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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 January 2, 2005
or,
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 0-26396
Benihana Inc.
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(Exact name of registrant as specified in its charter)
Delaware 65-0538630
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(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
8685 Northwest 53rd Terrace, Miami, Florida 33166
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (305) 593-0770
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None
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Former name, former address and former fiscal year, if changed since last report
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark whether the registrant is an accelerated
filer (as defined in Rule 12b-2 of the Act.) Yes X No
--- ---
Indicate the 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, 2,992,979 shares outstanding at February 15, 2005
Class A Common Stock $.10 par value, 6,181,475 shares outstanding at
February 15, 2005
BENIHANA INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE
THREE AND TEN PERIODS ENDED JANUARY 2, 2005
TABLE OF CONTENTS
PAGE
PART I - Financial Information
Item 1. Financial Statements - unaudited
Condensed Consolidated Balance Sheets (unaudited)
at January 2, 2005 and March 28, 2004 1
Condensed Consolidated Statements of Earnings
(unaudited) for the Three and Ten Periods Ended
January 2, 2005 and January 4, 2004 2 - 3
Condensed Consolidated Statement of Stockholders'
Equity (unaudited) for the Ten Periods Ended
January 2, 2005 4
Condensed Consolidated Statements of Cash Flows
(unaudited) for the Ten Periods Ended
January 2, 2005 and January 4, 2004 5
Notes to Condensed Consolidated Financial Statements
(unaudited) 6 - 12
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 13 - 18
Item 3. Quantitative and Qualitative Disclosures
about Market Risk 19
Item 4. Controls and Procedures 20
PART II - Other Information
Item 1. Legal Proceedings 21
Item 6. Exhibits and Reports on Form 8-K 21 - 22
Signature 23
Certifications 42 - 45
The Company's registered independent public accountants have not completed their
review of the financial statements that accompany this Form 10-Q. See Note 2 to
consolidated financial statements.
BENIHANA INC. AND SUBSIDIARIES
PART I - Financial Information
ITEM 1. FINANCIAL STATEMENTS - UNAUDITED
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (NOTE 2)
(In thousands, except share and per share information) January 2, March 28,
2005 2004
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Assets (As restated,
Current Assets: see Note 2)
Cash and cash equivalents $ 1,347 $ 2,196
Receivables 1,390 882
Inventories 6,832 6,147
Prepaid expenses 3,486 2,426
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Total current assets 13,055 11,651
Property and equipment, net 107,128 98,219
Goodwill, net 28,131 27,783
Other assets 4,506 4,757
Deferred tax asset, net 185
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$152,820 $142,595
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Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable and accrued expenses $24,566 $ 18,763
Current maturity of bank debt 3,333 21,500
Current maturities of obligations under capital leases 76 273
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Total current liabilities 27,975 40,536
Deferred obligations under operating leases 5,843 5,574
Long-term debt - bank 6,667
Obligations under capital leases 26
Deferred income taxes, net 53
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Total liabilities 40,538 46,136
Commitments and contingencies (Note 8)
Minority interest 1,907 1,414
Convertible Preferred Stock - $1.00 par value; authorized -
5,000,000 shares; Series B Mandatory Redeemable
Convertible Preferred Stock - authorized - 800,000 shares;
issued and outstanding - 400,000 shares (Note 7) 9,288
Stockholders' Equity:
Common stock - $.10 par value; convertible into Class A Common stock;
authorized - 12,000,000 shares; issued and outstanding - 2,992,979 and
3,134,979
shares, respectively 299 313
Class A Common stock - $.10 par value; authorized -
20,000,000 shares; issued and outstanding -
6,181,475 and 5,967,527 shares, respectively 618 597
Additional paid-in capital 51,507 50,772
Retained earnings 48,806 43,506
Treasury stock - 10,828 shares of Common and
Class A Common stock at cost (143) (143)
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Total stockholders' equity 101,087 95,045
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$152,820 $142,595
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See notes to condensed consolidated financial statements
BENIHANA INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (NOTE 2)
(UNAUDITED)
(In thousands, except per share information)
Three Periods Ended
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January 2, January 4,
2005 2004
- --------------------------------------------------------------------------------------------------------------- -----------------
(As restated,
Revenues see Note 2)
Restaurant sales $49,626 $46,607
Franchise fees and royalties 425 365
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Total revenues 50,051 46,972
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Costs and Expenses
Cost of food and beverage sales 11,695 12,096
Restaurant operating expenses 29,190 27,298
Restaurant opening costs 114 754
Marketing, general and administrative expenses 5,718 3,789
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Total operating expenses 46,717 43,937
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Earnings from operations 3,334 3,035
Interest expense, net 56 91
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Earnings before income taxes and minority interest 3,278 2,944
Income tax provision 1,130 955
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Earnings before minority interest 2,148 1,989
Minority interest 131 141
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Net Income $ 2,017 $ 1,848
Less: Accretion of issuance costs and preferred stock dividends 132
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Net income attributable to common stockholders $ 1,885 $ 1,848
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Earnings Per Share
Basic earnings per common share $ .21 $ .21
Diluted earnings per common share $ .20 $ .20
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Number of restaurants at end of period 69 68
See notes to condensed consolidated financial statements
BENIHANA INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (NOTE 2)
(UNAUDITED)
(In thousands, except per share information)
Ten Periods Ended
----------------------------------------
January 2, January 4,
2005 2004
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(As restated,
Revenues see Note 2)
Restaurant sales $162,361 $151,074
Franchise fees and royalties 1,191 1,235
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Total revenues 163,552 152,309
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Costs and Expenses
Cost of food and beverage sales 40,626 38,899
Restaurant operating expenses 95,899 89,100
Restaurant opening costs 667 1,792
Marketing, general and administrative expenses 16,997 12,500
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Total operating expenses 154,189 142,291
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Earnings from operations 9,363 10,018
Interest expense, net 242 324
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Earnings before income taxes and minority interest 9,121 9,694
Income tax provision 3,038 3,096
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Earnings before minority interest 6,083 6,598
Minority interest 493 479
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Net Income $ 5,590 $ 6,119
Less: Accretion of issuance costs and preferred stock dividends 290
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Net income attributable to common stockholders $ 5,300 $ 6,119
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Earnings Per Share
Basic earnings per common share $ .59 $ .69
Diluted earnings per common share $ .56 $ .67
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Number of restaurants at end of period 69 68
See notes to condensed consolidated financial statements
BENIHANA INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (NOTE 2)
TEN PERIODS ENDED JANUARY 2, 2005
(UNAUDITED)
(In thousands, except share information)
Class A Additional Total
Common Common Paid-in Retained Treasury Stockholders'
Stock Stock Capital Earnings Stock Equity
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Balance, March 28, 2004, as previously reported $313 $597 $50,772 $45,691 $(143) $97,230
Restatement, Note 2 (2,185) (2,185)
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Balance, March 28, 2004, as restated $313 $597 $50,772 $43,506 $(143) $95,045
Net income 5,590 5,590
Issuance of 71,598 shares of Class A
common stock under exercise of options 7 604 611
Conversion of 142,000 shares of common stock
into 142,000 shares of Class A common stock (14) 14
Issuance of 350 shares of Class A
common stock for incentive compensation 7 7
Dividends on Series B Preferred Stock (255) (255)
Tax benefit from stock option exercises 124 124
Accretion of issuance costs on
Series B Preferred Stock (35) (35)
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Balance, January 2, 2005 $299 $618 $51,507 $48,806 $(143) $101,087
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See notes to condensed consolidated financial statements
BENIHANA INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (NOTE 2)
(In thousands, except share information) Ten Periods Ended
----------------------------------------
January 2, January 4,
2005 2004
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(As restated,
Operating Activities: see Note 2)
Net income $ 5,590 $ 6,119
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 7,282 6,436
Minority interest 493 479
Deferred income taxes 238 780
Issuance of Class A common stock for incentive compensation 7
Loss on disposal of assets 191 124
Change in operating assets and liabilities that provided (used) cash:
Receivables (508) (396)
Inventories (685) (967)
Prepaid expenses (1,060) (526)
Other assets (41) 80
Accounts payable and accrued expenses 5,724 2,459
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Net cash provided by operating activities 17,231 14,588
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Investing Activities:
Cash proceeds from sale of equipment 4
Expenditures for property and equipment (16,094) (16,307)
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Net cash used in investing activities (16,090) (16,307)
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Financing Activities:
Borrowings under revolving line of credit 5,500 13,400
Proceeds from issuance of Series B Preferred Stock, net 9,253
Proceeds from issuance of common stock under exercise of
stock options and warrants 611 1,890
Tax benefit from stock option exercises 124 102
Repayment of long-term loan (3,000) (3,000)
Repayment of revolving line of credit (14,000) (10,400)
Repayment of obligations under capital leases (223) (301)
Dividends paid or accrued on Series B Preferred Stock (255)
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Net cash (used in) provided by financing activities (1,990) 1,691
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Net decrease in cash and cash equivalents (849) (28)
Cash and cash equivalents, beginning of year 2,196 2,299
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Cash and cash equivalents, end of period $ 1,347 $ 2,271
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Supplemental Disclosures of Cash Flow Information:
Cash paid during the ten periods:
Interest $ 366 $ 432
Income taxes $ 3,173 $ 1,400
- ---------------------------------------------------------------------------------------------------------------------------------
Supplemental schedule of noncash financing activities:
Accretion of issuance costs on Series B Preferred Stock $ 35
During the ten periods ended January 2, 2005, $348,000 of goodwill was recorded
related to contingent payments accrued for the RA Sushi acquisition.
