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 June 28, 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 August 11, 2008, 1,885,833 shares of Common Stock, $0.10 par value per share,
were outstanding.
--------------------------------------------------------------------------------
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION.....................................................................................1
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED).............................................1
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME....................................................2
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS..........................................................4
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS................................................6
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS...........................................8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS..............14
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.........................................26
ITEM 4. CONTROLS AND PROCEDURES............................................................................27
PART II. OTHER INFORMATION.......................................................................................27
ITEM 1. LEGAL PROCEEDINGS..................................................................................27
ITEM 1A. RISK FACTORS......................................................................................27
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS........................................28
ITEM 6. EXHIBITS............................................................................................28
As used in this Quarterly Report on Form 10-Q, the terms "we," "us," "our," the
"Company" and "Flanigan's" mean Flanigan's Enterprises, Inc. and its
subsidiaries (unless the context indicates a different meaning).
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands Except Per Share Amounts)
Thirteen Weeks Thirty Nine Weeks
Ended Ended
June 28, June 30, June 28, June 30,
2008 2007 2008 2007
---- ---- ---- ----
REVENUES:
Restaurant food sales $ 10,182 $ 9,773 $ 30,714 $ 28,832
Restaurant bar sales 2,346 2,206 7,117 6,642
Package store sales 2,842 3,037 9,673 10,050
Franchise related revenues 273 279 815 887
Owner's fee 68 71 183 151
Other operating income 54 41 150 134
--------- --------- --------- ---------
15,765 15,407 48,652 46,696
--------- --------- --------- ---------
COSTS AND EXPENSES:
Cost of merchandise sold:
Restaurant and lounges 4,197 4,211 12,670 12,206
Package goods 1,994 2,174 6,855 7,237
Payroll and related costs 4,645 4,494 14,363 13,098
Occupancy costs 989 1,099 2,969 2,863
Selling, general and administrative expenses 3,289 3,141 9,994 9,482
--------- --------- --------- ---------
15,114 15,119 46,851 44,886
--------- --------- --------- ---------
Income from Operations 651 288 1,801 1,810
--------- --------- --------- ---------
OTHER INCOME (EXPENSE):
Interest expense (117) (129) (358) (387)
Interest and other income 34 40 71 110
Gain on sale of property and equipment -- 393 -- 393
--------- --------- --------- ---------
(83) 304 (287) 116
--------- --------- --------- ---------
Income before Provision for Income Taxes and
Minority Interest in (Earnings) Losses of
Consolidated Limited Partnerships 568 592 1,514 1,926
Provision for Income Taxes (138) (236) (487) (603)
Minority Interest in (Earnings) Losses of
Consolidated Limited Partnerships (94) 71 (36) (240)
--------- --------- --------- ---------
NET INCOME $ 336 $ 427 $ 991 $ 1,083
========= ========= ========= =========
2
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands Except Per Share Amounts)
(Continued)
Thirteen Weeks Thirty Nine Weeks
Ended Ended
June 28, June 30, June 28, June 30,
2008 2007 2008 2007
---- ---- ---- ----
Net Income Per Common Share:
Basic $ 0.18 $ 0.23 $ 0.52 $ 0.57
========== ========== ========== ==========
Diluted $ 0.18 $ 0.22 $ 0.52 $ 0.57
========== ========== ========== ==========
Weighted Average Shares and Equivalent
Shares Outstanding
Basic 1,886,077 1,892,891 1,888,523 1,888,336
========== ========== ========== ==========
Diluted 1,895,378 1,914,986 1,899,515 1,910,119
========== ========== ========== ==========
See accompanying notes to unaudited condensed consolidated financial statements.
3
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 28, 2008 (UNAUDITED) AND SEPTEMBER 29, 2007
(In Thousands)
ASSETS
June 28, 2008 September 29, 2007
------------- ------------------
CURRENT ASSETS:
Cash and cash equivalents $ 3,464 $ 2,223
Notes and mortgages receivables,
current maturities, net 16 14
Prepaid income taxes 100 --
Due from franchisees 237 735
Other receivables 159 137
Inventories 2,237 2,165
Prepaid expenses 579 840
Deferred tax asset 210 208
------- -------
Total Current Assets 7,002 6,322
------- -------
Property and Equipment, Net 20,718 19,410
------- -------
Investment in Limited Partnership 155 142
------- -------
OTHER ASSETS:
Liquor licenses, net 345 347
Notes and mortgages receivable, net 32 44
Deferred tax asset 634 492
Leasehold purchases 1,938 2,085
Other 1,632 1,495
------- -------
Total Other Assets 4,581 4,463
------- -------
Total Assets $32,456 $30,337
======= =======
4
FLANIGAN'S ENTERPRISES, INC, AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 28, 2008 (UNAUDITED) AND SEPTEMBER 29, 2007
(In Thousands)
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
June 28, 2008 September 29, 2007
------------- ------------------
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 3,501 $ 3,666
Income taxes payable -- 331
Due to franchisees 339 312
Current portion of long term debt 185 196
Deferred revenues 37 45
Deferred rent 18 17
-------- --------
Total Current Liabilities 4,080 4,567
-------- --------
Long Term Debt, Net of Current Maturities 4,811 4,922
Line of Credit 1,562 962
Deferred Rent, Net of Current Portion 218 232
Minority Interest in Equity of
Consolidated Limited Partnerships 8,750 7,570
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 12,322 11,331
Treasury stock, at cost, 2,311,809 shares
at June 28, 2008 and 2,306,909
shares at September 29, 2007 (5,947) (5,907)
-------- --------
Total Stockholders' Equity 13,035 12,084
-------- --------
Total Liabilities and Stockholders' Equity $ 32,456 $ 30,337
======== ========
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 THIRTY-NINE WEEKS ENDED JUNE 28, 2008 AND JUNE 30, 2007
(In Thousands)
June 28, 2008 June 30, 2007
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 991 $ 1,083
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,518 1,395
Amortization of leasehold purchases 174 149
Gain on sale of property and equipment -- (393)
Loss on abandonment of property and equipment 15 26
Deferred income tax (144) 6
Deferred rent (13) 16
Minority interest in earnings of
consolidated limited partnerships 36 240
Income from unconsolidated limited partnership (22) (5)
Recognition of deferred revenue (8) (7)
Changes in operating assets and liabilities:
(Increase) decrease in
Due from franchisees 498 255
Other receivables (22) 167
Prepaid income taxes (100) --
Inventories (72) 13
Prepaid expenses 261 (243)
Other assets (137) (355)
Increase (decrease) in:
Accounts payable and accrued expenses (165) (50)
Income taxes payable (331) (150)
Due to franchisees 27 152
--------- ---------
Net cash provided by operating activities 2,506 2,299
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Collection on notes and mortgages receivable 10 8
Purchase of property and equipment (2,916) (2,417)
Purchase of leasehold interests (27) (955)
Purchase of assets of franchised restaurant -- (100)
Proceeds from sale of fixed assets 101 862
Proceeds from sale of marketable securities -- 381
Distributions from unconsolidated limited
Partnerships 9 9
Proceeds from insurance settlement -- 112
--------- ---------
Net cash used in investing activities (2,823) (2,100)
--------- ---------
6
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THIRTY-NINE WEEKS ENDED JUNE 28, 2008 AND JUNE 30, 2007
(In Thousands)
(Continued)
June 28, 2008 June 30, 2007
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of long term debt (148) (157)
Payment of line of credit -- (1,000)
Proceeds from long term debt -- 172
Proceeds from line of credit 600 1,200
Purchase of treasury stock (40) (36)
Purchase of minority limited partnership interest (120) --
Distributions to limited partnership
minority partners (759) (777)
Proceeds from limited partnership interests 2,025* 1,970**
Proceeds from exercise of stock options -- 61
--------- ---------
Net cash provided by financing activities 1,558 1,433
--------- ---------
Net Increase in Cash and Cash Equivalents 1,241 1,632
Beginning of Period 2,223 1,698
--------- ---------
End of Period $ 3,464 $ 3,330
========= =========
Supplemental Disclosure for Cash Flow Information:
Cash paid during period for:
Interest $ 358 $ 387
========= =========
Income taxes $ 1,061 $ 747
========= =========
Supplemental Disclosure of Non-Cash Investing and
Financing Activities:
Purchase of real property in exchange for debt -- $ 700
========= =========
Purchase of vehicle in exchange for debt $ 26 --
========= =========
* exclusive of the Companys investment in the limited partnership owning the
restaurant in Davie, Florida of $1,850,000.
