FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 2, 2010 AND OCTOBER 3, 2009
FLANIGAN'S ENTERPRISES,
INC. AND SUBSIDIARIES
INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS
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REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
F-1 |
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CONSOLIDATED
FINANCIAL STATEMENTS |
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Balance Sheets |
F-2 |
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Statements of Income |
F-3 |
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Statements of StockholdersÕ
Equity |
F-4 |
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Statements of Cash Flows |
F-5 – F-6 |
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Notes to Financial Statements |
F-7 - F-33 |
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
Board of Directors and
Stockholders
FlaniganÕs Enterprises, Inc.
Fort Lauderdale, Florida
We have audited the
accompanying consolidated balance sheets of FlaniganÕs Enterprises, Inc. and
Subsidiaries as of October 2, 2010 and October 3, 2009 and the related
consolidated statements of income, stockholdersÕ equity and cash flows for the
years then ended. FlaniganÕs
Enterprises, Inc.Õs management is responsible for these consolidated financial
statements. Our responsibility is
to express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in
accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting. Our audit
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
CompanyÕs internal control over financial reporting. Accordingly, we express no
such opinion. An
audit also includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of FlaniganÕs Enterprises, Inc. and Subsidiaries as of October 2, 2010 and October 3, 2009, and the consolidated results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
Fort Lauderdale,
Florida
December 28, 2010
The Company was incorporated in 1959 and operates in
South Florida as a chain of full-service restaurants and package liquor stores. Restaurant food and beverage sales make
up the majority of our total revenue.
At October 2, 2010, we (i) operated 24 units,
(excluding the adult entertainment club referenced in (ii) below), consisting
of restaurants, package liquor stores and combination restaurants/package
liquor stores that we either own or have operational control over and partial
ownership in; (ii) own but do not operate one adult entertainment club; and
(iii) franchise an additional five units, consisting of one restaurant and four
combination restaurants/package liquor stores, (one of which we operate). With the exception of one restaurant we
operate under the name ÒThe WhaleÕs RibÓ, and in which we do not have an
ownership interest, all of the restaurants operate under our service mark
ÒFlaniganÕs Seafood Bar and GrillÓ and all of the package liquor stores operate
under our service mark ÒBig DaddyÕs LiquorsÓ.
The
CompanyÕs Articles of Incorporation, as amended, authorize us to issue and have
outstanding at any one time 5,000,000 shares of common stock at a par value of
$0.10 per share.
We operate
under a 52-53 week year ending the Saturday closest to September 30. Our fiscal year 2010 is comprised of a
52-week period and our fiscal year 2009 is comprised of a 53-week period.
The
consolidated financial statements include the accounts of the Company and our
subsidiaries, all of which are wholly owned, and the accounts of the nine
limited partnerships in which we act as general partner and have controlling
interests. All significant
intercompany transactions and balances have been eliminated in
consolidation.
The consolidated financial statements and related
disclosures are prepared in conformity with accounting principles generally
accepted in the U.S. We are
required to make estimates and assumptions that affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities at
the date of the financial statements, and revenue and expenses during the
period reported. These estimates include assessing the estimated useful
lives of tangible assets and the recognition of deferred tax assets and
liabilities. Estimates and assumptions are reviewed periodically and the
effects of revisions are reflected in our consolidated financial statements in
the period they are determined to be necessary. Although these estimates
are based on our knowledge of current events and actions we may undertake in
the future, they may ultimately differ from actual results.
We consider all highly
liquid investments with an original maturity of three months or less at the
date of purchase to be cash equivalents.
Our inventories, which consist primarily of package liquor
products, are stated at the lower of average cost or market.
In accordance with the Financial Accounting Standards Board
Accounting Standards Codification (FASB ASC Topic 350), ÒIntangibles - Goodwill and
OtherÓ, our liquor licenses are indefinite lived assets, which are not
being amortized, but are tested annually for impairment (see Note 5).
Our
property and equipment are stated at cost. We capitalize expenditures for major
improvements and depreciation commences when the assets are placed in
service. We record depreciation on
a straight-line basis over the estimated useful lives of the respective assets.
We charge maintenance and repairs, which do not improve or extend the life of
the respective assets, to expense as incurred. When we dispose of assets, the
cost and related accumulated depreciation are removed from the accounts and any
gain or loss is included in income.
Leasehold
Interests
Our purchase of an existing restaurant location
usually includes a lease to the business premises. As a result, a portion of the purchase price is allocated to
the leasehold interest. We
capitalize the cost of the leasehold interest and amortization commences upon
our assumption of the lease. We
amortize leasehold interests on a straight line basis over the remaining term
of the lease.
We use the consolidation method of accounting when we have a
controlling interest in other companies and limited partnerships. We use the equity method of accounting
when we have an interest between twenty to fifty percent in other companies and
limited partnerships, but do not exercise control. Under the equity method, our original investments are
recorded at cost and are adjusted for our share of undistributed earnings or
losses. All significant
intercompany profits are eliminated.
Financial instruments that potentially subject us to
concentrations of credit risk are cash and cash equivalents.
Cash and Cash Equivalents
We
maintain deposit balances with financial institutions which balances may, from
time to time, exceed the federally insured limits. Effective October,
2008 through December 31, 2013, federally insured limits have been increased
from $100,000 to $250,000 for interest bearing deposits. However, effective
January 1, 2010, our primary financial banking institution no longer participated
in the Temporary Liquidity Guarantee Program, which program provided FDIC
coverage on the full balance of non-interest bearing accounts. As a result, as of October 2, 2010, $4,700,000 was held in excess
of federally insured limits. We have not experienced any losses in such
accounts.
Major Supplier
Throughout
our fiscal years 2010 and 2009, we purchased substantially all of our food
products from one major supplier pursuant to a master distribution agreement
which entitled us to receive certain purchase discounts, rebates and
advertising allowances. We believe
that several other alternative vendors are available, if necessary.
Revenue
Recognition
We record
revenues from normal recurring sales upon the sale of food and beverages and
the
sale of
package liquor products. We report
our sales net of sales tax.
Continuing royalties, which are a percentage of net sales of franchised
stores, are accrued as income when earned.
Our
pre-opening costs are those typically associated with the opening of a new
restaurant and generally include payroll costs associated with the Ònew
restaurant openersÓ (a team of select
Pre-opening
Costs (Continued)
employees
who travel to new restaurants to ensure that our high standards for quality are
met), rent and promotional costs.
We expense pre-opening costs as incurred. During our
fiscal years
2010 and 2009, we had no limited partnership restaurants under development and
therefore no limited partnerships reported losses primarily due to pre-opening
costs.
Our
advertising costs are expensed as incurred. Advertising costs incurred during our fiscal years ended October
2, 2010 and October 3, 2009 were approximately $465,000 and $351,000
respectively.
General Liability Insurance
We
have general liability insurance which incorporates a semi-self-insured plan
under which we assume the full risk of the first $50,000 of exposure per
occurrence, while the limited partnerships assume the full risk of the first
$10,000 of exposure per occurrence.
