UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF
1934
For the fiscal year ended September 27, 2008
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 I-6836
Flanigan's Enterprises, Inc.
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(Exact name of registrant as specified in its charter)
Florida 59-0877638
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5059 N.E. 18th Avenue, Fort Lauderdale, FL 33334
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code, (954) 377-1961
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Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $.10 Par Value American Stock Exchange
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Title of each class Name of each exchange
on which registered
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]
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
1
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 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 Securities Exchange Act of 1934. (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 Act). Yes [ ] No [X]
The aggregate market value of the voting stock held by non-affiliates of the
registrant was $6,838,000 as of March 29, 2008, the last business day of the
registrant's most recently completed second fiscal quarter, at a price of $8.05
per share.
There were 1,875,333 shares of the Registrant's Common Stock, $0.10 par value,
outstanding as of December 22, 2008
DOCUMENTS INCORPORATED BY REFERENCE
Information required by Part III is incorporated by reference to portions of the
Registrant's Proxy statement for the 2009 Annual Meeting of Shareholders which
will be filed with the Securities and Exchange Commission by January 26, 2009.
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FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
---------------------------------------------
INDEX TO FORM 10-K
PART I.
Item 1 Business 5
Item 1A Risk Factors 19
Item 2 Properties 23
Item 3 Legal Proceedings 28
Item 4 Submission of Matters to a Vote of Security Holders 29
PART II
Item 5 Market for Registrant's Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities. 29
Item 6 Selected Financial Data. 31
Item 7 Management's Discussion and Analysis of Financial Condition and
Results of Operation. 31
Item 7A Quantitative and Qualitative Disclosures About Market Risk. 43
Item 8 Financial Statements and Supplementary Data. 43
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure. 44
Item 9A(T) Controls and Procedures. 44
Item 9B. Other Information 45
PART III.
Item 10 Directors, Executive Officers and Corporate Governance 45
Item 11 Executive Compensation 45
Item 12 Security Ownership of Certain Beneficial Owners and Management and
Related Stockholders Matters 45
Item 13 Certain Relationships and Related Transactions, and Director
Independence. 45
Item 14 Principal Accountant Fees and Services 46
PART IV
Item 15 Exhibits and Financial Statement Schedules. 46
SIGNATURES
CERTIFICATIONS
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As used in this Annual Report on Form 10-K, 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).
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PART I
Item 1. Business
----------------
When used in this report, the words "anticipate", "believe", "estimate",
"will", "intend" and "expect" and similar expressions identify forward-looking
statements. Forward-looking statements in this report include, but are not
limited to, those relating to the general expansion of the Company's business.
Although we believe that our plans, intentions and expectations reflected in
these forward-looking statements are reasonable, we can give no assurance that
these plans, intentions or expectations will be achieved. We undertake no
obligation to update forward-looking statements to reflect events or
circumstances occurring after the date of this annual report on Form 10-K.
General
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At September 27, 2008, we (i) operate 23 units, (excluding the adult
entertainment club referenced in (ii) below), consisting of restaurants, package
liquor stores and combination restaurants/package liquor 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 restaurants/package liquor stores. The table below provides
information concerning the type (i.e. restaurant, package liquor 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 September 27, 2008 and as compared to
September 29, 2007. 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".
FISCAL FISCAL
YEAR YEAR NOTE
TYPES OF UNITS 2008 2007 NUMBER
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Company Owned:
-------------
Combination package liquor store and
restaurant 4 4
Restaurant only 3 3 (1)
Package liquor store only 5 5
Company Managed Restaurants Only:
--------------------------------
Limited partnerships 9 7 (2)(3)
Franchise 1 1
Unrelated Third Party 1 1
Company Owned Club: 1 1
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TOTAL - Company
Owned/Operated Units: 24 22
FRANCHISED - units 6 6 (4)
-- --
5
Notes:
(1) Includes a restaurant located in Lake Worth, Florida which we acquired
from a franchisee during the second quarter of our fiscal year 2007 and which
commenced operating as a Company owned restaurant on March 4, 2007.
(2) Includes a restaurant located in Pembroke Pines, Florida which is
owned by a limited partnership in which we are the sole general partner and own
17% of the limited partnership interest and commenced operating on October 29,
2007.
(3) 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.
(4) 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 us.
With the exception of our combination package store and restaurant located
at 4 N. Federal Highway, Hallandale, Florida, (Store #31), which is operated on
property owned by us, all of our package liquor stores, restaurants as well as
our adult entertainment club are operated on properties leased from unaffiliated
third parties.
History and Development of Our Business
---------------------------------------
We were incorporated in Florida in 1959 and commenced operating as a chain
of small cocktail lounges and package liquor stores throughout South Florida. By
1970, we had established a chain of "Big Daddy's" lounges and package liquor
stores between Vero Beach and Homestead, Florida. From 1970 to 1979, we expanded
our package liquor store and lounge operations throughout Florida and opened
clubs in five other "Sun Belt" states. In 1975, we discontinued most of our
package store operations in Florida except in the South Florida areas of
Miami-Dade, Broward, Palm Beach and Monroe Counties. In 1982 we expanded our
club operations into the Philadelphia, Pennsylvania area as general partner of
several limited partnerships we organized. In March 1985 we began franchising
package liquor stores and lounges in the South Florida area. See Note 7 to the
consolidated financial statements and the discussion of franchised units on page
8.
During our fiscal year 1987, we began renovating our lounges to provide
full restaurant food service, and subsequently renovated and added food service
to most of our lounges. Food sales currently represent approximately 81% and bar
sales approximately 19% of our total restaurant sales.
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Our package liquor stores emphasize high volume business by providing
customers with a wide variety of brand name and private label merchandise at
discount prices. Our restaurants offer alcoholic beverages and full food service
with abundant portions and reasonable prices, served in a relaxed, friendly and
casual atmosphere.
We conduct our operations directly and through a number of limited
partnerships and wholly owned subsidiaries, all of which are listed below. Our
subsidiaries and the limited partnerships, (except for the limited partnership,
where we are not the general partner, which owns and operates our franchised
restaurant in Fort Lauderdale, Florida) are reported on a consolidated basis.
STATE OF PERCENTAGE
ENTITY ORGANIZATION OWNED
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Flanigan's Management Services, Inc. Florida 100
Flanigan's Enterprises, Inc. of Georgia Georgia 100
Flanigan's Enterprises, Inc. of Pa. Pennsylvania 100
CIC Investors #13, Limited Partnership Florida 40
CIC Investors #50, Limited Partnership Florida 17
CIC Investors #55, Limited Partnership Florida 48
CIC Investors #60, Limited Partnership Florida 45
CIC Investors #65, Limited Partnership Florida 28
CIC Investors #70, Limited Partnership Florida 41
CIC Investors #75, Limited Partnership Florida 13
CIC Investors #80, Limited Partnership Florida 27
CIC Investors #95, Limited Partnership Florida 30
Josar Investments, LLC Florida 100
Package Liquor Store Operations
---------------------------------
Our package liquor stores emphasize high volume business by providing
customers with a wide selection of brand name and private label liquors, beer
and wines while offering competitive pricing by meeting the published sales
prices of our competitors. We provide extensive sales training to our package
liquor store personnel. The stores are open for business six or seven days a
week from 9:00-10:00 a.m. to 9:00-10:00 p.m., depending upon demand and local
law. Approximately half of the Company's units have "night windows" with
extended evening hours.
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Company Owned Package Liquor Stores. We own and operate nine package
liquor stores in the South Florida area under the name "Big Daddy's Liquors",
four of which are jointly operated with restaurants we own.
Franchised Package Liquor Stores. We franchise four package liquor stores
in the South Florida area, all of which are operated under the name "Big Daddy's
Liquors" and are jointly operated with our franchisee's restaurant operations.
Three of the four franchised package liquor stores are franchised to members of
the family of our Chairman of the Board, officers and/or directors. We have not
entered into a franchise arrangement for either a package liquor store,
restaurant or combination package liquor store/restaurant since 1986 and do not
anticipate that we will do so in the foreseeable future.
Generally, a franchise agreement with our franchisees for the operation of
a package liquor store runs for the balance of the term of the franchisee's
lease for the business premises, extended by the franchisee's continued
occupancy of the business premises thereafter, whether by lease or ownership. In
exchange for our providing management and related services to the franchisee and
our granting the right to the franchisee to use our service mark, "Big Daddy's
Liquors", franchisees of package liquor stores pay us weekly in arrears, (i) a
royalty equal to approximately 1% of gross sales; plus (ii) an amount for
advertising equal to between 1-1/2% to 3% of gross sales generated at the stores
depending upon our actual advertising costs.
Restaurant Operations.
----------------------
Our restaurants provide a neighborhood casual, standardized dining
experience, typical of restaurant chains. The interior decor of the restaurants
is nautical with numerous fishing and boating pictures and decorations. The
restaurants are designed to permit minor modifications without significant
capital expenditures. However, from time to time we are required to redesign and
refurbish the restaurants at significant cost. Drink prices may vary between
locations to meet local conditions. Food prices are substantially standardized
for all restaurants. The restaurants' hours of operation are from 11:00 a.m. to
1:00-5:00 a.m. depending upon demand and local law.
Company Owned Restaurants. We own and operate seven restaurants all under
our service mark "Flanigan's Seafood Bar and Grill" four of which are jointly
operated with package liquor stores we own. We acquired one of the seven
restaurants we own, (the Lake worth, Florida restaurant), during the second
quarter of our fiscal year 2007 from a former franchisee who informed us that he
did not intend to continue operating the restaurant.
Franchised Restaurants. We franchise six restaurants, all of which operate
under our service mark "Flanigan's Seafood Bar and Grill", two of which operate
as a restaurant only and four of which operate jointly with a franchisee
operated "Big Daddy's Liquors" package liquor store.
Generally, a franchise agreement with our franchisees for the operation of
a restaurant runs for the balance of the term of the franchisee's lease for the
business premises, extended by the franchisee's continued occupancy of the
business premises thereafter, whether by lease or ownership. In
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exchange for our providing management and related services to the franchisee and
our granting the right to the franchisee to use our service mark, "Flanigan's
Seafood Bar and Grill", our franchisees pay us weekly in arrears, (i) a royalty
equal to approximately 3% of gross sales; plus (ii) an amount for advertising
equal to between 1-1/2% to 3% of gross sales from the restaurants.
For accounting purposes, we do not consolidate the revenue and expenses of
our franchisees' operations with our revenue and expenses. Franchise royalties
we receive are "earned" when sales are made by franchisees.
Restaurants Owned by Affiliated Limited Partnerships
----------------------------------------------------
We have invested with others, (some of whom are or are affiliated with our
officers and directors), in ten limited partnerships which currently own and
operate ten South Florida based restaurants under our service mark "Flanigan's
Seafood Bar and Grill". In addition to being a limited partner in these limited
partnerships, we are the sole general partner of all of these limited
partnerships and manage and control the operations of the restaurants except for
the restaurant located in Fort Lauderdale, Florida where we only hold a limited
partnership interest.
Generally, the terms of the limited partnership agreements provide that
until the investors' cash investment in a limited partnership (including any
cash invested by us) is returned in full, the limited partnership distributes to
the investors annually out of available cash from the operation of the
restaurant, as a return of capital, 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 and
one-half (1/2) to the investors, (including us), prorata based on the investors'
investment, as a return of capital. Once all of the investors, (including us),
have received, in full, amounts equal to their cash invested, an annual
management fee becomes payable to us equal to one-half (1/2) of cash available
to be distributed, with the other one half (1/2) of available cash distributed
to the investors (including us), as a profit distribution, pro-rata based on the
investors' investment. As of September 27, 2008, limited partnerships owning
three (3) restaurants, (Surfside, Florida, Kendall, Florida and West Miami,
Florida locations), 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 our receipt of distributable amounts
from the limited partnerships, we receive a fee equal to 3% of gross sales for
use of our "Flanigan's Seafood Bar and Grill" service mark, which use is
authorized while we act as general partner only. This 3% fee is "earned" when
sales are made by the limited partnerships and is paid weekly, in arrears. We
anticipate that we will continue to form limited partnerships to raise funds to
own and operate restaurants under our service mark "Flanigan's Seafood Bar and
Grill" using the same or substantially similar financial arrangement.
Below is information on the ten limited partnerships which own and operate
"Flanigan's Seafood Bar and Grill" restaurants:
9
Pinecrest, Florida
We are the sole general partner and 40% limited partner in this limited
partnership which has owned and operated a restaurant in Pinecrest, Florida
under our "Flanigan's Seafood Bar and Grill" service mark since August 14, 2006.
15.0% of the remaining limited partnership interest is owned by persons who are
either our officers, directors or their family members. As of the end of our
fiscal year 2008, this limited partnership has returned to its investors
approximately 18% of their initial cash invested.
Fort Lauderdale, Florida
A corporation, owned by one of our directors, acts as sole general partner
of a limited partnership which has owned and operated a restaurant in Fort
Lauderdale, Florida under our "Flanigan's Seafood Bar and Grill" service mark
since April 1, 1997. We have a 25% limited partnership interest in this limited
partnership. 58.8% of the remaining limited partnership interest is owned by
persons who are either our officers, directors or their family members. As of
the end of our fiscal year 2008, this limited partnership has returned to its
investors all cash invested, but since we are not the general partner of this
limited partnership, we do not receive an annual management fee. We have a
franchise arrangement with this limited partnership and for accounting purposes,
we do not consolidate the operations of this limited partnership into our
operations.
Surfside, Florida
We are the sole general partner and a 45% limited partner in this limited
partnership which has owned and operated a restaurant in Surfside, Florida under
our "Flanigan's Seafood Bar and Grill" service mark since March 6, 1998. 34.9%
of the remaining limited partnership interest is owned by persons who are either
our officers, directors or their family members. As of the end of our fiscal
year 2008, this limited partnership has returned to its investors all of their
initial cash invested and we receive an annual management fee equal to one-half
(1/2) of the cash available for distribution by this limited partnership.
Kendall, Florida
We are the sole general partner and a 41% limited partner in this limited
partnership which has owned and operated a restaurant in Kendall, Florida under
our "Flanigan's Seafood Bar and Grill" service mark since April 4, 2000. 29.7%
of the remaining limited partnership interest is owned by persons who are either
our officers, directors or their family members. As of the end of our fiscal
year 2008, this limited partnership has returned to its investors all of their
initial cash invested and we receive an annual management fee equal to one-half
(1/2) of the cash available for distribution by this limited partnership.
West Miami, Florida
We are the sole general partner and a 27% limited partner in this limited
partnership which has owned and operated a restaurant in West Miami, Florida
under our "Flanigan's Seafood Bar and Grill" service mark since October 11,
2001. 34.1% of the remaining limited partnership interest is
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owned by persons who are either our officers, directors or their family members.
As of the end of our fiscal year 2008, this limited partnership has returned to
its investors all of their initial cash invested and we receive an annual
management fee equal to one-half (1/2) of the cash available for distribution by
this limited partnership.
Weston, Florida
We are the sole general partner and a 30% limited partner in this limited
partnership which has owned and operated a restaurant in Weston, Florida under
our "Flanigan's Seafood Bar and Grill" service mark since January 20, 2004.
35.1% of the remaining limited partnership interest is owned by persons who are
either our officers, directors or their family members. As of the end of our
fiscal year 2008, this limited partnership has returned to its investors
approximately 73.75% of their initial cash invested. During the first quarter of
our fiscal year 2009, no distribution was made to limited partners as this
limited partnership had limited cash flow generated by this restaurant. The
limited cash flow was primarily attributable to increased competition, which we
expect to continue into our fiscal year 2009.
Stuart, Florida
We are the sole general partner and 13% limited partner in this limited
partnership which has owned and operated a restaurant in a Howard Johnson's
Hotel in Stuart, Florida under our "Flanigan's Seafood Bar and Grill" service
mark since January 11, 2004. 31.0% of the remaining limited partnership interest
is owned by persons who are either our officers, directors or their family
members. As of the end of our fiscal year 2008, this limited partnership has
returned to its investors approximately 22.5% of their initial cash invested.
During our fiscal year 2006, the limited partners of this limited partnership
only received three (3) quarterly distributions due to the limited cash flow
generated by the restaurant. During our fiscal years 2007 and 2008, no
distributions were made to limited partners as this limited partnership had net
losses of $98,000 and $8,000 from the operation of the restaurant during the
fiscal years 2007 and 2008, respectively, before depreciation and amortization,
and owed the Company $203,000 and $216,000, as of the end of our fiscal years
2007 and 2008, respectively, in advances made to meet operating losses.
Wellington, Florida
We are the sole general partner and a 28% limited partner in this limited
partnership which has owned and operated a restaurant in Wellington, Florida
under our "Flanigan's Seafood Bar and Grill" service mark since May 27, 2005.
25.7% of the remaining limited partnership interest is owned by persons who are
either our officers, directors or their family members. As of the end of our
fiscal year 2008, this limited partnership has returned to its investors
approximately 41% of their initial cash invested.
Davie, Florida
We are the sole general partner and a 48% limited partner in this limited
partnership which has owned and operated a restaurant in Davie, Florida under
our "Flanigan's Seafood Bar and Grill" service mark since July
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28, 2008. 9.7% of the remaining limited partnership interest is owned by persons
who are either our officers, directors or their family members. As of the end of
our fiscal year 2008, this limited partnership has yet to return to its
investors any of their initial cash invested.
Pembroke Pines, Florida
We are the sole general partner and a 17% limited partner in this limited
partnership which has owned and operated a restaurant in Pembroke Pines, Florida
under our "Flanigan's Seafood Bar and Grill" service mark since October 29,
2007. 17.9% of the remaining limited partnership interest is owned by persons
who are either our officers, directors or their family members. As of the end of
our fiscal year 2008, this limited partnership has returned to its investors
approximately 7.0% of their initial cash invested.
Management Agreement for "The Whale's Rib" Restaurant
-----------------------------------------------------
Since January, 2006, we have managed "The Whale's Rib", a casual dining
restaurant located in Deerfield Beach, Florida, pursuant to a management
agreement. We paid $500,000 in exchange for our rights to manage this
restaurant. The restaurant is owned by a third party unaffiliated with us. In
exchange for providing management, bookkeeping and related services, we receive
one-half (1/2) of the net profit, if any, from the operation of the restaurant.
The term of the management agreement, which commenced January 9, 2006, is for
ten (10) years, with four (4) five (5) year renewal options in favor of the
owner of the restaurant. For our fiscal years ended September 27, 2008 and
September 29, 2007, we generated $150,000 and $160,000 of revenue, respectively,
from providing these management services.
Adult Entertainment Club
------------------------
We own, but do not operate, an adult entertainment nightclub located in
Atlanta, Georgia which operates under the name "Mardi Gras". We have a
management agreement with an unaffiliated third party to manage the club.
