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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 OCTOBER 16, 2000 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 IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
11802 S.E. Stark St.
Portland, Oregon 97216
---------------- -----
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(503) 252-1485
--------------
(REGISTRANT'S TELEPHONE NUMBER,
INCLUDING AREA CODE)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
___________
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 29, 2000: 1,832,032
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<PAGE>
ELMER'S RESTAURANTS, INC.
-------------------------
INDEX
PAGE
NUMBER
------
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements 3
Condensed Consolidated Balance Sheets,
October 16, 2000 (Unaudited) and
March 31, 2000
Condensed Consolidated Statements of Income, 4
12 and 28 weeks ended October 16, 2000 and
October 18, 1999 (Unaudited)
Condensed Consolidated Statements of Cash Flows, 5
28 weeks ended October 16, 2000 and October
18, 1999 (Unaudited)
Notes to Condensed Consolidated Financial Statements 6
(Unaudited)
Item 2. Management's Discussion and Analysis of Financial 6-9
Statements (Unaudited)
Item 3. Quantitative and Qualitative Disclosures about Market 9
Risk
PART II: OTHER INFORMATION AND SIGNATURES
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
2
<PAGE>
ELMER'S RESTAURANTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE><CAPTION>
October 16, 2000 March 31, 2000
----------- -----------
(unaudited) (audited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 1,046,140 $ 1,640,210
Accounts receivable 437,985 199,466
Inventories 322,280 339,654
Prepaid expenses and other 215,019 276,604
----------- -----------
Total current assets 2,021,424 2,455,934
Property, buildings and equipment-net 7,619,295 6,892,844
Intangible assets - net 4,376,872 4,390,471
Other assets 101,597 107,959
----------- -----------
Total assets $14,119,188 $13,847,208
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable, current portion $ 782,527 $ 572,399
Accounts payable 784,985 772,174
Accrued expenses 475,369 448,803
Accrued payroll and related taxes 173,627 218,728
Accrued income taxes 31,643 279,770
----------- -----------
Total current liabilities 2,248,151 2,291,874
Notes payable, net of current portion 4,852,127 5,124,130
Deferred income taxes 793,000 793,000
----------- -----------
Total liabilities 7,893,278 8,209,004
----------- -----------
Common stock 4,746,520 4,746,520
Retained earnings 1,479,390 891,684
----------- -----------
Total shareholders' equity 6,225,910 5,638,204
----------- -----------
Total liabilities and shareholders' equity $14,119,188 $13,847,208
=========== ===========
The accompanying notes are an integral part of the condensed consolidated financial statements.
</TABLE>
3
<PAGE>
ELMER'S RESTAURANTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE><CAPTION>
28 Weeks Ended 12 Weeks Ended
October 16, October 18, October 16, October 18,
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES: $ 12,689,513 $ 12,129,329 $ 5,458,374 $ 5,110,491
------------ ------------ ------------ ------------
COSTS AND EXPENSES:
Cost of restaurant sales
Food and beverage 3,549,660 3,532,574 1,506,474 1,470,645
Labor and related 3,970,968 3,879,841 1,676,977 1,606,729
Occupancy costs 703,875 693,113 305,571 288,132
Depreciation and amortization 358,749 368,987 159,512 155,743
Restaurant pre-opening expenses 29,967 -- 29,967 --
General and administrative expenses 2,957,229 2,630,513 1,266,163 1,134,984
------------ ------------ ------------ ------------
11,570,448 11,105,028 4,944,664 4,656,233
------------ ------------ ------------ ------------
INCOME FROM OPERATIONS
BEFORE OTHER INCOME (EXPENSE) 1,119,065 1,024,301 513,710 454,258
OTHER INCOME (EXPENSE):
Other income 79,142 22,990 27,548 19,494
Interest expense (300,945) (312,367) (113,628) (129,095)
------------ ------------ ------------ ------------
(221,803) (289,377) (86,080) (109,601)
Income before income taxes 897,262 734,924 427,630 344,657
