Flanigan's Enterprises(BDL) - 2021 Q3 - Quarterly Report

markdown PART I. FINANCIAL INFORMATION [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=4&type=section&id=ITEM%201.%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS%20(UNAUDITED)) The unaudited condensed consolidated financial statements for the thirteen and thirty-nine weeks ended July 3, 2021, show a significant increase in revenues and net income compared to the same periods in 2020, driven by COVID-19 recovery and PPP loan forgiveness [Unaudited Condensed Consolidated Statements of Operations](index=5&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) For the thirty-nine weeks ended July 3, 2021, total revenues increased to $103.7 million, and net income surged to $15.1 million, primarily due to a $10.1 million gain from PPP loan forgiveness Consolidated Statements of Operations Highlights (in thousands, except per share amounts) | Metric | Thirty-Nine Weeks Ended July 3, 2021 | Thirty-Nine Weeks Ended June 27, 2020 | | :--- | :--- | :--- | | **Total Revenues** | $103,672 | $84,732 | | **Income from Operations** | $6,672 | $2,016 | | **Gain on forgiveness of PPP loans** | $10,136 | $0 | | **Net Income** | $15,145 | $1,478 | | **Net Income attributable to stockholders** | $10,430 | $687 | | **Basic and Diluted EPS** | $5.61 | $0.37 | [Condensed Consolidated Balance Sheets](index=7&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) As of July 3, 2021, total assets grew to $123.2 million, while total liabilities decreased to $63.8 million, resulting in an increase in total equity to $59.5 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | July 3, 2021 | October 3, 2020 | | :--- | :--- | :--- | | **Total Current Assets** | $39,768 | $36,508 | | **Property and Equipment, Net** | $54,112 | $46,984 | | **Total Assets** | $123,243 | $112,484 | | **Total Current Liabilities** | $20,796 | $25,362 | | **Total Liabilities** | $63,750 | $66,928 | | **Total Equity** | $59,493 | $45,556 | [Unaudited Condensed Consolidated Statements of Stockholders' Equity](index=9&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20STOCKHOLDERS'%20EQUITY) Total stockholders' equity increased from $45.6 million at October 3, 2020, to $59.5 million at July 3, 2021, primarily driven by net income - Retained earnings grew from **$38.8 million** at the start of the fiscal year to **$49.3 million** by July 3, 2021, reflecting strong profitability during the period[16](index=16&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) For the thirty-nine weeks ended July 3, 2021, net cash provided by operating activities was $11.5 million, while investing and financing activities used $8.4 million and $1.1 million respectively, leading to a $2.0 million increase in cash and cash equivalents Summary of Cash Flows (in thousands) | Cash Flow Activity | Thirty-Nine Weeks Ended July 3, 2021 | Thirty-Nine Weeks Ended June 27, 2020 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $11,523 | $7,437 | | **Net cash used in investing activities** | ($8,374) | ($2,448) | | **Net cash (used in) provided by financing activities** | ($1,118) | $11,821 | | **Net Increase in Cash** | $2,031 | $16,810 | | **Cash at End of Period** | $31,953 | $30,482 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=12&type=section&id=NOTES%20TO%20UNAUDITED%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) The notes detail key accounting policies, property purchases, debt financing, and lease commitments, highlighting the forgiveness of **$10.1 million** in PPP loans and strong revenue growth in both restaurant and package store segments - The company exercised options to purchase real property for its North Lauderdale location for **$1.2 million** and its Sunrise location for **$4.8 million**, financing the latter with a **$2.2 million** loan[31](index=31&type=chunk)[33](index=33&type=chunk) - During the second quarter of fiscal 2021, the company applied for and received forgiveness for the entire principal and accrued interest on its PPP loans, resulting in a gain of **$10.1 million** reflected in the consolidated financial statements[62](index=62&type=chunk) - The company has significant construction commitments, including a **$2.1 million** contract for rebuilding a fire-damaged location in Hollywood and a **$1.4 million** contract for renovations at a new Sunrise location[47](index=47&type=chunk)[48](index=48&type=chunk) Operating Revenues by Segment (in thousands) | Segment | Thirty-Nine Weeks Ended July 3, 2021 | Thirty-Nine Weeks Ended June 27, 2020 | | :--- | :--- | :--- | | Restaurants | $77,611 | $64,305 | | Package stores | $23,923 | $18,833 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management attributes significant revenue and profit growth to COVID-19 recovery, menu price increases, strong package liquor store performance, and PPP loan forgiveness, while actively investing in capital expenditures and maintaining sufficient liquidity [Results of Operations](index=24&type=section&id=Results%20of%20Operations) Total revenue increased **60.3%** to **$37.9 million** for the thirteen weeks ended July 3, 2021, and **22.4%** to **$103.7 million** for the thirty-nine-week period, with net income surging to **$15.1 million** primarily due to PPP loan forgiveness Revenue Comparison - Thirteen Weeks Ended (in thousands) | Revenue Source | July 3, 2021 | June 27, 2020 | % Change | | :--- | :--- | :--- | :--- | | Restaurant food sales | $23,484 | $14,514 | +61.8% | | Restaurant bar sales | $5,617 | $1,630 | +244.6% | | Package store sales | $8,082 | $7,099 | +13.8% | | **Total Revenue** | **$37,935** | **$23,663** | **+60.3%** | Revenue Comparison - Thirty-Nine Weeks Ended (in thousands) | Revenue Source | July 3, 2021 | June 27, 2020 | % Change | | :--- | :--- | :--- | :--- | | Restaurant food sales | $62,501 | $51,469 | +21.4% | | Restaurant bar sales | $15,110 | $12,836 | +17.7% | | Package store sales | $23,923 | $18,833 | +27.0% | | **Total Revenue** | **$103,672** | **$84,732** | **+22.4%** | - Net income for the thirty-nine weeks ended July 3, 2021, increased by **$13.7 million** (**924.7%**) to **$15.1 million**, primarily due to the forgiveness of PPP loans and increased revenue[119](index=119&type=chunk) [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) As of July 3, 2021, the company had a cash balance of **$32.0 million** and working capital of **$19.0 million**, with operations funded by cash flow and borrowings, including significant capital expenditures for property purchases - Cash and cash equivalents increased by **$2.0 million** to **$31.95 million** as of July 3, 2021, from **$29.92 million** at October 3, 2020[127](index=127&type=chunk) - Capital expenditures for the thirty-nine weeks ended July 3, 2021, totaled **$9.7 million**, a significant increase from **$2.2 million** in the prior-year period, reflecting investments in property and renovations[134](index=134&type=chunk) - Long-term debt decreased to **$20.2 million** from **$26.3 million** at the start of the fiscal year, mainly due to the forgiveness of PPP loans[136](index=136&type=chunk) - The company has a purchase agreement to buy approximately **$6.42 million** of baby back ribs during calendar year 2021 at a fixed cost to ensure adequate supply[143](index=143&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=35&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company mitigates its primary market risk, interest rate fluctuations on variable-rate debt, through two interest rate swap agreements that convert these obligations to fixed rates - The company has two variable rate debt instruments outstanding, both of which are managed through interest rate swap agreements to convert them to fixed rates[154](index=154&type=chunk)[155](index=155&type=chunk) - The interest rate swaps fix the rates at **4.35%** and **4.61%** for the respective loans, and management has determined them to be effective hedging agreements[155](index=155&type=chunk) [Item 4. Controls and Procedures](index=36&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and procedures were not effective as of July 3, 2021, due to a material weakness in lease accounting under ASC 842, for which remediation measures are being implemented - A material weakness was identified in internal controls related to the company's effectiveness in distinguishing between operating and finance leases under ASC 842[160](index=160&type=chunk) - Based on an evaluation, the CEO and CFO concluded that disclosure controls and procedures were not effective as of July 3, 2021[159](index=159&type=chunk) - Remediation measures are underway, including developing a training program for accounting personnel, enhancing documentation, and implementing a management review plan for all new or remeasured leases[161](index=161&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=37&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company is involved in various ordinary course legal actions, which management believes will not have a material adverse effect on its financial position or results of operations - The company states that it is a party to various claims and legal actions arising in the ordinary course of business but does not expect them to have a material adverse effect[59](index=59&type=chunk)[163](index=163&type=chunk) [Item 1A. Risk Factors](index=37&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section directs readers to the company's Annual Report on Form 10-K for a comprehensive discussion of the risks affecting the business - For a detailed discussion of risk factors, the report refers investors to the company's Annual Report on Form 10-K for the fiscal year ended October 3, 2020[164](index=164&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=37&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) During the thirty-nine weeks ended July 3, 2021, the company did not purchase any common stock, retaining authority to purchase an additional **65,414 shares** under a 2007 plan - The company did not purchase any of its common stock during the thirty-nine weeks ended July 3, 2021[164](index=164&type=chunk) - The company has remaining authority to purchase **65,414 shares** of its common stock under a plan approved in 2007[164](index=164&type=chunk) [Item 6. Exhibits](index=38&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed with the Form 10-Q report, including CEO and CFO certifications and XBRL/Inline XBRL data files - The report includes required certifications from the Chief Executive Officer and Chief Financial Officer as exhibits **31.1**, **31.2**, **32.1**, and **32.2**[167](index=167&type=chunk) - Interactive Data Files (XBRL and Inline XBRL) are also filed as exhibits with this report[166](index=166&type=chunk)