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, 1996
--------------------------------------------
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 5, 1996, the registrant had outstanding 4,792,355 shares of Common
Stock, par value $0.001 per share.
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
ELXSI CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
A S S E T S
<CAPTION>
September 30, December 31,
1996 1995
---- ----
Current assets:
<S> <C> <C>
Accounts receivable, net $ 2,799 $ 2,776
Inventories, net 10,922 8,477
Prepaid expenses and other current assets 372 397
Assets held for sale -- 1,075
---------- ---------
Total current assets 14,093 12,725
Property, buildings and equipment, net 27,892 27,458
Intangible assets, net 5,571 5,703
Deferred debt costs, net 95 212
Note receivable - related party 1,156 1,156
Other 703 445
---------- ---------
Total assets $ 49,510 $ 47,699
========== =========
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
2
<PAGE>
<TABLE>
ELXSI CORPORATION
CONSOLIDATED BALANCE SHEETS (Continued)
(Dollars in Thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
September 30, December 31,
1996 1995
---- ----
Current liabilities
<S> <C> <C>
Accounts payable and drafts payable $ 3,519 $ 4,269
Accrued expenses 4,765 4,396
Capital lease obligations - current 137 137
Current portion of long-term debt 789 1,485
---------- ----------
Total current liabilities 9,210 10,287
Capital lease obligations - non current 1,627 1,732
Long-term debt, net of discount 11,547 11,570
Other liabilities 1,771 1,396
---------- ----------
Total liabilities 24,155 24,985
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--4,757,855
at September 30, 1996 and 4,792,361
at December 31, 1995 5 5
Additional paid-in capital 229,485 229,666
Accumulated deficit (204,027) (206,895)
Cumulative foreign currency translation adjustment (108) (62)
---------- ----------
Total stockholders' equity 25,355 22,714
---------- ----------
Total liabilities and stockholders' equity $ 49,510 $ 47,699
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
3
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<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,
---------------------------- ----------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 21,242 $ 22,048 $ 62,727 $ 54,576
Costs and expenses:
Cost of sales 16,993 17,544 50,920 42,759
Selling, general and administrative 1,814 1,846 5,446 5,267
Depreciation and amortization 681 602 2,036 1,631
----------- ----------- ----------- -----------
Operating income 1,754 2,056 4,325 4,919
Other income (expense):
Interest expense (333) (487) (1,163) (1,335)
Interest income 27 33 82 97
Other expense 34 (11) 20 (35)
----------- ----------- ----------- -----------
Income before income taxes 1,482 1,591 3,264 3,646
Provision for income taxes 167 159 396 385
----------- ----------- ----------- -----------
Net income $ 1,315 $ 1,432 $ 2,868 $ 3,261
=========== =========== =========== ===========
Net income per common share $ 0.27 $ 0.28 $ 0.57 $ 0.64
=========== =========== =========== ===========
Weighted average number of common
and common equivalent shares 4,994 5,120 5,055 5,104
=========== =========== =========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
4
</TABLE>
<PAGE>
<TABLE>
ELXSI CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Amounts in Thousands)
(Unaudited)
<CAPTION>
Cumulative
Common Stock Additional Accum- Foreign
---------------------- Paid-In ulated Translation
Shares Dollars Capital Deficit Adjustment
------ ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995 4,792 $ 5 $ 229,666 $ (206,895) $ (62)
Net income -- -- -- 2,868 --
Purchase of 34,000 shares of
Common Stock (34) -- (181) -- --
Foreign currency translation
adjustment -- -- -- -- (46)
------------- -------------- ------------- ------------- -----------
Balance at September 30, 1996 $ 4,758 $ 5 $ 229,485 $ (204,027) $ (108)
============= ============== ============= ============= ===========
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
5
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<TABLE>
ELXSI CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1996 1995
---- ----
Cash flows provided by operating activities:
<S> <C> <C>
Net income $ 2,868 $ 3,261
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 2,036 1,631
Amortization of deferred debt costs 117 167
Gain on disposal of equipment -- 12
Amortization of debt discount 15 (4)
Change in cumulative foreign currency
translation adjustment (46) (18)
(Increase) decrease in assets:
Accounts receivable (23) (545)
Inventories (2,445) (1,211)
Prepaid expenses and other current assets 25 (76)
Asset held for sale 1,075 --
Other (268) (134)
Increase (decrease) in liabilities:
Accounts payable and drafts payable (750) (1,212)
Accrued expenses 369 797
Other liabilities 375 262
----------- ----------
Net cash provided by operating activities 3,348 2,930
----------- ----------
Cash flows used in investing activities:
Purchase of property, building and equipment (2,301) (1,308)
Purchase of sixteen Abdow's Restaurants -- (3,800)
----------- ----------
Net cash used in investing activities (2,301) (5,108)
----------- ----------
Cash flows (used in) provided by financing activities:
Net (payment) borrowing of long-term debt (734) 52
Borrowing of long-term debt to acquire sixteen
Abdow's Restaurants 3,500
Purchase of Common Stock (181) (1,224)
Payment of deferred bank fee -- (125)
Principal payments of capital lease (132) (25)
----------- ----------
Net cash (used in) provided by financing activities $ (1,047) $ 2,178
----------- ----------
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
6
<PAGE>
<TABLE>
ELXSI CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Dollars in Thousands)
(Unaudited)
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1996 1995
---- ----
<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 $ 526 $ 502
Interest 1,001 1,123
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
7
<PAGE>
ELXSI CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1996
(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, 1996 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, 1995.
