# Flanigans Enterprises Inc: Form 10-Q for the period ended Dec 28, 2019

- Company: [Flanigans Enterprises Inc](/companies/bdl.md) (CIK 12040)
- Form: 10-Q
- Filed: 2020-02-11
- Accepted by EDGAR: Feb 11, 2020, 15:26 ET
- Period: 2019-12-28
- Accession: 0001174947-20-000148
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/12040/000117494720000148/form10q-23341_flan.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/12040/000117494720000148/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2019-12-28.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2019-09-29 to 2019-12-28 | $30.9m | us-gaap:Revenues |
| Selling, general and administrative | 3 months, 2019-09-29 to 2019-12-28 | $5.8m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2019-09-29 to 2019-12-28 | $1.2m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2019-09-29 to 2019-12-28 | $204.0k | us-gaap:InterestExpense |
| Income tax | 3 months, 2019-09-29 to 2019-12-28 | $118.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2019-09-29 to 2019-12-28 | $494.0k | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2019-09-29 to 2019-12-28 | $0.27 | us-gaap:EarningsPerShareBasicAndDiluted |
| Operating cash flow | 3 months, 2019-09-29 to 2019-12-28 | $3.4m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2019-09-29 to 2019-12-28 | $933.0k | us-gaap:PaymentsToAcquireProductiveAssets |
| Cash and equivalents | at 2019-12-28 | $19.1m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2019-12-28 | $26.7m | us-gaap:AssetsCurrent |
| Total assets | at 2019-12-28 | $102.9m | us-gaap:Assets |
| Current liabilities | at 2019-12-28 | $17.2m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2019-12-28 | $57.9m | us-gaap:Liabilities |
| Long-term debt | at 2019-12-28 | $15.1m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2019-12-28 | $3.1m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2019-12-28 | $38.8m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 32,685 characters.

Reported financial results may not be indicative of the financial results of future periods. All non-historical information contained in the following discussion constitutes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Words such as “anticipates, appears, expects, trends, intends, hopes, plans, believes, seeks, estimates, may, will,” and variations of these words or similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and involve a number of risks and uncertainties, including but not limited to customer demand and competitive conditions. Factors that could cause actual results to differ materially are included in, but not limited to, those identified in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in the Annual Report on our Form 10-K for the fiscal year ended September 28, 2019 and in this Quarterly Report on Form 10-Q. We undertake no obligation to publicly release the results of any revisions to these forward-looking statements that may reflect events or circumstances after the date of this report.

### OVERVIEW

As of December 28, 2019, Flanigan’s Enterprises, Inc., a Florida corporation, together with its subsidiaries, (i) operates 27 units, consisting of restaurants, package liquor stores and combination restaurants/package liquor stores that we either own or have operational control over and partial ownership in; and (ii) franchises an additional five units, consisting of two restaurants (one of which we operate) and three combination restaurants/package liquor stores. The table below provides information concerning the type (i.e. restaurant, package liquor store or combination restaurant/package liquor store) and ownership of the units (i.e. whether (i) we own 100% of the unit; (ii) the unit is owned by a limited partnership of which we are the sole general partner and/or have invested in; or (iii) the unit is franchised by us), as of December 28, 2019 and as compared to December 29, 2018. With the exception of “The Whale’s Rib”, a restaurant we operate but do not own, all of the restaurants operate under our service mark “Flanigan’s Seafood Bar and Grill” and all of the package liquor stores operate under our service marks “Big Daddy’s Liquors” or “Big Daddy’s Wine & Liquors”.

| Types of Units | December 28, 2019 | September 28, 2019 | December 29, 2018 |  |
| --- | ---: | ---: | ---: | ---: |
| Company Owned: Combination package and restaurant | 3 | 3 | 3 | (1) |
| Restaurant only | 7 | 7 | 7 |  |
| Package store only | 7 | 6 | 6 | (2) |
| Company Operated Restaurants Only: |  |  |  |  |
| Limited Partnerships | 8 | 8 | 8 |  |
| Franchise | 1 | 1 | 1 |  |
| Unrelated Third Party | 1 | 1 | 1 |  |
| Total Company Owned/Operated Units | 27 | 26 | 26 |  |
| Franchised Units | 5 | 5 | 5 | (3) |

