SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
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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 0-11877
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ELXSI CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 77-0151523
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(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
4209 Vineland Road, Suite J-1, Orlando, Florida 32811
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(Address of principal executive offices) Zip code)
Registrant's telephone number, including area code: (407) 849-1090
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(Former name, former address and former fiscal year, if changed since last
report.)
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 X No
----- -------
On November 6, 1995, the registrant had outstanding 4,792,345 shares of Common
Stock, par value $0.001 per share.
<PAGE>
<TABLE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
ELXSI CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
A S S E T S
<CAPTION>
September 30, December 31,
1995 1994
---- ----
<S> <C> <C>
Current assets:
Accounts receivable, net $ 2,823 $ 2,278
Inventories, net 7,419 6,208
Prepaid expenses and other
current assets 281 205
-------- ---------
Total current assets 10,523 8,691
Property, buildings and equipment, net 27,895 24,275
Intangible assets, net 5,752 5,891
Deferred debt costs, net 257 322
Note receivable - related party 1,156 1,156
Other 338 181
-------- ---------
Total assets $ 45,921 $ 40,516
======== =========
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
ELXSI CORPORATION
CONSOLIDATED BALANCE SHEETS (Continued)
(Dollars in Thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
September 30, December 31,
1995 1994
---- ----
<S> <C> <C>
Current liabilities:
Accounts payable and drafts payable $ 2,804 $ 4,016
Accrued expenses 4,799 4,002
Capital lease obligations - current 36 33
Current portion of long-term debt 1,678 1,063
-------- ---------
Total current liabilities 9,317 9,114
Capital lease obligations - non current 1,541 1,569
Long-term debt, net of discount 12,588 9,639
Other liabilities 1,058 796
-------- ---------
Total liabilities 24,504 21,118
Commitments and contingencies
Stockholders' equity:
Preferred stock, Series A Non-voting
Convertible, par value $0.002 per share
Authorized--5,000,000 shares
Issued and outstanding--none -- --
Common stock, par value $0.001 per share
Authorized--160,000,000 shares
Issued and outstanding--4,792,342
shares at September 30, 1995 and
5,032,333 shares at December 31,
1994 5 5
Additional paid-in capital 229,666 230,890
Accumulated deficit (208,180) (211,441)
Cumulative foreign currency
translation adjustment (74) (56)
-------- ---------
Total stockholders' equity 21,417 19,398
-------- ---------
Total liabilities and stockholders'
equity $ 45,921 $ 40,516
======== =========
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
ELXSI CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands, Except Per Share Data)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $22,048 $16,844 $54,576 $46,703
Costs and expenses:
Cost of sales 17,544 12,654 42,759 35,649
Selling, general and
administrative 1,846 1,618 5,267 4,938
Depreciation and
amortization 602 461 1,631 1,370
------- ------- ------- -------
Operating income 2,056 2,111 4,919 4,746
Other income (expense):
Interest expense (487) (340) (1,335) (1,079)
Interest income 33 -- 97 --
Other expense (11) (2) (35) (18)
------- ------- ------- -------
Income before income taxes 1,591 1,769 3,646 3,649
Provision for income taxes 159 138 385 290
------- ------- ------- -------
Net income $1,432 $ 1,631 $ 3,261 $ 3,359
====== ======= ======= =======
Net income per common share $ 0.28 $ 0.27 $ 0.64 $ 0.55
====== ======= ======= =======
Weighted average number of
common and common
equivalent shares 5,120 6,040 5,104 6,100
===== ===== ===== =====
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
ELXSI CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Amounts in Thousands)
(Unaudited)
<CAPTION>
Cumulative
Additional Accum- Foreign
Common Stock Paid-In ulated Translation
Shares Dollars Capital Deficit Adjustment
------ ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C>
Balance at December 31,
1994 5,032 $ 5 $ 230,890 $(211,441) $ (56)
Net income -- -- -- 3,261 --
Foreign currency translation
adjustment -- -- -- -- (18)
Purchase of 240,000 shares
of Common Stock (240) -- (1,224) -- --
------- --- --------- --------- ------
Balance at September 30,
1995 $ 4,792 $ 5 $ 229,666 $(208,180) $ (74)
======== === ========= ========= ======
