ITEM 1. CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF INCOME
(in thousands, except per share amounts)
|
|
Thirteen Weeks
Ended
|
|
|
Twenty Six Weeks
Ended
|
|
|
|
March
30, 2019
|
|
|
March
31, 2018
|
|
|
March
30, 2019
|
|
|
March
31, 2018
|
|
|
|
|
|
|
|
|
REVENUES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restaurant food sales
|
|
$
|
18,219
|
|
|
$
|
18,244
|
|
|
$
|
35,047
|
|
|
$
|
35,516
|
|
Restaurant bar sales
|
|
|
5,745
|
|
|
|
5,641
|
|
|
|
11,068
|
|
|
|
11,125
|
|
Package store sales
|
|
|
5,092
|
|
|
|
4,866
|
|
|
|
10,227
|
|
|
|
9,879
|
|
Franchise related revenues
|
|
|
429
|
|
|
|
443
|
|
|
|
796
|
|
|
|
823
|
|
Rental income
|
|
|
192
|
|
|
|
158
|
|
|
|
390
|
|
|
|
315
|
|
Owner’s fee
|
|
|
—
|
|
|
|
37
|
|
|
|
—
|
|
|
|
75
|
|
Other operating income
|
|
|
59
|
|
|
|
67
|
|
|
|
102
|
|
|
|
116
|
|
|
|
|
29,736
|
|
|
|
29,456
|
|
|
|
57,630
|
|
|
|
57,849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COSTS AND EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of merchandise sold:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restaurant and lounges
|
|
|
8,318
|
|
|
|
8,212
|
|
|
|
16,042
|
|
|
|
16,195
|
|
Package goods
|
|
|
3,719
|
|
|
|
3,508
|
|
|
|
7,487
|
|
|
|
7,129
|
|
Payroll and related costs
|
|
|
9,067
|
|
|
|
8,994
|
|
|
|
17,665
|
|
|
|
17,540
|
|
Occupancy costs
|
|
|
1,504
|
|
|
|
1,404
|
|
|
|
3,014
|
|
|
|
2,890
|
|
Selling, general and administrative expenses
|
|
|
5,238
|
|
|
|
4,826
|
|
|
|
10,877
|
|
|
|
9,996
|
|
|
|
|
27,846
|
|
|
|
26,944
|
|
|
|
55,085
|
|
|
|
53,750
|
|
Income from Operations
|
|
|
1,890
|
|
|
|
2,512
|
|
|
|
2,545
|
|
|
|
4,099
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(181
|
)
|
|
|
(196
|
)
|
|
|
(366
|
)
|
|
|
(372
|
)
|
Interest and other income
|
|
|
13
|
|
|
|
17
|
|
|
|
26
|
|
|
|
27
|
|
Insurance recovery, net of casualty loss
|
|
|
—
|
|
|
|
—
|
|
|
|
602
|
|
|
|
—
|
|
|
|
|
(168
|
)
|
|
|
(179
|
)
|
|
|
262
|
|
|
|
(345
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before Provision for Income Taxes
|
|
|
1,722
|
|
|
|
2,333
|
|
|
|
2,807
|
|
|
|
3,754
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for Income Taxes
|
|
|
(257
|
)
|
|
|
(448
|
)
|
|
|
(344
|
)
|
|
|
(913
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
|
1,465
|
|
|
|
1,885
|
|
|
|
2,463
|
|
|
|
2,841
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Net income attributable to noncontrolling interests
|
|
|
(444
|
)
|
|
|
(488
|
)
|
|
|
(699
|
)
|
|
|
(823
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income attributable to stockholders
|
|
$
|
1,021
|
|
|
$
|
1,397
|
|
|
$
|
1,764
|
|
|
$
|
2,018
|
|
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF INCOME
(in thousands, except per share amounts)
(Continued)
|
|
Thirteen Weeks
Ended
|
|
|
Twenty Six Weeks
Ended
|
|
|
|
March
30, 2019
|
|
|
March
31, 2018
|
|
|
March
30, 2019
|
|
|
March
31, 2018
|
|
|
|
|
|
Net Income Per Common Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted
|
|
$
|
0.55
|
|
|
$
|
0.75
|
|
|
$
|
0.95
|
|
|
$
|
1.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares and Equivalent
Shares Outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted
|
|
|
1,858,647
|
|
|
|
1,858,647
|
|
|
|
1,858,647
|
|
|
|
1,858,647
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited condensed
consolidated financial statements.
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 30, 2019 (UNAUDITED) AND SEPTEMBER
29, 2018
(in thousands)
ASSETS
|
|
March 30, 2019
|
|
|
September 29, 2018
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
13,473
|
|
|
$
|
13,414
|
|
Prepaid income taxes
|
|
|
272
|
|
|
|
257
|
|
Other receivables
|
|
|
495
|
|
|
|
474
|
|
Inventories
|
|
|
3,361
|
|
|
|
3,223
|
|
Prepaid expenses
|
|
|
2,145
|
|
|
|
1,657
|
|
|
|
|
|
|
|
|
|
|
Total Current Assets
|
|
|
19,746
|
|
|
|
19,025
|
|
|
|
|
|
|
|
|
|
|
Property and Equipment, Net
|
|
|
46,278
|
|
|
|
42,350
|
|
Construction in Progress
|
|
|
645
|
|
|
|
3,013
|
|
|
|
|
46,923
|
|
|
|
45,363
|
|
|
|
|
|
|
|
|
|
|
Investment in Limited Partnership
|
|
|
239
|
|
|
|
251
|
|
|
|
|
|
|
|
|
|
|
OTHER ASSETS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquor licenses
|
|
|
630
|
|
|
|
630
|
|
Deferred tax asset
|
|
|
309
|
|
|
|
612
|
|
Leasehold purchases, net
|
|
|
356
|
|
|
|
417
|
|
Other
|
|
|
471
|
|
|
|
967
|
|
|
|
|
|
|
|
|
|
|
Total Other Assets
|
|
|
1,766
|
|
|
|
2,626
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
68,674
|
|
|
$
|
67,265
|
|
See accompanying notes to unaudited condensed
consolidated financial statements.
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 30, 2019 (UNAUDITED) AND SEPTEMBER
29, 2018
(in thousands)
(Continued)
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
March 30, 2019
|
|
|
September 29, 2018
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
9,024
|
|
|
$
|
9,219
|
|
Due to franchisees
|
|
|
2,625
|
|
|
|
2,054
|
|
Current portion of long term debt
|
|
|
5,017
|
|
|
|
1,963
|
|
Deferred rent
|
|
|
68
|
|
|
|
74
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities
|
|
|
16,734
|
|
|
|
13,310
|
|
|
|
|
|
|
|
|
|
|
Long Term Debt, Net of Current Maturities
|
|
|
9,557
|
|
|
|
12,613
|
|
|
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
|
|
Flanigan’s Enterprises, Inc. 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
|
|
|
35,853
|
|
|
|
34,610
|
|
Treasury stock, at cost, 2,338,995 shares
at March 30, 2019 and 2,338,995
shares at September 29, 2018
|
|
|
(6,077
|
)
|
|
|
(6,077
|
)
|
Total Flanigan’s Enterprises, Inc.
stockholders’ equity
|
|
|
36,436
|
|
|
|
35,193
|
|
Noncontrolling interest
|
|
|
5,947
|
|
|
|
6,149
|
|
Total equity
|
|
|
42,383
|
|
|
|
41,342
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
$
|
68,674
|
|
|
$
|
67,265
|
|
See accompanying notes to unaudited condensed
consolidated financial statements.
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE TWENTY
SIX WEEKS ENDED MARCH 30, 2019 AND MARCH 31, 2018
|
|
|
|
|
|
|
|
Capital in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
Excess of
|
|
|
Retained
|
|
|
Treasury Stock
|
|
|
Noncontrolling
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Par Value
|
|
|
Earnings
|
|
|
Shares
|
|
|
Amount
|
|
|
Interests
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 29, 2018
|
|
|
4,197,642
|
|
|
$
|
420
|
|
|
$
|
6,240
|
|
|
$
|
34,610
|
|
|
|
2,338,995
|
|
|
$
|
(6,077
|
)
|
|
$
|
6,149
|
|
|
$
|
41,342
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
743
|
|
|
|
—
|
|
|
|
—
|
|
|
|
255
|
|
|
|
998
|
|
Distributions to noncontrolling interests
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(437
|
)
|
|
|
(437
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 29, 2018
|
|
|
4,197,642
|
|
|
$
|
420
|
|
|
$
|
6,240
|
|
|
$
|
35,353
|
|
|
|
2,338,995
|
|
|
$
|
(6,077
|
)
|
|
$
|
5,967
|
|
|
$
|
41,903
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,021
|
|
|
|
—
|
|
|
|
—
|
|
|
|
444
|
|
|
|
1,465
|
|
Distributions to noncontrolling interests
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(464
|
)
|
|
|
(464
|
)
|
Dividends paid
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(521
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(521
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 30, 2019
|
|
|
4,197,642
|
|
|
$
|
420
|
|
|
$
|
6,240
|
|
|
$
|
35,853
|
|
|
|
2,338,995
|
|
|
$
|
(6,077
|
)
|
|
$
|
5,947
|
|
|
$
|
42,383
|
|
|
|
|
|
|
|
|
|
Capital in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
Excess of
|
|
|
Retained
|
|
|
Treasury Stock
|
|
|
Noncontrolling
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Par Value
|
|
|
Earnings
|
|
|
Shares
|
|
|
Amount
|
|
|
Interests
|
|
|
Total
|
|
Balance, September 30, 2017
|
|
|
4,197,642
|
|
|
$
|
420
|
|
|
$
|
6,240
|
|
|
$
|
31,398
|
|
|
|
2,338,995
|
|
|
$
|
(6,077
|
)
|
|
$
|
6,195
|
|
|
$
|
38,176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
621
|
|
|
|
—
|
|
|
|
—
|
|
|
|
335
|
|
|
|
956
|
|
Distributions to noncontrolling interests
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(372
|
)
|
|
|
(372
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 30, 2017
|
|
|
4,197,642
|
|
|
$
|
420
|
|
|
$
|
6,240
|
|
|
$
|
32,019
|
|
|
|
2,338,995
|
|
|
$
|
(6,077
|
)
|
|
$
|
6,158
|
|
|
$
|
38,760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,397
|
|
|
|
—
|
|
|
|
—
|
|
|
|
488
|
|
|
|
1,885
|
|
Distributions to noncontrolling interests
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(463
|
)
|
|
|
(463
|
)
|
Acquisition of minority interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
(2
|
)
|
Dividends paid
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(465
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(465
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2018
|
|
|
4,197,642
|
|
|
$
|
420
|
|
|
$
|
6,240
|
|
|
$
|
32,951
|
|
|
|
2,338,995
|
|
|
$
|
(6,077
|
)
|
|
$
|
6,181
|
|
|
$
|
39,715
|
|
See accompanying notes to unaudited condensed
consolidated financial statements.