### Notes:

(1) During the first quarter of our fiscal year 2019, our combination package liquor store and restaurant located at 2505 N. University Drive, Hollywood, Florida (Store #19) was damaged by a fire which has caused it to be closed since the first quarter of our fiscal year 2019. Revenues and expenses from Store #19 for the time Store #19 was open during the first quarter of our fiscal year 2019 (two (2) days) are immaterial, with the exception of payroll. Store #19 remains closed through December 28, 2019.

(2) During the first quarter of our fiscal year 2020, our new package liquor store located at 12776 N. Kendal Drive, Miami, Florida (Store #45) opened for business.

(3) We operate a restaurant for one (1) franchisee. This unit is included in the table both as a franchised restaurant, as well as a restaurant operated by us.

Franchise Financial Arrangement: In exchange for our providing management and related services to our franchisees and granting them the right to use our service marks “Flanigan’s Seafood Bar and Grill” and “Big Daddy’s Liquors”, our franchisees (four of which are franchised to members of the family of our Chairman of the Board, officers and/or directors), are required to (i) pay to us a royalty equal to 1% of gross package store sales and 3% of gross restaurant sales; and (ii) make advertising expenditures equal to between 1.5% to 3% of all gross sales based upon our actual advertising costs allocated between stores, pro-rata, based upon gross sales.

Limited Partnership Financial Arrangement: We manage and control the operations of all restaurants owned by limited partnerships, except the Fort Lauderdale, Florida restaurant which is 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. Once the investors in the limited partnership have received, in full, amounts equal to their cash invested, an annual management fee is payable to us equal to one-half (½) of cash available to the limited partnership, with the other one half (½) of available cash distributed to the investors (including us and our affiliates). As of December 28, 2019, all limited partnerships 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”.

### RESULTS OF OPERATIONS

|  | -----------------------Thirteen Weeks Ended----------------------- December 28, 2019 Amount (In thousands) | Percent | December 29, 2018 Amount (In thousands) | Percent |
| --- | ---: | ---: | ---: | ---: |
| Restaurant food sales | $18,742 | 61.77 | $16,828 | 61.67 |
| Restaurant bar sales | 5,891 | 19.42 | 5,323 | 19.51 |
| Package store sales | 5,707 | 18.81 | 5,135 | 18.82 |
| Total Sales | $30,340 | 100.00 | $27,286 | 100.00 |
| Franchise related revenues | 360 |  | 367 |  |
| Rental income | 194 |  | 198 |  |
| Other operating income | 47 |  | 43 |  |
| Total Revenue | $30,941 |  | $27,894 |  |

### Comparison of Thirteen Weeks Ended December 28, 2019 and December 29, 2018.

***Revenues.*** Total revenue for the thirteen weeks ended December 28, 2019 increased $3,047,000 or 10.92% to $30,941,000 from $27,894,000 for the thirteen weeks ended December 29, 2018 due primarily to increased restaurant traffic and increased menu prices. Effective June 16, 2019 we increased certain menu prices for our bar offerings to target an increase to our total bar revenues of approximately 6.2% annually and effective June 23, 2019 we increased certain menu prices for our food offerings to target an increase to our total food revenues of approximately 3.4% annually, (the “2019 Price Increases”). We anticipate that total revenue for the balance of our fiscal year 2020 will increase due to increased restaurant traffic and the 2019 Price Increases. We expect that Store #19 will remain closed during the balance of our fiscal year 2020 and accordingly do not expect to generate any revenue from it.

