Flanigan's Enterprises(BDL) - 2025 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Presents Flanigan's unaudited condensed consolidated financial statements, covering income, balance sheets, equity, cash flows, and accounting policies UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME | Metric (in thousands) | 13 Weeks Ended June 28, 2025 | 13 Weeks Ended June 29, 2024 | 39 Weeks Ended June 28, 2025 | 39 Weeks Ended June 29, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total Revenues | $52,164 | $49,102 | $156,058 | $142,311 | | Income from Operations| $2,974 | $2,287 | $7,467 | $5,764 | | Net Income | $2,489 | $1,802 | $6,467 | $4,920 | | Net Income Attributable to Flanigan's Enterprises Inc. Stockholders | $1,392 | $1,121 | $4,137 | $3,172 | | Basic and Diluted EPS | $0.75 | $0.60 | $2.23 | $1.71 | UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | Metric (in thousands) | 13 Weeks Ended June 28, 2025 | 13 Weeks Ended June 29, 2024 | 39 Weeks Ended June 28, 2025 | 39 Weeks Ended June 29, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net Income | $2,489 | $1,802 | $6,467 | $4,920 | | Total Comprehensive Income | $2,489 | $1,833 | $6,467 | $4,736 | CONDENSED CONSOLIDATED BALANCE SHEETS | Metric (in thousands) | June 28, 2025 | September 28, 2024 | | :-------------------- | :------------ | :----------------- | | Total current assets | $30,288 | $31,529 | | Total assets | $140,694 | $142,082 | | Total current liabilities | $18,291 | $19,924 | | Total liabilities | $62,428 | $66,672 | | Total stockholders' equity | $78,266 | $75,410 | UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - Total stockholders' equity increased from $75,410 thousand as of September 28, 2024, to $78,266 thousand as of June 28, 2025, driven by net income and other comprehensive income, partially offset by distributions to noncontrolling interests and dividends paid[25] UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | Cash Flow Activity (in thousands) | 39 Weeks Ended June 28, 2025 | 39 Weeks Ended June 29, 2024 | | :-------------------------------- | :--------------------------- | :--------------------------- | | Net cash provided by operating activities | $7,150 | $5,219 | | Net cash used in investing activities | $(5,677) | $(4,068) | | Net cash used in financing activities | $(4,665) | $(4,560) | | Net Decrease in Cash and Cash Equivalents | $(3,192) | $(3,409) | | Cash and Cash Equivalents - End of Period | $18,210 | $22,123 | NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - The company early adopted ASU 2023-07, "Segment Reporting," in Q3 FY2024, which impacted the expense presentation in the income statements and business segments footnote[37] - During Q3 FY2025, the company purchased vacant real property for $2.2 million cash to construct a new "Flanigan's" restaurant, which will be leased to a limited partnership where the company is the sole general partner[41] - The company purchased 5.25% limited partnership interests in seven limited partnerships for an aggregate of $377,400 during Q3 FY2025[42] - Total annual insurance premiums for the policy year beginning December 30, 2024, amounted to approximately $4,010,000, covering general liability, auto, property, excess liability, and terrorism, including coverage for franchises[46][47] - The company entered into a new one-year Master Services Agreement with its major vendor, committing to purchase no less than 80% of overall product needs, and exercised the first one-year renewal option effective January 1, 2026[48][123] - A five-year agreement with Oracle for NetSuite ERP solution was implemented as the company's general ledger effective June 29, 2025, with implementation services costing approximately $237,000 paid in full by Q3 FY2025[49][50] | Lease Metric | June 28, 2025 | September 28, 2024 | | :----------- | :------------ | :----------------- | | Operating lease assets | $25,106 (in thousands) | $26,828 (in thousands) | | Operating lease current liabilities | $2,594 (in thousands) | $2,467 (in thousands) | | Operating lease non-current liabilities | $24,157 (in thousands) | $25,847 (in thousands) | | Weighted Average Remaining Lease Term | 9.67 Years | 10.17 Years | | Weighted Average Discount Rate | 5.12% | 5.02% | - The company operates in two reportable segments: package stores (retail liquor sales) and restaurants (food and bar sales), with a Corporate entity functioning as a cost center[57] | Segment (in thousands) | Identifiable Assets (June 28, 2025) | Identifiable Assets (September 28, 2024) | | :--------------------- | :---------------------------------- | :--------------------------------------- | | Restaurants | $78,186 | $77,613 | | Package stores | $23,237 | $23,084 | | Corporate | $39,271 | $41,385 | | Consolidated Totals | $140,694 | $142,082 | ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Analyzes Flanigan's financial condition and operational results, covering revenue, costs, liquidity, capital, and critical accounting policies Overview - As of June 28, 2025, Flanigan's operates 32 units (restaurants, package liquor stores, combination units, sports bar) and franchises an additional 5 units[74] | Unit Type | June 28, 2025 | September 28, 2024 | | :-------- | :------------ | :----------------- | | Company Owned: Combination package liquor store and restaurant | 2 | 2 | | Company Owned: Restaurant only, including sports bar | 9 | 9 | | Company Owned: Package liquor store only | 9 | 9 | | Company Managed Restaurants Only: Limited partnerships | 10 | 10 | | Company Managed Restaurants Only: Franchise | 1 | 1 | | Company Managed Restaurants Only: Unrelated Third Party | 1 | 1 | | Total Company Owned/Operated Units | 32 | 32 | | Franchised Units | 5 | 5 | - The company receives a royalty of 1% of gross package store sales and 3% of gross restaurant sales from franchisees, plus advertising expenditures. For limited partnerships, the company receives a management fee (initially after investor return, then 50% of available cash) and a 3% gross sales fee for service mark use[76][78] Results of Operations | Revenue Category (in thousands) | 13 Weeks Ended June 28, 2025 | 13 Weeks Ended June 29, 2024 | 39 Weeks Ended June 28, 2025 | 39 Weeks Ended June 29, 2024 | | :------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Restaurant food sales | $31,933 | $30,471 | $93,645 | $86,182 | | Restaurant bar sales | $7,931 | $7,577 | $24,087 | $22,780 | | Package store sales | $11,522 | $10,292 | $36,008 | $31,034 | | Total Sales | $51,386 | $48,340 | $153,740 | $139,996 | | Total Revenue | $52,164 | $49,102 | $156,058 | $142,311 | Thirteen Weeks Ended June 28, 2025 vs. June 29, 2024 - Total revenue increased by $3,062,000 (6.24%) to $52,164,000, primarily due to increased package liquor store and restaurant sales, and recent menu price increases[80] - Restaurant food sales increased by 4.69% in comparable weekly sales, driven by price increases. Restaurant bar sales increased by 4.63% in comparable weekly sales, also due to price increases. Package store sales increased by 11.87% in weekly average same-store sales due to increased traffic[81][82][83] - Costs and expenses increased by $2,375,000 (5.07%) to $49,190,000, mainly due to higher payroll and operating expenses, but decreased as a percentage of total revenue from 95.34% to 94.30%[84] | Expense Category (in thousands) | 13 Weeks Ended June 28, 2025 | 13 Weeks Ended June 29, 2024 | Change ($) | Change (%) | | :------------------------------ | :--------------------------- | :--------------------------- | :--------- | :--------- | | Payroll and Related Costs | $16,106 | $15,301 | $805 | 5.26% | | Operating Expenses | $7,029 | $6,268 | $761 | 12.14% | | Occupancy Costs | $2,070 | $2,024 | $46 | 2.27% | | Selling, General & Administrative Expenses | $1,084 | $1,288 | $(204) | (15.84%) | | Depreciation and Amortization | $1,167 | $1,127 | $40 | 3.55% | - Net income increased by 38.12% to $2,489,000, and net income attributable to stockholders increased by 24.17% to $1,392,000, driven by price increases and lower food costs, partially offset by increased expenses[94][95] Thirty-Nine Weeks Ended June 28, 2025 vs. June 29, 2024 - Total revenue increased by $13,747,000 (9.66%) to $156,058,000, primarily due to increased package liquor store and restaurant sales, recent menu price increases, and the opening of a new corporate-owned restaurant[96] - Restaurant food sales increased by 5.23% in comparable weekly sales, and restaurant bar sales increased by 2.97% in comparable weekly sales, both benefiting from price increases and the new restaurant. Package store sales increased by 15.95% in weekly average same-store sales due to increased