UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 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 1-6836
FLANIGAN'S ENTERPRISES, INC.
----------------------------
(Exact name of registrant as specified in its charter)
Florida 59-0877638
------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
5059 N.E. 18th Avenue, Fort Lauderdale, Florida 33334
----------------------------------------------- -----
Address of principal executive offices) Zip Code
(954) 377-1961
(Registrant's telephone number, including area code)
--------------------------------------------------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer", "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer |_| Accelerated filer |_|
Non-accelerated filer |_| Smaller reporting company |X|
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes|_| No|X|
On February 10, 2009, 1,874,483 shares of Common Stock, $0.10 par value per
share, were outstanding.
--------------------------------------------------------------------------------
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
---------------------------------------------
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION..................................................1
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)............1
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME....................2
CONDENSED CONSOLIDATED BALANCE SHEETS....................................4
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS................6
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS...........8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.............................................13
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK........21
ITEM 4T. CONTROLS AND PROCEDURES...........................................21
PART II. OTHER INFORMATION....................................................22
ITEM 1. LEGAL PROCEEDINGS.................................................22
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.......22
ITEM 6. EXHIBITS..........................................................23
As used in this Quarterly Report on Form 10-Q, the terms "we," "us," "our," the
"Company" and "Flanigan's" mean Flanigan's Enterprises, Inc. and its
subsidiaries (unless the context indicates a different meaning).
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands Except Per Share Amounts)
Thirteen Weeks Ended
December 27, 2008 December 29,2007
----------------- ----------------
REVENUES:
Restaurant food sales $ 10,169 $ 9,747
Restaurant bar sales 2,404 2,290
Package store sales 3,348 3,431
Franchise related revenues 262 331
Owner's fee 44 66
Other operating income 26 39
---------- ----------
16,253 15,904
---------- ----------
COSTS AND EXPENSES:
Cost of merchandise sold:
Restaurant and lounges 4,232 4,070
Package goods 2,366 2,465
Payroll and related costs 4,755 4,808
Occupancy costs 1,001 965
Selling, general and administrative expenses 3,610 3,416
---------- ----------
15,964 15,724
---------- ----------
Income from Operations 289 180
---------- ----------
OTHER INCOME (EXPENSE):
Interest expense (119) (120)
Interest and other income 167 16
---------- ----------
48 (104)
---------- ----------
Income before Provision for Income
Taxes and Minority
Interest in (Earnings) Losses of
Consolidated Limited Partnerships 337 76
Provision for Income Taxes (73) (152)
Minority Interest in (Earnings) Losses of
Consolidated Limited Partnerships (92) 261
---------- ----------
NET INCOME $ 172 $ 185
========== ==========
2
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands Except Per Share Amounts)
(Continued)
Thirteen Weeks Ended
December 27, December 29,
2008 2007
------------ ------------
Net Income Per Common Share:
Basic $0.09 $0.10
===== =====
Diluted $0.09 $0.10
===== =====
Weighted Average Shares and
Equivalent Shares Outstanding
Basic 1,876,681 1,890,372
========= =========
Diluted 1,876,681 1,903,300
========= =========
See accompanying notes to unaudited condensed consolidated financial statements.
3
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 27, 2008 (UNAUDITED) AND SEPTEMBER 27, 2008
(In Thousands)
ASSETS
December 27, September 27,
2008 2008
------------ -------------
CURRENT ASSETS:
Cash and cash equivalents $ 3,502 $ 3,244
Note receivable, current
maturities, net 17 16
Prepaid income taxes 223 176
Due from franchisees 424 351
Other receivables 377 107
Inventories 2,241 2,168
Prepaid expenses 516 547
Deferred tax asset 243 243
--------- --------
Total Current Assets 7,543 6,852
--------- --------
Property and Equipment, Net 21,617 21,601
--------- --------
Investment in Limited Partnership 143 151
--------- --------
OTHER ASSETS:
Liquor licenses, net 345 345
Note receivable, net 23 28
Deferred tax asset 729 729
Leasehold purchases, net 1,798 1,880
Other 772 987
--------- --------
Total Other Assets 3,667 3,969
--------- --------
Total Assets $ 32,970 $ 32,573
========= ========
4
FLANIGAN'S ENTERPRISES, INC, AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 27, 2008 (UNAUDITED) AND SEPTEMBER 27, 2008
(In Thousands)
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
December 27, September 27,
2008 2008
------------ -------------
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 4,508 $ 4,040
Due to franchisees 206 223
Current portion of long term debt 192 188
Current portion of line of credit 1,586 --
Deferred revenues 31 34
Deferred rent 19 19
---------- ----------
Total Current Liabilities 6,542 4,504
---------- ----------
Long Term Debt, Net of Current Maturities 4,715 4,764
Line of Credit -- 1,562
Deferred Rent, Net of Current Portion 208 214
Minority Interest in Equity of
Consolidated Limited Partnerships 8,277 8,437
Commitments, Contingencies and
Subsequent Events
Stockholders' Equity:
Common stock, $.10 par value, 5,000,000
shares authorized; 4,197,642 shares issued 420 420
Capital in excess of par value 6,240 6,240
Retained earnings 12,560 12,388
Treasury stock, at cost, 2,322,309 shares
at December 27, 2008 and 2,313,309
shares at September 27, 2008 (5,992) (5,956)
---------- ----------
Total Stockholders' Equity 13,228 13,092
---------- ----------
Total Liabilities and Stockholders' Equity $ 32,970 $ 32,573
========== ==========
See accompanying notes to unaudited condensed consolidated financial statements.