Effective May 1, 2006, the unaffiliated third party that manages the club became
obligated under a new lease for the business premises where the club operates
for a period of ten (10) years, with one (1) ten (10) year renewal option and as
of such date we are no longer obligated under the lease. Under our management
agreement, the unaffiliated third party management firm is obligated to pay us
an annual amount, paid monthly, equal to the greater of $150,000 or ten (10%)
percent of gross sales from the club, offset by one-half (1/2) of any rental
increases, provided our fees will never be less than $150,000 per year. For our
fiscal years ended September 27, 2008 and September 29, 2007, we generated
$238,000 and $203,000 of revenue, respectively, from the operation of the club.
Operations and Management
--------------------------
We emphasize systematic operations and control of all package liquor
stores and restaurants regardless of whether we own, franchise or manage the
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unit. Each unit has its own manager who is responsible for monitoring inventory
levels, supervising sales personnel, food preparation and service in restaurants
and generally assuring that the unit is managed in accordance with our
guidelines and procedures. We have in effect an incentive cash bonus program for
our managers and salespersons based upon various performance criteria. Our
operations are supervised by area supervisors. Each area supervisor supervises
the operations of the units within his or her territory and visits those units
to provide on-site management and support. There are five area supervisors
responsible for package liquor store, restaurant and club operations in specific
geographic districts.
All of our managers and salespersons receive extensive training in sales
techniques. We arrange for independent third parties, or "shoppers", to inspect
each unit in order to evaluate the unit's operations, including the handling of
cash transactions.
Purchasing and Inventory
------------------------
The package liquor business requires a constant substantial capital
investment in inventory in the units. Our inventory consists primarily of liquor
and wine products and as such, does not become excessive or obsolete that would
require identifying and recording of the same. Liquor inventory purchased can
normally be returned only if defective or broken.
All of our purchases of liquor inventory are made through our purchasing
department from our corporate headquarters. The major portion of inventory is
purchased under individual purchase orders with licensed wholesalers and
distributors who deliver the merchandise within one or two days of the placing
of an order. Frequently there is only one wholesaler in the immediate marketing
area with an exclusive distributorship of certain liquor product lines.
Substantially all of our liquor inventory is shipped by the wholesalers or
distributors directly to our stores. We significantly increase our inventory
prior to Christmas, New Year's Eve and other holidays. Under Florida law, we are
required to pay for our liquor purchases within ten days of delivery.
During the second quarter of our fiscal year, we contracted for the
purchase of a new point of sale computer system for our package liquor stores,
at a cost of approximately $237,000, including the cost to customize and test
the new system, but excluding a surveillance camera system which we estimate
will cost an additional $118,000. We also paid approximately $50,000 to purchase
universal wireless hand-held scanners, which payment is in addition to the
contracted amount. The testing of the new point of sale computer system was
successfully completed during our fiscal year 2008, we used the wireless
hand-held scanners to take our fiscal year end liquor inventory and the new
point of sale computer system was installed during the first quarter of our
fiscal year 2009. The package liquor stores began using the new point of sale
computer system on November 2, 2008. The final cost of the new point of sale
computer system, including hand-held, wireless scanners but excluding
surveillance camera system, is approximately $287,000, of which approximately
$266,000 has been paid to date.
Negotiations with food suppliers are conducted by our purchasing
department at our corporate headquarters. We believe this ensures that the
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best quality and prices will be available to each restaurant. Orders for food
products are prepared by each restaurant's kitchen manager and reviewed by the
restaurant's general manager before orders are placed. Food is delivered by the
supplier directly to each restaurant. Orders are placed several times a week to
ensure product freshness. Food inventory is primarily paid for monthly.
Government Regulation
---------------------
Our operations are subject to various federal, state and local laws
affecting our business. In particular, our operations are subject to regulation
by federal agencies and to licensing and regulation by state and local health,
sanitation, alcoholic beverage control, safety and fire department agencies in
the state or municipality where our units are located.
Alcoholic beverage control regulations require each of our restaurants and
package liquor stores to obtain a license to sell alcoholic beverages from a
state authority and in certain locations, county and municipal authorities.
In Florida, where all of our restaurants and package liquor stores are
located, most of our liquor licenses are issued on a "quota license" basis.
Quota licenses are issued on the basis of a population count established from
time to time under the latest applicable census. Because the total number of
liquor licenses available under a quota license system is limited and
restrictions placed upon their transfer, the licenses have purchase and resale
value based upon supply and demand in the particular areas in which they are
issued. The quota licenses held by us allow the sale of liquor for on and off
premises consumption. In Florida, the other liquor licenses held by us or
limited partnerships of which we are the general partner are restaurant liquor
licenses, which do not have quota restrictions and no purchase or resale value.
A restaurant liquor license is issued to every applicant who meets all of the
state and local licensing requirements, including, but not limited to zoning and
minimum restaurant size, seating and menu. The restaurant liquor licenses held
by us allow the sale of liquor for on premises consumption only.
In the State of Georgia, where our adult entertainment club is located,
licensed establishments also do not have quota restrictions for on-premises
consumption and such licenses are issued to any applicant who meets all of the
state and local licensing requirements based upon extensive license application
filings and investigations of the applicant.
All licenses must be renewed annually and may be revoked or suspended for
cause at any time. Suspension or revocation may result from violation by the
licensee or its employees of any federal, state or local law regulation
pertaining to alcoholic beverage control. Alcoholic beverage control regulations
relate to numerous aspects of the daily operations of our units, including,
minimum age of patrons and employees, hours of operations, advertising,
wholesale purchasing, inventory control, handling, storage and dispensing of
alcoholic beverages, internal control and accounting and collection of state
alcoholic beverage taxes.
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As the sale of alcoholic beverages constitutes a large share of our
revenue, the failure to receive or retain, or a delay in obtaining a liquor
license in a particular location could adversely affect our operations in that
location and could impair our ability to obtain licenses elsewhere.
During our fiscal years 2007 and 2008, no significant pending matters have
been initiated concerning any of our licenses which might be expected to result
in a revocation of a liquor license or other significant actions against us.
We are subject to "dram-shop" statutes due to our restaurant operations
and club ownership. These statutes generally provide a person injured by an
intoxicated person the right to recover damages from an establishment that
wrongfully served alcoholic beverages to the intoxicated individual. We carry
liquor liability coverage as part of our existing comprehensive general
liability insurance, which we believe is consistent with coverage carried by
other entities in the restaurant industry. Although we are covered by insurance,
a judgment against us under a dram-shop statute in excess of our liability
coverage could have a material adverse effect on us.
Our operations are also subject to federal and state laws governing such
matters as wages, working conditions, citizenship requirements and overtime.
Some states, including Florida, have set minimum wage requirements higher than
the federal level. Significant numbers of hourly personnel at our restaurants
are paid at rates related to the Florida minimum wage and, accordingly,
increases in the minimum wage will increase labor costs. We are also subject to
the Americans With Disability Act of 1990 (ADA), which, among other things, may
require certain renovations to our restaurants to meet federally mandated
requirements. The cost of any such renovations is not expected to materially
affect us.
We are not aware of any statute, ordinance, rule or regulation under
present consideration which would significantly limit or restrict our business
as now conducted. However, in view of the number of jurisdictions in which we
conduct business, and the highly regulated nature of the liquor business, there
can be no assurance that additional limitations may not be imposed in the
future, even though none are presently anticipated.
General Liability Insurance
---------------------------
We have general liability insurance which incorporates a semi-self-insured
plan under which we assume the full risk of the first $50,000 of exposure per
occurrence, while the limited partnerships assume the full risk of the first
$10,000 of exposure per occurrence. Our insurance carrier is responsible for
$1,000,000 coverage per occurrence above our self-insured deductible, up to a
maximum aggregate of $2,000,000 per year. During our fiscal year 2007 and again
in fiscal year 2008 we were able to purchase excess liability insurance at a
reasonable premium, whereby our excess insurance carrier is responsible for
$6,000,000 coverage above our primary general liability insurance coverage. With
the exception of one (1) limited partnership which has higher general liability
insurance coverage to comply with the terms of its lease for the business
premises, we are un-insured against liability claims in excess of $7,000,000 per
occurrence and in the aggregate.
15
Our general policy is to settle only those legitimate and reasonable
claims asserted and to aggressively defend and go to trial, if necessary, on
frivolous and unreasonable claims. We have established a select group of defense
attorneys which we use in conjunction with this program. Under our current
liability insurance policy, any expense incurred by us in defending a claim,
including adjusters and attorney's fees, are a part of our $50,000 self-insured
retention.
An accrual for our estimated liability claims is included in the
consolidated balance sheets in the caption "Accounts payable and accrued
expenses". A significant unfavorable judgment or settlement against us in excess
of our liability insurance coverage could have a materially adverse effect on
the Company.
Property Insurance; Windstorm Insurance; Deductibles
----------------------------------------------------
For the policy year commencing December 30, 2008, our property insurance
will provide for full insurance coverage for property losses, including those
caused by windstorm, such as a hurricane, and will be the first year of our two
(2) year property insurance policy with our insurance carrier. For property
losses caused by windstorm, the property insurance will have deductibles of 5%
per location, per occurrence. For all other property losses, the property
insurance will have deductibles of $10,000 per location, per occurrence. Our
insurance expense for the policy year commencing December 30, 2008, including
insurance coverage for our consolidated limited partnerships, estimated at
$294,000, decreased by approximately $140,000, (32%), due primarily to decreases
in windstorm insurance coverage. Our insurance expense for the policy year
commencing December 30, 2009 will remain the same excluding only increases
and/or decreases in insurance expense due to changes in insurable values.
For the policy year which commenced December 30, 2007, our property
insurance provided for full insurance coverage for property losses, other than
those caused by windstorm, such as a hurricane. The losses caused by hurricanes
during the 2004 and 2005 hurricane seasons in South Florida made windstorm
insurance coverage difficult to obtain and, where available, expensive to the
point that full windstorm coverage for all locations was economically
prohibitive. For those locations east of I-95, windstorm insurance coverage was
only available through the State of Florida sponsored insurance fund and then
limited to $1,000,000 per building, including personal property, but without
business interruption insurance. The State of Florida sponsored insurance fund
had deductibles of 3% per location, per occurrence. Windstorm coverage for
locations west of I-95 was procured through a private insurance carrier,
including business interruption insurance, which provided coverage of
$10,000,000 per occurrence and in the aggregate, with "named storm deductibles"
of 5% per location per occurrence, with a minimum deductible of $100,000 per
occurrence and "other windstorm deductibles" of $100,000 per occurrence. The
windstorm policy provided by the private insurance carrier contained a
limitation on recovery for roof replacement, with any roofs dating prior to 2001
being covered for their actual replacement value, in lieu of their replacement
cost. We determined that only two roofs at our locations west of I-95 for which
we and/or our limited partnerships are responsible, pre-date 2001 so the
exposure due to the roof replacement limitation was not significant. The private
insurance policy also provided business interruption insurance for locations
east of I-95, with a deductible of 5% per location, per occurrence, for business
16
interruption insurance, as well as windstorm insurance in excess of the primary
coverage provided through the State of Florida sponsored insurance fund.
Management believed that the windstorm insurance coverage effective December 30,
2007 would have provided adequate insurance coverage for all locations in the
event of a hurricane, but in the event that more than four (4) locations had
been destroyed by a hurricane, thereby requiring total reconstruction, the
windstorm insurance coverage may have been inadequate and we and/or the limited
partnership may have had to bear the cost of any uninsured expenses, which may
have had a material adverse effect upon the financial condition and/or results
of operations of the Company. Our insurance expense for the policy year
commencing December 30, 2007, including insurance coverage for our consolidated
limited partnerships, estimated at $434,000, decreased by approximately
$153,000, (26%), due primarily to decreases in windstorm insurance coverage.
During the policy year commencing December 30, 2007, neither we, nor any of our
limited partnerships, made a claim against our property insurance.
Competition and the Company's Market
------------------------------------
The liquor and hospitality industries are highly competitive and are often
affected by changes in taste and entertainment trends among the public, by
local, national and economic conditions affecting spending habits, and by
population and traffic patterns. We believe that the principal means of
competition among package liquor stores is price and that, in general, the
principal means of competition among restaurants include the location, type and
quality of facilities and the type, quality and price of beverage and food
served.
Our package liquor stores compete directly or indirectly with local
retailers and discount "superstores". Due to the competitive nature of the
liquor industry in South Florida, we have had to adjust our pricing to stay
competitive, including meeting all competitors' advertisements. Such practices
will continue in the package liquor business. We believe that we have a
competitive position in our market because of widespread consumer recognition of
the "Big Daddy's" and "Flanigan's" names.
We have many well-established competitors, both nationally and locally
owned, with substantially greater financial resources and a longer history of
operations than we do. Their resources and market presence may provide
advantages in marketing, purchasing and negotiating leases. We compete with
other restaurant and retail establishments for sites and finding management
personnel.
Our business is subject to seasonal effects, including that liquor
purchases tend to increase during the holiday seasons.
Trade Names
-----------
We operate our package liquor stores and restaurants under two service
marks; "Big Daddy's Liquors" and "Flanigan's Seafood Bar and Grill", both of
which are federally registered trademarks owned by us. Our right to the use of
the "Big Daddy's" service mark is set forth under a consent decree of a
17
Federal Court entered into by us in settlement of federal trademark litigation.
The consent decree and the settlement agreement allow us to continue to use and
to expand our use of the "Big Daddy's" service mark in connection with limited
food and liquor sales in Florida, while restricting the future sale of distilled
spirits in Florida under the "Big Daddy's" name by the other party who has a
federally registered service mark for "Big Daddy's" use in the restaurant
business. The Federal Court retained jurisdiction to enforce the consent decree.
We have acquired registered Federal trademarks on the principal register for our
"Flanigan's" and "Flanigan's Seafood Bar and Grill" service marks.
The standard symbolic trademark associated with our facilities and
operations is the bearded face and head of "Big Daddy" which is predominantly
displayed at all "Flanigan's" facilities and all "Big Daddy's" facilities
throughout the country. The face comprising this trademark is that of the
Company's founder, Joseph "Big Daddy" Flanigan, and is a federally registered
trademark owned by us.
Employees
---------
As of our fiscal year end 2008, we employed 1003 persons, of which 752
were full-time and 251 were part-time. Of these, 36 were employed at the
corporate offices in administrative capacities and 5 were employed in
maintenance. Of the remaining employees, 44 were employed in package liquor
stores and 918 in restaurants.
None of our employees are represented by collective bargaining
organizations. We consider our labor relations to be favorable.
EXECUTIVE OFFICERS OF THE REGISTRANT
Positions and Offices Office or Position
Name Currently Held Age Held Since
---- ----------------------- --- ------------------
James G. Flanigan Chairman of the Board 44 (1)
of Directors, Chief
Executive Officer and
President
August Bucci Chief Operating Officer 64 2002
and Executive Vice
President
Jeffrey D. Kastner Chief Financial Officer 55 (2)
General Counsel and
Secretary
Jean Picard Vice President of 70 2002
Package Liquor Store
Operations
(1) Chairman of the Board of Directors, Chief Executive Officer since 2005;
President since 2002.
(2) Chief Financial Officer since 2004; Secretary since 1995; and General
Counsel since 1982.
18
Flanigan's 401(k) Plan
----------------------
Effective July 1, 2004, we began sponsoring a 401(k) retirement plan
covering substantially all employees who meet certain eligibility requirements.
Employees may contribute elective deferrals to the plan up to amounts allowed
under the Internal Revenue Code. We are not required to contribute to the plan
but may make discretionary profit sharing and/or matching contributions. During
our fiscal years ended September 27, 2008 and September 29, 2007, the Board of
Directors approved discretionary matching contributions totaling $30,000 and
$29,000, respectively.
Item 1A Risk Factors
------------------------
An investment in our common stock involves a high degree of risk. These
risks should be considered carefully with the uncertainties described below, and
all other information included in this Annual Report on Form 10-K, before
deciding whether to purchase our common stock. Additional risks and
uncertainties not currently known to management or that management currently
deems immaterial may also become important factors that may harm our business,
financial condition or results or operations. The occurrence of any of the
following risks could harm our business, financial condition and results of
operations. The trading price of our common stock could decline due to any of
these risks and uncertainties and you may lose part or all of your investment.
Certain statements in this report contain forward-looking information. In
general, forward-looking statements include estimates of future revenues, cash
flows, capital expenditures, or other financial items and assumptions underlying
any of the foregoing. Forward-looking statements reflect management's current
expectations regarding future events and use words such as "anticipate",
"believe", "expect", "may", "will" and other similar terminology. These
statements speak only as of the date they were made and involve a number of
risks and uncertainties that could cause actual results to differ materially
from those expressed in the forward-looking statements. Several factors, many
beyond our control, could cause actual results to differ materially from
management's expectations.
General Economic Factors May Adversely Affect Results of Operations
-------------------------------------------------------------------
The disruption experienced in the United States and global credit markets
during the second half of calendar year 2008 has adversely affected disposable
consumer income and consumer confidence. Prolonged negative changes in domestic
and global economic conditions or disruptions of either or both of the financial
and credit markets may have a material adverse effect on our results of
operations, financial condition and liquidity. At this time, it is unclear
whether and to what extent the actions taken by the
19
United States government, including, without limitation, the passage of the
Emergency Economic Stabilization Act of 2008 and other measures currently being
implemented or contemplated, will mitigate the effect of the crisis. With
respect to the Company, while we have no immediate need to access the credit
markets in the foreseeable future, the impact of the current crisis on our
ability to obtain financing in the future, if needed, and the cost and terms of
the same is unclear. From an operating standpoint, the current financial crisis
has resulted in reduced customer traffic in some or all of our restaurants
and/or package liquor stores, reduced revenues and profitability, increased
costs and imposed practical limits on our menu pricing. A continued decline in
revenues and/or profitability may result in a deterioration of our financial
position.
Fluctuations in Commodity Prices and Availability of Commodities Including Pork,
Beef, Fish, Poultry and Dairy Could Affect Our Business
--------------------------------------------------------------------------------
A significant component of our costs are related to food commodities
including pork, beef, fish, poultry and dairy products. If there is a
substantial increase in prices for these products and we are unable to offset
the increases with changes in menu prices, our results could be negatively
affected.
Our Business Could Be Materially Adversely Affected If We Are Unable To
Expand In A Timely And Profitable Manner
----------------------------------------
To grow successfully, we must open new restaurants on a timely and
profitable basis. We have experienced delays in restaurant openings from time to
time and may experience delays in the future. During fiscal year 2008, due to
delays in the permitting process and construction, the Pembroke Pines, Florida
and Davie, Florida restaurants were opened after substantial delays. Increases
in labor and building material costs increased the cost of planned renovations
to the Davie, Florida restaurant by approximately $1,000,000.