Our insurance carrier is responsible for $1,000,000 coverage per
occurrence above our self-insured deductible, up to a maximum aggregate of
$2,000,000 per year. During our fiscal years ended October 2, 2010 and October 3,
2009, we were able to purchase excess liability insurance at a reasonable
premium, whereby our excess insurance carrier is responsible for $6,000,000
coverage above our primary general liability insurance coverage. With the
exception of one (1) limited partnership which has higher general liability
insurance coverage to comply with the terms of its lease for the business premises,
we are un-insured against liability claims in excess of $7,000,000 per
occurrence and in the aggregate.
Our
general policy is to settle only those legitimate and reasonable claims
asserted and to aggressively defend and go to trial, if necessary, on frivolous
and unreasonable claims. Under our
current liability insurance policy, any expense incurred by us in defending a
claim, including adjusters and attorney's fees, are a part of our $50,000 or
$10,000, as applicable, self-insured retention.
The
respective carrying value of certain of our on-balance-sheet financial
instruments approximated their fair value. These instruments include cash and cash equivalents, other
receivables, accounts payables, accrued expenses and debt. We have assumed carrying values to
approximate fair values for those financial instruments, which are short-term
in nature or are receivable or payable on demand. We estimated the fair value of debt based on current rates
offered to us for debt of comparable maturities and similar collateral
requirements.
Fair Value of Financial Instruments (continued)
In accordance with FASB ASC 820-10-50-1 (previously
SFAS 157), we utilized a valuation model to determine the fair value of our
swap agreement. As the valuation
model for the swap agreements were based upon observable inputs, they are
classified as Level 2 (see Note 9).
Derivative
Instruments
We account for derivative instruments in accordance
with FASB ASC Topic 815-10-05-4, (previously SFAS 133), ÒAccounting for Derivative Instruments and Hedging ActivitiesÓ as amended, which establishes accounting
and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and hedging activities. In accordance with FASB ASC Topic 815-10-05-4,
derivative instruments are recognized as assets or liabilities in the CompanyÕs
consolidated balance sheets and are measured at fair value. We recognized all
changes in fair value through earnings unless the derivative is determined to
be an effective hedge. We currently have no derivatives which have been
designated as hedges (See Note 9).
We account for our
income taxes using FASB ASC Topic 740, ÒIncome
TaxesÓ, which requires the recognition of deferred tax liabilities and
assets for expected future tax consequences of events that have been included
in the consolidated financial statements or tax returns. Under this method, deferred tax
liabilities and assets are determined based on the difference between the
financial statement and tax bases of assets and liabilities using enacted tax
rates in effect for the year in which the differences are expected to reverse.
We
adopted the provisions regarding Accounting
for Uncertainty in Income Taxes, which require the recognition of a
financial statement benefit of a tax position only after determining that the
relevant tax authority would more likely than not sustain the position
following an audit. For tax
positions meeting the more likely than not threshold, the amount recognized in
the financial statements is the largest benefit that has a greater than 50
percent likelihood of being realized upon ultimate settlement with the relevant
tax authority. We applied these
changes to tax positions for our fiscal years ending October 2, 2010 and
October 3, 2009. We had no
material unrecognized tax benefits and no adjustments to our financial
position, results of operations or cash flows were required. Generally, federal, state and local
authorities may examine the CompanyÕs tax returns for three years from the date
of filing and the current and prior three years remain subject to examination
as of October 2, 2010. We do not
expect that unrecognized tax benefits will increase within the next twelve
months. We recognize accrued
interest and penalties related to uncertain tax positions as income tax
expense.
We follow FASB ASC Topic 718, ÒCompensation – Stock CompensationÓ to account for stock-based
employee compensation, which generally requires, among other things that all
employee share-based compensation be measured using a fair value method and
that resulting
compensation costs be recognized in the consolidated
financial statements. We had no
unvested stock options as of January 1, 2006 and granted no stock options
subsequent thereto, including our fiscal years 2010 and 2009, so there is no compensation
expense recorded in our consolidated financial statements for our fiscal years
2010 or 2009.
We
continually evaluate whether events and circumstances have occurred that may
warrant revision of the estimated life of our intangible and other long-lived
assets or whether the remaining balance of our intangible and other long-lived
assets should be evaluated for possible impairment. If and when such factors, events or circumstances indicate
that intangible or other long-lived assets should be evaluated for possible
impairment, we will determine the fair value of the asset by making an estimate
of expected future cash flows over the remaining lives of the respective assets
and compare that fair value with the carrying value of the assets in measuring
their recoverability. In
determining the expected future cash flows, the assets will be grouped at the
lowest level for which there are cash flows, at the individual store level.
Certain
amounts in the prior year consolidated financial statements have been
reclassified to conform to the presentation of the 2010 consolidated financial
statements, which did not have a material impact on our net income or total
assets.
Earnings
Per Share
We follow FASB ASC Topic
260 - ÒEarnings per Share.Ó This section provides for the
calculation of basic and diluted earnings per share. Basic earnings per share includes no dilution and is
computed by dividing income available to common stockholders by the weighted
average number of common shares outstanding for the period. Diluted earnings per share assumes the
exercise of options granted if the weighted average market price exceeds the
exercise price. Earnings per share
are computed by dividing income available to common stockholders by the basic
and diluted weighted average number of common shares.
In December 2007, the FASB issued changes regarding
business combinations. These
changes establish 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. These changes
also establish disclosure requirements to enable the evaluation of the nature
and financial effects of the business combination. These changes were adopted by us in the first quarter of
fiscal 2010 and will have an impact on our accounting for any future business
acquisitions.
In December 2007, the FASB issued changes regarding consolidation
and non-controlling interests in consolidated financial statements. These changes impacted the accounting
and reporting for minority interests, which are now recharacterized as
noncontrolling interests (NCI) and classified as a component of equity. This new consolidation method
significantly changed the accounting for transactions with minority interest holders. These changes were adopted by us in the
first quarter of our fiscal year 2010 and did not have a material impact on our
consolidated financial statements.
In March 2008, the FASB issued
changes regarding derivatives and hedging to enhance disclosures about an
entityÕs derivative and hedging activities. These changes were adopted by us in the first quarter of our
fiscal year 2010. These changes do
not have a material impact on our consolidated financial statements.
The FASB has issued Accounting Standard Update (ASU) No. 2010-02, Consolidation (Topic 810) – ÒAccounting
and Reporting for Decreases in Ownership of a Subsidiary – A Scope
ClarificationÓ. This
ASU clarifies that the scope of the decrease in ownership provisions of
Subtopic 810-10 and related guidance and also clarifies that the decrease in
ownership guidance in Subtopic 810-10 does not apply to: (a) sales of in
substance real estate; and (b) conveyances of oil and gas mineral rights, even
if these transfers involve businesses. The amendments in this ASU also expand
the disclosure requirements about deconsolidation of a subsidiary or
derecognition of a group of assets. These changes were adopted by us in the first quarter of our
fiscal year 2010 and the adoption of this accounting standard will have an
effect on the presentation and disclosure of the noncontrolling interests of
any non wholly-owned businesses acquired in the future.
