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 June 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
----------------
ELXSI CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 77-0151523
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
4209 Vineland Road, Suite J-1, Orlando, Florida 32811
- --------------------------------------------------------------------------------
(Address of principal executive offices) Zip code)
Registrant's telephone number, including area code: (407) 849-1090
--------------------------
- --------------------------------------------------------------------------------
(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 July 24, 1996, the registrant had outstanding 4,792,362 shares of Common
Stock, par value $0.001 per share.
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
ELXSI CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
A S S E T S
June 30, December 31,
1996 1995
---- ----
Current assets:
Accounts receivable, net $ 3,072 $ 2,776
Inventories, net 9,742 8,477
Prepaid expenses and other current assets 260 397
Assets held for sale -- 1,075
-- -----
Total current assets 13,074 12,725
Property, buildings and equipment, net 27,664 27,458
Intangible assets, net 5,615 5,703
Deferred debt costs, net 121 212
Note receivable - related party 1,156 1,156
Other 661 445
----------- -----------
Total assets $ 48,291 $ 47,699
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE>
ELXSI CORPORATION
CONSOLIDATED BALANCE SHEETS (Continued)
(Dollars in Thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, December 31,
1996 1995
---- ----
Current liabilities
Accounts payable and drafts payable $ 4,330 $ 4,269
Accrued expenses 3,879 4,396
Capital lease obligations - current 137 137
Current portion of long-term debt 479 1,485
--- -----
Total current liabilities 8,825 10,287
Capital lease obligations - non current 1,662 1,732
Long-term debt, net of discount 11,923 11,570
Other liabilities 1,646 1,396
----------- -----------
Total liabilities 24,056 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--4,792,356
at June 30, 1996 and 4,792,361
at December 31, 1995 5 5
Additional paid-in capital 229,666 229,666
Accumulated deficit (205,342) (206,895)
Cumulative foreign currency translation adjustment (94) (62)
----------- -----------
Total stockholders' equity 24,235 22,714
----------- -----------
Total liabilities and stockholders' equity $ 48,291 $ 47,699
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
ELXSI CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands, Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- ------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 21,665 $ 16,914 $ 41,485 $ 32,528
Costs and expenses:
Cost of sales 17,463 13,011 33,927 25,215
Selling, general and administrative 1,884 1,744 3,632 3,421
Depreciation and amortization 677 515 1,355 1,029
--- --- ----- -----
Operating income 1,641 1,644 2,571 2,863
Other income (expense):
Interest expense (401) (422) (830) (848)
Interest income 27 33 55 64
Other expense (4) (33) (14) (24)
-- --- --- ---
Income before income taxes 1,263 1,222 1,782 2,055
Provision for income taxes 140 138 229 226
--- --- --- ---
Net income $ 1,123 $ 1,084 $ 1,553 $ 1,829
========= ========= ========= =========
Net income per common share $ 0.21 $ 0.21 $ 0.30 $ 0.36
========= ========= ========= =========
Weighted average number of common
and common equivalent shares 5,119 5,059 5,106 5,095
===== ===== ===== =====
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
ELXSI CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Amounts in Thousands)
(Unaudited)
<TABLE>
<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 -- -- -- 1,553 --
Foreign currency translation
adjustment -- -- -- -- (32)
---------- ----------- ----------- ---------- ---------
Balance at June 30, 1996 $ 4,792 $ 5 $ 229,666 $ (205,342) $ (94)
=== ==== =========== =========== =========== ========== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
ELXSI CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
Six Months Ended June 30,
-------------------------
1996 1995
---- ----
Cash flows provided by operating activities:
Net income $ 1,553 $ 1,829
Adjustments to reconcile net income to net
cash provided by operating
activities:
Depreciation and amortization 1,355 1,029
Amortization of deferred debt costs 121 116
Gain loss on disposal of equipment -- (9)
Amortization of debt discount 7 8
Change in cumulative foreign currency
translation adjustment (32) (13)
(Increase) decrease in assets:
Accounts receivable (296) (948)
Inventories (1,265) (499)
Prepaid expenses and other current assets 137 (318)
Asset held for sale 1,075 --
Other (224) (159)
Increase (decrease) in liabilities:
Accounts payable and drafts payable 61 381
Accrued expenses (517) (533)
Other liabilities 250 175
----------- -----------
Net cash provided by operating activities 2,225 1,059
----------- -----------
Cash flows used in investing activities:
Purchase of property, building and equipment (1,439) (984)
----------- -----------
Net cash used in investing activities (1,439) (984)
----------- -----------
Cash flows provided by financing activities:
Net (payment) borrowing of long-term debt (660) 1,216
Purchase of Common Stock -- (1,224)
Payment of deferred bank fee (30) (50)
Principal payments of capital lease (96) (17)
----------- -----------
Net cash used in financing activities $ (786) $ (75)
----------- -----------
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE>
ELXSI CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Dollars in Thousands)
(Unaudited)
Six Months Ended June 30,
-------------------------
1996 1995
---- ----
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 $ 358 $ 395
Interest 719 718
The accompanying notes are an integral part of these consolidated financial
statements.