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
FOR THE TWENTY SIX WEEKS ENDED MARCH 30,
2019 AND MARCH 31, 2018
(in thousands)
|
|
March 30, 2019
|
|
|
March 31, 2018
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
2,463
|
|
|
$
|
2,841
|
|
Adjustments to reconcile net income to net cash and
cash equivalents provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
1,403
|
|
|
|
1,311
|
|
Amortization of leasehold interests
|
|
|
61
|
|
|
|
60
|
|
Loss on sale or abandonment of property and equipment
|
|
|
49
|
|
|
|
15
|
|
Insurance recovery, net of casualty loss
|
|
|
118
|
|
|
|
—
|
|
Amortization of deferred loan costs
|
|
|
15
|
|
|
|
20
|
|
Deferred income tax
|
|
|
303
|
|
|
|
573
|
|
Deferred rent
|
|
|
(6
|
)
|
|
|
(7
|
)
|
(Income) loss from unconsolidated limited
partnership
|
|
|
(8
|
)
|
|
|
(29
|
)
|
Changes in operating assets and liabilities:
(increase) decrease in
|
|
|
|
|
|
|
|
|
Other receivables
|
|
|
111
|
|
|
|
(107
|
)
|
Prepaid income taxes
|
|
|
(15
|
)
|
|
|
(125
|
)
|
Inventories
|
|
|
(291
|
)
|
|
|
(216
|
)
|
Prepaid expenses
|
|
|
830
|
|
|
|
608
|
|
Other assets
|
|
|
(63
|
)
|
|
|
2
|
|
Increase (decrease) in:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
|
(472
|
)
|
|
|
732
|
|
Due to franchisees
|
|
|
571
|
|
|
|
714
|
|
Net cash and cash equivalents provided by operating activities
|
|
|
5,069
|
|
|
|
6,392
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(2,916
|
)
|
|
|
(927
|
)
|
Purchase of construction in process
|
|
|
(584
|
)
|
|
|
(848
|
)
|
Deposits on property and equipment
|
|
|
(140
|
)
|
|
|
(247
|
)
|
Proceeds from sale of property and equipment
|
|
|
22
|
|
|
|
22
|
|
Insurance recovery
|
|
|
1,068
|
|
|
|
—
|
|
Distributions from unconsolidated limited
Partnership
|
|
|
20
|
|
|
|
15
|
|
Net cash and cash equivalents used in investing activities
|
|
|
(2,530
|
)
|
|
|
(1,985
|
)
|
See accompanying notes to unaudited condensed
consolidated financial statements.
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
FOR THE TWENTY SIX WEEKS ENDED MARCH 30,
2019 AND MARCH 31, 2018
(in thousands)
(Continued)
|
|
March 30, 2019
|
|
|
March 31, 2018
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment of long term debt
|
|
|
(1,308
|
)
|
|
|
(993
|
)
|
Proceeds from long-term debt
|
|
|
250
|
|
|
|
3,500
|
|
Dividends paid
|
|
|
(521
|
)
|
|
|
(465
|
)
|
Purchase of noncontrolling limited partnership
interests
|
|
|
—
|
|
|
|
(2
|
)
|
Distributions to limited partnerships’
noncontrolling interests
|
|
|
(901
|
)
|
|
|
(835
|
)
|
|
|
|
|
|
|
|
|
|
Net cash and cash equivalents provided by (used in) financing
activities
|
|
|
(2,480
|
)
|
|
|
1,205
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Increase in Cash and
Cash Equivalents
|
|
|
59
|
|
|
|
5,612
|
|
|
|
|
|
|
|
|
|
|
Beginning of Period
|
|
|
13,414
|
|
|
|
9,885
|
|
|
|
|
|
|
|
|
|
|
End of Period
|
|
$
|
13,473
|
|
|
$
|
15,497
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure for Cash Flow Information:
Cash paid during period for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
366
|
|
|
$
|
372
|
|
Income taxes
|
|
$
|
55
|
|
|
$
|
174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Non-Cash Investing and Financing
Activities:
|
|
|
|
|
|
|
|
|
Financing of insurance contracts
|
|
$
|
1,041
|
|
|
$
|
1,057
|
|
Purchase deposits transferred to property and equipment
|
|
$
|
486
|
|
|
$
|
73
|
|
Purchase deposits transferred to CIP
|
|
$
|
213
|
|
|
$
|
—
|
|
CIP transferred to PP&E
|
|
$
|
3,165
|
|
|
$
|
—
|
|
Insurance recovery receivable
|
|
$
|
132
|
|
|
$
|
—
|
|
See accompanying notes to unaudited condensed
consolidated financial statements
FLANIGAN’S ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
MARCH 30, 2019
(1) BASIS OF PRESENTATION:
The accompanying condensed consolidated financial
information for the thirteen weeks ended March 30, 2019 and March 31, 2018 are unaudited. Financial information as of September
29, 2018 has been derived from the audited financial statements of the Company, but does not include all disclosures required by
accounting principles generally accepted in the United States of America. 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, 2018. Operating results
for interim periods are not necessarily indicative of results to be expected for a full year.
The condensed consolidated financial statements
include the accounts of the Company, its wholly-owned subsidiaries and the accounts of the eight limited partnerships in which
we act as general partner and have controlling interests. All intercompany balances and transactions have been eliminated. Non-controlling
interest represents the limited partners’ proportionate share of the net assets and results of operations of the eight limited
partnerships.
These condensed consolidated 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:
We follow Financial Accounting Standards Board
(FASB) Accounting Standards Codification (ASC) Section 260 - “
Earnings per Share
”. This section provides for
the calculation of basic and diluted earnings per share. The data on Page 2 shows the amounts used in computing earnings per share
and the effects on income. As of March 30, 2019 and March 31, 2018, no stock options were outstanding.
(3) RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:
Adopted
In
May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, “Revenue
from Contracts with Customers,” (ASU 2014-09), which requires an entity to recognize the amount of revenue to which it expects
to be entitled for the transfer of promised goods or services to customers. The new standard was effective for interim and annual
periods in fiscal years beginning after December 15, 2017. The standard permits the use of either the retrospective or cumulative
effect transition method.
The adoption of this new guidance did not have a material impact on our consolidated financial
statements.
(3) RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:
(Continued)
In August
2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-15 “Classification of Certain
Cash Receipts and Cash Payments”, which addresses how certain cash receipts and cash payments are presented and classified
in the statement of cash flows under Topic 230, “Statement of Cash Flows”, and other Topics. The new standard
was effective for interim and annual periods in fiscal years beginning after December 15, 2017. The adoption of this new guidance
did not have a material impact on our consolidated financial statements.
Issued
In February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842), which supersedes all existing guidance on accounting for leases in ASC Topic 840. ASU 2016-02 is
intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding
lease liabilities on the balance sheet. ASU 2016-02 will continue to classify leases as either finance or operating,
with classification affecting the pattern of expense recognition in the statement of income. ASU 2016-02 is effective
for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, which will require us
to adopt these provisions in the first quarter of our fiscal year 2020. Early adoption is permitted. ASU 2016-02
requires a modified retrospective approach for all leases existing at, or entered into after the date of initial adoption, with
an option to elect to use certain transition relief. We expect the adoption of the new guidance will have a material
impact on our consolidated balance sheets due to recognition of the right-of-use asset and the lease liability related to our current
operating leases. The process of evaluating the full impact of the new guidance of our consolidated financial statements and disclosures
is ongoing and we expect to have an estimate of the impact by the end of the third quarter of our fiscal year 2019.
(4) INVESTMENT IN REAL PROPERTY; OPTION
TO LEASE AGREEMENT:
Pompano Beach, Florida
During the second quarter of our fiscal
year 2019, we purchased from an unrelated third party the vacant real property (the “Property”), located at 2119 S.E.
9
th
Street, Pompano Beach, Florida for $1,300,000 cash at closing. The Property is adjacent to property owned by a third
party unaffiliated with us and leased to another third party unaffiliated with us for use as a restaurant (the “Adjacent
Property”). As a condition to closing on the Property, we executed an Option to Lease Agreement for the Adjacent Property,
to lease the Adjacent Property for a 50 year term commencing either in November, 2019 or if the current tenant exercises a one
time three year renewal option, November, 2022. We plan to renovate the building on the Adjacent Property for operation as a “Flanigan’s
Seafood Bar and Grill” restaurant and use the Property as parking. To fund the cash at closing, we used cash on hand. We
plan to raise funds to renovate this new restaurant location using our limited partnership ownership model.
(5) EXECUTION OF LEASES FOR NEW LOCATIONS:
Sunrise, Florida (“Flanigan’s
Seafood Bar and Grill”)
On February 28, 2019, we entered into a Lease
Agreement (the “Sunrise Lease Agreement”) with a non-affiliated third party to rent approximately 6,900 square feet
of commercial space in Sunrise, Florida where, subject to certain conditions, we anticipate opening a new restaurant location.
Subsequent to the end of the second quarter of our fiscal year 2019, we assigned the Sunrise Lease Agreement to a newly formed
limited partnership in which we currently are (i) the sole general partner; and (ii) our wholly owned subsidiary is the sole limited
partner. While there can be no assurances that we will be successful in doing so, we intend to sell limited partnership interests
to third parties as well as affiliates of the Company in order to raise net proceeds, in an amount to be determined, which proceeds
will be used to renovate this potential restaurant location. We anticipate that the new restaurant location’s ownership and
operating structure will be substantially similar to that of our other restaurants owned by limited partnerships. Any amounts we
advance to the limited partnership will be applied as a credit to limited partnership equity in the limited partnership we may
acquire (which equity shall be purchased at the same price and upon the same terms as other equity investors). If we do not acquire
equity in the limited partnership for at least $250,000, any excess amounts advanced by us will be reimbursed to us by the limited
partnership without interest. Through May 14, 2019, we have advanced $63,000 to the limited partnership.