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 July 1989, the Company announced a
major restructuring of its computer operations. In September 1989, the Company
discontinued all computer operations.
On July 1, 1991, ELXSI acquired thirty Bickford's and twelve Howard Johnson's
Restaurants, which are located in Massachusetts, Vermont, New Hampshire, Rhode
Island and Connecticut, from Marriott Family Restaurants, Inc.
Between July 1, 1991 and December 31, 1994, ELXSI sold six of its Howard
Johnson's Restaurants, converted five others into Bickford's Restaurants and
opened seven new Bickford's Restaurants. During 1995, ELXSI acquired sixteen
Abdow's Family Restaurants ("Abdow's") and converted two into Bickford's
Restaurants. In the first nine months of 1996, ELXSI sold one Abdow's, closed
one Abdow's, converted seven Abdow's into Bickford's Restaurants and added one
Bickford's Restaurant. As of September 30, 1996, ELXSI operated fifty-two
Bickford's, five Abdow's and one Howard Johnson's Restaurant (the "Restaurants"
or "Restaurant Division").
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. Long-Term Debt
On June 27, 1996, ELXSI amended and restated its existing line of credit with
Bank of America Illinois. The revised loan agreement contains a supplemental
$3.0 million loan facility to be used in the event ELXSI Corporation desires to
repurchase it's securities, including issued and outstanding Common Stock,
Warrants to purchase Common Stock and Senior Subordinated Notes. In addition,
the agreement reduced the minimum annual reductions in available credit from
$3,330,000 to $2,250,000, extended the expiration date one year to June 30,
1998, amended
8
<PAGE>
certain financial covenants, and reduced the interest rate at the option of the
Company to either the Bank's prime lending rate or 2% above the EuroRate.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
The Company's 1996 and 1995 nine-month and third quarter 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, 1996
During the first nine months of 1996, the Company had net sales of $62,727,000,
cost of sales of $50,920,000, selling, general and administrative expenses of
$5,446,000 and depreciation and amortization expense of $2,036,000, resulting in
operating income of $4,325,000. The operating income of $4,325,000 was reduced
by interest expense of $1,163,000 and income taxes of $396,000 and increased by
interest income of $82,000 and other income of $20,000, resulting in net income
of $2,868,000.
Earnings Per Share Earnings per share and the weighted average number of shares
outstanding for the nine months ended September 30, 1996 were $0.57 per share
and 5,055,000 shares, respectively. This compares to $0.64 per share for the
corresponding period in 1995, when there were 5,104,000 weighted average shares
outstanding. The average stock market price for the first nine months of 1996
was $6.03 compared to an average of $6.20 in the corresponding period of 1995. 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, 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.
COMPARISON OF FIRST NINE MONTH 1996 RESULTS TO 1995 RESULTS
The nine month sales increased $8,151,000, gross profit decreased $10,000,
selling, general and administrative expense increased $179,000 and depreciation
and amortization expense increased $405,000, resulting in an operating income
decrease of $594,000. Interest expense decreased by $172,000, interest income
decreased by $15,000, other income increased by $55,000 and income taxes
increased by $11,000, resulting in a decrease in net income of $393,000.
9
<PAGE>
Restaurant Division During the first nine months of 1996, restaurant sales
increased by $7,288,000 or 18.8% and gross profit decreased $160,000 or 2.1%
compared to the same period in the prior year. Selling, general and
administrative expense increased by $267,000 and depreciation and amortization
expense increased by $319,000, resulting in a decrease in operating income of
$746,000. The sales increase was due to the acquisition of the Abdow's and the
opening of two new Restaurants. Sales at restaurants operated in both periods
were flat for the first nine months of 1996 compared to the same period in 1995.
Customer counts at Restaurants operated in the first nine months of both periods
decreased 1.5%. The severe weather in the first quarter accounted for
approximately half of the customer count decrease in the first nine months of
1996 compared to the same period in 1995.