**Restaurant Food Sales.** Restaurant revenue generated from the sale of food, including non-alcoholic beverages, at restaurants totaled $18,742,000 for the thirteen weeks ended December 28, 2019 as compared to $16,828,000 for the thirteen weeks ended December 29, 2018. The increase in restaurant revenue for the thirteen weeks ended December 28, 2019 as compared to restaurant revenue during the thirteen weeks ended December 29, 2018 is primarily due to increased restaurant traffic and the 2019 Price Increases. Comparable weekly restaurant food sales (for restaurants open for all of the first quarter of our fiscal year 2020 and the first quarter of our fiscal year 2019, which consists of nine restaurants owned by us, (excluding Store #19 which was closed for the thirteen weeks ended December 28, 2019 and December 29, 2018 due to a fire on October 2, 2018) and eight restaurants owned by affiliated limited partnerships) was $1,432,000 and $1,295,000 for the thirteen weeks ended December 28, 2019 and December 29, 2018, respectively, an increase of 10.58%. Comparable weekly restaurant food sales for Company owned restaurants only was $721,000 and $642,000 for the first quarter of our fiscal year 2020 and the first quarter of our fiscal year 2019, respectively, an increase of 12.31%. Comparable weekly restaurant food sales for affiliated limited partnership owned restaurants only was $711,000 and $653,000 for the first quarter of our fiscal year 2020 and the first quarter of our fiscal year 2019, respectively, an increase of 8.88%. We expect restaurant revenue generated from the sale of food, including non-alcoholic beverages, at restaurants to increase throughout the balance of our fiscal year 2020 due to increased restaurant traffic and the 2019 Price Increases.

**Restaurant Bar Sales**. Restaurant revenue generated from the sale of alcoholic beverages at restaurants totaled $5,891,000 for the thirteen weeks ended December 28, 2019 as compared to $5,323,000 for the thirteen weeks ended December 29, 2018. The increase in restaurant revenue from the sale of alcoholic beverages at restaurants during the thirteen weeks ended December 28, 2019 is primarily due to increased restaurant traffic and the 2019 Price Increases. Comparable weekly restaurant bar sales (for restaurants open for all of the first quarter of our fiscal year 2020 and the first quarter of our fiscal year 2019, which consists of nine restaurants owned by us, (excluding Store #19 which was closed for the thirteen weeks ended December 28, 2019 and December 29, 2018 due to a fire on October 2, 2018), and eight restaurants owned by affiliated limited partnerships) was $453,000 for the thirteen weeks ended December 28, 2019 and $410,000 for the thirteen weeks ended December 29, 2018, an increase of 10.49%. Comparable weekly restaurant bar sales for Company owned restaurants only was $207,000 and $183,000 for the first quarter of our fiscal year 2020 and the first quarter of our fiscal year 2019, respectively, an increase of 13.11%. Comparable weekly restaurant bar sales for affiliated limited partnership owned restaurants only was $246,000 and $227,000 for the first quarter of our fiscal year 2020 and the first quarter of our fiscal year 2019, respectively, an increase of 8.37%. We expect restaurant revenue generated from the sale of alcoholic beverages at restaurants to increase throughout the balance of our fiscal year 2020 due to increased restaurant traffic and the 2019 Price Increases.

**Package Store Sales**. Revenue generated from sales of liquor and related items at package liquor stores totaled $5,707,000 for the thirteen weeks ended December 28, 2019 as compared to $5,135,000 for the thirteen weeks ended December 29, 2018, an increase of $572,000. This increase was primarily due to increased package liquor store traffic and the opening of our new Store #45 during the first quarter of our fiscal year 2020. The weekly average of same store package liquor store sales, which includes eight (8) Company owned package liquor stores, (excluding Store #19, which was closed for the thirteen weeks ended December 28, 2019 and December 29, 2018 due to a fire on October 2, 2018 and also excluding Store #45, which opened for business on October 10, 2019), was $416,000 for the thirteen weeks ended December 28, 2019 as compared to $395,000 for the thirteen weeks ended December 29, 2018, an increase of 5.31%. We expect package liquor store sales to increase throughout the balance of our fiscal year 2020 due to the opening of a new package liquor store located in Kendall, Florida during the first quarter of our fiscal year 2020.