(6) INCOME TAXES:
We account for our income taxes using FASB
ASC Topic 740, “
Income Taxes
”, which 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.
On December
22, 2017 the Tax Cuts and Jobs Act (the “Act”) was signed into law, reducing the corporate income tax rate to 21%.
Our accounting for the impact of the Act is complete. Consequently, we recorded a decrease of approximately $268,000 to our
net deferred tax asset, with a corresponding adjustment to deferred income tax expense for the thirteen weeks ended December 30,
2017.
(7) DEBT:
(a) Mortgage on Real Property
During the first quarter
of our fiscal year 2019, we borrowed the sum of $250,000 from a related third party lender (the “$250,000 Loan”). The
proceeds of the $250,000 Loan are being used as working capital. Our repayment obligations under the $250,000 Loan are secured
by a first mortgage on our quadraplex located at 1420 N.E. 50th Court, Fort Lauderdale, Florida 33334. The $250,000 Loan bears
interest at the fixed rate of 4.00% per annum and is amortizable over an eight (8) year period, with our current monthly payment
of principal and interest totaling $3,047. The entire principal balance and all accrued but unpaid interest are due on November
1, 2026.
(b) Financed Insurance Premiums
During the twenty six weeks ended March 30,
2019, we financed the premiums on the following three (3) property and general liability insurance policies, totaling approximately
$1.65 million, which property and general liability insurance includes coverage for our franchises which are not included in our
consolidated financial statements:
(i) For
the policy year beginning December 30, 2018, our general liability insurance, excluding limited partnerships, is a one (1) year
policy with our insurance carriers, including automobile and excess liability coverage. The one (1) year general liability insurance
premiums, including automobile and excess liability coverage, total, in the aggregate $620,000, of which $494,000 is financed through
an unaffiliated third party lender (the “Third Party Lender”). The finance agreement obligates us to repay the amounts
financed together with interest at the rate of 3.85% per annum, over 10 months, with monthly payments of principal and interest,
each in the amount of $50,000. The finance agreement is secured by a first priority security interest in all insurance policies,
all unearned premium, return premiums, dividend payments and loss payments thereof.
(ii) For
the policy year beginning December 30, 2018, our general liability insurance for our limited partnerships is a one (1) year policy
with our insurance carriers, including excess liability coverage. The one (1) year general liability insurance premiums, including
excess liability coverage, total, in the aggregate $521,000, of which $416,000 is financed through the Third Party Lender. The
finance agreement obligates us to repay the amounts financed, together with interest at the rate of 3.85% per annum, over 10 months,
with monthly payments of principal and interest, each in the amount of $42,000. The finance agreement is secured by a first priority
security interest in all insurance policies, all unearned premium, return premiums, dividend payments and loss payments thereof.
(iii) For
the policy year beginning December 30, 2018, our property insurance is a one (1) year policy. The one (1) year property insurance
premium is in the amount of $506,000, of which $385,000 is financed through the Third Party Lender. The finance agreement provides
that we are obligated to repay the amounts financed, together with interest at the rate of 3.85% per annum, over 10 months, with
monthly payments of principal and interest, each in the amount of approximately $39,000. The finance agreement is secured by a
first priority security interest in all insurance policies, all unearned premium, return premiums, dividend payments and loss payments
thereof.
As of March 30, 2019, the aggregate principal
balance owed from the financing of our property and general liability insurance policies is $833,000.
(8) COMMITMENTS AND CONTINGENCIES:
Construction Contracts
a. 13205 Biscayne Boulevard, North Miami, Florida (Store #20)
On June 14, 2017, we entered into an agreement
with a third party unaffiliated general contractor to renovate our restaurant located at 13205 Biscayne Boulevard, North Miami,
Florida, (Store #20) for a total contract price of $880,000. The renovations include, but are not limited to the construction of
a new kitchen and the expansion of the restaurant into our former package liquor store location. During the second quarter of our
fiscal year 2019, we agreed to change orders which had the effect of increasing the total contract price for the renovations to
$1,177,000, of which $933,000 has been paid. Subsequent to the end of the second quarter of our fiscal year 2019, we paid an additional
$229,000 toward the total contract price, leaving a balance of $15,000.
During our fiscal year 2018, we entered into
an agreement with a third party unaffiliated general contractor to renovate and add an outdoor patio area to the front of our restaurant
located at 13205 Biscayne Boulevard, North Miami, Florida (Store #20) for a total contract price of $912,000. During the second
quarter of our fiscal year 2019, we agreed to change orders which had the effect of decreasing the total contract price for the
renovation to $880,000, of which we have paid $777,000. Subsequent to the end of the second quarter of our fiscal year 2019, we
paid an additional $98,000 toward the total contract price, leaving a balance of $5,000.
b. 2505 N. University Drive, Hollywood,
Florida (Store #19)
During our fiscal year 2018, we entered into
two agreements with a third party unaffiliated general contractor for design and development services for a total contract price
of $127,000 (the “$127,000 Contract”) and $174,000 (the “$174,000 Contract”). The $127,000 Contract provides
for design and development services for the construction of a new building (the “New Building”) on a parcel of real
property which we own which is adjacent to the real property where our combination package liquor store and restaurant located
at 2505 N. University Drive, Hollywood, Florida, (Store #19) operated until it was closed in October 2018 due to damages caused
by a fire. The $174,000 Contract provides for design and development services for the renovation of the existing building which
housed the combination package liquor store and restaurant until it was closed in October 2018 due to damages caused by a fire.
If we complete the construction of the New Building and as a result of the fire, the rebuild of the existing building, (the “Rebuilt
Building”), we plan to re-locate our package liquor store located at the property to the New Building and to operate the
restaurant located at the property in the Rebuilt Building. During our fiscal year 2019, we agreed to change orders which had the
effect of increasing the total contract price for the $127,000 Contract to $138,000, and during the second quarter of our fiscal
year 2019, we paid the balance of the total contract price of the $127,000 Contract, in the amount of $25,000. During our fiscal
year 2019, we also agreed to change orders which had the effect of increasing the total contract price for the $174,000 Contract
to $187,000, and during the second quarter of our fiscal year 2019, we paid $46,000 as the final payment of the contract price
of the $174,000 Contract, (of which a total of $157,000 was paid), which we cancelled during the first quarter of our fiscal year
2019 due to the building being damaged by fire.
Subsequent to the end of the second quarter
of our fiscal year 2019, we entered into an agreement with a third party unaffiliated general contractor for site work to connect
the real property where our combination package liquor store and restaurant located at 2505 N. University Drive, Hollywood, Florida,
(Store #19) operated until it was closed in October 2018 due to damages caused by a fire to city sewer and for the construction
of the new building on the adjacent parcel of real property for the operation of our package liquor store for $1,618,000.
Subsequent to the end of the second quarter
of our fiscal year 2019, we also entered into an agreement with a third party unaffiliated architect for design and development
services for the re-build of our restaurant located at 2505 N. University Drive, Hollywood, Florida (Store #19) for a total contract
price of $77,000, of which we paid $15,000.
c. 4 N. Federal Highway, Hallandale Beach,
Florida (Store #31)
During the first quarter of our fiscal year
2019, we entered into an agreement with a third party unaffiliated design group for design and development services for a contract
price of $356,000 (the “$356,000 Contract”). The $356,000 Contract provided for design and development services for
the construction of two (2) new buildings on the real property which we own where our combination package liquor store and restaurant
located at 4 N. Federal Highway, Hallandale Beach, Florida, (Store #31) operates. Our plan for the real property was to (i) demolish
the building which currently houses our combination package liquor store and restaurant, (ii) build two new buildings, one of which
will house our package liquor store and the other of which will house our restaurant; and (iii) enter into a ground lease with
an existing retail tenant for a parcel of land which will not be improved by the two buildings. During the second quarter of our
fiscal year 2019, we learned that our planned development of Store #31 would cause the loss of too many parking spaces, so we abandoned
our development plans and terminated the $356,000 Contract. We paid $130,000 on account of the $356,000 Contract and owe no further
amounts under the same.
d. 14301 W. Sunrise Boulevard, Sunrise,
Florida (Store #85)
Subsequent to the end of the second quarter
of our fiscal year 2019, we also entered into an agreement with a third party unaffiliated design group for design and development
services of our new location at 14301 W. Sunrise Boulevard, Sunrise, Florida 33323 (Store #85) for a total contract price of $122,000,
of which we paid $20,000.
Litigation
From time to time, we
are a defendant in litigation arising in the ordinary course of our business, including claims resulting from “slip and fall”
accidents, dram shop claims, claims under federal and state laws governing access to public accommodations, employment-related
claims and claims from guests alleging illness, injury or other food quality, health or operational concerns. To date, none of
this litigation, some of which is covered by insurance, has had a material effect on us.
(9) CASUALTY LOSS
During the first quarter of our fiscal year
2019, our combination package liquor store and restaurant located at 2505 N. University Drive, Hollywood, Florida (Store #19) was
damaged by a fire and was forced to close. Due to the damage caused by the fire, we determined that Store #19 should be demolished
and rebuilt and as a result, the package liquor store and restaurant will be closed for our fiscal year 2019. We have insurance
coverage of $1,975,000, in the aggregate, which our insurance carrier has agreed to pay. We sustained a loss of $1,373,000 on our
building and business personal property, against which we received insurance proceeds of $1,200,000 resulting in a loss of $173,000.
We had a gain of $775,000 on our business interruption coverage, which when netted against our loss of $173,000 on our building
and business personal property produced a gain of $602,000. During the first quarter of our fiscal year 2019, we received an advance
of $600,000 against our insurance recovery and during the second quarter of our fiscal year 2019, we received the balance of our
insurance recovery, less only $132,000 as depreciation against our business personal property until such time as it is replaced.
