10-Q 1 bdl10q0402.htm 10-Q FLANIGANS ENTERPRISES INC
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 2, 2022

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to

Commission File Number 1-6836

FLANIGAN'S ENTERPRISES, INC.

(Exact name of registrant as specified in its charter)

Florida

59-0877638

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification Number)

 

 

5059 N.E. 18th Avenue, Fort Lauderdale, Florida

33334

(Address of principal executive offices)

Zip Code

(954) 377-1961

(Registrant's telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 Title of each class

 Trading symbol(s)

 Name of each exchange on which registered

Common Stock, $.10 par value

BDL

NYSE AMERICAN

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ☐

Accelerated filer ☐

Non-accelerated filer

Smaller reporting company

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 in Rule 12b-2 of the Exchange Act).

Yes ☐ No

On May 24, 2022, 1,858,647 shares of Common Stock, $0.10 par value per share, were outstanding.


 


FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

INDEX TO FORM 10-Q

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

1

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

3

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

5

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

6

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

8

 
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION  AND RESULTS OF OPERATIONS 17
ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 29
ITEM 4.  CONTROLS AND PROCEDURES 30
   
PART II. OTHER INFORMATION 31
   
ITEM 1.  LEGAL PROCEEDINGS 31
ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 31
ITEM 6. EXHIBITS 31
SIGNATURES 32

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 earnings per share amounts)

 

Thirteen Weeks Ended

Twenty Six Weeks Ended

April

2, 2022

April

3, 2021

April

2, 2022

April

3, 2021

 

REVENUES:

Restaurant food sales

$

24,775

$

20,689

$

46,980

$

39,017

Restaurant bar sales

6,669

5,050

12,676

9,493

Package store sales

8,148

7,830

16,659

15,841

Franchise related revenues

478

422

924

808

Rental income

199

226

398

413

Other operating income

61

140

96

165

40,330

34,357

77,733

65,737

 

COSTS AND EXPENSES:

Cost of merchandise sold:

Restaurant and bar

11,374

8,462

21,707

15,984

Package stores

5,869

5,668

12,209

11,519

Payroll and related costs

12,031

10,464

24,267

19,927

Occupancy costs

1,715

1,602

3,413

3,408

Selling, general and administrative expenses

7,491

5,368

13,522

10,836

38,480

31,564

75,118

61,674

Income from Operations

1,850

2,793

2,615

4,063

 

OTHER INCOME (EXPENSE):

Interest expense

(177

)

(248

)

(370

)

(527

)

Interest and other income

23

19

37

31

Gain on forgiveness of PPP loans

3,653

3,488

3,653

Gain on sale of property and equipment

8

11

33

(154

)

3,432

3,166

3,190

 

Income before Provision for Income Taxes

1,696

6,225

5,781

7,253

 

Provision for Income Taxes

(353

)

(533

)

(500

)

(529

)

 

Net Income

1,343

5,692

5,281

6,724

 

Less: Net loss (income) attributable to noncontrolling interests

317

(3,241

)

(2,057

)

(3,493

)

 

Net Income attributable to Flanigan's Enterprises, Inc. stockholders

$

1,660

$

2,451

$

3,224

$

3,231

(Continued)

1


Index

FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except share and per share amounts)

(Continued)

 

Thirteen Weeks Ended

Twenty Six Weeks Ended

April

2, 2022

April

3, 2021

April

2, 2022

April

3, 2021

 

Net Income Per Common Share:

Basic and Diluted

$

0.89

$

1.32

$

1.73

$

1.74

 

Weighted Average Shares and Equivalent Shares Outstanding

Basic and Diluted

1,858,647

1,858,647

1,858,647

1,858,647

See accompanying notes to unaudited condensed consolidated financial statements.

2


Index

FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

APRIL 2, 2022 (UNAUDITED) AND OCTOBER 2, 2021

(in thousands, except share and per share amounts)

 

ASSETS

April 2, 2022

October 2, 2021

 

CURRENT ASSETS:

 

Cash and cash equivalents

$

40,666

$

32,676

Prepaid income taxes

139

Other receivables

564

450

Inventories

4,928

4,283

Prepaid expenses

3,418

2,242

 

Total Current Assets

49,576

39,790

 

Property and Equipment, Net

55,541

51,441

Construction in Progress

4,708

5,445

60,249

56,886

 

Right-of-use assets, operating leases

28,900

28,559

Investment in Limited Partnerships

309

1,122

 

OTHER ASSETS:

 

Liquor licenses

822

822

Leasehold interests, net

97

118

Other

920

705

 

Total Other Assets

1,839

1,645

 

Total Assets

$

140,873

$

128,002

(Continued)

See accompanying notes to unaudited condensed consolidated financial statements.