Provision for income taxes (309,556) (249,628) (148,041) (116,420)
------------ ------------ ------------ ------------
NET INCOME $ 587,706 $ 485,296 $ 279,589 $ 228,237
============ ============ ============ ============
PER SHARE DATA:
Net income per share - Basic $ 0.32 $ 0.26 $ 0.15 $ 0.12
============ ============ ============ ============
Weighted average number of
common shares outstanding - Basic 1,832,032 1,832,032 1,832,032 1,832,032
============ ============ ============ ============
Net income per share - Diluted $ 0.31 $ 0.26 $ 0.15 $ 0.12
------------ ------------ ------------ ------------
Weighted average number of
common shares outstanding - Diluted 1,888,740 1,885,588 1,888,740 1,885,588
============ ============ ============ ============
The accompanying notes are an integral part of the condensed consolidated financial statements
</TABLE>
4
<PAGE>
ELMER'S RESTAURANTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE><CAPTION>
For the 28 weeks ended
October 16, October 18,
2000 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities
Net income $ 587,706 $ 485,296
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 358,749 368,987
Other assets (153,198) 166,030
Accounts payable and accrued expenses (5,724) 5,388
Income taxes (248,127) 231,520
----------- -----------
Net cash provided by operating activities 539,406 1,257,221
----------- -----------
Cash flows from investing activities:
Additions to property, buildings equipment and intangible assets (725,971) (136,042)
Business acquisition, net of cash acquired (345,630)
----------- -----------
Net cash used in investing activities (1,071,601) (136,042)
----------- -----------
Cash flows from financing activities:
Net change in revolving credit line balance 200,000
Payments on notes payable (261,875) (311,025)
----------- -----------
Net cash used in by financing activities (61,875) (311,025)
----------- -----------
Net increase (decrease) in cash and cash equivalents (594,070) 810,154
Cash and cash equivalents, beginning of period 1,640,210 603,572
----------- -----------
Cash and cash equivalents, end of period $ 1,046,140 $ 1,413,726
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 300,945 $ 284,357
=========== ===========
Income taxes $ 557,683 $ 12,000
=========== ===========
The accompanying notes are an integral part of the condensed consolidated financial statements.
</TABLE>
5
<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., (referred to individually and collectively with its
subsidiaries as the "Company" or "Elmer's") 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, 2000
balance sheet was derived from audited financial statements, 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, 2000, 1999, and 1998, respectively, included in
the Company's Annual Report on Form 10-K for the year ended March 31, 2000. The
results of the period ended October 16,2000 are not necessarily indicative of
the results which might be expected for the entire year..
Effective April 1, 2000, the Company changed its quarterly reporting periods
from 3 month periods ending on the last day of the respective month of the
quarter, to a "4-3-3-3" accounting cycle whereby each quarter will end on the
last Monday of the respective quarter. The prior year quarter and year-to-date
period have been restated to end on October 18, 1999, in order to conform with
the new presentation.
All net income per share amounts and weighted average number of common shares
outstanding have been retroactively adjusted to reflect the 10% stock dividend
which had a record date in August 2000.
Costs associated with opening new restaurants are expensed as incurred unless
they are related to a capital asset or leasehold improvement.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Unaudited Interim Financial Statements
In the opinion of management, the accompanying unaudited financial statements
contain all adjustments (consisting solely of normal recurring adjustments)
necessary to present fairly the financial position of Elmer's Restaurants, Inc.
and subsidiaries and their results of operations and cash flows.
