UNITED STATES
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 quarterly period ended March 28, 2009
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-6836
FLANIGAN'S ENTERPRISES, INC.
----------------------------
(Exact name of registrant as specified in its charter)
Florida 59-0877638
----------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
5059 N.E. 18th Avenue, Fort Lauderdale, Florida 33334
----------------------------------------------- -----
Address of principal executive offices) Zip Code
(954) 377-1961
--------------
(Registrant's telephone number, including area code)
--------------------------------------------------------------------------------
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 has submitted electronically and
posted on its Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes |X| No |_|
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer", "accelerated filer" and "smaller
reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer |_| Accelerated filer |_| Non-accelerated filer |_|
Smaller reporting company |X|
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes |_| No |X|
On May 12, 2009, 1,863,258 shares of Common Stock, $0.10 par value per share,
were outstanding.
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
---------------------------------------------
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION..................................................1
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)..........1
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME.................2
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS.......................4
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS.............6
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS........8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.......................................14
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK......26
ITEM 4T. CONTROLS AND PROCEDURES.........................................26
PART II. OTHER INFORMATION....................................................26
ITEM 1. LEGAL PROCEEDINGS...............................................26
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.....27
ITEM 6. EXHIBITS........................................................28
As used in this Quarterly Report on Form 10-Q, the terms "we," "us," "our," the
"Company" and "Flanigan's" mean Flanigan's Enterprises, Inc. and its
subsidiaries (unless the context indicates a different meaning).
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands Except Per Share Amounts)
Thirteen Weeks Ended Twenty Six Weeks Ended
March 28, March 29, March 28, March 29,
2009 2008 2009 2008
-------- -------- -------- --------
REVENUES:
Restaurant food sales $ 11,198 $ 10,785 $ 21,367 $ 20,532
Restaurant bar sales 2,668 2,481 5,072 4,771
Package store sales 3,515 3,400 6,863 6,831
Franchise related revenues 282 211 544 542
Owner's fee 45 49 89 115
Other operating income 49 57 75 96
-------- -------- -------- --------
17,757 16,983 34,010 32,887
-------- -------- -------- --------
COSTS AND EXPENSES:
Cost of merchandise sold:
Restaurant and lounges 4,656 4,403 8,888 8,473
Package goods 2,406 2,396 4,772 4,861
Payroll and related costs 5,060 4,910 9,815 9,718
Occupancy costs 973 1,015 1,974 1,980
Selling, general and administrative expenses 3,448 3,289 7,058 6,705
-------- -------- -------- --------
16,543 16,013 32,507 31,737
-------- -------- -------- --------
Income from Operations 1,214 970 1,503 1,150
-------- -------- -------- --------
OTHER INCOME (EXPENSE):
Interest expense (108) (121) (227) (241)
Interest and other income 18 21 185 37
-------- -------- -------- --------
(90) (100) (42) (204)
-------- -------- -------- --------
Income before Provision for Income Taxes
and Minority Interest in (Earnings) Losses of
Consolidated Limited Partnerships 1,124 870 1,461 946
Provision for Income Taxes (122) (197) (195) (349)
Minority Interest in (Earnings) Losses of
Consolidated Limited Partnerships (318) (203) (410) 58
-------- -------- -------- --------
NET INCOME $ 684 $ 470 $ 856 $ 655
======== ======== ======== ========
2
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands Except Per Share Amounts)
(Continued)
Thirteen Weeks Ended Twenty Six Weeks Ended
March 28, March 29, March 28, March 29,
2009 2008 2009 2008
--------- --------- --------- ----------
Net Income Per Common Share:
Basic $ 0.37 $ 0.25 $ 0.46 $ 0.35
========= ========= ========= ==========
Diluted $ 0.37 $ 0.25 $ 0.46 $ 0.34
========= ========= ========= ==========
Weighted Average Shares and Equivalent
Shares Outstanding
Basic 1,870,690 1,889,121 1,873,686 1,889,746
========= ========= ========= ==========
Diluted 1,870,690 1,899,992 1,873,686 1,901,543
========= ========= ========= ==========
See accompanying notes to unaudited condensed consolidated financial statements.
3
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 28, 2009 (UNAUDITED) AND SEPTEMBER 27, 2008
(In Thousands)
ASSETS
March 28, 2009 September 27, 2008
-------------- ------------------
CURRENT ASSETS:
Cash and cash equivalents $ 4,897 $ 3,244
Notes receivables, current maturities, net 17 16
Prepaid income taxes 126 176
Due from franchisees 238 351
Other receivables 114 107
Inventories 2,129 2,168
Prepaid expenses 1,231 778
Deferred tax asset 221 243
------- -------
Total Current Assets 8,973 7,083
------- -------
Property and Equipment, Net 21,538 21,601
------- -------
Investment in Limited Partnership 148 151
------- -------
OTHER ASSETS:
Liquor licenses, net 345 345
Notes receivable, net 19 28
Deferred tax asset 803 729
Leasehold purchases, net 1,746 1,880
Other 966 987
------- -------
Total Other Assets 3,879 3,969
------- -------
Total Assets $34,538 $32,804
======= =======
4
FLANIGAN'S ENTERPRISES, INC, AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 28, 2009 (UNAUDITED) AND SEPTEMBER 27, 2008
(In Thousands)
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
March 28, 2009 September 27, 2008
-------------- ------------------
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 5,060 $ 4,271
Due to franchisees 464 223
Current portion of long term debt 196 188
Current portion of line of credit 1,586 --
Deferred revenues 28 34
Deferred rent 24 19
-------- --------
Total Current Liabilities 7,358 4,735
-------- --------
Long Term Debt, Net of Current Maturities 4,845 4,764
Line of Credit -- 1,562
Deferred Rent, Net of Current Portion 206 214
Minority Interest in Equity of
Consolidated Limited Partnerships 8,267 8,437
Commitments, Contingencies and
Subsequent Events
Stockholders' Equity:
Common stock, $.10 par value, 5,000,000
shares authorized; 4,197,642 shares issued 420 420
Capital in excess of par value 6,240 6,240
Retained earnings 13,244 12,388
Treasury stock, at cost, 2,334,384 shares
at March 28, 2009 and 2,313,309
shares at September 27, 2008 (6,042) (5,956)
-------- --------
Total Stockholders' Equity 13,862 13,092
-------- --------
Total Liabilities and Stockholders' Equity $ 34,538 $ 32,804
======== ========
See accompanying notes to unaudited condensed consolidated financial statements.
5
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE TWENTY SIX WEEKS ENDED MARCH 28, 2009 AND MARCH 29, 2008
(In Thousands)
March 28, 2009 March 29, 2008
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 856 $ 655
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,156 1,061
Amortization of leasehold purchases 108 116
Loss on abandonment of property and equipment 24 8
Deferred income tax (52) (59)
Deferred rent (3) (8)
Minority interest in earnings (loss) of
consolidated limited partnerships 410 (58)
Income from unconsolidated limited partnership (3) (13)
Recognition of deferred revenue (6) (6)
Changes in operating assets and liabilities:
(increase) decrease in
Due from franchisees 113 354
Other receivables (7) (66)
Prepaid income taxes 50 (76)
Inventories 39 46
Prepaid expenses 404 299
Other assets (7) 34
Increase (decrease) in:
Accounts payable and accrued expenses (125) 192
Income taxes payable -- (331)
Due to franchisees 241 10
------- -------
Net cash provided by operating activities 3,198 2,158
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Collection on notes and mortgages receivable 8 6
Purchase of property and equipment (801) (1,955)
Deposit on property and equipment (63) --
Proceeds from sale of fixed assets 39 85
Distributions from unconsolidated limited
Partnerships 6 6
------- -------
Net cash used in investing activities (811) (1,858)
------- -------
6
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE TWENTY SIX WEEKS ENDED MARCH 28, 2009 AND MARCH 29, 2008
(In Thousands)
(Continued)
March 28, 2009 March 29, 2008
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of long term debt (92) (110)
Proceeds from line of credit 24 600
Purchase of treasury stock (86) (18)
Purchase of minority limited partnership interest -- (120)
Distributions to limited partnership
minority partners (580) (480)
Proceeds from limited partnership interests -- 2,025*
------- -------
Net cash provided by (used in) financing activities (734) 1,897
------- -------
Net Increase in Cash and Cash Equivalents 1,653 2,197
Beginning of Period 3,244 2,223
------- -------
End of Period $ 4,897 $ 4,420
======= =======
Supplemental Disclosure for Cash Flow Information:
Cash paid during period for:
Interest $ 227 $ 241
======= =======
Income taxes $ 239 $ 816
======= =======
Supplemental Disclosure of Non-Cash Investing and
Financing Activities:
Financing of insurance contracts $ 1,094 --
======= =======
Purchase deposits transferred to property
and equipment $ 292 --
======= =======
* exclusive of the Company's investment in the limited partnership owning
the restaurant in Davie, FL of $1,850,000.