Issued
In August 2010, the
FASB issued Accounting Standards Update (ÒASUÓ) No. 2010-22 – Accounting
for Various Topics – This ASU amends various SEC paragraphs and covers
the issuance of SAB 112 which amends or rescinds portions of certain SAB
topics. The adoption of ASU No.
2010-22 will not have a material impact on our financial statements.
Issued (Continued)
In August 2010, the FASB issued Accounting
Standards Update (ÒASUÓ) No. 2010-21 - Accounting for Technical Amendments to
Various SEC Rules and Schedules—This Accounting Standards Update amends
various SEC paragraphs pursuant to the issuance of Release No. 33-9026:
Technical Amendments to Rules, Forms, Schedules and Codification of Financial
Reporting Policies. The adoption
of ASU No. 2010-21 will not have a material impact on our financial statements.
In February 2010, the FASB amended its authoritative guidance related
to subsequent events to alleviate potential conflicts with current United
States Securities Exchange Commission (ÒSECÓ) guidance. Effective immediately,
these amendments remove the requirement that an SEC filer disclose the date
through which it has evaluated subsequent events. The adoption of
this guidance did not have an impact on the CompanyÕs consolidated
financial statements.
In January, 2010, the FASB issued ASU 2010-06 which clarifies and
provides additional disclosure requirements on the transfers of assets and
liabilities between Level 1 (quoted prices in active market for identical assets
or liabilities) and Level 2 (significant other observable inputs) of the fair
market measurement hierarchy, including the reasons for and the timing of the
transfers. Additionally, the
guidance requires a roll forward of activities on purchases, sales, issuance
and settlements of the assets and liabilities measured using significant
unobservable inputs (Level 3 fair value measurements). This standard is effective for interim
and annual reporting periods beginning after December 15, 2009 with the exception
of revised Level 3 disclosure requirements which are effective for interim and
annual reporting periods beginning after December 15, 2010. Comparative disclosures are not
required in the year of adoption, Such adoption did not have a material impact
on our financial position or results of operation.
In June 2009, the FASB issued changes to the accounting for determining
whether an entity is a variable interest entity and modifies the methods
allowed for determining the primary beneficiary of a variable interest
entity. In addition, these changes
require ongoing reassessments of whether an enterprise is the primary
beneficiary of a variable interest entity and enhanced disclosures related to
an enterpriseÕs involvement in a variable interest entity. These changes become effective for
annual periods beginning after November 15, 2009 and will be adopted by us in
our fiscal year 2011. We are
currently evaluating the potential impact, if any, of the adoption of these
changes on consolidated results of operations and financial condition.
NOTE 2. PROPERTY
AND EQUIPMENT
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2010 |
2009 |
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Furniture and
equipment |
$ 9,987,000 |
$ 9,589,000 |
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Leasehold
improvements |
16,753,000 |
19,131,000 |
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Land and land
improvements |
7,109,000 |
5,110,000 |
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Building and
improvements |
7,169,000 |
2,397,000 |
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Vehicles |
690,000 |
688,000 |
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41,708,000 |
36,915,000 |
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Less
accumulated depreciation and amortization |
17,713,000 |
15,675,000 |
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$23,995,000 |
$21,240,000 |
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2010 |
2009 |
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Leasehold interests, at cost |
$2,928,000 |
$2,929,000 |
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Less accumulated amortization |
1,483,000 |
1,285,000 |
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$1,445,000 |
$1,644,000 |
Future leasehold amortization as of October 2, 2010 is as follows:
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2011 |
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$212,000 |
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2012 |
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147,000 |
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2013 |
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127,000 |
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2014 |
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127,000 |
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2015 |
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121,000 |
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Thereafter |
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_ 711,000 |
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Total |
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$1,445,000 |
We have invested with others, (some of whom are or are
affiliated with our officers and directors), in ten limited partnerships which
own and operate ten South Florida based restaurants under our service mark
ÒFlaniganÕs Seafood Bar and GrillÓ.
In addition to being a
limited partner in these limited partnerships, we are
the sole general partner of all of these limited partnerships and manage and
control the operations of the restaurants except for the restaurant located in
Fort Lauderdale, Florida where we only hold a limited partnership interest.
Generally, the terms of the limited partnership
agreements provide that until the investorsÕ cash investment in a limited
partnership (including any cash invested by us) is returned in full, the
limited partnership distributes to the investors annually out of available cash
from the
operation of the restaurant, as a return of capital,
up to 25% of the cash invested in the limited partnership, with no management
fee paid to us. Any available cash
in excess of the 25% of the cash invested in the limited partnership
distributed to the investors annually, is paid one-half (½) to us as a
management fee and one-half (1/2) to the investors, (including us), prorata
based upon the investorsÕ investment, as a return of capital. Once all of the investors, (including
us), have received, in full, amounts equal to their cash invested, an annual
management fee becomes payable to us equal to one-half (½) of cash
available to be distributed, with the other one half (½) of available
cash distributed to the investors (including us), as a profit distribution,
pro-rata based upon the investorsÕ investment.
As of October 2, 2010, limited partnerships owning
three (3) restaurants, (Surfside, Florida, Kendall, Florida and West Miami,
Florida locations), have returned
all cash invested and we receive an annual management fee equal to one-half
(½) of the cash available for distribution by the limited
partnership. In addition to our
receipt of distributable amounts from the limited partnerships, we receive a
fee equal to 3% of gross sales for use of our ÒFlaniganÕs Seafood Bar and
GrillÓ service mark, which use is authorized only while we act as general
partner. This
3% fee is ÒearnedÓ when sales are made by the limited partnerships and is paid
weekly, in arrears. Although we
have no restaurants under development and whether we will have any under
development in the future will be dependent, among other things, on market
conditions and our ability to raise capital, we anticipate that we will
continue to form limited partnerships to raise funds to own and operate
restaurants under our service mark ÒFlaniganÕs Seafood Bar and GrillÓ using the
same or substantially similar financial arrangement.
Surfside, Florida
We are the sole general partner and a 45%
limited partner in this limited partnership which has owned and operated a
restaurant in Surfside, Florida under our ÒFlaniganÕs Seafood Bar and GrillÓ
service mark since March 6, 1998.
34.9% of the remaining limited partnership interest is owned by persons
who are either our officers, directors or their family members. This limited partnership has returned
to its investors all of their initial cash invested and we receive an annual management fee equal to one-half
(½) of the cash available for distribution
by the limited partnership. This entity is
consolidated in the accompanying financial statements.
Kendall, Florida
We are the sole general partner and a 41%
limited partner in this limited partnership which has owned and operated a
restaurant in Kendall, Florida under our ÒFlaniganÕs Seafood Bar and GrillÓ
service mark since April 4, 2000.