traffic[97][98][99] - Costs and expenses increased by $12,044,000 (8.82%) to $148,591,000, mainly due to higher payroll, food costs, and expenses from the new restaurant, but decreased as a percentage of total revenue from 95.95% to 95.22%[100] | Expense Category (in thousands) | 39 Weeks Ended June 28, 2025 | 39 Weeks Ended June 29, 2024 | Change ($) | Change (%) | | :------------------------------ | :--------------------------- | :--------------------------- | :--------- | :--------- | | Payroll and Related Costs | $48,036 | $44,658 | $3,378 | 7.56% | | Operating Expenses | $20,640 | $18,565 | $2,075 | 11.18% | | Occupancy Costs | $6,127 | $6,118 | $9 | 0.15% | | Selling, General & Administrative Expenses | $4,036 | $3,867 | $169 | 4.37% | | Depreciation and Amortization | $3,474 | $3,119 | $355 | 11.38% | - Net income increased by 31.44% to $6,467,000, and net income attributable to stockholders increased by 30.42% to $4,137,000, driven by price increases and the new restaurant, offset by higher food costs and overall increased expenses[110][111] Menu Price Increases and Trends - The company implemented several menu price increases for bar offerings (0.84% annually effective Feb 23, 2025; 4.90% annually effective Dec 4, 2024; 5.63% annually effective Aug 25, 2024) and food offerings (4.14% annually effective Nov 17, 2024) to offset rising costs[112] Liquidity and Capital Resources - Cash and cash equivalents decreased by $3,192,000 to $18,210,000 as of June 28, 2025, primarily due to a $2.2 million expenditure for undeveloped land for a future restaurant[113] - The company believes current cash and positive cash flow from operations will be sufficient to fund operations and planned capital expenditures for at least the next twelve months, despite inflationary pressures[114][125] Cash Flows | Cash Flow Activity (in thousands) | 39 Weeks Ended June 28, 2025 | 39 Weeks Ended June 29, 2024 | | :-------------------------------- | :--------------------------- | :--------------------------- | | Net cash provided by operating activities | $7,150 | $5,219 | | Net cash used in investing activities | $(5,677) | $(4,068) | | Net cash used in financing activities | $(4,665) | $(4,560) | | Net Decrease in Cash and Cash Equivalents | $(3,192) | $(3,409) | - A cash dividend of $0.55 per share was declared for shareholders of record on June 12, 2025, compared to $0.50 per share in the prior year[116] Capital Expenditures - Capital expenditures for property and equipment totaled $4,956,000 for the thirty-nine weeks ended June 28, 2025, including $2.2 million for the Cutler Bay Property and $285,000 for renovations to company-owned locations[117] - Anticipated refurbishment costs for fiscal year 2025 are approximately $550,000, with potential for significantly higher capital expenditures[118] Long-Term Debt - Long-term debt (including current portion) decreased to $20,926,000 as of June 28, 2025, from $21,912,000 as of September 28, 2024. The company is in compliance with all loan covenants[119][120] Purchase Commitments - The company committed to purchase approximately $7.8 million of "2.5 & Down Baby Back Ribs" for calendar year 2025 from a new supplier at a competitive fixed cost[121] - The Master Services Agreement with the major vendor was renewed for one year, effective January 1, 2026, requiring the purchase of no less than 80% of overall product needs[123] Working Capital | Item (in thousands) | June 28, 2025 | September 28, 2024 | | :------------------ | :------------ | :----------------- | | Current Assets | $30,288 | $31,529 | | Current Liabilities | $18,291 | $19,924 | | Working Capital | $11,997 | $11,605 | Off-Balance Sheet Arrangements - The Company does not have any off-balance sheet arrangements[126] Critical Accounting Policies and Estimates - Key estimates include useful lives of tangible assets, deferred tax assets/liabilities, incremental borrowing rates for leases, lease terms, and estimates for loyalty reward programs and gift card breakage[34][129][130][131][132] - The company consolidates operations of ten limited partnerships where it acts as general partner, even without owning over 50% equity, due to controlling interests[33][133] - Inflation, particularly in food, beverage, fuel, and labor costs (due to minimum wage increases), is materially impacting operations, which the company attempts to