During the
ten periods ended January 2, 2005, 142,000 shares of common stock were converted
into 142,000 shares of Class A common stock.
During the ten periods ended
January 4, 2004, 30,000 shares of common stock were converted into 30,000 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 TEN PERIODS ENDED JANUARY 2, 2005 AND JANUARY 4, 2004
(UNAUDITED) AS RESTATED
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 ten periods (forty weeks) ended January 2, 2005 and
January 4, 2004 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 28, 2004 appearing in the Benihana Inc. and
Subsidiaries (the "Company") Form 10-K/A 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.
The Company has a 52/53-week fiscal year and divides the year into 13
four-week periods. The Company's first fiscal quarter consists of 16 weeks,
and the remaining three quarters are 12 weeks each, except in the event of a
53-week year with the final quarter composed of 13 weeks. Because of the
differences in length of these accounting periods, results of operations
between the first quarter and the later quarters of a fiscal year are not
comparable. Certain prior period amounts have been reclassified to conform
to the current period presentation.
2. RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
Following a February 2005 review of the accounting adjustments cited in
several recent Form 8-K filings by other restaurant companies, a letter by
the Chief Accountant of the Securities and Exchange Commission to the
Chairman of the Center for Public Company Audit Firms of the AICPA dated
February 7, 2005 and in consultation with our independent registered public
accounting firm, Deloitte & Touche LLP, we determined that the adjustments
in those filings and the subject matter of the SEC's Chief Accountant in
his letter relating to the treatment of lease accounting and leasehold
depreciation applied to us, and that it was appropriate to adjust certain
of our prior financial statements. As a result, we have restated our
consolidated financial statements for the fiscal years through 2004 and for
the third quarter of fiscal 2004 included herein. Previously, when
accounting for leases with renewal options, we recorded rent expense on a
straight-line basis over the initial non-cancelable lease term, with the
term commencing when actual rent payments began. We depreciate our
buildings, leasehold improvements and other long-lived assets on those
properties over a period that includes both the initial non-cancelable
lease term and all option periods provided for in the lease (or the useful
life of the assets if shorter). Also, in certain situations, leases provide
that rental payments are not made for a certain period that estimates, at
the beginning of the leases the time frame that our restaurants are under
construction, a period commonly referred to as a "rent holiday". We did not
consider these rent holiday periods on a straight-line basis together with
the non-cancelable period in calculating our rent expense. We previously
believed that these longstanding accounting treatments were appropriate
under generally accepted accounting principles. We now have restated our
financial statements to recognize rent expense on a straight-line basis
over the expected lease term, including cancelable option periods where
failure to exercise such options would result in an economic penalty and
including the period that commences when the underlying property is made
available to us for construction. These adjustments were not attributable
to any material non-compliance by us, as a result of any misconduct, with
any financial reporting requirements under the securities laws.
BENIHANA INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND TEN PERIODS ENDED JANUARY 2, 2005 AND JANUARY 4, 2004
(UNAUDITED) AS RESTATED
The cumulative effect of the Restatement through fiscal 2004 is an increase
in deferred rent liability of $3.6 million and a decrease in deferred
income tax liability of $1.4 million. As a result, retained earnings at the
end of fiscal 2004 decreased by $2.2 million. Rent expense for fiscal year
ended 2004 and for the three and ten periods ended January 4, 2004
increased by $0.4 million, and $0.1 million and $0.3, respectively. The
Restatement decreased reported diluted net earnings per share $0.01 and
$0.03 for the three and ten periods ended January 4, 2004, respectively.
The Restatement had no impact on our previously reported cash flows, sales
or same-restaurant sales or on our compliance with any covenant under our
credit facility or other debt instruments. The impact on earnings of this
change to our previous policy is not material to earnings for the current
fiscal year which ends on March 27, 2005.
The consolidated financial statements included in this Form 10-Q have been
restated to reflect the adjustments described above. The Restatement will
be made in future amendments to our previously filed Form 10-K for the year
ended March 28, 2004 and for Forms 10-Q for the quarters ended July 18,
2004 and October 10, 2004.
The Company's independent registered public accounting firm has not
completed its review of these financial statements or the financial
statements for any other period and as a result, they may not agree with
the treatment reflected herein upon completion of their review.
The following is a summary of the impact of the Restatement on our
consolidated balance sheet at January 4, 2004 and our consolidated
statements of earnings for the quarter and ten periods ended January 4,
2004:
As Previously As
Year ended March 28, 2004 Reported Adjustments Restated
- -------------------------------------------------------------------------------------------------------------------------------
Consolidated Balance Sheet
- -------------------------------------------------------------------------------------------------------------------------------
Deferred income taxes $ 1,237 $(1,422) $ (185)
Total Assets 142,410 185 142,595
Accounts payable and accrued expenses 20,730 (1,967) 18,763
Deferred rent obligations under operating leases 0 5,574 5,574
Total liabilities 43,766 2,370 46,136
Retained earnings 45,691 (2,185) 43,506
Total stockholders' equity 97,230 (2,185) 95,045
As Previously As
Quarter ended January 4, 2004 Reported Adjustments Restated
- -------------------------------------------------------------------------------------------------------------------------------
Consolidated Statement of Earnings
- -------------------------------------------------------------------------------------------------------------------------------
Restaurant operating expenses $ 27,237 $ 61 $ 27,298
Restaurant opening costs 720 34 754
Earnings before income taxes and minority interest 3,039 (95) 2,944
Income taxes 988 33 955
Net income 1,910 62 1,848
Basic net earnings per share 0.21 -- 0.21
Diluted net earnings per share 0.21 (0.01) 0.20
BENIHANA INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND TEN PERIODS ENDED JANUARY 2, 2005 AND JANUARY 4, 2004
(UNAUDITED) AS RESTATED
As Previously As
Ten Periods ended January 4, 2004 Reported Adjustments Restated
- -------------------------------------------------------------------------------------------------------------------------------
Consolidated Statement of Earnings
- -------------------------------------------------------------------------------------------------------------------------------
Restaurant operating expenses $ 89,024 $ 76 $ 89,100
Restaurant opening costs 1,552 240 1,792
Earnings before income taxes and minority interest 10,010 (316) 9,694
Income taxes 3,207 (111) 3,096
Net income 6,324 (205) 6,119
Basic net earnings per share 0.72 (0.03) 0.69
Diluted net earnings per share 0.70 0.03) 0.67
3. NEW ACCOUNTING PRONOUNCEMENTS
In December 2004, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 123 (revised 2004),
Share-Based Payment ("SFAS 123R"), which amends FASB Statement Nos. 123 and
95 and supersedes Accounting Principles Board Opinion No. 25. SFAS 123R
requires all companies to measure compensation cost for all share-based
payments (including employee stock options) at fair value, and will be
effective for public companies for interim or annual periods beginning after
June 15, 2005. This new standard may be adopted in one of two ways - the
modified prospective transition method or the modified retrospective
transition method. The Company is currently evaluating the effect that the
accounting change will have on its financial position and results of
operations.
