UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from____________ to ____________
Commission File Number
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Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
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| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined
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As of February 10, 2025 there were
FLANIGAN’S ENTERPRISES, INC. AND SUBSIDIARIES
LIST XBRL DOCUMENTS
As used in this Quarterly Report on Form 10-Q, the terms “we,” “us,” “our,” the “Company” and “Flanigan’s” mean Flanigan’s Enterprises, Inc. and its subsidiaries (unless the context indicates a different meaning).
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FLANIGAN’S ENTERPRISES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share and per share amounts)
| Thirteen Weeks Ended | ||||||||
| December 28, 2024 | December 30, 2023 | |||||||
| REVENUES: | ||||||||
| Restaurant food sales | $ | $ | ||||||
| Restaurant bar sales | ||||||||
| Package store sales | ||||||||
| Franchise related revenues | ||||||||
| Rental income | ||||||||
| Other revenues | ||||||||
| COSTS AND EXPENSES: | ||||||||
| Cost of merchandise sold: | ||||||||
| Restaurant | ||||||||
| Package goods | ||||||||
| Payroll and related costs | ||||||||
| Operating expenses | ||||||||
| Occupancy costs | ||||||||
| Selling, general and administrative expenses | ||||||||
| Depreciation and amortization | ||||||||
| Income from Operations | ||||||||
| OTHER INCOME (EXPENSE): | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Interest and other income | ||||||||
| ( | ) | ( | ) | |||||
| Income before benefit (provision) for income taxes | ||||||||
| (Provision) benefit for income taxes | ( | ) | ||||||
| Net Income | ||||||||
| Less: Net Income attributable to noncontrolling interests | ( | ) | ( | ) | ||||
| Net Income Attributable to Flanigan’s Enterprises Inc. Stockholders | $ | $ | ||||||
| Net Income Per Common Share: | ||||||||
| Basic and Diluted | $ | $ | ||||||
| Weighted Average Shares and Equivalent Shares Outstanding | ||||||||
| Basic and Diluted | ||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
1
FLANIGAN’S ENTERPRISES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
| Thirteen Weeks Ended | ||||||||
| December 28, | December 30, | |||||||
| 2024 | 2023 | |||||||
| Net Income: | $ | $ | ||||||
| Other comprehensive income (loss): | ||||||||
| Change in fair value of interest rate swap, net of tax | ( | ) | ||||||
| Total Comprehensive Income | $ | $ | ||||||
See accompanying notes to unaudited condensed consolidated financial statements.
2
FLANIGAN’S ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 28, 2024 (UNAUDITED) AND SEPTEMBER 28, 2024
(in thousands, except share amounts)
| ASSETS | December 28, 2024 | September 28, 2024 | ||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Prepaid income taxes | ||||||||
| Other receivables | ||||||||
| Inventories | ||||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Right-of-use assets, operating leases | ||||||||
| Investment in limited partnerships | ||||||||
| Other Assets: | ||||||||
| Liquor licenses | ||||||||
| Leasehold interests, net | ||||||||
| Deposits on property and equipment | ||||||||
| Other | ||||||||
| Total other assets | ||||||||
| Total assets | $ | $ | ||||||
See accompanying notes to unaudited condensed consolidated financial statements.
3
FLANIGAN’S ENTERPRISES, INC, AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 28, 2024 (UNAUDITED) AND SEPTEMBER 28, 2024
(in thousands, except share amounts)
(Continued)
| LIABILITIES AND STOCKHOLDERS' EQUITY | December 28, 2024 | September 28, 2024 | ||||||
| Current Liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Accrued compensation | ||||||||
| Due to franchisees | ||||||||
| Current portion of long-term debt | ||||||||
| Operating lease liabilities, current | ||||||||
| Deferred revenue | ||||||||
| Total current liabilities | ||||||||
| Long-Term Debt, Net of Current Portion | ||||||||
| Operating lease liabilities, non-current | ||||||||
| Deferred tax liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies Note 7 | ||||||||
| Stockholders' Equity: | ||||||||
| Flanigan’s Enterprises, Inc.’s Stockholders’ Equity | ||||||||
| Common stock, $ | ||||||||
| Capital in excess of par value | ||||||||
| Retained earnings | ||||||||
| Accumulated other comprehensive income | ( | ) | ||||||
| Treasury stock, at cost, | ( | ) | ( | ) | ||||
| Total Flanigan’s Enterprises, Inc.’s Stockholders’ Equity | ||||||||
| Noncontrolling interests | ||||||||
| Total stockholders' equity | ||||||||
| Total liabilities and stockholders' equity | $ | $ | ||||||
See accompanying notes to unaudited condensed consolidated financial statements.
4
FLANIGAN’S ENTERPRISES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF STOCKHOLDERS’ EQUITY
FOR THE THIRTEEN WEEKS ENDED DECEMBER 28, 2024 AND DECEMBER 30, 2023
(in thousands, except share amounts)
| Common Stock | Capital in Excess of | Retained | Treasury Stock | Noncontrolling | ||||||||||||||||||||||||||||||||
| Shares | Amount | Par Value | AOCI | Earnings | Shares | Amount | Interests | Total | ||||||||||||||||||||||||||||
| Balance, September 28, 2024 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | |||||||||||||||||||||||||
| Net income | — | — | ||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | ||||||||||||||||||||||||||||||||||
| Distributions to noncontrolling interests | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Purchase of noncontrolling interest | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Balance, December 28, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||||||||||||
| Common Stock | Capital in Excess of | Retained | Treasury Stock | Noncontrolling | ||||||||||||||||||||||||||||||||
| Shares | Amount | Par Value | AOCI | Earnings | Shares | Amount | Interests | Total | ||||||||||||||||||||||||||||
| Balance, September 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||||||||||||
| Net income | — | — | ||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | ( | ) | — | ( | ) | ||||||||||||||||||||||||||||||
| Distributions to noncontrolling interests | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Balance, December 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
5
FLANIGAN’S ENTERPRISES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THIRTEEN WEEKS ENDED DECEMBER 28, 2024 AND DECEMBER 30, 2023
(in thousands)
| December 28, 2024 | December 30, 2023 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Amortization of leasehold interests | ||||||||
| Amortization of operating lease right-of-use assets | ||||||||
| Loss on abandonment of property and equipment | ||||||||
| Amortization of deferred loan costs | ||||||||
| Income from unconsolidated limited partnership | ( | ) | ( | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| (Increase) decrease in: | ||||||||
| Other receivables | ( | ) | ||||||
| Prepaid income taxes | ( | ) | ||||||
| Inventories | ( | ) | ( | ) | ||||
| Prepaid expenses | ||||||||
| Other assets | ||||||||
| Increase (decrease) in: | ||||||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| Due to franchisees | ( | ) | ( | ) | ||||
| Deferred revenue | ||||||||
| Net cash and cash equivalents provided by operating activities | ||||||||
| Cash Flows from Investing Activities: | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Purchase of construction in progress | ( | ) | ||||||
| Deposits on property and equipment | ( | ) | ( | ) | ||||
| Purchase of leaseholds | ( | ) | ||||||
| Proceeds from sale of property and equipment | ||||||||
| Proceeds from insurance recovery | ||||||||
| Distributions from unconsolidated limited partnership | ||||||||
| Net cash and cash equivalents used in investing activities | ( | ) | ( | ) | ||||
See accompanying notes to unaudited condensed consolidated financial statements.