** exclusive of the Company's investment in the limited partnership owning
the restaurant in Pembroke Pines, Florida of $380,000.
See accompanying notes to unaudited condensed consolidated financial statements
7
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 28, 2008
(1) BASIS OF PRESENTATION:
The accompanying financial information for the periods ended June 28, 2008 and
June 30, 2007 are unaudited. Financial information as of September 29, 2007 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 29, 2007. 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.
(3) RECLASSIFICATION:
Certain amounts in the fiscal year 2007 financial statements have been
reclassified to conform to the fiscal year 2008 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 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
8
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 for any acquisitions after
September 27, 2009.
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,
if any, of SFAS 160 on our consolidated financial statements.
In February 2007, the FASB issued SFAS 159, "Fair Value Option for Financial
Assets and Liabilities" ("SFAS 159") 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.
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 have not yet determined the impact, if any, of SFAS 157 on our
consolidated financial statements.
(5) INVESTMENT IN LIMITED PARTNERSHIPS:
Davie, Florida
We are the sole general partner and a 48% limited partner in this limited
partnership which owns a restaurant in Davie, Florida which commenced operating
under our "Flanigan's Seafood Bar and Grill" service mark on July 28, 2008. 9.5%
of the remaining limited partnership interest is owned by persons who are either
our officers, directors or their family members. As of June 28, 2008 we still
held $696,000 in funds from the private offering by this limited partnership,
which are sufficient funds to complete the renovations and upgrades to the
Davie, Florida restaurant and provide working capital.
(6) INVESTMENT IN LEASEHOLD INTEREST:
El Portal, Florida
During the third quarter of fiscal year 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
9
$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.
(7) LINE OF CREDIT:
Under a secured line of credit with a third party financial institution we are
able to borrow up to $2,600,000. As of June 28, 2008, the amount outstanding
under the line of credit was $1,562,000, with a remaining availability of
$1,038,000. During the third quarter of fiscal year 2008, we made no draws on
our line of credit and paid monthly installments of interest payments, with no
principal payments. During the fourth quarter of fiscal year 2008, we extended
the maturity date of our secured line of credit from April 2, 2009 to July 2,
2009.
(8) 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.
(9) STOCK OPTION PLANS:
We have two stock option plans under which qualified stock options may be
granted to our officers and other employees. Under these plans, the exercise
price for the qualified stock options must be at least 110% 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 plans expire after a five (5)
year period and generally vest no later than one (1) year from the date of
grant. As of June 28, 2008, options to acquire 49,350 shares were outstanding at
an average exercise price of $6.31 per share. Under the plans, options to
acquire an aggregate of 45,000 shares are available for grant.
No stock options were granted during the thirty nine weeks ended June 28, 2008,
nor were stock options granted during the thirty nine weeks ended June 30, 2007.
There were no stock option exercises during the thirty nine weeks ended June 28,
2008. Stock option exercises during the thirty nine weeks ended June 30, 2007
resulted in cash inflow to the Company of $61,000. The corresponding intrinsic
value as of the exercise date of the 9,510 stock options exercised during the
thirty nine weeks ended June 30, 2007 was $45,000.
Stock option activity during the thirty nine weeks ended June 28, 2008 was as
follows:
Weighted Average
Total Options Exercise Price
Outstanding at September 29, 2007 50,300 $6.31
Granted -- --
Exercised -- --
Expired 950 $6.14
------ -----
Outstanding at June 28, 2008 49,350 $6.31
====== =====
Options exercisable at June 28, 2008 49,350 $6.31
====== =====
10
The weighted-average remaining contractual terms of stock options outstanding
and stock options exercisable at June 28, 2008 was approximately 0.76 year. The
aggregate intrinsic value of options outstanding and stock options exercisable
at June 28, 2008 was approximately $2,000.
(10) 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 third quarter ended June 28, 2008, we
purchased 2,700 shares of our common stock for an aggregate amount of $21,536.
Of the shares purchased, we purchased 200 shares of our common stock on the open
market for an aggregate purchase price of $1,536 and 2,500 shares of our common
stock from an employee for a purchase price of $20,000. During the thirty nine
weeks ended June 28, 2008, we purchased 4,900 shares of our common stock for an
aggregate purchase price of $39,340. Of the shares purchased, we purchased 1,200
shares of our common stock on the open market for an aggregate purchase price of
$9,740, 2,500 shares of our common stock from an employee for $20,000 and 1,200
shares of our common stock from the Joseph G. Flanigan Charitable Trust for a
purchase price of $9,600.
Purchase of Limited Partnership Interests
During the thirty nine weeks ended June 28, 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 2.76% in certain of our limited partnerships
for $120,000.
(11) COMMITMENTS AND CONTINGENCIES:
Guarantees
We guarantee various leases for franchisees, limited partnerships that own
restaurants and locations sold in prior years. Remaining rental commitments
required under these leases are approximately $2,510,000. 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 dispute the seller's entitlement to
reimbursement of its attorney's fees and costs and are appealing the ruling
against us by the trial court. We are also disputing the amount of the seller's
claim as excessive.
11
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 a pylon sign which was formerly in front of the business premises before
being removed by the landlord and to require the landlord to re-construct the
same, at its cost. 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 which it removed. The lawsuit is in the discovery stage.
