November 13, 1995
Securities and Exchange Commission
450 Fifth Street, N.W.
Room 1004
Judiciary Plaza
Washington, D.C. 20549
RE: El Chico Restaurants, Inc. 10-Q for Quarter Ended September 30, 1995
Gentlemen:
We are transmitting electronically the Form 10-Q for El Chico Restaurants,
Inc. for the quarter ended September 30, 1995.
We are also forwarding three complete copies, one of which is manually signed,
to the National Association of Securities Dealers, Inc.
Sincerely,
Susan R. Holland
Treasurer, Controller
/kgt
cc: National Assoc. of Securities Dealers, Inc.
(w/enclosures)
Lawrence E. White
John A. Cuellar
Ron Frappier
Darl Hatfield
Britt Langford<PAGE>
==========================================================
F O R M 1 0 - Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-12802
EL CHICO RESTAURANTS, INC.
(Exact name of registrant as specified in its charter)
Texas 75-0982250
(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or organization)
12200 Stemmons Freeway, Suite 100, Dallas, Texas 75234
(Address of principal executive offices)
(Zip Code)
(214) 241-5500
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes x No
Number of shares outstanding of each of the issuer's classes of common stock,
as of November 1, 1995.
Common Stock, $0.10 par value: 4,093,753.
===============================================================<PAGE>
EL CHICO RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
(In Thousands of Dollars, Except Par Value)
September 30, December 31,
1995 1994
(Unaudited)
ASSETS
Current Assets:
Cash and Cash Equivalents $ 83 $ 727
Accounts Receivable 719 852
Inventories 1,224 1,189
Prepaid Expenses and Other 1,086 1,488
Deferred Income Taxes 90 56
------ -----
Total Current Assets 3,202 4,312
Property and Equipment - Net 43,567 38,559
Other Assets and Deferred Costs 1,013 1,093
------- -------
$47,782 $43,964
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current Maturities of Long-Term Debt $ 24 $ 22
Trade Accounts Payable 3,304 4,089
Accrued Liabilities 3,750 4,034
Income Taxes Payable 71 173
------- ------
Total Current Liabilities 7,149 8,318
Long-Term Debt, Less Current Maturities 7,866 5,533
Other Long-Term Liabilities 1,412 926
Deferred Income Taxes 106 305
Stockholders' Equity:
Preferred Stock - Authorized 1,000,000
Shares of$.10 Par Value; None Issued - -
Common Stock - Authorized 10,000,000
Shares of $.10 Par Value; Issued
4,743,974 and 4,743,640 Shares in 1995
and 1994 474 474
Additional Paid-In Capital 15,880 14,583
Retained Earnings 20,728 17,980
Unamortized Value of Restricted Stock
Issued (84) (68)
------ ------
36,998 32,969
Less Treasury Stock - At Cost, 651,555
and 615,263 Shares in 1995 and
1994, respectively (5,749) (4,087)
------ ------
31,249 28,882
------ ------
$47,782 $43,964
====== ======
<PAGE>
EL CHICO RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands of Dollars, Except Share and Per Share Amounts)
(Unaudited)
Quarter Ended Nine Months Ended
9/30/95 9/30/94 9/30/95 9/30/94
------- ------- ------- -------
Revenues:
Sales from Company-
Owned restaurants $26,178 $23,691 $75,849 $69,884
Equipment sales 146 299 754 587
Franchise revenues 555 543 1,558 1,572
------- ------- ------- -------
26,879 24,533 78,161 72,043
Cost and Expenses:
Restaurant cost of
sales - food and
beverage 6,520 5,954 19,067 17,848
Restaurant cost of
sales - labor 8,564 7,700 25,218 23,161
Restaurant operating
expenses 7,680 6,790 21,844 19,712
Cost of equipment sales 131 264 660 397
General and admin. 2,301 2,377 7,018 6,865
Interest expense 146 34 453 97
Interest income (17) (27) (63) (64)
------ ------ ------ ------
25,325 23,092 74,197 68,016
Income before inc taxes 1,554 1,441 3,964 4,027
Income tax provision 434 461 1,216 1,379
------- ------ ------ ------
NET EARNINGS $ 1,120 $ 980 $ 2,748 $ 2,648
======= ====== ====== ======
Net earnings per
common share $ 0.28 $ 0.23 $ 0.68 $ 0.62
======= ====== ====== ======
Weighted average number of
shares and share equivalents