6
FLANIGAN’S ENTERPRISES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THIRTEEN WEEKS ENDED DECEMBER 28, 2024 AND DECEMBER 30, 2023
(in thousands)
(Continued)
| December 28, 2024 | December 30, 2023 | |||||||
| Cash Flows from Financing Activities: | ||||||||
| Payments on long-term debt | ( | ) | ( | ) | ||||
| Purchase of noncontrolling limited partnership interest | ( | ) | ||||||
| Distributions to limited partnerships’ noncontrolling interests | ( | ) | ( | ) | ||||
| Net cash and cash equivalents used in financing activities | ( | ) | ( | ) | ||||
| Net Increase in Cash and Cash Equivalents | ||||||||
| Cash and Cash Equivalents - Beginning of Period | ||||||||
| Cash and Cash Equivalents - End of Period | $ | $ | ||||||
| Supplemental Disclosure for Cash Flow Information: | ||||||||
| Cash paid during the year for: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes | $ | $ | ||||||
| Supplemental Disclosure of Non-Cash Investing and Financing Activities: | ||||||||
| Increase (decrease) in fair value of interest rate swap | $ | $ | ( | ) | ||||
| Purchase deposits capitalized to property and equipment | $ | $ | ||||||
| Construction in progress transferred to property and equipment | $ | $ | ||||||
| Property and equipment and construction in progress in accounts payable and accrued expenses | $ | $ | ||||||
See accompanying notes to unaudited condensed consolidated financial statements.
7
FLANIGAN’S ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THIRTEEN WEEKS ENDED DECEMBER 28, 2024 AND DECEMBER 30, 2023
(1) BASIS OF PRESENTATION:
The accompanying condensed consolidated financial information for the thirteen weeks ended December 28, 2024 and December 30, 2023 is unaudited. Financial information as of September 28, 2024 has been derived from the audited financial statements of Flanigan’s Enterprises, Inc., a Florida corporation, together with its subsidiaries, (the “Company”, “we”, “our”, “ours” and “us” as the context requires), 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 28, 2024. 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 ten 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 ten limited partnerships.
The consolidated financial statements and related disclosures for condensed interim reporting are prepared in conformity with accounting principles generally accepted in the United States. 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 periods reported. These estimates include assessing the estimated useful lives of tangible assets, the recognition of deferred tax assets and liabilities and estimates relating to the calculation of incremental borrowing rates and length of leases associated with right-of-use assets and corresponding liabilities and estimates relating to loyalty reward programs. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in our condensed 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.
Certain amounts in the prior year Unaudited Condensed Consolidated Statement of Income and segment disclosures for interim reporting have been reclassified herein to conform to the presentation of the thirteen weeks ended December 28, 2024 Unaudited Condensed Consolidated Statement of Income and segment disclosures for interim reporting, which did not have a material impact on our net income.
(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 1 shows the amounts used in computing earnings per share. As of December 28, 2024 and December 30, 2023, no stock options or other potentially dilutive securities were outstanding and, accordingly, there is no difference in basic and diluted per share amounts.
(3) RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:
Adopted
The FASB issued guidance, Accounting Standards Update (ASU) 2016-13 Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which provides a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. This guidance was effective for the Company in the first quarter of our fiscal year 2024; however, after performing a thorough analysis the Company concluded there was no material impact from the adoption of this ASU.
8
In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” which updates reportable segment disclosure requirements, primarily through requiring enhanced disclosures about significant segment expenses and information used to assess segment performance. We early adopted this ASU in the third quarter of our fiscal year 2024 and this ASU affected the expense presentation of our Unaudited Condensed Consolidated Statements of Income and our Business Segments footnote. For further information regarding the Company’s Business Segments, please refer to our Unaudited Condensed Consolidated Statements of Income and Business Segments footnote.
Recently Issued
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which requires enhanced income tax disclosures, primarily related to standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. This ASU will be effective for the Company for our fiscal year 2026 annual reporting period, with the guidance applied either prospectively or retrospectively. Early adoption is permitted. We are currently evaluating the impact that the adoption of this ASU will have on our tax disclosures.
In November 2024, the FASB issued ASU 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures” which requires disclosure of disaggregated information about certain income statement expense line items in the notes to the financial statements on an interim and annual basis. This ASU will be effective for the Company for our fiscal year 2027 annual reporting period, with guidance applied either prospectively or retrospectively. Early adoption is permitted. We are currently evaluating the impact that the adoption of this ASU will have on our interim and consolidated financial statements.
There are no other recently issued accounting pronouncements that we have not yet adopted that we believe may have a material effect on our condensed consolidated financial statements.
(4) 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. The Company’s
income tax expense computed at the statutory federal rate of
(5) DEFERRED REVENUE
| Loyalty Program | ||||||||||||||||||||||||
| Gift Cards | Holiday Promo | Lunch Club | Big Daddy Good Customer | Other | Total | |||||||||||||||||||
| September 28, 2024 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Revenue deferred | ||||||||||||||||||||||||
| Revenue recognized | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| December 28, 2024 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| September 30, 2023 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Revenue deferred | ||||||||||||||||||||||||
| Revenue recognized | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| December 30, 2023 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
The Holiday Promo revenue recognized in Q1 2025 and Q1 2024 pertains to the breakage upon issuance of the promotional cards.
