SECURITIES AND EXCHANGE COMMISSION
Washington, D.C 20549
----------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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 incorporation (I.R.S. Employer Identification
or organization) No.)
4209 Vineland Road, Suite J-1, Orlando FL 32811
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (407) 849-1090
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on which
Title of each class registered
None Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.001
(Title of class)
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.[ X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K. [ ]
The approximate aggregate market value of the voting stock held by
non-affiliates of the Registrant, based upon the closing price of the Common
Stock on March 18, 1996, as reported by NASDAQ, was $23,886,000. On March 22,
1996, the Registrant had outstanding 4,792,356 shares of Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the Annual Meeting of Shareholders to be
held May 18, 1996 are incorporated by reference into Part III.
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PART I
ITEM 1. BUSINESS
GENERAL
ELXSI Corporation (the "Company") is a Delaware corporation that was formed in
September 1980 as Trilogy Limited, a Bermuda corporation. The Company changed
its name to ELXSI Ltd. in January 1987, and changed its incorporation from
Bermuda to Delaware and became known as ELXSI Corporation in August 1987. A
public company since November 1983, the Company acquired ELXSI ("ELXSI"), a
California corporation, in October 1985. In December 1987, the Company's other
California subsidiary, Trilogy Systems Corporation was merged into ELXSI.
In September 1989 and January 1990, the Company entered into Stock and Note
Purchase Agreements (the "Stock Purchase Agreement") with and among, The Airlie
Group L.P. ("Airlie"), Continental Illinois Equity Corporation ("CIEC") and
Milley & Company ("M&C"), (hereinafter referred to collectively as the "Buyers")
whereby the Buyers acquired 960,000 shares (par value $.001 per share ("Common
Stock"), $2,000,000 aggregate principal amount of the Company's notes and
warrants to purchase 1,204,000 shares of the Company's Common Stock. Subsequent
to these transactions, the Company announced its intention of pursuing a program
of identifying, acquiring and managing middle-market companies. The Company is
not limiting its opportunities to any single industry.
On July 1, 1991, ELXSI acquired 30 restaurants operating under the Bickford's or
Bickford's Family Fare names and 12 Howard Johnson's restaurants operating under
the Howard Johnson's name, which were located in Massachusetts, Vermont, New
Hampshire, Rhode Island and Connecticut, from Marriott Family Restaurants, Inc.
for a purchase price of approximately $23,867,000, including fees.
Between 1991 and 1994, ELXSI sold six of its Howard Johnson's restaurants and
converted five of the remaining six Howard Johnson's into Bickford's Family
Restaurants. During the same time period, ELXSI opened six new Bickford's Family
Restaurants.
During 1995, ELXSI opened one new Bickford's Family Restaurant and on July 3,
1995 acquired sixteen Abdow's Family Restaurants ("Abdow's") located in western
Massachusetts and Connecticut for approximately $3,800,000, including fees.
During the third and fourth quarters of 1995 and the first quarter of 1996,
ELXSI converted four of the Abdow's into Bickford's Family Restaurants and
completed negotiations to sell the Vernon, Connecticut Abdow's Restaurant for
approximately $1,225,000. This sale was completed on February 1, 1996.
Currently, ELXSI operates forty-six Bickford's Family Restaurants
("Bickford's"), eleven Abdow's and one Howard Johnson's Restaurant, in its
Bickford's Family Restaurant division (the "Bickford's Division" or "Restaurant
Division"). As used herein the term "Restaurants" refers to Bickford's and/or
Abdow's and/or Howard Johnson's restaurants owned and operated in the Restaurant
Division.
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On October 30, 1992, ELXSI acquired Cues, Inc., of Orlando, Florida and its two
wholly-owned subsidiaries, Knopafex, Ltd., of Toronto, Canada, and Cues B.V., of
Maastricht, The Netherlands. The Cues business in the United States is owned and
operated as a division of ELXSI, and such division, Knopafex Ltd. and Cues B.V.
are hereinafter collectively referred to as "Cues" or the "Cues Division".
Cues is principally engaged in the manufacture and servicing of video inspection
and rehabilitation equipment for wastewater and drainage systems primarily for
governmental municipalities, service contractors and industrial users.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
Reference is made to the information set forth in Note 12 (Segment Reporting) to
the Consolidated Financial Statements included herein, which information is
hereby incorporated by reference herein.
RESTAURANT DIVISION
The Restaurants are family-oriented and offer full service and relatively
inexpensive meals. Featuring a breakfast menu available throughout the day, the
Restaurants appeal to customers who are interested in a casual, low-to
moderately-priced meal. The Company has been successful at marketing the
breakfast menu concept to customers regardless of the time of day, and has
expanded lunch and dinner patronage by also offering improved traditional lunch
and dinner items. Most menu items are priced between $2.75 and $7.25, with the
average customer check being approximately $5.12, $4.96 and $4.74 in 1995, 1994
and 1993, respectively. Major categories of menu items are pancakes, waffles and
french toast, eggs and omelettes, "country" dinners, soups and side orders,
salads, hamburgers and sandwiches, and desserts. Breakfast items and coffee
accounted for approximately 73% of food sales.
Each Restaurant is open seven days a week, with most generally open from 7:00
a.m. to 11:00 p.m. during the week and later on weekends and with some open
twenty-four hours on the weekends. Some Restaurants are open twenty-four hours
every day. Approximately 60% of weekly sales volume is generated Friday through
Sunday.
While the Company believes that the Restaurants appeal to a wide variety of
customers, they primarily cater to senior citizens and families which are
attracted to the high-quality, moderately-priced meals. Each Restaurant
generally draws its customers from within a five-mile radius and, consequently,
repeat business is extremely important to the Restaurant Division's success.
Repeat business accounts for a majority of the Restaurant's sales.
Each of the original thirty Bickford's consists of a free standing building that
covers approximately 2,700 to 7,000 square feet, and they are typically located
adjacent to major roads and highways and shopping malls. Nearly all contain two
dining areas, smoking and non-smoking. At December 31, 1995, twelve of the
Bickford's buildings are owned, while the remaining thirty-two
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are a combination of leased or owned buildings on leased land. All of the
Abdow's acquired in 1995 are leased properties, all but two of which consist of
free standing buildings covering approximately 4,000 to 6,000 square feet. The
Howard Johnson's restaurant is a leased property.
Each Restaurant has a kitchen equipped with grill space and ovens for service of
baked foods. Seating capacity ranges from 100 to 200 people. Five of the
Bickford's provide counter service.
Restaurant Expansion and Renovation
The acquisition by ELXSI provided an opportunity to renovate the existing
locations and to acquire additional Restaurants. Capital expenditures during the
years ended December 31, 1995, 1994 and 1993 were as follows:
1995 1994 1993
------------ ------------ ------------
Expansion $ 221,000 $ 485,000 $ 914,000
Conversions 243,000 86,000 --
Purchase Leased Property -- 346,000 --
Renovation 415,000 95,000 289,000
Refurbishment & Equipment 1,088,000 1,003,000 463,000
------------ ------------ ------------
$ 1,967,000 $ 2,015,000 $ 1,666,000
Acquisition of Abdow's
Restaurants $ 2,575,000 $ -- $ --
============ ============ ============
The Company currently plans to spend $1,650,000 for renovations, refurbishments
and equipment replacements, $600,000 for conversions and $450,000 for Restaurant
expansion during 1996.
The Company believes that increased profitability of the Restaurants will come
mainly from gaining market share by continuing its programs to improve food
products and service, and through its programs of remodeling existing units,
opening new units and to a lesser extent, from price increases. The Company
believes that it is partially due to the foregoing that sales at the original
thirty Bickford's have increased. The 1995 comparison with 1994 is negatively
impacted by the inclusion of a 53rd week in 1994 and only 52 weeks in 1995.
Sales at the original thirty Bickford's increased 1.3% in 1995, 6.1% in 1994
(including a 53rd week) and 5.8% in 1993, in each case, over the prior year's
sales; customer counts at the original thirty Bickford's Restaurants decreased
1.8% in 1995, increased 1.5% in 1994 (including a 53rd week) and increased 3.9%
in 1993, in each case, over the prior year's counts; sales at same Restaurants,
including the five converted and one remaining Howard Johnson's units, decreased
.4% in 1995, increased 5.8% in 1994 (including a 53rd week) and increased 5.9%
in 1993, in both cases, over the prior year's sales, and customer counts at same
Restaurants decreased 3.4% in 1995, increased 1.2% in 1994 (including a 53rd
week) and increased 4.3% in 1993, in each case, over the prior year's counts.
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The Company takes an opportunistic approach to expansion. Management evaluates
both purchase and lease opportunities, and, in most instances, new Restaurants
will be opened utilizing leased properties. The Company will open a new
Restaurant only if it can reasonably be expected to meet the Company's return on
investment criteria.
Restaurant Management and Supervision
Each Restaurant has a manager and one to three assistant managers, at least one
of whom must be on duty at all times during restaurant hours. The managers are
responsible for hiring all personnel at the Restaurant level, managing the
payroll and employee hours and ordering necessary food and supplies. Subsequent
to the Abdow's acquisition, the Bickford's Division has nine district managers
who, between them, cover all the Restaurants. The district managers are
responsible for the complete operation of the Restaurants located in assigned
geographical areas, including responsibility for sales, profits and all
operational policies and procedures. The district managers, managers and
assistant managers are all salaried personnel, but are also compensated with
performance incentives which can provide a significant portion of their total
compensation. Bonuses paid under the program are based principally upon monthly
sales volume, attainment of certain cost targets and store profitability.
Sources and Availability of Materials
Food supplies are distributed by various Company-approved wholesalers and
purveyors, which deliver directly to the Restaurant locations. Essential
supplies and raw materials are available from several sources, and the Company
is not dependent upon any one supplier for its food supplies. The Company does
not maintain or engage in any warehousing or commissary operations.
Seasonality
The Restaurants experience slightly higher revenues in the summer months.
Customers
The Restaurants are not dependent upon a single customer or group of customers,
although a large portion of each Restaurant's customers live within a five mile
radius thereof and, accordingly, repeat customers are important to the
Bickford's Division's success.
Competition
The Restaurants are in direct competition with many local restaurants providing
family-oriented meals, some of which are owned, operated and/or franchised by
national and regional chains. The restaurant business is highly competitive with
respect to price, service, location and food quality. The Company believes that
its attention to quality and service, along with low-to-moderately-priced menu
items, will continue to attract customers. In 1995, the Company noticed an
increase
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in the number of restaurants offering buffet style dining in New England. The
Company believes that the freshness of its food and its reasonable pricing
compare favorable to these buffet concepts.
Employees
As of December 31, 1995, the Restaurant Division employed approximately 2,500
persons, of whom approximately 2,050 were part-time hourly employees,
approximately 230 were full-time hourly employees and approximately 220 were
salaried personnel. This represents an increase since December 31, 1994 of
approximately 750 persons, which increase consists mainly of part-time employees
as a result of the Abdow's acquisition. None of the employees are represented by
unions.
Environmental Matters
The Restaurant Division is subject to various federal, state and local laws,
rules and regulations relating to the protection of the environment that are
typical for companies in its industry. Management believes that it complies with
all such rules and that it has no material effect on its capital expenditures,
earnings or competitive position.
CUES DIVISION
Cues manufactures systems which utilize closed circuit television and highly
specialized rehabilitation equipment to inspect and repair underground sewer
lines. The infiltration of groundwater into sewer pipelines through leaking
joints and pipe fractures burdens the capacity of sewage treatment plants by
increasing the volume of fluids being treated. Leaking joints and pipe fractures
can also contribute to sewer line damage which can be repaired, in severe cases,
only by costly excavation. Cues installs its systems in specially designed
trucks and vans which are sold as mobile units. Cues also provides product
servicing and replacement parts for its customers and distributes chemical grout
sealants used in connection with its sealing equipment. The principal customers
of Cues are municipalities and contractors engaged in sewer inspection and
repair. Cues is not engaged in the service business of maintaining and repairing
sewer lines.
Inspection and Sealing Equipment
Cues's inspection and sealing equipment constitutes an integrated system that
combines the capability of inspecting underground sewer lines with remote
control television cameras creating a permanent maintenance record of the
condition of the sewer lines; pressure testing sewer line joints; and applying
chemical sealants to repair leaking joints and small pipe fractures.
Cues's inspection and sealing systems are placed in sewer lines through
manholes. The module and the television camera, which is a part of the module,
delays a television picture of the interior of that sewer line via cable to a
monitoring station in a mobile unit above ground. The television inspection
system employs a three inch diameter color camera that can be remotely adjusted
for
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close-up viewing of problem areas. By recording the position of the camera as
it moves through the sewer lines, the Cues's inspection and sealing equipment
gives the customers a permanent record of the condition of their sewer lines. If
the television camera inspection of the sewer lines discloses a leaking joint or
pipe fracture, the sealing portion of the module may immediately be positioned
through use of the camera to make the repair. Once the module is positioned,
inflatable packers seal off the line at either end of the damaged area and apply
a chemical sealant which penetrates the leak or fractures as well as the earth
surrounding the pipe, hardening to seal the line. The sealing module may also be
used to determine the structural integrity of the joint by applying air or water
pressure against the walls of the joint. This pressure test enables the
customers to detect leaking joints that may not be easily detected visually.
The sealing module manufactured by Cues is used to repair sewer lines where
infiltration or inflow of water occurs through leaking joints and pipe
fractures. Repairs can last 20 years or more, depending upon the structural
soundness of the sewer line or repaired joints. Cues's sealing equipment is not
designed to repair a severely damaged or collapsed pipe, which must be excavated
and replaced in the traditional manner or repaired by the use of other sewer
line repair technology. However, Cues's television inspection system is often
used to inspect and identify structurally deficient or collapsed sewer lines in
conjunction with the use of other sewer line repair technology. Cues has also
adapted its sewer line inspection equipment for use in the inspection, but not
the repair of underground water wells, as well as large pipe storm drains.
Cues also manufactures and sells a line of portable T.V. inspection equipment
used primarily for lateral inspection of pipes ranging in size from 2 inches to
6 inches.
Product Servicing, Replacement Parts and Chemicals
Cues provides product servicing and repair at its facilities in Orlando,
Florida, Sacramento, California, Toronto, Canada and Maastricht, The
Netherlands. In Orlando, Cues also maintains an inventory of replacement parts
for distribution and sale to customers. Cues recorded warranty expense of
approximately $255,000, $196,000 and $139,000, during the years 1995, 1994 and
1993, respectively.
Product Development
Cues has an ongoing program to improve its existing products and to develop new
products. During the twelve months ended December 31, 1995, 1994 and 1993,
approximately $311,000, $287,000 and $290,000, respectively, was expended by
Cues for product development, excluding the salary expense and benefits of the
Cues engineering department. Although Cues holds United States patents for
components of its products, management believes the expiration or invalidity of
any or all of such patents will not have a material adverse effect on the
business. For 1996, Cues plans to spend approximately $350,000 for product
development activities.
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Source and Availability of Raw Materials
Cues manufactures certain components of its system and purchases certain
television camera modules, monitors, video recorders, vehicles, etc., which are
readily available from a number of sources.
Cues has agreements with Orlando, Florida truck dealers to deliver truck bodies
that are used in the manufacture of certain Cues's systems. Under these
agreements, Cues reimburses the dealers floor plan financing costs for those
vehicles held by the dealer until delivery.
Marketing
Cues markets its products and services in the United States though thirteen
salesmen. In addition, technical service representatives are located in Orlando,
Toronto and Maastricht. Major customers include municipalities contractors
engaged in sewer line inspection and repair as well as privately-owned sewer
systems. No customer accounted for more the 5% of Cues's 1995 sales. Cues
participates in trade shows and uses trade magazine advertising in the marketing
of its products and services. The Cues name is well established, affording it
and its products wide recognition within its industry.
Outside North America, Cues markets its products in five continents, either
directly or through distributors, agents or dealers. During 1995, 1994 and 1993,
export sales to foreign countries represented approximately 14%, 16% and 16% of
total Cues sales, respectively. Sales by Cues B.V. and Knopafex, Ltd. to foreign
countries represent approximately 72%, 66% and 57% of total foreign sales in
1995, 1994 and 1993, respectively.
Competition
Competition for the type of products sold by Cues is on the basis of price,
service and reliability, and management believes that it competes effectively in
these respects. Management also believes that there are six companies which
produce and sell products which are competitive with those produced by Cues. A
significant portion of sales are generated through a bidding process initiated
by municipalities. This process has become extremely price sensitive requiring
Cues to meet or beat competitor's bids in order to secure sales.
Employees
At December 31, 1995, Cues had 140 full and part-time employees, none of whom
was represented by a union. This includes 8 employees at Knopafex, Ltd. and 4
employees at Cues B.V.
Environmental
The Cues Division is subject to various federal, state and local laws, rules and
regulations relating to the protection of the environment that are typical for
companies in its industry. Management
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believes that compliance therewith will have no material effect on its capital
expenditures, earnings or competitive position.
ITEM 2. PROPERTIES
The Restaurant Division conducts a substantial portion of its operations
utilizing leased facilities. ELXSI leases land and/or buildings at forty-six of
its fifty-eight restaurants, under lease agreements expiring (including options)
on various dates through 2032. The majority of these leases provide that the
Company pay taxes, maintenance, insurance and other occupancy expenses related
to the leased premises. The rental payments for a majority of the Restaurant
locations are based upon minimum annual rental payments and a percentage of
their respective sales.
Below is a summary of the Restaurant properties as of December 31, 1995
(excluding the Abdow's Restaurant located in Vernon, Connecticut held for sale
at December 31, 1995).