(10) BUSINESS SEGMENTS:
We operate principally in two reportable segments
– package stores and restaurants. The operation of package stores consists of retail liquor sales and related items. Information
concerning the revenues and operating income for the thirteen weeks and twenty six weeks ended March 30, 2019 and March 31, 2018,
and identifiable assets for the two reportable segments in which we operate, are shown in the following table. Operating income
is total revenue less cost of merchandise sold and operating expenses relative to each segment. In computing operating income,
none of the following items have been included: interest expense, other non-operating income and expenses and income taxes. Identifiable
assets by segment are those assets that are used in our operations in each segment. Corporate assets are principally cash 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.
|
|
(in thousands)
|
|
|
|
Thirteen
Weeks
Ended
March
30, 2019
|
|
|
Thirteen
Weeks
Ended
March
31, 2018
|
|
Operating Revenues:
|
|
|
|
|
|
|
|
|
Restaurants
|
|
$
|
23,964
|
|
|
$
|
23,885
|
|
Package stores
|
|
|
5,092
|
|
|
|
4,866
|
|
Other revenues
|
|
|
680
|
|
|
|
705
|
|
Total operating revenues
|
|
$
|
29,736
|
|
|
$
|
29,456
|
|
|
|
|
|
|
|
|
|
|
Income from Operations Reconciled to Income After Income Taxes and Net Income Attributable to Noncontrolling Interests
|
|
|
|
|
|
|
|
|
Restaurants
|
|
$
|
2,435
|
|
|
$
|
3,272
|
|
Package stores
|
|
|
283
|
|
|
|
344
|
|
|
|
|
2,718
|
|
|
|
3,616
|
|
Corporate expenses, net of other revenues
|
|
|
(828
|
)
|
|
|
(1,104
|
)
|
Income from operations
|
|
|
1,890
|
|
|
|
2,512
|
|
Interest expense
|
|
|
(181
|
)
|
|
|
(196
|
)
|
Interest and other income
|
|
|
13
|
|
|
|
17
|
|
Insurance recovery, net of casualty loss
|
|
|
—
|
|
|
|
—
|
|
Income Before Provision for Income Taxes
|
|
$
|
1,722
|
|
|
$
|
2,333
|
|
Provision for Income Taxes
|
|
|
(257
|
)
|
|
|
(448
|
)
|
Net Income
|
|
|
1,465
|
|
|
|
1,885
|
|
Net Income Attributable to Noncontrolling Interests
|
|
|
(444
|
)
|
|
|
(488
|
)
|
Net Income Attributable to Flanigan’s Enterprises, Inc.
|
|
|
|
|
|
|
|
|
Stockholders
|
|
$
|
1,021
|
|
|
$
|
1,397
|
|
|
|
|
|
|
|
|
|
|
Depreciation and Amortization:
|
|
|
|
|
|
|
|
|
Restaurants
|
|
$
|
578
|
|
|
$
|
536
|
|
Package stores
|
|
|
69
|
|
|
|
68
|
|
|
|
|
647
|
|
|
|
604
|
|
Corporate
|
|
|
97
|
|
|
|
81
|
|
Total Depreciation and Amortization
|
|
$
|
744
|
|
|
$
|
685
|
|
|
|
|
|
|
|
|
|
|
Capital Expenditures:
|
|
|
|
|
|
|
|
|
Restaurants
|
|
$
|
1,010
|
|
|
$
|
690
|
|
Package stores
|
|
|
87
|
|
|
|
41
|
|
|
|
|
1,097
|
|
|
|
731
|
|
Corporate
|
|
|
1,461
|
|
|
|
157
|
|
Total Capital Expenditures
|
|
$
|
2,558
|
|
|
$
|
888
|
|
|
|
Twenty Six Weeks
Ended
March 30, 2019
|
|
|
Twenty Six Weeks
Ended
March 31, 2018
|
|
Operating Revenues:
|
|
|
|
|
|
|
|
|
Restaurants
|
|
$
|
46,115
|
|
|
$
|
46,641
|
|
Package stores
|
|
|
10,227
|
|
|
|
9,879
|
|
Other revenues
|
|
|
1,288
|
|
|
|
1,329
|
|
Total operating revenues
|
|
$
|
57,630
|
|
|
$
|
57,849
|
|
|
|
|
|
|
|
|
|
|
Income from Operations Reconciled to Income After Income Taxes and Net Income Attributable to Noncontrolling Interests
|
|
|
|
|
|
|
|
|
Restaurants
|
|
$
|
3,822
|
|
|
$
|
5,229
|
|
Package stores
|
|
|
450
|
|
|
|
626
|
|
|
|
|
4,272
|
|
|
|
5,855
|
|
Corporate expenses, net of other revenues
|
|
|
(1,727
|
)
|
|
|
(1,756
|
)
|
Income from Operations
|
|
|
2,545
|
|
|
|
4,099
|
|
Interest expense
|
|
|
(366
|
)
|
|
|
(372
|
)
|
Interest and Other Income
|
|
|
26
|
|
|
|
27
|
|
Insurance recovery, net of casualty loss
|
|
|
602
|
|
|
|
—
|
|
Income Before Provision for Income Taxes
|
|
$
|
2,807
|
|
|
$
|
3,754
|
|
Provision for Income Taxes
|
|
|
(344
|
)
|
|
|
(913
|
)
|
Net Income
|
|
|
2,463
|
|
|
|
2,841
|
|
Net Income Attributable to Noncontrolling Interests
|
|
|
(699
|
)
|
|
|
(823
|
)
|
Net Income Attributable to Flanigan’s Enterprises, Inc.
|
|
|
|
|
|
|
|
|
Stockholders
|
|
$
|
1,764
|
|
|
$
|
2,018
|
|
|
|
|
|
|
|
|
|
|
Depreciation and Amortization:
|
|
|
|
|
|
|
|
|
Restaurants
|
|
|
1,135
|
|
|
|
1,076
|
|
Package stores
|
|
|
135
|
|
|
|
135
|
|
|
|
|
1,270
|
|
|
|
1,211
|
|
Corporate
|
|
|
194
|
|
|
|
160
|
|
Total Depreciation and Amortization
|
|
$
|
1,464
|
|
|
$
|
1,371
|
|
|
|
|
|
|
|
|
|
|
Capital Expenditures:
|
|
|
|
|
|
|
|
|
Restaurants
|
|
$
|
2,351
|
|
|
$
|
1,513
|
|
Package stores
|
|
|
165
|
|
|
|
123
|
|
|
|
|
2,516
|
|
|
|
1,636
|
|
Corporate
|
|
|
1,683
|
|
|
|
212
|
|
Total Capital Expenditures
|
|
$
|
4,199
|
|
|
$
|
1,848
|
|
|
|
|
|
|
|
|
|
|
|
|
March 30,
|
|
|
September 29,
|
|
|
|
2019
|
|
|
2018
|
|
Identifiable Assets:
|
|
|
|
|
|
|
|
|
Restaurants
|
|
$
|
31,451
|
|
|
$
|
30,963
|
|
Package store
|
|
|
10,107
|
|
|
|
10,127
|
|
|
|
|
41,558
|
|
|
|
41,090
|
|
Corporate
|
|
|
27,116
|
|
|
|
26,175
|
|
Consolidated Totals
|
|
$
|
68,674
|
|
|
$
|
67,265
|
|
(11) SUBSEQUENT
EVENTS:
Subsequent events have been evaluated through
the date these condensed consolidated financial statements were issued and except as disclosed herein, no events required disclosure.
|
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 our Form 10-K for the fiscal year ended September 29, 2018 and in this Quarterly Report on Form 10-Q. We undertake
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
As of March 30, 2019, Flanigan’s Enterprises,
Inc., a Florida corporation, together with its subsidiaries, (i) operates 26 units, consisting of restaurants, package liquor stores
and combination restaurants/package liquor stores that we either own or have operational control over and partial ownership in;
and (ii) franchises an additional five units, consisting of two restaurants (one of which we operate) and three combination restaurants/package
liquor stores. The foregoing excludes an adult entertainment club which we owned but did not operate and which was permanently
closed on September 20, 2018 when a Federal Court upheld recently enacted local legislation which prohibited the operation of the
club as then operated. The table below provides information concerning the type (i.e. restaurant, package liquor store or combination
restaurant/package liquor store) and ownership of the units (i.e. whether (i) we own 100% of the unit; (ii) the unit is owned by
a limited partnership of which we are the sole general partner and/or have invested in; or (iii) the unit is franchised by us),
as of March 30, 2019 and as compared to March 31, 2018 and September 29, 2018. With the exception of “The Whale’s Rib”,
a restaurant we operate but do not own, all of the restaurants operate under our service mark “Flanigan’s Seafood Bar
and Grill” and all of the package liquor stores operate under our service mark “Big Daddy’s Liquors”.
Types of Units
|
March 30, 2019
|
September 29,
2018
|
March 31,
2018
|
|
Company Owned:
Combination package and restaurant
|
3
|
3
|
3
|
(1)
|
Restaurant only
|
7
|
7
|
7
|
|
Package store only
|
6
|
6
|
6
|
|
|
|
|
|
|
Company Operated Restaurants Only:
|
|
|
|
|
Limited Partnerships
|
8
|
8
|
8
|
|
Franchise
|
1
|
1
|
1
|
|
Unrelated Third Party
|
1
|
1
|
1
|
|
|
|
|
|
|
Company Owned Club:
|
-
|
-
|
1
|
(2)
|
|
|
|
|
|
Total Company Owned/Operated Units
|
26
|
26
|
27
|
|
Franchised Units
|
5
|
5
|
5
|
(3)
|
Notes:
(1) During the first quarter of our
fiscal year 2019, our combination package liquor store and restaurant located at 2505 N. University Drive, Hollywood, Florida (Store
#19) was damaged by a fire which caused it to be closed during the first and second quarters of our fiscal year 2019. Revenues
and expenses from Store #19 for the first two (2) days of the first quarter of our fiscal year 2019, except payroll, are immaterial.
(2) During the fourth quarter of our fiscal
year 2018, the adult entertainment club which we owned but did not operate was closed permanently when a Federal Court upheld recently
enacted local legislation which prohibited the operation of the club as then operated.
(3)
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.