9
(6) INSURANCE PREMIUMS:
During the first quarter of our fiscal year 2025,
for the policy year commencing December 30, 2024, we obtained coverage on the following general liability, auto, property, excess liability
and terrorism policies with premiums totaling approximately $
(i) For
the policy year beginning December 30, 2024, our general liability insurance, excluding limited partnerships, is a one (1) year policy
with our insurance carriers. For the policy commencing December 30, 2024, the self-insured retention per occurrence is $
(ii) For
the policy year beginning December 30, 2024, the general liability insurance for our limited partnerships, including franchisees and the
managed restaurant is a one (1) year policy with our insurance carriers. For the policy commencing December 30, 2024, the self-insured
retention per occurrence is $
(iii) For
the policy year beginning December 30, 2024, our automobile insurance is a one (1) year policy. The one (1) year automobile insurance
premium is in the amount of $
(iv) For
the policy year beginning December 30, 2024, our property insurance is a one (1) year policy. The one (1) year property insurance premium
is in the amount of $
(v) For
the policy year beginning December 30, 2024, our excess liability insurance is a one (1) year policy. The one (1) year excess liability
insurance premium is in the amount of $
(vi) For
the policy year beginning December 30, 2024, our terrorism insurance is a one (1) year policy. The one (1) year terrorism insurance premium
is in the amount of $
We paid the $
10
(7) COMMITMENTS AND CONTINGENCIES:
Master Service Agreement
During the first quarter of our fiscal year 2025, we entered into a new Master Services Agreement with our current major vendor for a period of one (1) year effective January 1, 2025, with Company options for four (4) one (1) year renewal options to extend the term of the same. In this new Master Service Agreement, as in our prior Master Service Agreements, we commit to purchase specific products through our current major vendor, but are free to purchase other products through other vendors, provided no less than 80% of our overall product needs are purchased through our current major vendor.
ERP Contract
In the third quarter of our fiscal year 2024,
we entered into an agreement with Oracle, an unrelated third-party vendor for the licensing and support of NetSuite, a cloud-based Oracle
ERP solution to replace our general ledger. The agreement is for a period of
In the third quarter of our fiscal year 2024,
we also entered into an agreement with an unrelated third-party implementation partner for the implementation of NetSuite. The fee for
its implementation services will be approximately $
Leases
To conduct certain of our operations, we lease restaurant
and package liquor store space in South Florida from unrelated third parties. Our leases have remaining lease terms of up to
Common area maintenance and property taxes are not considered to be lease components.
| (in thousands) | ||||||||
| 13 Weeks | 13 Weeks | |||||||
| Ended December 28, 2024 | Ended December 30, 2023 | |||||||
| Operating Lease Expense, which is included in occupancy costs | $ | $ | ||||||
| Variable Lease Expense, which is included in occupancy costs | $ | $ | ||||||
11
| (in thousands) | ||||||||
| Classification on the Condensed Consolidated Balance Sheets | December 28, 2024 | September 28, 2024 | ||||||
| Assets | ||||||||
| Operating lease assets | $ | $ | ||||||
| Liabilities | ||||||||
| Operating lease current liabilities | $ | $ | ||||||
| Operating lease non-current liabilities | $ | $ | ||||||
| Weighted Average Remaining Lease Term: | ||||||||
| Operating Leases | ||||||||
| Weighted Average Discount: | ||||||||
| Operating leases | ||||||||
| (in thousands) | ||||
| For fiscal year | Operating | |||
| 2025 (39 weeks remaining) | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Thereafter | ||||
| Total lease payments (undiscounted cash flows) | ||||
| Less imputed interest | ( | ) | ||
| Total operating lease liabilities | $ | |||
Litigation
Our sale of alcoholic beverages subjects us to “dram shop” statutes, which allow an injured person to recover damages from an establishment that served alcoholic beverages to an intoxicated person. If we receive a judgment substantially in excess of our insurance coverage or if we fail to maintain our insurance coverage, our business, financial condition, operating results or cash flows could be materially and adversely affected. We currently have no “dram shop” claims.
From time to time, we are a party to various other claims, legal actions and complaints arising in the ordinary course of our business, including claims resulting from “slip and fall” accidents, claims under federal and state laws governing access to public accommodations, employment-related claims and claims from guests alleging illness, injury or other food quality, health or operational concerns. It is our opinion, after consulting with legal counsel, that all such matters are without merit or involve such amounts that an unfavorable disposition, some of which is covered by insurance, would not have a material adverse effect on our financial position or results of operations.