See accompanying notes to unaudited condensed consolidated financial statements
7
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 28, 2009
(1) BASIS OF PRESENTATION:
The accompanying financial information for the periods ended March 28, 2009 and
March 29, 2008 are unaudited. Financial information as of September 27, 2008 has
been derived from the audited financial statements of the Company, but does not
include all disclosures required by generally accepted accounting principles. In
the opinion of management, all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of the financial information for
the periods indicated have been included. For further information regarding the
Company's accounting policies, refer to the Consolidated Financial Statements
and related notes included in the Company's Annual Report on Form 10-K for the
year ended September 27, 2008. Operating results for interim periods are not
necessarily indicative of results to be expected for a full year.
These financial statements include estimates relating to performance based
officers' bonuses. The estimates are reviewed periodically and the effects of
any revisions are reflected in the financial statements in the period they are
determined to be necessary. Although these estimates are based on management's
knowledge of current events and actions it may take in the future, they may
ultimately differ from actual results.
(2) EARNINGS PER SHARE:
Statements of Financial Accounting Standards ("SFAS") No. 128, Earnings per
share establishes standards for computing and presenting earnings per share
("EPS"). This statement requires the presentation of basic and diluted EPS. The
data on Page 3 shows the amounts used in computing earnings per share and the
effects on income and the weighted average number of shares of potentially
dilutive common stock equivalents. For the thirteen and twenty six weeks ended
March 28, 2009, 40,000 options were not included in the common stock equivalents
because their inclusion would be anti-dilutive.
(3) RECLASSIFICATION:
Certain amounts in the fiscal year 2008 financial statements have been
reclassified to conform to the fiscal year 2009 presentation.
(4) RECENT ACCOUNTING PRONOUNCEMENTS:
In March 2008, the FASB issued SFAS No. 161 "Disclosures about Derivative
Instruments and Hedging Activities" ("SFAS 161") to enhance disclosures about an
entity's derivative and hedging activities. SFAS 161 is effective for all
financial statements issued in fiscal years and interim periods beginning after
November 15, 2008 and early application is encouraged. SFAS 161 also encourages
but does not require comparative disclosures for earlier periods at initial
adoption. As we do not currently engage in derivative transactions or hedging
activities, we do not anticipate any significant financial statement disclosure
impact as a result of our evaluation of SFAS 161.
In February 2008, the FASB issued FASB Staff Position No. FAS 157-2 ("FSP
157-2"). FSP 157-2 delays the implementation of SFAS 157 for nonfinancial assets
and nonfinancial liabilities, except for items that are recognized or disclosed
at fair value in the financial statements on a recurring basis. This
8
statement defers the effective date to fiscal years beginning after November 15,
2008 and interim periods within those fiscal years, which is fiscal year 2010
for the Company.
In December 2007, the FASB issued SFAS No. 141 (revised 2007), "Business
Combinations" ("SFAS 141R"). SFAS 141R establishes principles and requirements
for how an acquirer recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, any noncontrolling
interest in the acquiree and the goodwill acquired. SFAS 141R also establishes
disclosure requirements to enable the evaluation of the nature and financial
effects of the business combination. SFAS 141R is effective for the fiscal years
beginning after December 15, 2008 and will be adopted by us in the first quarter
of our fiscal year 2010. We are currently evaluating the potential impact, if
any, of the adoption of SFAS 141R on our consolidated results of operations and
financial condition.
In December 2007, the FASB issued Statement of Financial Accounting Standard No.
160, Noncontrolling Interests in Consolidated Financial Statements, an amendment
of ARB No. 51 ("SFAS 160"). SFAS 160 will change the accounting and reporting
for minority interests, which will be recharacterized as noncontrolling
interests (NCI) and classified as a component of equity. This new consolidation
method will significantly change the accounting for transactions with minority
interest holders. SFAS 160 is effective for fiscal years beginning after
December 15, 2008 (our fiscal year 2010). We have not yet determined the impact
of SFAS 160 on our consolidated financial statements.
(5) LINE OF CREDIT:
Under a secured line of credit with a third party financial institution we are
able to borrow up to $2,500,000. The outstanding balance on our line of credit
bears interest at BBA LIBOR 1 month rate, plus 2.25%, (2.783% as of March 28,
2009), with monthly payments of interest only and the unpaid principal balance
and any accrued interest due in full on October 7, 2009. We granted our lender a
security interest in substantially all of our assets and a second mortgage on
our corporate offices as collateral to secure our repayment obligations under
our credit line. During the second quarter of fiscal year 2009, we made no draws
on our line of credit and paid monthly installments of interest, with no
principal
9
payments. As of March 28, 2009, the amount outstanding under the line of credit
was $1,586,000, with a remaining availability of $914,000.
(6) INCOME TAXES:
Financial Accounting Standards Board Statement No. 109, Accounting for Income
Taxes, requires among other things, recognition of future tax benefits measured
at enacted rates attributable to deductible temporary differences between
financial statement and income tax basis of assets and liabilities and to tax
net operating loss carryforwards and tax credits to the extent that realization
of said tax benefits is more likely than not.
The Company's effective tax rate was 15.1% and 29.5% for the thirteen weeks
ended March 28, 2009 and March 29, 2008 respectively and 18.5% and 34.8% for the
twenty six weeks ended March 28, 2009 and March 29, 2008 respectively. The
Company's effective tax rate differs from the statutory rate primarily due to
various non-deductible expense items, state income taxes and credits against
income taxes. In addition, for the thirteen and twenty six weeks ended March 28,
2009, the effective tax rate also differs from the statutory rate due to an
adjustment of the joint venture deferred tax asset.
(7) STOCK OPTION PLANS:
We have one stock option plan under which qualified stock options may be granted
to our officers and other employees. Under this plan, the exercise price for the
qualified stock options must be no less than 100% of the fair market value of
the Company's Common Stock on the date the options are granted. In general,
options granted under our stock option plan expire after a five (5) year period
and generally vest no later than one (1) year from the date of grant. As of
March 28, 2009, options to acquire 40,000 shares were outstanding at an average
exercise price of $6.35 per share. Under this plan, options to acquire an
aggregate of 45,000 shares are available for grant.
No stock options were granted during the twenty six weeks ended March 28, 2009,
nor were stock options granted during the twenty six weeks ended March 29, 2008.
No stock options were exercised during the twenty six weeks ended March 28,
2009, nor were stock options exercised during the twenty six weeks ended March
29, 2008.
Stock option activity during the twenty six weeks ended March 28, 2009 was as
follows:
Weighted Average
Total Options Exercise Price
------------- --------------
Outstanding at September 27, 2008 49,350 $6.31
Granted -- --
Exercised -- --
Expired (9,350) 6.14
------- -----
Outstanding at March 28, 2009 40,000 $6.35
======= =====
Options exercisable at March 28, 2009 40,000 $6.35
======= =====
The weighted-average remaining contractual terms of stock options outstanding
and stock options exercisable at March 28, 2009 was approximately 0.125 years.
The aggregate intrinsic value of options outstanding and options exercisable at
March 28, 2009 was approximately $-0-.