7
<PAGE>
ELXSI CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 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 six months ended June 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 six months of 1996, ELXSI sold one Abdow's, closed one
Abdow's and converted five additional Abdow's into Bickford's Restaurants. As of
June 30, 1996, ELXSI operated forty-nine Bickford's, seven 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. In
July 1996, ELXSI used a portion of the supplemental loan facility to retire
$375,000 of its 14.5% Senior Subordinated Notes and designated $8.0 million of
its outstanding loan balance for EuroRate pricing.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
The Company's 1996 and 1995 six-month and second quarter revenues and expenses
result from the operation of ELXSI's Restaurant and Cues Divisions and the
Company's corporate ("Corporate") expenses.
SIX MONTHS ENDED JUNE 30, 1996
During the first half of 1996, the Company had net sales of $41,485,000, cost of
sales of $33,927,000, selling, general and administrative expenses of $3,632,000
and depreciation and amortization expense of $1,355,000, resulting in operating
income of $2,571,000. The operating income of $2,571,000 was reduced by interest
expense of $830,000, other expense of $14,000 and income taxes of $229,000 and
increased by interest income of $55,000, resulting in net income of $1,553,000.
Earnings Per Share Earnings per share and the weighted average number of shares
outstanding for the six months ended June 30, 1996 were $0.30 per share and
5,106,000 shares, respectively. This compares to $0.36 per share for the
corresponding period in 1995, when there were 5,095,000 weighted average shares
outstanding. The average stock market price for the first half of 1996 was $6.31
compared to an average of $6.01 in the corresponding period of 1995. An increase
in stock price results in a greater number of shares outstanding for purposes of
determining the weighted average shares outstanding used in the earnings per
share calculation.
During the second quarter ended June 30, 1996, the Company granted options to
management for the purchase of 125,000 shares of the Company's Common Stock at
the current market value on the date of the grant pursuant to the ELXSI
Corporation 1996 Incentive Stock Option Plan, which was adopted by the
stockholders on May 23, 1996.
SIX MONTHS ENDED JUNE 30, 1995
During the first half of 1995, the Company had net sales of $32,528,000, cost of
sales of $25,215,000, selling, general and administrative expenses of $3,421,000
and depreciation and amortization expense of $1,029,000, resulting in operating
income of $2,863,000. The operating income of $2,863,000 was reduced by interest
expense of $848,000, other expense of $24,000 and income taxes of $226,000 and
increased by interest income of $64,000, resulting in net income of $1,829,000.
9
<PAGE>
Earnings Per Share Earnings per share and the weighted average number of shares
outstanding for the six months ended June 30, 1995 were $0.36 per share and
5,095,000 shares, respectively.
COMPARISON OF FIRST HALF 1996 RESULTS TO FIRST HALF 1995 RESULTS
The six month sales increased $8,957,000, gross profit increased $245,000,
selling, general and administrative expense increased $211,000 and depreciation
and amortization expense increased $326,000, resulting in an operating income
decrease of $292,000. Interest expense decreased by $18,000, interest income
decreased by $9,000, other expense decreased by $10,000 and income taxes
increased by $3,000, resulting in a decrease in net income of $276,000.