12
(8) BUSINESS SEGMENTS:
We operate in
13
Thirteen Weeks Ended December 28, 2024
(in thousands)
| Restaurant | Package | Corporate | Eliminations | Total | ||||||||||||||||
| REVENUES: | ||||||||||||||||||||
| Restaurant food sales | $ | $ | $ | $ | $ | |||||||||||||||
| Intersegment revenues | ( | ) | ||||||||||||||||||
| Restaurant bar sales | ||||||||||||||||||||
| Package goods sales | ||||||||||||||||||||
| TOTAL REVENUE: | ( | ) | ||||||||||||||||||
| COST OF MERCHANDISE SOLD: | ||||||||||||||||||||
| Cost of merchandise sold: | ||||||||||||||||||||
| Intersegment cost of merchandise sold | ( | ) | ||||||||||||||||||
| TOTAL COST OF MERCHANDISE SOLD: | ( | ) | ||||||||||||||||||
| GROSS PROFIT: | ||||||||||||||||||||
| ADDITIONAL REVENUES: | ||||||||||||||||||||
| Franchise-related revenues | ||||||||||||||||||||
| Intersegment franchise-related revenues | ( | ) | ||||||||||||||||||
| Rental income | ||||||||||||||||||||
| Intersegment rental income | ( | ) | ||||||||||||||||||
| Intersegment partnership income | ( | ) | ||||||||||||||||||
| Other revenues | ||||||||||||||||||||
| TOTAL ADDITIONAL REVENUES: | ( | ) | ||||||||||||||||||
| ADDITIONAL EXPENSES: | ||||||||||||||||||||
| Payroll and related costs | ||||||||||||||||||||
| Operating expenses | ||||||||||||||||||||
| Intersegment operating expenses | ( | ) | ||||||||||||||||||
| Occupancy costs | ||||||||||||||||||||
| Intersegment occupancy costs | ( | ) | ||||||||||||||||||
| Selling, general and administrative expenses | ||||||||||||||||||||
| Intersegment selling, general and administrative expenses | ( | ) | ||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||
| TOTAL ADDITIONAL EXPENSES: | ( | ) | ||||||||||||||||||
| Income from Operations | ( | ) | ( | ) | ||||||||||||||||
| OTHER INCOME (EXPENSE): | ||||||||||||||||||||
| Interest expense | ( | ) | ( | ) | ||||||||||||||||
| Intersegment interest expense | ( | ) | ||||||||||||||||||
| Interest and other income | ||||||||||||||||||||
| Intersegment interest and other income | ( | ) | ||||||||||||||||||
| Gain on sale of property and equipment | ||||||||||||||||||||
| ( | ) | ( | ) | |||||||||||||||||
| Income (loss) before provision for income taxes: | ( | ) | ( | ) | ||||||||||||||||
| Provision for income taxes | ( | ) | ( | ) | ||||||||||||||||
| Net Income | ( | ) | ( | ) | ||||||||||||||||
| Less: Net Income attributable to noncontrolling interests | ( | ) | ( | ) | ||||||||||||||||
| Net Income Attributable to Flanigan's Enterprises, Inc. | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||
14
Thirteen Weeks Ended December 30, 2023
(in thousands)
| Restaurant | Package | Corporate | Eliminations | Total | ||||||||||||||||
| REVENUES: | ||||||||||||||||||||
| Restaurant food sales | $ | $ | $ | $ | $ | |||||||||||||||
| Intersegment revenues | ( | ) | ||||||||||||||||||
| Restaurant bar sales | ||||||||||||||||||||
| Package goods sales | ||||||||||||||||||||
| TOTAL REVENUE: | ( | ) | ||||||||||||||||||
| COST OF MERCHANDISE SOLD: | ||||||||||||||||||||
| Cost of merchandise sold: | ||||||||||||||||||||
| Intersegment cost of merchandise sold | ( | ) | ||||||||||||||||||
| TOTAL COST OF MERCHANDISE SOLD: | ( | ) | ||||||||||||||||||
| GROSS PROFIT: | ||||||||||||||||||||
| ADDITIONAL REVENUES: | ||||||||||||||||||||
| Franchise-related revenues | ||||||||||||||||||||
| Intersegment franchise-related revenues | ( | ) | ||||||||||||||||||
| Rental income | ||||||||||||||||||||
| Intersegment rental income | ( | ) | ||||||||||||||||||
| Intersegment partnership income | ( | ) | ||||||||||||||||||
| Other revenues | ||||||||||||||||||||
| TOTAL ADDITIONAL REVENUES: | ( | ) | ||||||||||||||||||
| ADDITIONAL EXPENSES: | ||||||||||||||||||||
| Payroll and related costs | ||||||||||||||||||||
| Intersegment payroll costs | ( | ) | ||||||||||||||||||
| Operating expenses | ||||||||||||||||||||
| Intersegment operating expenses | ( | ) | ||||||||||||||||||
| Occupancy costs | ||||||||||||||||||||
| Intersegment occupancy costs | ( | ) | ||||||||||||||||||
| Selling, general and administrative expenses | ||||||||||||||||||||
| Intersegment selling, general and administrative expenses | ( | ) | ||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||
| TOTAL ADDITIONAL EXPENSES: | ( | ) | ||||||||||||||||||
| Income from Operations | ( | ) | ( | ) | ||||||||||||||||
| OTHER INCOME (EXPENSE): | ||||||||||||||||||||
| Interest expense | ( | ) | ( | ) | ||||||||||||||||
| Intersegment interest expense | ( | ) | ||||||||||||||||||
| Interest and other income | ||||||||||||||||||||
| Intersegment interest and other income | ( | ) | ||||||||||||||||||
| ( | ) | ( | ) | ( | ) | |||||||||||||||
| Income (loss) before provision for income taxes: | ( | ) | ( | ) | ||||||||||||||||
| Benefit for income taxes | ||||||||||||||||||||
| Net Income | ( | ) | ( | ) | ||||||||||||||||
| Less: Net Income attributable to noncontrolling interests | ( | ) | ( | ) | ||||||||||||||||
| Net Income Attributable to Flanigan's Enterprises, Inc. | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||
15
| (in thousands) | ||||||||
| Thirteen Weeks Ended | ||||||||
| December 28, | December 30, | |||||||
| 2024 | 2023 | |||||||
| Capital Expenditures: | ||||||||
| Restaurants | $ | $ | ||||||
| Package stores | ||||||||
| Corporate | ||||||||
| Consolidated Totals | $ | $ | ||||||
| (in thousands) | ||||||||
| December 28, | September 28, | |||||||
| 2024 | 2024 | |||||||
| Identifiable Assets: | ||||||||
| Restaurants | $ | $ | ||||||
| Package stores | ||||||||
| Corporate | ||||||||
| Consolidated Totals | $ | $ | ||||||
(9) SUBSEQUENT EVENTS:
Subsequent events have been evaluated through the date the unaudited condensed financial statements were issued and no events required adjustments or disclosure.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CAUTIONARY NOTE REGARDING LOOKING FORWARD STATEMENTS
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 our periodic reports, including our Annual Report on Form 10-K for the fiscal year ended September 28, 2024. 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 December 28, 2024, Flanigan’s Enterprises, Inc., a Florida corporation, together with its subsidiaries (“we”, “our”, “ours” and “us” as the context requires), (i) operates 32 units, consisting of restaurants, package liquor stores, combination restaurant/package liquor stores and a sports bar that we either own or have operational control over and partial ownership in; and franchises an additional five units, consisting of two restaurants (one of which we operate) and three combination restaurant/package liquor stores. The table below provides information concerning the type (i.e. restaurant, sports bar, 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 December 28, 2024 and as compared to September 28, 2024. With the exception of “The Whale’s Rib,” a restaurant we operate but do not own, and “Brendan’s Sports Pub” a restaurant/bar we own, all of the restaurants operate under our service marks “Flanigan’s Seafood Bar and Grill” or “Flanigan’s” and all of the package liquor stores operate under our service marks “Big Daddy’s Liquors” or “Big Daddy’s Wine & Liquors”.