3


Index

FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

APRIL 2, 2022 (UNAUDITED) AND OCTOBER 2, 2021

(in thousands, except share and per share amounts)

(Continued)

LIABILITIES AND STOCKHOLDERS’ EQUITY

April 2, 2022

October 2, 2021

 

CURRENT LIABILITIES:

 

Accounts payable and accrued expenses

$

11,421

$

9,770

Income taxes payable

211

Due to franchisees

5,398

4,478

Current portion of long-term debt

3,532

2,555

Operating lease liability, current

2,213

2,009

Deferred revenue

1,744

1,411

Dividends payable

1,861

 

Total Current Liabilities

26,380

20,223

 

Long Term Debt, Net of Current Portion

15,255

19,560

 

Operating lease liabilities, non-current

27,579

27,183

Deferred tax liabilities

493

406

 

Total Liabilities

69,707

67,372

 

COMMITMENTS AND CONTINGENCIES

 

Equity:

Flanigan’s Enterprises, Inc. Stockholders’ Equity

Common stock, $.10 par value, 5,000,000

shares authorized; 4,197,642 shares issued

420

420

Capital in excess of par value

6,240

6,240

Retained earnings

51,995

50,632

Treasury stock, at cost, 2,338,995 shares

(6,077

)

(6,077

)

Total Flanigan’s Enterprises, Inc.

stockholders’ equity

52,578

51,215

Noncontrolling interest

18,588

9,415

Total stockholders’ equity

71,166

60,630

 

Total liabilities and stockholders' equity

$

140,873

$

128,002

See accompanying notes to unaudited condensed consolidated financial statements.

4


Index

FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE TWENTY-SIX WEEKS ENDED APRIL 2, 2022 AND APRIL 3, 2021

Capital in

Common Stock

Excess of

Retained

Treasury Stock

Noncontrolling

Shares

Amount

Par Value

Earnings

Shares

Amount

Interests

Total

 

Balance, October 3, 2020

4,197,642

$

420

$

6,240

$

38,848

2,338,995

$

(6,077

)

$

6,125

$

45,556

 

Net income

780

252

1,032

Distributions to

noncontrolling interests

(242

)

(242

)

 

Balance, January 2, 2021

4,197,642

$

420

$

6,240

$

39,628

2,338,995

$

(6,077

)

$

6,135

$

46,346

 

Net income

2,451

3,241

5,692

Distributions to noncontrolling interests

(483

)

(483

)

 

Balance, April 3, 2021

4,197,642

$

420

$

6,240

$

42,079

2,338,995

$

(6,077

)

$

8,893

$

51,555

 

Capital in

Common Stock

Excess of

Retained

Treasury Stock

Noncontrolling

Shares

Amount

Par Value

Earnings

Shares

Amount

Interests

Total

 

Balance, October 2, 2021

4,197,642

$

420

$

6,240

$

50,632

2,338,995

$

(6,077

)

$

9,415

$

60,630

 

Net income

1,564

2,374

3,938

Distributions to

noncontrolling interests

(757

)

(757

)

 

Balance, January 1, 2022

4,197,642

$

420

$

6,240

$

52,196

2,338,995

$

(6,077

)

$

11,032

$

63,811

 

Net income (loss)

1,660

(317

)

1,343

Distributions to noncontrolling interests

(757

)

(757

)

Sale of noncontrolling interests

8,630

8,630

Dividends payable

(1,861

)

(1,861

)

 

Balance, April 2, 2022

4,197,642

$

420

$

6,240

$

51,995

2,338,995

$

(6,077

)

$

18,588

$

71,166

5


Index

FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE TWENTY-SIX WEEKS ENDED APRIL 2, 2022 AND APRIL 3, 2021

(in thousands)