Howard
Bickford's Johnson's Abdow's Total
---------- --------- ------- -----
Massachusetts: Owned 8 -- -- 8
Leased 18 1 9 28
Connecticut: Owned 2 -- -- 2
Leased 4 -- 4 8
Rhode Island: Owned -- -- -- --
Leased 5 -- -- 5
New Hampshire: Owned 2 -- -- 2
Leased 5 -- -- 5
Total: Owned 12 -- -- 12
Leased 32 1 13 46
ELXSI also owns a 4,000 square foot building in Boston, Massachusetts, which is
used for its Restaurant Division management and administrative headquarters, and
a 26,000 square foot office and manufacturing facility in Orlando, Florida for
its Cues Division. In addition, Cues B.V. owns an office and manufacturing
facility in Maastricht, The Netherlands, and Knopafex, Ltd. rents office and
manufacturing space in Toronto, Canada.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company or ELXSI is
a party, to which any of their property is the subject of, nor are there any
proceedings known to be contemplated by governmental authorities against the
Company or ELXSI.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to vote of shareholders during the fourth
quarter of 1995.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Market Information
The Company's Common Stock is traded in the over-the-counter market and quoted
in the automated quotation system of the National Association of Securities
Dealers, Inc.- National Market System ("NASDAQ"), under the symbol ELXS. The
following table sets forth high and low closing sales prices for the fiscal
quarters indicated, as reported by NASDAQ.
1995 1994
---------------- -----------------
High Low High Low
---- --- ---- ---
First Quarter $7.38 $5.00 $9.25 $5.88
Second Quarter 7.13 5.63 7.38 5.38
Third Quarter 7.81 5.88 7.13 5.75
Fourth Quarter 6.50 4.88 6.00 4.75
On March 18, 1996, the reported last sale price for the Company's Common Stock
in NASDAQ was $6.50 per share. The above quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not necessarily
represent actual transactions.
Holders
As of March 18, 1996 there were 6,104 holders of record of the Company's Common
Stock.
Dividend History
The Company has never paid nor is there any intention to pay any dividends in
the foreseeable future. It is likely that the Company will retain future
earnings for use in the development of its business.
Stock Transfer Agent
The Company's stock transfer agent is Continental Stock Transfer and Trust Co.,
2 Broadway, New York, New York 10004, (212) 509-4000.
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ITEM 6. SELECTED FINANCIAL DATA
(Amounts in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- --------- -------- ------
<S> <C> <C> <C> <C> <C>
Net Sales $ 74,674 $ 62,423 $ 55,682 $ 38,139 $ 20,572
Costs and Expenses:
Cost of sales 58,347 47,440 41,338 29,168 16,159
General and administrative 7,484 6,630 6,406 2,761 1,183
Depreciation and amortization 2,206 1,794 1,589 1,138 511
Interest income (125) (8) -- -- (264)
Interest expense 1,767 1,426 1,653 1,496 1,148
Other (income) expense (65) 41 80 (222) (3)
Provision for income taxes 514 366 348 260 177
--------- --------- --------- -------- --------
Income from continuing operations 4,546 4,734 4,268 3,538 1,661
Gain on discontinued operations -- -- -- -- 97
--------- --------- --------- -------- --------
Net income $ 4,546 $ 4,734 $ 4,268 $ 3,538 $ 1,758
========= ========= ========= ======== ========
Net income per common share (A)
Primary $ 0.89 $ 0.79 $ 0.72 $ 0.68 $ 0.34
========= ========= ========= ======== ========
Fully diluted $ 0.89 $ 0.79 $ 0.69 $ 0.68 $ 0.34
========= ========= ========= ======== ========
Weighted average number of common
and common equivalent shares (A)
Primary 5,093 6,014 5,947 5,212 5,119
========= ========= ========= ======== ========
Fully diluted 5,093 6,014 6,234 5,211 5,119
========= ========= ========= ======== ========
Other Data:
Unrestricted cash and interest
receivable $ -- $ -- $ -- $ -- $ --
Working capital 2,438 (423) 471 (1,391) (3,890)
Total assets 47,699 40,516 38,520 35,202 25,988
Capitalized leases and long term debt 14,924 12,304 12,016 13,541 13,286
Stockholders' equity 22,714 19,398 18,126 13,885 7,163
<FN>
(A) Adjusted for 1992 one-for-twenty-five reverse split of Common Stock.
</FN>
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
See Note 1 to the Consolidated Financial Statements for background on the
Company. In July 1989, the Company announced a major restructuring of its
operations and the termination of ELXSI's development of large scale
multiprocessor computer systems and cessation of manufacturing operations at its
facility in San Jose, California.
The Company sold stock, notes and warrants to a group of investors in connection
with its restructuring efforts. Following the sale, the Company withdrew from
the computer business and now intends to continue a program of identifying,
acquiring and managing middle market companies.
Both the Company's corporate functions and Cues Division have fiscal years
consisting of four calendar quarters ending on December 31. The Restaurant
Division's fiscal years consist of four 13-week quarters (and, accordingly, one
52-week period) ending on the last Saturday in December closest to the 31;
however, this requires that every six or seven years the Restaurant Division add
an extra week at the end of the fourth quarter and fiscal year.
YEAR ENDED DECEMBER 31, 1995
The Company's 1995 revenues and expenses resulted from the operation of ELXSI's
Restaurant and Cues Divisions and the Company's corporate expenses
("Corporate"). For the year ended December 31, 1995, the Company's sales of
$74,674,000, cost of sales of $58,347,000, selling, general and administrative
expenses of $7,484,000, and depreciation and amortization of $2,206,000, yielded
operating income of $6,637,000. The operating income of $6,637,000 was increased
by interest income of $125,000, reduced by interest expense of $1,767,000,
increased by other income of $65,000 and reduced by income taxes of $514,000
resulting in net income of $4,546,000.
Restaurant Division The Restaurants had sales of $54,270,000, cost of sales of
$43,729,000, selling, general and administrative expense of $1,620,000 and
depreciation and amortization expense of $1,833,000, which yielded operating
income of $7,088,000. In addition, the Restaurants had $297,000 of interest
expense related to the amortization of deferred financing fees and capital
leases, resulting in income before taxes of $6,791,000.
Cues Division Cues had sales of $20,404,000, cost of sales of $14,618,000,
selling, general and administrative expenses of $4,425,000 and depreciation and
amortization expense of $373,000, which yielded operating income of $988,000. In
addition, Cues had $22,000 of interest expense, $2,000 of interest income,
$68,000 of other income and $4,000 of tax expense adjustments resulting in
income before taxes of $1,032,000.
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Corporate Corporate general and administrative expenses were $1,439,000. The
major components of general and administrative expense include the management
fee paid to Cadmus Corporation ("Cadmus") (see NOTE 6 to the Consolidated
Financial Statements), the compensation accrual related to the Bickford's
Phantom Stock Option Plan (see the Company's 1995 proxy statement for further
information), legal expense, corporate and Bickford's audit expense and
shareholder services and financial reporting expense. The services rendered by
Cadmus include participating actively in the management of the Company and of
ELXSI; it is through the management agreement that the Company is provided the
services of many of its officers and through which those officers are
compensated. Examples of management services provided include the ongoing
evaluation of management, preparing and reviewing division operating budgets and
plans, evaluating new restaurant locations, divesting under performing assets,
negotiating environmental matters, negotiating with lenders, evaluating
financing options, complying with public reporting requirements, communicating
with shareholders, negotiating and arranging insurance programs, monitoring tax
compliance, evaluating and approving capital spending, preparing market
research, developing and improving management reporting systems, surfacing and
evaluating acquisitions, etc. Interest expense was $1,448,000, consisting of
senior bank debt interest of $1,275,000 and subordinated note interest of
$173,000. In addition, the Company recorded interest income of $123,000, other
expense of $3,000 and a consolidated tax provision of $510,000 at the corporate
level.
Earnings Per Share Earnings per share and the weighted average number of shares
outstanding for the year ended December 31, 1995 were $0.89 and 5,093,000,
respectively. This compares to $0.79 per share for 1994, when there were
6,014,000 shares outstanding. The average stock price during 1995 and 1994 was
$6.12 and $5.42, respectively. The market price at December 31, 1995 and 1994
was $6.13 and $6.34, respectively. Due to the outstanding warrants and options,
which are considered common stock equivalents, a higher stock price results in a
greater number of outstanding shares for the earnings per share calculation.
YEAR ENDED DECEMBER 31, 1994
The Company's 1994 revenues and expenses resulted from the operation of ELXSI's
Restaurant and Cues Divisions and from "Corporate". For the year ended December
31, 1994, the Company's sales of $62,423,000, cost of sales of $47,440,000,
selling, general and administrative expenses of $6,630,000, and depreciation and
amortization of $1,794,000, yielded operating income of $6,559,000. The
operating income of $6,559,000 was increased by interest income of $8,000 and
reduced by interest expense of $1,426,000, other expense of $41,000 and income
taxes of $366,000 resulting in net income of $4,734,000.
Restaurant Division The Restaurants had sales of $43,391,000, cost of sales of
$34,234,000, selling, general and administrative expense of $1,293,000 and
depreciation and amortization expense of $1,460,000, which yielded operating
income of $6,404,000. In addition, the Restaurants had $266,000 of interest
expense related to the amortization of deferred financing fees and capital
leases, resulting in income before taxes of $6,138,000.
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Included in the 1994 results, the fifty-third week added approximately $810,000
in sales and, management estimates, approximately $200,000 in operating income.
Cues Division Cues had sales of $19,032,000, cost of sales of $13,206,000,
selling, general and administrative expenses of $4,146,000 and depreciation and
amortization expense of $334,000, which yielded operating income of $1,346,000.
In addition, Cues had $32,000 of interest expense, $27,000 of other expense and
$5,000 of tax adjustments resulting in income before taxes of $1,282,000.
Corporate Corporate general and administrative expenses were $1,191,000 in 1994.
The major components of general and administrative expense include the
management fee paid to Cadmus, the compensation accrual related to the
Bickford's Phantom Stock Option Plan, legal expense, corporate and Bickford's
audit expense and shareholder services and financial reporting expense. Interest
expense was $1,128,000, consisting of senior bank debt interest of $418,000 and
subordinated note interest of $710,000. In addition, the Company recorded
interest income of $8,000, other expense of $14,000 and a consolidated tax
provision of $361,000 at the corporate level.
Earnings Per Share Earnings per share and the weighted average number of shares
outstanding for the year ended December 31, 1994 were $0.79 and 6,014,000,
respectively, both on a primary and fully diluted share basis. The average stock
price during 1994 was $5.42 and the market price at December 31, 1994 was $5.25.
YEAR ENDED DECEMBER 31, 1993
The Company's 1993 revenues and expenses resulted from the operation of ELXSI's
Restaurant and Cues Division and from "Corporate". For the year ended December
31, 1993, the Company's sales of $55,682,000, cost sales of $41,338,000,
selling, general and administrative expenses of $6,406,000, and depreciation and
amortization of $1,589,000, yielded operating income of $6,349,000. The
operating income of $6,349,000 was reduced by interest expense of $1,653,000,
other expense of $80,000 and income taxes of $348,000 resulting in net income of
$4,268,000.
Restaurant Division The Restaurants had sales of $38,903,000, cost of sales of
$30,152,000, selling, general and administrative expense of $1,248,000 and
depreciation and amortization expense of $1,288,000, which yielded operating
income of $6,215,000. In addition, the Restaurants had $293,000 of interest
expense primarily related to the amortization of deferred financing fees
resulting in income before taxes of $5,922,000.
Cues Division Cues had sales of $16,779,000, cost of sales of $11,186,000,
selling, general and administrative expenses of $4,082,000 and depreciation and
amortization expense of $301,000, which yielded operating income of $1,210,000.
In addition, Cues had $26,000 of interest expense, $75,000 of other expense and
$3,000 of tax adjustments resulting in income before taxes of $1,106,000.
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Corporate Corporate general and administrative expenses were $1,076,000 in 1993.
The major components of general and administrative expense include the
management fee paid to Cadmus the compensation accrual related to the Bickford's
Phantom Stock Option Plan, legal expense, corporate and Bickford's audit expense
and shareholder services and financial reporting expense. Interest expense was
$1,334,000, consisting of senior bank debt interest of $594,000 and senior
subordinated note interest of $740,000. In addition, the Company recorded other
expense of $5,000 and a consolidated tax provision of $345,000 at the corporate
level.
Earnings Per Share Earnings per share for the year ended December 31, 1993 were
$0.72 ($0.69 per share fully diluted). The weighted average number of shares
outstanding for 1993 was 5,947,000 (6,234,000 shares fully diluted).
COMPARISON OF 1995 RESULTS TO 1994 RESULTS
The 1995 sales increased $12,251,000, or 19.6%, gross profit increased
$1,344,000, or 9.0%, selling, general and administrative expense increased
$854,000, or 12.9% and depreciation and amortization increased $412,000 or 23.0%
resulting in an operating income increase of $78,000 or 1.2% in each case as
compared to the corresponding period in 1994. Interest expense increased by
$341,000, or 23.9%, interest income increased by $117,000, other income and
expense increased from expense of $41,000 in 1994 to income of $65,000 in 1995
and income taxes increased by $148,000, or 40.4% resulting in a decrease in net
income of $188,000, or 4.0%.
Restaurant Division Restaurant sales increased by $10,879,000, or 25.1%, in
1995. The sales increase is attributable to a decrease in the same store sales
of $152,000 offset by the addition of new restaurants which added $11,031,000 to
1995 sales. The 1995 sales increase due to new restaurants consisted of
$8,112,000 from the fourteen Abdow's, $873,000 from the two Abdow's converted in
1995 and $2,046,000 from other new Bickford's. Same store restaurant sales
decreased by $152,000, or .4% mainly due to the inclusion of a 53rd week in 1994
which added $763,000 to those restaurants 1994 sales. The original thirty
Bickford's acquired in 1991 had a sales increase of $405,000, or 1.3%, the nine
other comparable Bickford's including the five converted Howard Johnson's had a
sales decrease of $494,000, or 5.1%, while the one remaining Howard Johnson's
unit had a sales decline of $63,000, or 4.1%. Included in the above comparisons
is the effect of the fifty-third week in 1994 which added sales of $582,000,
$155,000 and $26,000 to the original thirty Bickford's, the nine other
comparable Bickford's and the one remaining Howard Johnson Restaurant,
respectively. Excluding the 53rd week from 1994 sales, the same store restaurant
sales increased by $611,000, or 1.5%.
The original thirty Bickford's, the nine other comparable Bickford's and the one
Howard Johnson's Restaurant had a decrease in customer counts of 1.8%, 7.6% and
9.8%, respectively. Excluding the 53rd week from 1994, the original thirty
Bickford's, the nine other comparable Bickford's and the one Howard Johnson's
Restaurant had an increase (decrease) in customer counts of .1%, (6.2)% and
(8.3)%, respectively. The last Howard Johnson's Restaurant is located near one
of the
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three Bickford's licensed to an unrelated third party and may not be
converted into a Bickford's. Management is continuing to focus on improving
sales at all Restaurants through attention to customer service, food quality,
new menu items and Restaurant refurbishments.
Restaurant gross profit increased by $1,384,000, but declined as a percentage of
sales from 21.1% in 1994 to 19.4% in 1995. The main factor in the 1.7% decline
in the gross profit percentage was a 1.5% increase in food costs as a percentage
of sales primarily attributable to the Abdow's. It is anticipated that upon
conversion of the Abdow's into Bickford's that the food cost as a percentage of
sales will decline to the Bickford's level thereby increasing the gross profit
percentage. The Bickford's food costs increased as a percentage of sales as a
result of the sale of higher-cost dinner items and an increase in the cost of
individual food items including eggs, bacon and sausage partially offset by a
decline in coffee costs. In addition to the food cost increase, variable costs
as a percentage of sales increased by .4% in 1995. Labor costs as a percentage
of sales declined by .2% from 34.6% to 34.4% despite higher labor costs as a
percentage of sales at the sixteen Abdow's. The sixteen Abdow's (including the
two converted into Bickford's) had labor costs as a percentage of sales of
37.2%. Management does not intend to reduce the labor costs immediately upon
conversion of the Abdow's into Bickford's and will evaluate the benefits of
additional labor as evidenced by the excellent service reputation historically
enjoyed by the Abdow's. However, as management intends to keep up to six of the
acquired restaurants operating as lower margin Abdow's, the overall margins will
continue to be negatively influenced by the Abdow's.
Restaurant selling, general and administrative expense increased by $327,000
during 1995 over 1994 mainly as a result of adding additional support personnel
as a result of the acquisition of the Abdow's.
Restaurant depreciation and amortization increased by $373,000 during 1995
compared to 1994. 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 in July
1991 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, Restaurant operating income increased by $684,000 in
1995 compared to the fifty three weeks ended December 31, 1994. Management
estimates that the inclusion of a 53rd week in 1994 added approximately $200,000
to operating income that year.
Cues Division. Cues's sales increased by $1,372,000, or 7.2%, in 1995 compared
to 1994. As a percentage of sales, Cues's gross profit declined by 2.3% in 1995
compared to 1994 causing gross profit to decrease by $40,000. Operating income
was negatively impacted by an increase in selling, general and administrative
expense of $279,000 and an increase in depreciation and amortization expense of
$39,000. As a result of the above, operating income decreased by $358,000 in
1995 compared to 1994. 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.
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Corporate. Corporate general and administrative expenses increased by $248,000
during 1995 as compared to 1994, mainly due to an increase in the Bickford's
management compensation accrual related to its Phantom Stock Option Plan.
Interest expense increased by $320,000 in 1995 compared to 1994, due to a higher
average debt balance in 1995 partially offset by a decrease 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 Restaurants 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 beginning of 1995. The bank interest
rate applicable to Company borrowing was 1% above the prime lending rate or 9.5%
at December 31, 1995 and 1.5% above the prime lending rate or 10.0% at December
31, 1994.