5
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THIRTEEN WEEKS ENDED DECEMBER 27, 2008 AND DECEMBER 29, 2007
(In Thousands)
December 27, December 29,
2008 2007
------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 172 $ 185
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 582 513
Amortization of leasehold purchases 56 58
Loss on abandonment of property and equipment 19 5
Deferred income tax -- (11)
Deferred rent (6) (4)
Minority interest in earnings (losses) of
consolidated limited partnerships 92 (261)
Loss from unconsolidated limited partnership 5 --
Recognition of deferred revenue (3) (3)
Changes in operating assets and liabilities:
(increase) decrease in
Due from franchisees (73) 96
Other receivables (270) (128)
Prepaid income taxes (47) --
Inventories (73) (259)
Prepaid expenses 31 275
Other assets (18) 486
Increase (decrease) in:
Accounts payable and accrued expenses 468 510
Income taxes payable -- (303)
Due to franchisees (17) (128)
---------- ----------
Net cash provided by operating activities 918 1,031
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Collection on notes and mortgages receivable 4 2
Purchase of property and equipment (307) (1,311)
Deposit on property and equipment (65) --
Proceeds from sale of fixed assets 14 61
Distributions from unconsolidated limited partners 3 3
---------- ----------
Net cash used in investing activities (351) (1,245)
---------- ----------
6
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THIRTEEN WEEKS ENDED DECEMBER 27, 2008 AND DECEMBER 29, 2007
(In Thousands)
(Continued)
December 27, December 29,
2008 2007
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of long term debt (45) (55)
Proceeds from line of credit 24 600
Purchase of treasury stock (36) (10)
Distributions to limited partnership
minority partners (252) (215)
Proceeds from limited partnership interests -- 2,025*
-------- --------
Net cash provided by (used in) financing
activities (309) 2,345
-------- --------
Net Increase in Cash and Cash Equivalents 258 2,131
Beginning of Period 3,244 2,223
-------- --------
End of Period $ 3,502 $ 4,354
======== ========
Supplemental Disclosure for Cash Flow
Information:
Cash paid during period for:
Interest 119 120
======== ========
Income taxes 120 466
======== ========
Non-Cash Financing and Investing Activities:
Purchase deposits transferred to property
and equipment 280 --
======== ========
* exclusive of the Company's investment in the limited partnership owning the
restaurant in Davie, FL of $1,850,000.
See accompanying notes to unaudited condensed consolidated financial statements
7
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 27, 2008
(1) BASIS OF PRESENTATION:
The accompanying financial information for the periods ended December 27, 2008
and December 29, 2007 are unaudited. Financial information as of September 27,
2008 has been derived from the audited financial statements of the Company, but
does not include all disclosures required by generally accepted accounting
principles. In the opinion of management, all adjustments, consisting of normal
recurring adjustments, necessary for a fair presentation of the financial
information for the periods indicated have been included. For further
information regarding the Company's accounting policies, refer to the
Consolidated Financial Statements and related notes included in the Company's
Annual Report on Form 10-K for the year ended September 27, 2008. Operating
results for interim periods are not necessarily indicative of results to be
expected for a full year.
These financial statements include estimates relating to performance based
officers' bonuses. The estimates are reviewed periodically and the effects of
any revisions are reflected in the financial statements in the period they are
determined to be necessary. Although these estimates are based on management's
knowledge of current events and actions it may take in the future, they may
ultimately differ from actual results.
(2) EARNINGS PER SHARE:
Statements of Financial Accounting Standards ("SFAS") No. 128, Earnings per
share establishes standards for computing and presenting earnings per share
("EPS"). This statement requires the presentation of basic and diluted EPS. The
data on Page 3 shows the amounts used in computing earnings per share and the
effects on income and the weighted average number of shares of potentially
dilutive common stock equivalents. For the thirteen weeks ended December 27,
2008, basic and diluted weighted average number of shares are equal due to the
anti-dilutive affect of outstanding options.
(3) RECLASSIFICATION:
Certain amounts in the fiscal year 2008 financial statements have been
reclassified to conform to the fiscal year 2009 presentation.
(4) RECENT ACCOUNTING PRONOUNCEMENTS:
In March 2008, the FASB issued SFAS No. 161 "Disclosures about Derivative
Instruments and Hedging Activities" ("SFAS 161") to enhance disclosures about an
entity's derivative and hedging activities. SFAS 161 is effective for all
financial statements issued in fiscal years and interim periods beginning after
November 15, 2008 and early application is encouraged. SFAS 161 also encourages
but does not require comparative disclosures for earlier periods at initial
adoption. As we do not currently engage in derivative transactions or hedging
activities, we do not anticipate any significant financial statement disclosure
impact as a result of our evaluation of SFAS 161.
In February 2008, the FASB issued FASB Staff Position No. FAS 157-2 ("FSP
157-2"). FSP 157-2 delays the implementation of SFAS 157 for nonfinancial assets
and nonfinancial liabilities, except for items that are recognized or disclosed
at fair value in the financial statements on a recurring basis. This
8
statement defers the effective date to fiscal years beginning after November 15,
2008 and interim periods within those fiscal years, which is fiscal year 2010
for the Company.
In December 2007, the FASB issued SFAS No. 141 (revised 2007), "Business
Combinations" ("SFAS 141R"). SFAS 141R establishes principles and requirements
for how an acquirer recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, any noncontrolling
interest in the acquiree and the goodwill acquired. SFAS 141R also establishes
disclosure requirements to enable the evaluation of the nature and financial
effects of the business combination. SFAS 141R is effective for the fiscal years
beginning after December 15, 2008 and will be adopted by us in the first quarter
of our fiscal year 2010. We are currently evaluating the potential impact, if
any, of the adoption of SFAS 141R on our consolidated results of operations and
financial condition.
In December 2007, the FASB issued Statement of Financial Accounting Standard No.