Despite the sales increase, Restaurant gross profit decreased by $160,000 in the
first nine months of 1996 compared to the same period in 1995 due to a 3.4%
decline in the gross profit percentage. The decline in the gross profit
percentage was the result of an increase in labor and variable cost attributable
to the severe weather in the first quarter of 1996 and the acquisition of the
Abdow's Restaurants in 1995.
Management expected the gross profit percentage to decline 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. Lower than expected
sales and gross profit percentage at the Abdow's during the third quarter did
not offset the planned increases in Restaurant division overhead related to the
acquisition of Abdow's. It is anticipated that the gross profit percentage will
improve as the Abdow's Restaurants converted into Bickford's Restaurants
continue to mature. However, as management intends to keep up to five of the
acquired restaurants operating as lower margin Abdow's restaurants, the overall
margins will continue to be lower than if all restaurants were operated as
Bickford's Restaurants.
Restaurant selling, general and administrative expense increased by $267,000,
primarily as a result of adding additional support personnel in connection with
the acquisition of the Abdow's restaurants.
Restaurant Division depreciation and amortization expense increased by $319,000
during the first nine months of 1996. Restaurant Division depreciation and
amortization expense 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 1991 restaurant acquisition become fully depreciated. The equipment acquired
in that acquisition has a seven year useful life, and will become fully
depreciated in 1998.
As a result of the above items, operating income decreased by $746,000 or 15.0%
in the first nine months of 1996. Restaurant Division earnings before interest,
taxes, depreciation and amortization expense ("EBITD") decreased by $427,000 or
6.7% during the nine-month period. Restaurant Division interest expense related
to the amortization of deferred bank fees and to capital lease obligations
increased by $19,000.
Cues Division Cues's sales increased by $863,000 or 5.5% in the first nine
months of 1996 compared to the same period in the prior year. Gross profit
increased by $150,000 or 3.5%, while operating income increased by $220,000 or
26.2%. Included in the increase in operating income is the effect of a decrease
in selling, general and administrative expense of $156,000 and
10
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an increase in depreciation and amortization expense of $86,000. Management
anticipates that gross and operating margins will continue to experience
pressure in 1996 due to the fact that Cues's customers continue to stress
pricing factors in awarding contracts through the competitive bidding process.
Corporate Corporate general and administrative expenses increased by $68,000
during the first nine months of 1996 mainly as a result of an increase in the
phantom stock option plan accrual for Bickord's management. Interest expense
decreased by $162,000 due to a lower average bank debt balance in 1996, a
decrease in the Company's senior debt borrowing rate and a decrease in the
outstanding principal of the senior subordinated notes. The rate decrease was
comprised of a decrease in the prime rate and a decrease in the interest spread
charged by the bank from prime plus 1% at September 30, 1995 to prime or Euro
Rate plus 2% at September 30, 1996. During the first nine months of 1996 and
1995, the Company recorded interest income of $82,000 and $97,000, respectively
in connection with a note receivable due from a related party. Income tax
expense represented an effective rate of 12.1% compared to 10.6% in the first
half of 1995 due to the loss of certain state net operating loss carryforwards
that were available in 1995 and the recording of a potential foreign tax
assessment related to prior years 1996.
QUARTER ENDED SEPTEMBER 30, 1996
During the three months ended September 30, 1996, the Company had net sales of
$21,242,000, cost of sales of $16,993,000, selling, general and administrative
expenses of $1,814,000 and depreciation and amortization expense of $681,000,
resulting in operating income of $1,754,000. The operating income of $1,754,000
was reduced by interest expense of $333,000 and income taxes of $167,000 and
increased by interest income of $27,000 and other income of $34,000, resulting
in net income of $1,315,000.
Earnings Per Share Earnings per share and the weighted average number of shares
outstanding for the quarter ended September 30, 1996 were $0.27 per share and
4,994,000 shares, respectively. This compares to $0.28 per share for the
corresponding period in 1995, when there were 5,120,000 weighted average shares
outstanding. The decrease in the weighted average shares outstanding in the
third quarter of 1996 resulted from the decrease in the average stock market
price during the third quarter of 1996 compared to the same period in 1995 and
the repurchase of Common Stock. The average stock market price for the third
quarter of 1996 was $5.46 compared to an average of $6.58 in the corresponding
period of 1995.
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.
11
<PAGE>
COMPARISON OF THIRD QUARTER 1996 RESULTS TO THIRD QUARTER 1995 RESULTS
The third quarter sales decreased $806,000, gross profit decreased $255,000,
selling, general and administrative expense decreased $32,000 and depreciation
and amortization expense increased $79,000, resulting in an operating income
decrease of $302,000. Interest expense decreased by $154,000, other income
increased by $45,000, income taxes increased by $8,000 and interest income
decreased by $6,000, resulting in an decrease in net income of $117,000.