***Operating Costs and Expenses.*** Operating costs and expenses, (consisting of cost of merchandise sold, payroll and related costs, occupancy costs and selling, general and administrative expenses), for the thirteen weeks ended December 28, 2019 increased $2,471,000 or 9.07% to $29,710,000 from $27,239,000 for the thirteen weeks ended December 29, 2018. The increase was primarily due to an expected general increase in food costs, offset by actions taken by management to reduce and/or control costs. We anticipate that our operating costs and expenses will continue to increase through our fiscal year 2020 for the same reasons. Operating costs and expenses decreased as a percentage of total sales to approximately 96.02% in the first quarter of our fiscal year 2020 from 97.65% in the first quarter of our fiscal year 2019.

***Gross Profit.*** Gross profit is calculated by subtracting the cost of merchandise sold from sales.

**Restaurant Food and Bar Sales**. Gross profit for food and bar sales for the thirteen weeks ended December 28, 2019 increased to $16,209,000 from $14,427,000 for the thirteen weeks ended December 29, 2018 due primarily to the 2019 Price Increases. Our gross profit margin for restaurant food and bar sales (calculated as gross profit reflected as a percentage of restaurant food and bar sales), was 65.80% for the thirteen weeks ended December 28, 2019 and 65.13% for the thirteen weeks ended December 29, 2018. We anticipate that our gross profit for restaurant food and bar sales will increase during our fiscal year 2020 due primarily to the 2019 Price Increases, offset by higher food costs.

**Package Store Sales**. Gross profit for package store sales for the thirteen weeks ended December 28, 2019 increased to $1,568,000 from $1,367,000 for the thirteen weeks ended December 29, 2018, due primarily to the opening of a new package liquor store located at 12776 N. Kendall Drive, Miami, Florida, during the thirteen weeks ended December 28, 2019. Our gross profit margin, (calculated as gross profit reflected as a percentage of package liquor store sales), for package store sales was 27.48% for the thirteen weeks ended December 28, 2019 and 26.62% for the thirteen weeks ended December 29, 2018. We anticipate that the gross profit margin for package store merchandise will decrease during our fiscal year 2020 due to higher costs and a reduction in pricing of certain package store merchandise to be more competitive.

***Payroll and Related Costs.*** Payroll and related costs for the thirteen weeks ended December 28, 2019 increased $919,000 or 10.69% to $9,517,000 from $8,598,000 for the thirteen weeks ended December 29, 2018. Higher payroll and related costs for the thirteen weeks ended December 28, 2019 were primarily due to higher restaurant sales, which require additional payroll and related costs for employees such as cooks, bartenders and servers, and payroll for our new package liquor store in Kendall, Florida. Payroll and related costs as a percentage of total sales was 30.76% in the first quarter of our fiscal year 2020 and 30.82% of total sales in the first quarter of our fiscal year 2019.

***Occupancy Costs.*** Occupancy costs (consisting of percentage rent, common area maintenance, repairs, real property taxes, amortization of leasehold purchases and rent expense associated with operating lease liabilities under ASC 842) for the thirteen weeks ended December 28, 2019 increased $347,000 or 22.98% to $1,857,000 from $1,510,000 for the thirteen weeks ended December 29, 2018 due primarily to our adoption of ASC 842. We anticipate that our occupancy costs will increase throughout our fiscal year 2020 due primarily to the rent we are required to pay pursuant to the newly acquired lease agreement for our new restaurant in development to be located in Sunrise, Florida, and our adoption of ASC 842.

***Selling, General and Administrative Expenses.*** Selling, general and administrative expenses (consisting of general corporate expenses, including but not limited to advertising, insurance, professional costs, clerical and administrative overhead) for the thirteen weeks ended December 28, 2019 increased $134,000 or 2.38% to $5,773,000 from $5,639,000 for the thirteen weeks ended December 29, 2018. Selling, general and administrative expenses decreased as a percentage of total sales in the first quarter of our fiscal year 2020 to 18.66% as compared to 20.21% in the first quarter of our fiscal year 2019. We anticipate that our selling, general and administrative expenses will increase throughout the balance of our fiscal year 2020 due primarily to increases across all categories.