(12) BUSINESS SEGMENTS:
We operate principally in two reportable segments - package stores and
restaurants. The operation of package stores consists of retail liquor sales and
related items. Information concerning the revenues and operating income for the
thirteen weeks and thirty nine weeks ended June 28, 2008 and June 30, 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, notes and mortgages receivable,
real property, improvements, furniture, equipment and vehicles. 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
June 28, 2008 June 30, 2007
------------- -------------
Operating Revenues:
Restaurants $ 12,528 $ 11,979
Package stores 2,842 3,037
Other revenues 395 391
-------- --------
Total operating revenues $ 15,765 $ 15,407
======== ========
Operating Income Reconciled to Income Before Income
Taxes and Minority Interests in Earnings of Consolidated
Limited Partnerships
Restaurants $ 1,076 $ 310
Package stores 77 116
-------- --------
1,153 426
Corporate expenses, net of other
Revenues (502) (138)
-------- --------
Operating income 651 288
Other income (expense) (83) 304
-------- --------
Income Before Income Taxes and Minority Interests in
Earnings of Consolidated Limited Partnerships $ 568 $ 592
======== ========
Depreciation and Amortization:
Restaurants $ 427 $ 378
Package stores 57 57
-------- --------
484 435
Corporate 67 69
-------- --------
Total Depreciation and Amortization $ 551 $ 504
======== ========
Capital Expenditures:
Restaurants $ 878 $ 398
Package stores 19 61
-------- --------
897 459
Corporate 115 671
-------- --------
Total Capital Expenditures $ 1,012 $ 1,130
======== ========
12
Thirty Nine Weeks Thirty Nine Weeks
Ending Ending
June 28, 2008 June 30, 2007
------------- -------------
Operating Revenues:
Restaurants $ 37,831 $ 35,474
Package stores 9,673 10,050
Other revenues 1,148 1,172
-------- --------
Total operating revenues $ 48,652 $ 46,696
======== ========
Operating Income Reconciled to Income Before Income
Taxes and Minority Interests in Earnings of Consolidated
Limited Partnerships
Restaurants $ 3,058 $ 2,482
Package stores 418 498
-------- --------
3,476 2,980
Corporate expenses, net of other
Revenues (1,675) (1,170)
-------- --------
Operating income 1,801 1,810
Other income (expense) (287) 116
-------- --------
Income Before Income Taxes and Minority Interests in
Earnings of Consolidated Limited Partnerships $ 1,514 $ 1,926
======== ========
Depreciation and Amortization:
Restaurants $ 1,288 $ 1,149
Package stores 189 180
-------- --------
1,477 1,329
Corporate 215 215
-------- --------
Total Depreciation and Amortization $ 1,692 $ 1,544
======== ========
Capital Expenditures:
Restaurants $ 2,536 $ 2,852*
Package stores 155 261
-------- --------
2,691 3,113
Corporate 278 1,059
-------- --------
Total Capital Expenditures $ 2,969 $ 4,172*
======== ========
* includes $56,000 in assets from purchase of franchised restaurant
13
June 28, September 29,
2008 2007
---- ----
Identifiable Assets:
Restaurants $19,365 $18,202
Package store 3,719 3,577
------- -------
23,084 21,779
Corporate 9,372** 8,558
------- -------
Consolidated Totals $32,456 $30,337
======= =======
** includes $696,000 as the balance raised through the private offering by the
limited partnership which owns the Davie, Florida location.
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 29, 2007 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 June 28, 2008, we (i) operated 22 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
June 28, 2008 and as compared to June 30, 2007 and September 29, 2007. On July
28, 2008, a Flanigan's Seafood Bar and Grill restaurant located in Davie,
Florida opened for business. We are the sole general partner and a 48% limited
partner in the limited partnership which owns this Davie, Florida restaurant.
9.5% of the remaining limited partnership interest is owned by persons who are
either our officers, directors or their family members. 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".
14
Types of Units June 28, 2008 September 29, 2007 June 30, 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 8 7 7 (1)
Franchise 1 1 1 (2)
Unrelated Third Party 1 1 1
Company Owned Club: 1 1 1
Total Company Owned/Operated Units 23 22 22
Franchised Units 6 6 6 (2)
Notes:
(1) Includes the 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.
Does not include the restaurant located in Davie, Florida which commenced
operating on July 28, 2008.
(2) We operate a restaurant for one (1) franchisee. This unit is included in the
table both as a franchised restaurant, as well as a restaurant operated by the
Company.
RESULTS OF OPERATIONS
--------------------Thirteen Weeks Ended-------------------
June 28, 2008 June 30, 2007
------------- -------------
Amount Amount
------ ------
(In thousands) Percent (In thousands) Percent
-------------- ------- -------------- -------
Restaurant food sales $10,182 66.25 $ 9,773 65.08
Restaurant bar sales 2,346 15.26 2,206 14.69
Package store sales 2,842 18.49 3,037 20.23
------- ------- ------- -------
Total Sales $15,370 100.00 $15,016 100.00
Franchise related revenues 273 279
Owner's fee 68 71
Other operating income 54 41
------- -------
Total Revenue $15,765 $15,407
======= =======
15
---------------------Thirty-Nine Weeks Ended---------------------
June 28, 2008 June 30, 2007
------------- -------------
Amount Amount
------ ------
(In thousands) Percent (In thousands) Percent
-------------- ------- -------------- -------
Restaurant food sales $30,714 64.66 $28,832 63.33
Restaurant bar sales 7,117 14.98 6,642 14.59
Package store sales 9,673 20.36 10,050 22.08
------- ------- ------- -------
Total Sales $47,504 100.00 $45,524 100.00
Franchise related revenues 815 887
Owner's fee 183 151
Other operating income 150 134
------- -------
Total Revenue $48,652 $46,696
======= =======
Franchise Financial Arrangement: In exchange for our providing management and
related services to our franchisees and granting them the right to use our
service marks "Flanigan's Seafood Bar and Grill" and "Big Daddy's Liquors", our
franchisees (five of which are franchised to members of the family of our
Chairman of the Board, officers and/or directors), are required to (i) pay to us
a royalty equal to 1% of gross package sales and 3% of gross restaurant sales;
and (ii) make advertising expenditures equal to between 1.5% to 3% of all gross
sales based upon our actual advertising costs allocated between stores,
pro-rata, based upon gross sales.
Limited Partnership Financial Arrangement: We manage and control the operations
of all restaurants owned by limited partnerships, except the Fort Lauderdale,
Florida restaurant which is owned by a related franchisee. Accordingly, the
results of operations of all limited partnership owned restaurants, except the
Fort Lauderdale, Florida restaurant are consolidated into our operations for
accounting purposes. The results of operations of the Fort Lauderdale, Florida
restaurant are accounted for by us utilizing the equity method. In general,
until the investors' cash investment in a limited partnership (including any
cash invested by us and our affiliates) is returned in full, the limited
partnership distributes to the investors annually out of available cash from the
operation of the restaurant up to 25% of the cash invested in the limited
partnership, with no management fee paid to us. Any available cash in excess of
the 25% of the cash invested in the limited partnership distributed to the
investors annually, is paid one-half (1/2) to us as a management fee, with the
balance distributed to the investors. Once the investors in the limited
partnership have received, in full, amounts equal to their cash invested, an
annual management fee is payable to us equal to one-half (1/2) of cash available
to the limited partnership, with the other one half (1/2) of available cash
distributed to the investors (including us and our affiliates). As of June 28,
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 our
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 June 28, 2008 and June 30, 2007.