Restaurant Division Restaurant sales decreased by $755,000 or 4.4% in the third
quarter of 1996 compared to the same period in the prior year. The sales
decrease was mainly due to the closing of two Abdow's, the decreasing sales at
the five remaining Abdow's and a fire at the Bickford's located in Brockton.
These decreases were partially offset by the addition of one new Bickford's and
increased sales at the nine Abdow's converted into Bickford's Restaurants. Sales
and customer counts at Restaurants operated in the third quarter of both periods
were flat.
Restaurant gross profit decreased by $289,000 or 9.4% in 1996, due to the
decrease in sales and a .9% decline in the gross profit percentage during the
third quarter of 1996 compared to 1995. Lower than expected sales and gross
profit percentage at the Abdow's during the third quarter did not offset the
planned increases in Restaurant division overhead related to the acquisition of
Abdow's. It is anticipated that the gross profit percentage will improve as the
Abdow's Restaurants converted into Bickford's Restaurants continue to mature.
The decrease in the gross profit percentage was the result of an increase in
food, labor and variable cost attributable to the acquisition of the Abdow's
Restaurants in 1995 and the conversion and training costs associated with the
conversion of Abdow's into Bickford's Restaurants.
Restaurant selling, general and administrative expense increased by $37,000,
while Restaurant depreciation and amortization expense increased by $46,000
during the third quarter 1996.
Operating income decreased $372,000 or 17.6% after deducting the increase in
selling, general and administrative expense and the increase in depreciation and
amortization expense. Restaurant Division EBITD decreased by $326,000 or 12.4%.
Restaurant division interest expense related to the amortization of deferred
bank fees and to capital lease obligations decreased by $37,000.
Cues Division Cues's sales decreased by $51,000 or 1.0% in the third quarter of
1996 compared to the same period in the prior year, however Cues's third quarter
gross margin and gross profit percentage increased by $34,000 and 1%,
respectively. Operating income increased by $95,000 or 38.6%. Included in the
increase in operating income is the effect of a decrease in selling, general and
administrative expense of $94,000 and an increase in depreciation and
amortization expense of $33,000.
Corporate Corporate general and administrative expense increased by $25,000
during 1996. Interest expense decreased by $129,000 due to a lower average bank
debt balance in 1996, a decrease in the Company's senior debt borrowing rate and
a decrease in the outstanding principal of the senior subordinated notes. During
the third quarter of 1996, the Company recorded interest income of $27,000 in
connection with a note receivable due from a related party.
12
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Liquidity and Capital Resources
Available Resources The Company's unrestricted consolidated cash positions at
September 30, 1996 and December 31, 1995 was $0. The Company instituted 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 reduction in interest expense greater than the interest
income that cash could earn from alternative investments. Working capital needs,
when they arise, are met by daily borrowings.
During the first nine months of 1996, the Company had cash flow from operations
before working capital and other changes of $4,990,000. Working capital changes
and other assets and liabilities reduced cash flow from operations to
$3,348,000. The cash flow from operations funded the acquisition of property,
plant and equipment totalling $2,301,000, the repayment of long-term debt of
$734,000, the purchase Common Stock totalling $181,000, the repayment of capital
leases obligations of $132,000. During the first nine months of 1996, current
assets increased by $1,368,000 primarily due to an increase in Cues's inventory
partially offset by the sale of the Vernon, Connecticut Abdow's Restaurant,
which was classified as an asset held for sale at December 31, 1995. In
addition, current liabilities (excluding the current portion of long-term debt
and capital leases) decreased $381,000 mainly due to the timing of payments
related to Bickford's accounts payable partially offset by an increase in
accrued expenses.
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.
The Company instituted 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 reduction in interest expense
greater than the interest income that cash could earn 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
and principal payments on the senior bank debt and the remaining $743,000 of
14.5% Notes and 15% Notes. With bank approval, excess funds are available under
the Company's Loan Agreement to finance additional acquisitions.
13
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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. The federal minimum wage increased from $4.25 to $4.75 effective October
1, 1996 and will increase and additional $.40 in 1997. 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.
None
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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 11, 1996 /s/ Alexander M. Milley
-------------------------------------------
Alexander M. Milley, Chairman of the Board,
President and Chief Executive Officer
(Principal Executive Officer)
Date: November 11, 1996 /s/ Thomas R. Druggish
-------------------------------------------
Thomas R. Druggish, Vice President,
Treasurer and Secretary (Chief Accounting
Officer and Principal Financial Officer)
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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 11, 1996 -------------------------------------------
Alexander M. Milley, Chairman of the Board,
President and Chief Executive Officer
(Principal Executive Officer)
Date: November 11, 1996 -------------------------------------------
Thomas R. Druggish, Vice President,
Treasurer and Secretary (Chief Accounting
Officer and Principal Financial Officer)
16
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
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