SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD
ENDED SEPTEMBER 30, 1997 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 0-14837
ELMER'S RESTAURANTS, INC.
(Exact name of registrant as specified in its charter)
OREGON 93-0836824
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization
11802 S.E. Stark St.
P.O. Box 16938
Portland, Oregon 97292-0938
(Address of principal executive offices) (Zip Code)
(503) 252-1485
(Registrant's telephone number, including area code)
P.O. Box 16595, Portland, Oregon 97216
(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 of Common Stock outstanding at November 4, 1997: 1,404,686
<PAGE>
ELMER'S RESTAURANTS, INC.
INDEX
Page
Number
------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets, 1
September 30, 1997 (Unaudited) and
March 31, 1997
Condensed Consolidated Statements of Income, 2
six months and three ended September 30, 1997
and 1996 (Unaudited)
Condensed Consolidated Statements of Cash Flows, 3
six months ended September 30, 1997 and 1996
(Unaudited)
Notes to Condensed Consolidated Financial 4-5
Statements (Unaudited)
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 6-7
PART II. OTHER INFORMATION AND SIGNATURES
Item 6. Exhibits and Reports on Form 8-K 8
Signatures 8
<PAGE>
<TABLE>
<CAPTION>
ELMER'S RESTAURANTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 1997 March 31, 1997
------------------ --------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $1,751,316 $1,678,876
Accounts receivable 217,736 159,904
Note receivable-related party 69,880 69,880
Inventories 224,369 203,115
Prepaid expenses and deposits 139,432 126,099
--------- ---------
Total current assets 2,402,733 2,237,874
Property, buildings and equipment - net 4,726,838 4,738,012
Intangible assets - net 1,018,031 1,062,419
Other assets 72,405 70,660
----------- -----------
Total assets $8,220,007 $8,108,965
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable - current portions $ 467,653 $ 495,581
Accounts payable 625,714 631,639
Other current liabilities 379,320 323,080
--------- ---------
Total current liabilities 1,472,687 1,450,300
Common stock 1,518,098 1,518,098
Retained earnings 1,998,288 1,691,312
--------- ---------
Total shareholders' equity 3,516,386 3,209,410
--------- ---------
Total liabilities and shareholders' equity $8,220,00 $8,108,965
======== =========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
</TABLE>
(1)
<PAGE>
<TABLE>
<CAPTION>
ELMER'S RESTAURANTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Six Months Ended Three Months Ended
September 30, September 30,
------------------------------ ----------------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES:
Restaurant sales $7,838,609 $7,675,981 $3,920,227 $3,905,181
Franchise operations 326,169 331,469 172,842 169,885
Lottery 70,014 --- 38,316 ---
---------- ---------- ---------- ----------
8,234,792 8,007,450 4,131,385 4,075,066
---------- ---------- ---------- ----------
COSTS AND EXPENSES:
Cost of restaurant sales 4,875,104 4,763,812 2,458,880 2,433,352
Occupancy costs 496,696 497,817 251,904 251,605
Depreciation and amortization 327,138 342,924 163,569 171,462
General and administrative
expenses 1,935,204 1,919,825 973,310 962,825
---------- ---------- ---------- ----------
7,634,142 7,524,378 3,847,663 3,819,244
---------- ---------- ---------- ----------
INCOME FROM OPERATIONS
BEFORE OTHER INCOME
(EXPENSE) 600,650 483,072 283,722 255,882
OTHER INCOME (EXPENSE):
Other income 32,894 29,696 17,134 15,669
Interest expense (168,418) (179,617) (83,219) (90,546)
---------- ---------- ---------- ----------
Income before income taxes 465,126 333,151 217,637 180,945
Provision for income taxes (158,150) (113,300) (74,005) (61,550)
---------- ---------- ---------- ----------
NET INCOME $ 306,976 $ 219,851 $ 143,632 $ 119,395
========== ========== ========== ==========
PER SHARE DATA:
Net income $ 0.22 $ 0.15 $ 0.10 $ 0.08
========== ========== ========== ==========
Weighted average number of 1,404,686 1,493,585 1,404,686 1,487,969
========== ========== ========== ==========
common shares outstanding
The accompanying notes are an integral part of the
condensed consolidated financial statements.