4. 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 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 ten periods ended:
Three Periods Ended Ten Periods Ended
------------------------------- ------------------------------
January 2, January 4, January 2, January 4,
2005 2004 2005 2004
------------ ----------- ----------- ----------
Net Income (in thousands)
As reported and restated $2,017 $1,848 $5,590 $6,119
Accretion of issuance costs
and preferred stock dividends 132 290
------------ ----------- ----------- ---------
Net income attributable to
common stockholders 1,885 1,848 5,300 6,119
Add: Stock-based compensation
cost included in net income 7
Less: Total stock-based
employee compensation
expense determined under
fair value based method
for all awards 103 129 356 426
---------------- ----------- ------------ ----------
Pro forma $1,782 $1,719 $4,951 $5,693
================ =========== ============ ==========
Basic earnings per share
As reported $ .21 $ .21 $ .59 $ .69
---------------- ---------- ------------ ----------
Pro forma $ .19 $ .20 $ .55 $ .64
=============== ========== ============= ==========
BENIHANA INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND TEN PERIODS ENDED JANUARY 2, 2005 AND JANUARY 4, 2004
(UNAUDITED) AS RESTATED
Diluted earnings per share
As reported $ .20 $ .20 $ .56 $ .67
----------------- -------------- ---------------- ---------
Pro forma $ .17 $ .19 $ .50 $ .63
================= =============== ================ =========
See Note 2 New Accounting Pronouncements which will be effective for the
Company for the second quarter of fiscal 2006.
5. INVENTORIES
Inventories consist of (in thousands):
January 2, March 28,
2005 2004
------------------ ------------------
Food and beverage $3,013 $2,090
Supplies 3,819 4,057
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$6,832 $6,147
================== ==================
6. EARNINGS PER SHARE
Basic earnings per common share is computed by dividing net income
attributable to common stockholders by the weighted average number of common
shares outstanding during each period. The diluted earnings per common share
computation includes dilutive common share equivalents issued under the
Company's various stock option plans and conversion rights of Series B
Preferred Stock.
The following data shows the amounts (in thousands) used in computing
earnings per share and the effect on income and the weighted average number
of shares of dilutive potential common stock:
Three Periods Ended Ten Periods Ended
-------------------------------- -------------------------------
January 2, January 4, January 2, January 4,
2005 2004 2005 2004
----------- ------------- ------------- -----------
Net income as reported and restated $2,017 $1,848 $5,590 $6,119
Less: Accretion of issuance costs and
preferred stock dividends 132 290
------------ ------------- -------------- -----------
Income for computation of basic
earnings per common share 1,885 1,848 5,300 6,119
Add: Accretion of issuance costs and
preferred stock dividends 132 290
-------------- -------------- -------------- ----------
Income for computation of diluted
earnings per common share $2,017 $1,848 $5,300 $6,119
============== ============= ============== ==========
BENIHANA INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND TEN PERIODS ENDED JANUARY 2, 2005 AND JANUARY 4, 2004
(UNAUDITED) AS RESTATED
Three Periods Ended Ten Periods Ended
--------------------------------- -----------------------------------
January 2, January 4, January 2, January 4,
2005 2004 2005 2004
------------ ------------ ------------ ------------
Weighted average number of
common shares used in basic
earnings per share 9,160 8,903 9,050 8,829
Effect of dilutive securities:
Stock options and warrants 380 263 495 269
Series B Preferred Stock 648 434
------------- ------------ ------------ -------------
Weighted average number of
common shares and dilutive
potential common stock used
in diluted earnings per share 10,188 9,166 9,979 9,098
=============== ============= ============= =============
During the ten periods ended January 2, 2005 and January 4, 2004, stock options
and warrants to purchase 1,278,000 and 1,537,000 shares, respectively, of common
stock were excluded from the calculation of diluted earnings per share since the
effect would be considered antidilutive.
7. RESTAURANT OPERATING EXPENSES
Restaurant operating expenses consist of the following (in thousands):
Three Periods Ended Ten Periods Ended
---------------------------------- ------------------------------------
January 2, January 4, January 2, January 4,
2005 2004 2005 2004
------------ ------------ ----------- -------------
Labor and related costs $17,604 $16,629 $57,747 $54,323
Restaurant supplies 999 931 3,168 2,961
Credit card discounts 908 801 2,916 2,615
Utilities 1,140 1,003 3,978 3,683
Occupancy costs 2,943 2,846 9,653 8,796
Depreciation and amortization 2,204 1,943 7,118 6,171
Other restaurant operating expenses 3,392 3,145 11,319 10,551
----------- ------------ ---------- -------------
Total restaurant operating expenses $29,190 $27,298 $95,899 $89,100
=========== ============ ========== =============
8. RELATED PARTY TRANSACTION
John E. Abdo, a director of the Company, is a director and Vice Chairman of
the Board of BFC Financial Corporation ("BFC") and is a significant
shareholder of BFC. On July 1, 2004, the Company received $10,000,000, net
of issuance costs of approximately $747,000, representing the funding of the
first tranche of its sale of $20,000,000 aggregate principal amount of
Series B Convertible Preferred Stock ("Series B Preferred Stock") from BFC.
The Company is committed to issue another 400,000 shares of the Series B
Preferred Stock from time to time during the two-year period commencing on
June 8, 2005 at such time or times as the Company may determine. The Series
B Preferred Stock is convertible into Common Stock of the Company at a
conversion price of $19.00 per share; subject to adjustment, carries a
dividend of 5.0% payable in cash or additional Series B Preferred Stock, and
votes on an "as if converted" basis together with the Company's Common Stock
on all matters put to a vote of the holders of Common Stock. In addition,
under certain circumstances, the approval of a majority of the Series B
Preferred Stock will be required for certain events outside the ordinary
course of business, principally acquisitions or disposition of assets having
a value in excess of 25% of the total consolidated assets of the Company.
BENIHANA INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND TEN PERIODS ENDED JANUARY 2, 2005 AND JANUARY 4, 2004
(UNAUDITED) AS RESTATED
The holders of a majority of the outstanding Series B Preferred Stock will
be entitled to nominate one director at all times and one additional
director in the event that dividends are not paid for two consecutive
quarters to the holders of the Series B Preferred Stock.
The Company is obligated to redeem the Series B Preferred Stock at its
original issue price on July 2, 2014, which date may be extended by the
holders of a majority of the then-outstanding shares of Series B Preferred
Stock to a date no later than July 2, 2024. The Company may pay the
redemption in cash or, at its option, in shares of Common Stock valued at
then-current market prices unless the aggregate market value of the
Company's Common Stock and any other common equity is below $75.0 million.
In addition, the Series B Preferred Stock may, at the Company's option, be
redeemed in cash at any time beginning three years from the date of issue
if the volume-weighted average price of the Common Stock exceeds $38.00 per
share for sixty consecutive trading days.
9. 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
multiple of the defined cash flow measure for the acquired business. As of
January 2, 2005, the price for both the put and call options at the purchase
dates is not determinable as a number of unknown future factors could,
either individually or in combination, cause material changes in the value
of the put and call options. The fair value of the put and call options was
insignificant as of January 2, 2005.
In connection with the acquisition of RA Sushi in 2002, the Company agreed
to pay a base purchase price that consisted of $11.4 million along with the
assumption of approximately $1.2 million of debt and other costs of $0.5
million. The purchase price also included additional contingent purchase
price consideration to the sellers of the restaurants. The contingent
amounts are payable upon the achievement of stipulated levels of operating
earnings and revenues by the acquired restaurants over a three year period
commencing with the end of fiscal 2004, and are not contingent on the
continued employment of the sellers of the restaurants. For fiscal 2004 the
contingent payment amounted to $652,000 and for fiscal 2005 the minimum
contingent payment accrued as of January 2, 2005, amounted to $348,000. The
Company accounts for the contingent payments as an addition to the purchase
price.
On July 2, 2004, Benihana of Tokyo, Inc. ("BOT"), which owns shares
representing approximately 43.6% of the votes represented by the Company's
outstanding Common Stock, commenced a lawsuit in the Court of Chancery of
the State of Delaware against the Company, members of the Company's Board
of Directors and BFC. The action, which purports to be brought both
individually and derivatively on behalf of the Company, seeks temporary and
permanent injunctive relief, monetary damages of $14.24 million for loss of
value of the Company's Common Stock and from $9.48 million to $10.84
million for loss of an alleged control premium, and recovery of costs and
expenses, in connection with the closing of the $20,000,000 sale of a new
class of Series B Preferred Stock of the Company to BFC, a diversified
holding company with operations in banking, real estate and other
industries. John E. Abdo, a director of the Company, serves as a Vice
Chairman, director, and is a significant shareholder of BFC. Among other
relief sought, the action seeks rescission of the sale of the Series B
Preferred Stock to BFC.