160, Noncontrolling Interests in Consolidated Financial Statements, an amendment
of ARB No. 51 ("SFAS 160"). SFAS 160 will change the accounting and reporting
for minority interests, which will be recharacterized as noncontrolling
interests (NCI) and classified as a component of equity. This new consolidation
method will significantly change the accounting for transactions with minority
interest holders. SFAS 160 is effective for fiscal years beginning after
December 15, 2008 (our fiscal year 2010). We have not yet determined the impact
of SFAS 160 on our consolidated financial statements.
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 anticipate any significant financial statement
impact as a result of Statement 159.
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 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.
(5) LINE OF CREDIT:
During the first quarter of our fiscal year 2009, we changed our primary banking
relationship to another unaffiliated third party financial institution, which
includes a new secured line of credit under which we are able to borrow up to
$2,500,000. The outstanding balance on our line of credit bears interest at BBA
LIBOR 1 month rate, plus 2.25%, (4.20625% as of December 27, 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. During the first quarter of our fiscal year 2009, we paid monthly
installments of interest, with no borrowings or principal
9
payments. As of December 27, 2008, the amount outstanding under the line of
credit was $1,586,000, with a remaining availability of $914,000.
(6) INCOME TAXES:
Financial Accounting Standards Board Statement No. 109, Accounting for Income
Taxes, requires among other things, recognition of future tax benefits measured
at enacted rates attributable to deductible temporary differences between
financial statement and income tax basis of assets and liabilities and to tax
net operating loss carryforwards and tax credits to the extent that realization
of said tax benefits is more likely than not.
(7) STOCK OPTION PLAN:
We have one stock option plan under which qualified stock options may be granted
to our officers and other employees. Under this plan, the exercise price for the
qualified stock options must be no less than 100% of the fair market value of
the Company's Common Stock on the date the options are granted. In general,
options granted under our stock option plan expire after a five (5) year period
and generally vest no later than one (1) year from the date of grant. As of
December 27, 2008, options to acquire 40,000 shares were outstanding at an
average exercise price of $6.35 per share. Under this plan, options to acquire
an aggregate of 45,000 shares are available for grant.
No stock options were granted during the thirteen weeks ended December 27, 2008,
nor were stock options granted during the thirteen weeks ended December 29,
2007.
No stock options were exercised during the thirteen weeks ended December 27,
2008, nor were stock options exercised during the thirteen weeks ended December
29, 2007.
Stock option activity during the thirteen weeks ended December 27, 2008 was as
follows:
Weighted Average
Total Options Exercise Price
------------- ----------------
Outstanding at September 27, 2008 49,350 $6.31
Granted -- --
Exercised -- --
Expired (9,350) 6.14
------ -----
Outstanding at December 27, 2008 40,000 $6.35
====== =====
Options exercisable at December 40,000 $6.35
27, 2008 ====== =====
The weighted-average remaining contractual terms of stock options outstanding
and stock options exercisable at December 27, 2008 was approximately 0.375
years. The aggregate intrinsic value of options outstanding and stock options
exercisable at December 27, 2008 was approximately $-0-.
10
(8) ACQUISITIONS:
Purchase of Company Common Stock
Pursuant to a discretionary plan approved by the Board of Directors at its
meeting on May 17, 2007, during the thirteen weeks ended December 27, 2008, we
purchased 9,000 shares of our common stock on the open market for an aggregate
purchase price of $35,194. During the thirteen weeks ended December 29, 2007, we
purchased 1,200 shares of our common stock from the Joseph G. Flanigan
Charitable Trust for an aggregate purchase price of $9,600.
(9) COMMITMENTS AND CONTINGENCIES:
Guarantees
We guarantee various leases for franchisees and locations sold in prior years.
Remaining rental commitments required under these leases are approximately
$2,308,000. In the event of a default under any of these agreements, we will
have the right to repossess the premises and operate the business to recover
amounts paid under the guarantee either by liquidating assets or operating the
business.
Litigation
We own the building where our corporate offices are located. On April 16, 2001,
we filed suit against the owner of the adjacent shopping center to determine our
right to non-exclusive parking in the shopping center. During fiscal year 2007,
the appellate court affirmed and upon re-hearing, again affirmed the granting of
a summary judgment in favor of the shopping center. The seller from whom we
purchased the building was named as a defendant in the lawsuit and is currently
asserting a claim against us for reimbursement of its attorneys' fees and costs
resulting from the litigation. We disputed the seller's entitlement to
reimbursement of its attorney's fees and costs, but during the first quarter of
our fiscal year 2009, the appellate court affirmed the ruling against us by the
trial court. We are disputing that the amount of the seller's claim is
excessive. A hearing on the seller's claim for reimbursement of its attorney's
fees and costs is scheduled during the second quarter of our fiscal year 2009.
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.
(10) BUSINESS SEGMENTS:
We operate principally in two reportable segments - package stores and
restaurants. The operation of package stores consists of retail liquor sales and
related items. Information concerning the revenues and operating income for the
thirteen weeks ended December 27, 2008 and December 29, 2007, and identifiable
assets for the two reportable segments in which we operate, are shown in the
following table.
11
Operating income is total revenue less cost of merchandise sold and operating
expenses relative to each segment. In computing operating income, none of the
following items have been included: interest expense, other non-operating income
and expenses and income taxes. Identifiable assets by segment are those assets
that are used in our operations in each segment. Corporate assets are
principally cash, note receivable and real property, improvements, furniture,
equipment and vehicles used at our corporate headquarters. We do not have any
operations outside of the United States and transactions between restaurants and
package liquor stores are not material.