April 2, 2022

April 3, 2021

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

Net income

$

5,281

$

6,724

Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities:

Depreciation and amortization

1,400

1,493

Amortization of leasehold interests

21

43

Amortization of finance lease right-of-use asset

198

Amortization of operating lease right-of-use asset

1,177

1,258

Gain on forgiveness of PPP loans

(3,488

)

(3,653

)

Finance lease interest expense

109

Gain on sale of property and equipment

(11

)

(33

)

Loss on abandonment of property and equipment

13

16

Amortization of deferred loan costs

17

20

Deferred income taxes

87

352

Organizational costs

35

Income from unconsolidated limited partnership

(15

)

(111

)

Deferred revenue

333

Changes in operating assets and liabilities:

(Increase) decrease in

Other receivables

(114

)

184

Prepaid income taxes

139

(275

)

Inventories

(645

)

(548

)

Prepaid expenses

854

1,117

Other assets

(59

)

215

Increase (decrease) in:

Accounts payable and accrued expenses

1,987

741

Operating lease liabilities

(918

)

(2,111

)

Income taxes payable

211

166

Due to franchisees

920

1,187

Net cash and cash equivalents provided by operating activities

7,225

7,092

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

Purchases of property and equipment

(2,230

)

(4,114

)

Purchase of construction in progress

(1,881

)

(847

)

Deposits on property and equipment

(509

)

(296

)

Proceeds from sale of fixed assets

30

49

Distributions from unconsolidated limited partnership

16

12

Investment in limited Partnership

(297

)

Net cash and cash equivalents used in investing activities

(4,574

)

(5,493

)

(Continued)

See accompanying notes to unaudited condensed consolidated financial statements.

6


Index

FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE TWENTY-SIX WEEKS ENDED APRIL 2, 2022 AND APRIL 3, 2021

(in thousands)

(Continued)

April 2, 2022

April 3, 2021

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

Payment of long term debt

(1,742

)

(1,495

)

Deferred loan costs

(56

)

Proceeds from PPP loans

3,464

Proceeds from noncontrolling interest offering

8,595

Principal payments on finance leases

(81

)

Distributions to limited partnerships’ noncontrolling interests

(1,514

)

(725

)

 

Net cash and cash equivalents provided by financing activities

5,339

1,107

 

Net Increase in Cash and Cash Equivalents

7,990

2,706

 

Beginning of Period

32,676

29,922

 

End of Period

$

40,666

$

32,628

 

Supplemental Disclosure for Cash Flow Information: Cash paid during period for:

Interest

$

370

$

527

Income taxes

$

63

$

61

 

Supplemental Disclosure of Non-Cash Investing and Financing Activities:

Financing of insurance contracts

$

1,861

$

1,377

Purchase deposits transferred to property, plant and equipment

$

44

$

14

Purchase deposits transferred to CIP

$

309

$

18

CIP capitalized to property, plant and equipment

$

3,258

$

CIP in accounts payable

$

331

$

Dividends declared and unpaid

$

1,861

$

Operating lease liabilities arising from ROU asset

$

1,518

$

5,787

Purchase of vehicle in exchange for debt

$

$

58

Purchase of property in exchange for debt

$

$

2,200

See accompanying notes to unaudited condensed consolidated financial statements.

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FLANIGAN’S ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THIRTEEN WEEKS AND TWENTY-SIX WEEKS ENDED

APRIL 2, 2022 AND APRIL 3, 2021

(1) BASIS OF PRESENTATION:

The accompanying condensed consolidated financial information for the periods ended April 2, 2022 and April 3, 2021 is unaudited. Financial information as of October 2, 2021 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 October 2, 2021. 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.

These condensed consolidated financial statements include estimates relating to loyalty reward programs. The estimates are reviewed periodically and the effects of any revisions are reflected in the financial statements in the period they are determined to be necessary.

The condensed consolidated financial statements include estimates relating to the calculation of incremental borrowing rates and length of leases associated with right-of-use assets and corresponding liabilities.

Although these estimates are based on management’s knowledge of current events and actions it may take in the future, they may ultimately differ from actual results.

(2) EARNINGS PER SHARE:

We follow Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Section 260 - “Earnings per Share”. This section provides for the calculation of basic and diluted earnings per share. The data on Page 2 shows the amounts used in computing earnings per share and the effects on income. As of April 2, 2022 and April 3, 2021, no stock options or other potentially dilutive securities were outstanding.