***Depreciation and Amortization.*** Depreciation and amortization for the thirteen weeks ended December 28, 2019 increased $97,000 or 13.47% to $817,000 from $720,000 for the thirteen weeks ended December 29, 2018. As a percentage of total revenue, depreciation expense was 2.64% of revenue for the thirteen weeks ended December 28, 2019 and 2.58% of revenue in the thirteen weeks ended December 29, 2018.

***Interest Expense, Net.*** Interest expense, net, for the thirteen weeks ended December 28, 2019 increased $19,000 to $204,000 from $185,000 for the thirteen weeks ended December 29, 2018. Interest expense, net, will increase for the balance of our fiscal year 2020 due to our borrowing of an additional $4.5 million during the first quarter of our fiscal year 2020 on the re-financing by our wholly owned subsidiary, Flanigan’s Calusa Center, LLC, of its mortgage loan with an unrelated third party lender, increasing the principal amount borrowed from $2.72 million to $7.21 million.

***Income Taxes.*** Income taxes for the thirteen weeks ended December 28, 2019 was $118,000 and $87,000 for the thirteen weeks ended December 29, 2018.

***Net Income.*** Net income for the thirteen weeks ended December 28, 2019 decreased $77,000 or 7.72% to $921,000 from $998,000 for the thirteen weeks ended December 29, 2018. Net income for the thirteen weeks ended December 28, 2019 decreased when compared to the thirteen weeks ended December 29, 2018 primarily due to higher food costs and overall expenses and our adoption of ASC 842, offset by higher restaurant traffic and the 2019 Price Increases. As a percentage of sales, net income for the first quarter of our fiscal year 2020 is 2.98%, as compared to 3.58% in the first quarter of our fiscal year 2019.

***Net Income Attributable to Stockholders.*** Net income for the thirteen weeks ended December 28, 2019 decreased $249,000 or 33.51% to $494,000 from $743,000 for the thirteen weeks ended December 29, 2018. Net income attributable to stockholders for the thirteen weeks ended December 28, 2019 decreased when compared to the thirteen weeks ended December 29, 2018 primarily due to higher food costs and overall expenses and our adoption of ASC 842, offset by higher restaurant traffic and the 2019 Price Increases. As a percentage of sales, net income for the first quarter of our fiscal year 2020 is 1.60%, as compared to 2.66% in the first quarter of our fiscal year 2019.

### New Limited Partnership Restaurants

As new restaurants open, our income from operations will be adversely affected due to our obligation to advance pre-opening costs, including but not limited to pre-opening rent for the new locations. During the first quarter of our fiscal year 2020, we had one new restaurant location in Sunrise, Florida in the development stage and have advanced $480,000 through December 28, 2019. During the fourth quarter of our fiscal year 2019, we entered leases for two spaces adjacent to each other, to house a new “Flanigan’s Seafood Bar and Grill” as well as a “Big Daddy’s Wine and Liquors” in a shopping center in Miramar, Florida, which shopping center is currently under construction as well as lease.

### Menu Price Increases and Trends

Effective June 16, 2019 we increased menu prices for our bar offerings to target an increase to our bar revenues of approximately 6.2% annually and effective June 23, 2019 we increased menu prices for our food offerings to target an increase to our food revenues of approximately 3.4% annually to offset higher food costs and higher overall expenses. Prior to these increases, we previously raised menu prices in the fourth quarter of our fiscal year 2017. During the next twelve months, if demand for our restaurant and bar offerings remain substantially similar to the demand during our fiscal year 2019, (including a lack of restaurant and bar sales from Store #19 which we expect will be closed for our entire fiscal year 2020), of which there can be no assurance, we expect that restaurant and bar sales in our restaurants as well as gross profit for food and bar operations (including a lack of restaurant and bar sales from Store #19 which we expect will be closed for our entire fiscal year 2020) should increase as a result of the 2019 Price Increases, offset partially by higher food costs. We anticipate that our package liquor store sales will continue to increase, primarily due to our recently opened (October, 2019) package liquor store in Kendall, Florida, (excluding package liquor store sales from Store #19, which we expect will be closed for our entire fiscal year 2020 due to the Store #19 Closure), while gross profit margin for package liquor store sales will, in all likelihood, decrease.