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| December 28, 2024 | September 28, 2024 | |||||
| TYPES OF UNITS | ||||||
| Company Owned: | ||||||
| Combination package liquor store and restaurant | 2 | 2 | ||||
| Restaurant only, including sports bar | 9 | 9 | ||||
| Package liquor store only | 9 | 9 | ||||
| Company Managed Restaurants Only: | ||||||
| Limited partnerships | 10 | 10 | ||||
| Franchise | 1 | 1 | ||||
| Unrelated Third Party | 1 | 1 | ||||
| Total Company Owned/Operated Units | 32 | 32 | ||||
| Franchised Units | 5 | 5 | (1) |
Notes:
(1) 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 owned by a related franchisee. Accordingly, the results of operations of all limited partnership owned restaurants, except the Fort Lauderdale, Florida restaurant are consolidated into our operations for accounting purposes. The results of operations of the Fort Lauderdale, Florida restaurant are accounted for by us utilizing the equity method 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 as a return of capital. 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 a profit distribution. As of December 28, 2024, all limited partnerships, with the exception of the limited partnership which owns the restaurant in Sunrise, Florida (Store #85), which opened for business in March 2022 and the limited partnership which owns the restaurant in Miramar, Florida (Store #25), which opened for business in April 2023, 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 a fee equal to 3% of gross sales for use of the service mark “Flanigan’s Seafood Bar and Grill” or “Flanigan’s”.
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RESULTS OF OPERATIONS
| -----------------------Thirteen Weeks Ended----------------------- | ||||||||
| December 28, 2024 | December 30, 2023 | |||||||
| Amount | Amount | |||||||
| (in thousands) | Percent | (in thousands) | Percent | |||||
| Restaurant food sales | $29,126 | 58.81 | $26,355 | 59.33 | ||||
| Restaurant bar sales | 7,962 | 16.08 | 7,463 | 16.80 | ||||
| Package store sales | 12,435 | 25.11 | 10,602 | 23.87 | ||||
| Total Sales | $49,523 | 100.00 | $44,420 | 100.00 | ||||
| Franchise related revenues | 431 | 418 | ||||||
| Rental income | 267 | 253 | ||||||
| Other revenues | 41 | 49 | ||||||
| Total Revenue | $50,262 | $45,140 | ||||||
Comparison of Thirteen Weeks Ended December 28, 2024 and December 30, 2023.
Revenues. Total revenue for the thirteen weeks ended December 28, 2024 increased $5,122,000 or 11.35% to $50,262,000 from $45,140,000 for the thirteen weeks ended December 30, 2023 due primarily to increased package liquor store and restaurant sales, increased menu prices and revenue generated from the opening of our corporate owned restaurant in Hollywood, Florida (Store #19R) in March 2024. Effective December 4, 2024 we increased our menu prices for our bar offerings to target an increase to our bar revenues of approximately 4.90% annually and effective November 17, 2024 we increased our menu prices for our food offerings to target an increase to our food revenues of approximately 4.14% annually to offset higher food and liquor costs and higher overall expenses. Effective August 25, 2024, we increased menu prices for our bar offerings to target an increase to our bar revenues of approximately 5.63% annually to offset higher food and liquor costs and higher overall expenses (collectively the “Recent Price Increases”).
Restaurant Food Sales. Restaurant revenue generated from the sale of food, including non-alcoholic beverages, at restaurants totaled $29,126,000 for the thirteen weeks ended December 28, 2024 as compared to $26,355,000 for the thirteen weeks ended December 30, 2023. The increase in restaurant food sales during the thirteen weeks ended December 28, 2024 as compared to restaurant food sales during the thirteen weeks ended December 30, 2023 is attributable to the Recent Price Increases and restaurant food sales generated from the opening of our corporate owned restaurant in Hollywood, Florida (Store #19R) during the second quarter of our fiscal year 2024. Comparable weekly restaurant food sales for restaurants open for all of the thirteen weeks ended December 28, 2024 and December 30, 2023 respectively, which consists of ten restaurants owned by us (excluding our Hollywood, Florida location Store #19R which opened for business during the second quarter of our fiscal year 2024) and ten restaurants owned by affiliated limited partnerships was $2,099,000 and $2,007,000 for the thirteen weeks ended December 28, 2024 and December 30, 2023, respectively, an increase of 4.58%. Comparable weekly restaurant food sales for Company-owned restaurants (excluding our Hollywood, Florida location Store #19R which opened for business during the second quarter of our fiscal year 2024) was $873,000 and $838,000 for the thirteen weeks ended December 28, 2024 and December 30, 2023, respectively, an increase of 4.18%. Comparable weekly restaurant food sales for affiliated limited partnership owned restaurants only was $1,226,000 and $1,170,000 for the thirteen weeks ended December 28, 2024 and December 30, 2023, respectively, an increase of 4.79%. We expect that restaurant food sales, including non-alcoholic beverages, for the balance of our fiscal year 2025 will increase due to the Recent Price Increases.