-------------------------------------------------------------------
Revenues. Total revenue for the thirteen weeks ended June 28, 2008 increased
$358,000 or 2.32% to $15,765,000 from $15,407,000 for the thirteen weeks ended
June 30, 2007. This increase resulted from sales from the Pembroke Pines,
Florida limited partnership owned restaurant ($790,000) which was opened on
October 28, 2007, offset by the decline in same store restaurant food and bar
sales. Without giving effect to the revenues generated from the Pembroke Pines,
Florida restaurant, ($790,000), total
16
revenue for the thirteen weeks ended June 28, 2008 would have decreased $432,000
or 2.80% to $14,975,000 from $15,407,000 for the thirteen weeks ended June 30,
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 $10,182,000 for the thirteen weeks ended June 28, 2008 as
compared to $9,773,000 for the thirteen weeks ended June 30, 2007. The increase
in restaurant food sales is due to sales from the Pembroke Pines, Florida
restaurant, which generated $667,000 of revenues from the sale of food during
the thirteen weeks ended June 28, 2008. Without giving effect to the revenue
generated from the Pembroke Pines, Florida restaurant, ($667,000), revenue from
the sale of food for the thirteen weeks ended June 28, 2008 would have decreased
$258,000 or 2.64% to $9,515,000 from $9,773,000 for the thirteen weeks ended
June 30, 2007. Comparable weekly restaurant food sales (for restaurants open for
all of the third quarter of our fiscal year 2008 and the third quarter of our
fiscal year 2007, which consists of seven restaurants owned by us and seven
restaurants owned by affiliated limited partnerships) was $732,000 and $752,000
for the thirteen weeks ended June 28, 2008 and June 30, 2007, respectively, a
decrease of 2.66%. Comparable weekly restaurant food sales for Company owned
restaurants only was unchanged at $330,000 for the third quarter of our fiscal
year 2008 and the third quarter of our fiscal year 2007. Comparable weekly
restaurant food sales for affiliated limited partnership owned restaurants only
was $402,000 and $422,000 for the third quarter of our fiscal year 2008 and the
third quarter of our fiscal year 2007, respectively, a decrease of 4.74%. We
anticipate that restaurant food sales will continue to increase through our
fiscal year 2008 due to, among other things, the operation of the Pembroke
Pines, Florida limited partnership owned restaurant through the balance of our
fiscal year 2008 and the opening of the Davie, Florida restaurant during the
fourth quarter of our fiscal year 2008, 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 $2,346,000 for the
thirteen weeks ended June 28, 2008 as compared to $2,206,000 for the thirteen
weeks ended June 30, 2007. The increase in restaurant bar sales is due to sales
from the Pembroke Pines, Florida restaurant, which generated $123,000 of
revenues from restaurant bar sales during the thirteen weeks ended June 28,
2008. Without giving effect to the revenue from restaurant bar sales generated
from the Pembroke Pines, Florida restaurant, ($123,000), revenue from restaurant
bar sales for the thirteen weeks ended June 28, 2008 would have increased
$17,000 or 0.77% to $2,223,000 from $2,206,000 for the thirteen weeks ended June
30, 2007. Comparable weekly restaurant bar sales (for restaurants open for all
of the third quarter of our fiscal year 2008 and the third quarter of our fiscal
year 2007, which consists of seven restaurants owned by us and seven restaurants
owned by affiliated limited partnerships) was $171,000 and $170,000 for the
thirteen weeks ended June 28, 2008 and June 30, 2007, respectively, an increase
of 0.59%. Comparable weekly restaurant bar sales for Company owned restaurants
only was $74,000 and $72,000 for the third quarter of our fiscal year 2008 and
the third quarter of our fiscal year 2007, respectively, an increase of 2.78%.
Comparable weekly restaurant bar sales for affiliated limited partnership owned
restaurants only was $97,000 and $98,000 for the third quarter of our fiscal
year 2008 and the third quarter of our fiscal year 2007, respectively, a
decrease of 1.02%. We anticipate that restaurant bar sales will continue to
increase through our fiscal year 2008 due to, among other things, the operation
of the Pembroke Pines, Florida restaurant through the balance of our fiscal year
2008 and the opening of the Davie, Florida restaurant during the fourth quarter
of our fiscal year 2008.
Package Store Sales. Revenue generated from sales of liquor and related
items at package stores totaled $2,842,000 for the thirteen weeks ended June 28,
2008 as compared to $3,037,000 for the thirteen weeks ended June 30, 2007, a
decrease of 6.42%. The weekly average of same store package store sales was
$219,000 and $234,000 for the thirteen weeks ended June 28, 2008 and June 30,
2007, respectively. The decrease was primarily due to increased competition.
Package store sales are expected to decline
17
through the balance of our fiscal year 2008. Increased competition has had a
greater adverse impact upon package store sales when customers routinely make
larger volume purchases, which historically have been more likely to occur
during the first and second quarters of our fiscal year.
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 June 28, 2008
decreased $5,000 or 0.03% to $15,114,000 from $15,119,000 for the thirteen weeks
ended June 30, 2007. The decrease was primarily due to a decrease in the cost of
package goods associated with the decline in our package store sales, a decrease
in the cost of our higher volume meal items, a decrease in repairs and
maintenance to our units and actions taken by management to reduce costs and/or
expenses, including but not limited to new lower cost menu items and/or
ingredients, offset by expenses related to the operation of the Pembroke Pines,
Florida restaurant, pre-opening expenses related to the Davie, Florida
restaurant and to a lesser extent a general increase in overall expenses. We
anticipate that our operating costs and expenses will increase through our
fiscal year 2008 due to, among other things, the opening of the Davie, Florida
restaurant during the fourth quarter of fiscal year 2008. Operating costs and
expenses decreased as a percentage of total sales to approximately 95.87% in the
third quarter of our fiscal year 2008 from 98.13% in the third quarter of 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 the
thirteen weeks ended June 28, 2008 increased to $8,331,000 from $7,768,000 for
the thirteen weeks ended June 30, 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), increased to 66.50% for the thirteen weeks ended
June 28, 2008 compared to 64.85% for the thirteen weeks ended June 30, 2007. The
increase in our gross profit margin for restaurant and bar sales for the third
quarter of our fiscal year 2008 was primarily due to the lower cost of our
higher volume menu items, menu price increases instituted at the end of the
first quarter of our fiscal year 2008, introduction of lower cost menu items 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 June 28, 2008 decreased to $848,000 from $863,000 for the thirteen
weeks ended June 30, 2007. Our gross profit margin, (calculated as gross profit
reflected as a percentage of package store sales), was 29.84% for the thirteen
weeks ended June 30, 2008 compared to 28.42% for the thirteen weeks ended June
30, 2007. The increase in our gross profit margin, (1.42%), was primarily due to
the purchase of "close out" and inventory reduction merchandise from
wholesalers. We anticipate that the gross profit margin for package store sales
will remain constant throughout the balance of fiscal year 2008.
Payroll and Related Costs. Payroll and related costs for the thirteen weeks
ended June 28, 2008 increased $151,000 or 3.36% to $4,645,000 from $4,494,000
for the thirteen weeks ended June 30, 2007. This increase is primarily
attributable to expenses associated with the Pembroke Pines, Florida and Davie,
Florida restaurants. We anticipate that our payroll costs and related expenses
will continue to increase through our fiscal year 2008 due to, among other
things, the operation of the Pembroke Pines, Florida restaurant through the
balance of our fiscal year 2008 and the opening of the Davie, Florida restaurant
during the fourth quarter of fiscal year 2008. Payroll and related costs as a
percentage of total sales was 29.46% in the third quarter of our fiscal year
2008 and 29.17% of total sales in the third quarter of 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, offset by reductions in store
level management, where appropriate.