COMPARISON OF 1994 RESULTS TO 1993 RESULTS
The 1994 sales increased $6,741,000, or 12.1%, gross profit increased $639,000,
or 4.5%, selling, general and administrative expense increased $224,000, or 3.5%
and depreciation and amortization increased $205,000 or 12.9% resulting in an
operating income increase of $210,000 or 3.3% in each case as compared to the
corresponding period in 1993. Interest expense decreased by $227,000, or 13.7%,
interest income increased by $8,000, or 100%, other expense decreased by
$39,000, or 48.8% and income taxes increased by $18,000, or 5.2% resulting in an
increase in net income of $466,000, or 10.9%.
Restaurant Division Restaurant sales increased by $4,488,000, or 11.5%, in 1994,
which, included a 53rd week. Including the 53rd week in 1994, the original
thirty Bickford's acquired in 1991 had a sales increase of $1,791,000, or 6.1%,
and the five converted Howard Johnson's had a sales increase of $399,000, or
6.6%, while the one remaining Howard Johnson's unit had a sales decline of
$51,000, or 3.2%. New Restaurants accounted for the remaining portion of the
sales increase, totalling $2,349,000. The sales increase is mainly attributable
to an increase in the average guest check ($1,694,000), the addition of new
restaurants ($2,375,000) and the inclusion of a 53rd week in 1994 ($810,000),
partially offset by a customer count decline ($391,000). Including the 53rd
week, the original thirty Bickford's had a 1.5% increase in customer counts, the
five converted Howard Johnson's Restaurants had a 1.8% increase in customer
counts, while the one Howard Johnson's Restaurant had a 7.1% decline in customer
counts.
Restaurant gross profit increased by $406,000, but declined as a percentage of
sales from 22.5% in 1993 to 21.1% in the 53 weeks ended December 31, 1994. The
main factor in the 1.4% decline in the gross profit percentage was a .8%
increase in food costs as a percentage of sales, which was primarily
attributable to the sale of higher-cost dinner items and an increase in coffee
prices during 1994. Other factors that contributed to the decrease in the gross
margin were a .4% increase in labor costs due to increases in taxes, medical
insurance and workers compensation insurance premiums and a .4% increase in
fixed costs consisting mainly of increases in real estate taxes as a result of
receiving and recording in 1993 tax abatements for 1993 and prior years.
Restaurant selling, general and administrative expense increased by $45,000
during 1994 over 1993. No individual items represented a major portion of the
increase.
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Restaurant depreciation and amortization increased by $172,000 during 1994
compared to 1993.
As a result of the above, Restaurant operating income increased by $189,000 for
the 53 weeks ended December 31, 1994 compared to 1993. Management estimates that
the inclusion of a 53rd week in 1994 added approximately $200,000 to operating
income that year.
Cues Division Cues's sales increased by $2,253,000, or 13.4%, in 1994 compared
to 1993. As a percentage of sales, Cues's gross profit declined by 2.7% in 1994
compared to 1993. Despite the decline in the gross profit percentage, Cues's
gross profit increased by $233,000. This was partially offset by a $64,000
increase in selling, general and administrative expense and a $33,000 increase
in depreciation and amortization expense. As a result of the above, operating
income increased by $136,000 in 1994 compared to 1993.
Corporate Corporate general and administrative expenses increased by $115,000
during 1994 as compared to 1993, mainly due to an increase in the Bickford's
management compensation accrual related to its Phantom Stock Option Plan, an
increase in professional fees and corporate move-related costs. Interest expense
decreased by $206,000 in 1994 as compared to 1993, due to lower debt balances
partially offset by a higher average bank interest borrowing rate in 1994. The
borrowing rate remained at prime plus 1.5% during 1994, however the prime rate
increased by 2.5% from 6% at January 1, 1994 to 8.5% at December 31, 1994.
ACQUISITIONS
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 expenses of $300,000. The transaction includes the leasing of 16
restaurant sites and the purchase of associated assets located in western
Massachusetts and central Connecticut. On February 1, 1996, ELXSI completed its
sales of the Vernon, Connecticut Abdow's restaurant for net proceeds of
$1,225,000.
ELXSI purchased Cues on October 30, 1992. In connection with the acquisition,
the Company issued 751,000 shares of it's Common Stock valued at $4.25 per share
and a Series C Warrant to purchase an additional 68,762 common shares at $4.36
per share to the former parent of Cues. In addition, ELXSI borrowed $4,211,000
on its amended bank line of credit to pay the outstanding debt of Cues to its
former parent. The acquisition was accounted for as a purchase and the results
of Cues are included in the consolidated statement of operations from the date
of acquisition. The excess of the cost over the fair value of net assets
acquired of $3,690,000 is being amortized on a straight line basis over 35
years. The acquisition included all of the assets and liabilities of Cues, and
its subsidiaries. The shares and warrants issued in this acquisition were
subsequently distributed by Cues's former parent to is stockholders, including
Milley Management, Inc.
On July 1, 1991, ELXSI acquired the Restaurants, which are located in
Massachusetts, Vermont, New Hampshire, Rhode Island and Connecticut, from
Marriott for a purchase price of approximately $23,867,000, including fees. The
Bickford's and Howard Johnson's are family oriented restaurants with a wide
ranging, moderately priced menu, with a focus on breakfast fare.
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INCOME TAXES AND INFLATION
In 1995, the Company recorded a provision for federal alternative minimum taxes
of $118,000 (after the benefit of federal net operating loss carryforwards of
$1,619,000), and a state income tax provision of $396,000 (after the benefit of
state net operating loss carryforwards). In 1994, the Company recorded a
provision for federal alternative minimum taxes of $88,000 (after the benefit of
federal net operating loss carryforwards of $1,526,000), and a state income tax
provision of $278,000 (after the benefit of state net operating loss
carryforwards). In 1993, the Company recorded a provision for federal
alternative minimum taxes of $116,000 (after the benefit of federal net
operating loss carryforwards of $1,615,000), and a state income tax provision of
$232,000 (after the benefit of state net operating loss carryforwards).
Approximately one-half of ELXSI's consolidated taxable income is apportioned to
Massachusetts. The final year that the net operating loss is available to ELXSI
to offset Massachusetts taxable income was 1994 because the five year
Massachusetts carryforward period expired in 1995. During 1994 and 1993, ELXSI
would have recorded a provision for additional state income taxes of $190,000
and $230,000, respectively, had the Massachusetts net operating loss
carryforwards not been available. At December 31, 1995, the Company had
approximately $221,000,000 in federal net operating loss carryforwards, which
begin to expire in 1997 if not used. In addition, the Company had $6,500,000 in
investment tax credit and research and development credit carryforwards
available to reduce future federal income taxes.
Inflation and changing prices have not had a material impact on the Company's
results of operations.
LIQUIDITY AND CAPITAL RESOURCES
Available Resources The Company's consolidated unrestricted cash positions at
December 31, 1995 and 1994 were $0. The Company has 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 the cash could earn from alternative investments. Working capital needs,
when they arise, are met by daily borrowings.
During 1995, the Company had cash flow from operations before working capital
and other changes of $7,032,000. Working capital changes and other assets and
liabilities decreased cash flow from operations to $4,003,000, which along with
a net borrowing of $2,334,000 in long-term debt funded the purchase of property,
plant and equipment totalling $2,357,000 (including the one new Restaurant
opened in 1995), the net cost of acquiring the fifteen Abdow's totalling
$2,575,000, the repurchase of Common Stock of $1,224,000, the payment of bank
fees of $125,000 and the principal payments on capital leases of $56,000. The
$2,334,000 net borrowing of long-term debt consists of borrowing of bank debt of
$2,429,000, payment of other Cues's debt of $12,000 and repayment of long-term
15% Senior Subordinated Notes ("15% Notes") of $83,000. During 1995, current
assets increased by $4,034,000 primarily due to an increase in Cues's inventory
and the recording of an asset held for sale at December 31, 1995 related to the
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Vernon, Connecticut Abdow's restaurant. The December 31, 1995 balance included
in the asset held for sale of $1,075,000 was collected on February 1, 1996.
Inventory increased due to the introduction and development of new products and
an increase in equipment used for demonstrations. The increase in current assets
was partially offset by an increase in current liabilities of $647,000
(excluding the current portion of the long-term debt and current portion of
long-term capital leases).
During 1994, the Company had cash flow from operations before working capital
and other changes of $6,730,000. Working capital changes and other assets and
liabilities increased cash flow from operations to $6,871,000, which along with
a net borrowing of $225,000 in long-term debt funded the acquisition of
property, plant and equipment totalling $2,363,000 (including the two new
Restaurants opened in 1994), a loan to ELX Limited Partnership ("ELX") of which
Alexander M. Milley is the sole general partner of $1,156,000, the repurchase of
Common Stock and seven-year Series A Warrants to purchase Common Stock of
$3,499,000 and the payment of bank fees of $109,000. The $225,000 net borrowing
of long-term debt consists of borrowing of bank debt of $3,427,000, borrowing of
other Cues's debt of $19,000 and repayment of long-term 14.5% Senior
Subordinated Notes ("14.5% Notes") and 15% Notes of $3,221,000. During 1994,
current assets increased by $286,000 primarily due to an increase in Cues's
inventory partially offset by a decline in Cues's accounts receivable and a
decrease in Bickford's Division prepaid expenses. Inventory increased due to
increased monthly production volume caused by increased sales orders at Cues and
the introduction and development of new products. The increase in current assets
was partially offset by an increase in current liabilities of $136,000
(excluding the current portion of the long-term debt and current portion of
long-term capital leases).
During 1993, the Company had cash flow from operations before working capital
and other changes of $6,032,000. Working capital changes and other assets and
liabilities reduced cash flow from operations to $4,023,000, which funded the
acquisition of property, plant and equipment totalling $1,856,000 (including the
three new Restaurants opened in 1993), the payment of long-term bank debt of
$1,946,000, the payment of other Cues debt of $189,000 and the payment of
capital leases obligations of $32,000. During 1993, current assets increased by
$2,675,000 primarily due to an increase in Cues's accounts receivable and
inventory. The increase in accounts receivable was mainly attributable to
current accounts receivable (i.e., those accounts less than 30 days old), which
increased by $571,000 at December 31, 1993 as compared to December 31, 1992. The
percentage of accounts greater than sixty days old decreased from 26% at
December 31, 1992 to 24% at December 31, 1993. Cues's inventory increased due to
increased monthly production volume caused by increased sales orders and the
introduction and development of new products. The increase in current assets was
partially offset by an increase in current liabilities of $813,000.
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
$1,187,000 of 14.5% Notes and 15% Notes. With bank approval, excess funds are
available under the Company's loan Agreement to finance additional acquisitions.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements of the Company for each of the fiscal
years in the three-year period ended December 31, 1995, together with the report
thereon of Price Waterhouse LLP dated March 21, 1996 are filed as part of this
report commencing on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
The Company did not change its independent accountants during the year nor were
there any disagreements with such accountants on accounting principals or
practices, financial disclosure or auditing scope or procedure.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required under this item is incorporated herein by reference
from the ELXSI Corporation Proxy Statement to be filed within 120 days after
December 31, 1995 for the annual Meeting of Stockholders to be held May 22,
1996.
ITEM 11. EXECUTIVE COMPENSATION
The information required under this item is incorporated herein by reference
from the ELXSI Corporation Proxy Statement to be filed within 120 days after
December 31, 1995 for the annual Meeting of Stockholders to be held May 22,
1996.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The information required under this item is incorporated herein by reference
from the ELXSI Corporation Proxy Statement to be filed within 120 days after
December 31, 1995 for the annual Meeting of Stockholders to be held May 22,
1996.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required under this item is incorporated herein by reference
from the ELXSI Corporation Proxy Statement to be filed within 120 days after
December 31, 1995 for the annual Meeting of Stockholders to be held May 22,
1996.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
(a) Documents filed as part of this report:
Index to Consolidated Financial Statements
- ------------------------------------------
Page
1. Financial Statements Number(s)
---------
Report of Independent Certified Public Accountants F-1
Consolidated Balance Sheets at December 31, 1995 and 1994 F-2 to F-3
Consolidated Income Statements for the three years
ended December 31, 1995 F-4
Consolidated Statements of Stockholders' Equity for the
three years ended December 31, 1995 F-5
Consolidated Statements of Cash Flows for the three years
ended December 31, 1995 F-6 to F-7
Notes to Consolidated Financial Statements F-8 to F-20
2. Financial Statement Schedules
Schedule
Number Description Page
------ ----------- ----
VIII Valuation and Qualifying Accounts and Reserves S-1
All other schedules are omitted because they are not applicable or not required,
or because the required information is included in the Consolidated Financial
Statements or Notes thereto.
3. Exhibits
Exhibit
Number Description
- ------ -----------
2.1 Agreement and Plan of Merger by and among ELXSI Corporation, ELXSI,
Cadmus Corporation and Holdingcues, Inc. dated as of October 16,
1992, including form of Series C Warrant. (Incorporated herein by
reference to Exhibit 2.7 of the Company's Current Report on Form 8-K
as filed November 13, 1992 (File No 0-11877)).
2.2 Family Restaurant Sale and Purchase Agreement, between Marriott Family
Restaurants Inc. ("Marriott") and the Company dated February 28, 1991.
(Incorporated herein by reference to Exhibit 2.1 of the Company's
Current Report on Form 8-K, dated July 16, 1991 (File No. 0-11877)).
2.3 Side Letter to the Family Restaurant Sale and Purchase Agreement
between Marriott and the Company dated February 28, 1991.
(Incorporated herein by reference to Exhibit 2.2 of the Company's
Current Report on Form 8-K, dated July 16, 1991 (File No. 0-11877)).
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2.4 Assignment and Guaranty of Family Restaurants Sale and Purchase
Agreement and Side Letter, between the Company, Marriott and ELXSI
dated June 29, 1991. (Incorporated herein by reference to Exhibit 2.3
of the Company's Current Report on Form 8-K, dated July 16, 1991
(File No. 0-11877)).
2.5 Closing Side Letter Agreement Regarding Family Restaurants Sale and
Purchase Agreement between ELXSI and Marriott dated July 1, 1991.
(Incorporated herein by reference to Exhibit 2.4 of the Company's
Current Report on Form 8-K, dated July 16, 1991 (File No. 0- 11877)).
2.6 Real Estate Closing Side Letter Agreement Regarding Family
Restaurants Sale and Purchase Agreement between ELXSI and Marriott
dated July 1, 1991. (Incorporated herein by reference to Exhibit 2.5
of the Company's Current Report on Form 8-K, dated July 16, 1991
(File No. 0-11877)).
2.7 Agreement Concerning Massachusetts and Connecticut Liquor Licenses
between ELXSI and Marriott dated July 1, 1991. (Incorporated herein
by reference to Exhibit 2.6 of the Company's Current Report on Form
8-K, dated July 16, 1991 (File No. 0-11877)).
3.1 Restated Certificate of Incorporation of the Company, as amended.
(Incorporated herein by reference to Exhibit 3.1 of the Company's
Annual Report on Form 10-K for the fiscal year ended December 31,
1989 (file No. 0-11877)).
3.2 Certificate of Amendment of Restated Certificate of Incorporation of
the Company dated May 27, 1992. (Incorporated herein by reference to
Exhibit 3.2 of the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994 (file No. 0-11877)).
3.3 Bylaws of the Company. (Incorporated herein by reference to
Exhibit 3.1 of the Company's Registration Statement on Form S-4,
as amended. (file No. 0-11877)).
4.1 Series A Warrant No. A-4 to purchase 50,000 shares of Common
Stock issued to MMI. (Incorporated herein by reference to Exhibit
4.1 of the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994 (file No. 0-11877)).
4.2 Series A Warrant No. A-6 to purchase 150,500 shares of Common Stock
issued to the Alexander M. Milley Irrevocable Trust I U/A dated May
9, 1994. (Incorporated herein by reference to Exhibit 4.2 of the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994 (file No. 0-11877)).
4.3 Series B Warrant No. B-1 to purchase 604,656 shares of Series A
Non-Voting Convertible Preferred Stock issued to CIEC.
(Incorporated herein by reference to Exhibit 4.6 of the Company's
Annual Report on Form 10-K for the fiscal year ended December 31,
1989 (file No. 0-11877)).
4.4 Series C Warrant No. C-2 to purchase 68,762 shares of Common
Stock issued to MMI. (Incorporated herein by reference to Exhibit
4.4 of the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994 (file No. 0-11877)).
4.5 Amended and Restated Registration Rights Agreement dated as of
January 23, 1990 among the Company, M&C and CIEC. (Incorporated
herein by reference to Exhibit 4.7 of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1989 (file No.
0-11877)).
4.6 Exercise of option and Assignment of Registration Rights executed by
ELX and Airlie dated November 30, 1994. (Incorporated herein by
reference to Exhibit 4.6 of the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994 (file No. 0- 11877)).
23
<PAGE>
4.7 15% Senior Subordinated Note issued by the Company to CIEC in the
amount of $401,765.00. (Incorporated herein by reference to Exhibit
10.18 of the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1989 (file No. 0-11877)).
4.8 14.5% Senior Subordinated Note issued by the Company to CIEC in the
amount of $502,206.25 dated June 27, 1991. (Incorporated herein by
reference to Exhibit 4.8 of the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994 (file No. 0-11877)).
4.9 Amended and Restated Loan and Security Agreement, dated as of
October 30, 1992 between ELXSI and Continental Bank N.A. (now
Bank of America Illinois). (Incorporated herein by reference to
Exhibit 10.21 of the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992 (file No. 0-11877)).
4.10 First Amendment to Amended and Restated Loan and Security Agreement,
dated as of February 4, 1993 between ELXSI and Bank of America
Illinois (formerly Continental Bank N.A.) (Incorporated herein by
reference to Exhibit 4.10 of the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994 (file No. 0-11877)).