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 (four 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 store 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 managed and controlled by a related franchisee. Accordingly, the results of operations of all limited partnership owned
restaurants, except the Fort Lauderdale, Florida restaurant are consolidated 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 of accounting. 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 (½)
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 (½) of cash available
to the limited partnership, with the other one half (½) of available cash distributed to the investors (including us and
our affiliates). As of March 30, 2019, limited partnerships owning eight (8) restaurants, (Surfside, Florida, Kendall, Florida,
West Miami, Florida, Pinecrest, Florida, Wellington, Florida, Miami, Florida, Pembroke Pines, Florida and Davie, Florida locations),
have returned all cash invested and we receive an annual management fee equal to one-half (½) of the cash available for
distribution by the limited partnership. In addition to receipt of distributable amounts from the limited partnerships, we receive
from the limited partnerships a fee equal to 3% of gross sales for use of our service mark “Flanigan’s Seafood Bar
and Grill”.
RESULTS OF OPERATIONS
|
|
-----------------------Thirteen
Weeks Ended-----------------------
|
|
|
|
March
30, 2019
|
|
|
March
31, 2018
|
|
|
|
Amount
(In thousands)
|
|
|
Percent
|
|
|
Amount
(In thousands)
|
|
|
Percent
|
|
Restaurant food sales
|
|
$
|
18,219
|
|
|
|
62.70
|
|
|
$
|
18,244
|
|
|
|
63.46
|
|
Restaurant bar sales
|
|
|
5,745
|
|
|
|
19.77
|
|
|
|
5,641
|
|
|
|
19.62
|
|
Package store sales
|
|
|
5,092
|
|
|
|
17.53
|
|
|
|
4,866
|
|
|
|
16.92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Sales
|
|
$
|
29,056
|
|
|
|
100.00
|
|
|
$
|
28,751
|
|
|
|
100.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchise related revenues
|
|
|
429
|
|
|
|
|
|
|
|
443
|
|
|
|
|
|
Rental income
|
|
|
192
|
|
|
|
|
|
|
|
158
|
|
|
|
|
|
Owner’s fee
|
|
|
—
|
|
|
|
|
|
|
|
37
|
|
|
|
|
|
Other operating income
|
|
|
59
|
|
|
|
|
|
|
|
67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue
|
|
$
|
29,736
|
|
|
|
|
|
|
$
|
29,456
|
|
|
|
|
|
|
|
-----------------------Twenty Six Weeks Ended-----------------------
|
|
|
|
March 30, 2019
|
|
|
March 31, 2018
|
|
|
|
Amount
(In thousands)
|
|
|
Percent
|
|
|
Amount
(In thousands)
|
|
|
Percent
|
|
Restaurant food sales
|
|
$
|
35,047
|
|
|
|
62.20
|
|
|
$
|
35,516
|
|
|
|
62.84
|
|
Restaurant bar sales
|
|
|
11,068
|
|
|
|
19.64
|
|
|
|
11,125
|
|
|
|
19.68
|
|
Package store sales
|
|
|
10,227
|
|
|
|
18.16
|
|
|
|
9,879
|
|
|
|
17.48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Sales
|
|
$
|
56,342
|
|
|
|
100.00
|
|
|
$
|
56,520
|
|
|
|
100.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchise related revenues
|
|
|
796
|
|
|
|
|
|
|
|
823
|
|
|
|
|
|
Rental income
|
|
|
390
|
|
|
|
|
|
|
|
315
|
|
|
|
|
|
Owner’s fee
|
|
|
—
|
|
|
|
|
|
|
|
75
|
|
|
|
|
|
Other operating income
|
|
|
102
|
|
|
|
|
|
|
|
116
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue
|
|
$
|
57,630
|
|
|
|
|
|
|
$
|
57,849
|
|
|
|
|
|
Comparison of Thirteen Weeks Ended March 30, 2019 and March
31, 2018.
Revenues
.
Total
revenue for the thirteen weeks ended March 30, 2019 increased $280,000 or 0.95% to $29,736,000 from $29,456,000 for the
thirteen weeks ended March 31, 2018 due primarily to increased restaurant traffic and notwithstanding the loss of revenue
from our combination restaurant/package liquor store located at 2505 N. University Drive, Hollywood, Florida (Store #19),
which was closed for the thirteen weeks ended March 30, 2019 due to a fire on October 2, 2018, (the “Store
#19 Closure”). Revenue generated from operations at our Store #19 was $1,346,000 for the thirteen weeks ended March 31,
2018. We expect revenue to remain stable throughout the balance of our fiscal year 2019 due to increased restaurant traffic,
offset by the loss of revenue resulting from the Store #19 Closure. We currently anticipate that our Store #19 will be closed
for at least the remainder of our fiscal year 2019.
Restaurant
Food Sales
.
Restaurant revenue generated from the sale of
food, including non-alcoholic beverages, at restaurants (food sales) totaled $18,219,000 for the thirteen weeks ended March
30, 2019 as compared to $18,244,000 for the thirteen weeks ended March 31, 2018. The decrease in restaurant revenue from the
sale of food at restaurants during the thirteen weeks ended March 30, 2019 is primarily due to
the loss of
revenue resulting from the Store #19 Closure, offset by
increased
restaurant traffic
. Restaurant revenue from the sale of food at our Store #19 was $892,000 for the thirteen weeks
ended March 31, 2018.
Comparable weekly restaurant food sales (for
restaurants open for all of the second quarter of our fiscal year 2019 and the second quarter of our fiscal year 2018, which
consists of nine restaurants owned by us, (excluding Store #19
which was closed for the thirteen weeks ended March 30,
2019)
and eight restaurants owned by affiliated limited
partnerships) was $1,401,000 and $1,335,000 for the thirteen weeks ended March 30, 2019 and March 31, 2018, respectively, an
increase of 4.94%. Comparable weekly restaurant food sales for Company owned restaurants only was $720,000 and $685,000 for
the second quarter of our fiscal year 2019 and the second quarter of our fiscal year 2018, respectively, an increase of
5.11%. Comparable weekly restaurant food sales for affiliated limited partnership owned restaurants only was $681,000 and
$650,000 for the second quarter of our fiscal year 2019 and the second quarter of our fiscal year 2018, respectively, an
increase of 4.84%.
We expect restaurant revenue generated from food sales, including non-alcoholic beverages, at
restaurants to remain stable throughout the balance of our fiscal year 2019 due to the loss of food sales resulting from the
Store #19 Closure.
Restaurant
Bar Sales
. Restaurant revenue generated from the sale of alcoholic beverages at restaurants (bar sales) totaled
$5,745,000 for the thirteen weeks ended March 30, 2019 as compared to $5,641,000 for the thirteen weeks ended March 31, 2018.
The increase in restaurant revenue from the sale of alcoholic beverages at restaurants during the thirteen weeks ended March
30, 2019 is primarily due to increased restaurant traffic, offset by the
loss of revenue resulting from the Store #19
Closure. Restaurant revenue from the bar sales at our Store #19 was $190,000 for the thirteen weeks ended March 31, 2018.
Comparable
weekly restaurant bar sales (for restaurants open for all of the second quarter of our fiscal year 2019 and the second
quarter of our fiscal year 2018, which consists of nine restaurants owned by us, (excluding Store #19
which was closed
for the thirteen weeks ended March 30, 2019),
and eight restaurants
owned by affiliated limited partnerships) was $442,000 for the thirteen weeks ended March 30, 2019 and $423,000 for the
thirteen weeks ended March 31, 2018, an increase of 4.49%. Comparable weekly restaurant bar sales for Company owned
restaurants only was $205,000 and $195,000 for the second quarter of our fiscal year 2019 and the second quarter of our
fiscal year 2018, respectively, an increase of 5.13%. Comparable weekly restaurant bar sales for affiliated limited
partnership owned restaurants only was $237,000 and $228,000 for the second quarter of our fiscal year 2019 and the second
quarter of our fiscal year 2018, respectively, an increase of 3.95%.
We expect restaurant revenue generated from bar
sales to remain stable throughout the balance of our fiscal year 2019 due to increased restaurant traffic, offset by the loss
of bar sales resulting from the Store #19 Closure.
Package Store
Sales
. Revenue generated from sales of liquor and related items at package liquor stores totaled $5,092,000 for the
thirteen weeks ended March 30, 2019 as compared to $4,866,000 for the thirteen weeks ended March 31, 2018, an increase of $226,000.
This increase was primarily due to increased package liquor store traffic, offset by the loss of revenue generated from sales of
liquor and related items at Store #19, due to the Store #19 Closure. Revenue generated from sales of liquor and related items at
our Store #19 was $264,000 for the thirteen weeks ended March 31, 2018. The weekly average of same store package liquor store sales,
which includes eight (8) Company owned package liquor stores, (excluding Store #19, which was closed for the thirteen weeks ended
March 30, 2019), was $392,000 for the thirteen weeks ended March 30, 2019 as compared to $354,000 for the thirteen weeks ended
March 31, 2018, an increase of 10.73%. We expect package liquor store sales to increase throughout the balance of our fiscal year
2019 due to increased package liquor store traffic, offset by the loss of revenue generated from sales of liquor and related items
resulting from the Store #19 Closure.
Operating Costs and Expenses
.
Operating costs and expenses, (consisting of cost of merchandise sold, payroll and related costs, occupancy costs and selling,
general and administrative expenses), for the thirteen weeks ended March 30, 2019 increased $902,000 or 3.35% to $27,846,000 from
$26,944,000 for the thirteen weeks ended March 31, 2018. The increase was primarily due to an expected general increase in food
costs, offset by a reduction of operating costs and expenses at Store #19 due to the Store #19 Closure and actions taken by management
to reduce and/or control costs. Operating costs and expenses at our Store #19 were $529,000 for the thirteen weeks ended March
31, 2018. We anticipate that our operating costs and expenses will continue to increase through our fiscal year 2019 for the same
reasons. Operating costs and expenses increased as a percentage of total revenue to approximately 93.64% in the second quarter
of our fiscal year 2019 from 92.36% in the second quarter of our fiscal year 2018.
Gross Profit.
Gross profit is
calculated by subtracting the cost of merchandise sold from sales.
Restaurant Food Sales
and Bar Sales
. Gross profit for food sales and bar sales for the thirteen weeks ended March 30, 2019 decreased to $15,646,000
from $15,673,000 for the thirteen weeks ended March 31, 2018. Our gross profit margin for food sales and bar sales (calculated
as gross profit reflected as a percentage of restaurant food sales and bar sales), was 65.29% for the thirteen weeks ended March
30, 2019 and 65.62% for the thirteen weeks ended March 31, 2018. We anticipate that our gross profit for restaurant food and bar
sales will decrease during our fiscal year 2019 due to higher food costs.