Restaurant Division In the first half of 1996, restaurant sales increased by
$8,043,000 or 36.8% and gross profit increased $129,000 or 2.9% compared to the
same period in the prior year. The gross profit increase was offset by an
increase in selling, general and administrative expense of $230,000 and an
increase in depreciation and amortization expense of $273,000, resulting in an
operating income decrease of $374,000. The sales increase was due to the
acquisition of the Abdow's and the opening of one new Restaurant in the second
quarter of 1995, partially offset by a sales decrease of $63,000 or .3% at
restaurants operated in both periods. Severe weather in New England, including
record snow falls, resulted in the 1996 same store sales decrease compared to
the first half of 1995, which had mild weather in comparison. Customer counts at
Restaurants operated in the first half of both periods decreased 2.2%. The
severe weather accounted for approximately half of the customer count decrease
in the first half of 1996 compared to the same period in 1995.
As a result of the sales increase, Restaurant gross profit increased by $129,000
in the first half of 1996 compared to the same period in 1995 due to a 5.0%
decrease in the gross profit percentage. The decrease in the gross profit
percentage was the result of an increase in food, 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. 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 average 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 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 $230,000,
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 $273,000
during the first half 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
10
<PAGE>
the date of the restaurant acquisition become fully depreciated. The equipment
acquired in that acquisition has seven year useful life, and will become fully
depreciated in 1998.
As a result of the above items, operating income decreased by $374,000 or 13.0%
in the first half of 1996. Restaurant Division earnings before interest, taxes,
depreciation and amortization expense ("EBITD") decreased by $101,000 or 2.7%
during the six-month period. Restaurant Division interest expense related to the
amortization of deferred bank fees and to capital lease obligations increased by
$18,000.
Cues Division Cues's sales increased by $914,000 or 8.6% in the first half of
1996 compared to the same period in the prior year. Gross profit increased by
$116,000 or 4.0%, while operating income increased by $125,000 or 21.0%.
Included in the increase in operating income is the effect of a decrease in
selling, general and administrative expense of $62,000 and an increase in
depreciation and amortization expense of $53,000. 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 $43,000
during the first six 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 $33,000 due to a higher average debt balance in 1996 offset by a
decrease in the Company's senior debt borrowing rate from 10.5% at June 30, 1995
to 8.75% at June 30, 1996. The rate decrease was comprised of a decrease in the
prime rate from 9.0% at June 30, 1995 to 8.25% at June 30, 1996 and a decrease
in the interest spread charged by the bank from prime plus 1.5% at June 30, 1995
to prime plus .5% at June 30, 1996. During the first half of 1996 and 1995, the
Company recorded interest income of $55,000 and $64,000, respectively in
connection with a note receivable due from a related party. Income tax expense
represented an effective rate of 12.9% compared to 11.0% in the first half of
1995 due to the loss of certain state net operating loss carryforwards that were
available in 1995.
QUARTER ENDED JUNE 30, 1996
During the three months ended June 30, 1996, the Company had net sales of
$21,665,000, cost of sales of $17,463,000, selling, general and administrative
expenses of $1,884,000 and depreciation and amortization expense of $677,000,
resulting in operating income of $1,641,000. The operating income of $1,641,000
was reduced by interest expense of $401,000, other expense of $4,000 and income
taxes of $140,000 and increased by interest income of $27,000, resulting in net
income of $1,123,000.
Earnings Per Share Earnings per share and the weighted average number of shares
outstanding for the quarter ended June 30, 1996 were $0.21 per share and
5,119,000 shares, respectively. This compares to $0.21 per share for the
corresponding period in 1995, when there were 5,059,000 weighted average shares
outstanding. The increase in the weighted average shares outstanding in the
second quarter of 1996 resulted from the a increase in the average stock market
price during the second quarter of 1996 compared to the same period in 1995. The
average stock market price for the second quarter of 1996 was $6.42 compared to
an average of $5.99 in the corresponding period of 1995.