In addition to the rebuilding of Store #19, which was closed in October 2018 due to a fire, we have a new “Flanigan’s Seafood Bar and Grill” restaurant in Sunrise, Florida in the development stage. During the fourth quarter of our fiscal year 2019, we entered a lease for space to house a new “Flanigan’s Seafood Bar and Grill” in a shopping center in Miramar, Florida, which shopping center is currently under construction. We continue to search for new locations to open additional restaurants.

We are not actively searching for locations for the operation of new package liquor stores, but when our attempt to expand “The Whale’s Rib” restaurant concept in Miami, Florida was abandoned, we decided that the space we had targeted for the “The Whales Rib” would be ideal for the operation of a package liquor store and during the fourth quarter of our fiscal year 2018, we received governmental approval to operate a package liquor store at that location. The new package liquor store (Store #45) opened for business in October, 2019. During the fourth quarter of our fiscal year 2019, we entered a lease to house a new “Big Daddy’s Wine & Liquors” package liquor store in space adjacent to where we are planning a new “Flanigan’s Seafood Bar and Grill”, restaurant in a to be constructed shopping center in Miramar, Florida.

### Liquidity and Capital Resources

We fund our operations through cash from operations. As of December 28, 2019, we had cash of approximately $19,122,000, an increase of $5,450,000 from our cash balance of $13,672,000 as of September 28, 2019. During the first quarter of our fiscal year 2020, our wholly owned subsidiary, Flanigan’s Calusa Center, LLC, re-financed its mortgage loan with an unrelated third party lender, increasing the principal amount borrowed from $2.72 million to $7.21 million. We believe that our current cash availability from our cash on hand, positive cash flow from operations and borrowed funds will be sufficient to fund our operations and planned capital expenditures for at least the next twelve months.

### Cash Flows

The following table is a summary of our cash flows for the first thirteen weeks of fiscal years 2020 and 2019.

*(in thousands)*

|  | ---------Thirteen Weeks Ended-------- December 28, 2019 | December 29, 2018 |
| --- | ---: | ---: |
| Net cash provided by operating activities | $3,428 | $2,835 |
| Net cash used in investing activities | (1,296) | (910) |
| Net cash provided by (used in) financing activities | 3,318 | (839) |
| Net Increase in Cash and Cash Equivalents | 5,450 | 1,086 |
| Cash and Cash Equivalents, Beginning | 13,672 | 13,414 |
| Cash and Cash Equivalents, Ending | $19,122 | $14,500 |

We did not declare or pay a cash dividend on our capital stock in the first quarter of our fiscal year 2020 or the first quarter of our fiscal year 2019. Any future determination to pay cash dividends will be at our Board’s discretion and will depend upon our financial condition, operating results, capital requirements and such other factors as our Board deems relevant.

### Capital Expenditures

In addition to using cash for our operating expenses, we use cash 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, 2019, we acquired property and equipment and construction in progress of $933,000, (of which $29,000 was deposits recorded in other assets and $2,000 was purchase deposits transferred to construction in progess as of September 28, 2019), including $295,000 for renovations to two (2) limited partnership owned restaurants and three (3) Company owned restaurants. During the thirteen weeks ended December 29, 2018, we acquired property and equipment and construction in progress of $1,641,000, (of which $231,000 was deposits recorded in other assets and $213,000 was purchase deposits transferred to construction in progress as of September 29, 2018), including $100,000 for renovations to three (3) Company owned restaurants.