Our ability to open and profitably operate restaurants and/or package
liquor stores is subject to various risks such as identification and
availability of suitable and economically viable locations, the negotiation of
acceptable leases or the purchase terms of existing locations, the availability
of limited partner investors or other means to raise capital, the need to obtain
all required governmental permits (including zoning approvals) on a timely
basis, the need to comply with other regulatory requirements, the availability
of necessary contractors and subcontractors, the availability of construction
materials and labor, the ability to meet construction schedules and budgets,
variations in labor and building material costs, changes in weather or other
acts of God that could result in construction delays and adversely affect the
results of one or more restaurants and/or package liquor stores for an
indeterminate amount of time. If we are unable to successfully manage these
risks, we will face increased costs and lower than anticipated revenues which
will materially adversely affect our business, financial condition, operating
results and cash flow.
20
Changes in Customer Preferences for Casual Dining Styles Could Adversely Affect
Financial Performance
--------------------------------------------------------------------------------
Changing customer preferences, tastes and dietary habits can adversely
impact our business and financial performance. We offer a large variety of
entrees, side dishes and desserts and its continued success depends, in part, on
the popularity of our cuisine and casual style of dining. A change from this
dining style may have an adverse effect on our business.
Labor Shortages, an Increase in Labor Costs, or Inability to Attract Employees
Could Harm Our Business
--------------------------------------------------------------------------------
Our employees are essential to our operations and our ability to deliver
an enjoyable dining experience to our customers. If we are unable to attract and
retain enough qualified restaurant and/or package liquor store personnel at a
reasonable cost, and if they do not deliver an enjoyable dining experience, our
results may be negatively affected. Additionally, competition for qualified
employees could require us to pay higher wages, which could result in higher
labor costs.
Increases in Employee Minimum Wages by the Federal or State Government Could
Adversely Affect Business
--------------------------------------------------------------------------------
Certain of our Company employees are paid wages that relate to federal and
state minimum wage rates. Increases in the minimum wage rates, such as annual
cost of living increases in the State of Florida minimum wage, may significantly
increase our labor costs. In addition, since our business is labor-intensive,
shortages in the labor pool or other inflationary pressure could increase labor
costs, which could harm our financial performance.
Due to Our Geographic Locations, Restaurants are Subject to Climate Conditions
that Could Affect Operations
--------------------------------------------------------------------------------
All but one (1) of our restaurants and package liquor stores are located
in South Florida, with the remaining restaurant located in Central Florida.
During hurricane season, (June 1st through November 30th each year), our
restaurants and/or package liquor stores may face harsh weather associated with
hurricanes and tropical storms. These harsh weather conditions may make it more
difficult for customers to visit our restaurants and package liquor stores, or
may necessitate the closure of the stores and restaurants for a period of time.
If customers are unable to visit our restaurants and/or package liquor stores,
our sales and operating results may be negatively affected.
21
Due to Our Geographic Locations, We May Not be Able to Acquire Windstorm
Insurance Coverage or Adequate Windstorm Insurance Coverage at a Reasonable Rate
--------------------------------------------------------------------------------
Due to the anticipated active hurricane seasons in South Florida in the
future, we may not be able to acquire windstorm insurance coverage for our
restaurant and package liquor store locations on a year-to-year basis or may not
be able to get adequate windstorm insurance coverage at reasonable rates. If we
are unable to obtain windstorm insurance coverage or adequate windstorm
insurance coverage at reasonable rates, then we will be self-insured for all or
a part of the exposure for damages caused by a hurricane impacting South
Florida, which may have a material adverse effect upon our financial condition
and/or results of operations.
Inability to Attract and Retain Customers Could Affect Results of Operations
--------------------------------------------------------------------------------
We take pride in our ability to attract and retain customers, however, if
we do not deliver an enjoyable dining experience for our customers, they may not
return and results may be negatively affected.
We May Face Liability Under Dram Shop Statutes
----------------------------------------------
Our sale of alcoholic beverages subjects us to "dram shop" statutes. These
statutes allow an injured person to recover damages from an establishment that
served alcoholic beverages to an intoxicated person. If we receive a judgment
substantially in excess of our insurance coverage, or if we fail to maintain our
insurance coverage, our business, financial condition, operating results or cash
flows could be materially and adversely affected. We currently have no "dram
shop" claims. See "Item 1. Business--Government Regulation" for a discussion of
the regulations with which we must comply.
We May Face Instances of Food Borne Illness
-------------------------------------------
During our fiscal year 2007, several nationally known restaurants
experienced outbreaks of food poisoning believed to be caused by E.coli
contained in fresh spinach, which is not included in any of the items on our
menu. In years past, Asian and European countries experienced outbreaks of avian
flu. Incidents of "mad cow" disease have occurred in Canadian and U.S. cattle
herds. These problems, other food-borne illnesses (such as, hepatitis A,
trichinosis or salmonella) and injuries caused by food tampering have in the
past, and could in the future, adversely affect the price and availability of
affected ingredients and cause changes in consumer preference. As a result, our
sales could decline.
Instances of food-borne illnesses, real or perceived, whether at our
restaurants or those of our competitors, could also result in negative publicity
about us or the restaurant industry, which could adversely affect sales. If we
react to negative publicity by changing our menu or other key aspects of the
dining experience we offer, we may lose customers who do not accept those
changes, and may not be able to attract enough new customers to
22
produce the revenue needed to make our restaurants profitable. If our guests
become ill from food-borne illnesses, we could be forced to temporarily close
some restaurants. A decrease in guest traffic as a result of health concerns or
negative publicity, or as a result of a change in our menu or dining experience
or a temporary closure of any of our restaurants, could materially harm our
business.
We Face Competition in the Restaurant and Liquor Industries, and If We are
Unable to Compete Effectively, Our Business and Financial Performance will be
Adversely Affected
--------------------------------------------------------------------------------
The restaurant and liquor industries are intensely competitive and are
affected by changes in customer tastes, dietary habits and by economic and
demographic trends. New menu items, concepts and trends are constantly emerging.
We compete on quality, variety, value, service, price and location. If we are
unable to compete effectively, our business, financial condition and results of
operations will be materially adversely affected.
Item 2. Properties
------------------
Our operations are conducted primarily on leased property with the
exception of (i) our corporate headquarters, which is conducted in an office
building and the land upon which it is built, which we purchased in December,
1999 and have occupied since April 2001; and (ii) our combination restaurant and
package liquor store in Hallandale, Florida which operates in a building and the
land upon which it is built, which we purchased in July, 2006.
All of our units require periodic refurbishing in order to remain
competitive. We have budgeted $700,000 for our refurbishing program for fiscal
year 2009. See Item 7, "Liquidity and Capital Resources" for discussion of the
amounts spent in fiscal year 2008.
The following table summarizes information related to the properties upon
which our operations are conducted:
Square Franchised/
Name and Location Footage Seats Owned by Lease Terms
----------------- ------- ----- ----------- -----------
Big Daddy's Liquors #4 1,978 N/A Company 3/1/02 to 2/28/27
Flanigan's Enterprises and Options to
Inc. (6) 2/28/47
7003 Taft Street
Hollywood, FL
Big Daddy's Liquors #7 1,450 N/A Company 11/1/00 to 10/31/09
Flanigan's Enterprises and Annual Options
Inc. to 10/31/15
1550 W. 84th Street
Hialeah, FL
23
Square Franchised/
Name and Location Footage Seats Owned by Lease Terms
----------------- ------- ----- ----------- -----------
Big Daddy's Liquors #8 1,942 N/A Company 5/1/99 to 4/30/14
Flanigan's Enterprises
Inc.
959 State Road 84
Fort Lauderdale, FL
Flanigan's Seafood 4,300 130 Company 10/1/71 to 12/31/09
Bar and Grill #9 New lease 1/1/10
Flanigan's Enterprises to 12/31/14
Inc. Options to
1550 W. 84th Street 12/31/24
Hialeah, FL
Flanigan's Legends 5,000 150 Franchise 1/4/00 to 1/3/20
Seafood Bar and Grill Option to 1/3/25
#11, 11 Corporation (1)
330 Southern Blvd.
W. Palm Beach, FL
Flanigan's Seafood 5,000 180 Company 11/15/92 to
Bar and Grill #12 11/15/09
Flanigan's Enterprises, Option to
Inc. (11) 11/15/10
2405 Tenth Ave. North
Lake Worth, FL
Flanigan's Seafood 3,320 90 Franchise 6/1/79 to 6/1/09
Bar and Grill #14 Options to 6/1/19
Big Daddy's #14, Inc. (1)(2)(5)
2041 NE Second St.
Deerfield Beach, FL
Flanigan's Seafood 4,000 90 Franchise/ 3/2/76 to 8/31/11
Bar and Grill #15 Limited
CIC Investors #15 Ltd.(1)(2) Partnership
1479 E. Commercial Blvd.
Ft. Lauderdale, FL
Flanigan's Seafood 4,300 100 Franchise 2/15/72 to 12/31/10
Bar and Grill #18 Options to
Twenty Seven Birds 12/31/20
Corp. (1)(2)
2721 Bird Avenue
Miami, FL
Flanigan's Seafood 4,500 160 Company 3/1/72 to 12/31/10
Bar and Grill #19 Options to 12/31/20
Flanigan's Enterprises
Inc.
2505 N. University Dr.
Hollywood, FL
24
Square Franchised/
Name and Location Footage Seats Owned by Lease Terms
----------------- ------- ----- ----------- -----------
Flanigan's Seafood 5,100 140 Company 7/15/68 to 12/31/09
Bar and Grill #20 Annual options
Flanigan's Enterprises until the Company
Inc. fails to exercise
13205 Biscayne Blvd. Additional Lease
North Miami, FL 5/1/69 to 12/31/09
Annual options
until the Company
fails to exercise
Flanigan's Seafood 4,100 200 Company 12/16/68 to
Bar and Grill #22 12/31/10
Flanigan's Enterprises Options to 12/31/20
Inc. Option to purchase
2600 W. Davie Blvd.
Ft. Lauderdale, FL
Flanigan's Seafood 4,600 150 Company Company Owned
Bar and Grill #31
Flanigan's Enterprises
Inc. (7)
4 N. Federal Highway
Hallandale, FL
Flanigan's Guppy's 4,620 130 Franchise 11/1/03 to 4/30/11
Seafood Bar and Grill #33
Guppies, Inc. (1)(2)
45 S. Federal Highway
Boca Raton, FL
Big Daddy's Liquors 3,000 N/A Company 5/29/97 to 5/28/12
#34, Flanigan's Option to 5/28/17
Enterprises, Inc.
9494 Harding Ave.
Surfside, FL
Flanigan's Seafood 4,600 140 Company 4/1/71 to 12/31/10
Bar and Grill #40, Option to 12/31/15
Flanigan's Enterprises
Inc.
5450 N. State Road 7
N. Lauderdale, FL
Piranha Pat's #43 4,500 90 Franchise 12/1/72 to 11/30/12
BD 43 Corporation (1)(2) Option to 11/30/22
2500 E. Atlantic Blvd.
Pompano Beach, FL
25
Square Franchised/
Name and Location Footage Seats Owned by Lease Terms
----------------- ------- ----- ----------- -----------
Big Daddy's Liquors 6,000 N/A Company 12/21/68 to 1/1/10
#47, Flanigan's Options to 1/1/50
Enterprises, Inc. (3)
8600 Biscayne Blvd.
Miami, FL
Flanigan's Seafood 8,000 200 Limited 06/01/91 to 5/31/11
Bar and Grill #13, Partnership Options to 5/31/21
CIC Investors #13, Ltd.
11415 S. Dixie Highway
Pinecrest, FL
Flanigan's Seafood 4,000 200 Limited 10/24/06 to 10/23/11
Bar and Grill #50, Partnership Options to 10/23/26
CIC investors #50, Ltd.(8)
17185 Pines Boulevard
Pembroke Pines, FL
Flanigan's Seafood 5,900 200 Limited 1/5/07 to 12/31/21
Bar and Grill #55 Partnership Options to 12/31/31
CIC Investors #55, Ltd.(9)
2190 S. University Drive
Davie, Florida
Flanigan's Seafood 6,800 200 Limited 8/1/97 to 12/31/11
Bar and Grill #60 Partnership
CIC Investors #60 Ltd.
9516 Harding Avenue
Surfside, FL
Flanigan's Seafood 6,128 200 Limited 5/01/05 to 6/30/15
Bar and Grill #65 Partnership Options to 3/31/25
CIC Investors #65, Ltd.
2335 State Road 7,Suite 100
Wellington, FL
Flanigan's Seafood 4,850 161 Limited 4/1/00 to 3/31/10
Bar and Grill #70 Partnership Options to 3/31/30
CIC Investors #70 Ltd.
12790 SW 88 St
Kendall, FL
Flanigan's Seafood 7,000 200 Limited 10/1/03 to 9/30/09
Bar and Grill #75 Partnership Options to 9/30/27
CIC Investors # 75 Ltd.
950 S. Federal Highway
Stuart, FL
26
Square Franchised/
Name and Location Footage Seats Owned by Lease Terms
----------------- ------- ----- ----------- -----------
Flanigan's Seafood 5,000 165 Limited 6/15/01 to 12/14/19
Bar and Grill #80 Partnership Options to 12/14/39
CIC Investors #80 Ltd.
8695 N.W. 12th St
Miami, FL
Flanigan's Seafood 5,700 235 Limited 7/29/01 to 7/28/17
Bar and Grill #95 Partnership Options to 7/28/32
CIC Investors #95 Ltd.
2460 Weston Road
Weston, FL
Mardi Gras 10,000 400 Company 4/30/06 to 4/30/16
Flanigan's Enterprises, Option to 4/30/26
Inc., #600 (4)(10)
Powers Ferry Landing
Atlanta, GA
(1) Franchised by Company.
(2) Lease assigned to franchisee.
(3) We own 52% of the underlying leasehold from the unaffiliated third parties
to whom the lease had been assigned and subleased back.
(4) Location managed by an unaffiliated third party.
(5) Effective December 1, 1998, we purchased the Management Agreement to
operate the franchised restaurant for the franchisee.
(6) Ground lease executed by us on September 25, 2001. We constructed a
building of 4,120 square feet, 1,978 square feet is used by us for the
operation of a package liquor store and the other 2,142 square feet is
subleased as retail space. The package liquor store opened for business on
November 17, 2003.
(7) During the fourth quarter of our fiscal year 2006, we purchased the real
property and an assignment of a ground lease of this location pursuant to
an option to purchase contained in the Sublease Agreement. During our
fiscal year 2007, we purchased the real property subject to the ground
lease.
(8) Restaurant opened for business on October 29, 2007.
(9) Restaurant opened for business on July 28, 2008.
(10) During the third quarter of our fiscal year 2006, our lease for this
location expired. The unaffiliated third party entered into a new lease
for the business premises effective May 1, 2006 and as of that date, we no
longer have responsibility to pay any amounts under the lease.
27
(11) Effective March 4, 2007, we purchased the assets of the franchised
restaurant from our franchisee, including the leasehold.
During our fiscal year 2007, we purchased the real property and building
where our combination restaurant and package liquor store located at 4 North
Federal Highway, Hallandale, Florida (Store #31) operates. We paid $552,500 for
the real property, which was partially financed with an advance of $250,000 on
the mortgage procured by us during the fourth quarter of our fiscal year 2006 to
purchase the limited liability company which owns the real property and the
ground lease at this location, thereby raising the principal balance on such
mortgage to $3,530,000. The mortgage amount bears interest at the rate of seven
and one-half (7 1/2%) percent per annum, is amortized over twenty years with
equal monthly payments of principal and interest, each in the amount of $28,600,
with the entire principal balance and all accrued interest due in October 2013.
During our fiscal year 2007, we purchased the real property located
adjacent to the parking lot of our combination restaurant and package liquor
store located at 4 North Federal Highway, Hallandale, Florida, (Store #31). A
residence, consisting of approximately 1,200 square feet, is located upon the
property and as of the end of our fiscal year 2008 is leased to an unaffiliated
third party. We paid $600,000 for this property, $450,000 of which we borrowed
from an unaffiliated third party first mortgagee. The mortgage amount bears
interest at the rate of ten (10%) percent per annum, is amortized over thirty
(30) years with equal monthly payments of principal and interest, each in the
amount of $3,949, with the entire principal balance and all accrued interest due
in April, 2017.
During the third quarter of our fiscal year 2007, we sold the real
property located at 732 - 734 N.E. 125th Street, North Miami, Florida (Store
#27) and our rights under the liquor license for that location to the sublessee,
an unaffiliated third party for $780,000. We purchased this real property during
the first quarter of our fiscal year 2007 for a purchase price of $250,000 and
realized a gain of $393,000 from the sale.
Item 3. Legal Proceedings.
--------------------------
From time to time, we are a defendant in litigation arising in the
ordinary course of our business, including claims resulting from "slip and fall"
accidents, claims under federal and state laws governing access to public
accommodations, employment-related claims and claims from guests alleging
illness, injury or other food quality, health or operational concerns. To date,
none of this litigation, some of which is covered by insurance, has had a
material effect on us.
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
28
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.
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 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.
Item 4. Submission of Matters to a Vote of Security Holders.
------------------------------------------------------------
None.
PART II
-------
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities.
--------------------------------------------------------------------------------
Our common stock is traded on the American Stock Exchange under the symbol
"BDL". As of the close of business on December 22, 2008, there were
approximately 335 holders of record of our common stock. The following table
sets forth the high and low sales price of a share of our common stock for each
quarter in our fiscal years 2008 and 2007 as reported by the American Stock
Exchange:
Fiscal 2008 Fiscal 2007
------------ -------------
High Low High Low
---- ---- ----- -----
First quarter 9.75 7.65 11.75 8.91
Second quarter 9.90 6.56 12.30 10.28
Third quarter 8.54 6.35 12.00 10.17
Fourth quarter 6.85 5.09 11.30 8.65
29
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.
-------------------------------------------------------------------------------
ISSUER PURCHASES OF EQUITY SECURITIES
-------------------------------------------------------------------------------
(d) Maximum
(c) Total Number (or
Number of Approximate
Shares (or Dollar Value) of
Units) Shares (or
(b) Purchased as Units) that May
(a) Total Average Part of Yet Be
Number of Price Publicly Purchased
Shares (or Paid per Announced Under the
Units) Share Plans or Plans or
Period Purchased (or Unit) Programs Programs
-------------------------------------------------------------------------------
June 29, 2008
- August 2, 2008 none 92,600
-------------------------------------------------------------------------------
August 3, 2008
- August 30, 2008 600 $ 6.60 600 92,000
-------------------------------------------------------------------------------
August 31, 2008
- September 27, 2008 900 $ 6.1999 900 91,100
-------------------------------------------------------------------------------
Total as of
September 27, 2008 1,500 1,500 91,100
-------------------------------------------------------------------------------
Purchase of Company Common Stock
--------------------------------
Pursuant to a discretionary plan approved by the Board of Directors at its
meeting on May 17, 2007, the Board of Directors authorized management to
purchase up to 100,000 shares of our common stock. During our fiscal year 2008,
we purchased 6,400 shares of our common stock for an aggregate purchase price of
$48,935. Of the shares purchased, we purchased 1,200 shares of our common stock
from the Joseph G. Flanigan Charitable Trust for $9,600 and 2,500 shares of our
common stock from an employee for $20,000 in off market transactions, which
reflected an actual per share purchase price which was equal to the average per
share market price on the date of purchase. The balance of our common stock
purchased, 2,700 shares, was purchased on the open market for an aggregate
purchase price of $19,335. During our fiscal year 2007, we purchased 3,332
shares of our common stock for an aggregate purchase price of $36,000. Of the
shares purchased, 2,500 shares were purchased from August Bucci, our Chief
Operating Officer and Director, in an off market private transaction, at an
aggregate purchase price of $28,000,
30
which reflected an actual per share purchase price which was less than the
closing per share market price on the date of purchase. The balance of our
common stock purchased, 832 shares, were purchased from a former employee, (332
shares), for $3,500, and from the Joseph G. Flanigan Charitable Trust, (500
shares), for $4,500 in off market transactions, which reflected an actual per
share purchase price which was equal to the average per share market price on
the date of purchase.