10
(8) ACQUISITIONS:
Purchase of Company Common Stock
Pursuant to a discretionary plan approved by the Board of Directors at its
meeting on May 17, 2007, during the second quarter ended March 28, 2009, we
purchased 12,075 shares of our common stock for an aggregate purchase price of
$51,000. Of the shares purchased, we purchased 11,225 shares of our common stock
on the open market for an aggregate purchase price of $47,000 and 850 shares of
our common stock from the Joseph G. Flanigan Charitable Trust for a purchase
price of $4,000. During the twenty six weeks ended March 28, 2009, we purchased
21,075 shares of our common stock for an aggregate purchase price of $86,000. Of
the shares purchased, we purchased 20,225 shares of our common stock on the open
market for an aggregate purchase price of $82,000 and 850 shares of our common
stock from the Joseph G. Flanigan Charitable Trust for a purchase price of
$4,000.
(9) COMMITMENTS, CONTINGENCIES AND SUBSEQUENT EVENTS:
Guarantees
We guarantee various leases for franchisees, limited partnerships that own
restaurants and locations sold in prior years. Remaining rental commitments
required under these leases are approximately $2,141,000. In the event of a
default under any of these agreements, we will have the right to repossess the
premises and operate the business to recover amounts paid under the guarantee
either by liquidating assets or operating the business.
Subsequent to the end of the second quarter of our fiscal year 2009, we
guaranteed a loan from an unrelated third party to a related franchisee, in the
principal amount of $200,000, bearing interest at the rate of 10% per annum and
being fully amortized over five (5) years, with equal monthly payments of
principal and interest, each in the amount of $4,250. The franchisee granted the
lender a security interest in substantially all of its assets as collateral to
secure the repayment of the loan. The proceeds from the loan are being used to
re-finance existing loans owed by the franchisee, (approximately $75,000),
reimburse us for funds advanced to the franchisee to renovate the business
premises, (approximately $90,000) and provide additional working capital for the
franchisee.
Litigation
We own the building where our corporate offices are located. On April 16, 2001,
we filed suit against the owner of the adjacent shopping center to determine our
right to non-exclusive parking in the shopping center. During fiscal year 2007,
the appellate court affirmed and upon re-hearing, again affirmed the granting of
a summary judgment in favor of the shopping center. The seller from whom we
purchased the building was named as a defendant in the lawsuit and is currently
asserting a claim against us for reimbursement of its attorneys' fees and costs
resulting from the litigation. We disputed the seller's entitlement to
reimbursement of its attorney's fees and costs, but during the first quarter of
our fiscal year 2009, the appellate court affirmed the ruling against us by the
trial court. We are disputing the amount of the seller's claim as excessive. A
hearing on the seller's claim for reimbursement of its attorney's fees and costs
is scheduled during the third quarter of our fiscal year 2009. During the second
quarter of our fiscal year 2009, the seller filed suit against the Company for
malicious prosecution. We deny the allegations and will vigorously defend the
case.
During fiscal year 2007, we and the limited partnership which owns the
restaurant in Pinecrest, Florida filed suit against the limited partnership's
landlord. We are the sole general partner and a 40% limited
11
partner in this limited partnership. We are seeking to recover the cost of
structural repairs to the business premises we paid, as we believe these
structural repairs were the landlord's responsibility under the lease. The
lawsuit, in addition to attempting to recover the amounts expended by us for
structural repairs is also attempting to recover the rent paid by the limited
partnership while the repairs were occurring. The claim also includes a request
by the limited partnership for the court to determine if the limited partnership
has the exclusive right to the use of the pylon sign in front of the business
premises. The landlord filed its answer to the complaint denying liability for
structural repairs to the business premises, denying any obligation to reimburse
the limited partnership for any rent paid while structural repairs occurred and
denying the limited partnership's right to use the pylon sign. The lawsuit is in
the discovery stage, but is scheduled for trial during the third quarter of our
fiscal year 2009.
(10) BUSINESS SEGMENTS:
We operate principally in two reportable segments - package stores and
restaurants. The operation of package stores consists of retail liquor sales and
related items. Information concerning the revenues and operating income for the
thirteen weeks and twenty six weeks ended March 28, 2009 and March 29, 2008, and
identifiable assets for the two reportable segments in which we operate, are
shown in the following table. Operating income is total revenue less cost of
merchandise sold and operating expenses relative to each segment. In computing
operating income, none of the following items have been included: interest
expense, other non-operating income and expenses and income taxes. Identifiable
assets by segment are those assets that are used in our operations in each
segment. Corporate assets are principally cash, note receivable and real
property, improvements, furniture, equipment and vehicles used at our corporate
headquarters. We do not have any operations outside of the United States and
transactions between restaurants and package liquor stores are not material.
Thirteen Weeks Thirteen Weeks
Ending Ending
March 28, 2009 March 29, 2008
-------------- --------------
Operating Revenues:
Restaurants $ 13,866 $ 13,266
Package stores 3,515 3,400
Other revenues 376 317
---------- ----------
Total operating revenues $ 17,757 $ 16,983
========== ==========
Operating Income Reconciled to Income Before Income Taxes and
Minority Interests in Earnings of Consolidated Limited
Partnerships
Restaurants $ 1,346 $ 1,392
Package stores 257 196
---------- ----------
1,603 1,588
Corporate expenses, net of other
Revenues (389) (618)
---------- ----------
Operating income 1,214 970
Other income (expense) (90) (100)
---------- ----------
Income Before Income Taxes and Minority Interests in Earnings of
Consolidated Limited Partnerships $ 1,124 $ 870
========== ==========
Depreciation and Amortization:
Restaurants $ 473 $ 442
Package stores 67 70
---------- ----------
540 512
Corporate 86 94
---------- ----------
Total Depreciation and Amortization $ 626 $ 606
========== ==========
Capital Expenditures:
Restaurants $ 350 $ 487
Package stores 56 80
---------- ----------
406 567
Corporate 101 77
---------- ----------
Total Capital Expenditures $ 507 $ 644
========== ==========
12
Twenty Six Weeks Twenty Six Weeks
Ending Ending
March 28, 2009 March 29, 2008
-------------- --------------
Operating Revenues:
Restaurants $ 26,439 $ 25,303
Package stores 6,863 6,831
Other revenues 708 753
---------- ----------
Total operating revenues $ 34,010 $ 32,887
========== ==========
Operating Income Reconciled to Income Before Income Taxes and
Minority Interests in Earnings of Consolidated Limited
Partnerships
Restaurants $ 1,932 $ 1,982
Package stores 364 341
---------- ----------
2,296 2,323
Corporate expenses, net of other
Revenues (793) (1,173)
---------- ----------
Operating income 1,503 1,150
Other income (expense) (42) (204)
---------- ----------
Income Before Income Taxes and Minority Interests in Earnings of
Consolidated Limited Partnerships $ 1,461 $ 946
========== ==========
Depreciation and Amortization:
Restaurants $ 956 $ 860
Package stores 138 132
---------- ----------
1,094 992
Corporate 170 185
---------- ----------
Total Depreciation and Amortization $ 1,264 $ 1,177
========== ==========
Capital Expenditures:
Restaurants $ 694 $ 1,656
Package stores 172 136
---------- ----------
866 1,792
Corporate 227 163
---------- ----------
Total Capital Expenditures $ 1,093 $ 1,955
========== ==========
13
March 28, September 27,
2009 2008
---- ----
Identifiable Assets:
Restaurants $ 20,292 $ 19,866
Package store 3,534 3,709
---------- ---------
23,826 23,575
Corporate 10,712 9,229
---------- ---------
Consolidated Totals $ 34,538 $ 32,804
========== =========
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Reported financial results may not be indicative of the financial results of
future periods. All non-historical information contained in the following
discussion constitutes forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. Words such as "anticipates, appears, expects, trends, intends, hopes,
plans, believes, seeks, estimates, may, will," and variations of these words or
similar expressions are intended to identify forward-looking statements. These
statements are not guarantees of future performance and involve a number of
risks and uncertainties, including but not limited to customer demand and
competitive conditions. Factors that could cause actual results to differ
materially are included in, but not limited to, those identified in the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," in the Annual Report on Form 10-K for the Company's fiscal year
ended September 27, 2008 and in this Quarterly Report on Form 10-Q. The Company
undertakes no obligation to publicly release the results of any revisions to
these forward-looking statements that may reflect events or circumstances after
the date of this report.