All of our owned units require periodic refurbishing in order to remain competitive. We anticipate the cost of this refurbishment in our fiscal year 2020 to be approximately $750,000, excluding construction/renovations to Store #19 (our combination package liquor store and restaurant which is being rebuilt due to damages caused by a fire) and Store #85 (our Sunrise, Florida restaurant location in development), $295,000 of which has been spent through December 28, 2019.

### Long Term Debt

As of December 28, 2019, we had long term debt of $18,120,000, as compared to $15,220,000 as of December 29, 2018, and $13,080,000 as of September 28, 2019. Our long term debt increased as of December 28, 2019 as compared to September 28, 2019 due to the re-financing of its mortgage loan by our wholly owned subsidiary, Flanigan’s Calusa Center, LLC, increasing the principal amount borrowed from $2.72 million to $7.21 million and $1,281,000 for financed insurance premiums, less any payments made on account thereof. As of December 28, 2019, we are in compliance with the covenants of all loans with our lender.

### Construction Contracts

### a. 2505 N. University Drive, Hollywood, Florida (Store #19)

During our fiscal year 2018 and prior to its being closed in the first quarter of our fiscal year 2019 due to damages caused by a fire, we entered into an agreement with a third party unaffiliated general contractor for design and development services for the construction of a new building (the “New Building”) on a parcel of real property which we own and which is adjacent to the real property where our combination package liquor store and restaurant located at 2505 N. University Drive, Hollywood, Florida, (Store #19) operated until it was closed in October, 2018 due to damages caused by a fire for a total contract price of for a total contract price of $127,000 (the “$127,000 Contract”). We plan to re-locate our package liquor store at the property to the New Building. During the term of the $127,000 Contract, we agreed to change orders which had the effect of increasing the total contract price of the same to $138,000, and during the second quarter of our fiscal year 2019, we paid the balance of the total contract price of the $127,000 Contract, in the amount of $25,000. During the first quarter of our fiscal year 2020, we agreed upon changes to the $127,000 Contract for additional design and development services for the construction of the New Building which had the effect of increasing the total contract price of the same by $10,000 to $148,000, of which $6,000 has been paid.

During the third quarter of our fiscal year 2019, we entered into an agreement with a third party unaffiliated 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 2018 due to damages caused by a fire, of which $27,000 has been paid. Additionally, during the third quarter of our fiscal year 2019, we entered into an agreement with a third party unaffiliated general contractor for site work 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, of which $-0- has been paid.

### b. 14301 W. Sunrise Boulevard, Sunrise, Florida (Store #85)

During the third quarter of our fiscal year 2019, we entered into an agreement with a third party unaffiliated design group for design and development services of our new location at 14301 W. Sunrise Boulevard, Sunrise, Florida 33323 (Store #85) for a total contract price of $122,000, (the $122,000 Contract”). During the first quarter of our fiscal year 2020, we agreed upon changes to the $122,000 Contract for additional design and development services which had the effect of increasing the total contract price of the same by $18,000 to $140,000, of which $97,000 has been paid.

### Purchase Commitments

In order to fix the cost and ensure adequate supply of baby back ribs for our restaurants, on November 5, 2019, we entered into a purchase agreement with our current rib supplier, whereby we agreed to purchase approximately $5,314,000 of baby back ribs during calendar year 2020 from this vendor at a fixed cost.

While we anticipate purchasing all of our rib supply from this vendor, we believe there are several other alternative vendors available, if needed.

### Purchase of Limited Partnership Interest

During the thirteen weeks ended December 28, 2019 and the thirteen weeks ended December 29, 2018, we did not purchase any limited partnership interests.

### Working Capital

The table below summarizes the current assets, current liabilities, and working capital for our fiscal quarters ended December 28, 2019, December 29, 2018 and our fiscal year ended September 28, 2019.