Information regarding our equity compensation plan(s) is set forth under
page F-26 of this report.
Item 6. Selected Financial Data
-------------------------------
As a Smaller Reporting Company as defined by Rule 12b-2 of the Exchange
Act and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure
reporting obligations and therefore are not required to provide the information
requested by this Item 6.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
--------------------------------------------------------------------------------
Except for the historical information contained herein, the following
discussion contains forward-looking statements that are subject to known and
unknown risks, uncertainties and other factors that may cause our actual results
to differ materially from those expressed or implied by such forward-looking
statements. We discuss such risks, uncertainties and other factors throughout
this report and specifically under the captions "Risk Factors". In addition, the
following discussion and analysis should be read in conjunction with the 2008
Consolidated Financial Statements and the related Notes to Consolidated
Financial Statements included elsewhere in this report.
Overview
---------
Financial Information Concerning Industry Segments
--------------------------------------------------
Our business is conducted principally in two segments: the restaurant
segment and the package liquor store segment. Financial information broken into
these two principal industry segments for the two fiscal years ended September
27, 2008 and September 29, 2007 is set forth in the consolidated financial
statements which are attached hereto.
General
-------
At September 27, 2008, we (i) operate 23 units, (excluding the adult
entertainment club referenced in (ii) below), consisting of restaurants, package
liquor stores and combination restaurants/package liquor stores that we either
own or have operational control over and partial ownership in; (ii)
31
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 restaurants/package liquor stores.
Franchised Units. 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 liquor 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, prorata, based
upon gross sales.
Affiliated Limited Partnership Owned Units. We manage and control the
operations of the ten restaurants owned by limited partnerships, except the Fort
Lauderdale, Florida restaurant which is managed and controlled by a related
franchisee. Accordingly, the results of operations of all limited partnership
owned restaurants, except the Fort Lauderdale, Florida restaurant are
consolidated with our results of operations for accounting purposes. The results
of operations of the Fort Lauderdale, Florida restaurant are accounted for by us
utilizing the equity method.
Results of Operations
---------------------
REVENUES (in thousands):
--------------------------------------------------------------------------------
Fifty Two Fifty Two
Weeks Ended Weeks Ended
Sept. 27, 2008 Sept. 29, 2007
Sales
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Restaurant, food $ 40,906 65.2% $ 38,047 63.8%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Restaurant, bar 9,494 15.1% 8,764 14.7%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Package goods 12,317 19.7% 12,784 21.5%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Total 62,717 100.0% 59,595 100.0%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Franchise revenues 1,066 1,134
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Owner's fee 238 203
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Other operating income 188 169
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Total Revenues $ 64,209 $ 61,101
--------------------------------------------------------------------------------
32
Comparison of Fiscal Years Ended September 27, 2008 and September 29, 2007
--------------------------------------------------------------------------
Revenues. Total revenue for our fiscal year 2008 increased $3,108,000 or
5.09% to $64,209,000 from $61,101,000 for our fiscal year 2007. This increase
resulted from sales from three restaurant locations, the Davie, Florida limited
partnership owned restaurant ($818,000) which opened for business on July 28,
2008, the Pembroke Pines, Florida limited partnership owned restaurant
($3,189,000) which opened for business on October 29, 2007, and the Company
owned Lake Worth, Florida restaurant ($1,636,000), which was acquired on March
4, 2007, offset by a decline in same store restaurant food and bar sales
($1,872,000). Prior to March 4, 2007, the Lake Worth, Florida restaurant was
franchised by the Company. The Lake Worth, Florida restaurant generated
$1,018,000 of revenue during our fiscal year 2007. Without giving effect to the
revenue generated from the Pembroke Pines, Florida restaurant ($3,189,000), the
Davie, Florida restaurant ($818,000) and the increased revenue generated from
the Lake Worth, Florida restaurant, ($619,000), total revenue for our fiscal
year 2008 would have decreased $1,518,000 or 2.48% to $59,583,000 from
$61,101,000 for our fiscal year 2007. To a lesser extent, increased revenue is
attributable to increased menu prices.
Restaurant Food Sales. Restaurant revenue generated from the sale of food
at restaurants totaled $40,906,000 for our fiscal year 2008 as compared to
$38,047,000 for our fiscal year 2007. This increase in restaurant food sales is
due to sales from the Davie, Florida, Pembroke Pines, Florida and Lake Worth,
Florida restaurants. The Davie, Florida, Pembroke Pines, Florida and Lake Worth,
Florida restaurants generated $662,000, $2,677,000 and $1,225,000 of revenues,
respectively, from the sale of food during our fiscal year 2008, while the Lake
Worth, Florida restaurant generated $769,000 of revenue from the sale of food
during our fiscal year 2007. Without giving effect to the revenue generated from
the Davie, Florida restaurant ($662,000) and the Pembroke Pines, Florida
restaurant ($2,677,000) and the increased revenue generated from the Lake Worth,
Florida restaurant, ($456,000), from the sale of food during our fiscal year
2008, restaurant revenue generated from the sale of food during our fiscal year
2008 would have decreased $936,000 or 2.46% to $37,111,000 from $38,047,000 for
our fiscal year 2007. Comparable weekly restaurant food sales (for restaurants
open for all of our fiscal years 2008 and 2007, which consists of six
restaurants owned by us and seven restaurants owned by affiliated limited
partnerships) was $682,000 and $716,000 for our fiscal years 2008 and 2007,
respectively, a decrease of 4.75%. Comparable weekly restaurant food sales for
Company owned restaurants only was $299,000 and $297,000 for our fiscal years
2008 and 2007, respectively, an increase of 0.67%. Comparable weekly restaurant
food sales for affiliated limited partnership owned restaurants only was
$383,000 and $419,000 for our fiscal years 2008 and 2007, respectively, a
decrease of
33
8.59%. We anticipate that restaurant food sales will increase through our fiscal
year 2009 due to, among other things, the operation of the Davie restaurant
through our entire fiscal year 2009, offset by a decline in same store
restaurant food sales.
Restaurant Bar Sales. Restaurant revenue generated from the sale of
alcoholic beverages at restaurants totaled $9,494,000 for our fiscal year 2008
as compared to $8,764,000 for our fiscal year 2007. This increase of $730,000 in
restaurant bar sales is due to sales from the Davie, Florida, Pembroke Pines,
Florida and Lake Worth, Florida restaurants. The Davie, Florida, Pembroke Pines,
Florida and Lake Worth, Florida restaurants generated $154,000, $511,000 and
$288,000 of revenues, respectively, from restaurant bar sales during our fiscal
year 2008, while the Lake Worth, Florida restaurant generated $172,000 of
revenue from restaurant bar sales during our fiscal year 2007. Without giving
effect to the revenue generated from the Davie, Florida restaurant ($154,000)
and the Pembroke Pines, Florida restaurant ($511,000) and the increased revenue
generated from the Lake Worth, Florida restaurant, ($116,000), from restaurant
bar sales during our fiscal year 2008, revenue generated from restaurant bar
sales during our fiscal year 2008 would have decreased $51,000 or 0.58% to
$8,713,000 from $8,764,000 for our fiscal year 2007. Comparable weekly
restaurant bar sales (for restaurants open for all of our fiscal years 2008 and
2007, which consists of six restaurants owned by us and seven restaurants owned
by affiliated limited partnerships) was $164,000 and $166,000 for our fiscal
years 2008 and 2007, respectively, a decrease of 1.20%. Comparable weekly
restaurant bar sales for Company owned restaurants only was $68,000 and $66,000
for our fiscal years 2008 and 2007, respectively, an increase of 3.03%.
Comparable weekly restaurant bar sales for affiliated limited partnership owned
restaurants only was $96,000 and $100,000 for our fiscal years 2008 and 2007,
respectively, a decrease of 4.00%. We anticipate that restaurant bar sales will
increase through our fiscal year 2009 due to, among other things, the operation
of the Davie restaurant through our entire fiscal year 2009, offset by a decline
in same store restaurant bar sales.
Package Liquor Store Sales. Revenue generated from sales of liquor and
related items at package liquor stores totaled $12,317,000 for our fiscal year
2008 as compared to $12,784,000 for our fiscal year 2007, a decrease of
$467,000. The weekly average of same store package liquor store sales, which
includes all nine (9) Company owned package liquor stores, was $237,000 for our
fiscal year 2008 as compared to $246,000 for our fiscal year 2007, a decrease of
3.66%. The decrease was primarily due to increased competition and package
liquor store sales are expected to decline through 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 our fiscal year 2008
increased $3,208,000 or 5.44% to $62,209,000 from $59,001,000 for our fiscal
year 2007. The increase was primarily due to pre-opening expenses related to and
the operation of the Davie, Florida restaurant and the operation of the Pembroke
Pines, Florida and Lake Worth, Florida restaurants and to a lesser extent a
general increase in food costs, offset by the decreased cost of package goods
associated with the decline in our package store sales, a decrease in the cost
of ribs, a decrease in repairs and maintenance to our units and actions taken by
management to reduce and/or
34
control costs and expenses. We anticipate that our operating costs and expenses
will continue to increase through our fiscal year 2009 due to, among other
things, the operation of the Pembroke Pines, Florida and Davie, Florida
restaurants for our entire fiscal year 2009 and an expected general increase in
food costs, including an increase in the cost of ribs. Operating costs and
expenses increased slightly as a percentage of total sales to approximately
96.89% in our fiscal year 2008 from 96.56% in our fiscal year 2007.
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 our
fiscal year 2008 increased to $33,368,000 from $30,653,000 for our fiscal year
2007. 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
66.21% for our fiscal year 2008 and 65.48% for our fiscal year 2007. This
increase in gross profit for restaurant and bar sales for our fiscal year 2008
was primarily due to menu price increases instituted at the end of the first
quarter of our fiscal year 2008 and a decrease in the cost of ribs during
calendar year 2008.
Package Liquor Store Sales. Gross profit for package liquor store sales
for our fiscal year 2008 increased to $3,661,000 from $3,584,000 for our fiscal
year 2007, notwithstanding a decrease in our package store sales. Our gross
profit margin (calculated as gross profit reflected as a percentage of package
liquor store sales) for package liquor store sales was 29.72% for our fiscal
year 2008 and 28.04% for our fiscal year 2007. The increase in our gross profit
margin, (1.68%), was primarily due to the purchase of "close out" and inventory
reduction merchandise from wholesalers. We anticipate the gross profit margin
for package liquor store sales to remain constant throughout our fiscal year
2009.
Payroll and Related Costs. Payroll and related costs for our fiscal year
2008 increased $1,772,000 or 10.25% to $19,065,000 from $17,293,000 for our
fiscal year 2007. This increase was primarily due to the operation of the
Pembroke Pines, Florida, Davie, Florida and Lake Worth, Florida restaurants. We
anticipate that our payroll and related costs will increase through our fiscal
year 2009 due to, among other things, the operation of the Davie, Florida
restaurant for our entire fiscal year 2009. Payroll and related costs as a
percentage of total sales was 29.69% in our fiscal year 2008 and 28.30% of total
sales in our fiscal year 2007. This increase as a percentage of sales was
primarily due to the need to pay higher wages to attract and retain employees.
Occupancy Costs. Occupancy costs (consisting of rent, common area
maintenance, repairs, real property taxes and amortization of leasehold
purchases) for our fiscal year 2008 increased $110,000 or 2.84% to $3,977,000
from $3,867,000 for our fiscal year 2007. This increase is due to, (i) rental
payments for our entire fiscal year 2008 at three additional restaurant
locations (Pembroke Pines, Florida, - $175,000, Davie, Florida - $246,000, and
Lake Worth, Florida - $98,000)= $519,000, as compared to rental payments for a
part of our fiscal year 2007 at the same three additional restaurant locations,
(Pembroke Pines, Florida - $18,000 (non-cash pre-opening rent) and $125,000
(cash pre-opening rent), Davie, Florida - $138,000 and Lake Worth, Florida -
$61,000)= $342,000; and (ii) increases in real property taxes and
35
common area maintenance, which generally includes a pro-rata share of property
insurance for units located within shopping centers, offset by a general
decrease in repairs and maintenance. We anticipate that our occupancy costs will
stabilize through 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 our fiscal year 2008 increased $996,000 or 7.98% to
$13,479,000 from $12,483,000 for our fiscal year 2007. Selling, general and
administrative expenses increased as a percentage of total sales in our fiscal
year 2008 to approximately 20.99% as compared to 20.43% in our fiscal year 2007.
This increase is due primarily to the operation of the Pembroke Pines, Florida,
Davie, Florida and Lake Worth, Florida restaurants and an overall increase in
expenses. We anticipate that our selling, general and administrative expenses
will increase throughout our fiscal year 2009 due to, among other things, the
operation of our Pembroke Pines, Florida and Davie, Florida restaurants for our
entire fiscal year 2009 and an overall increase in expenses, which will not be
offset in their entirety by increased advertising credits and rebates from our
food distributor.
Depreciation. Depreciation for our fiscal year 2008 increased $182,000 or
9.34% to $2,131,000 from $1,949,000 for our fiscal year 2007. As a percentage of
total sales, depreciation expense was relatively constant over both periods,
representing 3.32% of revenue for our fiscal year 2008 and 3.19% of revenue for
our fiscal year 2007.
Other Income and Expense. Other income and expenses was an expense of
$392,000 for our fiscal year 2008 as compared to an expense of $35,000 for our
fiscal year 2007. Other income and expense for our fiscal year 2007 includes a
gain of $393,000 from the sale of real property. Other income and expense for
our fiscal year 2008 includes interest expense of $495,000, as compared to
interest expense of $508,000 for our fiscal year 2007. The decrease in interest
expense is attributable to a lower variable interest rate on our line of credit
during our fiscal year 2008.
Interest Expense, Net. Interest expense for our fiscal year 2008 decreased
$13,000 to $495,000 from $508,000 for our fiscal year 2007. This decrease is
attributable to a lower variable interest rate on our line of credit during our
fiscal year 2008.
Net Income. Net income for our fiscal year 2008 decreased $210,000 or
16.57% to $1,057,000 from $1,267,000 for our fiscal year 2007. As a percentage
of sales, net income for our fiscal year 2008 is 1.65%, as compared to 2.07% in
our fiscal year 2007. Our net income during our fiscal year 2007 includes a gain
of $393,000 from the sale of real property, offset by our share of the
pre-opening expenses associated with the Pembroke Pines, Florida restaurant,
($341,000), and the Davie, Florida restaurant, ($174,000), which adversely
affected net income. Without giving effect to the sale of the real property, we
would have generated net income of $1,007,000 for our fiscal year 2007, which as
a percentage of sales is 1.65%. Without giving effect to the sale of the real
property for our fiscal year 2007, net income for our fiscal year 2008, as a
percentage of sales, was equal to that for our fiscal year 2007 primarily due to
higher gross profit in both our restaurant and package liquor store divisions,
improved control
36
over expenses, offset by our share of the pre-opening expenses associated with
the Davie, Florida restaurant, ($632,000).
New Limited Partnership Restaurants
-----------------------------------
The limited partnership owned restaurant located in Pembroke Pines,
Florida opened for business during the first quarter of our fiscal year 2008
(October 29, 2007) and the limited partnership owned restaurant located in
Davie, Florida opened for business during the fourth quarter of our fiscal year
2008 (July 28, 2008). 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 our fiscal
year 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 our fiscal year 2008, we also
paid and expensed pre-opening rent in the approximate amount of $246,000 for the
Davie, Florida restaurant, which is the full rent provided in the lease. During
our fiscal year 2007, we recognized non-cash pre-opening rent in the approximate
amount of $18,000 and recognized cash pre-opening rent in the approximate amount
of $119,000 for the Pembroke Pines, Florida restaurant and pre-opening rent in
the approximate amount of $104,000 for the Davie, Florida restaurant, which is
the full rent provided in the lease. We are recognizing rent expense on a
straight line basis over the term of the lease.
During our fiscal year 2008, the limited partnership restaurant in Davie,
Florida reported losses of $632,000 primarily due to pre-opening costs, thus
contributing to a reduction in the operating income for our fiscal year 2008.
During our fiscal year 2007, the limited partnership restaurants in Pembroke
Pines, Florida and Davie, Florida reported losses of $341,000 and $174,000,
respectively, primarily due to pre-opening costs, thus contributing to a
reduction in operating income for our fiscal year 2007.
Until we find a new restaurant location, our income from operations will
not be adversely affected by pre-opening costs. During our fiscal year 2009, we
do not expect our income from operations to be materially adversely affected by
pre-opening costs for new restaurant locations. 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.
Trends
------
During the next twelve months, we expect continued increases in aggregate
restaurant sales as compared to prior periods due primarily to the restaurant 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 financial crisis. We expect
package liquor store sales to decrease due primarily to increased competition.
We expect higher food costs and higher overall expenses, which will adversely
affect our net income. In December, 2007, we raised menu prices to offset the
higher food costs and overall
37
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. As a last
resort, we will 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 now 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 from
our line of credit. As of September 27, 2008, we had cash of approximately
$3,244,000, an increase of $1,021,000 from our cash balance of $2,223,000 as of
September 29, 2007. The increase in cash as of September 27, 2008 was primarily
from our operations due to minimal demand upon our cash flow for extraordinary
items.