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Restaurant Bar Sales. Restaurant revenue generated from the sale of alcoholic beverages at restaurants totaled $7,962,000 for the thirteen weeks ended December 28, 2024 as compared to $7,463,000 for the thirteen weeks ended December 30, 2023. The increase in restaurant bar sales during the thirteen weeks ended December 28, 2024 is primarily due to the Recent Price Increases and the opening of our corporate owned restaurant in Hollywood, Florida (Store #19R) during the second quarter of our fiscal year 2024. Comparable weekly restaurant bar sales for restaurants open for all of the thirteen weeks ended December 28, 2024 and December 30, 2023 respectively, which consists of ten restaurants owned by us (excluding our Hollywood, Florida location Store #19R which opened for business during the second quarter of our fiscal year 2024) and ten restaurants owned by affiliated limited partnerships was $584,000 and $574,000 for the thirteen weeks ended December 28, 2024 and December 30, 2023, respectively, an increase of 1.74%. Comparable weekly restaurant bar sales for Company-owned restaurants only (excluding our Hollywood, Florida location Store #19R which opened for business during the second quarter of our fiscal year 2024) was $244,000 and $235,000 for the thirteen weeks ended December 28, 2024 and December 30, 2023, respectively, an increase of 3.83%. Comparable weekly restaurant bar sales for affiliated limited partnership owned restaurants only was $340,000 and $339,000 for the thirteen weeks ended December 28, 2024 and December 30, 2023, an increase of 0.29%. We expect that restaurant bar sales for the balance of our fiscal year 2025 will increase due to the Recent Price Increases.
Package Store Sales. Revenue generated from sales of liquor and related items at package liquor stores totaled $12,435,000 for the thirteen weeks ended December 28, 2024 as compared to $10,602,000 for the thirteen weeks ended December 30, 2023, an increase of $1,833,000. This increase was primarily due to increased package liquor store traffic. The weekly average of same store package liquor store sales, which includes eleven (11) Company-owned package liquor stores was $957,000 and $816,000 for the thirteen weeks ended December 28, 2024 and December 30, 2023, respectively, an increase of 17.28%. We expect that package liquor store sales for the balance of our fiscal year 2025 will increase due to increased package liquor store traffic.
Costs and Expenses. Costs and expenses (consisting of cost of merchandise sold, payroll and related costs, operating expenses, occupancy costs, selling, general and administrative expenses and depreciation and amortization), for the thirteen weeks ended December 28, 2024 increased $5,057,000 or 11.40% to $49,404,000 from $44,347,000 for the thirteen weeks ended December 30, 2023. The increase was primarily due to increased payroll, an expected general increase in food costs, costs and expenses incurred from the opening of our Company-owned restaurant in Hollywood Florida (Store #19R) during the second quarter of our fiscal year 2024, partially offset by actions taken by management to reduce and/or control costs. We anticipate that our costs and expenses will continue to increase through the balance of our fiscal year 2025. Costs and expenses increased as a percentage of total revenue to approximately 98.29% for the thirteen weeks ended December 28, 2024 from 98.24% for the thirteen weeks ended December 30, 2023.
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 and bar sales for the thirteen weeks ended December 28, 2024 increased to $24,059,000 from $21,987,000 for the thirteen weeks ended December 30, 2023. Our gross profit margin for restaurant food and bar sales (calculated as gross profit reflected as a percentage of restaurant food and bar sales), decreased to 64.87% for the thirteen weeks ended December 28, 2024 as compared to 65.02% for the thirteen weeks ended December 30, 2023 due primarily to higher food costs, partially offset by the Recent Price Increases.
Package Store Sales. Gross profit for package store sales for the thirteen weeks ended December 28, 2024 increased to $2,945,000 from $2,722,000 for the thirteen weeks ended December 30, 2023. Our gross profit margin (calculated as gross profit reflected as a percentage of package liquor store sales), for package store sales was 23.76% for the thirteen weeks ended December 28, 2024 and 25.67% for the thirteen weeks ended December 30, 2023. We anticipate that the gross profit margin for package liquor store merchandise will decrease for the balance of our fiscal year 2025 due to higher costs and a reduction in pricing of certain package store merchandise to remain competitive.
Payroll and Related Costs. Payroll and related costs for the thirteen weeks ended December 28, 2024 increased $1,361,000 or 9.46% to $15,746,000 from $14,385,000 for the thirteen weeks ended December 30, 2023. Payroll and related costs for the thirteen weeks ended December 28, 2024 were higher due primarily to the opening of our company owned restaurant in Hollywood, Florida (Store #19R) during the second quarter of our fiscal year 2024 and the increase to the Florida minimum wage. Payroll and related costs as a percentage of total revenue was 31.33% in the thirteen weeks ended December 28, 2024 and 31.87% of total revenue in the thirteen weeks ended December 30, 2023.
Operating Expenses. Operating expenses (including but not limited to utilities, insurance, cleaning, credit card fees, supplies, security, and other costs closely related to operating restaurant and package stores) for the thirteen weeks ended December 28, 2024 increased $641,000 or 10.84% to $6,554,000 from $5,913,000 for the thirteen weeks ended December 30, 2023 due primarily to the opening of our company owned restaurant in Hollywood, Florida (Store #19R) during the second quarter of our fiscal year 2024, inflation and otherwise to increases in expenses across all categories.
19
Occupancy Costs. Occupancy costs (consisting of percentage rent, common area maintenance, repairs, real property taxes, amortization of leasehold interests and rent expense associated with operating lease liabilities under ASC 842) for the thirteen weeks ended December 28, 2024 decreased $210,000 or 9.70% to $1,954,000 from $2,164,000 for the thirteen weeks ended December 30, 2023 partially due to the decrease in the Florida state sales tax and a smaller reconciliation increase in property tax for the calendar year 2024 in the first quarter of fiscal year 2025.
Selling, General and Administrative Expenses. Selling, general and administrative expenses (consisting of general corporate expenses, including but not limited to advertising, professional costs, clerical and administrative overhead) for the thirteen weeks ended December 28, 2024 increased $301,000 or 25.23% to $1,494,000 from $1,193,000 for the thirteen weeks ended December 30, 2023 due primarily to increased television and radio advertising costs. Selling, general and administrative expenses increased as a percentage of total revenue for the thirteen weeks ended December 28, 2024 to 2.97% as compared to 2.64% for the thirteen weeks ended December 30, 2023.
Depreciation and Amortization. Depreciation and amortization expense for the thirteen weeks ended December 28, 2024 increased $165,000 or 16.82% to $1,146,000 from $981,000 from the thirteen weeks ended December 30, 2023. This increase is driven by the opening of our company owned restaurant in Hollywood, Florida (Store #19R) during the second quarter of our fiscal year 2024. As a percentage of total revenue, depreciation and amortization expense was 2.28% of revenue in the thirteen weeks ended December 28, 2024 and 2.17% of revenue in the thirteen weeks ended December 30, 2023.