outstanding 4,042,599 4,249,881 4,022,833 4,295,738
========= ========= ========= =========
<PAGE>
EL CHICO RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
(Unaudited)
Nine Months Ended
9/30/95 9/30/94
Cash Flows from Operating Activities:
Net Earnings $ 2,748 $ 2,648
Adjustments to Reconcile Net Earnings to Net
Cash Provided by Operating Activities:
Depreciation and Amortization of Property
and Equipment 3,798 3,515
Amortization of Deferred Costs 1,043 958
Decrease in Accounts Receivable 133 129
Decrease in Income Tax Receivable - 792
Decrease (Increase) in Inventories (35) 143
Decrease (Increase) in Prepaid Expenses
and Other 157 (228)
Increase in Other Assets and Deferred Costs (963) (327)
Decrease in Trade Accounts Payable and
Accrued Liabilities (1,069) (843)
Increase (Dec.) in Income Taxes Payable (102) 330
Increase (Dec.) in Other Long-Term Liabilities 486 (34)
Deferred Income Taxes (233) 104
Other 281 359
----- -----
Net Cash Provided by Operating Activities 6,244 7,546
----- -----
Cash Flows from Investing Activities:
Purchase of Property and Equipment (8,978) (9,012)
Receipt of Note Receivable 245 -
------ ------
Net Cash Used in Investing Activities (8,733) (9,012)
------ ------
Cash Flows from Financing Activities:
Borrowings of Long-Term Debt 2,350 1,050
Purchase of Treasury Stock (2,174) -
Issuance of Common Stock 1,669 -
------ ------
Net Cash Provided by Financing Activities 1,845 1,050
------- ------
Net Decrease in Cash (644) (416)
Cash and Cash Equivalents at Beginning of Period 727 843
------- -------
Cash and Cash Equivalents at End of Period $ 83 $ 427
======= =======
<PAGE>
EL CHICO RESTAURANTS, INC. AND SUBSIDIARIES
Note to Consolidated Condensed Financial Statements
(Unaudited)
1. Basis of presentation and other accounting information.
The consolidated condensed financial statements and information included
herein are unaudited; however, they reflect all adjustments which are, in
the opinion of Management, necessary for a fair statement of the results
of operations for the interim periods ended September 30, 1995 and
September 30, 1994 and financial position at September 30, 1995. The
adjustments consist only of normal recurring items. The results of
operations for the quarter ended September 30, 1995 are not necessarily
indicative of the results to be expected for the full fiscal year. The
notes to the consolidated financial statements contained in the December
31, 1994 Annual Report on Form 10-K should be read in conjunction with
the consolidated condensed financial statements.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Company has an unsecured credit facility with a $16,000,000 commitment
comprised of a $15,000,000 revolving line of credit and a $1,000,000 letter
of credit facility. The line of credit matures on December 31, 1996, and may
be converted to a term loan, payable quarterly on a 10-year amortization
schedule, and maturing on December 31, 1998. Both the line of credit and the
term loan bear interest at the Company's option of prime rate or up to six-
month LIBOR plus .75 percent. Both rates are subject to maintaining certain
financial covenants, and interest is payable upon maturity of the LIBOR
advances or quarterly for prime rate advances. In addition, a commitment fee
of .25 percent is payable quarterly on any unused commitments. As of
September 30, 1995, $7,800,000 was outstanding under the line of credit. The
credit facility was obtained for the funding of the construction of new
Company-owned restaurants, remodeling existing restaurants, and the purchase
of the Company's headquarters facility during 1993. The Company plans to open
approximately seven El Chico restaurants and estimates capital expenditures
during 1995 to be approximately $12,000,000 to $13,000,000, which will be
funded by internal operations and the existing credit facility.
During the quarter two Company-owned "El Chico" restaurants were opened in
Evansville, Indiana and Edmond, Oklahoma.