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
ELXSI CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,261 $ 3,359
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 1,631 1,370
Amortization of deferred debt costs 167 82
Amortization of debt discount 12 33
(Gain) loss on disposal of equipment (4) 9
Change in cumulative foreign currency
translation adjustment (18) (20)
(Increase) decrease in assets:
Accounts receivable (545) 373
Inventories (1,211) 126
Prepaid expenses and other current
assets (76) 244
Other (134) (8)
Increase (decrease) in liabilities:
Accounts payable and drafts payable (1,212) (599)
Accrued expenses 797 (60)
Other liabilities 262 225
-------- --------
Net cash provided by operating
activities 2,930 5,134
-------- --------
Cash flows from investing activities:
Purchase of property, buildings and
equipment (1,308) (1,244)
Purchase of sixteen Abdow's
Restaurants (3,800) --
-------- --------
Net cash used in investing activities (5,108) (1,244)
-------- --------
Cash flows from financing activities:
Net borrowing (payment) of
long-term debt 52 (3,530)
Borrowing of long-term debt to
acquire sixteen Abdow's Restaurants 3,500 --
Principal payments on capital leases (25) (21)
Proceeds from exercise of common stock options -- 58
Purchase of Common Stock (1,224) --
Payment of deferred bank fees (125) (397)
-------- --------
Net cash used in financing activities $ 2,178 $ (3,890)
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
ELXSI CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Dollars in Thousands)
(Unaudited)
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1995 1994
---- ----
<S> <C> <C>
Increase (decrease) in cash and cash equivalents $ -- $ --
Cash and cash equivalents, beginning of period -- --
-------- --------
Cash and cash equivalents, end of period $ -- $ --
======== ========
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for
Income taxes $ 502 $ 447
Interest 1,123 966
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
ELXSI CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(Unaudited)
Note 1. The Company
General The information contained in this report is unaudited but, in
management's opinion, all adjustments necessary for a fair presentation have
been included and were of a normal and recurring nature. The results for the
three and nine months ended September 30, 1995 are not necessarily indicative of
results to be expected for the entire year. These financial statements and notes
should be read in conjunction with ELXSI Corporation's Annual Report on Form
10-K for the year ended December 31, 1994.
Prior to 1990, ELXSI Corporation (together with its subsidiaries, the "Company")
operated principally through its wholly-owned California subsidiary, ELXSI.
During that period, the principal business of ELXSI was the design, manufacture,
sale and support of minisupercomputers. In September 1989, the Company
discontinued all computer operations.
On July 1, 1991, ELXSI acquired thirty Bickford's and twelve Howard Johnson's
Restaurants (the "Restaurants"), which are located in Massachusetts, Vermont,
New Hampshire, Rhode Island and Connecticut, from Marriott Family Restaurants,
Inc.
Since July 1991, ELXSI sold six of its Howard Johnson's Restaurants, converted
five others into Bickford's Restaurants and opened seven new Bickford's
Restaurants. On July 3, 1995, ELXSI acquired sixteen Abdow's Family Restaurants
from the Abdow Corporation of Springfield, Massachusetts with the intention of
converting most into Bickford's Restaurants over a twelve to eighteen month
period. During the third quarter of 1995, ELXSI converted one Abdow's Restaurant
into a Bickford's Restaurant. Currently, ELXSI operates forty three Bickford's,
fifteen Abdow's and one Howard Johnson's Restaurants.
On October 30, 1992, ELXSI acquired Cues, Inc. of Orlando, Florida and its two
wholly owned subsidiaries Knopafex, Ltd., a Canadian company and Cues B.V., a
Dutch company, together referred to as ("Cues").
Cues is principally engaged in the manufacture and servicing of video inspection
and repair equipment for wastewater and drainage systems, primarily for
governmental municipalities, service contractors and industrial users.
Note 2. Acquisition
On July 3, 1995, ELXSI acquired 16 Abdow's Family Restaurants from Abdow
Corporation of Springfield, MA for a price of approximately $3,800,000 including
estimated acquisition related expenses of approximately $300,000. The
<PAGE>
transaction, which includes the leasing of 16 restaurant sites and the purchase
of associated assets located in western Massachusetts and central Connecticut,
brought the total number of restaurants operated by ELXSI to 59.