Occupancy Costs. Occupancy costs (consisting of rent, common area maintenance,
repairs, real property taxes and amortization of leasehold purchases) for the
thirteen weeks ended June 28, 2008 decreased
18
$110,000 or 10.01% to $989,000 from $1,099,000 for the thirteen weeks ended June
30, 2007. This decrease is due to a decrease in percentage rent and a general
decrease in repairs and maintenance.
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 June 28, 2008 increased
$148,000 or 4.71% to $3,289,000 from $3,141,000 for the thirteen weeks ended
June 30, 2007. Selling, general and administrative expenses increased as a
percentage of total sales in the third quarter of our fiscal year 2008 to 20.86%
as compared to 20.39% in the third quarter of our fiscal year 2007. We
anticipate that our selling, general and administrative expenses will increase
throughout the balance of our fiscal year 2008 due to, among other things, the
opening of the Davie, Florida restaurant during the fourth quarter of fiscal
year 2008 and the continuation of an overall increase in expenses.
Depreciation. Depreciation for the thirteen weeks ended June 28, 2008 and June
30, 2007 was $457,000 and $466,000 respectively. As a percentage of revenue,
depreciation expense was 2.90% of revenue in the thirteen weeks ended June 28,
2008 and 3.02% of revenue in the thirteen weeks ended June 30, 2007.
Other Income and Expense. Other income and expenses was an expense of $83,000
for the thirteen weeks ended June 28, 2008, as compared to an income of $304,000
for the thirteen weeks ended June 30, 2007. Other income and expense for the
thirteen weeks ended June 30, 2007 includes a gain of $393,000 from the sale of
real property. Other income and expense for the thirteen weeks ended June 28,
2008 includes interest expense of $117,000, as compared to interest expense of
$129,000 for the thirteen weeks ended June 30, 2007.
Interest Expense, Net. Interest expense, net, for the thirteen weeks ended June
28, 2008 decreased $12,000 to $117,000 from $129,000 for the thirteen weeks
ended June 30, 2007.
Net Income. Net income for the thirteen weeks ended June 28, 2008 decreased
$91,000 or 21.31% to $336,000 from $427,000 for the thirteen weeks ended June
30, 2007. As a percentage of sales, net income for the third quarter of our
fiscal year 2008 is 2.13%, as compared to 2.77% in the third quarter of our
fiscal year 2007. During the third quarter of fiscal year 2007, we recognized 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,
($141,000), and the Davie, Florida restaurant, ($62,000), which adversely
affected net income. Without giving effect to the sale of the real property, we
would have generated net income of $191,000 for the thirteen weeks ended June
30, 2007, which as a percentage of sales is 1.24%. Without giving effect to the
sale of the real property for the thirteen weeks ended June 30, 2007, the
increase in net income for the thirteen weeks ended June 28, 2008, as a
percentage of sales (0.89%) is primarily due to higher gross profit in both our
restaurant and package liquor store divisions, improved control over expenses,
offset by our share of the pre-opening expenses associated with the Davie,
Florida restaurant, ($74,000).
Comparison of Thirty-Nine Weeks Ended June 28, 2008 and June 30, 2007.
----------------------------------------------------------------------
Revenues. Total revenue for the thirty-nine weeks ended June 28, 2008 increased
$1,956,000 or 4.19% to $48,652,000 from $46,696,000 for the thirty-nine weeks
ended June 30, 2007. This increase resulted from sales from two restaurant
locations, the Pembroke Pines, Florida limited partnership owned restaurant
($2,465,000) which opened for business on October 29, 2007, and the Company
owned Lake Worth, Florida restaurant ($1,281,000), which opened for business on
March 4, 2007, offset by the decline in same store restaurant food and bar
sales. Prior to March 4, 2007, the Lake Worth, Florida restaurant was franchised
by the Company. The Lake Worth, Florida restaurant generated $612,000 of revenue
during the thirty-nine weeks ended June 30, 2007. Without giving effect to the
revenue
19
generated from the Pembroke Pines, Florida restaurant, ($2,465,000), and the
increased revenue generated from the Lake Worth, Florida restaurant, ($669,000),
total revenue for the thirty-nine weeks ended June 28, 2008 would have decreased
$1,178,000 or 2.52% to $45,518,000 from $46,696,000 for the thirty-nine weeks
ended June 30, 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 $30,714,000 for the thirty-nine weeks ended June 28, 2008
as compared to $28,832,000 for the thirty-nine weeks ended June 30, 2007. The
increase in restaurant food sales is due to sales from the Pembroke Pines,
Florida and Lake Worth, Florida restaurants. The Pembroke Pines, Florida and
Lake Worth, Florida locations generated $2,070,000 and $1,056,000 of revenues,
respectively, from the sale of food during the thirty-nine weeks ended June 28,
2008, while the Lake Worth, Florida restaurant generated $511,000 of revenue
from the sale of food during the thirty-nine weeks ended June 30, 2007. Without
giving effect to the revenue generated from the Pembroke Pines, Florida
restaurant, ($2,070,000), and the increased revenue generated from the Lake
Worth, Florida restaurant, ($545,000), revenue from the sale of food for the
thirty-nine weeks ended June 28, 2008 would have decreased $733,000 or 2.54% to
$28,099,000 from $28,832,000 for the thirty-nine weeks ended June 30, 2007.