29.7% of the remaining limited partnership interest is owned by persons
who are either our officers, directors or their family members. This limited partnership has returned
to its investors all of their initial cash invested and we receive an annual management fee equal to one-half
(½) of the cash available for distribution by the limited partnership.
This entity is consolidated in the accompanying financial statements.
We are the sole general partner and a 27%
limited partner in this limited partnership which has owned and operated a
restaurant in West Miami, Florida under our ÒFlaniganÕs Seafood Bar and GrillÓ
service mark since October 11, 2001.
34.1% of the remaining limited partnership interest is owned by persons
who are either our officers, directors or their family members. This limited partnership has returned
to its investors all of their initial cash invested and we receive an annual management fee equal to one-half
(½) of the cash available for distribution by the limited partnership.
This entity is consolidated in the accompanying financial statements.
We are the sole general partner and a 30%
limited partner in this limited partnership which has owned and operated a
restaurant in Weston, Florida under our ÒFlaniganÕs Seafood Bar and GrillÓ
service mark since January 20, 2003.
35.1% of the remaining limited partnership interest is owned by persons
who are either our officers, directors or their family members. As of the end of our fiscal year 2010,
this limited partnership has returned to its investors approximately 73.75% of
their initial cash invested.
During our fiscal year 2010, no distribution were made to limited
partners as this limited partnership had limited cash flow generated by this
restaurant. This entity is consolidated in the accompanying
financial statements.
We are the sole general partner and a 13%
limited partner in this limited partnership which has owned and operated a
restaurant in a Howard JohnsonÕs Hotel in Stuart, Florida under our ÒFlaniganÕs
Seafood Bar and GrillÓ service mark since January 11, 2004. 31.0% of the
remaining limited partnership interest is owned by persons who are either our
officers, directors or their family members. As of the end of our fiscal year 2010, this limited
partnership has returned to its investors approximately 22.5% of their initial
cash invested.
NOTE
4. INVESTMENTS
IN LIMITED PARTNERSHIPS (Continued)
Stuart,
Florida (Continued)
During
our fiscal years 2010 and 2009, no distributions were made to limited partners
as this limited partnership had a net loss of $19,000 and a net gain of $1,000
from the operation of the restaurant during the fiscal years 2010 and 2009,
respectively, before depreciation and amortization, and owed the Company $228,000
and $241,000, as of the end of our fiscal years 2010 and 2009, respectively, in
advances made to meet operating losses. This
entity is consolidated in the accompanying financial statements and therefore
the intercompany transactions are eliminated. As of October 2, 2010 and October
3, 2009, the amounts this limited partnership owes to us have been offset with
an allowance for doubtful accounts, in the amount of $228,000 and $241,000,
respectively, on our balance sheet and is offset by an eliminating entry in
consolidation in accordance with ASC 810 regarding accounting for
consolidation.
During the fourth quarter of our fiscal
year 2010, this limited partnership entered into a new lease with the lender
which acquired ownership of the property through foreclosure. The term of the lease is three (3)
years, retroactive to May 1, 2010, with one (1) three (3) year renewal option
and the annual rent is subject to fixed annual increases. During the fourth quarter of our fiscal
year 2010, the lender discontinued its ÒHoward JohnsonÕsÓ franchise, which
gives this limited partnership the right to terminate the lease in the event a
new franchise with a national hotel chain is not executed within ninety (90) days
of the termination of the ÒHoward JohnsonÕsÓ franchise or at anytime thereafter
until a new franchise with a national hotel chain is executed. If this limited partnership
were to terminate the lease and was required to vacate the Stuart, Florida
premises, it would have a material adverse effect on its operations. No assurance can be given that the
limited partnership would be able to locate a suitable replacement location at
reasonable rates and terms, if at all.
We
are the sole general partner and a 28% limited partner in this limited
partnership which has owned and operated a restaurant in Wellington, Florida
under our ÒFlaniganÕs Seafood Bar
and
GrillÓ service mark since May 27, 2005.
25.7% of the remaining limited partnership interest is owned by persons
who are either our officers, directors or their family members. As of the end of our fiscal year 2010,
this limited partnership has returned to its investors approximately 47% of
their initial cash invested, increased from approximately 42% as of the
end
of our fiscal year 2009. This entity is consolidated in the accompanying
financial statements.
NOTE
4. INVESTMENTS
IN LIMITED PARTNERSHIPS (Continued)
We are the sole general partner and 40%
limited partner in this limited partnership which has owned and operated a
restaurant in Pinecrest, Florida under our ÒFlaniganÕs Seafood Bar and GrillÓ
service mark since August 14, 2006.
15.0% of the remaining limited partnership interest is owned by persons
who are either our officers, directors or their family members. As of the end of our fiscal year 2010,
this limited partnership has returned to its investors approximately 50% of
their initial cash invested, increased from approximately 38% as of the
end of our fiscal year 2009. This entity is consolidated in the
accompanying financial statements.
Davie,
Florida
We are the sole general partner and a 48%
limited partner in this limited partnership which has owned and operated a
restaurant in Davie, Florida under our ÒFlaniganÕs Seafood Bar and GrillÓ
service mark since July 28, 2008.
9.7% of the remaining limited partnership interest is owned by persons
who are either our officers, directors or their family members. As of the end of our fiscal year 2010, this
limited partnership has returned to its investors approximately 13.5% of their
initial cash invested, increased from approximately 7.0% as of the end of our
fiscal year 2009. This entity is
consolidated in the accompanying financial statements.
Pembroke Pines, Florida
We
are the sole general partner and a 17% limited partner in this limited
partnership which has owned and operated a restaurant in Pembroke Pines,
Florida under our ÒFlaniganÕs Seafood Bar and GrillÓ service mark since October
29, 2007. 17.9% of the remaining
limited partnership interest is owned by persons who are either our officers,
directors or their family
members. As of the end of our fiscal year 2010,
this limited partnership has returned to its investors approximately 18.5% of
their initial cash invested, increased from approximately 11.0% as of the end
of our fiscal year 2009. This entity is consolidated in the accompanying
financial statements.
Fort
Lauderdale, Florida
A corporation, owned by one of our directors, acts as
sole general partner of a limited partnership which has owned and operated a
restaurant in Fort Lauderdale, Florida under our ÒFlaniganÕs Seafood Bar and
GrillÓ service mark since April 1, 1997.
We have a 25% limited
partnership interest in this limited partnership. 58.8% of the remaining limited
partnership interest is owned by persons who are either our officers, directors
or their family members. We have a
franchise arrangement with this limited partnership. For accounting purposes, we do not consolidate the
operations of this limited partnership into our operations. This entity is reported using the
equity method in the accompanying consolidated financial statements.