(3) RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:

Adopted

There are no accounting pronouncements that we have recently adopted.

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(3) RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS: (Continued)

Recently Issued

The FASB issued guidance, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedient and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. In response to the concerns about structural risks of interbank offered rates (“IBORs”) and, particularly, the risk of cessation of the LIBOR, regulators in several jurisdictions around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction based and less susceptible to manipulation. This accounting standards update provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. LIBOR rates will be published until June 30, 2023 and all principal and interest of the $1.405M Loan will be due in full on January 23, 2023 and all principal and interest of the Term Loan will be fully amortized and is anticipated to be paid in full as of December 28, 2022 so the discontinuance of LIBOR rates is not expected to have any impact on us.

(4) INCOME TAXES:

We account for our income taxes in interim periods using FASB ASC Topic 740-270, “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.

(5) PRIVATE OFFERINGS:

CIC Investors #85, Ltd. (Flanigan’s, Sunrise, Florida)

On October 15, 2021, we began a private offering for CIC Investors #85, Ltd., a Florida limited partnership of which the Company acts as general partner, to raise $5,000,000 through the sale of limited partnership units in the same. Limited partnership units were sold for $5,000 each, minimum purchase of two. which funds are intended to be used to satisfy (including reimbursement to us for advances we have made), build-out and renovation expenses and the purchase of such furniture, fixtures and equipment necessary for operation of our Sunrise, Florida restaurant under the service mark “Flanigan’s”. By February 15, 2022, we sold all limited partnership units, raising $5,000,000. The Company purchased 74 limited partnership units ($370,000) upon the same terms and conditions as all other investors. Capital raised from private investors is credited to sale of noncontrolling interests in our Statements of Stockholders’ Equity. On March 30, 2022, the Escrow Agent delivered $4,612,500 to the Company, representing the private offering proceeds ($5,000,000), less the Company’s purchase of 74 limited partnership units, ($370,000) and less organizational costs, ($17,500). This restaurant opened for business on March 22, 2022.

Under ASC 810, Consolidation, the Company, which is the entity issuing financial statements, is required to consolidate CIC Investors #85, Ltd. as we have a controlling interest in CIC Investors #85, Ltd. as general partner, although the Company has a 7.40% ownership.

CIC Investor #25, Ltd. (Flanigan’s, Miramar, Florida)

On October 15, 2021, we began a private offering for CIC Investors #25, Ltd., a Florida limited partnership of which the Company acts as general partner, to raise $4,000,000 through the sale of limited partnership units in the same. Limited partnership units were sold for $5,000 each, minimum purchase of two, which funds are intended to be used to satisfy (including reimbursement to us for advances we have made), build-out and renovation expenses and the purchase of such furniture, fixtures and equipment necessary for operation of our Miramar, Florida restaurant under the service mark “Flanigan’s. By February 15, 2022, we sold all limited partnership units, raising $4,000,000. The Company did not purchase any limited partnership units. Capital raised from private investors is credited to sale of noncontrolling interests in our Statements of Stockholders’ Equity. On March 30, 2022, the Escrow Agent delivered $3,982,500 to the Company, representing the private offering proceeds ($4,000,000), less organizational costs, ($17,500). It is anticipated that this restaurant will open for business the beginning of October, 2022.

Under ASC 810, Consolidation, the Company, which is the entity issuing financial statements, is required to consolidate CIC Investors #25, Ltd. as we have a controlling interest in CIC Investors #25, Ltd. as general partner, although the Company has no direct ownership.