BENIHANA INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND TEN PERIODS ENDED JANUARY 2, 2005 AND JANUARY 4, 2004
(UNAUDITED) AS RESTATED
The action alleges that the director defendants breached their fiduciary
duties in approving the financing transaction with BFC by diluting the
voting power represented by BOT's Common Stock holdings in the Company. The
trial portion of the litigation was completed on November 15, 2004 and a
decision is expected in the first quarter of the Company's next fiscal
year. All of the defendants have filed motions to dismiss the complaint,
which have not yet been ruled upon by the court. The Company and its Board
of Directors believe that the BFC financing was and is in the best
interests of the Company and all of its shareholders, that there is no
merit to the action brought by BOT, and have and intend to continue to
vigorously defend and oppose the action. Based on the above discussion, the
Company has not recorded a reserve balance for this lawsuit, but legal
costs are being incurred to defend the Company and members of the Board of
Directors. Such legal costs amounted to $1,200,000 or $0.08 per diluted
share for the three periods and $1,800,000 or $0.12 per diluted share for
the ten periods ended January 2, 2005. There can be no assurance that an
adverse outcome of the litigation will not have a material adverse effect
on the Company and its financial position.
BENIHANA INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESTATEMENT
Following a February 2005 review of the accounting adjustments cited in
several recent Form 8-K filings by other restaurant companies, a letter by
the Chief Accountant of the Securities and Exchange Commission to the
Chairman of the Center for Public Company Audit Firms of the AICPA dated
February 7, 2005 and in consultation with our independent registered public
accounting firm, Deloitte & Touche LLP, we determined that the adjustments
in those filings and the subject matter of the SEC's Chief Accountant in
his letter relating to the treatment of lease accounting and leasehold
depreciation applied to us, and that it was appropriate to adjust certain
of our prior financial statements. As a result, we have restated our
consolidated financial statements for the fiscal years through 2004 and for
the third quarter of fiscal 2004 included herein. Previously, when
accounting for leases with renewal options, we recorded rent expense on a
straight-line basis over the initial non-cancelable lease term, with the
term commencing when actual rent payments began. We depreciate our
buildings, leasehold improvements and other long-lived assets on those
properties over a period that includes both the initial non-cancelable
lease term and all option periods provided for in the lease (or the useful
life of the assets if shorter). Also, in certain situations, leases provide
that rental payments are not made for a certain period that estimates, at
the beginning of the leases the time frame that our restaurants are under
construction, a period commonly referred to as a "rent holiday". We did not
consider these rent holiday periods on a straight-line basis together with
the non-cancelable period in calculating our rent expense. We previously
believed that these longstanding accounting treatments were appropriate
under generally accepted accounting principles. We now have restated our
financial statements to recognize rent expense on a straight-line basis
over the expected lease term, including cancelable option periods where
failure to exercise such options would result in an economic penalty and
including the period that commences when the underlying property is made
available to us for construction. These adjustments were not attributable
to any material non-compliance by us, as a result of any misconduct, with
any financial reporting requirements under the securities laws.
The cumulative effect of the Restatement through fiscal 2004 is an increase
in deferred rent liability of $3.6 million and a decrease in deferred
income tax liability of $1.4 million. As a result, retained earnings at the
end of fiscal 2004 decreased by $2.2 million. Rent expense for fiscal year
ended 2004 and for the three and ten periods ended January 4, 2004
increased by $0.4 million, and $0.1 million and $0.3, respectively. The
Restatement decreased reported diluted net earnings per share $0.01 and
$0.03 for the three and ten periods ended January 4, 2004, respectively.
The Restatement had no impact on our previously reported cash flows, sales
or same-restaurant sales or on our compliance with any covenant under our
credit facility or other debt instruments. The impact on earnings of this
change to our previous policy is not material to earnings for the current
fiscal year which ends on March 27, 2005.
The Company's independent registered public accounting firm has not
completed its review of these financial statements or the financial
statements for any other period and as a result, they may not agree with
the treatment reflected herein upon completion of thier review.
The consolidated financial statements included in this Form 10-Q have been
restated to reflect the adjustments described above. The Restatement will
be made in future amendments to our previously filed Form 10-K for the year
ended March 28, 2004 and for Forms 10-Q for the quarters ended July 18,
2004 and October 10, 2004.
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 expenses and
certain other pre-opening charges which are expensed as incurred.
BENIHANA INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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 6.6% in the current three periods and 7.4% in the current ten
periods when compared to the corresponding periods a year ago. Net income
increased 5.6% in the current three periods but decreased 11.6% in the current
ten periods when compared to the corresponding periods a year ago. Earnings per
diluted share decreased in the current three and ten periods when compared to
the corresponding periods a year ago. Revenues and net income increased in the
current three periods due to increased sales as a result of menu price and
patronage increases as well as favorable commodity costs offset by legal fees of
approximately $1,200,000 related to the Benihana of Tokyo, Inc. litigation.
Earnings per diluted share decreased in the three periods as a result of
increased restaurant operating profits offset by legal fees related to the
Benihana of Tokyo, Inc. litigation and an 11.1% increase in the number of common
stock and equivalents outstanding during the current three periods compared to
the equivalent period a year ago.
REVENUES
Three and ten periods ended January 2, 2005 compared to January 4, 2004 -- 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 Ten Periods Ended
------------------------------------------ ---------------------------------------
January 2, January 4, January 2, January 4,
2005 2004 2005 2004
--------------- ------------ ----------- ----------------
Restaurant sales $49,626 $46,607 $162,361 $151,074
Franchise fees and royalties 425 365 1,191 1,235
----------------- ------------ ------------- ----------------
Total revenues $50,051 $46,972 $163,552 $152,309
================== ============ ============== ================
Three Periods Ended Ten Periods Ended
---------------------------------- -----------------------------------------
January 2, January 4, January 2, January 4,
2005 2004 2005 2004
------------ ------------ ------------- -----------------
Amount of change in total
revenues from previous year $3,079 $3,150 $11,243 $9,370
------------ ------------ ------------- -----------------
ercentage of change from the
previous year 6.6% 7.2% 7.4% 6.6%
============= ============ ============= =================
Restaurant revenues increased for the three and ten periods ended January 2,
2005 compared to the corresponding periods a year ago. Newly opened restaurants
contributed $2.3 million for the current three periods and $10.1 million for the
ten periods as compared to the corresponding periods a year ago. Positive
comparable sales contributed $2.4 million in the current three periods and $6.6
million for the current ten periods when compared to the equivalent periods a
year ago. Such contributions were offset by temporary and permanent restaurant
closures of $1.7 million for the current three periods and $5.9 million for the
current ten periods when compared to the equivalent periods a year ago.
BENIHANA INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Comparable restaurant sales growth for restaurants opened longer than one year
was 5.3% in the current three periods and 4.5% for the current ten periods
compared to the equivalent periods a year ago. Comparable sales for the
teppanyaki restaurants increased 5.3% and 4.2%, comparable sales for the Haru
restaurants increased 1.7% and 4.1%, comparable sales for the RA Sushi
restaurants increased 11.2% and 11.2% and for the one Doraku restaurant
comparable sales increased 10.4% and 7.0% in the current three and ten periods,
respectively, when compared to the equivalent periods a year ago.
Restaurant sales were positively affected by a 2 to 3% menu price increase
instituted during the previous fiscal quarter.
COSTS AND EXPENSES
Three and ten periods ended January 2, 2005 compared to January 4, 2004 -- 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 ten periods.