Thirteen Weeks Thirteen Weeks
Ending Ending
December 27, December 29,
2008 2007
-------------- --------------
Operating Revenues:
Restaurants $12,573 $12,037
Package stores 3,348 3,431
Other revenues 332 436
------- -------
Total operating revenues $16,253 $15,904
======= =======
Operating Income Reconciled to Income Before
Income Taxes and Minority Interests in
Earnings of Consolidated Limited Partnerships
Restaurants $ 586 $ 590
Package stores 107 145
------- -------
693 735
Corporate expenses, net of other
Revenues (404) (555)
------- -------
Operating income 289 180
Other income (expense) 48 (104)
------- -------
Income Before Income Taxes and Minority
Interests in Earnings of Consolidated
Limited Partnerships $ 337 $ 76
------- -------
Depreciation and Amortization:
Restaurants $ 483 $ 418
Package stores 71 62
------- -------
554 480
Corporate 84 91
------- -------
Total Depreciation and Amortization $ 638 $ 571
======= =======
Capital Expenditures:
Restaurants $ 344 $ 1,169
Package stores 116 56
------- -------
460 1,225
Corporate 127 86
------- -------
Total Capital Expenditures $ 587 $ 1,311
======= =======
December 27, September 27,
2008 2008
---- ----
Identifiable Assets:
Restaurants $19,639 $19,699
Package store 3,591 3,673
======= =======
23,230 23,372
Corporate 9,740 9,201
------- -------
Consolidated Totals $32,970 $32,573
======= =======
12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Reported financial results may not be indicative of the financial results of
future periods. All non-historical information contained in the following
discussion constitutes forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. Words such as "anticipates, appears, expects, trends, intends, hopes,
plans, believes, seeks, estimates, may, will," and variations of these words or
similar expressions are intended to identify forward-looking statements. These
statements are not guarantees of future performance and involve a number of
risks and uncertainties, including but not limited to customer demand and
competitive conditions. Factors that could cause actual results to differ
materially are included in, but not limited to, those identified in the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," in the Annual Report on Form 10-K for the Company's fiscal year
ended September 27, 2008 and in this Quarterly Report on Form 10-Q. The Company
undertakes no obligation to publicly release the results of any revisions to
these forward-looking statements that may reflect events or circumstances after
the date of this report.
OVERVIEW
At December 27, 2008, we (i) operated 23 units, (excluding the adult
entertainment club referenced in (ii) below), consisting of restaurants, package
stores and combination restaurants/package stores that we either own or have
operational control over and partial ownership in; (ii) own but do not operate
one adult entertainment club; and (iii) franchise an additional six units,
consisting of two restaurants, (one of which we operate) and four combination
restaurants/package stores. The table below provides information concerning the
type (i.e. restaurant, package store or combination restaurant/package liquor
store) and ownership of the units (i.e. whether (i) we own 100% of the unit;
(ii) the unit is owned by a limited partnership of which we are the sole general
partner and/or have invested in; or (iii) the unit is franchised by us), as of
December 27, 2008 and as compared to December 29, 2007 and September 27, 2008.
With the exception of "The Whale's Rib", a restaurant we operate but do not own,
all of the restaurants operate under our service mark "Flanigan's Seafood Bar
and Grill" and all of the package liquor stores operate under our service mark
"Big Daddy's Liquors".
December September December
Types of Units 27, 2008 27, 2008 29, 2007
------------- -------- --------- --------
Company Owned:
Combination package and
restaurant 4 4 4
Restaurant only 3 3 3
Package store only 5 5 5
Company Operated Restaurants Only:
Limited Partnerships 9 9 8 (1)
Franchise 1 1 1
Unrelated Third Party 1 1 1
Company Owned Club: 1 1 1
Total Company Owned/Operated Units 24 24 23
Franchised Units 6 6 6 (2)
Notes:
(1) Includes a restaurant located in Davie, Florida which is owned by a limited
partnership in which we are the sole general partner and own 48% of the limited
partnership interest and commenced operating on July 28, 2008.
(2) We operate a restaurant for one (1) franchisee. This unit is included in the
table both as a franchised restaurant, as well as a restaurant operated by us.
13
RESULTS OF OPERATIONS
Thirteen Weeks Ended
December 27, 2008 December 29, 2007
----------------- -----------------
Amount Amount
------ ------
(In thousands) Percent (In thousands) Percent
-------------- ------- -------------- -------
Restaurant food sales $ 10,169 63.87 $ 9,747 63.01
Restaurant bar sales 2,404 15.10 2,290 14.81
Package store sales 3,348 21.03 3,431 22.18
-------- ------ -------- ------
Total Sales $ 15,921 100.00 $ 15,468 100.00
Franchise related revenues 262 331
Owner's fee 44 66
Other operating income 26 39
-------- --------
Total Revenue $ 16,253 $ 15,904
======== ========
Franchise Financial Arrangement: In exchange for our providing management and
related services to our franchisees and granting them the right to use our
service marks "Flanigan's Seafood Bar and Grill" and "Big Daddy's Liquors", our
franchisees (five of which are franchised to members of the family of our
Chairman of the Board, officers and/or directors), are required to (i) pay to us
a royalty equal to 1% of gross package sales and 3% of gross restaurant sales;
and (ii) make advertising expenditures equal to between 1.5% to 3% of all gross
sales based upon our actual advertising costs allocated between stores,
pro-rata, based upon gross sales.