(6) DEBT:

Financed Insurance Premiums

During the twenty-six weeks ended April 2, 2022, we financed the premiums on the following property, general liability, excess liability and terrorist policies, totaling approximately $2.54 million, which property, general liability, excess liability and terrorist insurance includes coverage for our franchises which are not included in our consolidated financial statements:

(i) For the policy year beginning December 30, 2021, our general liability insurance, excluding limited partnerships, is a one (1) year policy with our insurance carriers. The one (1) year general liability insurance premium is in the amount of $467,000;

(ii) For the policy year beginning December 30, 2021, our general liability insurance for our limited partnerships is a one (1) year policy with our insurance carriers. The one (1) year general liability insurance premium is in the amount of $589,000;

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(iii) For the policy year beginning December 30, 2021, our automobile insurance is a one (1) year policy. The one (1) year automobile insurance premium is in the amount of $194,000;

(iv) For the policy year beginning December 30, 2021, our property insurance is a one (1) year policy. The one (1) year property insurance premium is in the amount of $700,000;

(v) For the policy year beginning December 30, 2021, our excess liability insurance are two (2) one (1) year policies. The aggregate (1) year excess liability insurance premiums are in the amount of $576,000;

(vi) For the policy year beginning December 30, 2021, our terrorist insurance is a one (1) year policy. The one (1) year terrorist insurance premium is in the amount of $8,900; and

(vii) For the policy year beginning December 30, 2021, our equipment breakdown insurance is a one (1) year policy. The one (1) year equipment breakdown insurance premium is in the amount of $6,800.

Of the $2,542,000 annual premium amounts, which includes coverage for our franchises which are not included in our consolidated financial statements, we financed $2,328,000 through an unaffiliated third party lender. The finance agreement obligates us to repay the amounts financed together with interest at the rate of 2.55% per annum, over 11 months, with monthly payments of principal and interest, each in the amount of $215,000. The finance agreement is secured by a first priority security interest in all insurance policies, all unearned premium, return premiums, dividend payments and loss payments thereof.

As of April 2, 2022, the aggregate principal balance owed from the financing of our property and general liability insurance policies is $1,527,000, excluding coverage for our franchises, (of approximately $408,000), which are not included in our consolidated financial statements.

(7) COMMITMENTS AND CONTINGENCIES:

Construction Contracts

(a) 7990 Davie Road Extension, Hollywood, Florida (Store #19 – “Big Daddy’s Wine & Liquors”)

During the third quarter of our fiscal year 2019, we entered into an agreement with a third party unaffiliated general contractor for site work at this location totaling $1,618,000, (i) to connect the real property where this restaurant operated (Store #19) to city sewer and (ii) to construct a new building on the adjacent parcel of real property for the operation of a package liquor store. During our fiscal years 2020 and 2021, we agreed to change orders to the agreement for additional construction services increasing the total contract price by $624,000 to $2,242,000, of which $1,951,000 has been paid through April 2, 2022 and $-0- has been paid subsequent to the end of the second quarter of our fiscal year 2022 through the date of filing of this quarterly report.

(b) 2505 N. University Drive, Hollywood, Florida (Store #19 – “Flanigan’s”)

During the third quarter of our fiscal year 2019, we entered into an agreement with an unaffiliated third party architect for design and development services totaling $77,000 for the re-build of our restaurant located at 2505 N. University Drive, Hollywood, Florida (Store #19), which has been closed since October 2, 2018 due to damages caused by a fire, of which $62,000 has been paid. During the first quarter of our fiscal year 2022, we entered into an agreement with a third party unaffiliated general contractor to re-build our restaurant at this location for $2,515,000, of which $226,000 has been paid subsequent to the end of the second quarter of our fiscal year 2022 through the date of filing of this quarterly report.

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(c) 14301 W. Sunrise Boulevard, Sunrise, Florida (Store #85 – “Flanigan’s”)

During the third quarter of our fiscal year 2019, we entered into an agreement with an unaffiliated third party design group for design and development services of our new location at 14301 W. Sunrise Boulevard, Sunrise, Florida 33323 (Store #85) for a total contract price of $122,000. During our fiscal year 2020, we agreed upon amendments to the $122,000 Contract for additional design and development services which had the effect of increasing the total contract price by $18,000 to $140,000, of which $131,000 has been paid through April 2, 2022. Additionally, during the fourth quarter of our fiscal year 2020, we entered into an agreement with a third party unaffiliated general contractor for interior renovations at this location totaling $1,236,000 and through the second quarter our fiscal year 2022 we agreed to change orders to the agreement for additional interior renovations increasing the total contract price by $215,000 to $1,451,000, which has been paid in full by the end of the second quarter of our fiscal year 2022.