NOTE
4. INVESTMENTS
IN LIMITED PARTNERSHIPS (Continued)
Fort
Lauderdale, Florida (Continued)
The following is a
summary of condensed unaudited financial information pertaining to our limited
partnership investment in Fort Lauderdale, Florida:
|
Financial Position: |
|
2010 |
2009 |
|
Current
assets |
|
$ 130,000 |
$ 76,000 |
|
Non-current
assets |
|
446,000 |
525,000 |
|
Current
liabilities |
|
120,000 |
126,000 |
|
Non-current
liabilities |
|
9,000 |
28,000 |
|
|
|
|
|
|
Operating Results: |
|
|
|
|
Revenues |
|
2,347,000 |
2,300,000 |
|
Gross profit |
|
1,558,000 |
1,509,000 |
|
Net income |
|
48,000 |
1,300 |
NOTE 6. INCOME
TAXES
The components of our provision for income taxes for our fiscal years
2010 and 2009 are as follows:
|
|
|
2010 |
2009 |
|
Current: |
|
|
|
|
Federal |
|
$625,000 |
$331,000 |
|
State |
|
183,000 |
92,000 |
|
Deferred: |
|
808,000 |
423,000 |
|
Federal |
|
(29,000) |
(167,000) |
|
State |
|
(22,000) |
(29,000) |
|
|
|
(51,000) |
(196,000) |
|
|
|
$ 757,000 |
$ 227,000 |
NOTE 6. INCOME
TAXES (Continued)
A reconciliation of income tax computed at the statutory federal rate to income tax expense is as follows:
|
|
|
2010 |
2009 |
|
|
|
|
|
|
Tax provision at the
statutory rate of 34% |
|
$828,000 |
$549,000 |
|
State income taxes, net
of federal income tax |
|
102,000 |
58,000 |
|
Deferred tax benefit of
tip credit generated |
|
(200,000) |
(167,000) |
|
Tax effect of
consolidation elimination entry |
|
5,000 |
(81,000) |
|
Deferred tax asset true
up |
|
- |
(140,000) |
|
Other |
|
22,000 |
8,000 |
|
|
|
$757,000 |
$227,000 |
We have deferred tax assets which arise primarily due to depreciation recorded at different rates for tax and book purposes offset by cost basis differences in depreciable assets due to the deferral of the recognition of insurance recoveries on casualty losses for tax purposes, investments in and management fees paid by limited partnerships, accruals for potential uninsured claims, bonuses accrued for book purposes but not paid within two and a half months for tax purposes, the capitalization of certain inventory costs for tax purposes not recognized for financial reporting purposes, the recognition of revenue from gift cards not redeemed within twelve months of issuance, allowances for uncollectable receivables, unfunded limited retirement commitments and tax credit carryforwards generated as a result of the application of alternative minimum taxes.
The components of our deferred tax assets at October 2, 2010 and October 3, 2009 were as follows:
|
|
2010 |
2009 |
|
|
|
|
|
Current: |
|
|
|
Reversal of aged payables |
$ 27,000 |
$ 27,000 |
|
Capitalized inventory costs |
20,000 |
20,000 |
|
Accrued bonuses |
165,000 |
135,000 |
|
Accruals for potential
uninsured claims |
21,000 |
48,000 |
|
Gift cards |
33,000 |
16,000 |
|
JV management fees |
(12,000) |
- |
|
Allowance for account
receivable for consolidated affiliate |
87,000 |
92,000 |
|
|
$341,000 |
$338,000 |
|
Long-Term: |
|
|
|
Book/tax differences in
property and equipment |
$434,000 |
$406,000 |
|
Limited partnership investments |
418,000 |
403,000 |
|
Accrued limited retirement |
27,000 |
- |
|
Alternative minimum tax
carryforward |
- |
21,000 |
|
|
$879,000 |
$830,000 |
NOTE 7. DEBT
Long-Term Debt
|
|
2010 |
2009 |
|
Mortgage
payable to bank, secured by a first mortgage on real property and improvements,
bearing interest at 7.5%; payable in monthly installments of principal and
interest of $28,600, maturing in October, 2013. |
$3,175,000 |
$3,273,000 |
|
Term
loan payable to lender, secured by a blanket lien on all Company assets and a
second mortgage on a building, bearing interest at BBA LIBOR +3.25%, (3.51%
at October 2, 2010), but fixed at 4.55%, pursuant to a swap agreement,
payable in monthly installments of principal and interest of approximately $50,000,
fully amortized over 36 months, with the final payment due August, 2013. |
1,544,000 |
- |
|
Mortgage
payable to a related third party, secured by first mortgage on a real
property and improvements, bearing interest at 10%, amortized over 15 years, payable
in monthly installments of principal and interest of approximately $10,800, with
a balloon payment of approximately $658,000 due in September, 2018. |
1,000,000 |
- |
|
Mortgage
payable to bank, secured by a first mortgage on real property and
improvements, bearing interest at BBA LIBOR +2.25%, (2.51% at October 2,
2010), but fixed at 5.11% pursuant to a swap agreement, amortized over 20
years, payable in monthly installments of principal and interest of
approximately $4,600, with a balloon payment of approximately $720,000 due in
August, 2017. |
934,000 |
- |
|
Mortgage
payable to unrelated third party, secured by first mortgage on a real
property and improvements, bearing interest at 8½ %, payable in
monthly installments of principal and interest of approximately $8,400,
maturing in November, 2017. |
826,000 |
- |
|
Mortgage
payable, secured by first mortgage on real property and improvements, bearing
interest at 10.0%; amortized over 30 years, payable in monthly installments
of principal and interest of approximately $4,000, with a balloon payment of
approximately $413,000 in May, 2017. |
441,000 |
444,000 |
|
Financed
insurance premiums, secured by all insurance policies, bearing interest
between 4.05% and 5.15%, payable in monthly installments of principal and
interest in the aggregate amount of $42,000 through October 31, 2009; $33,000
through October 31, 2010; and $13,000 for November 30, 2010 for general
liability insurance. The monthly
installments for property insurance remained at $30,000 a month through
August 31, 2010. |
79,000 |
445,000 |
|
Mortgage payable to bank, secured by first
mortgage on real property and improvements, bearing interest at 7.25%;
payable in monthly installments of principal and interest of approximately
$8,000, maturing in December, 2013.
Paid in full on July 26, 2010. |
- |
936,000 |
|
Note payable to finance company, secured by
vehicle, bearing interest at 9.25%, payable in monthly installments of
principal and interest of approximately $4,500 through maturity in July 2010,
at which time the unpaid principal of $45,000 becomes due. Paid in full on July 1, 2010. |
- |
80,000 |
|
|
|
|
|
Other
|
54,000 |
36,000 |
|
|
8,053,000 |
5,214,000 |
|
Less
current portion |
815,000 |
681,000 |
|
|
$7,238,000 |
$4,533,000 |
Long-term debt at October 2, 2010 matures as follows:
|
2011 2012 |
815,000 763,000 |
|
|
2013 |
750,000 |
|
|
2014 |
2,942,000 |
|
|
2015 |
128,000 |
|
|
Thereafter |
_
_2,655,000 |
|
|
|
$8,053,000 |
|
Line of Credit
In July, 2010, we converted the amount
outstanding on our line of credit ($1,586,000) to a term loan maturing in July,
2013. As of October 2, 2010, we no
longer have a line of credit.