OVERVIEW
At March 28, 2009, we (i) operated 23 units, (excluding the adult entertainment
club referenced in (ii) below), consisting of restaurants, package stores and
combination restaurants/package stores that we either own or have operational
control over and partial ownership in; (ii) own but do not operate one adult
entertainment club; and (iii) franchise an additional six units, consisting of
two restaurants, (one of which we operate) and four combination
restaurant/package stores. The table below provides information concerning the
type (i.e. restaurant, package store or combination restaurant/package liquor
store) and ownership of the units (i.e. whether (i) we own 100% of the unit;
(ii) the unit is owned by a limited partnership of which we are the sole general
partner and/or have invested in; or (iii) the unit is franchised by us), as of
March 28, 2009 and as compared to March 29, 2008 and September 27, 2008. With
the exception of "The Whale's Rib", a restaurant we operate but do not own, all
of the restaurants operate under our service mark "Flanigan's Seafood Bar and
Grill" and all of the package liquor stores operate under our service mark "Big
Daddy's Liquors".
Types of Units March 28, September 27, March 29,
-------------- --------- ------------- ---------
2009 2008 2008
---- ---- ----
Company Owned:
Combination package and restaurant 4 4 4
Restaurant only 3 3 3
Package store only 5 5 5
14
Company Operated Restaurants Only:
Limited Partnerships 9 9 8 (1)
Franchise 1 1 1
Unrelated Third Party 1 1 1
Company Owned Club: 1 1 1
Total Company Owned/Operated Units 24 24 23
Franchised Units 6 6 6 (2)
Notes:
(1) Includes a restaurant located in Davie, Florida which is owned by a limited
partnership in which we are the sole general partner and own 48% of the limited
partnership interest and commenced operating on July 28, 2008.
(2) We operate a restaurant for one (1) franchisee. This unit is included in the
table both as a franchised restaurant, as well as a restaurant operated by the
Company.
Franchise Financial Arrangement: In exchange for our providing management and
--------------------------------
related services to our franchisees and granting them the right to use our
service marks "Flanigan's Seafood Bar and Grill" and "Big Daddy's Liquors", our
franchisees (five of which are franchised to members of the family of our
Chairman of the Board, officers and/or directors), are required to (i) pay to us
a royalty equal to 1% of gross package sales and 3% of gross restaurant sales;
and (ii) make advertising expenditures equal to between 1.5% to 3% of all gross
sales based upon our actual advertising costs allocated between stores,
pro-rata, based upon gross sales.
Limited Partnership Financial Arrangement: We manage and control the operations
-----------------------------------------
of all restaurants owned by limited partnerships, except the Fort Lauderdale,
Florida restaurant which is owned by a related franchisee. Accordingly, the
results of operations of all limited partnership owned restaurants, except the
Fort Lauderdale, Florida restaurant are consolidated into our operations for
accounting purposes. The results of operations of the Fort Lauderdale, Florida
restaurant are accounted for by us utilizing the equity method. In general,
until the investors' cash investment in a limited partnership (including any
cash invested by us and our affiliates) is returned in full, the limited
partnership distributes to the investors annually out of available cash from the
operation of the restaurant up to 25% of the cash invested in the limited
partnership, with no management fee paid to us. Any available cash in excess of
the 25% of the cash invested in the limited partnership distributed to the
investors annually, is paid one-half (1/2) to us as a management fee, with the
balance distributed to the investors. Once the investors in the limited
partnership have received, in full, amounts equal to their cash invested, an
annual management fee is payable to us equal to one-half (1/2) of cash available
to the limited partnership, with the other one half (1/2) of available cash
distributed to the investors (including us and our affiliates). As of March 28,
2009, limited partnerships owning three (3) restaurants have returned all cash
invested and we receive an annual management fee equal to one-half (1/2) of the
cash available for distribution by the limited partnership. In addition to its
receipt of distributable amounts from the limited partnerships, we receive a fee
equal to 3% of gross sales for use of the service mark "Flanigan's Seafood Bar
and Grill".
RESULTS OF OPERATIONS
---------------Thirteen Weeks Ended---------------
March 28, 2009 March 29, 2008
-------------- --------------
Amount Amount
------ ------
(In thousands) Percent (In thousands) Percent
------------ ---------- ------------ ----------
Restaurant food sales $ 11,198 64.43 $ 10,785 64.71
Restaurant bar sales 2,668 15.35 2,481 14.89
Package store sales 3,515 20.22 3,400 20.40
---------- ---------- ---------- ----------
Total Sales $ 17,381 100.00 $ 16,666 100.00
Franchise related revenues 282 211
Owner's fee 45 49
Other operating income 49 57
---------- ----------
Total Revenue $ 17,757 $ 16,983
========== ==========
15
--------------Twenty Six Weeks Ended--------------
March 28, 2009 March 29, 2008
-------------- --------------
Amount Amount
------ ------
(In thousands) Percent (In thousands) Percent
------------ ---------- ------------ ----------
Restaurant food sales $ 21,367 64.16 $ 20,532 63.89
Restaurant bar sales 5,072 15.23 4,771 14.85
Package store sales 6,863 20.61 6,831 21.26
---------- ---------- ---------- ----------
Total Sales $ 33,302 100.00 $ 32,134 100.00
Franchise related revenues 544 542
Owner's fee 89 115
Other operating income 75 96
---------- ----------
Total Revenue $ 34,010 $ 32,887
========== ==========
Comparison of Thirteen Weeks Ended March 28, 2009 and March 29, 2008.
---------------------------------------------------------------------
Revenues. Total revenue for the thirteen weeks ended March 28, 2009 increased
$774,000 or 4.56% to $17,757,000 from $16,983,000 for the thirteen weeks ended
March 29, 2008. This increase resulted from sales from the Davie, Florida
limited partnership restaurant ($995,000), which opened for business on July 28,
2008, and the increase in same store package liquor sales ($115,000), offset by
declines in same store restaurant food and bar sales ($392,000). Without giving
effect to the revenue generated from the Davie, Florida restaurant ($995,000),
total revenue for the thirteen weeks ended March 28, 2009 would have decreased
$221,000 or 1.30% to $16,762,000 from $16,983,000 for the thirteen weeks ended
March 29, 2008.
Restaurant Food Sales. Restaurant revenue generated from the sale of
food at restaurants totaled $11,198,000 for the thirteen weeks ended March 28,
2009 as compared to $10,785,000 for the thirteen weeks ended March 29, 2008. The
increase in restaurant food sales resulted from sales from the Davie, Florida
restaurant, which generated $820,000 of revenue from the sale of food during the
thirteen weeks ended March 28, 2009. Without giving effect to the revenue
generated from the Davie, Florida restaurant ($820,000) from the sale of food
for the thirteen weeks ended March 28, 2009, restaurant revenue generated from
the sale of food during the thirteen weeks ended March 28, 2009, would have
decreased
16
$407,000 or 3.77% to $10,378,000 from $10,785,000 for the thirteen weeks ended
March 29, 2008. Comparable weekly restaurant food sales (for restaurants open
for all of the second quarter of our fiscal year 2009 and the second quarter of
our fiscal year 2008, which consists of seven restaurants owned by us and eight
restaurants owned by affiliated limited partnerships) was $798,000 and $830,000
for the thirteen weeks ended March 28, 2009 and March 29, 2008, respectively, a
decrease of 3.86%. Comparable weekly restaurant food sales for Company owned
restaurants only was $335,000 and $353,000 for the second quarter of our fiscal
year 2009 and the second quarter of our fiscal year 2008, respectively, a
decrease of 5.10%. Comparable weekly restaurant food sales for affiliated
limited partnership owned restaurants only was $463,000 and $477,000 for the
second quarter of our fiscal year 2009 and the second quarter of our fiscal year
2008, respectively, a decrease of 2.94%. We anticipate that restaurant food
sales will continue to increase throughout the balance of our fiscal year 2009
due to, primarily, the operation of the Davie, Florida restaurant, offset by a
decline in same store restaurant food sales.