Limited Partnership Financial Arrangement: We manage and control the operations
of all restaurants owned by limited partnerships, except the Fort Lauderdale,
Florida restaurant which is owned by a related franchisee. Accordingly, the
results of operations of all limited partnership owned restaurants, except the
Fort Lauderdale, Florida restaurant are consolidated into our operations for
accounting purposes. The results of operations of the Fort Lauderdale, Florida
restaurant are accounted for by us utilizing the equity method. In general,
until the investors' cash investment in a limited partnership (including any
cash invested by us and our affiliates) is returned in full, the limited
partnership distributes to the investors annually out of available cash from the
operation of the restaurant up to 25% of the cash invested in the limited
partnership, with no management fee paid to us. Any available cash in excess of
the 25% of the cash invested in the limited partnership distributed to the
investors annually, is paid one-half (1/2) to us as a management fee, with the
balance distributed to the investors. Once the investors in the limited
14
partnership have received, in full, amounts equal to their cash invested, an
annual management fee is payable to us equal to one-half (1/2) of cash available
to the limited partnership, with the other one half (1/2) of available cash
distributed to the investors (including us and our affiliates). As of December
27, 2008, limited partnerships owning three (3) restaurants have returned all
cash invested and we receive an annual management fee equal to one-half (1/2) of
the cash available for distribution by the limited partnership. In addition to
its receipt of distributable amounts from the limited partnerships, we receive a
fee equal to 3% of gross sales for use of the service mark "Flanigan's Seafood
Bar and Grill".
Comparison of Thirteen Weeks Ended December 27, 2008 and December 29, 2007.
---------------------------------------------------------------------------
Revenues. Total revenue for the thirteen weeks ended December 27, 2008 increased
$349,000 or 2.19% to $16,253,000 from $15,904,000 for the thirteen weeks ended
December 29, 2007. This increase resulted from sales from the Davie, Florida
limited partnership restaurant ($1,001,000), which opened for business on July
28, 2008, offset by declines in same store restaurant food and bar sales
($432,000) and in same store package liquor sales ($83,000) due to the current
domestic and global economic downturn. Without giving effect to the revenue
generated from the Davie, Florida restaurant ($1,001,000), total revenue for the
thirteen weeks ended December 27, 2008 would have decreased $652,000 or 4.10% to
$15,252,000 from $15,904,000 for the thirteen weeks ended December 29, 2007.
Restaurant Food Sales. Restaurant revenue generated from the sale of food
at restaurants totaled $10,169,000 for the thirteen weeks ended December 27,
2008 as compared to $9,747,000 for the thirteen weeks ended December 29, 2007.
The increase in restaurant food sales resulted from sales from the Davie,
Florida restaurant, which generated $830,000 of revenue from the sale of food
during the thirteen weeks ended December 27, 2008. Without giving effect to the
revenue generated from the Davie, Florida restaurant ($830,000) from the sale of
food for the thirteen weeks ended December 27, 2008, restaurant revenue
generated from the sale of food during the thirteen weeks ended December 27,
2008, would have decreased $408,000 or 4.19% to $9,339,000 from $9,747,000 for
the thirteen weeks ended December 29, 2007. Comparable weekly restaurant food
sales (for restaurants open for all of the first quarter of our fiscal year 2009
and the first quarter of our fiscal year 2008, which consists of seven
restaurants owned by us and seven restaurants owned by affiliated limited
partnerships) was $672,000 and $702,000 for the thirteen weeks ended December
27, 2008 and December 29, 2007, respectively, a decrease of 4.27%. Comparable
weekly restaurant food sales for Company owned restaurants only was $292,000 and
$309,000 for the first quarter of our fiscal year 2009 and the first quarter of
our fiscal year 2008, respectively, a decrease of 5.50%. Comparable weekly
restaurant food sales for affiliated limited partnership owned restaurants only
was $380,000 and $393,000 for the first quarter of our fiscal year 2009 and the
first quarter of our fiscal year 2008, respectively, a decrease of 3.31%. We
anticipate that restaurant food sales will continue to increase throughout the
balance of our fiscal year 2009 due to the operation of the Davie, Florida
restaurant, offset by a decline in same store restaurant food sales.
Restaurant Bar Sales. Restaurant revenue generated from the sale of
alcoholic beverages at restaurants (bar sales) totaled $2,404,000 for the
thirteen weeks ended December 27, 2008 as compared to $2,290,000 for the
thirteen weeks ended December 29, 2007. The increase in restaurant bar sales is
due to sales from the Davie, Florida restaurant, which generated $171,000 of
revenue from bar sales during the thirteen weeks ended December 27, 2008.
Without giving effect to the revenue from bar sales generated from the Davie,
Florida restaurant ($171,000) for the thirteen weeks ended December 27, 2008,
restaurant revenue generated from bar sales during the thirteen weeks ended
December 27, 2008, would have decreased $57,000 or 2.49% to $2,233,000 from
$2,290,000 for the thirteen weeks ended December 29, 2007. Comparable weekly
restaurant bar sales (for restaurants open for all of the first quarter of our
fiscal year 2009 and the first quarter of our fiscal year 2008, which consists
of seven restaurants owned by us and seven restaurants owned by affiliated
limited partnerships) was $163,000 for the thirteen weeks ended December 27,
2008 and $166,000 for the thirteen weeks ended December 29, 2007, a decrease of
15
1.81%. Comparable weekly restaurant bar sales for Company owned restaurants only
was $70,000 and $71,000 for the first quarter of our fiscal year 2009 and the
first quarter of our fiscal year 2008, respectively, a decrease of 1.41%.
Comparable weekly restaurant bar sales for affiliated limited partnership owned
restaurants only was $93,000 and $95,000 for the first quarter of our fiscal
year 2009 and the first quarter of our fiscal year 2008, respectively, a
decrease of 2.11%. We anticipate that restaurant bar sales will continue to
increase throughout the balance of our fiscal year 2009 due to the operation of
the Davie, Florida restaurant through our fiscal year 2009, offset by a decline
in same store restaurant bar sales.
Package Store Sales. Revenue generated from sales of liquor and related
items at package liquor stores totaled $3,348,000 for the thirteen weeks ended
December 27, 2008 as compared to $3,431,000 for the thirteen weeks ended
December 29, 2007, a decrease of $83,000. The weekly average of same store
package liquor store sales, which includes all nine (9) Company owned package
liquor stores, was $258,000 for the thirteen weeks ended December 27, 2008 as
compared to $264,000 for the thirteen weeks ended December 29, 2007, a decrease
of 2.27%. The decrease was primarily due to increased competition and package
liquor store sales are expected to decline throughout the balance of our fiscal
year 2009.