Cash Flows
----------
--------------------------------------------------------------------------------
Fiscal Years
--------------------------------------------------------------------------------
2008 2007
--------------------------------------------------------------------------------
(in thousands)
--------------------------------------------------------------------------------
Net cash and cash equivalents provided by
operating activities $ 3,747 $ 2,138
--------------------------------------------------------------------------------
Net cash and cash equivalents used in
investing activities (3,967) (2,761)
--------------------------------------------------------------------------------
Net cash and cash equivalents provided by
financing activities 1,241 1,148
--------------------------------------------------------------------------------
Net increase
in cash and equivalents 1,021 525
--------------------------------------------------------------------------------
Cash and equivalents,
beginning of year 2,223 1,698
--------------------------------------------------------------------------------
Cash and equivalents,
end of year $ 3,244 $ 2,223
--------------------------------------------------------------------------------
38
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 $4,337,000, (of which $26,000 was financed and
$593,000 of which was purchase deposits transferred to property and equipment),
during our fiscal year 2008, including $358,000 for renovations to one (1)
existing Company owned restaurant, as compared to $4,886,000 (of which $700,000
was financed) during our fiscal year 2007, which included $1,402,500 for the
purchase of real property and $615,000 for renovations to three (3) existing
Company owned restaurants. The additions to fixed assets during our fiscal year
2008 included most of the renovations to the business premises of the Davie,
Florida restaurant, while the additions to fixed assets during our fiscal year
2007 included most of the renovations to the business premises of the Pembroke
Pines, Florida restaurant and the purchase of leasehold interests of our Lake
Worth, Florida, Pembroke Pines, Florida and Davie, Florida restaurants.
In addition, during our fiscal year 2008, we purchased a 4% interest in
the underlying lease which we sublease for our El Portal, Florida location,
($27,000), from an unrelated sublessor, the cost of which is being amortized as
additional rent over the life of the lease, including the first ten (10) year
renewal option. During our fiscal year 2007, we purchased leasehold interests
for the Pembroke Pines, Florida ($305,000), Davie, Florida ($650,000) and Lake
Worth, Florida ($45,000) locations, the cost of which is being amortized as
additional rent over the life of the lease. The purchase of the leasehold
interest for the Lake Worth, Florida location occurred as a part of the purchase
of the franchise restaurant.
All of our owned units require periodic refurbishing in order to remain
competitive. The cost of this refurbishment in our fiscal year 2008 was
$358,000. We anticipate the cost of this refurbishment in our fiscal year 2009
will be approximately $700,000, which funds will be provided from operations.
Long Term Debt
--------------
As of the end of our fiscal year 2008, we had long term debt, (including
our line of credit), of $6,514,000, as compared to $6,080,000 as of the end of
our fiscal year 2007.
As of the end of our fiscal year 2008, the amount outstanding under our
line of credit from an unaffiliated financial institution was $1,562,000.
Subsequent to the end of our fiscal year 2008, 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 of
$1,586,000 as of November 30, 2008, bears interest at BBA LIBOR 1 month rate,
plus 2.25%, (4.20625% as of December 7, 2008), 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.
39
We repaid long term debt, including auto loans, mortgages and capital
lease obligations in the amount of $192,000 and $213,000 in our fiscal years
2008 and 2007, respectively.
We repaid our line of credit in the amount of $-0- and $1,000,000 in our
fiscal years 2008 and 2007 respectively. During our fiscal year 2008, we
borrowed $600,000 on our line of credit to pay the balance of the purchase price
for our limited partnership units in the limited partnership which owns the
Davie, Florida location. During our fiscal year 2007, we borrowed $1,200,000 on
our line of credit, primarily to advance the purchase price for the limited
partnership which owns the Pembroke Pines, Florida restaurant to close on the
purchase of its restaurant location ($340,000) and the limited partnership which
owns the Davie, Florida restaurant to close on the purchase of its restaurant
location ($650,000).
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.
Purchase of Limited Partnership Interests
-----------------------------------------
During our fiscal year 2008, we purchased from two separate limited
partners (neither of whom are officers, directors or family members of officers
or directors) limited partnership interests of varying amounts (0.13% to 2.67%)
in nine (9) limited partnerships which own restaurants for an aggregate purchase
price of $125,000.
Working capital
---------------
The table below summarizes our current assets, current liabilities and
working capital for our fiscal years 2008 and 2007:
Sept. 27 Sept. 29
(in thousands) 2008 2007
Current assets $6,852 $6,322
Current liabilities 4,504 4,567
Working capital 2,348 1,755
Working capital as of September 27, 2008 increased by $593,000 or 33.79%
from working capital as of September 29, 2007. Our working capital improved
during our fiscal year 2008 due to minimal demand upon our cash flow
40
for extraordinary items during the fiscal year. During our fiscal year 2007, the
limited partnership which owns the Pembroke Pines, Florida restaurant completed
its private offering and reimbursed us $300,000 for advances we made to the
limited partnership for pre-opening expenses. In addition, during our fiscal
year 2007, we sold the real property located at 732 - 734 N.E. 125th Street,
North Miami, Florida, realizing net sale proceeds in the approximate amount of
$763,000. Our working capital during our fiscal year 2007 was adversely affected
by advances made by us to the limited partnership owning the Davie, Florida
location, ($1,085,000), all of which ultimately became a part of our investment
when the limited partnership completed its private offering during our fiscal
year 2008.
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 in our fiscal year 2009. We also anticipate that
during our fiscal year 2009, working capital will be affected by the payment of
the balance for the purchase of a new point of sale system for our package
liquor stores ($21,000) and a surveillance camera system ($118,000).
Off-Balance Sheet Arrangements
------------------------------
We had no off-balance sheet arrangements as of the end of our fiscal year
2008 or our fiscal year 2007.
Critical Accounting Policies
----------------------------
Our significant accounting policies are more fully described in Note 1 to
our consolidated financial statements located in Item 8 of this Annual Report on
Form 10-K. 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, liabilities, revenues, and expenses, and the related disclosures of
contingent assets and liabilities. Actual results could differ from those
estimates under different assumptions or conditions. We believe that the
following critical accounting policies are subject to estimates and judgments
used in the preparation of our consolidated financial statements:
Estimated Useful Lives of Property and Equipment
------------------------------------------------
The estimate of useful lives for property and equipment are significant
estimates. Expenditures for the leasehold improvements and equipment when a
restaurant is first constructed are material. In addition, periodic refurbishing
takes place and those expenditures can be material. We estimate the useful life
of those assets by considering, among other things, expected use, life of the
lease on the building, and warranty period, if applicable. The assets are then
depreciated using a straight line method
41
over those estimated lives. These estimated lives are reviewed periodically and
adjusted if necessary. Any necessary adjustment to depreciation expense is made
in the income statement of the period in which the adjustment is determined to
be necessary.
Consolidation of Limited Partnerships
-------------------------------------
As of September 27, 2008, we operate nine (9) restaurants as general
partner of the limited partnerships that own the operations of these
restaurants. Additionally, we expect that any expansion which takes place in
opening new restaurants will also result in us operating the restaurants as
general partner. In addition to the general partnership interest we also
purchase limited partnership units ranging from 13% to 48% of the total units
outstanding. As a result of these controlling interests, we consolidate the
operations of these limited partnerships with ours despite the fact that we do
not own in excess of 50% of the equity interests. All intercompany transactions
are eliminated in consolidation. The minority interests in the earnings of these
limited partnerships are removed from net income and are not included in the
calculation of earnings per share.
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 bases of assets and liabilities and
to tax net operating loss and tip credit carryforwards to the extent that
realization of said benefits is more likely than not. For discussion regarding
our carryforwards refer to Note 9 to the consolidated financial statements for
our fiscal year 2008.
On September 30, 2007, we adopted the provisions of Financial Accounting
Standard Board (FASB) Interpretation 48, Accounting for Uncertainty in Income
Taxes (FIN 48). We previously had accounted for tax contingencies in accordance
with Statement of Financial Accounting Standards 5, Accounting for
Contingencies. As required by FIN 48, which clarifies FASB Statement No. 109,
Accounting for Income Taxes, we recognize the financial statement benefit of a
tax position only after determining that the relevant tax authority would more
likely than not sustain the position following an audit. For tax positions
meeting the more likely than not threshold, the amount recognized in the
financial statements is the largest benefit that has a greater than 50 percent
likelihood of being realized upon ultimate settlement with the relevant tax
authority. At the adoption date, we applied FIN 48 to tax positions for all open
tax years. We had no material unrecognized tax benefits and no adjustments to
our financial position, results of operations or cash flows were required. We do
not expect that unrecognized tax benefits will increase within the next twelve
months. We recognize accrued interest and penalties related to uncertain tax
positions as income tax expense.
During the first quarter of our fiscal year 2008, the corporate income tax
returns for our fiscal years ending September 29, 2007 and September 30,
42
2006 were audited by the Internal Revenue Service. As a result of the audit, we
paid additional corporate income tax of $6,227 and $2,637 for our fiscal years
ending September 29, 2007 and September 30, 2006, respectively. The effects of
the Internal Revenue Service adjustments were considered in the computation of
our income tax provision for our fiscal year ended September 27, 2008.
Other Matters
-------------
Impact of 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.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
-------------------------------------------------------------------
We do not ordinarily hold market risk sensitive instruments for trading
purposes. As of September 27, 2008 and September 29, 2007, we held no equity
securities.
Interest Rate Risk
------------------
At September 27, 2008, borrowings under our line of credit bear interest
at a variable annual rate equal to the prime rate of interest. Subsequent to the
end of our fiscal year 2008, we changed our primary banking relationship to
another unaffiliated financial institution, which includes a new line of credit.
The outstanding balance on our line of credit bears 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 September 27, 2008, our cash resources earn interest at variable rates.
Accordingly, our return on these funds is affected by fluctuations in interest
rates
There is no assurance that interest rates will increase or decrease over
our next fiscal year or that an increase will not have a material adverse effect
on our operations.
Item 8. Financial Statements and Supplementary Data.
---------------------------------------------------
Our Financial Statements and supplementary data are on pages F-1 through
F-6.
43
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures.
--------------------------------------------------------------------------------
None
Item 9A(T). 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.
Management's Report on Internal Control Over Financial Reporting
----------------------------------------------------------------
We are responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Exchange Act Rules
13a-15(f).
Under the supervision and with the participation of our management,
including our Chief Executive Officer and our Chief Financial Officer, we
conducted an evaluation of the effectiveness of our internal control over
financial reporting based on the framework in Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Base on this evaluation, we believe that, as of September 27, 2008,
our internal control over financial reporting was effective based on those
criteria.
This report does not include an attestation report of the Company's
registered public accounting firm regarding internal control over financial
reporting. Our report was not subject to attestation by the Company's
44
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit us to provide only management's report in
this report.
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.
Item 9B. Other Information.
----------------------------
None.
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
----------------------------------------------------------------
The information required by Item 10 is incorporated by reference to our
Proxy Statement for our 2009 Annual Meeting of Shareholders, which will be filed
with the Securities and Exchange Commission by January 26, 2009.
Item 11. Executive Compensation.
--------------------------------
The information required by Item 11 is incorporated by reference to our
Proxy Statement for our 2009 Annual Meeting of Shareholders, which will be filed
with the Securities and Exchange Commission by January 26, 2009.
Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters.
---------------------------------------------------------------------------
The information required by Item 12 is incorporated by reference to
our Proxy Statement for our 2009 Annual Meeting of Shareholders, which will
be filed with the Securities and Exchange Commission by January 26, 2009.
Item 13. Certain Relationships and Related Transactions and Director
Independence.
--------------------------------------------------------------------------------
The information required by Item 13 is incorporated by reference to our
Proxy Statement for our 2009 Annual Meeting of Shareholders, which will be filed
with the Securities and Exchange Commission by January 26, 2009.
45
Item 14. Principal Accountant Fees and Services.
-------------------------------------------------
The information required by Item 14 is incorporated by reference to our
Proxy Statement for our 2009 Annual Meeting of Shareholders, which will be filed
with the Securities and Exchange Commission by January 26, 2009.
PART IV
Item 15. Exhibits and Financial Statement Schedules.
----------------------------------------------------
(a)(1) Financial Statements
See Item 8, "Financial Statements and Supplementary Data" for Financial
Statements included with this Annual Report on Form 10-K.
(a)(2) Financial Statement Schedules
The following financial statement schedules are filed as a part of this
report:
1. Financial Statements:
- Report of Independent Registered Public Accounting Firm
- Consolidated Balance Sheets as of September 27, 2008 and
September 29, 2007
- Consolidated Statements of Income for the years ended
September 27, 2008 and September 29, 2007
- Consolidated Statements of Stockholders' Equity for the years
ended September 27, 2008 and September 29, 2007
- Consolidated Statements of Cash Flow for the years ended
September 27, 2008 and September 29, 2007
- Notes to Consolidated Financial Statements
2. Financial Statements Schedule:
- Schedule II - Valuation and Qualifying Accounts
All other schedules have been omitted because the required information is
not applicable or the information is included in the consolidated financial
statements or the Notes thereto.
3. Exhibits
The exhibits listed on the accompanying Index to Exhibits are filed as
part of this Annual Report.
46
Incorporated by Reference
Exhibit Filed
Number Exhibit Description Form Date Number Herewith
2 Plan of Reorganization, Amended Disclosure SB-2 5/5/87 2
Statement, Amended Plan of Reorganization,
Modification of Amended Plan of
Reorganization, Second Modification of
Amended Plan of Reorganization, Order
Confirming Plan of Reorganization
3 Restated Articles of Incorporation, 10-K 12/29/02 3
adopted January 9, 1984
10(a)(1) Employment Agreement with Joseph G. DEF14A 1/27/1988 10(a)(1)
Flanigan*
10(a)(2) Form of Employment Agreement between 10-K 10(a)(1)
Joseph G. Flanigan and the Company (as
ratified and amended by the stockholders
at the 1988 annual meeting is incorporated
herein by reference).*
10(c) Consent Agreement regarding the Company's 8-K 4/10/1985 10(c)
Trademark Litigation
10(d) King of Prussia(#850)Partnership Agreement* 8-K 4/10/1985 10(d)
10(o) Management Agreement for Atlanta, Georgia, 10-K 10/3/1992 10(o)
(#600)*
10(p) Settlement Agreement with Former Vice 10-K 10/3/1992 10(p)
Chairman of the Board of Directors (re #5)
10(q) Hardware Purchase Agreement and Software 10-KSB 10/2/1993 10(q)
License Agreement for restaurant point of
sale system.
10(a)(3) Key Employee Incentive Stock Option Plan DEF14A 1/26/1994 10(a)(3)
10(r) Limited Partnership Agreement of CIC 10-KSB 9/30/1995 10(r)
Investors #13, Ltd,. between Flanigan's
Enterprises, Inc., as General Partner and
fifty percent owner of the limited
partnership, and Hotel Properties, LTD.*
10(s) Form of Franchise Agreement between 10-KSB 9/30/1995 10(s)
Flanigan's Enterprises, Inc. and
Franchisees.*
47
10(t) Licensing Agreement between Flanigan's 10-KSB 9/28/1996 10(t)
Enterprises, Inc. and James B. Flanigan,
dated November 4, 1996, for non-exclusive
use of the servicemark "Flanigan's" in the
Commonwealth of Pennsylvania. *
10(u) Limited Partnership Agreement of CIC 10-KSB 9/27/1997 10(u)
Investors #15 Ltd., dated March 28, 1997,
between B.D. 15 Corp. as General Partner
and numerous limited partners, including
Flanigan's Enterprises, Inc. as a limited
partner owning twenty five percent of the
limited partnership. *
10(v) Limited Partnership Agreement of CIC 10-KSB 9/27/1997 10(v)
Investors #60 Ltd., dated July 8, 1997,
between Flanigan's Enterprises, Inc., as
General Partner and numerous limited
partners, including Flanigan's
Enterprises, Inc. as limited partner
owning forty percent of the limited
partnership. *
10(w) Stipulated Agreed Order of Dismissal upon 10-KSB 9/27/1997 10(w)
Mediation with former franchisee.
10(x) Limited Partnership Agreement of CIC 10-KSB 10/02/1999 10(x)
Investors #70, Ltd. dated February 1999
between Flanigan's Enterprises, Inc. as
General Partner and numerous limited
partners, including Flanigan's
Enterprises, Inc. as limited partner
owning forty percent of the limited
partnership. *
10(y) Limited Partnership Agreement of CIC 10-KSB 9/29/2001 10(y)
Investors #80, Ltd., dated May 2001,
between Flanigan's Enterprises, Inc. as
General Partner and numerous limited
48
partners, including Flanigan's
Enterprises, Inc., as limited partner
owning twenty five percent of the limited
partnership. *
10(z) Limited Partnership Agreement of CIC 10-KSB 9/29/2001 10(z)
Investors #95, Ltd., dated July 2001,
between Flanigan's Enterprises, Inc., as
General Partner and numerous limited
partners, including Flanigan's
Enterprises, Inc. as limited partner
owning twenty eight percent of the limited
partnership. *
10(aa) Limited Partnership Agreement of CIC 10-K 9/27/03 10(aa)
Investors #75, Ltd., dated June 17, 2003,
between Flanigan's Enterprises, Inc., as
General Partner, and numerous limited
partners, including Flanigan's
Enterprises, Inc. as limited partner
owning twelve percent of the limited
partnership. *
10(bb) Limited Partnership Agreement of CIC 10-K 10/2/2004 10(bb)
Investors #65, Ltd., dated June 24, 2004,
between Flanigan's Enterprises, Inc., as
General Partner, and numerous limited
partners, including Flanigan's
Enterprises, Inc. as limited partner
owning twenty six percent of the limited
partnership. *
10(cc) Amended and Restated Limited Partnership 10-K 9/30/2006 10(cc)
Certificate and Agreement of CIC Investors
#13, Ltd., dated March 1, 2006, between
Flanigan's Enterprises, Inc., as General
Partner, Flanigan's Management Services,
Inc. and numerous limited partners,
including Flanigan's Enterprises, Inc. as
limited partner owning thirty nine percent
of the limited partnership. *
10(dd) Limited Partnership Agreement of CIC 10-K 9/29/2007 10(dd)
Investors #50, Ltd., dated October 17,
2006, between Flanigan's Enterprises,
Inc., as General Partner, Flanigan's
Management Services, Inc. and numerous
limited partners, including Flanigan's
Enterprises, Inc. as limited partner
owning sixteen percent of the limited
partnership. *
10(ee) Limited Partnership Agreement of CIC 10-K 9/29/2007 10(ee)
Investors #55, Ltd., dated December 12,
2006, between Flanigan's Enterprises,
Inc., as General Partner, Flanigan's
Management Services, Inc. and numerous
limited partners, including Flanigan's
Enterprises, Inc. as limited partner
owning
49
forty eight percent of the limited
partnership. *
13 Registrant's Form 10-K constitutes the X
Annual Report to Shareholders for the
fiscal year ended September 27, 2008.
21(a) Company's subsidiaries are set forth in X
this Annual Report on Form 10-K.
31.1 Certification Pursuant to Section 302 of X
Sarbanes-Oxley Act of 2002 of Chief
Executive Officer.
31.2 Certification Pursuant to Section 302 of X
Sarbanes-Oxley Act of 2002 of Chief
Financial Officer.
32.1 Certification Pursuant to 18 U.S.C. X
Section 1350 as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of
2002 of Chief Executive Officer.