This report on Form 10-Q for the second fiscal quarter ended October 16, 2000
should be read in conjunction with the Company's Annual Report to Shareholders
on Form 10-K for the fiscal year ended March 31, 2000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Elmer's Restaurants, Inc., located in Portland, Oregon, is a franchisor and
operator of full-service, family oriented restaurants under the names "Elmer's
Breakfast. Lunch. Dinner." and "Elmer's Pancake & Steak House" and an operator
of delicatessen restaurants under the names "Ashley's" and "Richard's Deli and
Pub." The Company is an Oregon corporation and was incorporated in 1983. Walter
Elmer opened the first Elmer's restaurant in Portland, Oregon in 1960, and the
first franchised restaurant opened in 1966. The Company acquired the Elmer's
franchising operation in January 1984 from the Elmer family. The Company entered
into an occupancy lease on August 1, 2000 with Shilo Management Company and
opened its newest Elmer's restaurant location on November 6th in Springfield,
Oregon. On October 16, 2000 the Company sold a 25-year franchise license to a
new franchisee in Logan, Utah. On November 15, 2000 the Company sold its Elmer's
6
<PAGE>
Restaurant location in Gresham, Oregon to an existing Company franchisee. The
Company entered into a 25-year franchise agreement with the Gresham franchisee
along with an occupancy lease for the building and land still owned by the
Company. The Company now owns and operates 11 Elmer's restaurants and franchises
19 Elmer's restaurants in six western states. The Company reports on a fiscal
year commencing April 1 and ending March 31 of the following year.
The Company franchises or operates a total of 30 full-service, family-oriented
restaurants, with a warm, friendly atmosphere and comfortable furnishings. Most
of the restaurants are decorated in a home style with fireplaces in the dining
rooms. They are free standing buildings, ranging in size from 4,600 to
approximately 7,700 square feet with seating capacities ranging from 120 to 220.
A portion of the dining room in most restaurants may also be used for private
group meetings by closing it off from the public dining areas.
The menu offers an extensive selection of items for breakfast, lunch and dinner.
The Elmer's breakfast menu, which is available all day, contains a wide variety
of selections with particular emphasis on pancakes, waffles, omelets, crepes,
country platters and other popular breakfast items.
HIGHLIGHTS OF HISTORICAL RESULTS. The Company reported net income of $279,589
and $587,706, or $.15 and $.32 in basic earnings per share for the 12 and 28
week period ended October 16, 2000. These results are compared to reported net
income of $228,237 and $485,296, or $.12 and $.26 per share for the 12 and 28
week period ended October 18, 1999. The approximately $51,000 and $102,000
increases in net income for the 12 and 28 weeks ended October 16, 2000 are after
the absorption of approximately $30,000 in pre-opening expenses for the
Springfield location during the most recent quarter. Earnings improvements are
attributable to an improvement in comparable same store operating performance.
The Company's total assets as of October 16, 2000 were $14.1 million, which is
an increase of approximately $272,000 over total assets as of March 31, 2000. In
the 28 weeks ended October 16, 2000, working capital decreased approximately
$391,000 while notes payable (net of current portion) decreased $272,000. Cash
provided by operating activities totaled $539,406 for the 28 weeks ended October
16, 2000 compared to $1,257,221 for the 28 weeks ended October 18, 1999. The
decrease in cash provided from operations is substantially attributable to the
timing of quarterly tax payments and to increases in other current assets.
COMPARISON OF RESULTS OF OPERATIONS. The following discussion and analysis
presents the Company's results of operations for the 12 and 28 weeks ended
October 16, 2000 and the 12 and 28 weeks ending October 18, 1999 respectively.
For the 12 and 28 week period ended October 16, 2000, the Company's net income
and earnings per share increased 23% and 21% over net income and earnings per
share for the comparable periods in 1999. Net income as a percentage of total
revenue increased from 4.5% and 4.0% for the 12 and 28 week period ended October
18, 1999, to 5.0% and 4.6% for the 12 and 28 weeks ended October 16, 2000.
Dollar amounts in thousands except per share data
<TABLE><CAPTION>
RESULTS OF OPERATIONS RESULTS OF OPERATIONS
FOR THE 28 WEEKS ENDED FOR THE 28 WEEKS ENDED
OCTOBER 16, 2000 OCTOBER 18, 1999
---------------- ----------------
Percent of Percent of
Amount Revenues Amount Revenues
------ -------- ------ --------
<S> <C> <C> <C> <C>
Revenues $ 12,690 100.0% $ 12,129 100.0%
Restaurant costs and expenses 8,613 67.9 8,475 69.9
General and administrative expenses 2,957 23.3 2,630 21.7
Operating income 1,119 8.8 1,024 8.4
Non operating income (expense) (222) (1.7) (289) (2.4)
Net income 588 4.6 485 4.0
Basic earnings per share $ 0.32 $ 0.26
</TABLE>
7
<PAGE>
REVENUES. Revenues for the 12 and 28 weeks ended October 16, 2000 were 6.8% and
4.6% greater respectively than the comparable period in 1999. After adjusting
for lounge sales from the new Springfield location during the quarter, revenues
from same store restaurant operations showed an increase of 4.1% and 3.5% for
the 12 and 28 weeks ended October 16, 2000 over the comparable period in 1999.