11
<PAGE>
QUARTER ENDED JUNE 30, 1995
During the three months ended June 30, 1995, the Company had net sales of
$16,914,000, cost of sales of $13,011,000, selling, general and administrative
expenses of $1,744,000 and depreciation and amortization expense of $515,000,
resulting in operating income of $1,644,000. The operating income of $1,644,000
was reduced by interest expense of $422,000, other expense of $33,000 and income
taxes of $138,000 and increased by interest income of $33,000, resulting in net
income of $1,084,000.
Earnings per share and the weighted average number of shares outstanding for the
quarter ended June 30, 1995 were $0.21 per share and 5,059,000 shares,
respectively.
COMPARISON OF SECOND QUARTER 1996 RESULTS TO SECOND QUARTER 1995 RESULTS
The second quarter sales increased $4,751,000, gross profit increased $299,000,
selling, general and administrative expense increased $140,000 and depreciation
and amortization expense increased $162,000, resulting in an operating income
decrease of $3,000. Interest expense decreased by $21,000, other expense
decreased by $29,000, income taxes increased by $2,000 and interest income
decreased by $5,000, resulting in an increase in net income of $40,000.
Restaurant Division Restaurant sales increased by $4,055,000 or 35.4% in the
second quarter of 1996 compared to the same period in the prior year. The sales
increase was due mainly to the acquisition of the Abdow's and to a lesser extent
the opening of one new Restaurant in the second quarter of 1996 and a sales
increase of $59,000 or .5% at restaurants operated in both periods. Customer
counts at Restaurants operated in the second quarter of both periods decreased
approximately 1%.
Restaurant gross profit increased by $226,000 or 9.3% in 1996, due to the
increase in sales partially offset by a 4.1% decline in the gross profit
percentage during the second quarter of 1996 compared to 1995. 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.
Restaurant selling, general and administrative expense increased by $157,000,
while Restaurant depreciation and amortization expense increased by $135,000
during the second quarter 1996.
Operating income decreased $66,000 or 4.0% after deducting the increase in
selling, general and administrative expense and the increase in depreciation
and amortization expense. Restaurant Division EBITD increased by $69,000 or
3.3%.
Restaurant division interest expense related to the amortization of deferred
bank fees and to capital lease obligations increased by $10,000.
Cues Division Cues's sales increased by $696,000 or 12.7% in the second quarter
of 1996 compared to the same period in the prior year. Price erosion and
additional labor costs related to new product development contributed to an 1.9%
decline in Cues's second quarter gross profit percentage. Operating income
increased by $79,000 or 27.4%. Included in the increase in operating income is
the effect of a decrease in selling, general and administrative expense of
$33,000 and a increase in depreciation and amortization expense of $27,000.
12
<PAGE>
Corporate Corporate general and administrative expense increased by $16,000
during 1996. Interest expense decreased by $27,000 due to a higher average debt
balance offset by a decrease
in the prime lending rate in 1996. During the second quarter of 1996, the
Company recorded interest income of $28,000 in connection with a note receivable
due from a related party.
Liquidity and Capital Resources
Available Resources The Company's unrestricted consolidated cash positions at
June 30, 1996 and December 31, 1995 was $0.
During the first half of 1996, the Company had cash flow from operations before
working capital and other changes of $3,004,000. Working capital changes and
other assets and liabilities reduced cash flow to a $2,225,000 from operations.
The cash flow from operations funded the acquisition of property, plant and
equipment totalling $1,439,000, the repayment of long-term debt of $660,000, the
payment of a deferred bank fee of $30,000 and the repayment of capital leases
obligations of $96,000. During the first half of 1996, current assets increased
by $349,000 primarily due to an increase in Cues's accounts receivable and
inventory partially offset by the sale of the Vernon, Connecticut Abdow's
Restaurants, 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 $456,000 mainly due to the timing
of payments related to Bickford's accounts payable and accrued expenses.