32.2 Certification Pursuant to 18 U.S.C. X
Section 1350 as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of
2002 of Chief Financial Officer.
* Compensatory plan or arrangement.
50
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934 the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Flanigan's Enterprises, Inc.
Registrant
By: /s/ JAMES G. FLANIGAN II
------------------------
JAMES G. FLANIGAN II
Chief Executive Officer
Date: 12/22/08
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in their capacities and on the dates indicated.
/s/ JAMES G. FLANIGAN II Chairman of the Board, Date: 12/22/08
------------------------ Chief Executor Officer,
James G. Flanigan II and Director
/s/ JEFFREY D. KASTNER Chief Financial Officer Date: 12/22/08
---------------------- Secretary and Director
Jeffrey D. Kastner
/s/ MICHAEL ROBERTS Director Date: 12/22/08
----------------------
MICHAEL ROBERTS
/s/ GERMAINE M. BELL Director Date: 12/22/08
----------------------
Germaine M. Bell
/s/ BARBARA J. KRONK Director Date: 12/22/08
----------------------
Barbara J. Kronk
/s/ AUGIE BUCCI Chief Operating Officer Date: 12/22/08
---------------------- and Director
Augie Bucci
/s/ MICHAEL B. FLANIGAN Director Date: 12/22/08
-----------------------
Michael B. Flanigan
/s/ PATRICK J. FLANIGAN Director Date: 12/22/08
-----------------------
Patrick J. Flanigan
/s/ CHRISTOPHER O'NEIL Director Date: 12/22/08
-----------------------
Christopher O'Neil
51
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 27, 2008 AND SEPTEMBER 29, 2007
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
PAGE
----
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM F-1
CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheets F-2
Statements of Income F-3
Statements of Stockholders' Equity F-4
Statements of Cash Flows F-5 - F-6
Notes to Financial Statements F-7 - F-31
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
-------------------------------------------------------
Board of Directors and Stockholders
Flanigan's Enterprises, Inc.
Fort Lauderdale, Florida
We have audited the accompanying consolidated balance sheets of Flanigan's
Enterprises, Inc. and Subsidiaries as of September 27, 2008 and September 29,
2007 and the related consolidated statements of income, stockholders' equity and
cash flows for the years then ended. Flanigan's Enterprises, Inc.'s management
is responsible for these consolidated financial statements. Our responsibility
is to express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Flanigan's Enterprises, Inc. and Subsidiaries as of September 27, 2008 and
September 29, 2007, and the consolidated results of their operations and their
cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States.
RACHLIN LLP
Fort Lauderdale, Florida
December 22, 2008
F-1
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 27, 2008 AND SEPTEMBER 29, 2007
2008 2007
------------ ------------
ASSETS
------
Current Assets:
Cash and cash equivalents $ 3,244,000 $ 2,223,000
Note receivable, current maturities, net 16,000 14,000
Prepaid income taxes 176,000 --
Due from franchisees 351,000 735,000
Other receivables 107,000 137,000
Inventories 2,168,000 2,165,000
Prepaid expenses 547,000 840,000
Deferred tax assets 243,000 208,000
------------ ------------
Total current assets 6,852,000 6,322,000
------------ ------------
Property and Equipment, Net 21,601,000 19,410,000
------------ ------------
Investment in Limited Partnership 151,000 142,000
------------ ------------
Other Assets:
Liquor licenses, net 345,000 347,000
Note receivable, net 28,000 44,000
Deferred tax assets 729,000 492,000
Leasehold purchases, net 1,880,000 2,085,000
Other 987,000 1,495,000
------------ ------------
Total other assets 3,969,000 4,463,000
------------ ------------
Total assets $ 32,573,000 $ 30,337,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Accounts payable and accrued expenses $ 4,040,000 $ 3,666,000
Income taxes payable -- 331,000
Due to franchisees 223,000 312,000
Current portion of long-term debt 188,000 196,000
Deferred revenues 34,000 45,000
Deferred rent 19,000 17,000
------------ ------------
Total current liabilities 4,504,000 4,567,000
------------ ------------
Long-Term Debt, Net of Current Maturities 4,764,000 4,922,000
------------ ------------
Line of Credit 1,562,000 962,000
------------ ------------
Deferred Rent, Net of Current Portion 214,000 232,000
------------ ------------
Minority Interests in Equity of Consolidated Limited Partnerships 8,437,000 7,570,000
------------ ------------
Stockholders' Equity:
Common stock, $.10 par value; 5,000,000 shares authorized;
4,197,642 shares issued 420,000 420,000
Capital in excess of par value 6,240,000 6,240,000
Retained earnings 12,388,000 11,331,000
Treasury stock, at cost, 2,313,309 and 2,306,909 shares (5,956,000) (5,907,000)
------------ ------------
Total stockholders' equity 13,092,000 12,084,000
------------ ------------
Total liabilities and stockholders' equity $ 32,573,000 $ 30,337,000
============ ============
See notes to consolidated financial statements.
F-2
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED SEPTEMBER 27, 2008 AND SEPTEMBER 29, 2007
2008 2007
------------ ------------
Revenues:
Restaurant food sales $ 40,906,000 $ 38,047,000
Restaurant beverage sales 9,494,000 8,764,000
Package goods sales 12,317,000 12,784,000
Franchise-related revenues 1,066,000 1,134,000
Owner's fee 238,000 203,000
Other operating income 188,000 169,000
------------ ------------
64,209,000 61,101,000
------------ ------------
Costs and Expenses:
Cost of merchandise sold:
Restaurants and lounges 17,032,000 16,158,000
Package goods 8,656,000 9,200,000
Payroll and related costs 19,065,000 17,293,000
Occupancy costs 3,977,000 3,867,000
Selling, general and administrative expenses 13,479,000 12,483,000
------------ ------------
62,209,000 59,001,000
------------ ------------
Income from Operations 2,000,000 2,100,000
------------ ------------
Other Income (Expense):
Interest expense (495,000) (508,000)
Interest and other income 82,000 79,000
Limited partnership income 21,000 1,000
Gain on sale of property and equipment -- 393,000
------------ ------------
(392,000) (35,000)
------------ ------------
Income Before Provision for Income Taxes and
Minority Interests in Earnings of Consolidated
Limited Partnerships 1,608,000 2,065,000
Provision for Income Taxes (564,000) (698,000)
Minority interests in (earnings) losses of consolidated
limited partnerships 13,000 (100,000)
------------ ------------
Net Income $ 1,057,000 $ 1,267,000
============ ============
Net Income Per Common Share:
Basic $ 0.56 $ 0.67
============ ============
Diluted $ 0.56 $ 0.66
============ ============
Weighted Average Shares and Equivalent Shares Outstanding:
Basic 1,888,000 1,889,000
============ ============
Diluted 1,889,000 1,910,000
============ ============
See notes to consolidated financial statements.
F-3
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 27, 2008 AND SEPTEMBER 29, 2007
Common Stock Capital in Treasury Stock
--------------------- Excess of Retained ------------------------
Shares Amount Par Value Earnings Shares Amount Total
--------- --------- ----------- ------------ --------- ------------ ------------
Balance, September 30, 2006 4,197,642 $ 420,000 $ 6,203,000 $ 10,064,000 2,313,087 $ (5,895,000) $ 10,792,000
Year Ended September 29, 2007:
Net income -- -- -- 1,267,000 -- -- 1,267,000
Purchase of treasury stock -- -- -- -- 3,332 (36,000) (36,000)
Exchange of shares-
exercise of stock options -- -- 37,000 -- (9,510) 24,000 61,000
--------- --------- ----------- ------------ --------- ------------ ------------
Balance, September 29, 2007 4,197,642 420,000 6,240,000 11,331,000 2,306,909 (5,907,000) 12,084,000
Year Ended September 27, 2008:
Net income -- -- -- 1,057,000 -- -- 1,057,000
Purchase of treasury stock -- -- -- -- 6,400 (49,000) (49,000)
--------- --------- ----------- ------------ --------- ------------ ------------
Balance, September 27, 2008 4,197,642 $ 420,000 $ 6,240,000 $ 12,388,000 2,313,309 $ (5,956,000) $ 13,092,000
========= ========= =========== ============ ========= ============ ============
See notes to consolidated financial statements.
F-4
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 27, 2008 AND SEPTEMBER 29, 2007
2008 2007
----------- -----------
Cash Flows from Operating Activities:
Net income $ 1,057,000 $ 1,267,000
Adjustments to reconcile net income to net cash and cash equivalents provided by
operating activities:
Depreciation and amortization 2,131,000 1,949,000
Amortization of leasehold purchases 232,000 206,000
Gain on sale of property and equipment -- (393,000)
Loss on abandonment of property and equipment 43,000 94,000
Deferred income taxes (272,000) (116,000)
Deferred rent (16,000) 12,000
Minority interests in earnings (losses) of consolidated limited partnerships (13,000) 100,000
Income from unconsolidated limited partnership (21,000) (1,000)
Recognition of deferred revenues (11,000) (9,000)
Changes in operating assets and liabilities:
(Increase) decrease in:
Due from franchisees 384,000 (166,000)
Other receivables 30,000 191,000
Prepaid income taxes (176,000) --
Inventories (3,000) 50,000
Prepaid expenses 293,000 (27,000)
Other assets 135,000 (700,000)
Increase (decrease) in:
Accounts payable and accrued expenses 374,000 (430,000)
Income taxes payable (331,000) 67,000
Due to franchisees (89,000) 44,000
----------- -----------
Net cash and cash equivalents provided by operating activities 3,747,000 2,138,000
----------- -----------
Cash Flows from Investing Activities:
Collections on note receivable 14,000 12,000
Purchase of property and equipment (3,691,000) (3,131,000)
Deposits on property and equipment (294,000) --
Purchase of leasehold (27,000) (955,000)
Purchase of assets of franchised restaurant -- (100,000)
Proceeds from sale of fixed assets 19,000 908,000
Proceeds from sale of marketable securities -- 381,000
Distributions from unconsolidated limited partnership 12,000 12,000
Proceeds from insurance settlement -- 112,000
----------- -----------
Net cash and cash equivalents used in investing activities (3,967,000) (2,761,000)
----------- -----------
Cash Flows from Financing Activities:
Payments of long-term debt (192,000) (1,001,000)
Payment of line of credit -- (1,000,000)
Proceeds from long-term debt -- 960,000
Proceeds from line of credit 600,000 1,200,000
Purchase of minority limited partnership interest (125,000) --
Purchase of treasury stock (49,000) (36,000)
Distributions to limited partnerships' minority partners (1,018,000) (1,006,000)
Proceeds from limited partnership interests 2,025,000 * 1,970,000 *
Proceeds from exercise of stock options -- 61,000
----------- -----------
Net cash and cash equivalents provided by financing activities 1,241,000 1,148,000
----------- -----------
Net Increase in Cash and Cash Equivalents 1,021,000 525,000
Cash and Cash Equivalents, Beginning 2,223,000 1,698,000
----------- -----------
Cash and Cash Equivalents, Ending $ 3,244,000 $ 2,223,000
=========== ===========
See notes to consolidated financial statements.
F-5
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
2008 2007
---------- ----------
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for:
Interest $ 495,000 $ 508,000
========== ==========
Income taxes $1,432,000 $ 631,000
========== ==========
Non-Cash Financing and Investing Activities:
Purchase of vehicles in exchange for debt $ 26,000 $ --
========== ==========
Purchase deposits transferred to property and equipment $ 593,000 $ --
========== ==========
Purchase of real property in exchange for debt $ -- $ 700,000
========== ==========
* exclusive of the Company's investment in the limited partnership owning
the restaurant in Davie, Florida of $1,850,000 in fiscal year 2008 and
exclusive of the Company's investment in the limited partnership owning
the restaurant in Pembroke Pines, Florida of $380,000 in fiscal year 2007.
See notes to consolidated financial statements.
F-6
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 27, 2008 AND SEPTEMBER 29, 2007
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Capitalization
The Company was incorporated in 1959 and operates in South Florida
as a chain of full-service restaurants and package liquor stores.
Restaurant food and beverage sales make up the majority of our total
revenue. At September 27, 2008, we (i) operated 23 units, (excluding
the adult entertainment club referenced in (ii) below), consisting
of restaurants, package liquor stores and combination
restaurants/package liquor 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 restaurants/package liquor stores.
With the exception of one restaurant we operate under the name "The
Whale's Rib", and in which we do not have an ownership interest, 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".
The Company's Articles of Incorporation, as amended, authorize us to
issue and have outstanding at any one time 5,000,000 shares of
common stock at a par value of $0.10 per share.
We operate under a 52-53 week year ending the Saturday closest to
September 30. Our fiscal years 2008 and 2007 are each comprised of a
52-week period.
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and our subsidiaries, all of which are wholly owned, and the
accounts of the nine limited partnerships in which we act as general
partner and have controlling interests. All significant intercompany
transactions and balances have been eliminated in consolidation.
Use of Estimates
The consolidated financial statements and related disclosures are
prepared in conformity with accounting principles generally accepted
in the U.S. We are required to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the
financial statements, and revenue and expenses during the period
reported. These estimates include assessing the estimated useful
lives of tangible assets. Estimates and assumptions are reviewed
periodically and the effects of revisions are reflected in our
consolidated financial statements in the period they are determined
to be necessary. Although these estimates are based on our knowledge
of current events and actions we may undertake in the future, they
may ultimately differ from actual results.
F-7
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Cash and Cash Equivalents
We consider all highly liquid debt instruments with an original
maturity of three months or less at the date of purchase to be cash
equivalents.
Inventories
Our inventories, which consist primarily of package liquor products,
are stated at the lower of average cost or market.
Liquor Licenses
In accordance with Statement of Financial Accounting Standards No.
142, "Goodwill and Other Intangible Assets" (SFAS 142), our liquor
licenses are not being amortized, but are tested annually for
impairment (see Note 8).
Property and Equipment
Our property and equipment are stated at cost. We capitalize
expenditures for major improvements and depreciation commences when
the assets are placed in service. We record depreciation on a
straight-line basis over the estimated useful lives of the
respective assets. We charge maintenance and repairs, which do not
improve or extend the life of the respective assets, to expense as
incurred. When we dispose of assets, the cost and related
accumulated depreciation are removed from the accounts and any gain
or loss is included in income.
Our estimated useful lives range from three to five years for
vehicles, and three to seven years for furniture and equipment.
Leasehold improvements are currently being amortized over the
shorter of the life of the lease or 20 years. The building and
building improvements of our corporate offices in Fort Lauderdale,
Florida and our combination restaurant and package liquor store in
Hallandale, Florida, both of which we own, are being depreciated
over forty years.
Leasehold Purchases
Our purchase of an existing restaurant location usually includes a
lease to the business premises. As a result, a portion of the
purchase price is allocated to the leasehold interest, which we
refer to as a leasehold purchase. We capitalize the cost of the
leasehold purchase and amortization commences upon our assumption of
the lease. We amortize leasehold purchases over the remaining term
of the lease up to a maximum of 15 years.
F-8
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Investment in Limited Partnerships
We use the consolidation method of accounting when we have a
controlling interest in other companies and limited partnerships. We
use the equity method of accounting when we have an interest between
twenty to fifty percent in other companies and limited partnerships,
but do not exercise control. Under the equity method, our original
investments are recorded at cost and are adjusted for our share of
undistributed earnings or losses. All significant intercompany
profits are eliminated.
Concentrations of Credit Risk
Financial instruments that potentially subject us to concentrations
of credit risk are cash and cash equivalents, other receivables and
note receivable.
Cash and Cash Equivalents
We maintain deposit balances with financial institutions which from
time to time, may exceed the federally insured limits. At September
27, 2008, we had approximately $3,121,000 on deposit that was in
excess of the federal depository insurance coverage limit of
$100,000 per entity. The FDIC insurance limits were increased to
$250,000 on October 10, 2008 and will stay in effect until December
31, 2009. We have not experienced any losses in such accounts and
management believes it is not exposed to any significant credit
risks on cash and cash equivalents despite the current banking
environment.
Note Receivable
Our note receivable arises primarily from the sale of operating
assets, including liquor licenses. Generally, those assets serve as
collateral for the receivable. We believe that the collateral,
coupled with the credit standing of the purchasers, limits these
risks.
Major Supplier
Throughout our fiscal years 2008 and 2007, we purchased
substantially all of our food products from one major supplier
pursuant to a master distribution agreement which entitled us to
receive certain purchase discounts, rebates and advertising
allowances. We believe that several other alternative vendors are
available, if necessary.
Revenue Recognition
We record revenues from normal recurring sales upon the sale of food
and beverages and the
F-9
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue Recognition (Continued)
sale of package liquor products. We report our sales net of sales
tax. Continuing royalties, which are a percentage of net sales of
franchised stores, are accrued as income when earned.
Pre-opening Costs
Our pre-opening costs are those typically associated with the
opening of a new restaurant and generally include payroll costs
associated with the "new restaurant openers" (a team of select
employees who travel to new restaurants to ensure that our high
standards for quality are met), rent and promotional costs. We
expense pre-opening costs as incurred. During our fiscal year 2008,
the limited partnership restaurant in Davie, Florida reported losses
of $632,000, primarily due to pre-opening costs. During our fiscal
year 2007, the limited partnership restaurants in Pembroke Pines,
Florida and Davie, Florida reported losses of $341,000 and $174,000,
respectively, primarily due to pre-opening costs.
Advertising Costs
Our advertising costs are expensed as incurred. Advertising costs
incurred during our fiscal years ended September 27, 2008 and
September 29, 2007 were approximately $217,000 and $234,000
respectively.
Fair Value of Financial Instruments
The respective carrying value of certain of our on-balance-sheet
financial instruments approximated their fair value. These
instruments include cash and cash equivalents, note receivable,
other receivables, accounts payables and accrued expenses. We have
assumed fair values to approximate carrying values for those
financial instruments, which are short-term in nature or are
receivable or payable on demand.
We estimated the fair value of long-term debt based on current rates
offered to us for debt of comparable maturities and similar
collateral requirements.
Income Taxes
We account for our income taxes using SFAS No. 109, "Accounting for
Income Taxes", which requires the recognition of deferred tax
liabilities and assets for expected future tax consequences of
events that have been included in the consolidated financial
statements or tax returns. Under this method, deferred tax
liabilities and assets are determined based on the difference
between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which
the differences are expected to reverse.
F-10
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Stock-Based Compensation
On January 1, 2006, we adopted SFAS No. 123 (revised 2004),
"Share-Based Payment," (SFAS No. 123R) to account for stock-based
employee compensation. Among other items, SFAS 123R eliminates the
use of Accounting Principles Board Opinion ("APB") No. 25,
"Accounting for Stock Issued to Employees," and the intrinsic value
method of accounting and requires companies to recognize the cost of
employee services received in exchange for stock-based awards based
on the grant date fair value of those awards in their financial
statements. We elected to use the modified prospective method for
adoption, which requires compensation expense to be recorded for all
unvested stock options beginning in the first quarter of adoption.