Legal Matters
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
Legal
Matters (Continued)
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 by the owner of the adjacent shopping center and we filed and
served a cross-complaint against the seller. During the fourth quarter of our fiscal year 2009, the
seller was awarded reimbursement of its attorneysÕ fees and costs in the amount
of $109,000 and during
the second quarter of our fiscal year 2010, the trial court denied our motion
for re-consideration of a portion of the award. During the third quarter of our
fiscal year 2010, we paid the award of attorneysÕ fees and costs. During the second quarter of our fiscal
year 2009, the seller filed suit against us for malicious prosecution. During the second quarter of our fiscal
year 2010, the court denied the sellerÕs motion for punitive damages. We deny the allegations and are vigorously
defending against the allegations.
We are a party to various claims, legal actions and complaints arising in the ordinary course of our business. It is our opinion that all such matters are without merit or involve such amounts that an unfavorable disposition would not have a material adverse effect on our financial position or results of operations.
We lease a substantial portion of the land and buildings used in our operations under leases with initial terms expiring between 2011 and 2049. Renewal options are available on many of our leases. Most of our leases are fixed rent agreements. For one Company-owned restaurant/package liquor store combination unit, lease rental is subject to sales overrides ranging from 3% to 4% of annual sales in excess of established amounts. For five limited partnership restaurants, lease rentals are subject to sales overrides ranging from 2% to 5.5% of annual sales in excess of the base rent paid. We recognize rent expense on a straight line basis over the term of the lease and percentage rent as incurred.
We have a ground lease for an out parcel in Hollywood, Florida where we constructed a 4,120 square foot stand-alone building, one-half (1/2) of which is used by us for the operation of our Company-owned package liquor store and the other one-half (1/2) of which is subleased to an unrelated third party as retail space. Rent for the retail space commenced January 1, 2005, and we generated approximately $50,000 and $49,000 of revenue from this source during our fiscal years ended October 2, 2010 and October 3, 2009, respectively. Total future minimum sublease payments under the non-cancelable sublease are $240,000, including Florida sales tax (currently 6%).
Future minimum lease payments, including Florida sales tax (currently 6% to 7%) under our non-cancelable operating leases as of October 2, 2010 are as follows:
Leases (Continued)
|
2011 |
|
$ 2,516,000 |
|
2012 |
|
2,264,000 |
|
2013 |
|
2,077,000 |
|
2014 |
|
1,985,000 |
|
2015 |
|
1,559,000 |
|
Thereafter |
|
_ 4,703,000 |
|
Total |
|
$15,104,000 |
Total rent expense for all of our operating leases was approximately $2,924,000 and $2,725,000 in our fiscal years 2010 and 2009, respectively, and is included in ÒOccupancy costsÓ in our accompanying consolidated statements of income. This total rent expense is comprised of the following:
|
|
|
2010 |
2009 |
|
|
|
|
|
|
Minimum Base Rent |
|
$ 2,511,000 |
$ 2,367,000 |
|
Contingent Percentage Rent |
|
413,000 |
358,000 |
|
Total |
|
$ 2,924,000 |
$ 2,725,000 |
Subsequent to the end of our fiscal year 2010, the limited partnership which owns the restaurant located in Surfside, Florida (Store #60) extended its lease for ten years or until December 31, 2021. The renewal terms are substantially the same as the existing lease, except that the annual rent will be subject to an increase January 1, 2011 and will thereafter be subject to fixed annual increases.
We guarantee various leases for franchisees and stores sold in prior years. Remaining rental payments required under these leases total approximately $941,000.
We account
for such lease guarantees in accordance with FASB ASC Topic 460, ÒGuaranteesÓ. Under that standard, we would be required to recognize the
fair value of guarantees issued or modified after December 31, 2002, for
non-contingent guarantee obligations, and also a liability for contingent
guarantee obligations based on the probability that the guaranteed party will
not perform under the contractual terms of the guaranty agreement.
We do not
believe it is probable that we will be required to perform under the remaining
lease guarantees and therefore, no liability has been accrued in our
consolidated financial statements.
Purchase Commitments
Effective November 30, 2010, we entered into a purchase agreement with a
new rib supplier. The terms of the agreement stipulate that we will purchase
approximately $3,100,000 of baby back ribs during the 2011 calendar year at a
fixed cost. We contract for the
purchase of baby back ribs on an annual basis to fix the cost and ensure
adequate supply for the calendar year.
We anticipate purchasing all of our rib supply from this vendor, but we
believe that several other alternative vendors are available, if necessary.
At
October 2, 2010, we were the franchisor of five units under franchise
agreements. At October 3, 2009, we
were the franchisor of six units under franchise agreements. On October 18,
2009, we acquired the assets of the franchised restaurant in Boca Raton,
Florida. Of the five franchised
stores, four are combination restaurant/package liquor stores and one is a restaurant. Three franchised stores are owned and
operated by related parties. Under the franchise agreements, we provide
guidance, advice and management assistance to the franchisees. In addition and for an additional
annual fee of approximately $25,000, we also act as fiscal agent for the
franchisees whereby we collect all revenues and pay all expenses and
distributions. We also, from time
to time, advance funds on behalf of the franchisees for the cost of
renovations. The resulting amounts
receivable from and payable to these franchisees are reflected in the
accompanying consolidated balance sheet as either an asset or a liability. We also agree to sponsor and manage
cooperative buying groups on behalf of the franchisees for the purchase of
inventory. The franchise
agreements provide for royalties to us of approximately 3% of gross restaurant
sales and 1% of gross package liquor sales. We are not currently offering or accepting new franchises.
As of October 2, 2010 and October 3, 2009, we had no employment
agreements.
Our Board of Directors approved an annual performance bonus, with 14%
of the corporate pre-tax net income, plus or minus non-recurring items, but
before depreciation and amortization in excess of $650,000 paid to the Chief
Executive Officer and 6% paid to other members of management. Bonuses for our fiscal years 2010 and
2009 amounted to approximately $700,000 and $459,000, respectively.
Our Board of Directors also approved an annual performance bonus, with
5% of the pre-tax net income before depreciation and amortization from our
restaurants in excess of $1,875,000 and our share of the pre-tax net income
before depreciation and amortization from the restaurants owned by the limited
partnerships paid to the Chief Operating Officer and 5% paid
to the Chief Financial Officer.
Bonuses for our fiscal years 2010 and 2009 amounted to approximately $396,000
and $331,000, respectively.
Our Board of Directors
approved an annual performance bonus, with 3% of the pre-tax net income before
depreciation and amortization from the package liquor stores paid to the Vice
President of Package
Operations. Bonuses for our fiscal
years 2010 and 2009 amounted to approximately $38,000 and $24,000,
respectively.