*(in Thousands)*

| Item | Dec. 28, 2019 | Dec. 29, 2018 | Sept. 28, 2019 |
| --- | ---: | ---: | ---: |
| Current Assets | $26,709 | $22,595 | $19,593 |
| Current Liabilities | 17,239 | 15,745 | 13,129 |
| Working Capital | $9,470 | $6,850 | $6,464 |

Our working capital increased during our fiscal quarter ended December 28, 2019 from our working capital for our fiscal quarter ended December 29, 2018 and our fiscal year ended September 28, 2019 due to the cash received from the re-financing by our wholly owned subsidiary, Flanigan’s Calusa Center, LLC, of a mortgage loan, increasing the principal amount from $2.72 million to $7.21 million, offset by $327,000 due to our adoption of ASC 842.

While there can be no assurance due to, among other things, unanticipated expenses or unanticipated decline in revenues, or both, we believe that our cash on hand, positive cash flow from operations and funds borrowed on our term loan will adequately fund operations, debt reductions and planned capital expenditures throughout our fiscal year 2020.

### Off-Balance Sheet Arrangements

The Company does not have off-balance sheet arrangements.

### Inflation

The primary inflationary factors affecting our operations are food, beverage and labor costs. A large number of restaurant personnel are paid at rates based upon applicable minimum wage and increases in minimum wage directly affect labor costs. To date, inflation has not had a material impact on our operating results, but this circumstance may change in the future if food and fuel costs continue to rise.

## Market risk

As filed, 3,220 characters.

We do not ordinarily hold market risk sensitive instruments for trading purposes and as of December 28, 2019 held no equity securities.

### Interest Rate Risk

As part of our ongoing operations, we are exposed to interest rate fluctuations on our borrowings. As more fully described in Note 14 “Fair Value Measurements of Financial Instruments” to the Consolidated Financial Statements included in “Item 8. Financial Statements and Supplementary Data” of our Annual Report on Form 10-K for our fiscal year ended September 28, 2019, 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.

At December 28, 2019, we had two variable rate debt instruments outstanding that are impacted by changes in interest rates. In January, 2013, we refinanced the mortgage loan encumbering the property where our combination package liquor store and restaurant located at 4 N. Federal Highway, Hallandale, Florida, (Store #31) operates, which mortgage loan is held by an unaffiliated third party lender (the “$1.405M Loan”). In December, 2016, we closed on a secured revolving line of credit which entitled us to borrow, from time to time through December 28, 2017, up to $5,500,000 (the “Credit Line”), which on December 28, 2017 converted to a term loan (the “Term Loan”).

As a means of managing our interest rate risk on these debt instruments, we entered into interest rate swap agreements with our unrelated third party lender to convert these variable rate debt obligations to fixed rates. We are currently party to the following two (2) interest rate swap agreements:

(i) The first interest rate swap agreement entered into in January, 2013 relates to the $1.405M Loan (the “$1.405M Term Loan Swap”). The $1.405M Term Loan Swap requires us to pay interest for a twenty (20) year period at a fixed rate of 4.35% on an initial amortizing notional principal amount of $1,405,000, while receiving interest for the same period at LIBOR – 1 Month, plus 2.25%, on the same amortizing notional principal amount. We determined that at December 28, 2019, the interest rate swap agreement is an effective hedging agreement and the fair value was not material; and

(ii) The second interest rate swap agreement entered into in December, 2016 and became effective December 28, 2017, relates to the Term Loan (the “Term Loan Swap”). The Term Loan Swap requires us to pay interest for a five (5) year period at a fixed rate of 4.61% on an initial amortizing notional principal amount of $5,500,000, while receiving interest for the same period at LIBOR – 1 Month, plus 2.25%, on the same amortizing notional principal amount. We determined that at December 28, 2019, the interest rate swap agreement is an effective hedging agreement and the fair value was not material

At December 28, 2019, our 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 will not have a material adverse effect on our operations.

## Controls and procedures

As filed, 1,436 characters.

### 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, 2019, 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 effective as of December 28, 2019.

### Changes in Internal Control Over Financial Reporting

During the period covered by this report, we have not made any change to our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Filed Feb 11, 2020.
Source: SEC EDGAR, the filing index for accession 0001174947-20-000148. Last ingested by Listed: Oct 24, 2026, 14:51 ET. No prices; not investment advice.