The transaction was financed by an increase in ELXSI's existing line of credit
with Bank of America Illinois, which recently was extended to June 30, 1997. The
total available credit on July 3, 1995 was increased to $15,840,000. The minimum
monthly reductions in available credit were increased from $220,000 per month to
$280,000 per month from July to December 1995 and $3,330,000 annually
thereafter, in equal monthly installments from April through December.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
The Company's revenues and expenses result from the operation of ELXSI's
Restaurant and Cues Divisions and the Company's corporate ("Corporate")
expenses.
Nine Months Ended September 30, 1995
During the first nine months of 1995, the Company had net sales of $54,576,000,
cost of sales of $42,759,000, selling, general and administrative expenses of
$5,267,000 and depreciation and amortization expense of $1,631,000, resulting in
operating income of $4,919,000. The operating income of $4,919,000 was increased
by interest income of $97,000 and reduced by interest expense of $1,335,000,
other expense of $35,000 and income taxes of $385,000 resulting in net income of
$3,261,000.
Earnings per share for the nine months ended September 30, 1995 was $0.64 per
share and the weighted average shares outstanding was 5,104,000. This compares
to $0.55 per share for the corresponding period in 1994 when there were
6,100,000 weighted average shares outstanding. The decrease in the weighted
average shares outstanding in 1995 resulted from the repurchase of Common Stock
and Warrants to purchase Common Stock during the fourth quarter of 1994 and the
first quarter of 1995 and, to a lesser extent, a decrease in the average stock
market price during the first nine months of 1995 as compared to the same period
in 1994. The average stock market price for the first nine months of 1995 was
$6.20 compared to an average of $6.65 in the corresponding period of 1994. A
decrease in stock price results in a lesser number of shares outstanding for
purposes of determining the weighted average shares outstanding used in the
earnings per share calculation.
Nine Months Ended September 30, 1994
During the first nine months of 1994, the Company had net sales of $46,703,000,
cost of sales of $35,649,000, selling, general and administrative expenses of
$4,938,000 and depreciation and amortization expense of $1,370,000, resulting in
operating income of $4,746,000. The operating income of $4,746,000 was reduced
by interest expense of $1,079,000, other expense of $18,000 and income taxes of
$290,000 resulting in net income of $3,359,000.
<PAGE>
Earnings per share for the nine months ended September 30, 1994 was $0.55 per
share and the weighted average shares outstanding was 6,100,000.
COMPARISON OF NINE MONTH 1995 RESULTS TO 1994 RESULTS
The nine month sales increased $7,873,000, gross profit increased $763,000,
selling, general and administrative expense increased $329,000 and depreciation
and amortization increased $261,000 resulting in an operating income increase of
$173,000. Interest expense increased by $256,000, interest income increased by
$97,000, other expense increased by $17,000 and income taxes increased by
$95,000 resulting in a decrease in net income of $98,000.
Restaurant Division Restaurant sales increased by $7,257,000 or 23.0% in the
first nine months of 1995 compared to the same period in the prior year, while
gross profit increased $889,000. The gross profit increase was partially offset
by increases in selling, general and administrative expense of $184,000 and
depreciation and amortization expense of $247,000 resulting in an increase in
operating income of $458,000. The sales increase consisted of $4,549,000 due to
the acquisition of the Abdow's Restaurants, $1,910,000 due to the opening of
three new Restaurants and $798,000 or 2.6% due to increased sales at Restaurants
open during each period. The same store sales increase was primarily
attributable to the successful introduction of new lunch and dinner items and
improved operations in the first quarter of 1995. Customer counts at Restaurants
operated in the first nine months of 1995 decreased .7% compared to 1994. The
total number of customers served increased 19.4% as a result of the Abdow's
acquisition and the opening of new restaurants.
