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 DECEMBER 31, 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 of (I.R.S. Employer
incorporation or organization) Identification No.)
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)
(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 February 8, 1998: 1,311,109
<PAGE>
ELMER'S RESTAURANTS, INC.
INDEX
Page
Number
------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets, 1
December 31, 1997 (Unaudited) and
March 31, 1997
Condensed Consolidated Statements of Income, 2
nine months and three months ended December 31, 1997
and 1996 (Unaudited)
Condensed Consolidated Statements of Cash Flows, 3
nine months ended December 31, 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
December 31, 1997 March 31, 1997
----------------- --------------
(Unaudited) (Note)
<S> <C> <C>
ASSETS
Cash and equivalents $2,011,817 $1,678,876
Accounts receivable 170,287 159,904
Note receivable-related party 69,880 69,880
Inventories 230,836 203,115
Prepaid expenses and deposits 172,145 126,099
---------- ----------
Total current assets 2,654,965 2,237,874
Property, buildings and equipment - net 4,744,728 4,738,012
Intangible assets - net 995,837 1,062,419
Other assets 74,797 70,660
---------- ----------
Total assets $8,470,327 $8,108,965
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable - current portion $ 455,153 $495,581
Accounts payable 795,759 631,539
Other current liabilities 486,265 323,080
---------- ----------
Total current liabilities 1,737,177 1,450,300
Long-term liabilities 3,109,303 3,449,255
---------- ----------
Total liabilities 4,846,480 4,899,555
---------- ----------
Common stock 1,499,198 1,518,098
Retained earnings 2,124,649 1,691,312
---------- ----------
Total shareholders' equity 3,623,847 3,209,410
---------- ----------
Total liabilities and shareholders' equity $8,470,327 $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)
Nine Months Ended Three Months Ended
December 31, December 31,
--------------------------------- ---------------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Restaurant sales $11,848,973 $11,542,292 $ 4,010,364 $ 3,866,311
Franchise operations 498,208 496,258 172,039 164,789
Lottery 124,381 12,595 54,367 12,595
----------- ----------- ----------- -----------
12,471,562 12,051,145 4,236,770 4,043,695
----------- ----------- ----------- -----------
COSTS AND EXPENSES:
Cost of restaurant sales 7,374,638 7,168,748 2,499,534 2,404,936
Occupancy costs 748,825 745,852 252,129 248,035
Depreciation and amortization 490,707 523,401 163,569 180,477
General and administrative
expenses 2,944,407 2,893,455 1,009,203 973,630
----------- ----------- ----------- -----------
11,558,577 11,331,456 3,924,435 3,807,078
----------- ----------- ----------- -----------
INCREASE FROM
OPERATIONS BEFORE
OTHER INCOME (EXPENSE) 912,985 719,689 312,335 236,617
OTHER INCOME (EXPENSE):
Other income 49,779 45,283 16,885 15,587
Interest expense (248,652) (267,944) (80,234) (88,327)
----------- ----------- ----------- -----------
Income before income taxes 714,112 497,028 248,986 163,877
Provision for income taxes (242,800) (169,800) (84,650) (55,700)
----------- ----------- ----------- -----------
NET INCOME $ 471,312 $ 328,028 $ 164,336 $ 108,177
=========== =========== =========== ===========
PER SHARE DATA:
Net income $ 0.34 $ 0.22 $ 0.12 $ 0.07
=========== =========== ========== ===========
Weighted average number of
common shares outstanding 1,401,504 1,489,295 1,395,175 1,470,762
=========== =========== ========== ===========
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)
Nine Months Ended
December 31,
---------------------------------
1997 1996
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 471,312 $ 328,028
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation $ 424,125 $ 450,555
Amortization 66,582 72,846
Changes in assets and liabilities:
Accounts receivable (10,383) (137,961)
Inventories (27,721) (20,044)
Prepaid expenses and deposits (46,046) (42,825)
Accounts payable 164,120 109,508
Other current liabilities 163,185 69,062
---------- ----------
Net cash provided by operating activities 1,205,174 829,169
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, buildings and equipment (430,841) (308,012)
Net cash used by investing activities (430,841) (308,012)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable 100,000
Payments on notes payable (380,380) (367,046)
Repurchase of common stock (56,875) (34,700)
Other assets (4,137) 22,172
Net cash used in financing activities (441,392) (279,574)
Net increase in cash and cash equivalents 332,941 241,583
Cash and cash equivalents, beginning of period 1,678,876 1,370,829
---------- ----------
Cash and cash equivalents, end of period $2,011,817 $1,612,412
========== ==========
Supplemental disclosures of cash flow information: Cash paid during the period
for:
Interest $ 248,652 $ 267,944
========== ==========
Income taxes 198,781 88,150
========== ==========
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 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 nine months ended December 31, 1997, are
not necessarily indicative of the results that may be expected for the year
ending March 31, 1998, or any other future interim report.