Package Store Sales
.
Gross profit for package store sales for the thirteen weeks ended March 30, 2019 increased to $1,373,000 from $1,358,000 for the
thirteen weeks ended March 31, 2018. Our gross profit margin, (calculated as gross profit reflected as a percentage of package
liquor store sales), for package liquor store sales was 26.96% for the thirteen weeks ended March 30, 2019 and 27.91% for the thirteen
weeks ended March 31, 2018. We anticipate that the gross profit margin for package store merchandise will decrease during our fiscal
year 2019 due to anticipated lower pricing of certain package store merchandise in order for us to stay competitive.
Payroll
and Related Costs.
Payroll and related costs for the thirteen weeks ended March 30, 2019 increased $73,000 or 0.81% to
$9,067,000 from $8,994,000 for the thirteen weeks ended March 31, 2018. Higher payroll and related costs for the thirteen weeks
ended March 30, 2019 were primarily due to higher restaurant sales, which require additional payroll and related costs for employees
such as cooks, bartenders and servers, offset by a decrease in payroll and related costs of $657,000
at Store #19 due to
the Store #19 Closure.
Payroll and related costs as a percentage of total
revenue was 30.49% in the second quarter of our fiscal year 2019 and 30.82% of total sales in the second quarter of our fiscal
year 2018.
Occupancy Costs.
Occupancy costs
(consisting of rent, common area maintenance, repairs, real property taxes and amortization of leasehold purchases) for the thirteen
weeks ended March 30, 2019 increased $100,000 or 7.12% to $1,504,000 from $1,404,000 for the thirteen weeks ended March 31, 2018.
We anticipate that our occupancy costs will remain stable throughout the balance of our fiscal year 2019.
Selling, General and Administrative Expenses.
Selling, general and administrative expenses (consisting of general corporate expenses, including but not limited to advertising,
insurance, professional costs, clerical and administrative overhead) for the thirteen weeks ended March 30, 2019 increased $412,000
or 8.54% to $5,238,000 from $4,826,000 for the thirteen weeks ended March 31, 2018. Selling, general and administrative expenses
increased as a percentage of total revenue in the second quarter of our fiscal year 2019 to 17.61% as compared to 16.38% in the
second quarter of our fiscal year 2018. We anticipate that our selling, general and administrative expenses will increase throughout
the balance of our fiscal year 2019 due primarily to increases across all categories.
Depreciation and Amortization.
Depreciation and amortization expense for the thirteen weeks ended March 30, 2019 increased $59,000 or 8.61% to $744,000 from $685,000
from the thirteen weeks ended March 31, 2018. As a percentage of total revenue, depreciation and amortization expense was 2.50%
of revenue in the thirteen weeks ended March 30, 2019 and 2.33% of revenue in the thirteen weeks ended March 31, 2018.
Interest Expense, Net
.
Interest
expense, net, for the thirteen weeks ended March 30, 2019 decreased $15,000 to $181,000 from $196,000 for the thirteen weeks ended
March 31, 2018.
Income Taxes.
Income taxes
for the thirteen weeks ended March 30, 2019 was $257,000 and $448,000 for the thirteen weeks ended March 31, 2018.
Net Income.
Net income for the
thirteen weeks ended March 30, 2019 decreased $418,000 or 22.18% to $1,465,000 from $1,885,000 for the thirteen weeks ended March
31, 2018. Net income for the thirteen weeks ended March 30, 2019 decreased when compared to the thirteen weeks ended March 31,
2018 primarily due to a net loss of $18,000 from Store #19 resulting from the Store #19 Closure and by higher food costs and overall
expenses, offset by higher restaurant traffic. During the thirteen weeks ended March 31, 2018, the net income from Store #19 was
$233,000. As a percentage of sales, net income for the second quarter of our fiscal year 2019 is 4.93%, as compared to 6.40% in
the second quarter of our fiscal year 2018. For the balance of our fiscal year 2019, our net income will be adversely affected
by a loss of net income from Store #19 resulting from the Store #19 Closure, which location will remain closed through at least
the end of our fiscal year 2019 and we do not anticipate we will be receiving any further insurance proceeds from the Store #19
Closure, other than $132,000 in depreciation insurance recovery which we have yet to receive.
Net Income Attributable to Stockholders.
Net income attributable to stockholders for the thirteen weeks ended March 30, 2019 decreased $374,000 or 26.77% to $1,021,000
from $1,397,000 for the thirteen weeks ended March 31, 2018. Net income for the thirteen weeks ended March 30, 2019 decreased when
compared to the thirteen weeks ended March 31, 2018 primarily due to a net loss of $18,000 from Store #19 resulting from the Store
#19 Closure and by higher food costs and overall expenses, offset by higher restaurant traffic. During the thirteen weeks ended
March 31, 2018, the net income from Store #19 was $233,000. As a percentage of revenue, net income attributable to stockholders
for the thirteen weeks ended March 30, 2019 is 3.43%, as compared to 4.74% for the thirteen weeks ended March 31, 2018. For the
balance of our fiscal year 2019, our net income attributable to stockholders will be adversely affected by a loss of net income
from Store #19 resulting from the Store #19 Closure, which location will remain closed through at least the end of our fiscal year
2019 and we do not anticipate we will be receiving any further insurance proceeds from the Store #19 Closure, other than $132,000
in depreciation insurance recovery which we have yet to receive.
Comparison of Twenty Six Weeks Ended
March 30, 2019 and March 31, 2018.
Revenues
.
Total
revenue for the twenty-six weeks ended March 30, 2019 decreased $219,000 or 0.38% to $57,630,000 from $57,849,000 for the
twenty-six weeks ended March 31, 2018 due primarily to the loss of revenue resulting from the Store #19 Closure, offset by
increased restaurant traffic. We anticipate that Store #19 will remain closed through at least the end of our fiscal year
2019 and do not anticipate we will receive any insurance proceeds from the Store #19 Closure. Revenue generated from operations at Store #19 was $2,697,000 for the twenty-six weeks ended March 31, 2018.
We expect total revenue to remain stable throughout the balance of our fiscal year 2019 due to the loss of revenue generated
from our Store #19, due to the Store #19 Closure.
Restaurant
Food Sales
.
Restaurant revenue generated from the sale of
food, including non-alcoholic beverages, at restaurants (food sales) totaled $35,047,000 for the twenty-six weeks ended March
30, 2019 as compared to $35,516,000 for the thirteen weeks ended March 31, 2018. The decrease in restaurant revenue from
food sales during the twenty-six weeks ended March 30, 2019 is primarily due to
the loss of food sales at Store
#19 resulting from the Store #19 Closure, offset by
increased
restaurant traffic
. Restaurant revenue from the sale of food at our Store #19 was $1,747,000 for the twenty-six weeks
ended March 31, 2018.
Comparable weekly restaurant food sales
(for restaurants open for all of the first and second quarters of our fiscal year 2019 and 2018, which consists of
nine restaurants owned by us, (excluding Store #19
which was closed for the twenty-six weeks ended March 30, 2019)
and
eight restaurants owned by affiliated limited partnerships) was $1,348,000 and $1,298,000 for the twenty-six weeks
ended March 30, 2019 and March 31, 2018, respectively, an increase of 3.85%. Comparable weekly restaurant food sales for
Company owned restaurants only was $681,000 and $659,000 for the first and second quarters of our fiscal years 2019 and
2018, respectively, an increase of 3.34%. Comparable weekly restaurant food sales for affiliated limited partnership
owned restaurants only was $667,000 and $639,000 for the first and second quarters of our fiscal years 2019 and 2018,
respectively, an increase of 4.38%.
We expect restaurant revenue generated from food sales, including non-alcoholic
beverages, at restaurants to remain stable throughout the balance of our fiscal year 2019 due to the loss of food sales at
Store #19 resulting from the Store #19 Closure.
Restaurant
Bar Sales
. Restaurant revenue generated from the sale of alcoholic beverages at restaurants (bar sales)
totaled $11,068,000 for the twenty-six weeks ended March 30, 2019 as compared to $11,125,000 for the twenty-six weeks ended
March 31, 2018. The decrease in restaurant revenue from bar sales during the twenty-six weeks ended March 30, 2019 is
primarily due to
the loss of bar sales at Store #19 resulting from the Store #19 Closure, offset by increased
restaurant traffic. Restaurant revenue from the bar sales at Store #19 was $374,000 for the twenty-six weeks ended March 31,
2018.
Comparable weekly restaurant bar sales (for restaurants open
for all of the first and second quarters of our fiscal years 2019 and 2018, respectively, which consists of nine restaurants
owned by us, (excluding Store #19
which was closed for the twenty-six weeks ended March 30, 2019)
and
eight restaurants owned by affiliated limited partnerships) was $426,000 for the twenty-six weeks ended March 30, 2019 and
$413,000 for the twenty-six weeks ended March 31, 2018, an increase of 3.15%. Comparable weekly restaurant bar sales for
Company owned restaurants only was $194,000 and $190,000 for the first and second quarters of our fiscal years 2018 and 2019,
respectively, an increase of 2.11%. Comparable weekly restaurant bar sales for affiliated limited partnership owned
restaurants only was $232,000 and $223,000 for the first and second quarters of our fiscal year 2019 and 2018, respectively,
an increase of 4.04%.
We expect restaurant revenue generated from bar sales to remain stable throughout the balance
of our fiscal year 2019 due to the loss of bar sales at Store #19 resulting from the Store #19 Closure.
Package Store
Sales
. Revenue generated from sales of liquor and related items at package liquor stores totaled $10,227,000 for the
twenty-six weeks ended March 30, 2019 as compared to $9,879,000 for the twenty-six weeks ended March 31, 2018, an increase of $348,000.
This increase was primarily due to increased package liquor store traffic, offset by the loss of revenue generated from sales of
liquor and related items at Store #19 resulting from the Store #19 Closure. Revenue generated from sales of liquor and related
items at Store #19 was $576,000 for the twenty-six weeks ended March 31, 2018. The weekly average of same store package liquor
store sales, which includes eight (8) Company owned package liquor stores, (excluding Store #19, which was closed for the twenty-six
weeks ended March 30, 2019), was $393,000 for the twenty-six weeks ended March 30, 2019 as compared to $358,000 for the twenty-six
weeks ended March 31, 2018, an increase of 9.78%. We expect package liquor store sales to increase throughout the balance of our
fiscal year 2019 due to increased package liquor store traffic, offset by the loss of revenue generated from sales of liquor and
related items at Store #19 resulting from the Store #19 Closure.