Despite the sales increase, Restaurant gross profit increased by only $889,000
in 1995, due to a 1.6% decline in the gross profit percentage during the first
nine months of 1995 compared to 1994. This decline in the gross profit
percentage was expected as a result of the acquisition of the Abdow's
Restaurants, which have a higher percentage of food, labor and rent costs
compared to the Bickford's Restaurants. It is anticipated that upon conversion
of the Abdow's Restaurants into Bickford's Restaurants the food cost as a
percentage of sales will decline to the Bickford's level thereby increasing the
gross profit percentage. Management does not intend to reduce the labor costs
immediately upon conversion and will evaluate the benefits of additional labor
as evidenced by the excellent service reputation historically enjoyed by the
Abdow's Restaurants. However, as management intend to keep up to six of the
acquired restaurants operating as lower margin Abdow's restaurants, the overall
margins will continue to be negatively influenced by the Abdow's Restaurants.
The gross profit margin at Bickford's Restaurants declined slightly due to an
increase in food costs, primarily coffee, and labor costs.
Restaurant depreciation and amortization will continue to increase each year
with the addition of new restaurants or until such time as assets valued and
recorded at the date of the restaurant acquisition become fully depreciated. The
equipment acquired at the July 1, 1991 acquisition has a seven year useful life,
and will become fully depreciated in 1998. Of the $3,800,000 acquisition cost of
Abdow's, approximately $1,600,000 is allocated to equipment, furniture and
fixtures and will be written off over seven years. The balance is primarily
allocated to leasehold interests and leasehold improvements that will be written
off over longer period associated with the lease period or building life,
whichever is shorter.
<PAGE>
As a result of the above items, operating income increased by $458,000 or 10.1%
in the first nine months of 1995. Excluding the effects of depreciation and
amortization, the Restaurant earnings before interest, taxes, depreciation and
amortization ("EBITD") increased by $705,000 or 12.5% during the nine month
period. Restaurant division interest expense related to capital lease
obligations and the write off of deferred debt costs increased by $28,000.
Cues Division Cues' sales increased by $616,000 or 4.1% in the first nine months
of 1995 compared to the same period in the prior year. Competitive pricing and
additional labor costs related to new product development contributed to a 2.0%
decline in Cues' nine month gross profit percentage and caused gross profit to
decrease by $126,000. Operating income decreased by $274,000 or 24.6%. Included
in the decrease in operating income is the effect of an increase in selling,
general and administrative expense of $134,000 and an increase in depreciation
and amortization of $14,000. Management continues to focus efforts on protecting
market share and developing new products.
Corporate Corporate general and administrative expenses increased by $11,000
during the first nine months of 1995. Interest expense increased by $232,000 due
to a higher average debt balance and an increase in interest rates in 1995. The
higher average debt balance in 1995 was the result of spending approximately
$3.8 million to purchase Abdow's and $7.4 million to purchase the Company's
common stock, warrants to purchase common stock and subordinated notes at the
end of 1994 and the beginning of 1995. The bank interest rate applicable to
Company borrowings was 1.25% above the prime lending rate or 10.0% at September
30, 1995 and 1.5% above the prime lending rate or 9.25% at September 30, 1994.
As of October 1, 1995 and the bank reduced the Company's borrowing rate to 1%
above the prime lending rate. During the first nine months of 1995, the Company
recorded interest income of $97,000 in connection with a note receivable due
from a related party. Income tax expense represented an effective rate of 10.5%
compared to 7.9% in the first nine months of 1994 due to the loss of certain
state net operating loss carryforwards that were available in 1994.
QUARTER ENDED SEPTEMBER 30, 1995
During the three months ended September 30, 1995, the Company had net sales of
$22,048,000, cost of sales of $17,544,000, selling, general and administrative
expenses of $1,846,000 and depreciation and amortization expense of $602,000,
resulting in operating income of $2,056,000. The operating income of $2,056,000
was reduced by interest expense of $487,000, other expense of $11,000 and income
taxes of $159,000 and increased by interest income of $33,000 resulting in net
income of $1,432,000.
Earnings per share for the quarter ended September 30, 1995 was $0.28 per share
on weighted average shares outstanding of 5,120,000.
QUARTER ENDED SEPTEMBER 30, 1994
During the three months ended September 30, 1994, the Company had net sales of
$16,844,000, cost of sales of $12,654,000, selling, general and administrative
expenses of $1,618,000 and depreciation and amortization expense of $461,000,
resulting in operating income of $2,111,000. The operating income of $2,111,000
was reduced by interest expense of $340,000, other expense of $2,000 and income
taxes of $138,000 resulting in net income of $1,631,000.