4.11 Second Amendment to Amended and Restated Loan and Security Agreement,
dated as of December 6, 1994 between ELXSI and Bank of America
Illinois (formerly Continental Bank N.A.) (Incorporated herein by
reference to Exhibit 4.11 of the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994 (file No. 0-11877)).
4.12 14.5% Senior Subordinated Note issued by the Company to Pan Fixed
Income Fund, Ltd., dated as of November 16, 1993 in the amount of
$250,000. (Incorporated herein by reference to Exhibit 4.12 of the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994 (file No. 0-11877)).
4.13 14.5% Senior Subordinated Note issued by the Company to Rona Jaffe,
dated as of November 16, 1993 in the amount of $100,000.
(Incorporated herein by reference to Exhibit 4.13 of the Company's
Annual Report on Form 10-K for the fiscal year ended December 31,
1994 (file No. 0-11877)).
4.14 14.5% Senior Subordinated Note issued by the Company to Anne
Strassler A.C.S.W. P.C., dated as of November 16, 1993 in the amount
of $25,000. (Incorporated herein by reference to Exhibit 4.14 of the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994 (file No. 0-11877)).
4.15 Third Amendment to Amended and Restated Loan and Security Agreement,
dated as of January 25, 1995 between ELXSI and Bank of America
Illinois (formerly Continental Bank N.A.)
4.16 Fourth Amendment to Amended and Restated Loan and Security Agreement,
dated as of May 25, 1995 between ELXSI and Bank of America Illinois
(formerly Continental Bank N.A.)
4.17 Fifth Amendment to Amended and Restated Loan and Security Agreement,
dated as of July 3, 1995 between ELXSI and Bank of America Illinois
(formerly Continental Bank N.A.)
10.1 The Company's 1987 Incentive Stock Option Plan as amended.
(Incorporated by reference to Exhibit 10.1 of the Company's
Annual Report on Form 10-K for the fiscal year ended December 31,
1987 (file No. 0-11877)).
24
<PAGE>
10.2 The Company's 1987 Supplemental Stock Option Plan as amended.
(Incorporated by reference to Exhibit 10.2 of the Company's
Annual Report on Form 10-K for the fiscal year ended December 31,
1987 (file No. 0-11877)).
10.3 The Company's 1993 Incentive Stock Option Plan. (Incorporated
herein by reference to Exhibit 10.3 of the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994
(file No. 0-11877)).
10.4 The ELXSI 1991 Phantom Stock Option Plan for the management of the
Bickford's Division. (Incorporated herein by reference to Exhibit
10.4 of the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994 (file No. 0-11877)).
10.5 Amendment No. 1 to the ELXSI 1991 Phantom Stock Option Plan for
the management of the Bickford's Division. (Incorporated herein
by reference to Exhibit 10.5 of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994 (file No.
0- 11877)).
10.6 Promissory Note of ELX Limited Partnership payable to the Company
dated December 8, 1994 in the amount of $1,155,625.00 due December 8,
1997. (Incorporated herein by reference to Exhibit 10.6 of the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994 (file No. 0-11877)).
10.7 Non-Qualified Stock Option Agreement issued to Robert C. Shaw for the
purchase of 12,500 shares of Common Stock, dated October 30, 1992.
(Incorporated herein by reference to Exhibit 10.7 of the Company's
Annual Report on Form 10-K for the fiscal year ended December 31,
1994 (file No. 0-11877)).
10.8 Non-Qualified Stock Option Agreement issued to John C. Savage for the
purchase of 10,000 shares of Common Stock, dated October 30, 1992.
(Incorporated herein by reference to Exhibit 10.8 of the Company's
Annual Report on Form 10-K for the fiscal year ended December 31,
1994 (file No. 0-11877)).
10.9 Non-Qualified Stock Option Agreement issued to Farrokh K. Kavarana
for the purchase of 10,000 shares of Common Stock, dated October 30,
1992. (Incorporated herein by reference to Exhibit 10.9 of the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994 (file No. 0-11877)).
10.10 Non-Qualified Stock Option Agreement issued to Kevin P. Lynch for the
purchase of 20,000 shares of Common Stock, dated October 30, 1992.
(Incorporated herein by reference to Exhibit 10.10 of the Company's
Annual Report on Form 10-K for the fiscal year ended December 31,
1994 (file No. 0-11877)).
10.11 Non-Qualified Stock Option Agreement issued to Alexander M. Milley
for the purchase of 30,000 shares of Common Stock, dated October 30,
1992. (Incorporated herein by reference to Exhibit 10.11 of the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994 (file No. 0-11877)).
10.12 Non-Qualified Stock Option Agreement issued to Thomas R. Druggish for
the purchase of 30,000 shares of Common Stock, dated October 30,
1992. (Incorporated herein by reference to Exhibit 10.12 of the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994 (file No. 0-11877)).
10.13 Stock and Note Purchase Agreement dated as of August 31, 1989 by and
among the Company, Airlie and M&C. (Incorporated herein by reference
to Exhibit 2.1 of the Company's Current Report on Form 8-K as filed
October 3, 1989 (File No 0-11877)).
25
<PAGE>
10.14 Stock and Note Purchase Agreement dated as of January 23, 1990 among
Airlie, CIEC and M&C. (Incorporated herein by reference to Exhibit
10.14 of the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994 (file No. 0-11877)).
10.15 Management Agreement ("Management Agreement") between Winchester
National, Inc. (d/b/a as M&C) and the Company dated September 25,
1989. (Incorporated herein by reference to Exhibit 10.21 of the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1991 (file No. 0-11877)).
10.16 Assignment of Management Agreement dated June 28, 1991 among the
Company, Winchester National, Inc., ELXSI and MMI. (Incorporated
herein by reference to Exhibit 10.16 of the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1994 (file No.
0-11877)).
10.17 Management Agreement Extension dated September 25, 1992 between ELXSI
and MMI. (Incorporated herein by reference to Exhibit 10.17 of the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994 (file No. 0-11877)).
10.18 Assignment to Cadmus on January 1, 1994 of MMI's rights under the
extended Management Agreement dated September 25, 1992 between ELXSI
and MMI. (Incorporated herein by reference to Exhibit 10.18 of the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994 (file No. 0-11877)).
10.19 The Company's 1995 Incentive Stock Option Plan. (Incorporated
herein by reference to Form S-8 filed with the commission on
November 14, 1995. (file No. 0-11877)).
21.1 Subsidiaries of the Company. (Incorporated by reference to
Exhibit 22.1 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1990 (file No. 0- 11877)).
23.1 Consent of Price Waterhouse LLP
27 Financial Data Schedule
(b) Reports on Form 8-K
In connection with the acquisition of sixteen Abdow's Family
Restaurants from Abdow Corporation of Springfield, MA, the Company
filed a current report on Form 8-K dated July 3, 1995.
26
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
ELXSI CORPORATION
BY: /s/ Alexander M. Milley
-------------------------------------------
Alexander M. Milley
Chairman of the Board, President and
Chief Executive Officer
Dated: March 25, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature Title Date
- ------------------------------ ------------------------- --------------
/s/ Alexander M. Milley Chairman of the Board, March 25, 1996
- ------------------------------
Alexander M. Milley President and Chief Executive
Officer (Principal Executive
Officer)
/s/ Robert C. Shaw Director and Vice President March 25, 1996
- ------------------------------
Robert C. Shaw
/s/ Thomas R. Druggish Vice President, Treasurer March 25, 1996
- ------------------------------ and Secretary (Chief
Thomas R. Druggish Accounting Officer and
Principal Financial Officer)
/s/ Kevin P. Lynch Director and Vice President March 25, 1996
- ------------------------------
Kevin P. Lynch
/s/ Farrokh K. Kavarana Director March 25, 1996
- ------------------------------
Farrokh K. Kavarana
/s/ John C. Savage Director March 25, 1996
- ------------------------------
John C. Savage
27
<PAGE>
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders of
ELXSI Corporation
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) and (2) on page 22, present fairly, in all
material respects, the financial position of ELXSI Corporation and its
subsidiary at December 31, 1995 and 1994, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1995, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Orlando, Florida
March 21, 1996
F-1
<PAGE>
ELXSI CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
A S S E T S
December 31, December 31,
1995 1994
----------- -----------
Current assets:
Accounts receivable, less allowance for
doubtful accounts of $58 and $35 in 1995
and 1994, respectively $ 2,776 $ 2,278
Inventories 8,477 6,208
Prepaid expenses and other current assets 397 205
Asset held for sale 1,075 --
--------- ---------
Total current assets 12,725 8,691
Property, buildings and equipment, net 27,458 24,275
Intangible assets, net 5,703 5,891
Deferred debt costs, net 212 322
Note receivable - related party 1,156 1,156
Other 445 181
--------- ---------
Total assets $ 47,699 $ 40,516
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
F-2
<PAGE>
ELXSI CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, Except Per Share Data)
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31, December 31,
1995 1994
----------- -----------
Current liabilities:
Accounts payable and drafts payable $ 4,269 $ 4,016
Accrued expenses 4,396 4,002
Capital lease obligations - current 137 33
Current portion of long-term debt 1,485 1,063
--------- ---------
Total current liabilities 10,287 9,114
Capital lease obligations - non current 1,732 1,569
Long-term debt, net of discount 11,570 9,639
Other non current liabilities 1,396 796
--------- ---------
Total liabilities 24,985 21,118
Commitments and contingencies (Note 8) -- --
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--4,792,353
at December 31, 1995 and 5,032,333
at December 31, 1994 5 5
Additional paid-in-capital 229,666 230,890
Accumulated deficit (206,895) (211,441)
Cumulative foreign currency translation
adjustment (62) (56)
--------- ---------
Total stockholders' equity 22,714 19,398
--------- ---------
Total liabilities and stockholders' equity $ 47,699 $ 40,516
======== =========
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
ELXSI CORPORATION
CONSOLIDATED INCOME STATEMENTS
(Amounts in Thousands, Except Per Share Data)
Year Ended December 31,
---------------------------------------
1995 1994 1993
---------- --------- ----------
Net sales $ 74,674 $ 62,423 $ 55,682
Costs and expenses:
Cost of sales 58,347 47,440 41,338
Selling, general and administrative 7,484 6,630 6,406
Depreciation and amortization 2,206 1,794 1,589
--------- --------- ---------
Operating income 6,637 6,559 6,349
Other income (expense):
Interest income 125 8 --
Interest expense (1,767) (1,426) (1,653)
Other income (expense) 65 (41) (80)
--------- --------- ---------
Income before income taxes 5,060 5,100 4,616
Provision for income taxes 514 366 348
--------- --------- ---------
Net income $ 4,546 $ 4,734 $ 4,268
========= ========= =========
Primary net income per common share $ 0.89 $ 0.79 $ 0.72
========= ========= =========
Fully diluted net income per common $ 0.89 $ 0.79 $ 0.69
share ========= ========= =========
Weighted average number of common
and common equivalent shares
Primary 5,093 6,014 5,947
========= ========= =========
Fully Diluted 5,093 6,014 6,234
========= ========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
ELXSI CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in Thousands)
Cumulative
Foreign
Additional Accum- Currency
Common Paid-In- ulated Translation
Stock Capital Deficit Adjustment
------- ---------- --------- ------------
Balance at December 31, 1992 $ 5 $ 234,331 $(220,443) $ (8)
Foreign currency translation
adjustment -- -- -- (27)
Net income -- -- 4,268 --
-------- --------- --------- --------
Balance at December 31, 1993 5 234,331 (216,175) (35)
Foreign currency translation
adjustment -- -- -- (21)
Purchase of 354,963 shares of Common
Stock and warrants to purchase
761,638 shares of Common Stock -- (3,499) -- --
Exercise of Common Stock options
to purchase 18,400 shares of
Common Stock -- 58 -- --
Net income -- -- 4,734 --
-------- --------- --------- --------
Balance at December 31, 1994 5 230,890 (211,441) (56)
Foreign currency translation
adjustment -- -- -- (6)
Purchase of 240,000 shares of Common
Stock -- (1,224) -- --
Net income -- -- 4,546 --
-------- --------- --------- --------
Balance at December 31, 1995 $ 5 $ 229,666 $(206,895) $ (62)
======== ========= ========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
ELXSI CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
Year Ended December 31,
-------------------------------
1995 1994 1993
------- -------- --------
Cash flows provided by operating activities:
Net income $ 4,546 $ 4,734 $ 4,268
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,206 1,794 1,589
Amortization of deferred debt costs 213 126 157
Amortization of debt discount 19 90 43
Loss on disposal of equipment 54 7 2
Other (6) (21) (27)
(Increase) decrease in assets:
Accounts receivable (498) 301 (996)
Inventories (2,269) (794) (1,709)
Prepaid expenses and other current assets (192) 207 30
Asset held for sale (1,075) -- --
Other (242) (9) (110)
Increase (decrease) in liabilities:
Accounts payable and drafts payable 253 305 1,197
Accrued expenses 394 281 (671)
Other current liabilities -- (450) --
Other non current liabilities 600 300 250
-------- -------- --------
Net cash provided by operating activities 4,003 6,871 4,023
-------- -------- --------
Cash flows used in investing activities:
Acquisition of Abdow's Restaurants (2,575) -- --
Purchase of property, building and equipment(2,357) (2,363) (1,856)
Note receivable - related party -- (1,156) --
-------- -------- --------
Net cash used in investing activities (4,932) (3,519) (1,856)
-------- -------- --------
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
ELXSI CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Dollars in Thousands)
Year Ended December 31,
----------------------------
1995 1994 1993
---- ---- ----
Cash flows provided by (used in) financing
activities:
Net borrowing (payment) of line of credit 2,429 3,446 (2,135)
Payments of long-term senior subordinated
debt (83) (3,221) --
Payments of long-term debt (12) -- --
Purchase of Common Stock and warrants to
purchase Common Stock (1,224) (3,499) --
Proceeds from exercise of Common Stock
options -- 58 --
Payment of deferred bank fee (125) (109) --
Principal payments on capital lease
obligations (56) (27) (32)
------- -------- --------
Net cash provided by (used in) financing
activities 929 (3,352) (2,167)
------- -------- --------
(2,167)
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 year for:
Interest $ 1,544 $ 1,324 $ 1,482
Taxes 563 455 223
Supplemental Disclosure of Noncash Investing and Financing Activities:
In September 1989, the Company recorded a $301,000 warrant discount upon
issuance of $2,000,000 in senior subordinated notes. Interest expense on the
Consolidated Income Statement for each of the years ended December 31, 1995,
1994 and 1993 includes $19,000, $43,000 and $43,000, respectively of
amortization of this debt discount. During 1994, the Company prepaid a portion
of the senior subordinated notes and wrote off an additional $47,000 of the debt
discount, which is included in interest expense during 1994.
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE>
ELXSI CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
NOTE 1. The Company
General Prior to 1990, ELXSI Corporation (together with its subsidiary, 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.
In September 1989 and January 1990, the Company entered into agreements with,
and between, The Airlie Group L.P. ("Airlie"), Continental Illinois Equity
Corporation ("CIEC") and Milley & Company ("M&C"), (hereinafter referred to
collectively as the "Buyers") whereby the Buyers acquired 960,000 shares of the
Company's Common Stock for $3,000,000 in cash. In addition, the Buyers loaned
the Company $2,000,000 (see Note 6). Subsequent to these transactions, the
Company announced its intention of pursuing an active program of identifying,
acquiring and managing middle market companies.
On July 1, 1991, ELXSI acquired thirty Bickford's Restaurants and twelve Howard
Johnson's Restaurants, which are located in Massachusetts, Vermont, New
Hampshire, Rhode Island and Connecticut , from Marriott Family Restaurants, Inc.
During 1992, ELXSI sold six of its Howard Johnson's Restaurants, converted four
others into Bickford's Restaurants and opened one new Bickford's Restaurant.
During 1993, ELXSI opened three new Bickford's Restaurants. During 1994, ELXSI
opened two new Bickford's Restaurants and converted one of its two remaining
Howard Johnson's Restaurants into a Bickford's Restaurant. During 1995, ELXSI
opened one new Bickford's Restaurant, acquired sixteen Abdow's Family
Restaurants ("Abdows") and converted two of the Abdows into Bickford's
Restaurants. As of December 31, 1995, ELXSI operated forty-four Bickford's,
fourteen Abdows and one Howard Johnson's Restaurant, (the "Restaurants" or the
"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 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. Summary of Significant Accounting Policies
Principles of Consolidation The consolidated financial statements include the
accounts of ELXSI Corporation and its wholly-owned subsidiary. All material
intercompany accounts and transactions have been eliminated.
F-8
<PAGE>
Both the Company's corporate functions and Cues Division have fiscal years
consisting of four calendar quarters ending on December 31. The Restaurant
Division's fiscal year consists of four 13-week quarters (one 52-week period)
ending on the last Saturday in December closest to the 31; however, this
requires that every six or seven years the Restaurant Division add an extra week
at the end of the fourth quarter and fiscal year.
Cash and Cash Equivalents The Company has instituted a cash management system
whereby cash generated by operations is immediately used to reduce debt.
Accordingly the Company maintains no cash or cash equivalents.
Fair Value of Financial Instruments The carrying amount of accounts and note
receivable, asset held for sale, accounts and drafts payable, accrued expenses
and long-term debt approximates fair value because of the short maturity of
those instruments and the variable nature of the interest rates associated with
the debt.
Inventories Inventories are stated at the lower of cost or market determined by
the first-in, first-out method.
Property, Buildings and Equipment Property, buildings and equipment, including
buildings under capital leases, are stated at cost less accumulated depreciation
and amortization. Depreciation and amortization are provided using the
straight-line method for book purposes. Buildings held pursuant to capital
leases are amortized over the shorter of the term of the respective lease
including options or the estimated useful life. The estimated lives used are:
Buildings and improvements 30 years
Equipment, furniture and fixtures 7 years
Depreciation and amortization expense for 1995, 1994 and 1993 was $2,018,000,
$1,614,000 and $1,409,000, respectively.