Restaurant Bar Sales. Restaurant revenue generated from the sale of
alcoholic beverages at restaurants (bar sales) totaled $2,668,000 for the
thirteen weeks ended March 28, 2009 as compared to $2,481,000 for the thirteen
weeks ended March 29, 2008. The increase in restaurant bar sales is due to sales
from the Davie, Florida restaurant, which generated $174,000 of revenue from bar
sales during the thirteen weeks ended March 28, 2009. Without giving effect to
the revenue from bar sales generated from the Davie, Florida restaurant
($174,000) for the thirteen weeks ended March 28, 2009, restaurant revenue
generated from bar sales during the thirteen weeks ended March 28, 2009, would
have increased $13,000 or 0.52% to $2,494,000 from $2,481,000 for the thirteen
weeks ended March 29, 2008. Comparable weekly restaurant bar sales (for
restaurants open for all of the second quarter of our fiscal year 2009 and the
second quarter of our fiscal year 2008, which consists of seven restaurants
owned by us and eight restaurants owned by affiliated limited partnerships) was
$192,000 for the thirteen weeks ended March 28, 2009 and $191,000 for the
thirteen weeks ended March 29, 2008, an increase of 0.52%. Comparable weekly
restaurant bar sales for Company owned restaurants only was $81,000 and $79,000
for the second quarter of our fiscal year 2009 and the second quarter of our
fiscal year 2008, respectively, an increase of 2.53%. Comparable weekly
restaurant bar sales for affiliated limited partnership owned restaurants only
was $111,000 and $112,000 for the second quarter of our fiscal year 2009 and the
second quarter of our fiscal year 2008, respectively, a decrease of 0.89%. We
anticipate that restaurant bar sales will continue to increase throughout the
balance of our fiscal year 2009 due to, primarily, the operation of the Davie,
Florida restaurant through our fiscal year 2009.
Package Store Sales. Revenue generated from sales of liquor and related
items at package liquor stores totaled $3,515,000 for the thirteen weeks ended
March 28, 2009 as compared to $3,400,000 for the thirteen weeks ended March 29,
2008, an increase of $115,000 or 3.38%. The weekly average of same store package
liquor store sales, which includes all nine (9) Company owned package liquor
stores, was $270,000 for the thirteen weeks ended March 28, 2009 as compared to
$262,000 for the thirteen weeks ended March 29, 2008, an increase of 3.05%. The
increase was primarily due to increased advertising and promotions during the
thirteen weeks ended March 28, 2009. Package liquor store sales are expected to
remain constant throughout the balance of our fiscal year 2009.
Operating Costs and Expenses. Operating costs and expenses, (consisting of cost
of merchandise sold, payroll and related costs, occupancy costs and selling,
general and administrative expenses), for the thirteen weeks ended March 28,
2009 increased $530,000 or 3.31% to $16,543,000 from $16,013,000 for the
thirteen weeks ended March 29, 2008. The increase was primarily due to expenses
related to the operation of the Davie, Florida restaurant and to a lesser extent
a general increase in food costs, offset by actions taken by management to
reduce and/or control costs and expenses. We anticipate that our operating costs
and expenses will continue to increase throughout the balance of our fiscal year
2009 due to, primarily, the operation of the Davie, Florida restaurant and an
expected general increase in food costs. Operating costs and expenses decreased
as a percentage of total sales to approximately
17
93.16% in the second quarter of our fiscal year 2009 from 94.29% in the second
quarter of our fiscal year 2008.
Gross Profit. Gross profit is calculated by subtracting the cost of merchandise
sold from sales.
Restaurant Food and Bar Sales. Gross profit for food and bar sales for
the thirteen weeks ended March 28, 2009 increased to $9,210,000 from $8,863,000
for the thirteen weeks ended March 29, 2008. Our gross profit margin for
restaurant food and bar sales (calculated as gross profit reflected as a
percentage of restaurant food and bar sales), was 66.42% for the thirteen weeks
ended March 28, 2009 and 66.81% for the thirteen weeks ended March 29, 2008.
This decrease in gross profit for restaurant and bar sales for the second
quarter of our fiscal year 2009, (-0.39%), resulted from higher food costs. We
have not increased menu prices since the first quarter of our fiscal year 2008
to offset higher food costs.
Package Store Sales. Gross profit for package store sales for the
thirteen weeks ended March 28, 2009 increased to $1,109,000 from $1,004,000 for
the thirteen weeks ended March 29, 2008. Our gross profit margin, (calculated as
gross profit reflected as a percentage of package liquor store sales), for
package liquor store sales was 31.55% for the thirteen weeks ended March 28,
2009 and 29.53% for the thirteen weeks ended March 29, 2008. The increase in our
gross profit margin, (2.02%), was primarily due to the purchase of "close out"
and inventory reduction merchandise from wholesalers during the thirteen weeks
ended March 28, 2009. We anticipate the gross profit margin for package store
sales to remain constant throughout the balance of our fiscal year 2009 as we
expect to continue purchasing "close out" and inventory reduction merchandise
from wholesalers.
Payroll and Related Costs. Payroll and related costs for the thirteen weeks
ended March 28, 2009 increased $150,000 or 3.05% to $5,060,000 from $4,910,000
for the thirteen weeks ended March 29, 2008. This increase is primarily
attributable to the Davie, Florida restaurant and the annual increase in the
Florida minimum wage, which was effective January 1, 2009, offset by a reduction
of our store level management. We anticipate that our payroll costs and related
expenses will continue to increase through our fiscal year 2009 due to,
primarily, the operation of the Davie, Florida restaurant through the balance of
our fiscal year 2009. Payroll and related costs as a percentage of total sales
was 28.50% in the second quarter of our fiscal year 2009 and 28.91% of total
sales in the second quarter of our fiscal year 2008. This decrease as a
percentage of sales was primarily due to a reduction of our store level
management, offset by the annual increase in the Florida minimum wage, which was
effective January 1, 2009.
Occupancy Costs. Occupancy costs (consisting of rent, common area maintenance,
repairs, real property taxes and amortization of leasehold purchases) for the
thirteen weeks ended March 28, 2009 decreased $42,000 or 4.14% to $973,000 from
$1,015,000 for the thirteen weeks ended March 29, 2008. This decrease is
primarily due to decreases in common area maintenance, which generally includes
a pro-rata share of property insurance for units located within shopping
centers. We anticipate that our occupancy costs will stabilize throughout the
balance of our fiscal year 2009 with no rental payments for additional
restaurant locations being developed by the Company.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses (consisting of general corporate expenses, including but
not limited to advertising, insurance, professional costs, clerical and
administrative overhead) for the thirteen weeks ended March 28, 2009 increased
$159,000 or 4.83% to $3,448,000 from $3,289,000 for the thirteen weeks ended
March 29, 2008. Selling, general and administrative expenses as a percentage of
total sales was 19.42% in the second quarter of our fiscal year 2009, as
compared to 19.37% in the second quarter of our fiscal year 2008. We anticipate
that our selling, general and administrative expenses will increase throughout
the balance of our fiscal year 2009 due to, primarily, the operation of our
Davie, Florida restaurant, increased advertising expense and an overall increase
in expenses.
18
Depreciation. Depreciation for the thirteen weeks ended March 28, 2009 and March
29, 2008 was $481,000 and $606,000 respectively. As a percentage of revenue,
depreciation expense was 2.71% of revenue in the thirteen weeks ended March 28,
2009 and 3.57% of revenue in the thirteen weeks ended March 29, 2008.
Interest Expense, Net. Interest expense, net, for the thirteen weeks ended March
28, 2009 decreased $13,000 to $108,000 from $121,000 for the thirteen weeks
ended March 29, 2008. The principal balance on our line of credit was
approximately equal during the thirteen weeks ended March 28, 2009 and March 29,
2008, however our interest rate was lower this year.
Net Income. Net income for the thirteen weeks ended March 28, 2009 increased
$214,000 or 45.53% to $684,000 from $470,000 for the thirteen weeks ended March
29, 2008. As a percentage of sales, net income for the second quarter of our
fiscal year 2009 is 3.85%, as compared to 2.77% in the second quarter of our
fiscal year 2008. The increase in net income as a percentage of sales (1.08%) is
primarily an adjustment of $122,000 to our deferred tax asset, higher gross
profit in both our restaurant and package liquor store divisions and improved
control over expenses. Without giving effect to this adjustment of $122,000 to
our deferred tax asset, we would have generated net income of $562,000 for the
thirteen weeks ended March 28, 2009, which as a percentage of sales is 3.16%.