Three Periods Ended Ten Periods Ended
------------------------------------ ----------------------------------------
January 2, January 4, January 2, January 4,
2005 2004 2005 2004
--------------- ------------- ------------- ----------------
COST AS A PERCENTAGE OF
RESTAURANT SALES:
Cost of food and beverage sales 23.6% 26.0% 25.0% 25.7%
Restaurant operating expenses 58.8% 58.6% 59.1% 59.0%
Restaurant opening costs 0.2% 1.6% 0.4% 1.2%
Marketing, general and
administrative expenses 11.5% 8.1% 10.5% 8.3%
Three Periods Ended Ten Periods Ended
----------------------------------- ----------------------------------------
January 2, January 4, January 2, January 4,
2005 2004 2005 2004
------------ ------------ ------------- -------------------
AMOUNT OF CHANGE FROM
PREVIOUS COMPARABLE PERIOD
(IN THOUSANDS):
Cost of food and beverage sales $ (401) $1,527 $ 1,727 $4,017
Restaurant operating expenses $1,892 $1,465 $ 6,799 $3,678
Restaurant opening costs $ (640) $ 665 $(1,125) $1,438
Marketing, general and
administrative expenses $1,929 $ (19) $ 4,497 $ 517
BENIHANA INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Three Periods Ended Ten Periods Ended
---------------------------------- --------------------------------------
January 2, January 4, January 2, January 4,
2005 2004 2005 2004
----------- ------------ ------------ ---------------
PERCENTAGE CHANGE FROM
PREVIOUS COMPARABLE PERIOD:
Cost of food and beverage sales (3.3%) 14.4% 4.4% 11.5%
Restaurant operating expenses 6.9% 5.7% 7.6% 4.3%
Restaurant opening costs (84.9%) 746.1% (62.8%) 406.8%
Marketing, general and
administrative expenses 50.9% (0.5%) 36.0% 4.3%
The cost of food and beverage sales decreased in the current three periods and
increased in the current ten periods in total dollar amount and decreased when
expressed as a percentage of sales in the current three and ten periods when
compared to the corresponding periods in the prior year. Costs of food and
beverage sales, which are generally variable with sales, directly decreased when
expressed as a percentage of sales with changes in revenues for the three
periods and increased for the ten periods ended January 2, 2005 as compared to
the equivalent periods ended January 4, 2004. The decrease when expressed as a
percentage of sales in the current three periods resulted from the
aforementioned menu price increase coupled with relatively stable commodity
prices.
Restaurant operating expenses increased in both absolute amount and when
expressed as a percentage of sales when compared to the corresponding periods a
year ago. The increase in both absolute amount and when expressed as a
percentage of sales was due to increased occupancy costs and depreciation and
amortization associated with the newly opened teppanyaki and RA Sushi
restaurants and from capital expenditures made to existing restaurants which
also increased depreciation and amortization in the current three and ten
periods when compared to the equivalent periods.
Restaurant opening costs decreased in the current three and ten periods ended
January 2, 2005 compared to the prior year corresponding periods. The decrease
in the current three and ten periods when compared to the equivalent periods a
year ago is attributable to fewer restaurants in the development stage when
pre-opening costs are incurred.
Marketing, general and administrative costs increased in absolute amount and
when expressed as a percentage of sales in the current three and ten periods
when compared to the equivalent periods a year ago. The increase is due to
increased labor and related costs and professional fees. The increase in labor
and related costs is attributable to additional corporate personnel hired to
accommodate the Company's growth plans. The increase in professional fees is
attributable to legal fees related to the Benihana of Tokyo, Inc. litigation and
to professional fees relating to Sarbanes-Oxley Section 404 compliance.
Interest expense decreased in the current three and ten periods when compared to
the corresponding periods of the prior year. The decrease in the current three
and ten periods was attributable to lower average borrowings outstanding in the
current year compared to the equivalent periods a year ago.
Our effective income tax rate increased in the current three periods to 34.5%
from 32.5% and in the current ten periods to 33.3% from 32.0%.
BENIHANA INC. AND SUBSIDIARIES
ITEM 2. 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 and others. 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
January 2, 2005, we had $14,000,000 available for borrowing. We also had a
$1,000,000 letter of credit outstanding against such facility in connection with
our workers compensation insurance program. At January 2, 2005, we had
$10,000,000 outstanding under the term loan which is payable in quarterly
installments of $833,333 thereafter until the term loan matures in December
2007. The interest rate at January 2, 2005 of both the line of credit and the
term loan was 3.56%. We have the option to pay interest at Wachovia's prime rate
plus 1% or at libor 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 limit 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):
Ten Periods Ended
-----------------------------
January 2, January 4,
2005 2004
----------- -----------
Cash provided by operations $ 17,231 $ 14,588
Cash (used in) investing activities (16,090) (16,307)
Cash (used in) provided by financing activities (1,990) 1,691
----------- -----------
(Decrease) in cash and cash equivalents $ (849) $ (28)
=========== ===========
See Financing Activities for a description of the Company's Series B Preferred
Stock facility.
We have announced a major renovation program to approximately 20 of our
teppanyaki restaurants which began in the third quarter of fiscal 2005. We
anticipate that the total cost of these renovations will range from $25 to $30
million over a three-year period. Our other future capital requirements depend
on numerous factors, including market acceptance of our products, the timing and
rate of expansion of our business, acquisitions, and other factors. We have
increased our expenditures consistent with the development of the number of
restaurants we build and we anticipate that our expenditures will continue to
increase in the foreseeable future. We believe that the cash from operations and
the funds available under our term loan and line of credit and future issuances
of Series B Preferred Stock pursuant to our agreement with BFC Financial
Corporation will provide sufficient capital to fund our operations, restaurant
renovation programs and restaurant expansion for at least the next twelve
months.
BENIHANA INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Operating Activities
Cash provided by operations increased during the ten periods ended January 2,
2005 compared to the equivalent period in the previous year. The increase
resulted mainly from the change in cash provided by operating assets and
liabilities in the current ten periods when compared to the comparable period a
year ago.
Investing Activities
Expenditures for property and equipment decreased during the ten periods ended
January 2, 2005 from the prior comparable periods. The decrease is primarily
attributable to decreased capital expenditures for new restaurants in the
current ten periods when compared to the equivalent periods a year ago.
Financing Activities
On July 1, 2004, the Company issued 400,000 shares of Series B Preferred Stock
at $25.00 per share which resulted in net proceeds of $9.3 million. The Company
is committed to issue another 400,000 shares of the Series B Preferred Stock
from time to time during the two-year period commencing on June 8, 2005 at such
time or times as the Company may determine. The Series B Preferred Stock is
convertible into Common Stock of the Company at a conversion price of $19.00 per
share, subject to adjustment, carries a dividend of 5.0% payable in cash or
additional Series B Preferred Stock and votes on an "as if converted" basis
together with the Company's Common Stock on all matters put to a vote of the
holders of Common Stock. In addition, under certain circumstances, the approval
of a majority of the Series B Preferred Stock will be required for certain
events outside the ordinary course of business, principally acquisitions or
dispositions of assets having a value in excess of 25% of the total consolidated
assets of the Company.
The holders of a majority of the outstanding Series B Preferred Stock are
entitled to nominate one director at all times and one additional director in
the event that dividends are not paid for two consecutive quarters to the
holders of the Series B Preferred Stock.
The Company is obligated to redeem the Series B Preferred Stock at its original
issue price on July 2, 2014, which date may be extended by the holders of a
majority of the then-outstanding shares of Series B Preferred Stock to a date no
later than July 2, 2024. The Company may pay the redemption in cash or, at its
option, in shares of Common Stock valued at then-current market prices unless
the aggregate market value of the Company's Common Stock and any other common
equity is below $75.0 million. In addition, the Series B Preferred Stock may, at
the Company's option, be redeemed in cash at any time beginning three years from
the date of issue if the volume-weighted average price of the Common Stock
exceeds $38.00 per share for sixty consecutive trading days.
During the current ten periods there were stock option exercises and warrants
with cash proceeds to the Company of $612,000 as compared to $1,890,000 in the
comparable period a year ago. Our total indebtedness decreased by $11,723,000
during the ten periods ended January 2, 2005. We paid down $3,000,000 of the
term loan, $8,500,000 of the revolving line of credit and paid $223,000 under
leases that are considered to be capital in nature.
Critical Accounting Policies
Our 2004 Annual Report on Form 10-K/A contains a description of the critical
accounting policies of the Company, including property and equipment
capitalization, impairment testing of long-lived assets and goodwill, estimated
liabilities for employee health insurance and workers' compensation, and our
estimation of certain components of our provision for income taxes. For the
three and ten periods ended January 2, 2005, there were no material changes to
these policies.
BENIHANA INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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 the outcome of pending litigation 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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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 January 2, 2005.
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 have historically not purchased 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
The Company has a 52/53-week fiscal year and divides the year into 13 periods.
The Company's first fiscal quarter consists of 16 weeks, and the remaining three
four-week quarters are 12 weeks each, except in the event of a 53-week year with
the final quarter composed of 13 weeks. Because of the differences in length of
these accounting periods, results of operations between the first quarter and
the later quarters of a fiscal year are not comparable.