Intangibles The excess of cost over fair value of net assets acquired is being
amortized over 35 years using the straight-line method. Amortization expense for
1995, 1994 and 1993 was $153,000, $151,000 and $151,000, respectively.
Management periodically reviews the potential impairment of intangible assets in
order to determine the proper carrying value of such intangible assets as of
each consolidated balance sheet presented.
Trademarks are being amortized over 35 years using the straight-line method.
Amortization expense for 1995, 1994 and 1993 was $35,000, $29,000 and $29,000,
respectively.
Deferred Debt Costs Deferred debt costs are amortized over the term of the loan
to interest expense using the effective interest method. As of December 31, 1995
and 1994, $212,000 and $322,000, respectively remain to be amortized over future
periods. Amortization expense in 1995, 1994 and 1993 was $213,000, $126,000 and
$157,000, respectively.
Use of Estimates The preparation of consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
F-9
<PAGE>
Foreign Currency Translation The assets and liabilities of the Canadian and
Dutch subsidiaries of Cues are translated into U.S. dollars at year end exchange
rates, and revenue and expense items are translated at average rates of exchange
prevailing during the year. Resulting translation adjustments are accumulated in
a separate component of stockholders' equity.
Income Taxes The Company has adopted Statement of Financial Accounting Standards
Number 109 "Accounting For Income Taxes" ("SFAS 109"). This Statement provides
for accounting for taxes under an asset and liability approach. This approach
requires the recognition of deferred tax assets and liabilities for the expected
future tax consequences of temporary differences between the carrying amounts
and the tax basis of other assets and liabilities. Temporary differences giving
rise to deferred tax assets and liabilities include certain accrued liabilities
and net operating loss carryforwards. The provision for income taxes includes
the amount of income taxes payable for the year as determined by applying the
provisions of the current tax law to the taxable income for the year and the net
change during the year in the Company's deferred tax assets and liabilities (see
Note 5).
Advertising Advertising costs, included in selling, general and administrative
expense, are expensed as incurred and were $862,000, $753,000 and $558,000 in
1995, 1994 and 1993.
Net Income Per Common Share Net income per common share is computed using the
weighted average number of common and, when dilutive, common equivalent shares
outstanding during the respective periods.
NOTE 3. Acquisitions
On July 3, 1995, ELXSI acquired Abdow's Family Restaurants from Abdow
Corporation of Springfield, MA, for a price of approximately $3,800,000
including estimated expenses of approximately $300,000. The transaction includes
the leasing of 16 restaurant sites and the purchase of associated assets located
in western Massachusetts and central Connecticut. ELXSI intends to convert most
of the Abdows locations into Bickford's Restaurants over the next 12 to 18
months. Shortly after the acquisition, ELXSI negotiated the sale of the Vernon,
Connecticut Abdow's Restaurant for a net sales price of approximately
$1,225,000, which approximated the fair market value of the Restaurant on the
date of its acquisition by ELXSI. The balance receivable from the sale is
reflected as an asset held for sale at December 31, 1995. The balance of the
purchase price of $2,575,000 was allocated to the equipment, leasehold
improvements and leasehold interests of the remaining fifteen Abdow's
restaurants. The sale of the Vernon Connecticut, Abdows Restaurant was
consummated on February 1, 1996.
The acquisition was financed by an increase in ELXSI's existing line of credit
with the Bank of America Illinois, which 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.
F-10
<PAGE>
NOTE 4. Composition of Certain Financial Statement Components
Year Ended December 31,
------------------------------
1995 1994
------------ ------------
Inventories:
Raw materials and finished goods $ 5,715,000 $ 4,191,000
Work in process 2,762,000 2,017,000
------------ ------------
$ 8,477,000 $ 6,208,000
============ ============
Property, buildings and equipment:
Land $ 7,298,000 $ 7,298,000
Buildings and improvements 14,696,000 12,865,000
Buildings held pursuant to
capital leases 1,671,000 1,671,000
Equipment, furniture and fixtures 10,080,000 6,855,000
------------ ------------
33,745,000 28,689,000
Accumulated depreciation and
amortization (6,287,000) (4,414,000)
------------ ------------
$ 27,458,000 $ 24,275,000
============ ============
Intangible assets:
Excess of cost over fair value of
net assets acquired $ 5,249,000 $ 5,249,000
Trademarks 1,030,000 1,030,000
Liquor licenses 85,000 85,000
------------ ------------
6,364,000 6,364,000
Accumulated amortization (661,000) (473,000)
------------ ------------
$ 5,703,000 $ 5,891,000
============ ============
The excess of cost over fair value of net assets acquired, trademarks and liquor
licenses represent the value assigned to these intangible assets upon the
acquisition of the Restaurants and Cues by ELXSI.
Year Ended December 31,
-------------------------------
1995 1994
------------- -------------
Accrued expenses:
Accrued salaries, benefits
and vacation $1,452,000 $ 1,092,000
Other taxes 678,000 463,000
Other reserves 355,000 683,000
Accrued utilities 306,000 221,000
Accrued insurance 304,000 167,000
Accrued rents 233,000 257,000
Accrued professional fees 146,000 213,000
Warranty accrual 180,000 150,000
Accrued interest and bank fees 126,000 240,000
Accrued royalty 72,000 --
Accrued acquisition costs 56,000 84,000
Accrued management fees - related party 18,000 20,000
State and federal income taxes 6,000 17,000
Other accrued expenses 464,000 395,000
------------ ------------
$ 4,396,000 $ 4,002,000
============ ============
F-11
<PAGE>
NOTE 5. Income Taxes
Effective January 1, 1993, the Company adopted the provisions of SFAS 109. As a
result of the adoption of SFAS 109, the Company recorded a deferred tax asset of
$88,698,000 which was fully offset by a valuation allowance in accordance with
the provisions of SFAS 109 at January 1, 1993.
Pre-tax income for the years ended December 31, 1995, 1994 and 1993 was as
follows:
1995 1994 1993
---------- ---------- ----------
Domestic $4,941,000 $4,911,000 $4,575,000
Foreign 119,000 189,000 41,000
--------- --------- ---------
Total $5,060,000 $5,100,000 $4,616,000
========== ========== ==========
Income tax expense for the years ended December 31, 1995, 1994 and 1993 is as
follows:
Year Ended December 31,
-------------------------------------
1995 1994 1993
--------- --------- ---------
Current tax expense
Federal $ 118,000 $ 88,000 $ 116,000
State and local 396,000 278,000 232,000
--------- --------- ---------
Total current $ 514,000 $ 366,000 $ 348,000
========= ========= =========
Deferred tax (liabilities) assets are comprised of the following at December 31,
1995 and 1994:
1995 1994
------------ ------------
Accrued expenses and other $ (1,422,000) $ (1,174,000)
------------ ------------
Gross deferred tax liabilities (1,422,000) (1,174,000)
------------ ------------
Syndication costs 1,662,000 1,662,000
Acquisition costs 421,000 421,000
Accrued expenses and other 1,380,000 1,031,000
Loss carryforwards 75,217,000 76,854,000
Credit carryforwards 6,730,000 6,730,000
------------ ------------
Gross deferred tax assets 85,410,000 86,698,000
------------ ------------
Deferred tax asset valuation
allowance (83,988,000) (85,524,000)
Net deferred taxes $ -- $ --
The Company has net operating loss carryforwards for federal income tax purposes
of approximately $221 million and $226 million at December 31, 1995 and 1994,
respectively. The decrease in the deferred tax asset valuation allowance
primarily resulted from the use of net operating loss carryforwards to offset
the 1995 estimated federal taxable income. The net operating loss carryforwards
expire between 1997 and 2005. The Company also has investment tax credit
carryforwards of approximately $3.2 million, research and development tax credit
carryforwards of approximately $3.3 million and minimum tax credit carryforwards
of approximately $230,000. The investment tax credit and research and
development tax credit
F-12
<PAGE>
carryforwards expire between 1997 and 2003,and the minimum tax credit
carryforwards have an unlimited carryforward period.
A reconciliation of the statutory federal tax rate and the Company's effective
income tax rate for the years ended December 31, 1995, 1994 and 1993 is as
follows:
Year Ended December 31,
-------------------------------------
1995 1994 1993
--------- ----------- ----------
Federal income tax rate 34.0% 34.0% 34.0%
State income taxes, net of
federal benefit 7.7 5.3 4.9
Other .5 (.1) .6
Recognition of net operating loss (32.0) (32.0) (32.0)
--------- ---------- ---------
Effective income tax rate 10.2% 7.2% 7.5%
========= ========== =========
The utilization of the Company's net operating loss and tax credit carryforwards
may be impaired or reduced under certain circumstances. Events which may affect
these carryforwards include, but are not limited to, cumulative stock ownership
changes of 50% or more over a three-year period, as defined, and the timing of
the utilization of the tax benefit carryforwards.
NOTE 6. Long-Term Debt and Related Party Transactions
On September 25, 1989, the Company consummated a Stock and Note Purchase
Agreement ("Agreement") with Airlie and M&C, whereby Airlie and M&C loaned the
Company $1,750,000 and $250,000, respectively, for 15% senior subordinated
ten-year notes, and warrants to purchase 1,053,500 and 150,500 shares,
respectively, of the Company's Common Stock. The Company recorded as
paid-in-capital (relating to the warrants) a discount of $301,000 to reflect a
valuation of $0.25 per warrant which was determined by the Company to represent
the fair market value of the warrants at the inception of the Agreement. The
warrants have an exercise price of $3.125 per share, are immediately
exercisable, and expire on September 25, 1996. The notes bear interest at 15%
payable quarterly, commencing on November 15, 1989. Principal is to be repaid in
five annual $400,000 installments commencing on September 25, 1995. In addition,
Airlie purchased 960,000 shares of the Company's Common Stock for $3,000,000 in
cash and granted to ELX Limited Partnership ("ELX"), of which the President of
the Company is the sole general partner and other officers of the Company are
limited partners, a currently exercisable seven-year option to purchase up to
480,000 of the 960,000 shares of the Common Stock, at an exercise price of
$3.125 per share.
In January 1990, CIEC purchased from Airlie 220,400 shares of the Company's
Common Stock as well as $402,000 principal amount of notes. In addition, the
Company and Airlie modified the warrants, described above, for the purchase of
1,053,500 shares of the Common Stock of the Company, in that such warrants were
exchanged for two warrants, one exercisable for 811,638 shares of Common Stock
and the second exercisable for 24,186 shares of the Company's Series A
Non-Voting Convertible Preferred Stock, which is convertible, under certain
specified conditions, into 241,862 shares of the Common Stock. The Series A
Non-Voting Convertible Preferred Stock carries a liquidation preference of
$0.002 per share and does not have voting rights, but otherwise has
substantially the same rights as the Common Stock. Following the issuance of the
two warrants, the second warrant was sold by Airlie to CIEC. In addition, in
connection with such purchases, the option previously granted by Airlie to ELX
was amended to be exercisable for
F-13
<PAGE>
369,800 shares of Common Stock, and an option to purchase 110,200 shares of
Common Stock at a price of $3.125 per share was granted by CIEC to ELX.
On June 27, 1991, in connection with the Restaurant purchase, Airlie, CIEC and
M&C purchased an additional, $1,685,000, $502,000 and $313,000, respectively, of
the Company's senior subordinated notes. The notes bear interest at 14.5% and
are payable in five annual installments of $500,000 commencing on June 27, 1997.
On November 15, 1993, Airlie sold $500,000 of its 14.5% seniaor subordinated
notes. In connection with the sale, Milley Management, Inc., a management
consulting firm, of which the President of the Company is the President and
majority stockholder, acquired 50,000 of the outstanding warrants previously
issued by the Company to Airlie. In addition, Cadmus Corporation ("Cadmus"),
whose President and principal owner is Alexander M. Milley, purchased $125,000
of the senior subordinated notes from Airlie. The remaining $375,000 was
purchased by three unrelated entities.
On May 19, 1994, the Company purchased all of the 15.0% and 14.5% senior
subordinated notes held by Milley Management, Inc. at their face value of
approximately $250,000 and $313,000, respectively. Milley Management, Inc.
waived the prepayment penalties.
On December 8, 1994, in connection with a complete divestiture of Airlie's
holdings in the Company, the Company purchased all of the 15.0% and 14.5% senior
subordinated notes held by Airlie at their face value of approximately
$1,348,000 and $1,185,000, respectively. Airlie waived the prepayment penalties
and the Company agreed to cancel the remaining debt commitment due from Airlie.
In addition to the two notes, the Company purchased and retired 354,963 shares
of the Company's Common Stock at $5.25 per share and 761,638 warrants to
purchase the Company's common stock for $2.125 per share.
In conjunction with the above transaction, the Company loaned ELX approximately
$1,156,000 on December 8, 1994. ELX used the proceeds to exercise its option to
purchase 369,800 shares held by Airlie under an existing option. The note bears
interest at 1/2% above the Company's senior debt borrowing rate, and the
principal and interest are due on December 8, 1997.
On December 8, 1994, Cadmus purchased 50,000 shares of the Company Common Stock
held by Airlie for $5.25 per share. The above December 8, 1994 transactions
represented a complete divestiture of the Company's securities held by Airlie.
The source of the funds was the bank line of credit.
Transactions with Cadmus Corporation In connection with the Agreement described
above, ELXSI (as assignee of ELXSI Corporation) entered into a management
agreement on September 25, 1989 with Cadmus. The management agreement which was
scheduled to expire in September 1992 was extended for a minimum of three
additional years. Certain of the Company's officers and directors are affiliated
with Cadmus. The management agreement provides for Cadmus to receive for
management services rendered, compensation of $500,000 per year commencing as
soon as the Company has operating income, as defined, of $1,250,000 for a fiscal
quarter, plus reimbursement for reasonable expenses. The fee shall be
discontinued immediately following a year in which the Company has operating
income, as defined, of less than $4,000,000 and shall be reinstated in the month
following a quarter in which the Company has operating income, as defined, of
$1,250,000. During 1995, 1994 and 1993, the Company was charged management
F-14
<PAGE>
fees of $500,000 each year. Cadmus also provides the Company with general and
administrative services. During 1995, 1994 and 1993, the Company was charged
$36,000, $41,000 and $42,000, respectively, for such items. At December 31, 1995
and 1994, accrued expenses include $18,000 and $20,000, respectively, due to
Cadmus under such agreement.
NOTE 7. Long-Term Debt
Long-term debt consists of the following:
December 31,
-------------------------
1995 1994
----------- -----------
1. ELXSI
Bank Line of Credit, $14,160,000, as amended,
interest due monthly at prime plus 1%
(9.5% at December 31, 1995), maturing on
June 28, 1997. The line of credit
provides for minimum reductions in
available credit of $3,330,000 annually.
The line is secured by assets of the
Company, including real estate and the
outstanding stock of ELXSI. The note
provides for interest of .3% on the
unused portion of the line of credit. In
addition, the agreement restricts the
payment of cash dividends on Common
Stock to an amount not to exceed 50% of
the excess cash flow as defined in the
agreement. $ 11,709,000 $ 9,280,000
2. ELXSI Corporation
Unsecured senior subordinated note payable
with interest at 15% payable quarterly in
arrears, commencing November 15, 1989. The
principal is payable in five equal annual
installments of approximately $80,000
commencing September 25, 1995. At issuance,
ELXSI Corporation recorded the note at a
discount, which is being amortized to
interest expense on a straight line basis
over the life of the note. 310,000 374,000
3. ELXSI Corporation
Unsecured senior subordinated notes payable
with interest at 14.5% payable quarterly in
arrears, commencing August 15, 1991. The
principal is payable in five equal annual
installments of approximately $175,000
commencing June 27, 1997. 877,000 877,000
4. Cues
Mortgage payable at 8.25% on the land and
building owned by Cues B.V. 141,000 141,000
F-15
<PAGE>
December 31,
----------------------------
1995 1994
---- ----
Other $ 18,000 $ 30,000
------------ ------------
13,055,000 10,702,000
Less current portion (1,485,000) (1,063,000)
----------- -----------
Long-Term Debt $ 11,570,000 $ 9,639,000
============ ============
The above debt, contains, among other provisions, financial covenants related
to the maintenance of minimum net worth, restrictions on capital expenditures
and compliance with certain ratios including liabilities to net worth and
interest coverage. Aggregate maturities of long-term debt for the five years
ending December 31, 2000 and thereafter are as follows:
1996 $ 1,485,000
1997 10,596,000
1998 265,000
1999 265,000
2000 184,000
Thereafter 260,000
------------
$ 13,055,000
============
At December 31, 1995, the Company was in default of two financial debt covenants
relating to the bank line of credit facility. The Company received a waiver from
the bank for these defaults for the quarter ended December 31, 1995. Further,
the bank has agreed to modify those existing covenants, which the Company
expects to be in violation of during 1996, based on its 1996 budget. Management
expects to meet its 1996 budget and to be in compliance with the related
covenants in the coming year.
NOTE 8. Commitments and Contingencies
ELXSI conducts a substantial portion of its operations utilizing leased
facilities. ELXSI leases land and/or buildings at forty-six of its fifty-eight
restaurants under terms of numerous lease agreements expiring on various dates
including options through 2032. The majority of the leases provide that ELXSI
pay taxes, maintenance, insurance, and other occupancy expenses related to
leased premises. The rental payments for a majority of the restaurant locations
are based on a minimum annual rental plus a percentage of sales, as defined in
the related agreements. Generally, the leases provide for renewal options and in
most cases, management expects that in the normal course of business, lease
agreements will be renewed or replaced by other leases.
Cues has several noncancelable operating leases, primarily for certain office
and transportation equipment, that expire over the next three years and
generally provide for purchases or renewal options.