Without giving effect to the adjustment to our deferred tax asset for the
thirteen weeks ended March 28, 2009, the increase in net income for the thirteen
weeks ended March 28, 2009, as a percentage of sales (0.39%) is primarily due to
higher gross profit in both our restaurant and package liquor store divisions
and improved control over expenses. During the second quarter of fiscal year
2008, we had pre-opening, non-recurring expenses associated with the Davie,
Florida restaurant, ($33,000), which adversely affected net income.
Comparison of Twenty Six Weeks Ended March 28, 2009 and March 29, 2008.
-----------------------------------------------------------------------
Revenues. Total revenue for the twenty six weeks ended March 28, 2009 increased
$1,123,000 or 3.41% to $34,010,000 from $32,887,000 for the twenty six weeks
ended March 29, 2008. This increase resulted from sales from the Davie, Florida
limited partnership restaurant ($1,997,000), which opened for business on July
28, 2008 and increases in same store package liquor stores ($32,000), offset by
declines in same store restaurant food and bar sales ($1,065,000). Without
giving effect to the revenue generated from the Davie, Florida restaurant
($1,997,000), total revenue for the twenty six weeks ended March 28, 2009 would
have decreased $874,000 or 2.66% to $32,013,000 from $32,887,000 for the twenty
six weeks ended March 29, 2008.
Restaurant Food Sales. Restaurant revenue generated from the sale of
food at restaurants totaled $21,367,000 for the twenty six weeks ended March 28,
2009 as compared to $20,532,000 for the twenty six weeks ended March 29, 2008,
an increase of $835,000 or 4.06%. The increase in restaurant food sales resulted
from sales from the Davie, Florida restaurant, which generated $1,649,000 of
revenue from the sale of food during the twenty six weeks ended March 28, 2009.
Without giving effect to the revenue generated from the Davie, Florida
restaurant ($1,649,000) from the sale of food for the twenty six weeks ended
March 28, 2009, restaurant revenue generated from the sale of food during the
twenty six weeks ended March 28, 2009, would have decreased $814,000 or 3.96% to
$19,718,000 from $20,532,000 for the twenty six weeks ended March 29, 2008.
Comparable weekly restaurant food sales (for restaurants open for all of the
twenty six weeks
19
ended March 28, 2009 and the twenty six weeks ended March 29, 2008, which
consists of seven restaurants owned by us and seven restaurants owned by
affiliated limited partnerships) was $712,000 and $736,000 for the thirteen
weeks ended March 28, 2009 and March 29, 2008, respectively, a decrease of
3.26%. Comparable weekly restaurant food sales for Company owned restaurants
only was $314,000 and $331,000 for the twenty six weeks ended March 28, 2009 and
March 29, 2008, respectively, a decrease of 5.14%. Comparable weekly restaurant
food sales for affiliated limited partnership owned restaurants only was
$398,000 and $405,000 for the twenty six weeks ended March 28, 2009 and March
29, 2008, respectively, a decrease of 1.73%. We anticipate that restaurant food
sales will continue to increase throughout the balance of our fiscal year 2009
due to, primarily, the operation of the Davie, Florida restaurant, offset by a
decline in same store restaurant food sales.
Restaurant Bar Sales. Restaurant revenue generated from the sale of
alcoholic beverages at restaurants (bar sales) totaled $5,072,000 for the twenty
six weeks ended March 28, 2009 as compared to $4,771,000 for the twenty six
weeks ended March 29, 2008, an increase of $301,000 or 6.31%. The increase in
restaurant bar sales is due to sales from the Davie, Florida restaurant, which
generated $345,000 of revenue from bar sales during the twenty six weeks ended
March 28, 2009. Without giving effect to the revenue from bar sales generated
from the Davie, Florida restaurant ($345,000) for the twenty six weeks ended
March 28, 2009, restaurant revenue generated from bar sales during the twenty
six weeks ended March 29, 2008, would have decreased $44,000 or 0.92% to
$4,727,000 from $4,771,000 for the twenty six weeks ended March 29, 2008.
Comparable weekly restaurant bar sales (for restaurants open for all of the
twenty six weeks ended March 28, 2009 and the twenty six weeks ended March 29,
2008, which consists of seven restaurants owned by us and seven restaurants
owned by affiliated limited partnerships) was unchanged at $173,000 for the
twenty six weeks ended March 28, 2009 and the twenty six weeks ended March 29,
2008. Comparable weekly restaurant bar sales for Company owned restaurants only
was unchanged at $75,000 for the twenty six weeks ended March 28, 2009 and the
twenty six weeks ended March 29, 2008. Comparable weekly restaurant bar sales
for affiliated limited partnership owned restaurants only was unchanged at
$98,000 for the twenty six weeks ended March 28, 2009 and the twenty six weeks
ended March 29, 2008. We anticipate that restaurant bar sales will continue to
increase throughout the balance of our fiscal year 2009 due to, primarily, the
operation of the Davie, Florida restaurant through our fiscal year 2009, offset
by a decline in same store restaurant bar sales.
Package Store Sales. Revenue generated from sales of liquor and related
items at package stores totaled $6,863,000 for the twenty six weeks ended March
28, 2009 as compared to $6,831,000 for the twenty six weeks ended March 29,
2008, an increase of 0.47%. The weekly average of same store package store sales
was $264,000 and $263,000 for the twenty six weeks ended March 28, 2009 and
March 29, 2008, respectively. The increase was primarily due to increased
advertising and promotions. Package store sales are expected to remain constant
through the balance of our fiscal year 2009.
Operating Costs and Expenses. Operating costs and expenses, (consisting of cost
of merchandise sold, payroll and related costs, occupancy costs and selling,
general and administrative expenses), for the twenty six weeks ended March 28,
2009 increased $770,000 or 2.43% to $32,507,000 from $31,737,000 for the twenty
six weeks ended March 29, 2008. The increase was primarily due to expenses
related to the operation of the Davie, Florida restaurant and to a lesser extent
a general increase in food costs. We anticipate that our operating costs and
expenses will continue to increase throughout the balance of our fiscal year
2009 due to, primarily, the operation of the Davie, Florida restaurant and an
expected general increase in food costs. Operating costs and expenses decreased
as a percentage of total sales to 95.58% for the twenty six weeks ended March
28, 2009 from 96.50% for the twenty six weeks ended March 29, 2008.
20
Gross Profit. Gross profit is calculated by subtracting the cost of merchandise
sold from sales.
Restaurant Food and Bar Sales. Gross profit for food and bar sales for
the twenty six weeks ended March 28, 2009 increased to $17,551,000 from
$16,830,000 for the twenty six weeks ended March 29, 2008. Our gross profit
margin for restaurant food and bar sales (calculated as gross profit reflected
as a percentage of restaurant food and bar sales), was 66.38% for the twenty six
weeks ended March 28, 2009 and 66.51% for the twenty six weeks ended March 29,
2008. This decrease in gross profit for restaurant and bar sales for the twenty
six weeks ended March 28, 2009, (-0.13%), resulted from higher food costs. We
have not increased menu prices since the first quarter of our fiscal year 2008
to offset higher food costs.
Package Store Sales. Gross profit for package store sales for the
twenty six weeks ended March 28, 2009 increased to $2,091,000 from $1,970,000
for the twenty six weeks ended March 29, 2008. Our gross profit margin,
(calculated as gross profit reflected as a percentage of package store sales),
was 30.47% for the twenty six weeks ended March 28, 2009 compared to 28.84% for
the twenty six weeks ended March 29, 2008. The increase in our gross profit
margin, (1.63%), was primarily due to our purchase of "close out" and inventory
reduction merchandise from wholesalers during the twenty six weeks ended March
28, 2009. We anticipate the gross profit margin for package store sales to
remain constant throughout the balance of our fiscal year 2009 as we expect to
continue purchasing "close out" and inventory reduction merchandise from
wholesalers.