Operating Costs and Expenses. Operating costs and expenses, (consisting of cost
of merchandise sold, payroll and related costs, occupancy costs and selling,
general and administrative expenses), for the thirteen weeks ended December 27,
2008 increased $240,000 or 1.53% to $15,964,000 from $15,724,000 for the
thirteen weeks ended December 29, 2007. The increase was primarily due to
expenses related to the operation of the Davie, Florida restaurant and to a
lesser extent a general increase in food costs, offset by 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 control costs and expenses. We
anticipate that our operating costs and expenses will continue to increase
throughout the balance of our fiscal year 2009 due to, among other things, the
operation of the Davie, Florida restaurant and an expected general increase in
food costs, including an increase in the cost of ribs. Operating costs and
expenses decreased as a percentage of total sales to approximately 98.22% in the
first quarter of our fiscal year 2009 from 98.87% in the first quarter of our
fiscal year 2008.
Gross Profit. Gross profit is calculated by subtracting the cost of merchandise
sold from sales.
Restaurant Food and Bar Sales. Gross profit for food and bar sales for the
thirteen weeks ended December 27, 2008 increased to $8,341,000 from $7,967,000
for the thirteen weeks ended December 29, 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 66.34% for the thirteen weeks
ended December 27, 2008 and 66.19% for the thirteen weeks ended December 29,
2007. This increase in gross profit for restaurant and bar sales for the first
quarter of our fiscal year 2009 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 Store Sales. Gross profit for package store sales for the thirteen
weeks ended December 27, 2008 increased to $982,000 from $966,000 for the
thirteen weeks ended December 29, 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 29.33% for the thirteen weeks ended December 27, 2008 and 28.16%
for the thirteen weeks ended December 29, 2007. The increase in our gross profit
margin, (1.17%), was primarily due to the purchase of "close out" and inventory
reduction merchandise from wholesalers. We anticipate the gross profit margin
for package store sales to decrease throughout the balance of our fiscal year
2009 as we do not expect to be
16
able to purchase "close out" and inventory reduction merchandise from
wholesalers to the same extent that we were able to make such purchases during
the thirteen weeks ended December 27, 2008.
Payroll and Related Costs. Payroll and related costs for the thirteen weeks
ended December 27, 2008 decreased $53,000 or 1.11% to $4,755,000 from $4,808,000
for the thirteen weeks ended December 29, 2007, notwithstanding the Davie,
Florida restaurant being open during the thirteen weeks ended December 27, 2008.
The decrease in our payroll and related costs is attributed to lower payroll
costs associated with the opening of the Davie, Florida restaurant, ($326,000),
during the thirteen weeks ended December 27, 2008, as compared to the opening
payroll costs associated with the Pembroke Pines, Florida restaurant,
($378,000), during the thirteen weeks ended December 29, 2007. In addition,
during the thirteen weeks ended December 27, 2008, the Pembroke Pines, Florida
restaurant had lower payroll costs, ($210,000), and we also reduced our store
level management. Our payroll and related costs will increase throughout the
balance of our fiscal year 2009 due to, among other things, the annual increase
in the Florida minimum wage, effective January 1, 2009. Payroll and related
costs as a percentage of total sales was 29.26% in the first quarter of our
fiscal year 2009 and 30.23% of total sales in the first quarter of our fiscal
year 2008.
Occupancy Costs. Occupancy costs (consisting of rent, common area maintenance,
repairs, real property taxes and amortization of leasehold purchases) for the
thirteen weeks ended December 27, 2008 increased $36,000 or 3.73% to $1,001,000
from $965,000 for the thirteen weeks ended December 29, 2007. This increase is
primarily due to increases in real property taxes and common area maintenance,
which generally includes a pro-rata share of property insurance for units
located within shopping centers. We anticipate that our occupancy costs will
stabilize throughout the balance of our fiscal year 2009 with no rental payments
for additional restaurant locations being developed by the Company.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses (consisting of general corporate expenses, including but
not limited to advertising, insurance, professional costs, clerical and
administrative overhead) for the thirteen weeks ended December 27, 2008
increased $194,000 or 5.68% to $3,610,000 from $3,416,000 for the thirteen weeks
ended December 29, 2007. Selling, general and administrative expenses increased
as a percentage of total sales in the first quarter of our fiscal year 2009 to
approximately 22.21% as compared to 21.48% in the first quarter of our fiscal
year 2008. This increase is due primarily to the operation of the Davie, Florida
restaurant and an overall increase in expenses. We anticipate that our selling,
general and administrative expenses will continue to increase throughout the
balance of our fiscal year 2009 due to, among other things, the operation of our
Davie, Florida restaurant and an overall increase in expenses.
Depreciation and Amortization. Depreciation and amortization for the thirteen
weeks ended December 27, 2008 increased $67,000 or 11.73% to $638,000 from
$571,000 for the thirteen weeks ended December 29, 2007. As a percentage of
total revenue, depreciation expense was 3.93% of revenue for the thirteen weeks
ended December 27, 2008 and 3.59% of revenue in the thirteen weeks ended
December 29, 2007.
Other Income and Expense. Other income and expenses was income of $48,000 for
the thirteen weeks ended December 27, 2008, as compared to an expense of
$104,000 for the thirteen weeks ended December 29, 2007. Other income and
expense for the thirteen weeks ended December 27, 2008 included interest income
of $124,000 paid on claims we filed in the liquidation proceedings of Ambassador
Insurance Company in 1983 and other income of $26,000 paid as the balance of our
claims (10%) filed in the liquidation proceedings of Ambassador Insurance
Company, offset by interest expense of $119,000, as compared to interest expense
of $120,000 for the thirteen weeks ended December 29, 2007. The interest expense
and principal balance on our line of credit were approximately equal during the
thirteen weeks ended December 27, 2008 and December 29, 2007.