F-16
<PAGE>
The following is a schedule of future minimum lease commitments for the five
years ending December 31:
Capital Leases Operating Leases
-------------- ----------------
1996 $ 276,000 $ 2,623,000
1997 276,000 2,637,000
1998 273,000 2,417,000
1999 175,000 2,366,000
2000 175,000 2,347,000
Thereafter 2,718,000 17,254,000
------------ ------------
Total minimum lease payments 3,893,000 $ 29,644,000
============
Less - Amount representing interest (2,024,000)
------------
Present value of net minimum capital
lease payments 1,869,000
Less - current portion (137,000)
-----------
Long-term capital lease obligation $ 1,732,000
============
Included in the above schedule of future minimum lease commitments are sublease
rental income of $32,000 in 1996 and $23,000 in each year from 1997 to 2005.
Rent expense charged to operations amounted to $2,235,000, $1,701,000 and
$1,516,000 during 1995, 1994, and 1993, respectively.
At December 31, 1995 and 1994, ELXSI had outstanding letters of credit totalling
$500,000 and $600,000, respectively.
Cues has agreements with truck dealers to deliver truck bodies which are used in
the manufacture of certain Cues products. Under these agreements, Cues
reimburses the dealers floor-plan financing costs for those vehicles held by the
dealers until delivery to Cues. The amount of this reimbursement for 1995, 1994
and 1993 was $56,000, $57,000 and $25,000, respectively. At December 31, 1995
and 1994, truck bodies held by the dealers under these agreements were valued at
$688,000 and $719,000, respectively.
NOTE 9. Thrift and Profit Sharing Plan
In 1986, Cues established a contributory trusteed thrift and profit sharing plan
covering all of its employees who have completed one year of eligible service.
The plan's enrollment dates are January 1, April 1, July 1, and October 1, of
each year. Participants have the option of making after-tax or deferred cash
contributions, not to exceed 6% of their annual compensation, which are
supplemented by employer matching contributions in the amount of 50% of the
participant's contribution. The participants may make additional voluntary
contributions to the plan which are not supplemented by employer contributions.
Participants partially vest in the employer's contributions after the second
year of service and are fully vested after the sixth year of service. Thrift and
profit sharing expense for 1995, 1994 and 1993 was $48,000, $40,000 and $48,000,
respectively.
During 1995, the Restaurant division established a non-contributory trusteed
thrift and profit sharing plan covering all of its employees who are over the
age of twenty-one and have completed one year of eligible service.
F-17
<PAGE>
NOTE 10. Common Stock
Activity in common stock shares for the years ended December 31, 1995, 1994 and
1993 was as follows:
1995 1994 1993
------------ ------------ ------------
Common Stock Issued:
Balance at beginning of year 5,032,333 5,368,870 5,282,359
Issuance of fractional shares 20 26 357
Options exercised -- 18,400 --
Warrants exercised -- -- 86,154
Shares repurchased and cancelled (240,000) (354,963) --
------------ ------------ ------------
Balance at end of year 4,792,353 5,032,333 5,368,870
============ ============ ============
NOTE 11. Common Stock Options and Warrants
Common Stock Options At December 31, 1995, the Company had a total of 644,587
common shares reserved for issuance under its stock option plans. Options under
the Company's plans are granted at prices determined by the Board of Directors,
but not less than the fair market value of the Common Stock on the date of
grant. Options generally become exercisable in cumulative annual installments
beginning one year after the date of grant, are fully exercisable after five
years, and expire after 10 years. During 1995, stockholders approved the 1995
Incentive Stock Option Plan (the "1995 Plan") consisting of 125,000 shares.
Under the 1995 Plan 104,500 shares were granted at an exercise price of $5.75
per share. The shares become exercisable on November 19, 1995. During 1993,
stockholders approved the 1993 Incentive Stock Option Plan (the "1993 Plan")
consisting of 300,000 shares. Under the 1993 Plan 21,000, 115,000 and 100,400
shares were granted at exercise prices of $5.375, $5.75 and $5.375 per share in
1995, 1994 and 1993, respectively. The shares become exercisable on October 24,
1996, November 19, 1994 and March 8, 1994, respectively. During the year ended
December 31, 1992, the Company granted stock options for the purchase of 100,000
shares at an exercise price of $5.00 per share. The grant became fully
exercisable when ratified by the Company's stockholders at its annual meeting on
May 27, 1993.
Shares Option Prices
------ -------------
Outstanding at December 31, 1993 220,600 $3.125 -$26.50
Granted 115,000 $5.75
Exercised (18,400) $3.125
------------
Outstanding at December 31, 1994 317,200 $3.125 -$26.50
Granted 125,500 $5.375 - $5.75
Exercised (600) $3.125
Cancelled (4,190) $5.375 - $5.75
------------
Outstanding at December 31, 1995 437,910 $5.375 -$26.50
============
Options available for grant under all of the these plans total 206,677 shares
and 202,987 shares at December 31, 1995 and 1994, respectively.
Warrants At December 31, 1995, the Company had a total of 511,124 common shares
reserved for issuance pursuant to the warrants as follows:
F-18
<PAGE>
In connection with the acquisition of Cues, the Company issued a warrant to
purchase 68,762 shares of the Company's Common Stock to the former parent of
Cues. The warrants remain unexercised at December 31, 1995, have an exercise
price of $4.36 per share, are currently exercisable and expire on January 31,
1997.
In connection with the Stock and Note Purchase Agreement (see Note 6), the
Company issued warrants to acquire up to an aggregate of 1,204,000 shares of the
Company's Common Stock to private investors in 1989. On December 8, 1994, the
Company repurchased the warrant for 761,638 shares from Airlie for $2.125 per
share. The remaining 442,362 warrants remain unexercised at December 31, 1995,
are currently exercisable, expire on September 25, 1996 and have an exercise
price of $3.125 per share.
In connection with a 1987 private placement of Common Stock, the Company issued
fully paid warrants to acquire up to an aggregate of 86,154 shares of the
Company's Common Stock. These warrants were exercised during 1993.
Phantom Option Plan The phantom stock option plan was implemented in 1992 as a
long-term incentive plan for four key Bickford's Restaurants employees (the
"Group"). At the inception of the plan, the Group paid an initial investment
totalling approximately $116,000. Each participant is entitled to receive, upon
exercise, a cash payment equal to his individual vested percentage of the
appraised value of Bickford's Restaurants, as defined, less the balance of his
exercise price payable upon exercise. Full vesting occurs on July 1, 1996, at
which time the Group, as a whole, is entitled to 13.9% of the appraised value of
Bickford's, as defined. The phantom stock options may be exercised on the
earliest of July 1, 2001, the termination of the employees' employment or the
sale of the Restaurant Division. During 1995, 1994 and 1993, the Company
recorded compensation expense related to the phantom stock option plan of
$600,000, $300,000 and $250,000, respectively.
NOTE 12. Segment Reporting
The Company operates in two segments, restaurant management and equipment
manufacturing. Summarized financial information by business segment for the
years ended December 31, 1995, 1994 and 1993 is as follows:
1995 1994 1993
------------ ------------ ------------
Net Sales:
Restaurants $ 54,270,000 $ 43,391,000 $ 38,903,000
Equipment 20,404,000 19,032,000 16,779,000
------------ ------------ ------------
$ 74,674,000 $ 62,423,000 $ 55,682,000
============ ============ ============
Operating Income:
Restaurants $ 7,088,000 $ 6,404,000 $ 6,215,000
Equipment 988,000 1,346,000 1,210,000
Corporate (1,439,000) (1,191,000) (1,076,000)
------------ ------------ ------------
$ 6,637,000 $ 6,559,000 $ 6,349,000
============ ============ ============
Total Assets:
Restaurants $ 30,008,000 $ 25,989,000 $ 25,828,000
Equipment 16,321,000 13,182,000 12,688,000
Corporate 1,370,000 1,345,000 4,000
------------ ------------ ------------
$ 47,699,000 $ 40,516,000 $ 38,520,000
============ ============ ============
F-19
<PAGE>
1995 1994 1993
------------ ------------ ------------
Depreciation and Amortization:
Restaurants $ 1,833,000 $ 1,460,000 $ 1,288,000
Equipment 373,000 334,000 301,000
------------ ------------ ------------
$ 2,206,000 $ 1,794,000 $ 1,589,000
============ ============ ============
Capital Expenditures:
Restaurants $ 1,967,000 $ 2,015,000 $ 1,666,000
Equipment 390,000 348,000 190,000
------------ ------------ ------------
$ 2,357,000 $ 2,363,000 $ 1,856,000
============ ============ ============
Capital expenditures exclude amounts in connection with acquisition and
divestitures.
There were no intersegment sales or transfers during 1995, 1994, and 1993.
Operating income by business segment excludes interest income, interest expense,
and unallocated corporate expenses. Corporate assets consist principally of
prepaid expenses and the related party note receivable.
Foreign assets, revenues, and export sales each represents less than ten percent
of the Company's totals. No material amount of the Company's sales are dependent
upon a single customer.
NOTE 13. Subsequent Event
On February 1, 1996, ELXSI completed the sale of its Vernon, Connecticut Abdow's
Restaurant for a net price of $1,225,000. At December 31, 1995 the Company
reflected the $1,075,000 balance receivable of as an asset held for sale on the
Consolidated Balance Sheet. No gain or loss will be recognized on this sale as
the net proceeds approximated the estimated fair market value on the July 3,
1995 acquisition date.
NOTE 14. Quarterly Financial Data - (Unaudited)
The following summarizes quarterly financial data for 1995 and 1994 (in
thousands, except per share data):
1995
---------------------------------------------
Mar. 31, June 30, Sep. 30, Dec. 31,
-------- -------- -------- --------
Net sales $ 15,614 $ 16,914 $ 22,048 $ 20,098
Gross profit 3,410 3,903 4,504 4,510
Income before income taxes 833 1,222 1,591 1,414
Net income $ 745 $ 1,084 $ 1,432 $ 1,285
Earnings per common share:
Primary $ .15 $ .21 $ .28 $ .25
Fully diluted $ .15 $ .21 $ .28 $ .25
Mar. 31, June 30, Sep. 30, Dec. 31,
-------- -------- -------- --------
Net sales $ 14,228 $ 15,631 $ 16,844 $ 15,720
Gross profit 3,000 3,864 4,190 3,929
Income before income taxes 535 1,345 1,769 1,451
Net income $ 489 $ 1,239 $ 1,631 $ 1,375
Earnings per common share:
Primary $ .08 $ .20 $ .27 $ .24
Fully diluted $ .08 $ .20 $ .27 $ .24
F-20
<PAGE>
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
ELXSI CORPORATION AND SUBSIDIARIES
(Dollars in Thousands)
<TABLE>
<CAPTION>
Additions
Balance at Charged Charged to Balance
Beginning Costs and Other Deductions at End
of Period Expenses Accounts-describe Describe of Period
--------- -------- ----------------- -------- ---------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1995
Account deducted from assets:
Reserve for doubtful accounts
receivable $ 35 $ 23 $ 19 (C) $(19) (A) $ 58
========= ======== ======= ===== =======
Inventory reserve $ 100 $ 54 $ -- (4) (B) $ 150
========= ======== ====== ===== =======
Year ended December 31, 1994
Account deducted from assets:
Reserve for doubtful accounts
receivable $ 77 $ 3 $ -- (45) (A) $ 35
========= ======== ====== ===== =======
Inventory reserve $ 262 $ 53 $ -- (215) (B) $ 100
========= ======== ====== ===== =======
Year ended December 31, 1993
Account deducted from assets:
Reserve for doubtful accounts
receivable $ 38 $ 35 $ 6 (2) (A) $ 77
========= ======== ====== ===== =======
Inventory reserve $ 339 $ 29 $ -- (106) (B) $ 262
========= ======== ====== ===== =======
<FN>
(A) Uncollectible accounts written off during 1995, 1994 and 1993.
(B) Obsolete inventory written off during 1995, 1994 and 1993.
(C) Bad debt recoveries.
</FN>
</TABLE>
S-1
<PAGE>
ELXSI Corporation
Exhibits Index
1995 - Form 10-K
Exhibit
Number Description Page No.
- ------ ----------- --------
2.1 Agreement and Plan of Merger by and among ELXSI
Corporation, ELXSI, Cadmus Corporation and Holdingcues,
Inc. dated as of October 16, 1992, including form of
Series C Warrant. (Incorporated herein by reference to
Exhibit 2.7 of the Company's Current Report on Form 8-K
as filed November 13, 1992 (File No 0-11877)).
2.2 Family Restaurant Sale and Purchase Agreement, between
Marriott Family Restaurants Inc. ("Marriott") and the
Company dated February 28, 1991. (Incorporated herein
by reference to Exhibit 2.1 of the Company's Current
Report on Form 8-K, dated July 16, 1991 (File No.
0-11877)).
2.3 Side Letter to the Family Restaurant Sale and Purchase
Agreement between Marriott and the Company dated
February 28, 1991. (Incorporated herein by reference to
Exhibit 2.2 of the Company's Current Report on Form
8-K, dated July 16, 1991 (File No. 0-11877)).
2.4 Assignment and Guaranty of Family Restaurants Sale and
Purchase Agreement and Side Letter, between the
Company, Marriott and ELXSI dated June 29, 1991.
(Incorporated herein by reference to Exhibit 2.3 of the
Company's Current Report on Form 8-K, dated July 16,
1991 (File No. 0-11877)).
2.5 Closing Side Letter Agreement Regarding Family
Restaurants Sale and Purchase Agreement between ELXSI
and Marriott dated July 1, 1991. (Incorporated herein
by reference to Exhibit 2.4 of the Company's Current
Report on Form 8-K, dated July 16, 1991 (File No.
0-11877)).
2.6 Real Estate Closing Side Letter Agreement Regarding
Family Restaurants Sale and Purchase Agreement between
ELXSI and Marriott dated July 1, 1991. (Incorporated
herein by reference to Exhibit 2.5 of the Company's
Current Report on Form 8-K, dated July 16, 1991 (File
No. 0-11877)).
2.7 Agreement Concerning Massachusetts and Connecticut
Liquor Licenses between ELXSI and Marriott dated July
1, 1991. (Incorporated herein by reference to Exhibit
2.6 of the Company's Current Report on Form 8-K, dated
July 16, 1991 (File No. 0-11877)).
3.1 Restated Certificate of Incorporation of the Company,
as amended. (Incorporated herein by reference to
Exhibit 3.1 of the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1989 (file No.
0-11877)).
3.2 Certificate of Amendment of Restated Certificate of
Incorporation of the Company dated May 27, 1992.
(Incorporated herein by reference to Exhibit 3.2 of the
Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994 (file No. 0-11877)).
<PAGE>
3.3 Bylaws of the Company. (Incorporated herein by
reference to Exhibit 3.1 of the Company's Registration
Statement on Form S-4, as amended. (file No. 0-11877)).
4.1 Series A Warrant No. A-4 to purchase 50,000 shares of
Common Stock issued to MMI. (Incorporated herein by
reference to Exhibit 4.1 of the Company's Annual Report
on Form 10-K for the fiscal year ended December 31,
1994 (file No. 0- 11877)).
4.2 Series A Warrant No. A-6 to purchase 150,500 shares of
Common Stock issued to the Alexander M. Milley
Irrevocable Trust I U/A dated May 9, 1994.
(Incorporated herein by reference to Exhibit 4.2 of the
Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994 (file No. 0-11877)).
4.3 Series B Warrant No. B-1 to purchase 604,656 shares of
Series A Non-Voting Convertible Preferred Stock issued
to CIEC. (Incorporated herein by reference to Exhibit
4.6 of the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989 (file No.
0-11877)).
4.4 Series C Warrant No. C-2 to purchase 68,762 shares of
Common Stock issued to MMI. (Incorporated herein by
reference to Exhibit 4.4 of the Company's Annual Report
on Form 10-K for the fiscal year ended December 31,
1994 (file No. 0- 11877)).
4.5 Amended and Restated Registration Rights Agreement
dated as of January 23, 1990 among the Company, M&C and
CIEC. (Incorporated herein by reference to Exhibit 4.7
of the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989 (file No.
0-11877)).
4.6 Exercise of option and Assignment of Registration
Rights executed by ELX and Airlie dated November 30,
1994. (Incorporated herein by reference to Exhibit 4.6
of the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994 (file No.
0-11877)).
4.7 15% Senior Subordinated Note issued by the Company to
CIEC in the amount of $401,765.00. (Incorporated herein
by reference to Exhibit 10.18 of the Company's Annual
Report on Form 10-K for the fiscal year ended December
31, 1989 (file No. 0-11877)).
4.8 14.5% Senior Subordinated Note issued by the Company to
CIEC in the amount of $502,206.25 dated June 27, 1991.
(Incorporated herein by reference to Exhibit 4.8 of the
Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994 (file No. 0-11877)).
4.9 Amended and Restated Loan and Security Agreement, dated
as of October 30, 1992 between ELXSI and Continental
Bank N.A. (now Bank of America Illinois). (Incorporated
herein by reference to Exhibit 10.21 of the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1992 (file No. 0- 11877)).
4.10 First Amendment to Amended and Restated Loan and
Security Agreement, dated as of February 4, 1993
between ELXSI and Bank of America Illinois formerly
Continental Bank N.A.) (Incorporated herein by
reference to Exhibit 4.10 of the
<PAGE>
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994 (file No. 0-11877)).
4.11 Second Amendment to Amended and Restated Loan and
Security Agreement, dated as of December 6, 1994
between ELXSI and Bank of America Illinois (formerly
Continental Bank N.A.) (Incorporated herein by
reference to Exhibit 4.11 of the Company's Annual
Report on Form 10-K for the fiscal year ended December
31, 1994 (file No. 0-11877)).