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
ITEM 4. 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,
notwithstanding the restatement for the classification of the Company's bank
debt from long-term debt to current liabilities identified in our 2004 Annual
Report on Form 10-K/A, 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. Subsequent to the period covered by this
report, and following a February 2005 review of the accounting adjustments cited
in several recent Form 8-K filings by other restaurant companies, a letter by
the Chief Accountant of the Securities and Exchange Commission to the Chairman
of the center for Public Company Audit Firms of the AICPA, and in consultation
with our independent registered public accounting firm, Deloitte & Touche LLP,
we determined that one of the adjustments in those filings relating to the
treatment of lease accounting and leasehold depreciation applied to us, and that
it was appropriate to adjust certain of our prior financial statements. As a
result, on February 16, 2005, we concluded that our previously-filed financial
statements through 2004 and for the third quarter of fiscal 2004 should be
restated. The Restatement is further discussed in the section entitled
"Restatement" in Management's Discussion and Analysis of Financial Condition
and Results of Operations included in Item 2 of this Form 10-Q and in Note 2,
"Restatement of Financial Statements' under Notes to Consolidated Financial
Statements included in Item 1, "Financial Statements" of this Form 10-Q. In
connection with the Restatement under the supervision and with the participation
of our management, including our Chief Executive Officer and our Chief Financial
Officer, we re-evaluated the effectiveness of the design and operation of our
disclosure controls and procedures as of February 16, 2005. 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
On July 2, 2004, BOT, which owns shares representing approximately 43.6% of the
Company's outstanding Common Stock, commenced a lawsuit in the Court of Chancery
of the State of Delaware against the Company, members of the Company's Board of
Directors and BFC Financial Corporation. The action, which purports to be
brought both individually and derivatively on behalf of the Company, seeks
temporary and permanent injunctive relief, and monetary damages of $14.24
million for loss of value of the Company's Common Stock and from $9.48 million
to $10.84 million for loss of an alleged control premium, and recovery of costs
and expenses, in connection with the closing of the $20,000,000 sale of a new
class of Series B Preferred Stock of the Company to BFC Financial Corporation, a
diversified holding company with operations in banking, real estate and other
industries. John E. Abdo, a director of the Company, serves as a Vice Chairman,
director, and is a significant shareholder of BFC. Among other relief sought,
the action seeks rescission of the sale of the Series B Preferred Stock to BFC.
The action alleges that the director defendants breached their fiduciary duties
in approving the financing transaction with BFC by diluting the voting power
represented by BOT's Common Stock holdings in the Company. The trial portion of
the litigation was completed on November 15, 2004 and a decision is expected in
the first quarter of the Company's next fiscal year. All of the defendants have
filed motions to dismiss the complaint, which have not yet been ruled upon by
the court. The Company and its Board of Directors believe that the BFC financing
was and is in the best interests of the Company and all of its shareholders,
that there is no merit to the action brought by BOT, and have and intend to
continue to vigorously defend and oppose the action. There can be no assurance
that an adverse outcome of the litigation will not have a material adverse
effect on the Company and its financial condition.
Item 6. Exhibits and Reports on Form 8-K
(a) On January 12, 2005 the Company filed a report on Form
8-K announcing its third quarter sales and comparable
sales results for the fiscal quarter ended January 2,
2005.
(a)(i) On January 3, 2005 the Company filed a report on Form
8-K disclosing a letter received from the staff of
NASDAQ advising the Company that it had regained
compliance with the NASDAQ Marketplace Rule 4350 (h).
(a)(ii) On November 23, 2004 the Company filed a report on
Form 8-K disclosing the restatement of the condensed
consolidated balance sheets at March 28, 2004 and July
18, 2004.
(b) Exhibit 10.1 - Amendment Number 2 to Credit Agreement
dated November 19, 2004, by and among Benihana Inc.,
the Guarantors (as defined therein), and Wachovia
Bank, National Association, as agent for the Lenders.
(b)(i) Exhibit 10.2 - Amendment Number 3 to Credit Agreement
dated November 23, 2004, by and among Benihana Inc.,
the Guarantors (as defined therein), and Wachovia
Bank, National Association, as agent for the Lenders.
(b)(ii) Exhibit 10.3 - Amendment Number 4 to Credit Agreement
dated January 20, 2005, by and among Benihana Inc.,
the Guarantors (as defined therein), and Wachovia
Bank, National Association, as agent for the Lenders.
(b)(iii) Exhibit 31.1 - Chief Executive Officer's certification
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
BENIHANA INC. AND SUBSIDIARIES
PART II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(b)(iv) Exhibit 31.2 - Chief Financial Officer's certification
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
(b)(v) Exhibit 32.1 - Chief Executive Officer's certification
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
(b)(vi) 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: February 15, 2005 /s/ Joel A. Schwartz
- ------------------------- ------------------------------------
Joel A. Schwartz
President and
Chief Executive Officer
and Director
Exhibit 10.1
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (the "Second Amendment")
dated as of November 19, 2004, is to that Credit Agreement dated as of December
3, 2002, as amended by that certain First Amendment to Credit Agreement dated as
of July 1, 2004 (as may be subsequently amended and modified from time to time,
the "Credit Agreement"; terms used but not otherwise defined herein shall have
the meanings provided in the Credit Agreement), by and among BENIHANA INC., a
Delaware corporation (the "Borrower"), the Guarantors identified therein, the
several banks and other financial institutions identified therein (the
"Lenders") and WACHOVIA BANK, NATIONAL ASSOCIATION, as agent for the Lenders
thereunder (in such capacity, the "Agent").
W I T N E S S E T H:
WHEREAS, the Lenders have established a secured credit facility for
the benefit of the Borrower pursuant to the terms of the Credit Agreement;
WHEREAS, the Borrower wishes to amend the Credit Agreement to modify
certain provisions contained therein;
WHEREAS, the Required Lenders have agreed to the requested amendment
on the terms and conditions hereinafter set forth;
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
A. The Credit Agreement is amended in the following respects:
Under Section 7.11(c) Consolidated EBITDA, the amount of $31,000,000
for fiscal year 2005 and $36,500,000 for fiscal year 2006 are hereby
deleted and replaced with the following:
Fiscal year 2005: $22,000,000 commencing at the end of the first
quarter of fiscal year 2005, increasing by $250,000 a quarter through October
30, 2005
The existing requirements for the remainder of Fiscal year 2006 and
future periods will remain unchanged.
B. This Second Amendment shall be and become effective as of the date hereof
when the Agent shall have received counterparts of this Second Amendment, which
collectively shall have been duly executed by the Credit Parties, the Lenders
and the Agent.
C. Except as modified hereby, all of the terms and provisions of the
Credit Agreement (and Exhibits) remain in full force and effect.
D. Each Guarantor hereby reaffirms its obligations under Section 4 of
the Credit Agreement as of the date hereof and agrees that nothing contained
herein shall operate to relieve any such Guarantor of its obligations
thereunder.
E. The Credit Parties hereby represent and warrant that:
(i) any and all representations and warranties made by the
Credit Parties and contained in the Credit Agreement (other than
those which expressly relate to a prior period) are true and correct
in all material respects as of the date of this Second Amendment; and
(ii) No Default or Event of Default currently exists and is
continuing under the Credit Agreement as of the date of this Second
Amendment.
F. This Second Amendment and the Credit Agreement, as amended hereby,
shall be deemed to be contracts made under, and for all purposes shall be
construed in accordance with the laws of the State of North Carolina.
G. This Second Amendment may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original and it shall not be necessary in making proof of this Second Amendment
to produce or account for more than one such counterpart.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Second Amendment to be duly executed and delivered as of the
date and year first above written.
BORROWER: BENIHANA INC.
- -------------------------
a Delaware corporation
By:
-------------------------------------
Joel A. Schwartz
President
SUBSIDIARY
GUARANTORS:
1501 BROADWAY RESTAURANT CORP.
a New York corporation
BENIHANA BETHESDA CORP.,
a New York corporation
BENIHANA BRICKELL STATION CORP.,
a Delaware corporation
BENIHANA CARLSBAD CORP.,
a Delaware corporation
BENIHANA ENCINO CORP.,
a California corporation
BENIHANA INTERNATIONAL CORP.,
a Delaware corporation
BENIHANA LINCOLN ROAD CORP.,
a Delaware corporation
BENIHANA LOMBARD CORP.,
a Illinois corporation
BENIHANA MARINA CORP.,
a California corporation
BENIHANA MONTEREY CORPORATION,
a Delaware corporation
BENIHANA NATIONAL CORP.,
a Delaware corporation
BENIHANA NATIONAL OF FLORIDA CORP.,
a Delaware corporation
BENIHANA NEW YORK CORP.,
a Delaware corporation
BENIHANA ONTARIO CORP.,
a Delaware corporation
BENIHANA ORLANDO CORP.,
a Delaware corporation
BENIHANA OF PUENTE HILLS CORP.,
a Delaware corporation
BENIHANA SCHAUMBURG CORP.,
a Delaware corporation
[signature pages continue]
RA SUSHI CHICAGO CORP.,
a Delaware corporation
BENIHANA SUNRISE CORP.,
a Delaware corporation
BENIHANA WESTBURY CORP.