17
Net Income. Net income for the thirteen weeks ended December 27, 2008 decreased
$13,000 or 7.03% to $172,000 from $185,000 for the thirteen weeks ended December
29, 2007. As a percentage of sales, net income for the first quarter of our
fiscal year 2009 is 1.06%, as compared to 1.16% in the first quarter of our
fiscal year 2008. During the thirteen weeks ended December 27, 2008, we
recognized interest income of $124,000 paid on claims we filed in the
liquidation proceedings of Ambassador Insurance Company in 1983 and other income
of $26,000 paid as the balance of our claims (10%) filed in the liquidation
proceedings of Ambassador Insurance Company. Without giving effect to this
interest income of $124,000 and other income of $26,000, we would have generated
net income of $66,000 for the thirteen weeks ended December 27, 2008, which as a
percentage of sales is 0.41%. Without giving effect to this interest income and
other income for the thirteen weeks ended December 27, 2008, the decrease in net
income for the thirteen weeks ended December 27, 2008, as a percentage of sales
(-0.75%) is primarily due to a decline in same store restaurant and package
store sales and a general increase in overall expenses. The net income for the
thirteen weeks ended December 29, 2007 was adversely affected by our share of
the pre-opening and opening expenses associated with the limited partnership
owned restaurant in Pembroke Pines, Florida, ($40,000), and our share of the
pre-opening expenses associated with the limited partnership owned restaurant in
Davie, Florida, ($102,000).
New Limited Partnership Restaurants
As new restaurants open, our income from operations will be adversely affected
due to our obligation to fund pre-opening costs, including but not limited to
pre-opening rent for the new locations. During the first quarter of our fiscal
year 2009, we did not have a new restaurant location in the development stage
and did not recognize any pre-opening costs. During the first quarter of 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 the first quarter
of our fiscal year 2008, we also paid and expensed pre-opening rent in the
approximate amount of $33,000 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 the first quarter of our fiscal year 2008, the limited partnership
restaurant in Davie, Florida reported losses of $175,000 primarily due to
pre-opening costs, thus contributing to a reduction in the operating income for
the first quarter of our fiscal year 2008.
Until we fund a new unit, our income from operations will not be adversely
affected by pre-opening costs. Throughout the balance of fiscal year 2009, we do
not expect our income from operations to be materially adversely affected by
pre-opening costs for new locations.
Trends
During the next twelve months, we expect continued increases in aggregate
restaurant sales as compared to prior periods due primarily to the 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 economic downturn. We expect
higher food costs and higher overall expenses, which will adversely affect our
net income. During the first quarter of our fiscal year 2008, we raised menu
prices to offset higher food costs and overall expenses. We plan to limit menu
price increases as long as possible while maintaining our high quality of food
and service and without reducing our food portions. We have increased our
advertising to attract customers through our monthly full page newspaper ads and
our radio advertising and plan to continue with this advertising program.
Notwithstanding, the promotion of our specials, especially our $4.99 lunch
specials, will result in reduced revenues and profitability in some or all of
our restaurants, which will adversely affect our net income. As a last resort,
we will raise menu prices whenever necessary and wherever competitively
possible.
18
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 under our
line of credit. As of December 27, 2008, we had cash of approximately
$3,502,000, an increase of $258,000 from our cash balance of $3,244,000 as of
September 27, 2008. The increase in cash as of December 27, 2008 was primarily
from our operations due to minimal demand upon our cash flow for extraordinary
items.
Cash Flows
The following table is a summary of our cash flows for the thirteen weeks of
fiscal years 2009 and 2008.
Thirteen Weeks Ended
December 27, 2008 December 29, 2007
----------------- -----------------
(in Thousands)
Net cash provided by operating $ 918 $ 1,031
activities
Net cash used in investing activities (351) (1,245)
Net cash provided by (used in)
financing activities (309) 2,345
------ -------
Net Increase in Cash and Cash
Equivalents 258 2,131
Cash and Cash Equivalents, Beginning 3,244 2,223
------ -------
Cash and Cash Equivalents, Ending $3,502 $ 4,354
====== =======
We have recently determined that we must retain any earnings for the development
and operation of our business and accordingly, we do not intend to pay any cash
dividends in the foreseeable future.
Capital Expenditures
In addition to using cash for our operating expenses, we use cash to fund the
development and construction of new restaurants and secondarily to fund
capitalized property improvement for our existing restaurants. We acquired
property and equipment of $587,000, (including $280,000 of deposits recorded in
other assets as of September 27, 2008), during the thirteen weeks ended December
27, 2008, including $211,000 to complete the renovations to one (1) existing
Company owned restaurant, as compared to $1,311,000 during the thirteen weeks
ended December 29, 2007, which included $96,000 for renovations to one (1)
existing Company restaurant .
All of our owned units require periodic refurbishing in order to remain
competitive. We anticipate the cost of this refurbishment in our fiscal year
2009 to be approximately $700,000, of which $211,000 has been spent through
December 27, 2008.
19
Long Term Debt
As of December 27, 2008, we had long term debt of $6,493,000, which includes the
balance on our line of credit, as compared to $6,625,000 as of December 29,
2007, and $6,514,000 as of September 27, 2008.
During the first quarter of our fiscal year 2009, we changed our primary banking
relationship to another unaffiliated financial institution, which includes a new
line of credit of $2,500,000. The outstanding balance on our line of credit
bears interest at BBA LIBOR 1 month rate, plus 2.25%, (4.20625% as December 27,
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. As of December 27, 2008, the amount outstanding under our
secured line of credit was $1,586,000.