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
(4)
<PAGE>
format for the financial statement in which comprehensive income is reported,
but does require that an amount 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 December 31, 1997 totaled $917,788, which
is an increase of $130,214 from working capital of $787,574 at March 31, 1997.
Cash provided by operations totaled $1,205,174 for the nine months ended
December 31, 1997, compared to $829,169 for the nine months ended December 31,
1996. The primary reasons for the increase were an increase in net income of
approximately $143,284, and the timing of the payment of certain liabilities.
Cash used to repay indebtedness was $380,380 for the nine months ended December
31, 1997. For the same period cash used to acquire assets amounted to $430,841,
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 December
31, 1997, together with funds provided by operations, will be sufficient to fund
the Company's continuing operations.
RESULTS OF OPERATIONS
Revenues
Revenues increased $193,075 (4.8%) and $420,417 (3.5%) for the three months
and nine months ended December 31, 1997, respectively, compared to the
corresponding periods of fiscal 1997. These increases resulted primarily from a
$144,053 (3.7%) and a $306,681 (2.7%) increase in revenues from restaurant sales
for the three months and nine months ended December 31, 1997, respectively,
compared to the corresponding periods of fiscal 1997. Net revenues from video
poker were $54,367 and $124,381 for the three months and nine months ended
December 31, 1997, compared to $12,595 for the corresponding periods of fiscal
1997. Video poker was first offered to customers in the third quarter of fiscal
1997. Lottery net revenues were reclassified out of restaurants sales for the
period ended December 31, 1996 to conform to the 1997 presentation.
Revenues from the franchise operations increased $7,250 (4.4%) and $1,950
(.4%) for the three months and nine months ended December 31, 1997,
respectively, compared to the corresponding periods of fiscal 1997.
There were eleven Company-owned restaurants at December 31, 1997.
(6)
<PAGE>
Costs and Expenses
Costs and expenses increased $117,357 (3.1%) and $227,121 (2.0%) for the
three months and nine months ended December 31, 1997, respectively, compared to
the corresponding periods of fiscal 1997, primarily due to the operations of the
Company-owned restaurants. Cost of restaurant sales as a percentage of
restaurant sales was 62.3% for the three months and 62.2% for the nine months
ended December 31, 1997, respectively, and 62.2% and 62.1% for the corresponding
periods of fiscal 1997. Occupancy costs increased $4,094 and $2,973 for the
three months and the nine months ended December 31, 1997, primarily due to
increased rent expense based on a percentage of restaurant sales of the
Company-owned restaurants.
Depreciation and amortization decreased $16,908 (9.4%) and $32,694 (6.2%)
for the three months and nine months ended December 31, 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 23.8% for the three months and 23.6% for the nine
months ended December 31, 1997, respectively, and 24.1% and 24.0% for the
corresponding periods of fiscal 1997.
Income From Operations
Income from operations increased $75,718 (32.0%) and $193,296 (26.9%) for
the three months and nine months ended December 31, 1997, respectively, compared
to the corresponding periods of fiscal 1997, due primarily to increased revenues
from restaurant sales and video poker.
Other Income and Expenses
Interest income increased $1,298 (8.3%) and $4,496 (9.9%) for the three
months and nine months ended December 31, 1997, respectively, compared to the
corresponding periods of fiscal 1997, due primarily to the increase of cash and
cash equivalents of approximately $260,500 available for investment by the
Company.
Interest expense decreased $8,093 (9.2%) and $19,292 (7.2%) for the three
months and nine months ended December 31, 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 nine month periods ended December 31, 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 /s/ ANITA GOLDBERG
--------------------------------------
Anita Goldberg, President
By /s/ Juanita Nelson
--------------------------------------
Juanita Nelson, Asst. Sec./Controller
(Principal Accounting Officer)
(8)
<PAGE>
EXHIBIT INDEX
Exhibit Sequential
No. Description Page No.
- ------- ----------- ----------
27
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 2,011,817
<SECURITIES> 0
<RECEIVABLES> 245,167
<ALLOWANCES> (5,000)
<INVENTORY> 230,836
<CURRENT-ASSETS> 2,654,965
<PP&E> 11,898,419
<DEPRECIATION> 7,153,691
<TOTAL-ASSETS> 8,470,327
<CURRENT-LIABILITIES> 1,737,177
<BONDS> 2,998,303
1,499,198
0
<COMMON> 0
<OTHER-SE> 2,124,649
<TOTAL-LIABILITY-AND-EQUITY> 8,470,327
<SALES> 11,848,973
<TOTAL-REVENUES> 12,471,562
<CGS> 7,374,638
<TOTAL-COSTS> 11,558,577
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 248,652
<INCOME-PRETAX> 912,985
<INCOME-TAX> 242,800
<INCOME-CONTINUING> 471,312
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 471,312
<EPS-PRIMARY> 0.34
<EPS-DILUTED> 0.34
</TABLE>