</TABLE>
(2)
<PAGE>
<TABLE>
<CAPTION>
ELMER'S RESTAURANTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
September 30,
-------------------------------------
1997 1996
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 306,976 $ 219,851
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 282,750 294,360
Amortization 44,388 48,564
Changes in assets and liabilities:
Accounts receivable (57,832) (71,334)
Inventories (21,254) (20,044)
Prepaid expenses and deposits (13,333) 14,829
Accounts payable (5,925) (11,985)
Other current liabilities 56,010 15,172
---------- ----------
Net cash provided by operating activities 592,010 489,413
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, buildings and equipment (271,576) (188,0640
Net cash used by investing activities (271,576) (188,064)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable 100,000
Payments on notes payable (246,249) (236,707)
Repurchase of common stock (34,700)
Other assets (1,745) 18,423
---------- ----------
Net cash used in financing activities (247,994) (152,984)
Net increase in cash and cash equivalents 72,440 148,365
Cash and cash equivalents, beginning of period 1,678,876 1,370,829
---------- ----------
Cash and cash equivalents, end of period $1,751,316 $1,519,194
========== ==========
Supplemental disclosures of cash flow information: Cash paid during the period
for:
Interest $ 168,418 $ 179,617
========== ==========
Income taxes $ 149,795 $ 80,900
========== ==========
The accompanying notes are an integral part of the
condensed consolidated financial statements.
</TABLE>
(3)
<PAGE>
ELMER'S RESTAURANTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying unaudited financial statements have been prepared by
Elmer's Restaurants, Inc.("the Company") in accordance with the rules and
regulations of the Securities and Exchange commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted in accordance with such rules and regulations. The March 31, 1997
balance sheet was derived from the audited financial statement, but does not
include all of the disclosures required by generally accepted accounting
principles. In the opinion of management, the accompanying unaudited financial
statements reflect all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the financial position of the Company,
and its results of operations and cash flows. These financial statements should
be read in conjunction with the audited financial statements and notes thereto
for the years ended March 31, 1997, 1996 and 1995 included in the Company's
Annual Report on Form 10-K for the year ended March 31, 1997.
The results of operations for the six months ended September 30, 1997 are
not necessarily indicative of the results that may be expected for the year
ending March 31, 1998 or any other future interim period.
2. Impact of Recently Issued Accounting Standards
In February 1997 the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS
128") and Statement of Financial Accounting Standards No. 129, "Disclosure of
Information about Capital Structure" ("SFAS 129"), which are effective for the
Company's 1998 fiscal year. The Company's management has studied the
implications of SFAS 128 and SFAS 129 and, based on the initial evaluation, does
not expect the adoption to have a material impact on the Company's financial
condition or results of operations.
In June 1997 FASB issued SFAS No. 130, "Comprehensive Income, " which
becomes effective in 1998 and requires reclassification of earlier financial
statements for comparative purposes. SFAS No. 130 requires that changes in the
amounts of certain items, including foreign currency translation adjustments and
gains and losses on certain securities, be shown in the financial statements.
SFAS No. 130 does not require a specific format for the financial statement in
which comprehensive income is reported, but does require that an amount
(4)
<PAGE>
representing total comprehensive income be reported in that statement.
Management has not yet determined the effect, if any, of SFAS No. 130 on the
consolidated financial statements.
Also in June 1997, the FASB issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information". This Statement will change
the way public companies report information about segments of their business in
their annual financial statements and requires them to report selected segment
information in their quarterly reports issued to shareholders. It also requires
entity-wide disclosures about the products and services an entity provides, the
material countries in which it holds assets and reports revenues, and its major
customers. The Statement is effective for fiscal years beginning after December
15, 1997. Management has not yet determined the effect, if any, of SFAS No. 131
on the consolidated financial statements.
(5)
<PAGE>
ELMER'S RESTAURANTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
The Company's working capital at September 30, 1997 totaled $930,046, which
is an increase of $142,472 from working capital of $787,574 at March 31, 1997.
Cash provided by operations totaled $592,010 for the six months ended
September 30, 1997, compared to $489,413 for the six months ended September 30,
1996. The primary reasons for the increase were an increase in net income of
approximately $87,125 and the timing of payment of certain liabilities. Cash
used to repay indebtedness was $246,249 for the six months ended September 30,
1997. Cash used to acquire assets amounted to $271,576 for the six months ended
September 30, 1997, primarily for acquisition of equipment for and improvements
to the Company's existing restaurants.