Management
Agreements
Atlanta, Georgia
We
own, but do not operate, an adult entertainment nightclub located in Atlanta,
Georgia which operates under the name ÒMardi GrasÓ. We have a management agreement with an unaffiliated third
party to manage the club. Under
our management agreement, the unaffiliated third party management firm is
obligated to pay us an annual amount, paid monthly, equal to the greater of
$150,000 or ten (10%) percent of gross sales from the club, offset by one-half
(1/2) of any rental increases, provided our fees will never be less than
$150,000 per year. For our fiscal
years ended October 2, 2010 and October 3, 2009, we generated $165,000 and $170,000
of revenue, respectively, from the operation of the club.
Deerfield
Beach, Florida
Since
January 2006, we have managed ÒThe WhaleÕs RibÓ, a casual dining restaurant
located in Deerfield Beach, Florida, pursuant to a management agreement. We paid $500,000 in exchange for our
rights to manage this restaurant.
The management agreement is being amortized on a straight line basis over
the life of the initial term of the agreement, ten (10) years. As of October 2,
2010 and October 3, 2009, the balance of our management agreement of $262,000
and $312,000 was included in other assets in the accompanying consolidated
balance sheet. The restaurant is owned by a third party unaffiliated with
us. In exchange for providing
management, bookkeeping and related services, we receive one-half (½) of
the net profit, if any, from the operation of the restaurant. The term of the management agreement,
which commenced January 9, 2006, is for ten (10) years, with four (4) five (5)
year renewal options in favor of the owner of the restaurant. For our fiscal years ended October 2,
2010 and October 3, 2009, we generated $263,000 and $185,000 of revenue,
respectively, from providing these management services. As of October 2, 2010, we have
generated revenue in the aggregate amount of $866,000 since the effective date
of the management agreement on January 9, 2006.
NOTE 9. FAIR VALUE MEASUREMENTS OF
FINANCIAL INSTRUMENTS
As
of October 2, 2010, we have fully adopted FASB ASC Topic 820, ÒFair Value Measurements and DisclosuresÓ,
for financial assets and liabilities and for non-financial assets and
liabilities that are recognized or disclosed at fair value on at least an
annual basis. Topic 820 defines
fair value as the price that would be received from selling an asset or paid to
transfer a liability in an orderly transaction between market participants at
the measurement date. When determining the fair value measurements for assets
and liabilities required or permitted to be recorded at fair value, we consider
the principal or most advantageous market in which it would transact and
consider assumptions that market participants would use when pricing the asset
or liability, such as inherent risk, transfer restrictions and risk of
non-performance. Topic 820
establishes a fair market hierarchy that requires an entity to maximize the use
of observable inputs and minimize the use of unobservable inputs when measuring
fair value. Topic 820 establishes
three levels of inputs that may be used to measure fair value:
¥ Level 1 Inputs –
Unadjusted quoted prices in active markets for identical assets or liabilities.
¥ Level 2 Inputs -- Inputs
other than quoted prices included in Level 1 that are either directly or
indirectly observable through correlation with market data. These include quoted prices for similar
assets or liabilities in active markets; quoted prices for identical or similar
assets or liabilities in markets that are not active; and inputs to evaluation
models or other pricing methodologies that do not require significant judgment
because the inputs used in the model, such as interest rates and volatility,
can be corroborated by readily observable market data.
¥ Level 3 Inputs -- One or more
significant inputs that are unobservable and supported by little or no market
activity, and that reflect the use of significant management judgment. Level 3 assets and liabilities include
those whose fair value measurements are determined using pricing models,
discounted cash flow methodologies or similar valuation techniques, and
significant management judgment or estimation.
Interest
Rate Swap Agreements
At October 2, 2010, we had two variable
rate debt instruments (the Term Loan and the Refinanced Mortgage Loan)
outstanding that are impacted by changes in interest rates. As a means of managing our interest rate
risk on these debt instruments, we entered into interest rate swap agreements
with third party financial institutions to effectively convert certain variable
rate debt obligations to fixed rates.
We are currently party to the following two (2) interest rate swap
agreements:
(i)
One (1) interest rate swap agreement entered into in July, 2010 relates to the
Term Loan, (the ÒTerm Loan SwapÓ).
The Term Loan Swap requires us to pay interest for a three (3) year
period at a fixed rate of 4.55% on an initial amortizing notional principal
NOTE 9. FAIR VALUE
MEASUREMENTS OF FINANCIAL INSTRUMENTS
(Continued)
Interest Rate Swap Agreements (Continued)
amount
of $1,586,000, while receiving interest for the same period at the British
Bankers Association LIBOR (ÒLIBORÓ), Daily Floating Rate, plus 3.25%, on the
same amortizing notional principal amount. Under this method of accounting, at
October 2, 2010, we determined the fair value of the Term Loan Swap based upon
unadjusted quoted
prices in active markets for similar assets or liabilities provided by our
unrelated third party lender (Level 2 Input). The fair
value of the Term Loan Swap was not significant at year end; and
(ii) The second interest rate swap agreement entered
into in July, 2010 relates to the Refinanced Mortgage Loan (the ÒMortgage Loan
SwapÓ). The Mortgage Loan Swap requires us to pay interest for a seven (7) year
period at a fixed rate of 5.11% on an initial amortizing notional principal
amount of $935,000, while receiving interest for the same period at LIBOR,
Daily Floating Rate, plus 2.25%, on the same amortizing notional principal
amount. Under
this method of accounting, at October 2, 2010, we determined the fair value of
the Mortgage Loan Swap based upon unadjusted quoted prices in active
markets for similar assets or liabilities provided by our unrelated third party
lender (Level 2 Input). The fair value of the Mortgage Loan Swap
was not significant at year end.
Purchase of Common Shares
Pursuant
to a discretionary plan approved by the Board of Directors, during our fiscal
year 2010, we purchased 1,018 shares of our common stock for an aggregate
purchase price of $6,000. Of the
shares purchased, we purchased 1,000 shares of our common stock from the Joseph
G. Flanigan Charitable Trust for $6,000 and 18 shares of our common stock were
purchased on the open market.
During our fiscal year 2009, we purchased 21,400 shares of our common
stock for an aggregate purchase price of $87,000. Of the shares purchased, we purchased 850 shares of our
common stock from the Joseph G. Flanigan Charitable
Trust for $4,000 and 325 shares of our common stock from an employee for $2,000 in off market transactions,
which reflected an actual per
share
purchase price which was equal to the average per share market price on the
date of purchase. The balance of
our common stock purchased, 20,225 shares, was purchased on the open market for
an aggregate purchase price of $81,000.
Sale of Common Shares
During
our fiscal years 2010 and 2009, we did not sell any shares of our common stock.
Stock Options
We granted no options during our fiscal years 2010 and 2009. We have no options outstanding at October 2, 2010. During fiscal years ended October 2, 2010 and October 3, 2009, NONE and 49,350 options expired unexercised.
NOTE 11. BUSINESS SEGMENTS
We operate principally in two reportable
segments –package stores and restaurants. The operation of package stores consists of retail liquor
sales and related items.
