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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 March 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-12802
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EL CHICO RESTAURANTS, INC.
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(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Texas 75-0982250
- --------------------------------------------- ------------------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer Identification No.)
or organization)
</TABLE>
12200 Stemmons Freeway, Suite 100, Dallas, Texas 75234
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(Address of principal executive offices)
(Zip Code)
(214) 241-5500
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Number of shares outstanding of each of the issuer's classes of common stock,
as of April 27, 1995.
Common Stock, $0.10 par value: 3,925,385.
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EL CHICO RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
(In Thousands of Dollars)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
------------------ ----------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents $ 329 $ 727
Accounts Receivable 669 852
Inventories 1,252 1,189
Prepaid Expenses and Other 1,330 1,488
Deferred Income Taxes 265 56
------------------ ----------------
Total Current Assets 3,845 4,312
Property and Equipment - Net 41,036 38,559
Other Assets and Deferred Costs 1,141 1,093
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$ 46,022 $ 43,964
================== ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current Maturities of Long-Term Debt $ 23 $ 22
Trade Accounts Payable 3,622 4,089
Accrued Liabilities 3,290 4,034
Income Taxes Payable 636 173
------------------ ----------------
Total Current Liabilities 7,571 8,318
Long-Term Debt, Less Current Maturities 9,677 5,533
Other Long-Term Liabilities 1,019 926
Deferred Income Taxes 384 305
Stockholders' Equity
Preferred Stock - Authorized 1,000,000 Shares of
$.10 Par Value; None Issued -- --
Common Stock - Authorized 10,000,000 Shares of
$.10 Par Value; Issued 4,743,974 and 4,743,640
Shares in 1995 and 1994 474 474
Additional Paid-In Capital 14,599 14,583
Retained Earnings 18,604 17,980
Unamortized Value of Restricted Stock Issued (52) (68)
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33,625 32,969
Less Treasury Stock - At Cost, 823,006 and 615,263
Shares in 1995 and 1994, respectively (6,254) (4,087)
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27,371 28,882
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$ 46,022 $ 43,964
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2
<PAGE> 3
EL CHICO RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands of Dollars, Except Share and Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Quarter Ended
March 31, 1995 March 31, 1994
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<S> <C> <C>
Revenues:
Sales from Company-owned restaurants $ 23,942 $ 22,273
Equipment sales 192 139
Franchise revenues 461 491
-------------- --------------
24,595 22,903
Cost and Expenses:
Restaurant cost of sales - food and beverage 6,076 5,734
Restaurant cost of sales - labor 8,140 7,535
Restaurant operating expenses 6,809 6,299
Cost of equipment sales 141 20
General and administrative 2,385 2,184
Interest expense 149 24
Interest income (36) (13)
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23,664 21,783
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Income before income taxes 931 1,120
Income tax provision 306 414
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NET EARNINGS $ 625 $ 706
============== ==============
Net earnings per common share $ 0.15 $ 0.16
============== ==============
Weighted average number of shares and share
equivalents outstanding 4,083,528 4,334,413
============== ==============
</TABLE>
3
<PAGE> 4
EL CHICO RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Quarter
Ended Ended
March 31, 1995 March 31, 1994
-------------- --------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Earnings $ 624 $ 706
Adjustment to Reconcile Net Earnings to Net
Cash Provided by Operating Activities
Depreciation and Amortization of Property and Equipment 1,173 1,133
Amortization of Deferred Costs 355 312
Decrease in Accounts Receivable 183 91
Decrease in Income Tax Receivable -- 792
Decrease (Increase) in Inventories (63) 90
Decrease in Prepaid Expenses and Other 158 106
Increase in Other Assets and Deferred Costs (403) (174)
Decrease in Trade Accounts Payable and Accrued Liabilities (1,211) (1,558)
Increase in Income Taxes Payable 463 241
Increase in Other Long-Term Liabilities 93 22
Deferred Income Taxes (130) (41)
Other 40 77
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Net Cash Provided by Operating Activities 1,282 1,797
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Cash Flows from Investing Activities:
Purchase of Property and Equipment (3,656) (2,565)
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Net Cash Used in Investing Activities (3,656) (2,565)
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Cash Flows from Financing Activities:
Borrowings of Long-Term Debt 4,150 1,050
Purchase of Treasury Stock (2,174) --
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Net Cash Provided by Financing Activities 1,976 1,050
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Net Increase (Decrease) in Cash (398) 282
Cash and Cash Equivalents at Beginning of Period 727 843
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Cash and Cash Equivalents at End of Period $ 329 $ 1,125
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</TABLE>
4
<PAGE> 5
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 March 31, 1995 and March 31,
1994 and financial position at March 31, 1995. The adjustments consist
only of normal recurring items. The results of operations for the
quarter ended March 31, 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.