The Company believes that the cash and cash equivalents on hand at
September 30, 1997, together with funds provided by operations, will be
sufficient to fund the Company's continuing operations.
RESULTS OF OPERATIONS
Revenues
Revenues increased $56,319 (1.4%) and $227,342 (2.8%) for the three months
and six months ended September 30, 1997, respectively, compared to the
corresponding period of fiscal 1997. These increases resulted in part from a
$15,046 (.4%) and a $162,628 (2.1%) increase in revenues from restaurant sales
for the three months and six months ended September 30, 1997, respectively,
compared to the corresponding periods of fiscal 1997. Net revenues from video
poker were $38,316 and $70,014 for the three months and six months ended
September 30, 1997, which was first offered to customers in the quarter ended
December 31, 1997.
Revenues from franchise operations increased $2,957 (1.7%) and decreased
$5,300 (1.6%) for the three months and six months ended September 30, 1997,
respectively, compared to the corresponding periods of fiscal 1997.
There were eleven Company-owned restaurants at September 30, 1997.
(6)
<PAGE>
Costs and Expenses
Costs and expenses increased $28,419 (.7%) and $109,764 (1.5%) for the
three months and six months ended September 30, 1997, respectively, compared to
the corresponding periods of fiscal 1997, primarily in connection with the
operations of the Company-owned restaurants. Cost of restaurant sales as a
percentage of restaurant sales was 62.7% for the three months and 62.2% for the
six months ended September 30, 1997, respectively, and 62.3% and 62.1% for the
corresponding periods of fiscal 1997. Depreciation and amortization decreased
$7,893 (4.6%) and $15,786 (4.6%) for the three months and six months ended
September 30, 1997, respectively, compared to the corresponding periods of
fiscal 1997, as a result of certain assets becoming fully depreciated. General
and administrative expenses as a percentage of revenues were 23.6% for the three
months and 23.5% for the six months ended September 30, 1997, respectively, and
23.6% and 23.9% for the corresponding periods of fiscal 1997.
Income From Operations
Income from operations increased $27,840 (10.9%) and $117,578 (24.3%) for
the three months and six months ended September 30, 1997, respectively, compared
to the corresponding periods of fiscal 1997, due primarily to increased revenues
from restaurant sales and net revenues from video poker, which was first offered
to customers in the quarter ended December 31, 1996.
Other Income and Expenses
Interest income increased $1,465 (9.3%) and $3,198 (10.8%) for the three
months and six months ended September 30, 1997, respectively, compared to the
corresponding periods of fiscal 1997, due primarily to the increase in cash and
cash equivalents of approximately $308,000 available for investment by the
Company.
Interest expense decreased $7,327 (8.1%) and $11,199 (6.2%) for the three
months and six months ended September 30, 1997, respectively, compared to the
corresponding periods of fiscal 1997, due primarily to the reduction of
principal balance of the outstanding debt.
Income Taxes
The Company's income tax rate was 34% of income before income taxes for the
three month and six month periods ended September 30, 1997 and 1996.
(7)
<PAGE>
PART II. OTHER INFORMATION
Item. 6. Exhibits and Reports of Form 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports of Form 8-K
None
By ANITA GOLDBERG
--------------------------------------
Anita Goldberg, President
By JUANITA NELSON
--------------------------------------
Juanita Nelson, Asst.Sec./Controller
(Principal Accounting Officer)
(8)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,751,316
<SECURITIES> 0
<RECEIVABLES> 292,616
<ALLOWANCES> (5,000)
<INVENTORY> 224,369
<CURRENT-ASSETS> 2,402,733
<PP&E> 11,669,870
<DEPRECIATION> 7,012,316
<TOTAL-ASSETS> 8,220,007
<CURRENT-LIABILITIES> 1,472,687
<BONDS> 3,119,934
0
0
<COMMON> 1,518,098
<OTHER-SE> 1,998,288
<TOTAL-LIABILITY-AND-EQUITY> 3,516,386
<SALES> 7,838,609
<TOTAL-REVENUES> 8,234,792
<CGS> 4,875,104
<TOTAL-COSTS> 7,634,142
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 168,418
<INCOME-PRETAX> 465,126
<INCOME-TAX> 158,150
<INCOME-CONTINUING> 306,976
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 306,976
<EPS-PRIMARY> 0.22
<EPS-DILUTED> 0.22
</TABLE>