<PAGE>
Earnings per share for the quarter ended September 30, 1994 was $0.27 per share
on weighted average shares outstanding of 6,040,000.
COMPARISON OF THIRD QUARTER 1995 RESULTS TO 1994 RESULTS
The third quarter sales increased $5,204,000, gross profit increased $314,000,
selling, general and administrative expense increased $228,000 and depreciation
and amortization increased $141,000 resulting in an operating income decrease of
$55,000. Interest expense increased by $147,000, interest income increased by
$33,000, other expense increased by $9,000 and income taxes increased by $21,000
resulting in a decrease in net income of $199,000.
Restaurant Division Restaurant sales increased by $5,074,000 or 42.6% in the
third quarter of 1995 compared to the same period in the prior year. The sales
increase consisted of $4,549,000 due to the acquisition of the Abdow's
Restaurants, $545,000 due to the opening of three new Restaurants slightly
offset by a $20,000 or .2% sales decrease at Restaurants opened during each
period. Customer counts at Restaurants operated in the third quarter of both
periods decreased by approximately 3%. Some of the customer count decrease was
associated with a few Restaurants that had either outside negative influences in
1995 or outside positive influences in 1994 that did not exist in 1995. For
example, several adjoining hotels that were closed or declined in business in
1995 and the World Cup Soccer tournament in 1994 both provided increased
customer traffic in 1994 compared to 1995. In addition, operational issues in
several other Restaurants caused the overall customer counts to decrease.
Management is targeting these Restaurants to solve the operational issues in
order to increase traffic in the restaurants going forward.
Despite the sales increase, Restaurant gross profit increased by only $317,000
in 1995, due to a 5.0% decline in the gross profit percentage during the third
quarter of 1995 compared to 1994. The decline in the gross margin was expected
as a result of the acquisition of the sixteen Abdow's Restaurants, which
historically have had higher food and labor costs and currently have higher rent
costs than the Bickford's Restaurants. It is anticipated that upon conversion of
the Abdow's Restaurants into Bickford's Restaurants the food cost as a
percentage of sales will decline to the historic Bickford's level thereby
increasing the gross profit percentage. Management does not intend to reduce the
labor costs immediately upon conversion and will evaluate the benefits of
additional labor as evidenced by the excellent service reputation historically
enjoyed by the Abdow's Restaurants. In addition to the higher food and labor
costs, the average annual rent on the sixteen Abdow's Restaurants is
substantially higher than the average rent on the typical leased Bickford's
Restaurant thereby further lowering the gross profit percentage. The gross
profit margin on Bickford's Restaurants declined slightly due to an increase in
food costs, primarily coffee, and labor costs.
Restaurant selling, general and administrative expense increased by $117,000,
while Restaurant depreciation and amortization increased by $140,000 during the
third quarter 1995. The increase in selling, general and administrative expense
was primarily the result of additional administrative labor associated with the
increased number of restaurants.
<PAGE>
Operating income increased $60,000 or 2.9% after deducting the increase in
selling general and administrative expense and the increase in depreciation and
amortization. Excluding the effects of depreciation and amortization, the
Restaurant EBITD increased by $200,000 or 8.2% during the quarter.
Restaurant division interest expense decreased by $9,000.
Cues Division Cues' sales increased by $130,000 or 2.6% in the third quarter of
1995 compared to the same period in the prior year. Price erosion and additional
labor costs related to new product development contributed to a .8% decline in
Cues' third quarter gross profit percentage. Due to the erosion in the gross
profit percentage and an increase in selling, general and administrative expense
of $91,000, operating income decreased by $95,000 or 27.9%. Included in the
decrease in operating income is the effect of an increase in depreciation and
amortization of $1,000.
Corporate Corporate general and administrative expenses increased by $20,000
during 1995. Interest expense increased by $138,000 due to a higher average
debt balance and an
increase in the bank lending rate in 1995.
Liquidity and Capital Resources
Available Resources The Company's unrestricted consolidated cash positions at
September 30, 1995 and December 31, 1994 was $0.