Interest Expense, Net. Interest expense, net, for the thirteen weeks ended December 28, 2024 decreased $12,000 to $250,000 from $262,000 for the thirteen weeks ended December 30, 2023.
Income Taxes. Income tax for the thirteen weeks ended December 28, 2024 was an expense of $35,000, as compared to a benefit of $18,000 for the thirteen weeks ended December 30, 2023. This is primarily due to the tax expense that is anticipated based on the projected pre-tax income and permanent differences.
Net Income. Net income for the thirteen weeks ended December 28, 2024 increased $38,000 or 6.40% to $632,000 from $594,000 for the thirteen weeks ended December 30, 2023 due primarily to the Recent Prices Increases and the operation of our Company-owned restaurant of Hollywood, Florida (Store #19R) during the thirteen weeks ended December 28, 2024, offset by higher food costs and overall increased expenses. As a percentage of revenue, net income for the thirteen weeks ended December 28, 2024 is 1.26%, as compared to 1.32% for the thirteen weeks ended December 30, 2023.
Net Income Attributable to Flanigan’s Enterprises, Inc. Stockholders. Net income attributable to Flanigan’s Enterprises, Inc.’s stockholders for the thirteen weeks ended December 28, 2024 decreased $54,000 or 49.54 % to $55,000 from $109,000 for the thirteen weeks ended December 30, 2023 due primarily to higher food costs and overall increased expenses and more income attributable to noncontrolling interests during the thirteen weeks ended December 28, 2024. As a percentage of revenue, net income attributable to stockholders for the thirteen weeks ended December 28, 2024 is 0.11%, as compared to 0.24% for the thirteen weeks ended December 30, 2023.
Menu Price Increases and Trends
During the thirteen weeks ended December 28, 2024, we increased our menu prices for our bar offerings (effective December 4, 2024) to target an increase to our bar revenues of approximately 4.90% annually and we increased our menu prices for our food offerings (effective November 17, 2024) to target an increase to our food revenues of approximately 4.14% annually to offset higher food and liquor costs and higher overall expenses. During our fiscal year 2024, we increased menu prices for our bar offerings (effective August 25, 2024) to target an increase to our bar revenues of approximately 5.63% annually to offset higher food and liquor costs and higher overall expenses. Prior to these increases we previously raised menu prices in the second quarter of our fiscal year 2023.
20
Liquidity and Capital Resources
We fund our operations through cash from operations and borrowings from third parties. As of December 28, 2024, we had cash and cash equivalents of approximately $27,322,000, an increase of $5,920,000 from our cash balance of $21,402,000 as of September 28, 2024. The increase in cash as of December 28, 2024 was primarily due to the timing of payments associated with accrued expenses.
Inflation is affecting all aspects of our operations, including but not limited to food, beverage, fuel and labor costs. Supply chain issues also contribute to inflation. Inflation is having a material impact on our operating results.
We believe that our current cash availability from our cash on hand and positive cash flow from operations 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 thirteen weeks ended December 28, 2024 and December 30, 2023.
| ---------Thirteen Weeks Ended-------- | ||||
| December 28, 2024 | December 30, 2023 | |||
| (in thousands) | ||||
| Net cash provided by operating activities | $7,701 | $3,450 | ||
| Net cash used in investing activities | (703) | (774) | ||
| Net cash used in financing activities | (1,078) | (1,311) | ||
| Net Increase in Cash and Cash Equivalents | 5,920 | 1,365 | ||
| Cash and Cash Equivalents, Beginning | 21,402 | 25,532 | ||
| Cash and Cash Equivalents, Ending | $27,322 | $26,897 | ||
We did not declare or pay a cash dividend on our capital stock in the first quarter of our fiscal year 2025 or the first quarter of our fiscal year 2024. 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.
21
Capital Expenditures
In addition to using cash for our operating expenses, we use cash generated from operations and borrowings to fund the development and construction of new restaurants and to fund capitalized property improvements for our existing restaurants. During the thirteen weeks ended December 28, 2024, we acquired property and equipment of $745,000, (of which $9,000 was purchase deposits transferred to property and equipment), including $87,000 for renovations to one (1) Company-owned package location. During the thirteen weeks ended December 30, 2023, we acquired property and equipment and construction in progress of $1,378,000, (of which $115,000 was purchase deposits transferred to property and equipment and $574,000 was construction in progress in accounts payable), including $233,000 for renovations to two (2) Company owned restaurants.
We anticipate the cost of refurbishment in our fiscal year 2025 will be approximately $550,000, although capital expenditures for our refurbishing program for fiscal year 2025 may be significantly higher.
Long-Term Debt
As of December 28, 2024, we had long-term debt (including the current portion) of $21,587,000, as compared to $21,912,000 as of September 28, 2024.
As of December 28, 2024, we are in compliance with all of the covenants contained in our loan agreements.
Purchase Commitments
In order to fix the cost and ensure adequate supply of baby back ribs for our restaurants for calendar year 2025, we entered into a purchase agreement with a new rib supplier, whereby we agreed to purchase approximately $7.8 million of “2.5 & Down Baby Back Ribs” (weight range in which baby back ribs are sold) during calendar year 2025, at a prescribed cost, which we believe is competitive.
While we anticipate purchasing all of our rib supply from the new rib vendor, we believe there are several other alternative vendors available, if needed.
During the first quarter of our fiscal year 2025, we entered into a new Master Services Agreement with our current major vendor for a period of one (1) year effective January 1, 2025, with Company options for four (4) one (1) year renewal options to extend the term of the same. In this new Master Service Agreement, as in our prior Master Service Agreements, we commit to purchase specific products through our current major vendor, but are free to purchase other products through other vendors, provided no less than 80% of our overall product needs are purchased through our current major vendor.
22
Working Capital
The table below summarizes the current assets, current liabilities, and working capital for our fiscal quarter ended December 28, 2024, and our fiscal year ended September 28, 2024.
| Item | December 28, 2024 | September 28, 2024 | ||
| (in thousands) | ||||
| Current Assets | $36,987 | $31,529 | ||
| Current Liabilities | 25,380 | 19,924 | ||
| Working Capital | $11,607 | $11,605 | ||
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 and positive cash flow from operations will adequately fund operations, debt reductions and planned capital expenditures throughout our fiscal year 2025.