5
<PAGE> 6
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 March 31, 1995,
$9,600,000 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 eight to ten El
Chico restaurants and estimates capital expenditures during 1995 to be
approximately $15,000,000 to $18,000,000 which will be funded by internal
operations and the existing credit facility.
During the quarter, the Company opened one "El Chico" restaurant and purchased
an existing "El Chico" restaurant from a franchisee.
Working capital increased from a deficit of $4,006,000 at December 31, 1994 to
a deficit of $3,726,000 at March 31, 1995, primarily as a result of a decrease
in accounts payable and accrued liabilities, a reflection of normal seasonal
payment patterns.
Results of Operations
Revenues for the quarter ended March 31, 1995 were $24.6 million compared with
$22.9 million for the quarter ended March 31, 1994. Company-owned restaurant
sales included in these amounts were $23.9 million and $22.3 million,
respectively. Comparable "El Chico" restaurant sales were down 2.7 percent.
During the quarter, the Company opened one "El Chico" restaurant in The
Woodlands, Texas and purchased one existing "El Chico" restaurant from a
franchise in Paducah, Kentucky.
Franchise-related income decreased for the quarter primarily as a result of the
purchase of the Paducah, Kentucky restaurant from a franchisee during the
quarter, the closing of a franchise restaurant in December 1994, and a decrease
in comparable store sales of .5 percent.
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 increased from $139,000 to $192,000. Equipment
costs of sales for the quarter ended March 31, 1995 increased as a percentage
of sales due to higher vendor rebate income a year ago.
6
<PAGE> 7
Results of Operations - Cont'd.
Restaurant food costs for the quarter decreased as a percentage of sales from
25.7 percent to 25.4 percent primarily due to decreases in beef and produce
costs.
Restaurant labor as a percentage of sales increased during the quarter from
33.8 percent to 34.0 percent as a result of additional labor required for the
initial phase of new store openings.
Operating expenses for the quarter increased slightly from 28.3 percent of
sales to 28.4 percent. Increases in supplies, advertising and security fees
were partially offset by a decrease in laundry and insurance expense.
General and administrative costs for the quarter increased from $2,184,000 to
$2,385,000 as a result of an increase in professional fees, employee costs and
training wages.
Interest expense, reported net of capitalized interest, increased as a result
of increased borrowings and interest rates. Interest income decreased due to a
decline in average invested cash balances.
At March 31, 1995 there were 67 Company-operated restaurants and 28 franchised
restaurants.
7
<PAGE> 8
PART II. OTHER INFORMATION
Item 5. Other Information
On February 9, 1995, the Board of Directors of the Company
adopted a shareholder rights plan (the "Rights Plan") and
declared a dividend distribution of one preferred share
purchase right (a "Right") for each outstanding share of the
Company's Common Stock to shareholders of record as of the
close of business on February 23, 1995. Each Right entitles
the registered holder to purchase from the Company a unit
consisting of one-thousandth of a share (a "Unit") of the
Company's Series A Preferred Stock, $.10 par value (the
"Preferred Stock"), at a purchase price of $48 per Unit,
subject to adjustment. The description and terms of the
Rights are set forth in that certain Rights Agreement dated
February 9, 1995 (the "Rights Agreement"), between the Company
and Society National Bank, as Rights Agent.
The Rights Agreement, as well as certain other documents
related to the Rights Plan, are filed as exhibits to the
Company's registration statement on Form 8-A, filed with the
Securities and Exchange Commission on February 21, 1995, and
as amended under cover of Form 8-A/A (Amendment No. 1) filed
with the Commission on March 13, 1995 (as so amended, the
"Form 8-A"). For a more complete description of the terms and
provisions of the Rights and the Rights Plan, see the Form
8-A.
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 March 31, 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: May 10, 1995 By: /s/ SUSAN R. HOLLAND
----------------------
Susan R. Holland
Treasurer, Controller
8
<PAGE> 9
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000719961
<NAME> EL CHICO CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 329
<SECURITIES> 0
<RECEIVABLES> 669
<ALLOWANCES> 0
<INVENTORY> 1,252
<CURRENT-ASSETS> 3,845
<PP&E> 41,036
<DEPRECIATION> 0
<TOTAL-ASSETS> 46,022
<CURRENT-LIABILITIES> 7,571
<BONDS> 0
<COMMON> 474
0
0
<OTHER-SE> 8,293
<TOTAL-LIABILITY-AND-EQUITY> 46,022
<SALES> 23,942
<TOTAL-REVENUES> 24,595
<CGS> 14,216
<TOTAL-COSTS> 23,551
<OTHER-EXPENSES> (36)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 149
<INCOME-PRETAX> 931
<INCOME-TAX> 306
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 625
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
</TABLE>