Operating Costs and Expenses
.
Operating costs and expenses, (consisting of cost of merchandise sold, payroll and related costs, occupancy costs and selling,
general and administrative expenses), for the twenty-six weeks ended March 30, 2019 increased $1,335,000 or 2.48% to $55,085,000
from $53,750,000 for the twenty-six weeks ended March 31, 2018. The increase was primarily due to an expected general increase
in food costs, offset by a reduction of operating costs and expenses at Store #19, which was closed for the twenty-six weeks ended
March 30, 2019 due to the Store #19 Closure and actions taken by management to reduce and/or control costs. Operating costs and
expenses at Store #19 were $1,088,000 for the twenty-six weeks ended March 31, 2018. We anticipate that our operating costs and
expenses will continue to increase through our fiscal year 2019 for the same reasons. Operating costs and expenses increased as
a percentage of total revenue to approximately 95.85% for the twenty-six weeks of our fiscal year 2019 from 92.91% for the twenty-six
weeks of our fiscal year 2018.
Gross Profit.
Gross profit is
calculated by subtracting the cost of merchandise sold from sales.
Restaurant Food Sales
and Bar Sales
. Gross profit for food sales and bar sales for the twenty six weeks ended March 30, 2019 decreased to $30,073,000
from $30,446,000 for the twenty six weeks ended March 31, 2018. Our gross profit margin for food sales and bar sales (calculated
as gross profit reflected as a percentage of restaurant food sales and bar sales), was 65.21% for the twenty six weeks ended March
30, 2019 and 65.28% for the twenty six weeks ended March 31, 2018. We anticipate that our gross profit for restaurant food and
bar sales will decrease during our fiscal year 2019 due to higher food costs.
Package Store Sales
.
Gross profit for package store sales for the twenty six weeks ended March 30, 2019 decreased to $2,741,000 from $2,750,000 for
the twenty six weeks ended March 31, 2018. Our gross profit margin, (calculated as gross profit reflected as a percentage of package
liquor store sales), for package liquor store sales was 26.80% for the twenty six weeks ended March 30, 2019 and 27.84% for the
twenty six weeks ended March 31, 2018. We anticipate that the gross profit margin for package store sales will decrease during
our fiscal year 2019 due to anticipated lower pricing of certain package store merchandise undertaken in order for us to stay competitive.
Payroll
and Related Costs.
Payroll and related costs for the twenty six weeks ended March 30, 2019 increased $125,000 or 0.71%
to $17,665,000 from $17,540,000 for the twenty six weeks ended March 31, 2018. Higher payroll and related costs for the twenty
six weeks ended March 30, 2019 were primarily due to higher restaurant sales, which require additional payroll and related costs
for employees such as cooks, bartenders and servers, offset by a decrease in payroll and related costs of $730,000
at Store
#19, which was closed for substantially all of the twenty-six weeks ended March 30, 2019 due to the Store #19 Closure.
Payroll
and related costs as a percentage of total revenue was 30.65% for the twenty-six weeks ended March 30, 2019 and 30.32% of total
revenue for the twenty-six weeks ended March 31, 2018.
Occupancy Costs.
Occupancy costs
(consisting of rent, common area maintenance, repairs, real property taxes and amortization of leasehold purchases) for the twenty
six weeks ended March 30, 2019 increased $124,000 or 4.29% to $3,014,000 from $2,890,000 for the twenty six weeks ended March 31,
2018. We anticipate that our occupancy costs will remain stable throughout the balance of our fiscal year 2019.
Selling, General and Administrative Expenses.
Selling, general and administrative expenses (consisting of general corporate expenses, including but not limited to advertising,
insurance, professional costs, clerical and administrative overhead) for the twenty six weeks ended March 30, 2019 increased $881,000
or 8.81% to $10,877,000 from $9,996,000 for the twenty six weeks ended March 31, 2018. Selling, general and administrative expenses
increased as a percentage of total revenue for the twenty six weeks ended March 30, 2019 to 18.87% as compared to 17.28% for the
twenty six weeks ended March 31, 2019. We anticipate that our selling, general and administrative expenses will increase throughout
the balance of our fiscal year 2019 due primarily to increases across all categories.
Depreciation and Amortization.
Depreciation and amortization expense for the twenty six weeks ended March 30, 2019 increased $93,000 or 6.78% to $1,464,000 from
$1,371,000 from the twenty six weeks ended March 31, 2018. As a percentage of total revenue, depreciation and amortization expense
was 2.54% of revenue in the twenty six weeks ended March 30, 2019 and 2.37% of revenue in the twenty six weeks ended March 31,
2018.
Interest Expense, Net
.
Interest
expense, net, for the twenty six weeks ended March 30, 2019 decreased $6,000 to $366,000 from $372,000 for the twenty six weeks
ended March 31, 2018.
Income Taxes.
Income taxes
for the twenty six weeks ended March 30, 2019 was $343,000 and $913,000 for the twenty six weeks ended March 31, 2018. Income
taxes decreased during the twenty six weeks ended March 30, 2019 due to a reduction of $268,000 to our deferred tax asset due
to the corporate tax rate reduction, which reduction was a part of our current tax expense during the twenty six weeks ended
March 31, 2018.
Net Income.
Net income for the
twenty-six weeks ended March 30, 2019 decreased $378,000 or 13.31% to $2,463,000 from $2,841,000 for the twenty-six weeks ended
March 31, 2018. Net income for the twenty-six weeks ended March 30, 2019 decreased when compared to the twenty-six weeks ended
March 31, 2018 primarily due to higher food costs and overall expenses and a net loss of $274,000 from Store #19 resulting from
the Store #19 Closure, offset by the receipt in the first quarter of our 2019 fiscal year of a $602,000 insurance recovery, as
a result of the Store #19 Closure and higher restaurant traffic. During the twenty-six weeks ended March 31, 2018, the net income
from Store #19 was $408,000. Net income for the twenty-six weeks ended March 30, 2018 was also reduced by a reduction of $268,000
to our deferred tax asset. For the balance of our fiscal year 2019, our net income will be adversely affected by a loss of net
income from Store #19 resulting from the Store #19 Closure. We anticipate that Store #19 will remain closed through at least the
end of our fiscal year 2019 and we do not anticipate we will receive any additional insurance proceeds from the Store #19 Closure,
other than $132,000 in depreciation insurance recovery which we have yet to receive.
Net Income Attributable to Stockholders.
Net income attributable to stockholders for the twenty-six weeks ended March 30, 2019 decreased $254,000 or 12.59% to $1,764,000
from $2,018,000 for the twenty-six weeks ended March 31, 2018. Net income for the twenty-six weeks ended March 30, 2019 decreased
when compared to the twenty-six weeks ended March 31, 2018 primarily due to higher food costs and overall expenses and a net loss
of $274,000 from Store #19 resulting from the Store #19 Closure, offset by the receipt in the first quarter of our 2019 fiscal
year of a $602,000 insurance recovery, as a result of the Store #19 Closure and higher restaurant traffic. During the twenty-six
weeks ended March 31, 2018, the net income from Store #19 was $408,000. Net income for the twenty-six weeks ended March 30, 2018
was also reduced by a reduction of $268,000 to our deferred tax asset. As a percentage of revenue, net income attributable to stockholders
for the twenty-six weeks ended March 30, 2019 is 3.06%, as compared to 3.49% for the twenty-six weeks ended March 31, 2018. For
the balance of our fiscal year 2019, our net income attributable to stockholders will be adversely affected by a loss of net income
from Store #19 resulting from the Store #19 Closure. We anticipate that Store #19 will remain closed through at least the end of
our fiscal year 2019 and we do not anticipate we will receive any additional insurance proceeds from the Store #19 Closure, other
than $132,000 in depreciation insurance recovery which we have yet to receive.
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 thirteen weeks ended March 30, 2019, we had one new restaurant location in Sunrise, Florida in the development
stage and have recognized pre-opening costs of $63,000.
Menu Price Increases and Trends
Effective September 3, 2017 we increased menu
prices for our bar offerings to target an increase to our bar revenues of approximately 4.9% annually and effective September 16,
2017 we increased menu prices for our food offerings to target an increase to our food revenues of approximately 4.0% annually
to offset higher food costs and higher overall expenses. Prior to these increases, we previously raised menu prices in the second
quarter of our fiscal year 2016. During the next twelve months, if demand for our restaurant and bar offerings remain substantially
similar to the demand during our fiscal year 2018, (excluding restaurant and bar sales from Store #19 which we expect will be closed
for our entire fiscal year 2019) of which there can be no assurance, we expect that restaurant and bar sales in our restaurants
as well as gross profit for food and bar operations (excluding restaurant and bar sales from Store #19 which we expect will be
closed for our entire fiscal year 2019) should remain substantially the same. We anticipate that our package liquor store sales
will continue to increase, (excluding package liquor store sales from Store #19, which we expect will be closed for our entire
fiscal year 2019 due to the Store #19 Closure), while gross profit margin for package liquor store sales will, in all likelihood,
decrease.
In addition to the rebuilding of Store #19,
which was closed in October 2018 due to a fire, we have a new “Flanigan’s Seafood Bar and Grill” restaurant in
Sunrise, Florida in the development stage and also continue to search for new locations to open restaurants and thereby expand
our business.
We are not actively searching for locations
for the operation of new package liquor stores, but when our attempt to expand “The Whale’s Rib” restaurant concept
in Miami, Florida was abandoned, we decided that the space we had targeted for the “The Whales Rib” would be ideal
for the operation of a package liquor store and during the fourth quarter of our fiscal year 2018, we received governmental approval
to operate a package liquor store. It is anticipated that this new package liquor store will be open for business during the fourth
quarter of our fiscal year 2019.
Liquidity and Capital Resources
We fund our operations through cash from operations.
As of March 30, 2019, we had cash of approximately $13,473,000, an increase of $59,000 from our cash balance of $13,414,000 as
of September 29, 2018. During the second quarter of our fiscal year 2019, on March 28, 2019, we paid a dividend of $.28 per share.