Information concerning the revenues and operating income for our fiscal
years ended 2010 and 2009, 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 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.
|
Operating
Revenues: |
|
2010 |
2009 |
|||
|
Restaurants |
|
$55,717,000 |
$52,979,000 |
|||
|
Package stores |
|
12,898,000 |
12,632,000 |
|||
|
Other revenues |
|
1,378,000 |
1,449,000 |
|||
|
Total
operating revenues |
|
$69,993,000 |
$67,060,000 |
|||
|
|
|
|
|
|||
|
Operating
Income Reconciled to Income before Income Taxes and Net Income
Attributable to Noncontrolling Interests |
|
|
|
|||
|
Restaurants |
|
$4,620,000 |
$3,695,000 |
|||
|
Package
stores |
|
1,068,000 |
526,000 |
|||
|
|
|
5,688,000 |
4,221,000 |
|||
|
Corporate
expenses, net of other revenues |
|
(2,073,000) |
(1,774,000) |
|||
|
Operating
income |
|
3,615,000 |
2,447,000 |
|||
|
Other Income |
- |
- |
1,000 |
|||
|
Net Income
Attributable to Noncontrolling Interests |
|
(799,000) |
(627,000) |
|||
|
Interest
expense, net of interest income |
|
(380,000) |
(205,000) |
|||
|
Income Before Income Taxes |
|
$2,436,000 |
$1,616,000 |
|||
|
|
|
|
|
|||
|
Identifiable
Assets: |
|
|
|
|||
|
Restaurants |
|
$22,043,000 |
$19,587,000 |
|||
|
Package store |
|
3,678,000 |
3,396,000 |
|||
|
|
|
25,721,000 |
22,983,000 |
|||
|
Corporate |
|
11,593,000 |
10,496,000 |
|||
|
Consolidated
Totals |
|
$37,314,000 |
$33,479,000 |
|||
|
|
|
|
|
|||
|
Capital
Expenditures: |
|
|
|
|||
|
Restaurants |
|
$
3,957,000 |
$
1,284,000 |
|||
|
Package stores |
|
940,000 |
305,000 |
|||
|
|
|
4,897,000 |
1,589,000 |
|||
|
Corporate |
|
108,000 |
345,000 |
|||
|
Total
Capital Expenditures |
|
$ 5,005,000 |
$ 1,934,000 |
|||
|
|
|
|
|
|||
|
Depreciation
and Amortization: |
|
|
|
|||
|
Restaurants |
|
$
1,911,000 |
$ 1,887,000 |
|||
|
Package stores |
|
215,000 |
250,000 |
|||
|
|
|
2,126,000 |
2,137,000 |
|||
|
Corporate |
|
332,000 |
332,000 |
|||
|
Total
Depreciation and Amortization |
|
$2,458,000 |
$2,469,000 |
|||
NOTE 12. QUARTERLY INFORMATION (UNAUDITED)
The
following is a summary of our unaudited quarterly results of operations for the
quarters in our fiscal years 2010 and 2009.
|
|
Quarter
Ended |
|||
|
|
January
2, 2010 |
April
3, 2010 |
July
3, 2010 |
October
2, 2010 |
|
|
|
|
|
|
|
Revenues |
$17,164,000 |
$18,938,000 |
$17,374,000 |
$16,517,000 |
|
Income
from operations |
591,000 |
1,515,000 |
1,034,000 |
475,000 |
|
Net
income attributable to stockholders |
288,000 |
670,000 |
426,000 |
295,000 |
|
Net
income per share – Basic |
0.15 |
0.36 |
0.23 |
0.16 |
|
Net
income per share – Diluted |
0.15 |
0.36 |
0.23 |
0.16 |
|
Weighted
average common |
|
|
|
|
|
stock outstanding – basic |
1,862,534 |
1,861,743 |
1,861,735 |
1,861,725 |
|
Weighted
average common |
|
|
|
|
|
stock outstanding –
diluted |
1,862,534 |
1,861,743 |
1,861,735 |
1,861,725 |
|
|
Quarter
Ended |
|||
|
|
December
27, 2008 |
March
28, 2009 |
June
27, 2009 |
October
3, 2009 |
|
|
|
|
|
|
|
Revenues |
$16,253,000 |
$17,757,000 |
$16,491,000 |
$16,559,000 |
|
Income
from operations |
289,000 |
1,214,000 |
650,000 |
294,000 |
|
Net
income attributable to stockholders |
172,000 |
684,000 |
311,000 |
222,000 |
|
Net
income per share – Basic |
|
|
|
|
|
0.09 |
0.37 |
0.17 |
0.12 |
|
|
Net
income per share – Diluted |
|
|
|
|
|
0.09 |
0.37 |
0.17 |
0.12 |
|
|
Weighted
average common |
|
|
|
|
|
stock outstanding – basic |
1,876,681 |
1,870,690 |
1,863,007 |
1,862,743 |
|
Weighted
average common |
|
|
|
|
|
stock outstanding –
diluted |
1,876,681 |
1,870,690 |
1,863,007 |
1,862,743 |
Quarterly
operating results are not necessarily representative of our operations for a
full year for various reasons including the seasonal nature of both the
restaurant and package store segments.
NOTE 13. 401(k) PLAN
Effective July 2004, we began sponsoring a 401(k) retirement plan covering substantially all employees who meet certain eligibility requirements. Employees may contribute elective deferrals to the plan up to amounts allowed under the Internal Revenue Code. We are not required to contribute to the plan but may make discretionary profit sharing and matching contributions. During our fiscal years 2010 and 2009, we made discretionary contributions of $21,000 and $NONE, respectively.
NOTE 14. SUBSEQUENT EVENTS
(a)
Purchase
of Real Property, (North Miami, FL.):
During the
fourth quarter of our fiscal year 2010 we contracted for the purchase of the
real property and building where our combination
restaurant and package liquor store located at 13205 Biscayne Boulevard, North
Miami, Florida,(Store #20), operates. Subsequent to the end of our fiscal year
2010, we assigned all of our rights under the contract to a new wholly owned
subsidiary, (FlaniganÕs Enterprises of N. Miami, Inc., a Florida corporation),
and closed on the purchase. We
paid $1,750,000 for this property, $850,000 of which we borrowed from a related
third party, pursuant to a first mortgage, which we guaranteed. The mortgage note bears interest at the
rate of ten (10%) percent per annum, is amortized over fifteen (15) years with
equal
NOTE 14. SUBSEQUENT
EVENTS (Continued)
monthly
payments of principal and interest, each in the amount of $9,100, with the
entire principal balance and all accrued interest due in eight (8) years.
(b) Extension
of Lease for Existing Location, (Surfside, FL.):
Subsequent
to the end of our fiscal year 2010, the limited partnership which owns the
restaurant located at 9516 Harding Avenue, Surfside, Florida, (Store #60),
extended its lease for a period of ten years. The renewal terms are substantially the same as the existing
lease, except that the annual rent will be subject to an increase effective
January 1, 2011 and will thereafter be subject to fixed annual increases.
Subsequent events have been evaluated
through the date these consolidated financial statements were issued. No events, other than the events
described above, required disclosure.