For stock-based awards granted or modified subsequent to January 1,
2006, compensation expense, based on the fair value on the date of
grant, is recognized in the consolidated financial statements over
the vesting period. This application requires us to record
compensation expense for all awards granted to employees and
directors after the adoption date and for the unvested portion of
awards that were outstanding at the date of adoption. We had no
unvested stock options as of January 1, 2006 and granted no stock
options subsequent thereto, including our fiscal years 2008 and
2007, so there is no impact of SFAS No. 123R on our consolidated
financial statements for our fiscal years 2008 or 2007.
Long-Lived Assets
We continually evaluate whether events and circumstances have
occurred that may warrant revision of the estimated life of our
intangible and other long-lived assets or whether the remaining
balance of our intangible and other long-lived assets should be
evaluated for possible impairment. If and when such factors, events
or circumstances indicate that intangible or other long-lived assets
should be evaluated for possible impairment, we will determine the
fair value of the asset by making an estimate of expected future
cash flows over the remaining lives of the respective assets and
compare that fair value with the carrying value of the assets in
measuring their recoverability. In determining the expected future
cash flows, the assets will be grouped at the lowest level for which
there are cash flows, at the individual store level.
Recently Issued 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.
F-11
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recently Issued Accounting Pronouncements (Continued)
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 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.
In February 2007, the FASB issued SFAS 159, "Fair Value Option for
Financial Assets and Liabilities" which permits an entity to choose
to measure many financial instruments and certain other items at
fair value. The standard contains an amendment to SFAS 115
pertaining to available-for-sale and trading securities. The
objective of the standard is to improve financial reporting by
providing entities with the opportunity to mitigate volatility in
reported earnings caused by measuring related assets and liabilities
differently without having to apply complex hedge accounting
provisions. The provisions of SFAS 159 are effective for financial
statements issued for fiscal years beginning after November 15,
2007. We do not expect the adoption of Statement 159 at the
beginning of fiscal year 2009 to have a material impact on our
consolidated results of operations and financial condition.
In September 2006, the FASB issued Statement of Financial Accounting
Standards No. 157, "Fair Value Measurements" ("SFAS 157"). SFAS 157
provides a common definition of fair value and establishes a
framework to make the measurement of fair value in generally
accepted accounting principles more consistent and comparable. SFAS
157 also requires
F-12
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recently Issued Accounting Pronouncements (Continued)
expanded disclosures to provide information about the extent to
which fair value is used to measure assets and liabilities, the
methods and assumptions used to measure fair value and the effect of
fair value measures on earnings. SFAS 157 is effective for fiscal
years beginning after November 15, 2007 (our fiscal year 2009),
although early adoption is permitted. In September 2007, the FASB
provided a one-year deferral for the implementation of SFAS 157 only
with regard to nonfinancial assets and liabilities. We do not
anticipate any significant financial statement impact as a result of
SFAS 157.
NOTE 2. ACQUISITIONS
Purchase of Real Property
On April 2, 2007, we purchased the real property located adjacent to
the parking lot of our combination restaurant and package liquor
store located at 4 North Federal Highway, Hallandale, Florida,
(Store #31). We paid $600,000 for this property, $450,000 of which
we borrowed from an unaffiliated third party first mortgagee. We
fully attributed the purchase price to the fair value of the land
and building.
On October 20, 2006, we purchased the real property and building
where our combination restaurant and package liquor store located at
4 North Federal Highway, Hallandale, Florida (Store #31) operates.
We paid $552,500 for the real property, which was partially financed
with an advance of $250,000 on the mortgage procured by us during
the fourth quarter of our fiscal year 2006 to purchase the limited
liability company which owns the real property and the ground lease
at this location, thereby raising the principal balance on such
mortgage to $3,530,000.
Purchase of Franchised Unit
On March 4, 2007, we acquired the assets of a franchised restaurant
located in Lake Worth, Florida for $100,000 of total consideration.
We have included the assets acquired in our consolidated financial
statements as of that date. We allocated the purchase price $55,000
to the value of property and equipment and $45,000 to the value of
the leasehold purchased.
Purchase of Leasehold Interests
On March 31, 2008, we purchased a four (4%) percent interest, as
lessee, in the Ninety Nine Year Ground Lease, and a four (4%)
percent interest, as sublessor, in the Sublease Agreement by which
we sublease the real property and improvements for our package
liquor store and warehouse located at 8600 Biscayne Boulevard, El
Portal, Miami-Dade County, Florida, (Store #47) for $27,000. With
this purchase, we increased our ownership interest in the
Ninety-Nine Year Ground Lease and the Sublease Agreement to fifty
two (52%) percent.
F-13
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 2. ACQUISITIONS
Purchase of Limited Partnership Interests
During fiscal year 2008, we purchased from a limited partner (not a
family member of any of our directors or officers) limited
partnership interests of 0.76% to 2.67% in our limited partnerships,
with the only exception being CIC Investors #55, Ltd. for $120,000.
We also purchased from another limited partner (not a family member
of any of our directors or officers) a limited partnership interest
of 0.13% in our limited partnership which owns the Davie, Florida
restaurant, for $5,000.
NOTE 3. DISPOSITIONS
On April 23, 2007, we sold our real property located at 732-734 N.E.
125th Street, North Miami, Florida and our rights under the liquor
license for that location for $780,000. We purchased this real
property during the first quarter of our fiscal year 2007 for a
purchase price of $250,000 and realized a gain of $393,000 for the
sale.
NOTE 4. NOTE RECEIVABLE
Our note receivable consists of the following at September 27, 2008
and September 29, 2007:
2008 2007
-------- --------
Note receivable from related party,
bearing interest at 14% and due in
installments through August, 2011 44,000 58,000
-------- --------
Current portion 16,000 14,000
-------- --------
$ 28,000 $ 44,000
======== ========
The remaining note receivable represents the amount owed to us for a
store operation which was sold. Since we did not receive a
significant amount of cash on the sale, a pro rata portion of the
gain is deferred and recognized only as payments on the note are
received by us. We recognized approximately $11,000 and $9,000 of
deferred gain on collections of such note receivable during our
fiscal years ended September 27, 2008 and September 29, 2007,
respectively.
Future scheduled payments on our note receivable at September 27,
2008 consists of the following:
2009 $ 16,000
2010 19,000
2011 9,000
--------
$ 44,000
========
F-14
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 5. PROPERTY AND EQUIPMENT
2008 2007
------------ ------------
Furniture and equipment $ 9,184,000 $ 7,909,000
Leasehold improvements 18,195,000 15,413,000
Land and land improvements 5,104,000 5,104,000
Building and improvements 2,385,000 2,383,000
Vehicles 685,000 670,000
------------ ------------
35,553,000 31,479,000
Less accumulated depreciation and amortization 13,952,000 12,069,000
------------ ------------
$ 21,601,000 $ 19,410,000
============ ============
Depreciation expense for the fiscal years ended September 27, 2008 and
September 29, 2007 was approximately $2,057,000 and $1,949,000,
respectively.
NOTE 6. LEASEHOLD PURCHASES
2008 2007
----------- ----------
Leasehold purchases, at cost $ 2,938,000 $ 2,911,000
Less accumulated amortization 1,058,000 826,000
----------- -----------
$ 1,880,000 $ 2,085,000
=========== ===========
NOTE 7. INVESTMENTS IN LIMITED PARTNERSHIPS
We have invested with others, (some of whom are or are affiliated
with our officers and directors), in ten limited partnerships which
own and operate ten South Florida based restaurants under our
service mark "Flanigan's Seafood Bar and Grill". In addition to
being a limited partner in these limited partnerships, we are the
sole general partner of all of these limited partnerships and manage
and control the operations of the restaurants except for the
restaurant located in Fort Lauderdale, Florida where we only hold a
limited partnership interest.
Generally, the terms of the limited partnership agreements provide
that until the investors' cash investment in a limited partnership
(including any cash invested by us) is returned in full, the limited
partnership distributes to the investors annually out of available
cash from the operation of the restaurant, as a return of capital,
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
and one-half (1/2) to the investors, (including us), prorata based
upon the investors' investment, as a return of capital. Once all of
the investors, (including us), have received, in full, amounts equal
to their cash invested, an annual management fee becomes payable to
us equal to one-half (1/2) of cash available to be
F-15
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 7. INVESTMENTS IN LIMITED PARTNERSHIPS (Continued)
distributed, with the other one half (1/2) of available cash
distributed to the investors (including us), as a profit
distribution, pro-rata based upon the investors' investment.
As of September 27, 2008, limited partnerships owning three (3)
restaurants, (Surfside, Florida, Kendall, Florida and Miami, Florida
locations), 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 our receipt
of distributable amounts from the limited partnerships, we receive a
fee equal to 3% of gross sales for use of our "Flanigan's Seafood
Bar and Grill" service mark, which use is authorized while we act as
general partner only. This 3% fee is "earned" when sales are made by
the limited partnerships and is paid weekly, in arrears. We
anticipate that we will continue to form limited partnerships to
raise funds to own and operate restaurants under our service mark
"Flanigan's Seafood Bar and Grill" using the same or substantially
similar financial arrangement.
Surfside, Florida
We are the sole general partner and a 45% limited partner in this
limited partnership which has owned and operated a restaurant in
Surfside, Florida under our "Flanigan's Seafood Bar and Grill"
service mark since March 6, 1998. 34.9% of the remaining limited
partnership interest is owned by persons who are either our
officers, directors or their family members. As of the end of our
fiscal year 2008, this limited partnership has returned to its
investors all of their initial 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. This entity is
consolidated in the accompanying financial statements.
Kendall, Florida
We are the sole general partner and a 41% limited partner in this
limited partnership which has owned and operated a restaurant in
Kendall, Florida under our "Flanigan's Seafood Bar and Grill"
service mark since April 4, 2000. 29.7% of the remaining limited
partnership interest is owned by persons who are either our
officers, directors or their family members. As of the end of our
fiscal year 2008, this limited partnership has returned to its
investors all of their initial 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. This entity is
consolidated in the accompanying financial statements.
West Miami, Florida
We are the sole general partner and a 27% limited partner in this
limited partnership which has owned and operated a restaurant in
West Miami, Florida under our "Flanigan's Seafood Bar and Grill"
service mark since October 11, 2001. 34.2% of the remaining limited
partnership interest is owned by persons who are either our
officers, directors or their family
F-16
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 7. INVESTMENTS IN LIMITED PARTNERSHIPS (Continued)
West Miami, Florida (Continued)
members. As of the end of our fiscal year 2008, this limited
partnership has returned to its investors all of their initial 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. This entity is consolidated in the accompanying
financial statements.
Weston, Florida
We are the sole general partner and a 30% limited partner in this
limited partnership which has owned and operated a restaurant in
Weston, Florida under our "Flanigan's Seafood Bar and Grill" service
mark since January 20, 2003. 35.1% of the remaining limited
partnership interest is owned by persons who are either our
officers, directors or their family members. As of the end of our
fiscal year 2008, this limited partnership has returned to its
investors approximately 73.75% of their initial cash invested.
During the first quarter of our fiscal year 2009, no distribution
was made to limited partners as this limited partnership had limited
cash flow generated by this restaurant. The limited cash flow was
primarily attributable to increased competition, which we expect to
continue into our fiscal year 2009. This entity is consolidated in
the accompanying financial statements.
Stuart, Florida
We are the sole general partner and a 13% limited partner in this
limited partnership which has owned and operated a restaurant in a
Howard Johnson's Hotel in Stuart, Florida under our "Flanigan's
Seafood Bar and Grill" service mark since January 11, 2004. 31.0% of
the remaining limited partnership interest is owned by persons who
are either our officers, directors or their family members. As of
the end of our fiscal year 2008, this limited partnership has
returned to its investors approximately 22.5% of their initial cash
invested. During our fiscal year 2006, the limited partners of this
limited partnership only received three (3) quarterly distributions
due to the limited cash flow generated by the restaurant.
During our fiscal years 2007 and 2008, no distributions were made to
limited partners as this limited partnership had net losses of
$98,000 and $8,000 from the operation of the restaurant during the
fiscal years 2007 and 2008, respectively, before depreciation and
amortization, and owed the Company $203,000 and $216,000, as of the
end of our fiscal years 2007 and 2008, respectively, in advances
made to meet operating losses. This entity is consolidated in the
accompanying financial statements and therefore the intercompany
transactions are eliminated.
Wellington, Florida
We are the sole general partner and a 28% limited partner in this
limited partnership which has owned and operated a restaurant in
Wellington, Florida under our "Flanigan's Seafood
F-17
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 7. INVESTMENTS IN LIMITED PARTNERSHIPS (Continued)
Wellington, Florida (Continued)
Bar and Grill" service mark since May 27, 2005. 25.7% of the
remaining limited partnership interest is owned by persons who are
either our officers, directors or their family members. As of the
end of our fiscal year 2008, this limited partnership has returned
to its investors approximately 41% of their initial cash invested.
This entity is consolidated in the accompanying financial
statements.
Pinecrest, Florida
We are the sole general partner and 40% limited partner in this
limited partnership which has owned and operated a restaurant in
Pinecrest, Florida under our "Flanigan's Seafood Bar and Grill"
service mark since August 14, 2006. 15.0% of the remaining limited
partnership interest is owned by persons who are either our
officers, directors or their family members. As of the end of our
fiscal year 2008, this limited partnership has returned to its
investors approximately 18% of their initial cash invested. This
entity is consolidated in the accompanying financial statements.
Davie, Florida
We are the sole general partner and a 48% limited partner in this
limited partnership which has owned and operated a restaurant in
Davie, Florida under our "Flanigan's Seafood Bar and Grill" service
mark since July 28, 2008. 9.7% of the remaining limited partnership
interest is owned by persons who are either our officers, directors
or their family members. As of the end of our fiscal year 2008, this
limited partnership has yet to return to its investors any of their
initial cash invested. This entity is consolidated in the
accompanying financial statements.
Pembroke Pines, Florida
We are the sole general partner and a 17% limited partner in this
limited partnership which has owned and operated a restaurant in
Pembroke Pines, Florida under our "Flanigan's Seafood Bar and Grill"
service mark since October 29, 2007. 17.9% of the remaining limited
partnership interest is owned by persons who are either our
officers, directors or their family members. As of the end of our
fiscal year 2008, this limited partnership has returned to its
investors approximately 7.0% of their initial cash invested. This
entity is consolidated in the accompanying financial statements.
Fort Lauderdale, Florida
A corporation, owned by one of our directors, acts as sole general
partner of a limited partnership which has owned and operated a
restaurant in Fort Lauderdale, Florida under our "Flanigan's Seafood
Bar and Grill" service mark since April 1, 1997. We have a 25%
limited
F-18
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 7. INVESTMENTS IN LIMITED PARTNERSHIPS (Continued)
Fort Lauderdale, Florida (Continued)
partnership interest in this limited partnership. 58.8% of the
remaining limited partnership interest is owned by persons who are
either our officers, directors or their family members. We have a
franchise arrangement with this limited partnership. For accounting
purposes, we do not consolidate the operations of this limited
partnership into our operations. This entity is reported using the
equity method in the accompanying consolidated financial statements.
The following is a summary of condensed unaudited financial
information pertaining to our limited partnership investment in Fort
Lauderdale, Florida:
2008 2007
----------- -----------
Financial Position:
Current assets $ 75,000 $ 49,000
Non-current assets 549,000 615,000
Current liabilities 87,000 152,000
Non-current liabilities 44,000 58,000
Operating Results:
Revenues 2,287,000 2,286,000
Gross profit 1,525,000 1,507,000
Net income 86,000 5,000
NOTE 8. LIQUOR LICENSES
Liquor licenses are tested for impairment in September of each of
our fiscal years. The fair value of liquor licenses at September 27,
2008, exceeded the carrying amount; therefore, we recognized no
impairment loss. The fair value of the liquor licenses was evaluated
by comparing the carrying value to recent sales for similar liquor
licenses in the County issued. At September 27, 2008 and September
29, 2007, the total carrying amount of our liquor licenses was
approximately $345,000 and $347,000, respectively. We acquired no
liquor licenses in fiscal year 2008 which required capitalization.
NOTE 9. INCOME TAXES
The components of our provision for income taxes for our fiscal
years 2008 and 2007 are as follows:
2008 2007
----------- -----------
Current:
Federal $ 687,000 $ 664,000
State 148,000 150,000
----------- -----------
835,000 814,000
----------- -----------
Deferred:
Federal (245,000) (99,000)
State (26,000) (17,000)
----------- -----------
(271,000) (116,000)
----------- -----------
$ 564,000 $ 698,000
=========== ===========
F-19
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 9. INCOME TAXES (Continued)
A reconciliation of income tax computed at the statutory federal
rate to income tax expense is as follows:
2008 2007
--------- ---------
Tax provision at the statutory rate of 34% $ 563,000 $ 749,000
State income taxes, net of federal income tax 72,000 88,000
Tax benefit of tip credit generated (160,000) (141,000)
Sec. 179 phase out and other permanent items 85,000 --
Other 4,000 2,000
--------- ---------
$ 564,000 $ 698,000
========= =========
We have deferred tax assets which arise primarily due to
depreciation recorded at different rates for tax and book purposes
offset by cost basis differences in depreciable assets due to the
deferral of the recognition of insurance recoveries on casualty
losses for tax purposes, investments in limited partnerships,
accruals for potential uninsured claims, bonuses accrued for book
purposes but not paid within two and a half months for tax purposes,
the capitalization of certain inventory costs for tax purposes not
recognized for financial reporting purposes and the recognition of
revenue from gift cards not redeemed within twelve months of
issuance.
The components of our deferred tax assets at September 27, 2008 and
September 29, 2007 were as follows:
2008 2007
-------- --------
Current:
Reversal of aged payables $ 27,000 $ 27,000
Capitalized inventory costs 22,000 22,000
Accrued bonuses 142,000 135,000
Accruals for potential uninsured claims 43,000 24,000
Gift cards 9,000 --
-------- --------
$243,000 $208,000
======== ========
Long-Term:
Book/tax differences in property and equipment $421,000 $321,000
Limited partnership investments 308,000 171,000
-------- --------
$729,000 $492,000
======== ========
Internal Revenue Service Audit of Company's Corporate Income Tax
Return for the Fiscal Years Ending September 29, 2007 and September
30, 2006
During our fiscal year 2008, the corporate income tax returns for
our fiscal years ending September 29, 2007 and September 30, 2006
were audited by the Internal Revenue Service. We agreed that the
sums of $6,227 and $2,637 were due as additional corporate income
tax
F-20
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 9. INCOME TAXES (Continued)
for our fiscal years ending September 29, 2007 and September 30,
2006, respectively. The effects of the settlement of the audits were
considered in the computation of tax amounts for our fiscal year
ended September 27, 2008.