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.
Working Capital
The table below summarizes the current assets, current liabilities, and working
capital for our fiscal quarters ended December 27, 2008, December 29, 2007 and
our fiscal year ended September 27, 2008.
Item Dec. 27, 2008 Dec. 29, 2007 Sept 27, 2008
---- ------------- ------------- -------------
(in Thousands)
Current Assets $ 7,543 $ 8,470 $ 6,852
Current Liabilities 6,542 4,630 4,504
------- ------- -------
Working Capital $ 1,001 $ 3,840 $ 2,348
Our working capital as of December 27, 2008 decreased by 73.93% from the working
capital for the fiscal quarter ending December 29, 2007 and decreased by 57.37%
from our working capital for our fiscal year ending September 27, 2008. Our
working capital decreased during our fiscal quarter ending December 27, 2008 due
to the re-classification of our line of credit, which matures on October 7,
2009, as a current liability. Our prior lender consistently extended the
maturity date on our line of credit on a quarterly basis which prevented it from
becoming a current liability. During our fiscal quarter ending December 29,
2007, the limited partnership which owns the Davie, Florida restaurant completed
its private offering, raising the sum of $3,875,000, less $1,224,000 which we
advanced for expenses of the limited partnership and was used, in part, to
credit our obligation to pay for our equity investment.
While there can be no assurance due to, among other things, unanticipated
expenses or unanticipated decline in revenues, or both, we believe that positive
cash flow from operations will adequately fund operations, debt reductions and
planned capital expenditures throughout the balance of our fiscal year 2009. We
also anticipate that throughout the balance of our fiscal year 2009, working
capital will be affected by the payment of the balance for the purchase of a new
point of sale system for our package
20
liquor stores, ($7,500), a surveillance camera system ($118,000) and our line of
credit in the event the line of credit is not renewed.
Off-Balance Sheet Arrangements
The Company does not have off-balance sheet arrangements.
Inflation
The primary inflationary factors affecting our operations are food, beverage and
labor costs. A large number of restaurant personnel are paid at rates based upon
applicable minimum wage and increases in minimum wage directly affect labor
costs. To date, inflation has not had a material impact on our operating
results, but this circumstance may change in the future if food and fuel costs
continue to rise.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We do not ordinarily hold market risk sensitive instruments for trading purposes
and as of December 27, 2008 held no equity securities.
Interest Rate Risk
At December 27, 2008, of the Company's debt arrangements, only borrowings under
our line of credit bear interest at BBA LIBOR 1 month rate, plus 2.25%.
Increases in interest rates may have a material affect upon results of
operations, depending upon the outstanding principal balance on our line of
credit from time to time.
At December 27, 2008, our cash resources earn interest at variable rates.
Accordingly, our return on these funds is affected by fluctuations in interest
rates.
ITEM 4T. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Based on evaluations as of the end of the period covered by this report, our
Chief Executive Officer and Chief Financial Officer, with the participation of
our management team, have concluded that our disclosure controls and procedures
(as defined in Rules 13a-15(e) and 15d-15(e) to the Securities Exchange Act of
1934, as amended (the "Exchange Act")) were effective.
Limitations on the Effectiveness of Controls and Permitted Omission from
Management's Assessment
Our internal control over financial reporting is designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally
accepted accounting principles. All internal control systems, no matter how well
designed, have inherent limitations, including the possibility of human error
and the circumvention or overriding of controls. Accordingly, even effective
internal controls can only provide reasonable assurance with respect to
financial statement preparation. Also, projections of any evaluation of
21
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Changes in Internal Control Over Financial Reporting
During the period covered by this report, we have not made any change to our
internal control over financial reporting that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See "Litigation" on page 11 of this Report and Item 1 and Item 3 to Part 1 of
the Annual Report on Form 10-K for the fiscal year ended September 27, 2008 for
a discussion of other legal proceedings resolved in prior years.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Purchase of Company Common Stock
Pursuant to a discretionary plan approved by the Board of Directors at its
meeting on May 17, 2007, during the thirteen weeks ended December 27, 2008, we
purchased 9,000 shares of our common stock on the open market for an aggregate
purchase price of $35,194. During the thirteen weeks ended December 29, 2007, we
purchased 1,200 shares of our common stock from the Joseph G. Flanigan
Charitable Trust for an aggregate purchase price of $9,600.
ISSUER PURCHASES OF EQUITY SECURITIES
(d) Maximum
(c) Total Number (or
Number of Approximate
(b) Shares (or Dollar Value)
Average Units) of Shares (or
Price Purchased Units) that
(a) Total Paid as Part of May Yet Be
Number of per Publicly Purchased
Shares (or Share Announced Under the
Units) (or Plans or Plans or
Period Purchased Unit) Programs Programs
------ ---------- ------- ---------- -------------
September
28, 2008
-
November
1, 2008 9,000 $3.91 9,000 82,100
----------------------------------------------------------------
November
2, 2008 -
November
29, 2008 none 82,100
----------------------------------------------------------------
November
30, 2008
-
December
27, 2008 none 82,100
----------------------------------------------------------------
Total as of
December
27, 2008 9,000 9,000 82,100
----------------------------------------------------------------
22
ITEM 6. EXHIBITS
The following exhibits are filed with this Report:
Exhibit Description
31.1 Certification of Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
23
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FLANIGAN'S ENTERPRISES, INC.
Date: February 10, 2009 /s/ James G. Flanigan
------------------------------------------
JAMES G. FLANIGAN, Chief Executive Officer
and President
/s/ Jeffrey D. Kastner
------------------------------------------------
JEFFREY D. KASTNER, Chief Financial Officer and
Secretary (Principal Financial and Accounting
Officer)
24
X