offset through menu price increases[114][135] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Outlines Flanigan's market risk exposure, covering economic, legislative, regulatory, and interest rate fluctuations, and management strategies Economic Risk - The company acknowledges potential impacts from changes in government trade policy (tariffs), immigration policies, and international relations, but cannot predict the timing or extent of such effects[137] Legislative and Regulatory Risk - The company is evaluating the potential impact of the "One Big Beautiful Bill Act" (signed July 4, 2025), which includes tax incentives and regulatory changes for the food service and hospitality industries[138] Interest Rate Risk - The company uses interest rate swap agreements to convert variable rate debt obligations to fixed rates, specifically for an $8.90 million loan, which was refinanced and swapped to a fixed rate of 4.90% in November 2024[139][140][141][142] - The company holds approximately $733,000 in 90-day government guaranteed CDs (4.20%-4.25% fixed) and $732,000 in 180-day government guaranteed CDs (4.05%-4.25% fixed) as short-term investments[144] ITEM 4. CONTROLS AND PROCEDURES Reports ineffective disclosure controls and procedures due to material weaknesses in IT general controls and deferred revenue, with no material misstatements Evaluation of Disclosure Controls and Procedures - Management concluded that the company's disclosure controls and procedures were not effective as of June 28, 2025[147] Material Weaknesses in Internal Control Over Financial Reporting - Identified material weaknesses include ineffective IT general controls (access restrictions, logging of database changes) and inadequate controls for timely and accurate recognition of deferred revenues from promotional gift cards[149][150] - Despite the material weaknesses, no material misstatements occurred in financial statements or disclosures, and no changes to previously released financial results were necessary. Remediation efforts are ongoing[151] Changes in Internal Control Over Financial Reporting - No additional material changes to internal controls over financial reporting were made during the fiscal quarter ended June 28, 2025[152] PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Refers to Note 9 and prior 10-K for legal proceedings, including 'dram shop' statutes and other ordinary course claims - The company is subject to "dram shop" statutes and other claims (e.g., "slip and fall," employment-related), but management believes current matters are without merit or involve amounts not materially adverse to financial position, often covered by insurance[55][56] ITEM 1A. RISK FACTORS Marked 'Not Applicable,' indicating no new material risk factors are disclosed beyond those previously reported ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS No common stock shares purchased in the period; 65,414 shares remain authorized for purchase under discretionary plan - No shares of common stock were purchased during the thirty-nine weeks ended June 28, 2025, or June 29, 2024[155] - As of June 28, 2025, the company has remaining authority to purchase 65,414 shares of common stock under a plan approved in May 2007[155] ITEM 3. DEFAULTS UPON SENIOR SECURITIES Marked 'Not Applicable,' indicating no senior securities defaults occurred in the current period ITEM 4. MINE SAFETY DISCLOSURES Marked 'Not Applicable,' indicating no mine safety disclosures are required ITEM 5. OTHER INFORMATION No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements adopted or terminated by directors or officers in the period - No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted or terminated by directors or officers during the thirty-nine weeks ended June 28, 2025[156] ITEM 6. EXHIBITS Lists Form 10-Q exhibits, including CEO/CFO certifications and Inline XBRL documents - The report includes certifications from the Chief Executive Officer and Chief Financial Officer (Exhibits 31.1, 31.2, 32.1, 32.2) and Inline XBRL documents (Exhibits 101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[157] SIGNATURES Report signed August 12, 2025, by James G. Flanigan (CEO/President) and Jeffrey D. Kastner (CFO/Secretary) - Report signed August 12, 2025, by James G. Flanigan (CEO and President) and Jeffrey D. Kastner (CFO and Secretary)[160][161]