Comparable weekly restaurant food sales (for restaurants open for all of the
thirty-nine weeks ended June 28, 2008 and the thirty-nine weeks ended June 30,
2007, which consists of six restaurants owned by us and seven restaurants owned
by affiliated limited partnerships) was $707,000 and $726,000 for the
thirty-nine weeks ended June 28, 2008 and June 30, 2007, respectively, a
decrease of 2.62%. Comparable weekly restaurant food sales for Company owned
restaurants only was $304,000 and $301,000 for the thirty-nine weeks ended June
28, 2008 and June 30, 2007, respectively, an increase of 1.00%. Comparable
weekly restaurant food sales for affiliated limited partnership owned
restaurants only was $404,000 and $425,000 for the thirty-nine weeks ended June
28, 2008 and June 30, 2007, respectively, a decrease of 4.94%. We anticipate
that restaurant food sales will continue to increase through our fiscal year
2008 due to, among other things, the operation of the Pembroke Pines, Florida
restaurant through the balance of our fiscal year 2008 and the opening of the
Davie, Florida restaurant during the fourth quarter of our fiscal year 2008,
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 $7,117,000 for the
thirty-nine weeks ended June 28, 2008 as compared to $6,642,000 for the
thirty-nine weeks ended June 30, 2007. The increase in restaurant bar sales is
due to sales from the Pembroke Pines, Florida and Lake Worth, Florida
restaurants. The Pembroke Pines, Florida and Lake Worth, Florida locations
generated $395,000 and $227,000 of revenues from restaurant bar sales during the
thirty-nine weeks ended June 28, 2008, respectively, while the Lake Worth,
Florida restaurant generated $101,000 of revenue from restaurant bar sales
during the thirty-nine weeks ended June 30, 2007. Without giving effect to the
revenue from restaurant bar sales generated from the Pembroke Pines, Florida
restaurant, ($395,000), and the increased revenue from restaurant bar sales
generated from the Lake Worth, Florida restaurant, ($126,000), revenue from
restaurant bar sales for the thirty-nine weeks ended June 28, 2008 would have
decreased $46,000 or 0.69% to $6,596,000 from $6,642,000 for the thirty-nine
weeks ended June 30, 2007. Comparable weekly restaurant bar sales (for
restaurants open for all of the thirty-nine weeks ended June 28, 2008 and the
thirty-nine weeks ended June 30, 2007, which consists of six restaurants owned
by us and seven restaurants owned by affiliated limited partnerships) was
$167,000 and $168,000 for the thirty nine weeks ended June 28, 2008 and June 30,
2007, respectively, a decrease of 0.60%. Comparable weekly restaurant bar sales
for Company owned restaurants only was $69,000 and $66,000 for the thirty-nine
weeks ended June 28, 2008 and the thirty- nine weeks ended June 30, 2007,
respectively, an increase of 4.55%. Comparable weekly restaurant bar sales for
affiliated limited partnership owned restaurants only was $98,000 and $101,000
for the thirty- nine weeks ended June 28, 2008 and the thirty-nine weeks ended
June 30, 2007, respectively, a decrease of 2.97%. We anticipate that restaurant
bar sales will continue to increase through our fiscal year 2008
20
due to, among other things, the operation of the Pembroke Pines, Florida
restaurant through the balance of our fiscal year 2008 and the opening of the
Davie, Florida restaurant during the fourth quarter of our fiscal year 2008,
offset by a decline in same store restaurant bar sales.
Package Store Sales. Revenue generated from sales of liquor and related
items at package stores totaled $9,673,000 for the thirty-nine weeks ended June
28, 2008 as compared to $10,050,000 for the thirty-nine weeks ended June 30,
2007, a decrease of 3.75%. The weekly average of same store package store sales
was $248,000 and $258,000 for the thirty-nine weeks ended June 28, 2008 and June
30, 2007, respectively. The decrease was primarily due to increased competition.
Package store sales are expected to decline through the balance of our fiscal
year 2008. Increased competition has had a greater adverse impact upon package
store sales when customers routinely make larger volume purchases, which
historically have been more likely to occur during the first and second quarters
of our fiscal year.
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 thirty- nine weeks ended June 28,
2008 increased $1,965,000 or 4.38% to $46,851,000 from $44,886,000 for the
thirty-nine weeks ended June 30, 2007. The increase was primarily due to
expenses related to the operation of the Pembroke Pines, Florida restaurant,
pre-opening expenses related to 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 costs and/or expenses, including but not limited
to new lower cost menu items and/or ingredients. We anticipate that our
operating costs and expenses will continue to increase through our fiscal year
2008 due to, among other things, the opening of the Davie, Florida restaurant
during the fourth quarter of fiscal year 2008. Operating costs and expenses
increased as a percentage of total sales to approximately 96.30% for the
thirty-nine weeks ended June 28, 2008 from 96.12% for the thirty-nine weeks
ended June 30, 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 the
thirty-nine weeks ended June 28, 2008 increased to $25,161,000 from $23,268,000
for the thirty-nine weeks ended June 30, 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), increased to 66.51% for the
thirty-nine weeks ended June 28, 2008 compared to 65.59% for the thirty-nine
weeks ended June 30, 2007. This increase in gross profit for restaurant and bar
sales for the thirty-nine weeks ended June 28, 2008 was primarily due to menu
price increases instituted at the end of the first quarter of our fiscal year
2008, introduction of lower cost menu items and/or ingredients and a decrease in
the cost of ribs during calendar year 2008.
Package Store Sales. Gross profit for package store sales for the thirty-nine
weeks ended June 28, 2008 increased to $2,818,000 from $2,813,000 for the
thirty-nine weeks ended June 30, 2007. Our gross profit margin, (calculated as
gross profit reflected as a percentage of package store sales), was 29.13% for
the thirty-nine weeks ended June 28, 2008 compared to 27.99% for the thirty-nine
weeks ended June 30, 2007. The increase in our gross profit margin, (1.14%), was
primarily due to the purchase of "close out" and inventory reduction merchandise
from wholesalers. We anticipate that the gross profit margin for package store
sales will remain constant throughout the balance of our fiscal year 2008.
Payroll and Related Costs. Payroll and related costs for the thirty-nine weeks
ended June 28, 2008 increased $1,265,000 or 9.66% to $14,363,000 from
$13,098,000 for the thirty-nine weeks ended June 30, 2007. This increase is
primarily attributable to the expenses associates with the Pembroke Pines,
Florida
21
and Lake Worth, Florida restaurants. We anticipate that our payroll costs and
related expenses will continue to increase through our fiscal year 2008 due to,
among other things, the operation of the Pembroke Pines, Florida restaurant
through the balance of our fiscal year 2008 and the opening of the Davie,
Florida restaurant during the fourth quarter of fiscal year 2008. Payroll and
related costs as a percentage of total sales was 29.52% for the thirty-nine
weeks ended June 28, 2008 and 28.05% of total sales for the thirty-nine weeks
ended June 30, 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 the
thirty-nine weeks ended June 28, 2008 increased $106,000 or 3.70% to $2,969,000
from $2,863,000 for the thirty-nine weeks ended June 30, 2007. This increase is
due to, (i) rental payments for the entire thirty-nine weeks ended June 28, 2008
at three additional restaurant locations (Pembroke Pines, Florida, - $106,000,
Davie, Florida - $100,000, and Lake Worth, Florida - $74,000), as compared to
rental payments for a part of the thirty-nine weeks ended June 30, 2007 at the
same three additional restaurant locations, (Pembroke Pines, Florida - $18,000
(non-cash pre-opening rent) and $71,000 (cash pre-opening rent), Davie, Florida
- $92,000 and Lake Worth, Florida - $35,000); and (ii) 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, offset by
a general decrease in repairs and maintenance.
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 thirty-nine weeks ended June 30, 2008 increased
$512,000 or 5.40% to $9,994,000 from $9,482,000 for the thirty-nine weeks ended
June 30, 2007. Selling, general and administrative expenses increased as a
percentage of total sales for the thirty-nine weeks ended June 28, 2008 to
20.54% as compared to 20.31% for the thirty-nine weeks ended June 30, 2007. This
increase is attributable to the operation of the Pembroke Pines, Florida and
Lake Worth, Florida restaurants and an overall increase in expenses. We
anticipate that our selling, general and administrative expenses will increase
throughout the balance of our fiscal year 2008 due to, among other things, the
operation of our Pembroke Pines, Florida restaurant throughout the balance of
our fiscal year 2008, the opening of the Davie, Florida restaurant during the
fourth quarter of fiscal year 2008 and the continuation of an overall increase
in expenses, which will not be offset in their entirety by reduced advertising
and increased advertising credits and rebates from our food distributor.