The Company is currently operating with a working capital deficit, which is
common in the restaurant industry, since restaurant companies do not typically
require a significant investment in either accounts receivable or inventory.
Working capital increased from a deficit of $4,006,000 at December 31, 1994
to a deficit of $3,947,000 at September 30, 1995, primarily as a result of a
decrease in accrued liabilities, partly offset by a decrease in prepaid
expenses.
Results of Operations
Revenues for the quarter ended September 30, 1995 were $26.9 million, an
increase of 9.6 percent, as compared to $24.5 million for the quarter ended
September 30, 1994. Company-owned restaurant sales included in these amounts
were $26.2 million and $23.7 million, respectively, an increase of 10.5
percent, reflecting the addition of new stores. Comparable Company-owned El
Chico concept restaurant sales were down 2.1 percent. During the quarter the
Company introduced a new menu into its El Chico restaurants that increased its
average check by about 1% during the quarter. By quarter end, the average
check had increased 3%.
Year-to-date revenues were $78.2 million compared with $72.0 million for the
same period a year earlier. Company-owned restaurant sales included in these
amounts were $75.8 million and $69.9 million, respectively. The increase of
8.5 percent was due to the addition of new stores, partly offset by a decrease
of 1.8 percent in comparable store sales for Company-owned El Chico
restaurants.
Franchise-related income increased for the quarter due to an increase in
comparable store sales of 2.7 percent. Year-to-date franchise-related income
decreased as a result of a decrease in the number of franchise stores, partly
offset by an increase in same-store sales of 1.3 percent and the Wichita,
Kansas franchise fee.
Pronto Design & Supply, Inc. (Pronto) is a wholly owned subsidiary in the
business of designing food-service kitchens and supplying the related
equipment. Equipment sales decreased for the quarter as the result of Pronto
directing its resources on El Chico restaurant growth rather than the
development of outside sales. Equipment sales increased for the year-to-date,
primarily due to the sale of kitchen equipment to the Wichita, Kansas
franchisee. Equipment cost of sales for the quarter and year-to-date
increased as a percentage of sales due to higher vendor rebate income a year
ago.
Restaurant food costs for the quarter decreased as a percentage of sales to
24.9 percent from 25.1 percent as a result of a decline in the cost of beef,
beans, avocados and tomatoes from a year ago. Food costs for the year-to-date
decreased from 25.5 percent to 25.1 percent as a result of a decline in the
cost of beef, cheese, avocadoes and tomatoes, partly offset by an increase in
lettuce costs.
Restaurant labor increased as a percentage of sales to 32.7 percent from 32.5
percent and for the year-to-date to 33.2 percent from 33.1 percent as a result
of an increase in management labor.
Operating expenses for the quarter increased as a percentage of sales from
28.7 percent to 29.3 percent as a result of an increase in supply costs,
preopening amortization and cost related to the replacement of point-of-sale
equipment. These increases were partly offset by a decline in laundry and
insurance costs. Operating expenses for the year-to-date increased as a
percentage of sales due to an increase in supply costs, advertising and the
costs related to replacing point-of-sale equipment, partially offset by lower
laundry costs.
General and administrative costs for the quarter decreased as the result of
lower professional fees, training wages and incentive compensation, offset by
increased field supervision costs and increased employee costs. General and
administrative costs for the year-to-date increased due to increased employee
costs and field supervision, partly offset by lower incentive compensation.
Interest expense increased for the quarter and year-to-date as a result of an
increase in average outstanding debt and higher interest rates. Interest
income for the quarter decreased due to a decline in average invested cash
balances. Interest income for the year-to-date decreased from $64,000 to
$63,000 due to a decline in average invested cash balances, partly offset by
interest income received related to amended tax returns.
At September 30, 1995 there were 70 Company-operated restaurants and 29
franchised restaurants.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27 Financial Data Schedule.
(b) No report on Form 8-K was filed or required to be filed during the
quarter ended September 30, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EL CHICO RESTAURANTS, INC.
Date: November 13, 1995 By: /s/Susan R. Holland
Treasurer, Controller
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<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
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0
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<INCOME-PRETAX> 3,964
<INCOME-TAX> 1,216
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