a Delaware corporation
BENIHANA WHEELING CORP.
a Delaware corporation
BIG SPLASH KENDALL CORP.,
a Delaware corporation
HARU AMSTERDAM AVENUE CORP.
a New York corporation
HARU FOOD CORP.
a New York corporation
HARU HOLDING CORP.
a Delaware corporation
HARU PARK AVENUE CORP.,
a Delaware corporation
HARU THIRD AVENUE CORP.
a New York corporation
HARU TOO, INC.,
a New York corporation
MAXWELL INTERNATIONAL INC.,
a Delaware corporation
NOODLE TIME, INC.,
a Florida corporation
RA AHWATUKEE RESTAURANT CORP.,
a Delaware corporation
RA KIERLAND RESTAURANT CORP.,
a Delaware corporation
RA SCOTTDALE CORP.,
a Delaware corporation
RA TEMPE CORP.,
a Delaware corporation
RUDY'S RESTAURANT GROUP, INC.,
a Nevada corporation
TEPPAN RESTAURANTS LTD.,
a California corporation
THE SAMURAI, INC.,
a New York corporation
By:
-----------------------------------------
Name: Joel A. Schwartz
Title: President of each of the foregoing
Subsidiary Guarantors
[signature pages continue]
BENIHANA LAS COLINAS CORP.,
a Texas corporation
BENIHANA OF TEXAS, INC.,
a Texas corporation
BENIHANA WOODLANDS CORP.,
a Texas corporation
HARU PHILADELPHIA CORP.,
a Delaware corporation
RA SUSHI LAS VEGAS CORP.,
a Nevada corporation
By:
-----------------------------------------
Name: Joel A. Schwartz
Title: Authorized Agent of each of the
foregoing Subsidiary Guarantors
AGENT: WACHOVIA BANK,
- -----------------
NATIONAL ASSOCIATION,
as Agent and in its capacity as a Lender
By:
----------------------------------------
Name:
----------------------------------------
Title:
----------------------------------------
Exhibit 10.2
THIRD AMENDMENT TO CREDIT AGREEMENT
THIS THIRD AMENDMENT TO CREDIT AGREEMENT (the "Third Amendment")
dated as of November 23, 2004, is to that Credit Agreement dated as of December
3, 2002, as amended by that certain First Amendment to Credit Agreement dated as
of July 1, 2004 and that certain Second Amendment to Credit Agreement dated as
of November 19, 2004 (as may be subsequently amended and modified from time to
time, the "Credit Agreement"; terms used but not otherwise defined herein shall
have the meanings provided in the Credit Agreement), by and among BENIHANA INC.,
a Delaware corporation (the "Borrower"), the Guarantors identified therein, the
several banks and other financial institutions identified therein (the
"Lenders") and WACHOVIA BANK, NATIONAL ASSOCIATION, as agent for the Lenders
thereunder (in such capacity, the "Agent").
W I T N E S S E T H:
WHEREAS, the Lenders have established a secured credit facility for
the benefit of the Borrower pursuant to the terms of the Credit Agreement;
WHEREAS, the Borrower wishes to amend the Credit Agreement to modify
certain provisions contained therein;
WHEREAS, the Required Lenders have agreed to the requested amendment
on the terms and conditions hereinafter set forth;
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
A. The Credit Agreement is amended in the following respects:
(i) The definition of "Funded Indebtedness" in Section 1.1 of the
Credit Agreement is hereby amended deleting clause (g) thereof and replacing it
with a new clause (g) to read as follows:
(g) (i) all preferred Capital Stock issued by such Person
and required by the terms thereof to be redeemed in cash prior to or
within ninety (90) days after the Maturity Date, or for which
mandatory sinking fund payments are due, (ii) all accrued but unpaid
dividends, and (iii) all other items which in accordance with GAAP
would be listed as liabilities on the balance sheet of such Person,
(ii) The definition of "Indebtedness" in Section 1.1 of the Credit
Agreement is hereby amended deleting clause (l) thereof and replacing it with a
new clause (l) to read as follows:
(l) (i) all preferred Capital Stock issued by such Person
and required by the terms thereof to be redeemed in cash prior to or
within ninety (90) days after the Maturity Date, or for which
mandatory sinking fund payments are due, (ii) all accrued but unpaid
dividends, and (iii) all other items which in accordance with GAAP
would be listed as liabilities on the balance sheet of such Person,,
(iii) A new Section 8.14 is hereby added to the Credit Agreement
in the appropriate numerical order to read as follows:
Section 8.14 Stock Purchase Agreement.
The Borrower shall not, nor shall it permit any
Consolidated Party to, redeem the Permitted Preferred Stock for cash
on an Early Redemption Date (as defined in the Certificate of
Designations).
B. This Third Amendment shall be and become effective as of the date
hereof when the Agent shall have received counterparts of this Third Amendment
which collectively shall have been duly executed by the Credit Parties, the
Lenders and the Agent.
C. Except as modified hereby, all of the terms and provisions of the
Credit Agreement (and Exhibits) remain in full force and effect.
D. Each Guarantor hereby reaffirms its obligations under Section 4 of
the Credit Agreement as of the date hereof and agrees that nothing contained
herein shall operate to relieve any such Guarantor of its obligations
thereunder.
E. The Credit Parties hereby represent and warrant that:
(i) any and all representations and warranties made by the
Credit Parties and contained in the Credit Agreement (other than
those which expressly relate to a prior period) are true and correct
in all material respects as of the date of this Third Amendment; and
(ii) No Default or Event of Default currently exists and is
continuing under the Credit Agreement as of the date of this Third
Amendment.
F. This Third Amendment and the Credit Agreement, as amended hereby,
shall be deemed to be contracts made under, and for all purposes shall be
construed in accordance with the laws of the State of North Carolina.
G. This Third Amendment may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original and it shall not be necessary in making proof of this Third Amendment
to produce or account for more than one such counterpart.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Third Amendment to be duly executed and delivered as of the
date and year first above written.
BORROWER: BENIHANA INC.
- --------------------------
a Delaware corporation
By:
--------------------------------------
Joel A. Schwartz
President
SUBSIDIARY
GUARANTORS:
1501 BROADWAY RESTAURANT CORP.
a New York corporation
BENIHANA BETHESDA CORP.,
a New York corporation
BENIHANA BRICKELL STATION CORP.,
a Delaware corporation
BENIHANA CARLSBAD CORP.,
a Delaware corporation
BENIHANA ENCINO CORP.,
a California corporation
BENIHANA INTERNATIONAL CORP.,
a Delaware corporation
BENIHANA LINCOLN ROAD CORP.,
a Delaware corporation
BENIHANA LOMBARD CORP.,
a Illinois corporation
BENIHANA MARINA CORP.,
a California corporation
BENIHANA MONTEREY CORPORATION,
a Delaware corporation
BENIHANA NATIONAL CORP.,
a Delaware corporation
BENIHANA NATIONAL OF FLORIDA CORP.,
a Delaware corporation
BENIHANA NEW YORK CORP.,
a Delaware corporation
BENIHANA ONTARIO CORP.,
a Delaware corporation
BENIHANA ORLANDO CORP.,
a Delaware corporation
BENIHANA OF PUENTE HILLS CORP.,
a Delaware corporation
BENIHANA SCHAUMBURG CORP.,
a Delaware corporation
[signature pages continue]
RA SUSHI CHICAGO CORP.,
a Delaware corporation
BENIHANA SUNRISE CORP.,
a Delaware corporation
BENIHANA WESTBURY CORP.
a Delaware corporation
BENIHANA WHEELING CORP.
a Delaware corporation
BIG SPLASH KENDALL CORP.,
a Delaware corporation
HARU AMSTERDAM AVENUE CORP.
a New York corporation
HARU FOOD CORP.
a New York corporation
HARU HOLDING CORP.
a Delaware corporation
HARU PARK AVENUE CORP.,
a Delaware corporation
HARU THIRD AVENUE CORP.