Depreciation. Depreciation for the thirty-nine weeks ended June 28, 2008 and
June 30, 2007 was $1,518,000 and $1,454,000 respectively. As a percentage of
revenue, depreciation expense was 3.12% of revenue in the thirty-nine weeks
ended June 28, 2008 and 3.11% of revenue in the thirty-nine weeks ended June 30,
2007.
Other Income and Expense. Other income and expenses was an expense of $287,000
for the thirty-nine weeks ended June 28, 2008, as compared to income of $116,000
for the thirty-nine weeks ended June 30, 2007. Other income and expense for the
thirty-nine weeks ended June 30, 2007 includes a gain of $393,000 from the sale
of real property. Other income and expense for the thirty-nine weeks ended June
28, 2008 includes interest expense of $358,000, as compared to interest expense
of $387,000 for the thirty- nine weeks ended June 30, 2007. The decrease in
interest expense is attributable to a decreased average balance outstanding on
our line of credit during the thirty-nine weeks ended June 28, 2008.
Interest Expense, Net. Interest expense, net, for the thirty-nine weeks ended
June 28, 2008 decreased $29,000 to $358,000 from $387,000 for the thirty-nine
weeks ended June 30, 2007.
22
Net Income. Net income for the thirty-nine weeks ended June 28, 2008 decreased
$92,000 or 8.49% to $991,000 from $1,083,000 for the thirty-nine weeks ended
June 30, 2007. As a percentage of sales, net income for the thirty-nine weeks
ended June 28, 2008 is 2.04%, as compared to 2.32% for the thirty-nine weeks
ended June 30, 2007. During the thirty-nine weeks ended June 30, 2007, we
recognized 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, ($205,000), and the Davie, Florida restaurant, ($118,000), which
adversely affected net income. Without giving effect to the sale of the real
property, we would have generated net income of $813,000 for the thirty-nine
weeks ended June 30, 2007, which as a percentage of sales is 1.74%. Without
giving effect to the sale of the real property for the thirty-nine weeks ended
June 30, 2007, the increase in net income for the thirty-nine weeks ended June
28, 2008, as a percentage of sales (0.30%), is primarily due to higher gross
profit in both our restaurant and package liquor store divisions, improved
control over expenses, offset by our share of the pre-opening expenses
associated with the Davie, Florida restaurant, ($74,000).
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. 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 thirty nine weeks ended June
28, 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 thirty nine weeks ended
June 28, 2008, we also paid and expensed pre-opening rent in the approximate
amount of $100,000 for the Davie, Florida restaurant, which is the full rent
provided in the lease. During the thirty nine weeks ended June 30, 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 $71,000 for the
Pembroke Pines, Florida restaurant and pre-opening rent in the approximate
amount of $92,000 for the Davie, Florida restaurant. We are recognizing rent
expense on a straight line basis over the term of the lease.
During the thirty nine weeks ended June 28, 2008, the limited partnership
restaurant in Davie, Florida reported losses of $400,000 primarily due to
pre-opening costs, thus contributing to a reduction in the operating income for
the thirty nine weeks ended June 28, 2008. During the thirty nine weeks ended
June 30, 2007, the limited partnership restaurant in Pembroke Pines, Florida
reported a loss of $205,000 primarily due to pre-opening costs and the limited
partnership restaurant in Davie, Florida reported a loss of $118,000 primarily
due to pre-opening costs, thus contributing to a reduction in the operating
income for the thirty nine weeks ended June 30, 2007.
Throughout the balance of fiscal year 2008, income from operations will be
adversely affected by pre-opening costs, including but not limited to
pre-opening rent, ($11,000), to be incurred for the Davie, Florida restaurant.
Management believes that our current cash availability from our 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 restaurant sales
compared to corresponding periods in prior years due primarily to the Pembroke
Pines, Florida restaurant being open for the entire twelve month period and the
opening of the new restaurant in Davie, Florida. Same store restaurant food and
bar sales are expected to decline over the next twelve month period, with
decreases
23
primarily in restaurants in Palm Beach County, Florida and to a lesser extent in
Broward County, Florida, offset partially by increases in same store restaurant
food and bar sales in Miami-Dade County, Florida, due to our strong name
recognition in that county. Package store sales are expected to decrease due
primarily to increased competition. Management also expects higher food costs
and overall expenses to increase. We are reviewing our food costs and overall
expenses looking for ways to reduce and/or control the same, including but not
limited to new lower cost menu items and/or ingredients, without sacrificing our
food quality and service. During the first quarter of our fiscal year 2007, we
raised menu prices to offset the higher food costs and overall expenses. During
the first quarter of our fiscal year 2008, we again raised menu prices to offset
higher food costs and overall expenses and will continue to do so whenever
necessary and wherever competitively possible.
Liquidity and Capital Resources
We fund our operations through cash from operations and borrowings under our
line of credit. As of June 28, 2008, we had cash of approximately $3,464,000, an
increase of $1,241,000 from our cash balance of $2,223,000 as of September 29,
2007. The increase in cash was due primarily to amounts which have been raised
but have not yet been required to be used for expenses by the limited
partnership which owns the Davie, Florida location, ($696,000) and 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 thirty-nine weeks of
fiscal years 2008 and 2007.
-----Thirty-Nine Weeks Ended---
June 28, 2008 June 30, 2007
------------- -------------
(in Thousands)
Net cash provided by operating activities $ 2,506 $ 2,299
Net cash used in investing activities (2,823) (2,100)
Net cash provided by financing activities 1,558 1,433
------- -------
Net Increase in Cash and Cash Equivalents 1,241 1,632
Cash and Cash Equivalents, Beginning 2,223 1,698
------- -------
Cash and Cash Equivalents, Ending $ 3,464 $ 3,330
======= =======
We have determined that we must retain any earnings for the development and
operation of our business and accordingly, we do not intend to pay any cash
dividends in the foreseeable future.
Capital Expenditures
We acquired property and equipment of $2,969,000, (of which $26,000 was
financed), during the thirty nine weeks ended June 28, 2008, including $268,000
for renovations to one (1) existing Company owned restaurant, as compared to
$4,172,000, (of which $700,000 was financed), during the thirty nine weeks ended
June 30, 2007, which included $1,402,500 for the purchase of real property and
$615,000 for renovations to three (3) existing Company restaurants. During the
thirty nine weeks ended June 28, 2008, the limited partnership which owns the
Davie, Florida restaurant completed its private offering, raising the sum of
$3,875,000, of which $1,850,000 represents our investment. We did not advance
any funds to
24
this limited partnership in excess of our investment. The funds from the private
offering are being used to complete the renovations to the business premises for
operation of a "Flanigan's Seafood Bar and Grill" restaurant and provide working
capital.
In addition, during the thirty nine weeks ended June 28, 2008, we purchased 4%
leasehold/subleasehold interests for our El Portal, Florida location, ($26,000),
from an unrelated lessor/sublessor, the cost of which is being amortized as
additional rent over the life of the lease, including first ten (10) year
renewal option. During the thirty nine weeks ended June 30, 2007, we purchased
the 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 previously franchised restaurant.