Payroll and Related Costs. Payroll and related costs for the twenty six weeks
ended March 28, 2009 increased $97,000 or 1.00% to $9,815,000 from $9,718,000
for the twenty six weeks ended March 29, 2008. This increase is primarily
attributable to the Davie, Florida restaurant and the annual increase in the
Florida minimum wage, which was effective January 1, 2009, offset by a reduction
of our store level management. Payroll and related costs as a percentage of
total sales was 28.86% for the twenty six weeks ended March 28, 2009 and 29.55%
of total sales for the twenty six weeks ended March 29, 2008. We anticipate that
our payroll costs and related expenses will continue to increase through our
fiscal year 2009 due to, primarily, the operation of the Davie, Florida
restaurant through the balance of our fiscal year 2009 and the annual increase
in the Florida minimum wage, which was effective January 1, 2009, offset by a
reduction of our store level management.
Occupancy Costs. Occupancy costs (consisting of rent, common area maintenance,
repairs, real property taxes and amortization of leasehold purchases) for the
twenty six weeks ended March 28, 2009 decreased $6,000 or 0.30% to $1,974,000
from $1,980,000 for the twenty six weeks ended March 29, 2008. This decrease is
primarily due to decreases in common area maintenance, which generally includes
a pro-rata share of property insurance for units located within shopping
centers. We anticipate that our occupancy costs will stabilize throughout the
balance of our fiscal year 2009 with no rental payments for additional
restaurant locations being developed by the Company.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses (consisting of general corporate expenses, including but
not limited to advertising, insurance, professional costs, clerical and
administrative overhead) for the twenty six weeks ended March 28, 2009 increased
$353,000 or 5.26% to $7,058,000 from $6,705,000 for the twenty six weeks ended
March 29, 2008. Selling, general and administrative expenses increased as a
percentage of total sales for the twenty six weeks ended March 28, 2009 to
20.75% as compared to 20.39% for the twenty six weeks ended March 29, 2008. This
increase is due primarily to the operation of the Davie, Florida restaurant and
an overall increase in expenses. We anticipate that our selling, general and
administrative expenses will continue to increase throughout the balance of our
fiscal year 2009 due to, primarily, the operation of our Davie, Florida
restaurant and an overall increase in expenses.
21
Depreciation. Depreciation for the twenty six weeks ended March 28, 2009 and
March 29, 2008 was $1,264,000 and $1,177,000 respectively. As a percentage of
revenue, depreciation expense was 3.72% of revenue in the twenty six weeks ended
March 28, 2009 and 3.58% of revenue in the twenty six weeks ended March 29,
2008.
Interest Expense, Net. Interest expense, net, for the twenty six weeks ended
March 28, 2009 decreased $14,000 to $227,000 from $241,000 for the twenty six
weeks ended March 29, 2008. The interest expense and principal balance on our
line of credit were approximately equal during the twenty six weeks ended March
28, 2009 and March 29, 2008.
Net Income. Net income for the twenty six weeks ended March 28, 2009 increased
$201,000 or 30.69% to $856,000 from $655,000 for the twenty six weeks ended
March 29, 2008. As a percentage of sales, net income for the twenty six weeks
ended March 28, 2009 is 2.52%, as compared to 1.99% for the twenty six weeks
ended March 29, 2008. During the twenty six weeks ended March 28, 2009, we
recognized interest income of $124,000 paid on claims we filed in the
liquidation proceedings of Ambassador Insurance Company in 1983 and other income
of $26,000 paid as the balance of our claims (10%) filed in the liquidation
proceedings of Ambassador Insurance Company. We also adjusted our tax deferred
asset by $122,000. Without giving effect to this interest income of $124,000,
other income of $26,000 and the adjustment to our deferred tax asset of
$122,000, we would have generated net income of $639,000 for the twenty six
weeks ended March 28, 2009, which as a percentage of sales is 1.88%. Without
giving effect to the interest income and other income and the adjustment to our
deferred tax asset for the twenty six weeks ended March 28, 2009, the decrease
in net income for the twenty six weeks ended March 28, 2009, as a percentage of
sales (-0.11%) is primarily due to a decline in same store restaurant sales and
a general increase in overall expenses. The net income for the twenty six weeks
ended March 29, 2008 was adversely affected by our share of the non-recurring
pre-opening and opening expenses associated with the limited partnership owned
restaurant in Pembroke Pines, Florida, ($40,000), and our share of the
non-recurring pre-opening expenses associated with the limited partnership owned
restaurant in Davie, Florida, ($36,000), higher food costs and overall expenses,
including electric, gas and real property taxes.
New Limited Partnership Restaurants
As new restaurants open, our income from operations will be adversely affected
due to our obligation to fund pre-opening costs, including but not limited to
pre-opening rent for the new locations. During the twenty six weeks ended March
28, 2009, we did not have a new restaurant location in the development stage and
did not recognize any pre-opening costs. During the twenty six weeks ended March
29, 2008, we recognized non-cash pre-opening rent in the approximate amount of
$6,000 and recognized cash pre-opening rent in the approximate amount of $12,000
for the Pembroke Pines, Florida restaurant. During the twenty six weeks ended
March 29, 2008, we also paid and expensed pre-opening rent in the approximate
amount of $67,000 for the Davie, Florida restaurant, which is the full rent
provided in the 15 year lease. We are recognizing rent expense on a straight
line basis over the term of the lease.
22
During the twenty six weeks ended March 29, 2008, the limited partnership
restaurant in Davie, Florida reported losses of $245,000 primarily due to
pre-opening costs, thus contributing to a reduction in the operating income for
the twenty six weeks ended March 29, 2008. This restaurant opened for business
on July 28, 2008.
Until we fund a new unit, our income from operations will not be adversely
affected by pre-opening costs. Throughout the balance of fiscal year 2009, we do
not expect our income from operations to be materially adversely affected by
pre-opening costs for new locations.
Trends
During the next twelve months, we expect continued increases in aggregate
restaurant sales as compared to prior periods due primarily to the restaurants
in Davie, Florida being open for the entire twelve month period. We expect same
store restaurant food and bar sales to decline over the next twelve month period
due primarily to the current domestic and global economic downturn. We expect
higher food costs and higher overall expenses, which will adversely affect our
net income. During the first quarter of our fiscal year 2008, we raised menu
prices to offset higher food costs and overall expenses. We plan to limit menu
price increases as long as possible while maintaining our high quality of food
and service and without reducing our food portions. We have increased our
advertising to attract customers through our monthly full page newspaper ads and
our radio advertising and plan to continue with this advertising program. We
have also instituted direct mailings to attract customers. Notwithstanding our
increased promotional activity, including our $4.99 lunch specials, we believe
we will experience reduced revenues and increased costs in some or all of our
locations and as a result our net income will be adversely affected. To mitigate
this, we may raise menu prices whenever necessary and wherever competitively
possible.
We continue to search for new locations to open restaurants and thereby expand
our business, but we are currently looking for locations that will not require
an extensive and costly renovation. Any new locations will likely be opened
using our limited partnership ownership model.
We are not actively searching for locations for the operation of new package
liquor stores, but if an appropriate location for a package liquor store becomes
available, we will consider it.
Liquidity and Capital Resources
We fund our operations through cash from operations and borrowings under our
line of credit. As of March 28, 2009, we had cash of approximately $4,897,000,
an increase of $1,653,000 from our cash balance of $3,244,000 as of September
27, 2008. The increase in cash as of March 28, 2009 was primarily from our
operations due to minimal demand upon our cash flow for extraordinary items.
Management believes that the Company's current cash availability from its line
of credit and expected cash from operations will be sufficient to fund
operations and capital expenditures for at least the next twelve months.
Cash Flows
The following table is a summary of our cash flows for the twenty six weeks of
fiscal years 2009 and 2008.
23
-------Twenty Six Weeks Ended-----
March 28, 2009 March 29, 2008
-------------- --------------
(in Thousands)
Net cash provided by operating activities $ 3,198 $ 2,158
Net cash used in investing activities (811) (1,858)
Net cash provided by (used in)
financing activities (734) 1,897
---------- ----------
Net Increase in Cash and Cash Equivalents 1,653 2,197
Cash and Cash Equivalents, Beginning 3,244 2,223
---------- ----------
Cash and Cash Equivalents, Ending $ 4,897 $ 4,420
========== ==========
We have determined that we must retain any earnings for the development and
operation of our business and accordingly, we do not intend to pay any cash
dividends in the foreseeable future.