We believe that our current cash availability from our cash on hand, positive cash flow from operations and borrowed funds will
be sufficient to fund our operations and planned capital expenditures for at least the next twelve months.
Cash Flows
The following table is a summary of our cash
flows for the twenty six weeks ended March 30, 2019 and March 31, 2018.
|
|
---------Twenty Six Weeks Ended--------
|
|
|
|
March 30, 2019
|
|
|
March 31, 2018
|
|
|
|
(in Thousands)
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
5,069
|
|
|
$
|
6,392
|
|
Net cash used in investing activities
|
|
|
(2,530
|
)
|
|
|
(1,985
|
)
|
Net cash provided by (used in) financing activities
|
|
|
(2,480
|
)
|
|
|
1,205
|
|
|
|
|
|
|
|
|
|
|
Net Increase in Cash and Cash Equivalents
|
|
|
59
|
|
|
|
5,612
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, Beginning
|
|
|
13,414
|
|
|
|
9,885
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, Ending
|
|
$
|
13,473
|
|
|
$
|
15,497
|
|
During the twenty six weeks ended March 30,
2019, our Board of Directors declared and paid a cash dividend of 28 cents per share to shareholders of record on March 15, 2019.
During the twenty six weeks ended March 31, 2018, our Board of Directors declared and paid a cash dividend of 25 cents per share
to shareholders of record on March 16, 2018. Any future determination to pay cash dividends will be at our Board’s discretion
and will depend upon our financial condition, operating results, capital requirements and such other factors as our Board deems
relevant.
Capital Expenditures
In addition to using cash for
our operating expenses, we use cash to fund the development and construction of new restaurants and to fund capitalized
property improvements for our existing restaurants. We acquired property, plant and equipment and construction in progress
of $4,199,000, (of which $1,300,000 was for the purchase of vacant real property in Pompano Beach, Florida, $584,000 was for
the purchase of construction in process and $486,000 was from deposits recorded in other assets as of September 29, 2018),
during the twenty six weeks ended March 30, 2019, which amount included $73,000 for renovations to one (1) existing limited
partnership restaurant and $213,000 for renovations to three (3) Company owned restaurants. During the twenty six weeks ended
March 31, 2018, we acquired property, plant and equipment and construction in progress of $1,848,000, (of which $848,000 was
for the purchase of construction in process and $73,000 was from deposits recorded in other assets as of September 30,
2017), during the twenty six weeks ended March 31, 2018, which amount included $729,000 for the renovation of an existing
restaurant and $196,000 for renovations to two (2) Company owned restaurants.
All of our owned units require periodic refurbishing
in order to remain competitive. We anticipate the cost of this refurbishment in our fiscal year 2019 to be approximately $450,000,
of which $286,000 has been spent through March 30, 2019.
Long Term Debt
As of March 30, 2019, we had long term debt
of $14,574,000, as compared to $14,576,000 as of September 29, 2018. As of March 30, 2019, we are in compliance with the covenants
of all loans with our lender.
As of March 30, 2019, the aggregate principal
balance owed from the financing of our property and general liability insurance policies is $833,000.
Construction Contracts
a. 13205 Biscayne Boulevard, North Miami, Florida (Store #20)
On June 14, 2017, we entered into an agreement
with a third party unaffiliated general contractor to renovate our restaurant located at 13205 Biscayne Boulevard, North Miami,
Florida, (Store #20) for a total contract price of $880,000. The renovations include, but are not limited to the construction of
a new kitchen and the expansion of the restaurant into our former package liquor store location. During the second quarter of our
fiscal year 2019, we agreed to change orders which had the effect of increasing the total contract price for the renovations to
$1,177,000, of which $933,000 has been paid. Subsequent to the end of the second quarter of our fiscal year 2019, we paid an additional
$229,000 toward the total contract price, leaving a balance of $15,000.
During our fiscal year 2018, we entered into
an agreement with a third party unaffiliated general contractor to renovate and add an outdoor patio area to the front of our restaurant
located at 13205 Biscayne Boulevard, North Miami, Florida (Store #20) for a total contract price of $912,000. During the second
quarter of our fiscal year 2019, we agreed to change orders which had the effect of decreasing the total contract price for the
renovation to $880,000, of which we have paid $777,000. Subsequent to the end of the second quarter of our fiscal year 2019, we
paid an additional $98,000 toward the total contract price, leaving a balance of $5,000.
b. 2505 N. University Drive, Hollywood,
Florida (Store #19)
During our fiscal year 2018, we entered into
two agreements with a third party unaffiliated general contractor for design and development services for a total contract price
of $127,000 (the “$127,000 Contract”) and $174,000 (the “$174,000 Contract”). The $127,000 Contract provides
for design and development services for the construction of a new building (the “New Building”) on a parcel of real
property which we own which is adjacent to the real property where our combination package liquor store and restaurant located
at 2505 N. University Drive, Hollywood, Florida, (Store #19) operated until it was closed in October 2018 due to damages caused
by a fire. The $174,000 Contract provides for design and development services for the renovation of the existing building which
housed the combination package liquor store and restaurant until it was closed in October 2018 due to damages caused by a fire.
If we complete the construction of the New Building and as a result of the fire, the rebuild of the existing building, (the “Rebuilt
Building”), we plan to re-locate our package liquor store located at the property to the New Building and to operate the
restaurant located at the property in the Rebuilt Building. During our fiscal year 2019, we agreed to change orders which had the
effect of increasing the total contract price for the $127,000 Contract to $138,000, and during the second quarter of our fiscal
year 2019, we paid the balance of the total contract price of the $127,000 Contract, in the amount of $25,000. During our fiscal
year 2019, we also agreed to change orders which had the effect of increasing the total contract price for the $174,000 Contract
to $187,000, and during the second quarter of our fiscal year 2019, we paid $46,000 as the final payment of the contract price
of the $174,000 Contract, (of which a total of $157,000 was paid), which we cancelled during the first quarter of our fiscal year
2019 due to the building being damaged by fire.
Subsequent to the end of the second quarter
of our fiscal year 2019, we entered into an agreement with a third party unaffiliated general contractor for site work to connect
the real property where our combination package liquor store and restaurant located at 2505 N. University Drive, Hollywood, Florida,
(Store #19) operated until it was closed in October 2018 due to damages caused by a fire to city sewer and for the construction
of the new building on the adjacent parcel of real property for the operation of our package liquor store for $1,618,000.
Subsequent to the end of the second quarter
of our fiscal year 2019, we also entered into an agreement with a third party unaffiliated architect for design and development
services for the re-build of our restaurant located at 2505 N. University Drive, Hollywood, Florida (Store #19) for a total contract
price of $77,000, of which we paid $15,000.
c. 4 N. Federal Highway, Hallandale Beach,
Florida (Store #31)
During the first quarter of our fiscal year
2019, we entered into an agreement with a third party unaffiliated design group for design and development services for a contract
price of $356,000 (the “$356,000 Contract”). The $356,000 Contract provided for design and development services for
the construction of two (2) new buildings on the real property which we own where our combination package liquor store and restaurant
located at 4 N. Federal Highway, Hallandale Beach, Florida, (Store #31) operates. Our plan for the real property was to (i) demolish
the building which currently houses our combination package liquor store and restaurant, (ii) build two new buildings, one of which
will house our package liquor store and the other of which will house our restaurant; and (iii) enter into a ground lease with
an existing retail tenant for a parcel of land which will not be improved by the two buildings. During the second quarter of our
fiscal year 2019, we learned that our planned development of Store #31 would cause the loss of too many parking spaces, so we abandoned
our development plans and terminated the $356,000 Contract. We paid $130,000 on account of the $356,000 Contract and owe no further
amounts under the same.
d. 14301 W. Sunrise Boulevard, Sunrise,
Florida (Store #85)
Subsequent to the end of the second quarter
of our fiscal year 2019, we also entered into an agreement with a third party unaffiliated design group for design and development
services of our new location at 14301 W. Sunrise Boulevard, Sunrise, Florida 33323 (Store #85) for a total contract price of $122,000,
of which we paid $20,000.
Purchase Commitments
In order to fix the cost and ensure adequate
supply of baby back ribs for our restaurants during calendar year 2019, on November 15, 2018, we entered into a purchase agreement
with our current rib supplier, whereby we agreed to purchase approximately $5,888,000 of baby back ribs during calendar year 2019
from this vendor at a fixed cost.
While we anticipate purchasing all of our rib
supply from this vendor, we believe there are several other alternative vendors available, if needed.
Purchase of Limited Partnership Interest
During the twenty six weeks ended March 30,
2019, we did not purchase any limited partnership interests. During the twenty six weeks ended March 31, 2018, we purchased from
one limited partner (who is not an officer, director or family member of officers or directors) a limited partnership interest
of 0.21% in a limited partnership which owns a restaurant, for a purchase price of $1,600.
Working Capital
The table below summarizes the current assets,
current liabilities, and working capital for our fiscal quarters ended March 30, 2019, March 31, 2018 and our fiscal year ended
September 29, 2018.
Item
|
|
March 30, 2019
|
|
|
March 31, 2018
|
|
|
Sept. 29, 2018
|
|
|
|
(in Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
$
|
19,746
|
|
|
$
|
21,411
|
|
|
$
|
19,025
|
|
Current Liabilities
|
|
|
16,734
|
|
|
|
14,217
|
|
|
|
13,310
|
|
Working Capital
|
|
$
|
3,012
|
|
|
$
|
7,194
|
|
|
$
|
5,715
|
|
Our working capital decreased during our fiscal
quarter ended March 30, 2019 from our working capital for our fiscal quarter ended March 31, 2018 and our fiscal year ended September
29, 2018 due to the $1,300,000 we paid to close on our purchase of the vacant parcel of property located at 2119 S.E. 9
th
Street, Pompano Beach, Florida and the reclassification of the principal balance of an existing mortgage to short term.
While there can be no assurance due to, among
other things, unanticipated expenses or unanticipated decline in revenues, or both, we believe that our cash on hand, positive
cash flow from operations and funds available from our term loan will adequately fund operations, debt reductions and planned capital
expenditures throughout our fiscal year 2019.
Off-Balance Sheet Arrangements
We do 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.