NOTE 10. DEBT
Long-Term Debt
2008 2007
---------- ----------
Mortgage payable to bank, secured by land and building,
bearing interest at 7.5%; payable in monthly installments of
principal and interest of $28,600, maturing in October, 2013. $3,363,000 $3,446,000
Mortgage payable to bank, secured by first mortgage on a
building, bearing interest at 7.25%; payable in monthly
installments of principal and interest of approximately $8,000,
maturing in December, 2013. 962,000 985,000
Mortgage payable, secured by land and building, bearing
interest at 10.0%; payable in monthly installments of principal
and interest of $3,949, maturing in May, 2017. 446,000 449,000
Note payable to finance company, secured by vehicle, bearing
interest at 9.25%, payable in monthly installments of principal
and interest of approximately $4,500 through maturity in July
2010, at which time the unpaid principal of $45,000 becomes
due. 122,000 161,000
Other 59,000 77,000
---------- ----------
4,952,000 5,118,000
Less current portion 188,000 196,000
---------- ----------
$4,764,000 $4,922,000
========== ==========
Long-term debt at September 27, 2008 matures as follows:
2009 $ 188,000
2010 236,000
2011 157,000
2012 154,000
2013 166,000
Thereafter 4,051,000
----------
$4,952,000
==========
F-21
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 10. DEBT (Continued)
Line of Credit
As of the end of our fiscal year 2008, we have a $2,650,000 line of
credit, which has a variable interest rate at prime, (5.0% at
September 27, 2008), and is payable in monthly installments of
interest only on the outstanding principal balance, with a maturity
in the third quarter of our fiscal year 2009. The original agreement
provides for a security interest in substantially all of our assets.
We granted our lender a second mortgage on our corporate offices as
additional collateral for the increase in the line of credit in the
first quarter of our fiscal year 2007. As of September 27, 2008, our
line of credit had a principal balance of $1,562,000, as compared to
$962,000 as of September 29, 2007.
Subsequent to the end of our fiscal year 2008, we changed our
primary banking relationship to another unaffiliated financial
institution, which includes a new $2,500,000 line of credit. The
outstanding balance on our line of credit of $1,586,000 as of
November 30, 2008, bears interest at BBA LIBOR 1 month rate, plus
2.25%, (4.20625% as of December 7, 2008), 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.
NOTE 11. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS
Legal Matters
We are a party to various claims, legal actions and complaints
arising in the ordinary course of our business. It is our opinion
that all such matters are without merit or involve such amounts that
an unfavorable disposition would not have a material adverse effect
on our financial position or results of operations.
Leases
We lease a substantial portion of the land and buildings used in our
operations under leases with initial terms expiring between 2009 and
2049. Renewal options are available on many of our leases. Most of
our leases are fixed rent agreements. For two Company-owned
restaurant/package liquor store combination units, lease rentals are
subject to sales overrides ranging from 1.75% to 4% of annual sales
in excess of established amounts. For four limited partnership
restaurants, lease rentals are subject to sales overrides ranging
from 2% to 5.5% of annual sales in excess of the base rent paid. We
recognize rent expense on a straight line basis over the term of the
lease. Certain of our leases are subject to fair market rental
appraisals at the time of renewal. We have the option to purchase
the real property which we lease for the operation of our Fort
Lauderdale, Florida restaurant.
F-22
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 11. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Continued)
Leases (Continued)
We have a ground lease for an out parcel in Hollywood, Florida where
we constructed a building on the out parcel, one-half (1/2) of which
is used by us for the operation of a package liquor store and the
other one-half (1/2) of which is subleased to an unrelated third
party as retail space. Rent for the retail space commenced January
1, 2005, and we generated $49,000 and $46,000 of revenue from this
source during our fiscal years ended September 27, 2008 and
September 29, 2007, respectively. Total future minimum sublease
payments under the non-cancelable sublease are $340,000, including
Florida sales tax (currently 6%).
Future minimum lease payments, including Florida sales tax
(currently 6% to 7%) under our non-cancelable operating leases as of
September 27, 2008 are as follows:
2009 $ 2,485,000
2010 2,169,000
2011 1,721,000
2012 1,209,000
2013 1,094,000
Thereafter 5,335,000
-----------
Total $14,013,000
===========
Total rent expense for all of our operating leases was approximately
$2,697,000 and $2,625,000 in our fiscal years 2008 and 2007,
respectively, and is included in "Occupancy costs" in our
accompanying consolidated statements of income. This total rent
expense is comprised of the following:
2008 2007
----------- -----------
Minimum Base Rent $ 2,301,000 $ 2,259,000
Contingent Percentage Rent 396,000 366,000
----------- -----------
Total $ 2,697,000 $ 2,625,000
=========== ===========
We guarantee various leases for franchisees and stores sold in prior
years. Remaining rental payments required under these leases total
approximately $2,475,000.
Purchase Commitments
Effective November 24, 2008, we entered into a purchase agreement
with our rib supplier. The terms of the agreement stipulate that we
will purchase approximately $3,800,000 of baby back ribs during the
2009 calendar year at a fixed cost. We contract for the purchase of
baby back ribs on an annual basis to fix the cost and ensure
adequate supply for the calendar year. We purchase all of our rib
supply from this vendor, but we believe that several other
alternative vendors are available, if necessary.
F-23
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 11. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Continued)
Franchise Program
At September 27, 2008 and September 29, 2007, we were the franchisor
of six units under franchise agreements. On March 4, 2007, we
acquired the assets of the franchised restaurant in Lake Worth,
Florida. Of the six franchised stores, four are combination
restaurant/package liquor stores and two are restaurants. Four
franchised stores are owned and operated by related parties. Under
the franchise agreements, we provide guidance, advice and management
assistance to the franchisees. In addition and for an additional
annual fee of approximately $25,000, we also act as fiscal agent for
the franchisees whereby we collect all revenues and pay all expenses
and distributions. We also, from time to time, advance funds on
behalf of the franchisees for the cost of renovations. The resulting
amounts receivable from and payable to these franchisees are
reflected in the accompanying consolidated balance sheet as either
an asset or a liability. We also agree to sponsor and manage
cooperative buying groups on behalf of the franchisees for the
purchase of inventory. The franchise agreements provide for
royalties to us of approximately 3% of gross restaurant sales and 1%
of gross package liquor sales. We are not currently offering or
accepting new franchises.
Employment Agreement/Bonuses
As of September 27, 2008 and September 29, 2007, we had no
employment agreements.
Our Board of Directors approved an annual performance bonus, with
14% of the corporate pre-tax net income, plus or minus non-recurring
items, but before depreciation and amortization in excess of
$650,000 paid to the Chief Executive Officer and 6% paid to other
members of management. Bonuses for our fiscal years 2008 and 2007
amounted to approximately $492,000 and $438,000, respectively.
Our Board of Directors also approved an annual performance bonus,
with 5% of the pre-tax net income before depreciation and
amortization from our restaurants and our share of the pre-tax net
income before depreciation and amortization from the restaurants
owned by the limited partnerships paid to the Chief Operating
Officer and 5% paid to the Chief Financial Officer. Bonuses for our
fiscal years 2008 and 2007 amounted to approximately $357,000 and
$323,000, respectively.
Our Board of Directors approved an annual performance bonus, with 3%
of the pre-tax net income before depreciation and amortization from
the package liquor stores paid to the Vice President of Package
Operations and 2% paid to the package store supervisor. During the
second quarter of fiscal year 2008, our Board of Directors modified
the annual performance bonus, eliminating the 2% of the pre-tax net
income before depreciation and amortization from the package liquor
stores paid to the package store supervisor. Bonuses for our fiscal
years 2008 and 2007 amounted to approximately $22,000 and $36,000,
respectively.
F-24
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 11. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Continued)
Management Agreements
Atlanta, Georgia
We own, but do not operate, an adult entertainment nightclub
located in Atlanta, Georgia which operates under the name
"Mardi Gras". We have a management agreement with an
unaffiliated third party to manage the club. Effective May 1,
2006, the unaffiliated third party that manages the club
became obligated under a new lease for the business premises
where the club operates for a period of ten (10) years, with
one (1) ten (10) year renewal option and as of such date we
are no longer obligated under the lease. Under our management
agreement, the unaffiliated third party management firm is
obligated to pay us an annual amount, paid monthly, equal to
the greater of $150,000 or ten (10%) percent of gross sales
from the club, offset by one-half (1/2) of any rental
increases, provided our fees will never be less than $150,000
per year. For our fiscal years ended September 27, 2008 and
September 29, 2007, we generated $238,000 and $203,000 of
revenue, respectively, from the operation of the club.
Deerfield Beach, Florida
Since January, 2006, we have managed "The Whale's Rib", a
casual dining restaurant located in Deerfield Beach, Florida,
pursuant to management agreement. We paid $500,000 in exchange
for our rights to manage this restaurant. The management
agreement is being amortized straight line over the life of
the initial term of the agreement, ten (10) years. The
restaurant is owned by a third party unaffiliated with us. In
exchange for providing management, bookkeeping and related
services, we receive one-half (1/2) of the net profit, if any,
from the operation of the restaurant. The term of the
management agreement, which commenced January 9, 2006, is for
ten (10) years, with four (4) five (5) year renewal options in
favor of the owner of the restaurant. For our fiscal years
ended September 27, 2008 and September 29, 2007, we generated
$150,000 and $160,000 of revenue, respectively, from providing
these management services.
NOTE 12. COMMON STOCK
Treasury Stock
Purchase of Common Shares
Pursuant to a discretionary plan approved by our Board of
Directors, during our fiscal year 2008, we purchased 6,400
shares of our common stock for an aggregate purchase price of
$49,000. Of the shares purchased, we purchased 1,200 shares of
our common stock from the Joseph G. Flanigan Charitable Trust
for $9,600 and 2,500 shares of our common stock from an
employee for $20,000 in off market transactions, which
reflected an actual per share purchase price which was equal
to the average per share market price on the date of
F-25
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 12. COMMON STOCK (Continued)
Purchase of Common Shares (Continued)
purchase. The balance of our common stock purchased, 2,700
shares, were purchased on the open market for an aggregate
purchase price of $19,400. During our fiscal year 2007, we
purchased 3,332 shares of our common stock for an aggregate
purchase price of $36,000. Of the shares purchased, 2,500
shares were purchased from August Bucci, our Chief Operating
Officer and Director, in an off market private transaction, at
an aggregate purchase price of $28,000, which reflected an
actual per share purchase price which was less than the
avarage per share market price on the date of purchase. The
balance of our common stock purchased, 832 shares, were
purchased from a former employee, (332 shares), for $3,500,
and from the Joseph G. Flanigan Charitable Trust, (500
shares), for $4,500 in off market transactions, which
reflected an actual per share purchase price which was equal
to the average per share market price on the date of purchase.
Sale of Common Shares
During our fiscal years 2008 and 2007, we sold an aggregate of
-0- and 9,510 shares of our common stock, respectively,
pursuant to the exercise of options, to certain employees and
officers for a total of approximately $-0-, and $61,000,
respectively.
Stock Options
We granted no options during our fiscal years 2008 and 2007.
Effective January 1, 2006, we adopted SFAS No. 123 (revised 2004),
"Share-Based Payment," (SFAS No. 123R) to account for stock-based
employee compensation. We elected to use the modified prospective
method for adoption, which requires compensation expense to be
recorded for all unvested stock options beginning in the first
quarter of adoption. We had no unvested stock options as of January
1, 2006 and granted no stock options in the fiscal years ended
September 27, 2008 and September 29, 2007, so no compensation cost
has been recognized on our consolidated financial statements for our
fiscal years ended September 27, 2008 and September 29, 2007.
Changes in our outstanding incentive stock options for common stock
are as follows:
2008 2007
------ ------
Outstanding at beginning of year 50,300 67,850
Options granted -- --
Options exercised -- (9,510)
Options expired (950) (8,040)
------ ------
Outstanding at end of year 49,350 50,300
------ ------
Exercisable at end of year 49,350 50,300
====== ======
F-26
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 12. COMMON STOCK (Continued)
Stock Options (Continued)
The intrinsic value as of the exercise date of the -0- and 9,510
stock options exercised during our fiscal years ended September 27,
2008 and September 29, 2007 were approximately $-0- and $45,000,
respectively.
Weighted average option exercise price information for our fiscal
years 2008 and 2007 is as follows:
2008 2007
----- -----
Outstanding at beginning of year $6.31 $6.27
===== =====
Granted during the year $ - $ -
===== =====
Exercised during the year $ - $6.23
===== =====
Outstanding at end of year $6.31 $6.31
===== =====
Exercisable at end of year $6.31 $6.31
===== =====
Our significant option groups outstanding at September 27, 2008 and
related weighted average price and life information are as follows:
Grant Options Options Exercise Remaining
Date Outstanding Exercisable Price Life (Years)
------- ----------- ----------- -------- ------------
10-1-03 9,350 9,350 $6.14 0.0*
5-20-04 40,000 40,000 $6.35 0.625
*expired unexercised on October 3, 2008.
The weighted-average remaining contractual terms of our stock
options outstanding and stock options exercisable at September 27,
2008 was 0.507 years. The aggregate intrinsic value of our options
outstanding and stock options exercisable at September 27, 2008 was
$-0-.
NOTE 13. NET INCOME PER COMMON SHARE
We follow SFAS No. 128, "Earnings per Share." SFAS 128 provides for
the calculation of basic and diluted earnings per share. Basic
earnings per share includes no dilution and is computed by dividing
income available to common stockholders by the weighted average
number of common shares outstanding for the period. Diluted earnings
per share assume the exercise of options granted if the weighted
average market price exceeds the exercise price. In the fourth
quarter, the options granted on May 20, 2004 became anti-dilutive
and were not included in the computation of diluted EPS for the
fourth quarter. Earnings per share are computed by dividing income
available to common stockholders by the basic and diluted weighted
average number of common shares.
F-27
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 13. NET INCOME PER COMMON SHARE (Continued)
2008 2007
--------- ---------
Basic weighted average shares 1,888,000 1,889,000
Incremental shares relating to outstanding
Options 1,000 21,000
--------- ---------
Diluted weighted average shares 1,889,000 1,910,000
========= =========
NOTE 14. RELATED PARTY TRANSACTIONS
Our Chief Executive Officer manages one of our franchised stores.
Also see Notes 7 and 11 for additional related party transactions.
NOTE 15. 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 our fiscal years ended 2008 and 2007, 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 expense 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.
2008 2007
----------- -----------
Operating Revenues:
Restaurants $50,400,000 $46,811,000
Package stores 12,317,000 12,784,000
Other revenues 1,492,000 1,506,000
----------- -----------
Total operating revenues $64,209,000 $61,101,000
=========== ===========
F-28
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 15. BUSINESS SEGMENTS (Continued)
2008 2007
----------- -----------
Operating Income Reconciled to Income before
Income Taxes and Minority Interest in earnings (losses)
of Consolidated Limited Partnerships:
Restaurants $ 3,669,000 $ 3,281,000
Package stores 491,000 470,000
----------- -----------
4,160,000 3,751,000
Corporate expenses, net of other revenues (2,160,000) (1,651,000)
----------- -----------
Operating income 2,000,000 2,100,000
Equity in net income of limited partnership 21,000 1,000
Minority interest in (earnings) losses of consolidated
limited partnerships 13,000 (100,000)
Interest expense, net of interest income (413,000) (494,000)
Other -- 458,000
----------- -----------
Income Before Income Taxes $ 1,621,000 $ 1,965,000
=========== ===========
Identifiable Assets:
Restaurants $19,699,000 $18,202,000
Package store 3,673,000 3,577,000
----------- -----------
23,372,000 21,779,000
Corporate 9,201,000 8,558,000
----------- -----------
Consolidated Totals $32,573,000 $30,337,000
=========== ===========
Capital Expenditures:
Restaurants $ 3,825,000 $ 3,505,000
Package stores 194,000 274,000
----------- -----------
4,019,000 3,779,000
Corporate 318,000 1,107,000
----------- -----------
Total Capital Expenditures $ 4,337,000 $ 4,886,000
=========== ===========
Depreciation and Amortization:
Restaurants $ 1,759,000 $ 1,550,000
Package stores 252,000 245,000
----------- -----------
2,011,000 1,795,000
Corporate 352,000 360,000
----------- -----------
Total Depreciation and Amortization $ 2,363,000 $ 2,155,000
=========== ===========
F-29
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 16. QUARTERLY INFORMATION (UNAUDITED)
The following is a summary of our unaudited quarterly results of
operations for the quarters in our fiscal years 2008 and 2007.
Quarter Ended
--------------------------------------------------------
December 29, March 29, June 28, September 27,
2007 2008 2008 2008
------------ ----------- ----------- -------------
Revenues $ 15,904,000 $16,983,000 $15,765,000 $ 15,557,000
Income from operations 180,000 970,000 651,000 199,000
Net income 185,000 470,000 336,000 66,000
Net income per share -
Basic 0.10 0.25 0.18 0.03
Net income per share -
Diluted 0.10 0.25 0.18 0.03
Weighted average common
stock outstanding - basic 1,890,372 1,889,121 1,886,077 1,885,274
Weighted average common
stock outstanding - diluted 1,903,300 1,899,992 1,895,378 1,885,573
Quarter Ended
--------------------------------------------------------
December 30, March 31, June 30 September 29,
2006 2007 2007 2007
------------ ----------- ----------- -------------
Revenues $ 14,985,000 $16,304,000 $15,407,000 $ 14,405,000
Income from operations 712,000 810,000 288,000 290,000
Net income 324,000 332,000 427,000 184,000
Net income per share -
Basic 0.17 0.18 0.23 0.10
Net income per share -
Diluted 0.17 0.17 0.22 0.10
Weighted average common
stock outstanding - basic 1,884,201 1,887,917 1,892,891 1,890,543
Weighted average common
stock outstanding - diluted 1,911,022 1,915,176 1,914,986 1,908,462
The following is a summary of the significant fourth quarter
adjustments for our fiscal year 2007:
Decrease in accrual for officers' bonuses ($181,000)
Adjusting estimated income taxes to actual 95,000
---------
($ 86,000)
=========
F-30
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 16. QUARTERLY INFORMATION (UNAUDITED) (Continued)
Quarterly operating results are not necessarily representative of
our operations for a full year for various reasons including the
seasonal nature of both the restaurant and package store segments.
NOTE 17. 401(k) PLAN
Effective July 2004, we began sponsoring a 401(k) retirement
plan covering substantially all employees who meet certain
eligibility requirements. Employees may contribute elective
deferrals to the plan up to amounts allowed under the Internal
Revenue Code. We are not required to contribute to the plan
but may make discretionary profit sharing and matching
contributions. During our fiscal years 2008 and 2007, we made
discretionary contributions of $30,000 and $29,000,
respectively.
Schedule II - Valuation and Qualifying Accounts
We maintain no accounts that qualify for this schedule for each of
our two fiscal years ended September 27, 2008 or, September 29,
2007.
F-31