During the first half of 1995, the Company had cash flow from operations before
working capital and other changes of $2,960,000. Working capital changes and
other assets and liabilities decreased cash flow from operations to $1,059,000,
which along with an increase in long-term bank debt of $1,216,000 funded the
purchase of property, building and equipment totalling $984,000, the purchase of
240,000 shares of Common Stock for $1,224,000, and the payment of capital leases
obligations of $17,000 and deferred bank fees of $50,000. During the first half
of 1995, current assets increased by $1,765,000, primarily due to an increase in
Cues's accounts receivable and inventory and a one-time increase in Restaurant
Division prepaid expenses of $335,000 as a result of up front costs paid in
connection with the July 3, 1995 acquisition of Abdow's Family Restaurants. The
increase in current assets was slightly offset by a decrease in current
liabilities (excluding the current portion of long-term debt and capital leases)
of $152,000.
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
payments on the senior bank debt and interest payments on the remaining
$1,194,000 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
<PAGE>
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 is likely to increase by approximately $.90 from
$4.25 over the course of the next twelve months. In Massachusetts legislation
passed that did or 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 4. Submission of Matters to a Vote of Security-Holders.
The Company's 1995 Annual Meeting of Stockholders was held on May 23, 1996. In
connection therewith the Company submitted three proposals to stockholders in
its Notice of Annual Meeting of Stockholders and Proxy Statement dated April 9,
1996.
All of the directors of the company, with the exception of John C. Savage, who
resigned and was replaced by Denis M. ODonnell, were re-elected at the 1996
Annual Meeting of Stockholders, having received votes as follows:
<TABLE>
<CAPTION>
Against/ Broker
Nominee For Withheld Abstentions Non Votes
------- --- -------- ----------- ---------
<S> <C> <C> <C> <C>
Farrokh H. Kavarana 3,468,187 35,994 -- --
Kevin P. Lynch 3,468,187 35,994 -- --
Alexander M. Milley 3,468,040 36,141 -- --
Denis M. O'Donnell 3,464,771 39,410 -- --
Robert C. Shaw 3,467,147 37,034 -- --
</TABLE>
A majority of the stockholders approved the Company's 1996 Incentive Stock
Option Plan, voting as follows:
<TABLE>
<CAPTION>
Against/ Broker
For Withheld Abstentions Non Votes
--- -------- ----------- ---------
<S> <C> <C> <C> <C>
Number of votes 3,066,194 429,108 8,879 --
</TABLE>
14
<PAGE>
A majority of the stockholders approved the appointment of Price Waterhouse LLP
as the Company's independent accountants for the fiscal year ending December 31,
1996, voting as follows:
<TABLE>
<CAPTION>
Against/ Broker
For Withheld Abstentions Non Votes
--- -------- ----------- ---------
<S> <C> <C> <C> <C>
Number of votes 3,484,323 16,143 3,715 --
</TABLE>
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
15
<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: August 12, 1996 /s/ Alexander M. Milley
-----------------------------------------
Alexander M. Milley, Chairman of the Board,
President and Chief Executive Officer
(Principal Executive Officer)
Date: August 12, 1996 /s/ Thomas R. Druggish
------------------------------------------
Thomas R. Druggish, Vice President,
Treasurer and Secretary (Chief Accounting
Officer and Principal Financial Officer)
16
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 3,124,000
<ALLOWANCES> 52,000
<INVENTORY> 9,742,000
<CURRENT-ASSETS> 13,074,000
<PP&E> 27,664,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 48,291,000
<CURRENT-LIABILITIES> 8,825,000
<BONDS> 0
0
0
<COMMON> 5,000
<OTHER-SE> 24,230,000
<TOTAL-LIABILITY-AND-EQUITY> 48,291,000
<SALES> 41,485,000
<TOTAL-REVENUES> 41,485,000
<CGS> 33,927,000
<TOTAL-COSTS> 38,914,000
<OTHER-EXPENSES> (14,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 830,000
<INCOME-PRETAX> 1,782,000
<INCOME-TAX> 229,000
<INCOME-CONTINUING> 1,553,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,553,000
<EPS-PRIMARY> .30
<EPS-DILUTED> .30
</TABLE>