During the first nine months of 1995, the Company had cash flow from operations
before working capital and other changes of $5,049,000. Changes in working
capital and other assets and liabilities decreased cash flow from operations to
$2,930,000. Cash flow from operations combined with $3,500,000 of additional
credit provided by the bank and $52,000 of borrowings on the existing line of
credit funded the acquisition of Abdow's totalling approximately $3,800,000, the
purchase of property, plant and equipment in the amount of $1,308,000, the
purchase of Common Stock in the amount of $1,224,000, the payment of deferred
debt costs totalling $125,000 and repaid capital leases obligations of $25,000.
During the first nine months of 1995, current assets increased by $1,832,000
primarily due to a increase in Cues' accounts receivable and inventory. In
addition to the increase in current assets, current liabilities decreased by
$415,000 (excluding the current portion of long-term debt and capital leases).
The decrease in current liabilities consists mainly of a net decrease in
accounts payable and accrued expenses.
During the first nine months of 1994, the Company had cash flow from operations
before working capital and other changes of $4,833,000. Changes in working
capital and other assets and liabilities increased cash flow from operations to
$5,134,000, which funded the acquisition of property, plant and equipment
totalling $1,244,000, and repaid long term bank debt, subordinated debt and
capital leases obligations of $2,967,000, $563,000 and $21,000, respectively.
The Company also received proceeds for the exercise of stock options totalling
$58,000 and paid an accrued bank fee of $397,000 in connection with its existing
credit agreement. During the first nine months of 1994, current assets decreased
by $743,000 primarily due to a decrease in Cues' accounts receivable and
inventory. The decrease in current assets was partially offset by a decrease in
current liabilities of $659,000 (excluding the change in current portion of long
term debt and capital leases and the payment of the bank fee). The decrease in
current liabilities consists mainly of a decrease in accounts payable and drafts
payable at Bickford's and Cues of $483,000 and $116,000, respectively. It also
includes an increase in accrued expenses of $75,000 and a decrease in the
restructuring reserve of $135,000 during the first nine months of 1994.
<PAGE>
The Company maintains no cash in its bank accounts as a result of instituting a
cash management system whereby the net cash generated by operations is
immediately used to reduce bank debt. The immediate reduction of outstanding
debt provides the Company with a greater reduction in interest expense than
could be offset with interest income from alternative investments. Working
capital needs, when they arise, are met by daily borrowings.
Future Needs For and Sources of Capital Management believes that cash generated
by operations is sufficient to fund current operations including the interest
payments on its senior bank debt and interest payments on the remaining
$1,251,000 outstanding principal balance of 14.5% and 15% Senior Subordinated
Notes. With bank approval, excess funds are available under the Company's loan
Agreement to finance additional acquisitions.
Impact of Inflation Inflationary factors such as increases in food and labor
costs directly affect the Company's operation. Many of the Restaurant employees
are paid hourly rates related to the federal minimum wage, and accordingly,
increases in the minimum wage will result in increases in the Company's labor
costs. Currently, there are no further mandated increases in the federal minimum
wage, however in Massachusetts legislation has recently passed that will
increase the minimum wage by $.50 per hour on both January 1, 1996 and 1997 from
the current minimum wage of $4.25 per hour. In addition, the cost of food
commodities utilized by the Company are subject to market supply and demand
pressures. Shifts in these costs may have a significant impact on the Company's
food cost. The Company anticipates that food cost increases can be offset
through selective price increases, although no assurances can be given that the
Company will be successful in this regard.
Increases in interest rates could negatively affect the Company's operations.
PART II. OTHER INFORMATION
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27.0 Financial Data Schedule
(b) Reports on Form 8-K.
In connection with the acquisition of 16 Abdow's Family Restaurants on
July 3, 1995, the Company filed a current report on Form 8-K dated
July 3, 1995.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ELXSI CORPORATION
(Registrant)
Date: November 10, 1995 /s/ Alexander M. Milley
--------------------------------------------
Alexander M. Milley, Chairman of the Board,
President and Chief Executive Officer
(Principal Executive Officer)
Date: November 10, 1995 /s/ Thomas R. Druggish
-------------------------------------------
Thomas R. Druggish, Vice President Finance,
Treasurer and Corporate Secretary
(Chief Accounting Officer)
<PAGE>
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