Off-Balance Sheet Arrangements
The Company does not have off-balance sheet arrangements.
Critical Accounting Policies
During the thirteen weeks ended December 28, 2024, we have not made any change to our critical accounting policies.
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. Inflation is having a material impact on our operating results, especially rising food, fuel and labor costs. We have endeavored to offset the adverse effects of cost increases by increasing our menu prices.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We do not ordinarily hold market risk sensitive instruments for trading purposes and as of December 28, 2024 held no equity securities.
Interest Rate Risk
As part of our ongoing operations, we are exposed to interest rate fluctuations on our borrowings. We use interest rate swap agreements to manage these risks. These instruments are not used for speculative purposes but are used to modify variable rate obligations into fixed rate obligations.
23
At December 28, 2024, we had one variable rate instrument outstanding that is impacted by changes in interest rates. In September 2022, we refinanced the mortgage loan encumbering the property where our combination package liquor store and restaurant located at 4 N. Federal Highway, Hallandale Beach, Florida, (Store #31) operates, which mortgage loan is held by an unaffiliated third-party lender (the “$8.90M Loan”). The interest rate of our variable rate debt instrument was equal to the lender’s BSBY Screen Rate plus one and one-half percent (1.50%) per annum. Effective November 15, 2024, the publication of BSBY was terminated and as of such date, the variable rate of interest under our debt instrument is equal to the lender’s 1 Month CME Term Secured Overnight Financing Rate (“SOFR”), plus 10 basis points, as an equivalent alternative approved by the lender.
As a means of managing our interest rate risk on this debt instrument, we entered into an interest rate swap agreement with an unrelated third-party lender to convert this variable rate debt obligation to a fixed rate. We are currently a party to an interest rate swap agreement entered into in September 2022 relating to the $8.90M Loan (the “$8.90M Term Loan Swap”). The $8.90M Term Loan Swap required us to pay interest for a fifteen (15) year period at a fixed rate of 4.90% on an initial amortizing notional principal amount of $8,900,000, while receiving interest for the same period at BSBY Screen Rate – 1 Month, plus 1.50%, on the same amortizing notional principal amount. Due to the change in the interest rate on the $8.9M Loan, on November 22, 2024, we terminated the $8.90M Term Loan Swap and simultaneously entered into a new interest rate swap agreement for $8,015,601, the balance due on the $8.90M Loan, which requires us to pay interest for twelve (12) years, ten (10) months, which is the balance of the original fifteen (15) year period at a fixed rate of 4.90% on an initial amortizing notional principal amount of $8,015,601, while receiving interest for the same period at the lender’s 1 Month CME Term Secured Overnight Financing Rate (“SOFR”), plus 10 basis points, at the same amortizing notional principal amount. We determined that the interest rate swap agreement is an effective hedging agreement and changes in fair value are adjusted quarterly.
During the thirteen weeks ended December 28, 2024, we had approximately an aggregate principal amount of $1,039,000 of 90-day government guaranteed certificates of deposit at fixed annual interest rates between 4.25% and 4.5%. Otherwise, at December 28, 2024, our cash resources offset our bank charges and any excess cash resources earn interest at variable rates. Accordingly, our return on these funds is affected by fluctuations in interest rates.
There is no assurance that interest rates will increase or decrease over our next fiscal year or that an increase in interest rates will not have a material adverse effect on our operations.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed with the U.S. Securities and Exchange Commission (the “SEC”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
As of December 28, 2024, an evaluation was performed under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) to the Securities Exchange Act of 1934). Based on that evaluation, management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were not effective as of December 28, 2024.
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Material Weaknesses in Internal Control Over Financial Reporting
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our interim or annual financial statements will not be prevented or detected on a timely basis.
Information technology general controls (ITGCs) were not designed and implemented effectively to ensure (i) that access to applications and data, and the ability to make program and database changes, were adequately restricted to appropriate personnel and (ii) that database changes were logged completely and accurately. Business process controls (automated and manual) that are dependent on the affected ITGCs were also deemed ineffective because they could have been adversely impacted.
We currently do not have adequate internal controls to ensure the timely and accurate recognition of deferred revenues associated with promotional gift cards that are provided in conjunction with certain sales from time to time, including during holiday periods. During the course of our independent registered public accounting firm performing its quarterly review procedures in connection with our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, we became aware of certain errors made by management in overstating restaurant revenues and understating deferred revenue liabilities, which constituted a material weakness in our internal controls. We intend to begin the process of addressing this material weakness over the next several months.
The material weaknesses identified above did not result in any material misstatements in our financial statements or disclosures, and there were no changes to previously released financial results. However, as a result of this finding, during the first quarter of our fiscal year 2025, we began the process of addressing these material weaknesses to our controls.
Changes in Internal Control Over Financial Reporting
During the fiscal quarter ended December 28, 2024, we have not made any additional changes to our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See “Litigation” in Note 8 of this Report and Item 1 and Item 3 to Part 1 of the Annual Report on Form 10-K for the fiscal year ended September 28, 2024 for a discussion of other legal proceedings resolved in prior years.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Purchase of Company Common Stock
During the thirteen weeks ended December 28, 2024 and December 30, 2023, we did not purchase any shares of our common stock. As of December 28, 2024, we still have authority to purchase 65,414 shares of our common stock under the discretionary plan approved by the Board of Directors at its meeting on May 17, 2007.
ITEM 5. OTHER INFORMATION.
During the thirteen weeks ended December 28, 2024,
none of the Company’s directors or officers (as defined in Rule 16a-1(f) under the Exchange Act)
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ITEM 6. EXHIBITS
The following exhibits are filed with this Report:
List of XBRL documents as exhibits 101
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| FLANIGAN’S ENTERPRISES, INC. | |
| Date: February 11, 2025 | /s/ James G. Flanigan |
| JAMES G. FLANIGAN, Chief Executive Officer and President | |
| /s/ Jeffrey D. Kastner | |
| JEFFREY D. KASTNER, Chief Financial Officer and Secretary | |
| (Principal Financial and Accounting Officer) | |
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