All of the Company owned units require periodic refurbishing in order to remain
competitive. Management anticipates the cost of this refurbishment in fiscal
year 2008 to be approximately $375,000, of which $268,000 has been spent through
June 28, 2008.
Long Term Debt
As of June 28, 2008, we had long term debt of $6,558,000, as compared to
$6,136,000 as of June 30, 2007, and $6,080,000 as of September 29, 2007. The net
increase in long term debt as of June 28, 2008, as compared to long term debt as
of June 30, 2007 and September 29, 2007, respectively, is primarily attributed
to the borrowing of $600,000 under our secured line of credit from an
unaffiliated financial institution during the first quarter of our fiscal year
2008 to pay the balance of the purchase price for our limited partnership units
in the limited partnership which owns the Davie, Florida restaurant.
As of June 28, 2008, the amount outstanding under our secured line of credit was
$1,562,000. During the fourth quarter of fiscal year 2008, we extended the
maturity date of our secured line of credit from April 2, 2009 to July 2, 2009.
During the third quarter of fiscal year 2007, in connection with our purchase of
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, we became obligated to repay to an unaffiliated third party
lender, a purchase money mortgage in the principal amount of $450,000. 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 $3,949.07, with the entire principal balance and
all accrued interest due in ten (10) years.
Purchase Commitments
In order to fix the cost and ensure adequate supply of baby back ribs for our
restaurants, effective November 20, 2007, we entered into a purchase agreement
with our rib supplier, whereby we agreed to purchase approximately $3,200,000 of
baby back ribs during calendar year 2008 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 the fiscal quarters ended June 28, 2008, June 30, 2007 and the
fiscal year ended September 29, 2007.
25
Item June 28, 2008 June 30, 2007 Sept 29, 2007
---- ------------- ------------- -------------
(in Thousands)
Current Assets $ 7,002 $ 7,263 $ 6,322
Current Liabilities 4,080 4,854 4,567
-------- -------- --------
Working Capital $ 2,922 $ 2,409 $ 1,755
Working capital as of June 28, 2008 increased by 21.30% from the working capital
for the fiscal quarter ending June 30, 2007 and increased by 66.50% from the
working capital for the fiscal year ending September 29, 2007. Our working
capital improved during the third quarter of our fiscal year 2008 due primarily
to the amounts which have been raised but not yet required to be used for
expenses by the limited partnership which owns the Davie, Florida restaurant,
($696,000). Working capital also continued to improve during the fiscal quarter
ending June 28, 2008 due to the minimal demand upon our cash flow for
extraordinary items during the fiscal quarter. Our working capital during the
third quarter of fiscal year 2007 included the completion of the private
offering by the limited partnership which owns the Pembroke Pines, Florida
restaurant, which private offering raised the sum of $2,350,000, and reimbursed
us approximately $300,000 for amounts previously advanced in excess of our
investment in the limited partnership. In addition, during the third quarter of
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.
We believe that positive cash flow from operations will adequately fund
operations and debt reduction through the balance of our fiscal year 2008.
During the second quarter of our fiscal year 2008, we contracted for the
purchase of a new point of sale system for our package stores, at a cost of
approximately $218,000, excluding a surveillance camera system which we estimate
will cost an additional $90,000. During the third quarter of our fiscal year
2008, we amended the contract, raising the cost to approximately $227,000. As of
June 28, 2008, we have already paid approximately $175,000 on account of the new
point of sale system for our package stores, including the cost to customize and
test the new point of sale system. We also paid approximately $50,000 to
purchase universal wireless hand-held scanners, which payment is in addition to
the contracted amount. We anticipate that this new point of sale system for our
package stores will be installed and fully operational by the end of our fiscal
year 2008.
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 June 28, 2008 held no equity securities.
26
Interest Rate Risk
At June 28, 2008, of the Company's debt arrangements, only borrowings under our
line of credit bear interest at a variable annual rate equal to the prime rate
of interest. 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 June 28, 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
Under the supervision and with the participation of certain members of our
management, including our Chairman of the Board, Chief Executive Officer and
Chief Financial Officer, we completed an evaluation of the effectiveness of the
design and operation of 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")). Based on that evaluation, we and our management have
concluded that, our disclosure controls and procedures at June 28, 2008 were
effective to ensure that information required to be disclosed by us in the
reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the rules and forms
of the SEC, and are designed to ensure that information required to be disclosed
by us in these reports is accumulated and communicated to our management, as
appropriate to allow timely decisions regarding required disclosures. In the
thirteen weeks ended June 28, 2008, there has been no change in our internal
control over financial reporting that has materially affected, or is reasonably
likely to affect, our internal control over financial reporting. Management does
not expect that disclosure controls and procedures or internal controls can
prevent all errors and all fraud. A control system, no matter how well conceived
and operated, can provide only reasonable and not absolute assurance that the
objectives of the control system are met. Further, the design of a control
system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs. While
management believes that its disclosure controls and procedures provide
reasonable assurance that fraud can be detected and prevented, because of the
inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, have been detected.
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 29, 2007 for
a discussion of other legal proceedings resolved in prior years.
ITEM 1A. RISK FACTORS
There have been no material changes to the risk factors previously disclosed in
our Annual Report on Form 10-K for the fiscal year ended September 29, 2007 and
in other reports filed from time to time with the SEC since the date we filed
our Form 10-K. Readers are urged to carefully review these risk factors since
they may cause our results to differ from the "forward-looking statements" made
in this report or otherwise made by or on our behalf. Those risk factors are not
the only ones we face. Additional risks not presently known to us or other
factors not perceived by us to present significant risks to our business at this
time also may impair our business operations. We do not undertake to update any
of these forward-
27
looking statements or to announce the results of any revisions to these
forward-looking statements except as required by law.
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, the Board of Directors authorized management to
purchase up to 100,000 shares of our common stock. During the third quarter
ended June 28, 2008, we purchased 2,700 shares of our common stock for an
aggregate purchase price of $21,536. Of the shares purchased, we purchased 2,500
shares of our common stock from an employee for $20,000 and 200 shares of our
common stock on the open market for an aggregate purchase price of $1,536.
Maximum
Number (or
Total Number Approximate
of Shares Dollar Value)
Purchased as of Shares that
Part of May Yet be
Publicly Purchased
Total Number Announced Under the
of Shares Average Price Plans or Plans or
Period Purchased Paid Per Share Programs Programs
------ --------- -------------- -------- --------
As of March 29, 2008: 95,300
4/3/2008 1,150 $8.00 1,150 94,150
4/17/2008 1,350 $8.00 1,350 92,800
6/5/2008 200 $7.68 200 92,600
----- -----
Total: 2,700 2,700
As of June 28, 2008: 92,600
ITEM 6. EXHIBITS
The following exhibits are filed with this Report:
Exhibit Description
------- -----------
31.1 Certification of Chief Executive Officer pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification of Chief Financial Officer pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
28
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FLANIGAN'S ENTERPRISES, INC.
Date: August 11, 2008 /s/ James G. Flanigan
--------------------------------------------
JAMES G. FLANIGAN,
Chief Executive Officer and President
/s/ Jeffrey D. Kastner
--------------------------------------------
JEFFREY D. KASTNER,
Chief Financial Officer and Secretary
(Principal Financial and Accounting Officer)
29