a New York corporation
HARU TOO, INC.,
a New York corporation
MAXWELL INTERNATIONAL INC.,
a Delaware corporation
NOODLE TIME, INC.,
a Florida corporation
RA AHWATUKEE RESTAURANT CORP.,
a Delaware corporation
RA KIERLAND RESTAURANT CORP.,
a Delaware corporation
RA SCOTTDALE CORP.,
a Delaware corporation
RA TEMPE CORP.,
a Delaware corporation
RUDY'S RESTAURANT GROUP, INC.,
a Nevada corporation
TEPPAN RESTAURANTS LTD.,
a California corporation
THE SAMURAI, INC.,
a New York corporation
By:
----------------------------------------
Name: Joel A. Schwartz
Title: President of each of the foregoing
Subsidiary Guarantors
[signature pages continue]
BENIHANA LAS COLINAS CORP.,
a Texas corporation
BENIHANA OF TEXAS, INC.,
a Texas corporation
BENIHANA WOODLANDS CORP.,
a Texas corporation
HARU PHILADELPHIA CORP.,
a Delaware corporation
RA SUSHI LAS VEGAS CORP.,
a Nevada corporation
By:
----------------------------------------
Name: Joel A. Schwartz
Title: Authorized Agent of each of the
foregoing Subsidiary Guarantors
AGENT: WACHOVIA BANK,
- -----------------
NATIONAL ASSOCIATION,
as Agent and in its capacity as a Lender
By:
----------------------------------------
Name:
----------------------------------------
Title:
----------------------------------------
Exhibit 10.3
FOURTH AMENDMENT TO CREDIT AGREEMENT
THIS FOURTH AMENDMENT TO CREDIT AGREEMENT (the "Fourth Amendment")
dated as of January 20, 2005, is to that Credit Agreement dated as of December
3, 2002, as amended by that certain First Amendment to Credit Agreement dated as
of July 1, 2004, that certain Second Amendment to Credit Agreement dated as of
November 19, 2004 and that certain Third Amendment to Credit Agreement dated as
of November 23, 2004 (as may be subsequently amended and modified from time to
time, the "Credit Agreement"; terms used but not otherwise defined herein shall
have the meanings provided in the Credit Agreement), by and among BENIHANA INC.,
a Delaware corporation (the "Borrower"), the Guarantors identified therein, the
several banks and other financial institutions identified therein (the
"Lenders") and WACHOVIA BANK, NATIONAL ASSOCIATION, as agent for the Lenders
thereunder (in such capacity, the "Agent").
W I T N E S S E T H:
WHEREAS, the Lenders have established a secured credit facility for
the benefit of the Borrower pursuant to the terms of the Credit Agreement;
WHEREAS, the Borrower wishes to amend the Credit Agreement to modify
certain provisions contained therein;
WHEREAS, the Required Lenders have agreed to the requested amendment
on the terms and conditions hereinafter set forth;
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
A. The Credit Agreement is amended by amending and restating
Sections 7.11(c) and (d) in their entirety to read respectively as follows:
(c) Consolidated EBITDA. Consolidated EBITDA at the end of
each fiscal quarter of the Borrower for the immediately preceding
four consecutive fiscal quarters as shown on the financial statements
of the Borrower delivered pursuant to Section 7.1(b) for each date of
determination occurring during each of the periods listed below shall
not be less than:
Period Amount
------ ------
Fiscal year 2005 $22,750,000
Fiscal year 2006 $23,750,000
Fiscal year 2007 $30,000,000
Fiscal year 2008 $30,000,000
(d) Capital Expenditures. Consolidated Capital Expenditures
for each fiscal year shall not exceed the amounts set forth below for
the periods set forth below:
Period Amount
------ ------
Fiscal year 2005 $31,000,000
Fiscal year 2006 $31,500,000
Fiscal year 2007 $38,500,000
Fiscal year 2008 $38,500,000
B. This Fourth Amendment shall be and become effective as of the date
hereof when the Agent shall have received (i) counterparts of this Fourth
Amendment which collectively shall have been duly executed by the Credit
Parties, the Lenders and the Agent and (ii) an amendment fee in the amount of
$10,000.
C. Except as modified hereby, all of the terms and provisions of the
Credit Agreement (and Exhibits) remain in full force and effect.
D. Each Guarantor hereby reaffirms its obligations under Section 4 of
the Credit Agreement as of the date hereof and agrees that nothing contained
herein shall operate to relieve any such Guarantor of its obligations
thereunder.
E. The Credit Parties hereby represent and warrant that:
(i) any and all representations and warranties made by the
Credit Parties and contained in the Credit Agreement (other than
those which expressly relate to a prior period) are true and correct
in all material respects as of the date of this Fourth Amendment; and
(ii) No Default or Event of Default currently exists and is
continuing under the Credit Agreement as of the date of this Fourth
Amendment.
F. This Fourth Amendment and the Credit Agreement, as amended hereby,
shall be deemed to be contracts made under, and for all purposes shall be
construed in accordance with the laws of the State of North Carolina.
G. This Fourth Amendment may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original and it shall not be necessary in making proof of this Fourth Amendment
to produce or account for more than one such counterpart.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Fourth Amendment to be duly executed and delivered as of the
date and year first above written.
BORROWER: BENIHANA INC.
- -------------------------
a Delaware corporation
By:
------------------------------------------
Joel A. Schwartz
President
SUBSIDIARY
GUARANTORS:
1501 BROADWAY RESTAURANT CORP.
a New York corporation
BENIHANA BETHESDA CORP.,
a New York corporation
BENIHANA BRICKELL STATION CORP.,
a Delaware corporation
BENIHANA CARLSBAD CORP.,
a Delaware corporation
BENIHANA ENCINO CORP.,
a California corporation
BENIHANA INTERNATIONAL CORP.,
a Delaware corporation
BENIHANA LINCOLN ROAD CORP.,
a Delaware corporation
BENIHANA LOMBARD CORP.,
a Illinois corporation
BENIHANA MARINA CORP.,
a California corporation
BENIHANA MONTEREY CORPORATION,
a Delaware corporation
BENIHANA NATIONAL CORP.,
a Delaware corporation
BENIHANA NATIONAL OF FLORIDA CORP.,
a Delaware corporation
BENIHANA NEW YORK CORP.,
a Delaware corporation
BENIHANA ONTARIO CORP.,
a Delaware corporation
BENIHANA ORLANDO CORP.,
a Delaware corporation
BENIHANA OF PUENTE HILLS CORP.,
a Delaware corporation
BENIHANA SCHAUMBURG CORP.,
a Delaware corporation
[signature pages continue]
RA SUSHI CHICAGO CORP.,
a Delaware corporation
BENIHANA SUNRISE CORP.,
a Delaware corporation
BENIHANA WESTBURY CORP.
a Delaware corporation
BENIHANA WHEELING CORP.
a Delaware corporation
BIG SPLASH KENDALL CORP.,
a Delaware corporation
HARU AMSTERDAM AVENUE CORP.
a New York corporation
HARU FOOD CORP.
a New York corporation
HARU HOLDING CORP.
a Delaware corporation
HARU PARK AVENUE CORP.,
a Delaware corporation
HARU THIRD AVENUE CORP.
a New York corporation
HARU TOO, INC.,
a New York corporation
MAXWELL INTERNATIONAL INC.,
a Delaware corporation
NOODLE TIME, INC.,
a Florida corporation
RA AHWATUKEE RESTAURANT CORP.,
a Delaware corporation
RA KIERLAND RESTAURANT CORP.,
a Delaware corporation
RA SCOTTDALE CORP.,
a Delaware corporation
RA TEMPE CORP.,
a Delaware corporation
RUDY'S RESTAURANT GROUP, INC.,
a Nevada corporation
TEPPAN RESTAURANTS LTD.,
a California corporation
THE SAMURAI, INC.,
a New York corporation
By:
-----------------------------------------
Name: Joel A. Schwartz
Title: President of each of the foregoing
Subsidiary Guarantors
[signature pages continue]
BENIHANA LAS COLINAS CORP.,
a Texas corporation
BENIHANA OF TEXAS, INC.,
a Texas corporation
BENIHANA WOODLANDS CORP.,
a Texas corporation
HARU PHILADELPHIA CORP.,
a Delaware corporation
RA SUSHI LAS VEGAS CORP.,
a Nevada corporation
By:
----------------------------------------
Name: Joel A. Schwartz
Title: Authorized Agent of each of the
foregoing Subsidiary Guarantors
AGENT: WACHOVIA BANK,
- -----------------
NATIONAL ASSOCIATION,
as Agent and in its capacity as a Lender
By:
----------------------------------------
Name:
----------------------------------------
Title:
----------------------------------------
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: February 15, 2005 /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: February 15, 2005 /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 January 2, 2005 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
February 15, 2005
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 January 2, 2005 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
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Michael R. Burris
Senior Vice President -
Finance and Chief Financial
Officer
February 15, 2005