Capital Expenditures
In addition to using cash for our operating expenses, we use cash to fund the
development and construction of new restaurants and secondarily to fund
capitalized property improvement for our existing restaurants. We acquired
property and equipment of $1,093,000, (including $292,000 of deposits recorded
in other assets as of September 27, 2008), during the twenty six weeks ended
March 28, 2009, including $497,000 for renovations to two (2) existing Company
owned restaurants, as compared to $1,955,000 during the twenty six weeks ended
March 29, 2008, which included $268,000 for renovations to one (1) existing
Company owned restaurant. During the twenty six weeks ended March 29, 2008, the
limited partnership which owns the Davie, Florida restaurant completed its
private offering, raising the sum of $3,875,000, of which $1,850,000 represents
our investment. We did not advance any funds to this limited partnership in
excess of our investment. The funds from the private offering were used to
complete the renovations to the business premises for operation of a "Flanigan's
Seafood Bar and Grill" restaurant and provided working capital.
All of our owned units require periodic refurbishing in order to remain
competitive. We anticipate the cost of this refurbishment in our fiscal year
2009 to be approximately $700,000, of which $497,000 has been spent through
March 28, 2009.
Long Term Debt
As of March 28, 2009, we had long term debt of $6,627,000, which includes the
balance on our line of credit, as compared to $6,570,000 as of March 29, 2008,
and $6,514,000 as of September 27, 2008.
During the twenty six weeks ended March 28, 2009, we changed our primary banking
relationship to another unaffiliated financial institution, which includes a new
line of credit of $2,500,000. The outstanding balance on our line of credit
bears interest at BBA LIBOR 1 month rate, plus 2.25%, (2.783% as March 28,
2009), with monthly payments of interest only and the unpaid principal balance
and all accrued interest due in full on October 7, 2009. We granted our lender a
security interest in substantially all of our assets and a second mortgage on
our corporate offices as collateral to secure our repayment obligations under
our credit line. As of March 28, 2009, the amount outstanding under our secured
line of credit was $1,586,000.
24
Purchase Commitments
In order to fix the cost and ensure adequate supply of baby back ribs for our
restaurants, on November 26, 2008, we entered into a purchase agreement with our
rib supplier, whereby we agreed to purchase approximately $3,800,000 of baby
back ribs during calendar year 2009 from this vendor at a fixed cost. While we
anticipate purchasing all of our rib supply from this vendor, we believe there
are several other alternative vendors available, if needed.
Working Capital
The table below summarizes the current assets, current liabilities, and working
capital for our fiscal quarters ended March 28, 2009, March 29, 2008 and our
fiscal year ended September 27, 2008.
Item Mar. 28, 2009 Mar. 29, 2008 Sept 27, 2008
---- ------------- ------------- -------------
(in Thousands)
Current Assets $ 8,973 $ 8,607 $ 7,083
Current Liabilities 7,358 5,102 4,735
----- ----- -----
Working Capital $ 1,615 $ 3,505 $ 2,348
Our working capital as of March 28, 2009 decreased by 53.92% from the working
capital for the fiscal quarter ending March 29, 2008 and decreased by 31.22%
from our working capital for our fiscal year ending September 27, 2008. Our
working capital decreased during our fiscal quarter ending March 28, 2009 due to
the re-classification of our line of credit, which matures on October 7, 2009,
as a current liability. Our prior lender consistently extended the maturity date
on our line of credit on a quarterly basis and accordingly, our obligations
under our prior line of credit were not recorded as a current liability. During
our fiscal quarter ending March 29, 2008, our working capital improved due
primarily to the amounts which had been raised but not yet required to be used
for expenses by the limited partnership which owns the Davie, Florida
restaurant, ($1,816,000).
While there can be no assurance due to, among other things, unanticipated
expenses or unanticipated decline in revenues, or both, we believe that positive
cash flow from operations will adequately fund operations, debt reductions and
planned capital expenditures throughout the balance of our fiscal year 2009. We
also anticipate that throughout the balance of our fiscal year 2009, working
capital may be affected by the payment of the purchase of a surveillance camera
system ($118,000) and our line of credit in the event the line of credit is not
renewed.
Off-Balance Sheet Arrangements
The Company does not have off-balance sheet arrangements.
Inflation
The primary inflationary factors affecting our operations are food, beverage and
labor costs. A large number of restaurant personnel are paid at rates based upon
applicable minimum wage and increases in minimum wage directly affect labor
costs. To date, inflation has not had a material impact on our operating
results, but this circumstance may change in the future if food and fuel costs
continue to rise.
25
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We do not ordinarily hold market risk sensitive instruments for trading purposes
and as of March 28, 2009 held no equity securities.
Interest Rate Risk
At March 28, 2009, of the Company's debt arrangements, only borrowings under our
line of credit bear interest at BBA LIBOR 1 month rate, plus 2.25%. Increases in
interest rates may have a material affect upon results of operations, depending
upon the outstanding principal balance on our line of credit from time to time.
At March 28, 2009, our cash resources earn interest at variable rates.
Accordingly, our return on these funds is affected by fluctuations in interest
rates.
ITEM 4T. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Based on evaluations as of the end of the period covered by this report, our
Chief Executive Officer and Chief Financial Officer, with the participation of
our management team, have concluded that our disclosure controls and procedures
(as defined in Rules 13a-15(e) and 15d-15(e) to the Securities Exchange Act of
1934, as amended (the "Exchange Act")) were effective.
Limitations on the Effectiveness of Controls and Permitted Omission from
Management's Assessment
Our internal control over financial reporting is designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally
accepted accounting principles. All internal control systems, no matter how well
designed, have inherent limitations, including the possibility of human error
and the circumvention or overriding of controls. Accordingly, even effective
internal controls can only provide reasonable assurance with respect to
financial statement preparation. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Changes in Internal Control Over Financial Reporting
During the period covered by this report, we have not made any change to our
internal control over financial reporting that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See "Litigation" on page 11 of this Report and Item 1 and Item 3 to Part 1 of
the Annual Report on Form 10-K for the fiscal year ended September 27, 2008 for
a discussion of other legal proceedings resolved in prior years.
26
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Purchase of Company Common Stock
Pursuant to a discretionary plan approved by the Board of Directors at its
meeting on May 17, 2007, during the thirteen weeks ended March 28, 2009, we
purchased 12,075 shares of our common stock for an aggregate purchase price of
$51,000. Of the common stock purchased, we purchased 11,225 shares of our common
stock on the open market for an aggregate purchase price of $47,000 and we
purchased 850 shares of our common stock from the Joseph G. Flanigan Charitable
Trust for an aggregate purchase price of $4,000. During the thirteen weeks ended
March 29, 2008, we purchased 1,000 shares of our common stock on the open market
for an aggregate purchase price of $8,000.
--------------------------------------------------------------------------------
ISSUER PURCHASES OF EQUITY SECURITIES
--------------------------------------------------------------------------------
(c) Total (d) Maximum
Number of Number (or
Shares (or Approximate
Units) Dollar Value) of
(b) Purchased as Shares (or
(a) Total Average Part of Units) that May
Number of Price Publicly Yet Be
Shares (or Paid per Announced Purchased
Units) Share Plans or Under the Plans
Period Purchased (or Unit) Programs or Programs
--------------------------------------------------------------------------------
December
28, 2008 -
January
29, 2009 2,475 $4.24 2,475 79,625
--------------------------------------------------------------------------------
January
30, 2009 -
February
27, 2009 3,600 $4.15 3,600 76,025
--------------------------------------------------------------------------------
February
28, 2009
- March
28, 2009 6,000 $3.95 6,000 70,025
--------------------------------------------------------------------------------
Total as of
March 28,
2009 12,075 12,075 70,025
--------------------------------------------------------------------------------
27
ITEM 6. EXHIBITS
The following exhibits are filed with this Report:
Exhibit Description
------- -----------
31.1 Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
32.2 Certification of Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
28
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FLANIGAN'S ENTERPRISES, INC.
Date: May 12, 2009 /s/ James G. Flanigan
------------------------------------------
JAMES G. FLANIGAN, Chief Executive Officer and President
/s/ Jeffrey D. Kastner
------------------------------------------
JEFFREY D. KASTNER, Chief Financial Officer and Secretary
(Principal Financial and Accounting Officer)
29