4.12 14.5% Senior Subordinated Note issued by the Company to
Pan Fixed Income Fund, Ltd., dated as of November 16,
1993 in the amount of $250,000. (Incorporated herein by
reference to Exhibit 4.12 of the Company's Annual
Report on Form 10-K for the fiscal year ended December
31, 1994 (file No. 0- 11877)).
4.13 14.5% Senior Subordinated Note issued by the Company to
Rona Jaffe, dated as of November 16, 1993 in the amount
of $100,000. (Incorporated herein by reference to
Exhibit 4.13 of the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1994 (file
No. 0-11877)).
4.14 14.5% Senior Subordinated Note issued by the Company to
Anne Strassler A.C.S.W. P.C., dated as of November 16,
1993 in the amount of $25,000. (Incorporated herein by
reference to Exhibit 4.14 of the Company's Annual
Report on Form 10-K for the fiscal year ended December
31, 1994 (file No. 0- 11877)).
4.15 Third Amendment to Amended and Restated Loan and
Security Agreement, dated as of January 25, 1995
between ELXSI and Bank of America Illinois (formerly
Continental Bank N.A.)
4.16 Fourth Amendment to Amended and Restated Loan and
Security Agreement, dated as of May 25, 1995 between
ELXSI and Bank of America Illinois (formerly
Continental Bank N.A.)
4.17 Fifth Amendment to Amended and Restated Loan and
Security Agreement, dated as of July 3, 1995 between
ELXSI and Bank of America Illinois (formerly
Continental Bank N.A.)
10.1 The Company's 1987 Incentive Stock Option Plan as
amended. (Incorporated by reference to Exhibit 10.1 of
the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1987 (file No. 0-11877)).
10.2 The Company's 1987 Supplemental Stock Option Plan as
amended. (Incorporated by reference to Exhibit 10.2 of
the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1987 (file No. 0-11877)).
10.3 The Company's 1993 Incentive Stock Option Plan.
(Incorporated herein by reference to Exhibit 10.3 of
the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994 (file No. 0-11877)).
10.4 The ELXSI 1991 Phantom Stock Option Plan for the
management of the Bickford's Division. (Incorporated
herein by reference to Exhibit 10.4 of the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1994 (file No. 0-11877)).
<PAGE>
10.5 Amendment No. 1 to the ELXSI 1991 Phantom Stock Option
Plan for the management of the Bickford's Division.
(Incorporated herein by reference to Exhibit 10.5 of
the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994 (file No. 0-11877)).
10.6 Promissory Note of ELX Limited Partnership payable to
the Company dated December 8, 1994 in the amount of
$1,155,625.00 due December 8, 1997. (Incorporated
herein by reference to Exhibit 10.6 of the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1994 (file No. 0- 11877)).
10.7 Non-Qualified Stock Option Agreement issued to Robert
C. Shaw for the purchase of 12,500 shares of Common
Stock, dated October 30, 1992. (Incorporated herein by
reference to Exhibit 10.7 of the Company's Annual
Report on Form 10-K for the fiscal year ended December
31, 1994 (file No. 0- 11877)).
10.8 Non-Qualified Stock Option Agreement issued to John C.
Savage for the purchase of 10,000 shares of Common
Stock, dated October 30, 1992. (Incorporated herein by
reference to Exhibit 10.8 of the Company's Annual
Report on Form 10-K for the fiscal year ended December
31, 1994 (file No. 0-11877)).
10.9 Non-Qualified Stock Option Agreement issued to Farrokh
K. Kavarana for the purchase of 10,000 shares of Common
Stock, dated October 30, 1992. Incorporated herein by
reference to Exhibit 10.9 of the Company's Annual
Report on Form 10-K for the fiscal year ended December
31, 1994 (file No. 0-11877)).
10.10 Non-Qualified Stock Option Agreement issued to Kevin
P. Lynch for the purchase of 20,000 shares of Common
Stock, dated October 30, 1992. (Incorporated herein by
reference to Exhibit 10.10 of the Company's Annual
Report on Form 10-K for the fiscal year ended December
31, 1994 (file No. 0-11877)).
10.11 Non-Qualified Stock Option Agreement issued to
Alexander M. Milley for the purchase of 30,000 shares
of Common Stock, dated October 30, 1992. (Incorporated
herein by reference to Exhibit 10.11 of the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1994 (file No. 0-11877)).
10.12 Non-Qualified Stock Option Agreement issued to Thomas
R. Druggish for the purchase of 30,000 shares of Common
Stock, dated October 30, 1992. (Incorporated herein by
reference to Exhibit 10.12 of the Company's Annual
Report on Form 10-K for the fiscal year ended December
31, 1994 (file No. 0-11877)).
10.13 Stock and Note Purchase Agreement dated as of August
31, 1989 by and among the Company, Airlie and M&C.
(Incorporated herein by reference to Exhibit 2.1 of the
Company's Current Report on Form 8-K as filed October
3, 1989 (File No 0-11877)).
<PAGE>
10.14 Stock and Note Purchase Agreement dated as of January
23, 1990 among Airlie, CIEC and M&C. (Incorporated
herein by reference to Exhibit 10.14 of the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1994 (file No. 0-11877)).
10.15 Management Agreement ("Management Agreement") between
Winchester National, Inc. (d/b/a as M&C) and the
Company dated September 25, 1989. (Incorporated herein
by reference to Exhibit 10.21 of the Company's Annual
Report on Form 10-K for the fiscal year ended December
31, 1991 (file No. 0- 11877)).
10.16 Assignment of Management Agreement dated June 28, 1991
among the Company, Winchester National, Inc., ELXSI and
MMI. (Incorporated herein by reference to Exhibit 10.16
of the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994 (file No.
0-11877)).
10.17 Management Agreement Extension dated September 25,
1992 between ELXSI and MMI. (Incorporated herein by
reference to Exhibit 10.17 of the Company's Annual
Report on Form 10-K for the fiscal year ended December
31, 1994 (file No. 0-11877)).
10.18 Assignment to Cadmus on January 1, 1994 of MMI's
rights under the extended Management Agreement dated
September 25, 1992 between ELXSI and MMI. (Incorporated
herein by reference to Exhibit 10.18 of the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1994 (file No. 0- 11877)).
10.19 The Company's 1995 Incentive Stock Option Plan.
(Incorporated herein by reference to Form S-8 filed
with the commission on November 14, 1995. (file No.
0-11877)).
21.1 Subsidiaries of the Company. (Incorporated by reference
to Exhibit 22.1 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1990 (file
No. 0-11877)).
23.1 Consent of Price Waterhouse LLP
27 Finacial Data Schedule
<PAGE>
THIRD AMENDMENT
TO
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
THIS THIRD AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
(this "Amendment") is entered into as of January 25, 1995 between ELXSI, a
California corporation ("Borrower"), and BANK OF AMERICA ILLINOIS (formerly
Continental Bank N.A.) ("Lender").
W I T N E S S E T H:
WHEREAS, Borrower and Lender are parties to an Amended and Restated Loan
and Security Agreement dated as of October 30, 1992 (as heretofore amended, the
"Loan Agreement"); and
WHEREAS, Borrower desires Lender to amend the Loan Agreement in certain
respects.
NOW, THEREFORE, in consideration of the premises and mutual agreements
herein contained, the parties hereto agree as follows:
SECTION 1. DEFINED TERMS.
Terms defined in the Loan Agreement and not otherwise defined herein are
used herein as therein defined.
SECTION 2. AMENDMENTS TO LOAN AGREEMENT.
2.1. The definition of "Revolving Credit Amount" in Section 1.1 of the
Loan Agreement is hereby amended and restated to read in its entirety as
follows:
"Revolving Credit Amount" means, from and after January 25,
1995, $12,580,000, as adjusted after such date pursuant to this Agreement,
including pursuant to Sections 2.1.3 and 2.1.4.
2.2. Section 5.13 of the Loan Agreement is hereby amended by (i) deleting
the word "and" prior to clause (d) of the proviso to the first sentence of such
Section, (ii) adding the following at the end of such first sentence 11; and (e)
so long as no Event of Default or Unmatured Event of Default exists or would
result therefrom, in January, 1995 Borrower may pay to Parent dividends in an
aggregate amount not to exceed $1,224,000, the proceeds of which will be used by
Parent solely to purchase 240,000 shares of its common stock from Morgens
Waterfall Vintaidis & Co. (and/or one or more entities affiliated therewith) and
(iii) deleting the words "clause (a), (b) or (c)" from the last sentence of such
Section and inserting the words "clause (a), (b), or (c) or (d)" in lieu
thereof.
<PAGE>
SECTION 3. CONDITIONS PRECEDENT.
The amendment to the Loan Agreement set forth in Section 2 of this
Amendment shall become effective on such date (the "Effective Date") when the
following conditions precedent have been satisfied:
3.1. Receipt of Documents. Lender shall have received all
of the following, each duly executed and dated the date hereof,
in form and substance satisfactory to Lender:
(a) Amendment. An original of this Amendment duly
executed by Borrower.
(b) Certificate. A certificate, dated the date hereof and signed by
the President or a Vice President of Borrower, as to the matters set
forth in Section 3.2.
(c) Opinion. An opinion of Dechert Price & Rhoads,
counsel to Borrower, in form and substance satisfactory
to Lender.
(d) Other. Such other documents as Lender may
reasonably request.
3.2. Warranties True and Absence of Defaults. (i) No Event of Default or
Unmatured Event of Default shall have occurred and shall be continuing as of the
Effective Date (after giving effect to this Amendment) and (ii) the warranties
of Borrower contained in Section 4 of the Loan Agreement shall be true and
correct as of the Effective Date, with the same effect as though made on such
date (except (x) to the extent changed by circumstances permitted by the Loan
Agreement, and (y) for such warranties which relate solely to an earlier date
and were true and correct on and as of such date).
3.3. Fee. Lender shall have received from Borrower a non-
refundable amendment fee of $25,000.
SECTION 4. MISCELLANEOUS.
4.1. Warranties True and Absence of Defaults. In order to
induce Lender to enter into this Amendment, Borrower hereby
warrants to Lender that, as of the date hereof and the Effective
Date:
(a) The warranties of Borrower contained in Section 4 of the Loan
Agreement are true and correct as of the date hereof and the
Effective Date (after giving effect to this Amendment) with the same
effect as though made on each such date (except (x) to the extent
changed by circumstances permitted by the Loan Agreement and (y)
- 2 -
<PAGE>
for such warranties which relate solely to a specific earlier date
and were true and correct as of such date).
(b) No Event of Default or Unmatured Event of Default exists as of
each such date.
4.2. Expenses. Borrower agrees to pay on demand all costs and expenses of
Lender (including the reasonable fees, charges and expenses of counsel for
Lender) in connection with the preparation, negotiation, execution, delivery and
administration of this Amendment and all other instruments or documents provided
for herein or delivered or to be delivered hereunder or in connection herewith.
In addition, Borrower agrees to pay, and save Lender harmless from all liability
for, any documentary, stamp or other similar taxes which may be payable in
connection with the execution or delivery of this Amendment, the borrowings
under the Loan Agreement, as amended hereby, and the execution and delivery of
any instruments or documents provided for herein or delivered or to be delivered
hereunder or in connection herewith. All obligations provided in this Section
4.2 shall survive any termination of this Amendment or the Loan Agreement as
amended hereby.
4.3. Governing Law. This Amendment shall be a contract
made under and governed by the internal laws of the State of
Illinois.
4.4. Counterparts. This Amendment may be executed in any number of
counterparts, and by the parties hereto on the same or separate counterparts,
and each such counterpart, when so executed and delivered, shall be deemed to be
an original, but all such counterparts shall together constitute but one and the
same instrument.
4.5. Reference to Loan Agreement. Except as amended hereby, the Loan
Agreement shall remain in full force and effect and is hereby ratified and
confirmed in all respects. On and after the effectiveness of the amendment to
the Loan Agreement accomplished hereby, each reference in the Loan Agreement to
"this Agreement," "hereunder," "hereof," "herein" or words of like import, and
each reference to the Loan Agreement in any Note and in any Related Agreement,
or other agreements, documents or instruments executed and delivered pursuant to
the Loan Agreement, shall be deemed a reference to the Loan Agreement, as
amended hereby.
4.6. Successors. This Amendment shall be binding upon the
parties hereto and their successors and permitted assigns.
- 3 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the date
and year first above written.
ELXSI
By: ____________________________
Title: ________________________
BANK OF AMERICA ILLINOIS
(formerly Continental Bank N.A.)
By: ____________________________
Title: ________________________
- 4 -
<PAGE>
FOURTH AMENDMENT
TO
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
THIS FOURTH AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
(this "Amendment") is entered into as of May 5, 1995 between ELXSI, a California
corporation ("Borrower"), and BANK OF AMERICA ILLINOIS (formerly Continental
Bank N.A.) ("Lenders").
W I T N E S S E T H:
WHEREAS, Borrower and Lender are parties to an Amended and Restated Loan
and Security Agreement dated as of October 30, 1992 (as heretofore amended, the
"Loan Agreement"); and
WHEREAS, Borrower desires Lender to amend the Loan Agreement in certain
respects.
NOW, THEREFORE, in consideration of the premises and mutual agreements
herein contained, the parties hereto agree as follows:
SECTION 1. DEFINED TERMS.
Terms defined in the Loan Agreement and not otherwise defined herein are
used herein as therein defined.
SECTION 2. AMENDMENTS TO LOAN AGREEMENT.
2.1. The following definitions are hereby added to Section 1.1 of the Loan
Agreement, each in its appropriate alphabetical position:
"Annualized EBITDA" means, as of any date of determination thereof,
EBITDA for the fiscal quarter ended on such date multiplied by four.
"EBITDA" means Borrower's consolidated net earnings before interest
expense, depreciation, amortization and provision for Taxes for the fiscal
quarter of Borrower ending on the date of determination. For purposes of
this definition, (i) net earnings shall not include any gains on the sale
or other disposition of Investments (other than cash equivalents) or fixed
assets and any extraordinary or nonrecurring items of income in any fiscal
quarter to the extent that the aggregate of all such gains and
extraordinary or-nonrecurring items of income exceeds the aggregate of
losses on such sales or other dispositions and extraordinary or
nonrecurring charges during such quarter, and (ii) interest expense shall
include, without limitation, implicit interest expense on Capitalized
Leases.
<PAGE>
2.2. The definition of "Credit Reduction Amount" in Section 1.1 of the
Loan Agreement is hereby amended and restated to read in its entirety as
follows:
"Credit Reduction Amount" means, (i) for each Credit Reduction Date
during 1995, an amount equal to $220,000 and (ii) for each Credit
Reduction Date thereafter, an amount equal to $293,333, in each case
subject to adjustment as provided in Section 2-1.
2.3. The definition of "Credit Reduction Date" in Section 1.1 of the Loan
Agreement is hereby amended and restated to read in its entirety as follows:
"Credit Reduction Date" means the last Banking Day of each calendar
month other than January, February and March.
2.4. The definition of "Revolving Credit Amount" in Section 1.1 of the
Loan Agreement is hereby amended and restated to read in its entirety as
follows:
"Revolving Credit Amount" means, from and after May 5, 1995,
$12,780,000, as adjusted after such date pursuant to this Agreement,
including pursuant to Sections 2.1.3 and 2.1.4.
2.5. The definition of "Termination Date" in Section 1.1 of the Loan
Agreement is hereby amended and restated to read in its entirety as follows:
"Termination Date" means June 30, 1997 or such later date as may be
fixed pursuant to Section 11.7.
2.6. Section 2.1.3(b) of the Loan Agreement is hereby amended
and restated to read in its entirety as follows:
(b) [Intentionally left blank.]
2.7. Section 2.4.2 of the Loan Agreement is hereby amended by deleting the
phrase "one-half of one percent (1/2 of 1%)" where it appears in the first
sentence of such Section and inserting in lieu thereof the phrase "three-tenths
of one percent (.30 of 1%)".
2.8. Section 5.13 of the Loan Agreement is hereby amended and
restated to read in its entirety as follows:
5.13 Restricted Payments. Not purchase or redeem any shares of its
stock (other than for stock of Borrower), declare or pay any dividends
thereon (other than stock dividends), make any distribution to
stockholders as such (other than distributions of stock of Borrower) or
set aside any funds for any such purpose, not prepay, purchase or
- 2 -
<PAGE>
redeem, and not permit any Subsidiary to purchase, any Subordinated Debt
and, if an Event of Default or Unmatured Event of Default exists or would
result therefrom, not, and not permit any Subsidiary to, pay any
management or similar fees to Parent or any of its affiliates pursuant to
the terms of the Management Agreement; provided, however, that: (a)
Borrower may pay dividends in an aggregate amount not exceeding 50% of
Borrower's Excess Cash Flow for the immediately preceding Fiscal Year so
long as (i) Lender shall have received Borrower's annual audit report
pursuant to Section 5.1.1(a) for such preceding Fiscal Year, (ii) after
giving effect to any such proposed dividend the amount of the Revolving
Loan Availability will exceed the outstanding principal amount of the
Revolving Loans by at least $500,000, (iii) no Event of Default or
Unmatured Event of Default shall then exist or will result from any such
dividend payment and (iv) Borrower shall have given Lender prior written
notice of any such proposed dividend and certified its compliance with
this Section 5,13; (b) Borrower may, within 60 days after obtaining the
proceeds of any loan permitted pursuant to Section 5,15(e), pay a dividend
in an amount not exceeding 25% of the proceeds of such loan so long as the
conditions specified in sub-clauses (ii) , (iii) and (iv) of clause (a)
above have been met; and (c) Borrower may make scheduled payments of
principal of and interest on the Subordinated Note, so long as the
conditions specified in sub-clauses (ii), (iii) and (iv) of clause (a)
above have been met (it being understood that each reference to a
"dividend" in such subclauses shall be deemed, for purposes of this clause
(c), to be a reference to the relevant payment on the Subordinated Note).
