
24.6. This Agreement shall inure to the benefit of, and shall be binding upon,
the Company, its successors and assigns, including, without limitation, any
entity that may acquire all or substantially all of the Company's assets and
business or into which the Company may be consolidated or merged. This Agreement
may not be assigned by Employee.
24.7. This Agreement may be executed in separate counterparts, each of which
shall constitute the original thereof.
24.8. This Agreement supersedes and replaces all previous Employment Agreements
between the Company and the Employee.
IN WITNESS WHEREOF, the parties have set their hands as of the date
first above written.
BENIHANA INC.
By: /s/ Joel A. Schwartz
-------------------------------------------
Joel A. Schwartz, President
/s/Juan C. Garcia
-------------------------------------------
Juan C. Garcia
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: November 20, 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: November 20, 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 October 12, 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
November 20, 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 October 12, 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
November 20, 2003