(d) 11225 Miramar Parkway, #250, Miramar, Florida (Store #25 - “Flanigan’s”)

During the second quarter of our fiscal year 2022, we entered into an agreement with a third party unaffiliated general contractor for interior renovations at this location totaling $1,421,000, of which $-0- has been paid through April 2, 2022 and $180,000, has been paid subsequent to the end of the second quarter of our fiscal year 2022 through the date of filing of this quarterly report.

(e) 11225 Miramar Parkway, #245, Miramar, Florida (Store #24 - “Big Daddy’s Wine and Liquors”)

During the first quarter of our fiscal year 2022, we entered into an agreement with a third party unaffiliated general contractor for interior renovations at this location totaling $317,000, of which $93,000 has been paid through April 2, 2022 and $-0- has been paid subsequent to the end of the second quarter of our fiscal year 2022 through the date of filing of this quarterly report.

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 10 years, some of which include options to renew and extend the lease terms for up to an additional 30 years. We presently intend to renew some of the extension options available to us and for purposes of computing the right-of-use assets and lease liabilities required by ASC 842, we have incorporated into all lease terms which may be extended, an additional term of the lesser of (i) the amount of years the lease may be extended; or (ii) 15 years.

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Following the adoption of ASC 842 during our fiscal year ended October 3, 2020, common area maintenance and property taxes are not considered to be lease components.

The components of lease expense are as follows:

13 Weeks

13 Weeks

Ended April 2, 2022

Ended April 3, 2021

Finance Lease Amortization

$

$

79,000

Finance Lease Expense, which is included in interest expense

44,000

Operating Lease Expense, which is included in occupancy costs

916,000

808,000

$

916,000

$

931,000

26 Weeks

26 Weeks

Ended April 2, 2022

Ended April 3, 2021

Finance Lease Amortization

$

$

198,000

Finance Lease Expense, which is included in interest expense

109,000

Operating Lease Expense, which is included in occupancy costs

1,834,000

1,867,000

$

1,834,000

$

2,174,000

Supplemental balance sheet information related to leases is as follows:

Classification on the Condensed Consolidated Balance Sheet

April 2, 2022

October 2, 2021

 

Assets

Operating lease assets

$

28,900,000

$

28,559,000

 

Liabilities

Operating lease current liabilities

2,213,000

2,009,000

Operating lease non-current liabilities

$

27,579,000

$

27,183,000

 

Weighted Average Remaining Lease Term:

Operating leases

9.21 Years

8.93 Years

 

Weighted Average Discount:

Operating leases

4.52%

4.62%

Total operating lease liabilities are as follows:

For fiscal year 2022

Operating

2022 (six (6) months to October 1, 2022)

$

1,723,000

2023

3,501,000

2024

3,544,000

2025

3,537,000

2026

3,371,000

Thereafter

22,121,000

 

Total lease payments

(Undiscounted cash flows)

37,797,000

Less imputed interest

(8,005,000

)

Total operating lease liabilities

$

29,792,000

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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.

We are a party to various other claims, legal actions and complaints arising in the ordinary course of our business. It is our opinion, after consulting with legal counsel, 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.

(8) CORONAVIRUS PANDEMIC:

In March 2020, a novel strain of coronavirus was declared a global pandemic and a National Public Health Emergency. The novel coronavirus pandemic and related “shelter-in-place” orders and other governmental mandates relating thereto (collectively, “COVID-19”) adversely affected and will, in all likelihood continue to adversely affect, our restaurant operations and financial results for the foreseeable future.

During the second quarter of our fiscal year 2021, certain of the entities owning the limited partnership stores (the “LP’s”), as well as the store we manage but do not own (the “Managed Store”), applied for and received loans from an unrelated third party lender pursuant to the Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) enacted March 27, 2020, in the aggregate principal amount of approximately $3.98 million, (the “2nd PPP Loans”), of which approximately: (i) $3.35 million was loaned to six of the LP’s; and (ii) $0.63 million was loaned to the Managed Store. The 2nd PPP Loan to the Managed Store is not included in our consolidated financial statements. During the first quarter of our fiscal year 2022, we applied for and received forgiveness of the entire amount of principal and accrued interest for all 2nd PPP Loans, including the Managed Store.