Dividends permitted and paid under clause (a) or (b) of the foregoing
sentence shall not reduce the amount of dividends payable under any other
such sub-clause.
2.9. Section 3.1(a) of Supplement A to the Loan Agreement is
hereby amended and restated to read in its entirety as follows:
(a) Interest to Maturity. The unpaid principal balance of the
Revolving Loans shall bear interest to maturity at the Reference Rate in
effect from time to time plus the Margin (defined below). When used in
this Section 3.1(a), "Margin" means (i) until September 30, 1995, one and
one quarter percent (1.25%) per annum, (ii) from and after September 30,
1995, unless clause (iii) below shall be applicable, one percent (1%) per
annum and (iii) after Borrower delivers to Lender the audited financial
statements described in Section 5.1.1(a) of the Loan Agreement for Fiscal
Year 1995, (x) if Borrower's consolidated net earnings before interest
expense and provision for Taxes for Fiscal Year 1995 is equal to or
greater than Borrower's consolidated net earnings before interest expense
and provision for Taxes for Fiscal Year 1994, one-half of one percent
(.50%) per annum or (y) if Borrower's
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<PAGE>
consolidated net earnings before interest expense and provision for Taxes
for Fiscal Year 1995 is less than Borrower's consolidated net earnings
before interest expense and provision for Taxes for Fiscal Year 1994, one
percent (1%) per annum; provided, however, that, if and to the extent that
clause (iii)(x) above is applicable, if any Event of Default or Unmatured
Event of Default shall have occurred and be continuing, the Margin shall
equal one percent (1%) per annum during the continuance of such Event of
Default or Unmatured Event of Default.
2.10. Section 4 of Supplement A to the Loan Agreement is
hereby amended and restated to read in its entirety as follows:
4. Additional Covenants. Until all of Borrower's
Liabilities are paid in full, Borrower agrees that, unless
Lender otherwise consents in writing, it will:
4.1. Net Worth. Not permit, on the last day of any
fiscal quarter set forth below, Net Worth to be less than the
amount set forth below across from such fiscal quarter:
Fiscal Quarter Ending Net Worth
6/30/95 $18,500,000
9/30/95 $19,000,000
12/31/95 $20,000,000
3/31/96 $21,000,000
6/30/96 $21,000,000
9/30/96 $22,000,000
12/31/96 $22,000,000
3/31/97 $23,000,000
6/30/97 $23,000,000
Each fiscal quarter thereafter $24,500,000.
4.2. Liabilities to Net Worth Ratio. Not permit, on the last day of
any fiscal quarter set forth below, the ratio of the Borrower's
consolidated total liabilities to the Borrower's Net Worth to exceed (a)
for each fiscal quarter ending during Fiscal Year 1995, 1.25:1 and (b) for
each fiscal quarter thereafter, 1.10:1.
4.3. Capital Expenditures. Not, and not permit any Subsidiary to,
purchase or otherwise acquire (including, without limitation, acquisition
by way of Capitalized Lease), or commit to purchase or otherwise acquire,
any fixed asset if, after giving effect to such purchase or other
acquisition, (A) the aggregate capitalized cost of all fixed assets
purchased or otherwise acquired (other than by means of a Capitalized
Lease) by Borrower and its Subsidiaries on a consolidated basis plus (B)
the aggregate annual payments under Capitalized Leases (excluding the
portion thereof
- 4 -
<PAGE>
representing imputed interest) of Borrower and its Subsidiaries on a
consolidated basis (excluding, in each of (A) and (B), (a) any fixed asset
which constitutes a replacement for an asset which was the subject of a
casualty or governmental taking to the extent the purchase or other
acquisition thereof is funded by insurance proceeds or other payments
received as a result of such casualty or taking and (b) the first $675,000
of capital expenditures related solely to removal of underground storage
tanks or other environmental problems at Borrower's restaurant locations)
would exceed $2,500,000 in any Fiscal Year.
4.4. Interest Coverage Ratio. Not permit, on the last day of any
fiscal quarter set forth below, the ratio of (a) Borrower's EBITDA to (b)
Borrower's consolidated interest expense for such fiscal quarter to be
less than (i) for each fiscal quarter ending during Fiscal Year 1995,
3.50:1 and (ii) for each fiscal quarter thereafter, 4.00:1.
4.5. Funded Debt/Annualized EBITDA Ratio. Not permit, on the last
day of any fiscal quarter set forth below, the ratio of (a) the aggregate
principal amount of all Funded Debt (as defined below) of the Borrower and
its Subsidiaries to (b) Borrower's Annualized EBITDA to be less than the
ratio set forth below across from such fiscal quarter:
Fiscal Quarter Ending Ratio
6/30/95 1.50:1
9/30/95 1.40:1
12/31/95 1.40:1
3/31/96 1.35:1
6/30/96 1.30:1
Each fiscal quarter thereafter 1.25:1.
When used in this Section 4.5, "Funded Debt" means (i) all Liabilities and
(ii) all other Indebtedness of Borrower and its Subsidiaries referred to in
clauses (i), (iv) and (v) of the definition of "Indebtedness."
SECTION 3. CONDITIONS PRECEDENT.
The amendment to the Loan Agreement set forth in Section 2 of this
Amendment shall become effective on such date (the "Effective Date") when the
following conditions precedent have been satisfied:
3.1. Receipt of Documents. Lender shall have received all of
the following, each duly executed and dated the date hereof, in
form and substance satisfactory to Lender:
(a) Amendment. An original of this Amendment duly
executed by Borrower.
- 5 -
<PAGE>
(b) Certificate. A certificate, dated the date hereof and signed by
the President or a Vice President of Borrower, as to the matters set
forth in Section 3.2.
(c) Opinion. An opinion of Dechert Price & Rhoads,
counsel to Borrower, in form and substance satisfactory
to Lender.
(d) Other. Such other documents as Lender may
reasonably request.
3.2. Warranties True and Absence of Defaults. (i) No Event of Default or
Unmatured Event of Default shall have occurred and shall be continuing as of the
Effective Date (after giving effect to this Amendment) and (ii) the warranties
of Borrower contained in Section 4 of the Loan Agreement shall be true and
correct as of the Effective Date, with the same effect as though made on such
date (except (x) to the extent changed by circumstances permitted by the Loan
Agreement, and (y) for such warranties which relate solely to an earlier date
and were true and correct on and as of such date).
3.3. Amendment Fee. Lender shall have received from Borrower
a non-refundable amendment fee of $25,000.
SECTION 4. MISCELLANEOUS.
4.1. Warranties True and Absence of Defaults. In order to
induce Lender to enter into this Amendment, Borrower hereby
warrants to Lender that, as of the date hereof and the Effective
Date:
(a) The warranties of Borrower contained in Section 4 of the Loan
Agreement are true and correct as of the date hereof and the
Effective Date (after giving effect to this Amendment) with the same
effect as though made on each such date (except (x) to the extent
changed by circumstances permitted by the Loan Agreement and (y) for
such warranties which relate solely to a specific earlier date and
were true and correct as of such date).
(b) No Event of Default or Unmatured Event of Default exists as of
each such date.
4.2. Expenses. Borrower agrees to pay on demand all costs and expenses of
Lender (including the reasonable fees, charges and expenses of counsel and
allocated costs of staff counsel for Lender) in connection with the preparation,
negotiation, execution, delivery and administration of this Amendment and all
other instruments or documents provided for herein or delivered or to be
delivered hereunder or in connection herewith. In addition, Borrower agrees to
pay, and save Lender harmless from all liability for, any documentary, stamp or
other similar taxes which may be
- 6 -
<PAGE>
payable in connection with the execution or delivery of this Amendment, the
borrowings under the Loan Agreement, as amended hereby, and the execution and
delivery of any instruments or documents provided for herein or delivered or to
be delivered hereunder or in connection herewith. All obligations provided in
this Section 4.2 shall survive any termination of this Amendment or the Loan
Agreement as amended hereby.
4.3. Governing Law. This Amendment shall be a contract made
under and governed by the internal laws of the State of Illinois.
4.4. Counterparts. This Amendment may be executed in any number of
counterparts, and by the parties hereto on the same or separate counterparts,
and each such counterpart, when so executed and delivered, shall be deemed to be
an original, but all such counterparts shall together constitute but one and the
same instrument.
4.5. Reference to Loan Agreement. Except as amended hereby, the Loan
Agreement shall remain in full force and effect and is hereby ratified and
confirmed in all respects. On and after the effectiveness of the amendment to
the Loan Agreement accomplished hereby, each reference in the Loan Agreement to
"this Agreement," "hereunder," "hereof," "herein" or words of like import, and
each reference to the Loan Agreement in any Note and in any Related Agreement,
or other agreements, documents or instruments executed and delivered pursuant to
the Loan Agreement, shall be deemed a reference to the Loan Agreement, as
amended hereby.
4.6. Successors. This Amendment shall be binding upon the
parties hereto and their successors and permitted assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the date
and year first above written.
ELXSI
By: ____________________________
Title: ________________________
BANK OF AMERICA ILLINOIS (formerly
Continental Bank N.A.)
By: ____________________________
Title: ________________________
- 7 -
<PAGE>
FIFTH AMENDMENT
TO
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
THIS FIFTH AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
(this "Amendment") is entered into as of July 3, 1995 between ELXSI, a
California corporation ("Borrower"), and BANK OF AMERICA ILLINOIS (formerly
Continental Bank N.A.)
("Lender").
W I T N E S S E T H:
WHEREAS, Borrower and Lender are parties to an Amended and Restated Loan
and Security Agreement dated as of October 30, 1992 (as heretofore amended, the
"Loan Agreement"); and
WHEREAS, Borrower desires Lender to amend the Loan Agreement in certain
respects.
NOW, THEREFORE, in consideration of the premises and mutual agreements
herein contained, the parties hereto agree as follows:
SECTION 1. DEFINED TERMS.
Terms defined in the Loan Agreement and not otherwise defined herein are
used herein as therein defined.
SECTION 2. AMENDMENTS TO LOAN AGREEMENT.
2.1. The definition of "Credit Reduction Amount" in Section 1.1 of the
Loan Agreement is hereby amended and restated to read in its entirety as
follows:
"Credit Reduction Amount" means, (i) for each Credit Reduction Date
during 1995, an amount equal to $280,000 and (ii) for each Credit
Reduction Date thereafter, an amount equal to $370,000, in each case
subject to adjustment as provided in Section 2.1.
2.2. The definition of "Revolving Credit Amount" in Section 1.1 of the
Loan Agreement is hereby amended and restated to read in its entirety as
follows:
"Revolving Credit Amount" means, from and after July 3, 1995,
$15,840,000, as adjusted after such date pursuant to this Agreement,
including pursuant to Sections 2.1.3 and 2.1.4.
SECTION 3. CONDITIONS PRECEDENT.
The amendments to the Loan Agreement set forth in Section 2 of this
Amendment shall become effective on such date (the "Effective Date") when the
following conditions precedent have been satisfied:
<PAGE>
3.1. Receipt of Documents. Lender shall have received all
of the following, each duly executed and dated the date hereof,
in form and substance satisfactory to Lender:
(a) Amendment. An original of this Amendment duly
executed by Borrower.
(b) Certificate. A certificate, dated the date hereof and signed by
the President or a Vice President of Borrower, as to the matters set
forth in Section 3.2.
(c) Opinion. An Opinion of Dechert Price & Rhoads,
counsel to Borrower, in form and substance satisfactory
to Lender.
(d) Real Property. With respect to each parcel of Real Property
owned or leased by Borrower not previously mortgaged to Lender
pursuant to the Loan Agreement, other than those parcels listed on
Schedule I hereto:
(i) A Mortgage duly executed by Borrower;
(ii) Copies of all documents of record
concerning such parcel as shown on the commitment
for the ALTA Loan Title Insurance Policy;
(iii) Except with respect to leased Real
Property in shopping centers, a survey acceptable
to Lender in Lender's reasonable exercise of
judgment; and
(iv) Original or certified copies of insurance
policies (or certificates therefor) issued to Borrower for
"all risk" property, casualty and public liability insurance
for such parcel and, if such parcel is in a flood hazard area,
flood insurance, with standard noncontributory mortgagee
clauses or endorsement in favor of Lender (it being understood
that the amount, terms of coverage and insurer shall be
reasonably acceptable to Lender).
(e) Other. Such other documents as Lender may
reasonably request.
3.2. Warranties True and Absence of Defaults. (i) No Event of Default or
Unmatured Event of Default shall have occurred and shall be continuing as of the
Effective Date (after giving effect to this Amendment) and (ii) the warranties
of Borrower contained in Section 4 of the Loan Agreement shall be true and
correct as of the Effective Date, with the same effect as though made on such
date (except (x) to the extent changed by circumstances permitted by the Loan
Agreement, and (y) for such warranties which relate solely to an earlier date
and were true and correct
- 2 -
<PAGE>
on and as of such date).
3.3. Restructuring Fee. Lender shall have received from
Borrower a non-refundable restructuring fee of $75,000.
SECTION 4. MISCELLANEOUS.
4.1. Warranties True and Absence of Defaults. In order to
induce Lender to enter into this Amendment, Borrower hereby
warrants to Lender that, as of the date hereof and the Effective
Date:
(a) The warranties of Borrower contained in Section 4 of the Loan
Agreement are true and correct as of the date hereof and the Effective
Date (after giving effect to this Amendment) with the same effect as
though made on each such date (except (x) to the extent changed by
circumstances permitted by the Loan Agreement and (y) for such warranties
which relate solely to a specific earlier date and were true and correct
as of such date).
(b) No Event of Default or Unmatured Event of Default exists as of each
such date.
4.2. Expenses. Borrower agrees to pay on demand all costs and expenses of
Lender (including the reasonable fees, charges and expenses of counsel and
allocated costs of staff counsel for Lender) in connection with the preparation,
negotiation, execution, delivery and administration of this Amendment and all
other instruments or documents provided for herein or delivered or to be
delivered hereunder or in connection herewith. In addition, Borrower agrees to
pay, and save Lender harmless from all liability for, any documentary, stamp or
other similar taxes which may be payable in connection with the execution or
delivery of this Amendment, the borrowings under the Loan Agreement, as amended
hereby, and the execution and delivery of any instruments or documents provided
for herein or delivered or to be delivered hereunder or in connection herewith.
All obligations provided in this Section 4.2 shall survive any termination of
this Amendment or the Loan Agreement as amended hereby.
4.3. Governing Law. This Amendment shall be a contract
made under and governed by the internal laws of the State of
Illinois.
4.4. Counterparts. This Amendment may be executed in any number of
counterparts, and by the parties hereto on the same or separate counterparts,
and each such counterpart, when so executed and delivered, shall be deemed to be
an original, but all such counterparts shall together constitute but one and the
same instrument.
4.5. Reference to Loan Agreement. Except as amended
hereby, the Loan Agreement shall remain in full force and effect
and is hereby ratified and confirmed in all respects. On and
after the effectiveness of the amendment to the Loan Agreement
- 3 -
<PAGE>
accomplished hereby, each reference in the Loan Agreement to "this Agreement,"
"hereunder," "hereof," "herein" or words of like import, and each reference to
the Loan Agreement in any Note and in any Related Agreement, or other
agreements, documents or instruments executed and delivered pursuant to the Loan
Agreement, shall be deemed a reference to the Loan Agreement, as amended hereby.
4.6. Successors. This Amendment shall be binding upon the
parties hereto and their successors and permitted assigns.
4.7. Title Insurance Policies. Within 45 days after the Effective Date,
Borrower shall deliver to Lender, with respect to each parcel of Real Property
owned or leased by Borrower not previously mortgaged to Lender pursuant to the
Loan Agreement, other than those parcels listed on Schedule I hereto, an ALTA
Loan Title Insurance Policy issued by an insurer acceptable to Lender and
insuring Lender's Lien on such parcel (or Borrower's leasehold interest therein)
in an amount and with a title insurance company acceptable to Lender and
containing such endorsements as Lender may reasonably require (it being
understood that the amount of coverage, exceptions to coverage and status of
title set forth in the policy shall be reasonably acceptable to Lender). Failure
to comply with this Section 4.7 shall constitute an Event of Default under the
Loan Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the date
and year first above written.
ELXSI
By:________________________________
Title:_____________________________
BANK OF AMERICA ILLINOIS (formerly
Continental Bank N.A.)
By:________________________________
Title:_____________________________
- 4 -
<PAGE>
Consent of Independent Certified Public Accountants
We hereby consent to the incorporation by reference in the prospectuses
constituting part of the Registration Statements of Form S-8 (Nos. 33-17925,
33-78562, 33-64205) and Form S-3 (Nos. 33-61712) of ELXSI Corporation of our
report dated March 21, 1996 appearing on page F-1 of this form 10-K.
Price Waterhouse LLP
Orlando, Florida
March 28, 1996
<PAGE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 2,834,000
<ALLOWANCES> 58,000
<INVENTORY> 8,477,000
<CURRENT-ASSETS> 12,725,000
<PP&E> 33,745,000
<DEPRECIATION> 6,287,000
<TOTAL-ASSETS> 47,699,000
<CURRENT-LIABILITIES> 10,287,000
<BONDS> 0
0
0
<COMMON> 5,000
<OTHER-SE> 22,709,000
<TOTAL-LIABILITY-AND-EQUITY> 47,699,000
<SALES> 74,674,000
<TOTAL-REVENUES> 74,674,000
<CGS> 58,347,000
<TOTAL-COSTS> 63,037,000
<OTHER-EXPENSES> (65,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,767,000
<INCOME-PRETAX> 5,060,000
<INCOME-TAX> 514,000
<INCOME-CONTINUING> 4,546,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,546,000
<EPS-PRIMARY> .89
<EPS-DILUTED> .89
</TABLE>