COVID-19 has had a material adverse effect on our access to supplies or labor and there can be no assurance that there will not be a significant adverse impact on our supply chain or access to labor in the future. We are actively monitoring our food suppliers to assess how they are managing their operations to mitigate supply flow and food safety risks. To ensure we mitigate potential supply availability risk, we are building additional inventory back stock levels when appropriate and we have also identified alternative supply sources in key product categories including but not limited to food, sanitation and safety supplies.

(9) BUSINESS SEGMENTS:

We operate principally in two reportable segments – package stores and restaurants. The operation of package stores consists of retail liquor sales and related items. Information concerning the revenues and operating income for the thirteen weeks and twenty-six weeks ended April 2, 2022 and April 3, 2021, and identifiable assets for the two reportable segments in which we operate, are shown in the following table. Operating income is total revenue less cost of merchandise sold and operating expenses relative to each segment. In computing operating income, none of the following items have been included: interest expense, other non-operating income and expenses and income taxes. Identifiable assets by segment are those assets that are used in our operations in each segment. Corporate assets are principally cash and real property, improvements, furniture, equipment and vehicles used at our corporate headquarters. We do not have any operations outside of the United States and transactions between restaurants and package liquor stores are not material.

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Index

(in thousands)

Thirteen Weeks

Ended

April 2, 2022

Thirteen Weeks

Ended

April 3, 2021

Operating Revenues:

Restaurants

$

31,444

$

25,739

Package stores

8,148

7,830

Other revenues

738

788

Total operating revenues

$

40,330

$

34,357

 

Income from Operations Reconciled to Income After Income Taxes and Net Income Attributable to Noncontrolling Interests

Restaurants

$

1,675

$

2,037

Package stores

760

735

 

2,435

2,772

Corporate expenses, net of other revenues

(585)

21

Income from operations

1,850

2,793

Interest expense

(177

)

(248

)

Interest and other income

23

19

Gain on forgiveness of PPP Loans

3,653

Gain on sale of property and equipment

8

Income Before Provision for Income Taxes

$

1,696

$

6,225

Provision for Income Taxes

(353

)

(533

)

Net Income

1,343

5,692

Net Income Attributable to Noncontrolling Interests

317

(3,241

)

Net Income Attributable to Flanigan’s Enterprises, Inc.

Stockholders

$

1,660

$

2,451

 

Depreciation and Amortization:

Restaurants

$

542

$

578

Package stores

79

87

621

665

Corporate

101

97

Total Depreciation and Amortization

$

722

$

762

 

Capital Expenditures:

Restaurants

$

1,671

$

5,523

Package stores

874

169

 

2,545

5,692

Corporate

239

454

Total Capital Expenditures

$

2,784

$

6,146

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Index

Twenty Six Weeks

Ended

April 2, 2022

Twenty Six Weeks

Ended

April 3, 2021

Operating Revenues:

Restaurants

$

59,656

$

48,510

Package stores

16,659

15,841

Other revenues

1,418

1,386

Total operating revenues

$

77,733

$

65,737

 

Income from Operations Reconciled to Income After Income Taxes and Net Income Attributable to Noncontrolling Interests

Restaurants

$

2,052

$

3,217

Package stores

1,442

1,450

 

3,494

4,667

Corporate expenses, net of other revenues

(879

)

(604

)

Income from Operations

2,615

4,063

Interest expense

(370

)

(527

)

Interest and Other Income

37

31

Gain on forgiveness of PPP Loans

3,488

3,653

Gain on sale of property and equipment

11

33

Income Before Provision for Income Taxes

$

5,781

$

7,253

Provision for Income Taxes

(500

)

(529

)

Net Income

5,281

6,724

Net Income Attributable to Noncontrolling Interests

(2,057

)

(3,493

)

Net Income Attributable to Flanigan’s Enterprises, Inc.

Stockholders

$

3,224

$

3,231

 

Depreciation and Amortization:

Restaurants

1,063

1,171

Package stores

158

176

 

1,221

1,347

Corporate

200

189

Total Depreciation and Amortization

$

1,421

$

1,536

 

Capital Expenditures:

Restaurants

$

2,924

$

6,287

Package stores

1,395

282

 

4,319

6,569

Corporate

476

682

Total Capital Expenditures

$

4,795

$

7,251

 

April 2,

October 2,

2022

2021

Identifiable Assets:

Restaurants

$

70,604