The Company anticipates further improvement in same store sales as it introduces
a holiday and a winter seasonal menu during the third quarter of fiscal 2001.
Dollar amounts in thousands
<TABLE><CAPTION>
REVENUES REVENUES
FOR THE 28 WEEKS ENDED FOR THE 28 WEEKS ENDED
OCTOBER 16, 2000 OCTOBER 18, 1999
---------------- ----------------
Percent of Percent of
Amount Revenues Amount Revenues
<S> <C> <C> <C> <C>
Restaurant operations:
Restaurant sales $10,486 82.6% $10,189 84.0%
Lottery 1,786 14.1 1,586 13.1
------- ----- ------- -----
12,272 96.7 11,775 97.1
Franchise operations 418 3.3 354 2.9
------- ----- ------- -----
Total revenue $12,690 100.0% $12,129 100.0%
======= ===== ======= =====
</TABLE>
RESTAURANT COSTS AND EXPENSES. Restaurant costs and expenses, which consists of
five categories including food, beverage and supply costs, labor and labor
related costs, occupancy costs, and depreciation and amortization, and
restaurant pre-opening expenses decreased to 67.4% and 67.9% of revenue for the
12 and 28 weeks ended October 16, 2000 respectively compared to 68.9% and 69.9%
for the 12 and 28 weeks ended October 18, 1999. Food, beverage and supply costs
as a percentage of total revenues were 27.6% and 28.0% for the 12 and 28 weeks
ended October 16, 2000 compared to 28.8% and 29.1% for the comparable period in
1999. Labor expenses totaled 30.7% and 31.3% of revenues for 12 and 28 weeks
ended October 16, 2000 compared to 31.4% and 32.0% of revenues for the 12 and 28
weeks ended October 18, 1999. The decrease in labor as a percentage of revenues
in the second quarter and current year to date over fiscal year 2000 is driven
by revenue improvements in franchise and lottery operations. Occupancy costs as
a percentage of revenues dropped from 5.6% and 5.7% for the 12 and 28 weeks
ended October 18, 1999 to 5.6% and 5.5% for the 12 and 28 weeks ended October
16, 2000. Depreciation and amortization expense as a percentage of revenues
dropped from 3.0% for both the 12 and 28 weeks ended October 18, 1999 to 2.9%
and 2.8% for the 12 and 28 weeks ended October 16, 2000. Both decreases are
principally attributable to increases in all revenue categories. Restaurant
pre-opening expenses is a new category of expenses in fiscal year 2001
representing .5% and .2% of total revenues for the 12 and 28 week period.
Management anticipates start-up expenses for new operating units to increase as
a percentage of revenues as the Company continues to add new restaurant units.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative ("G&A") expenses
were 23.2% and 23.3% of total revenue for the 12 and 28 weeks ended October 16,
2000 compared to 22.2% and 21.7% of revenues in the comparable period in 1999.
The increase in G&A includes cash compensation paid to the Chief Executive
Officer and President as well as increased administrative wages and benefits.
NON-OPERATING EXPENSE. Non-operating expense was 1.7% and 1.7% of total revenues
for the 12 and 28 weeks ended October 16, 2000 compared to 2.1% and 2.4% of
total revenues in the comparable period in 1999.
LIQUIDITY AND CAPITAL RESOURCES. As of October 16, 2000, the Company had cash
and equivalents of approximately $1 million representing a decrease from March
31, 2000 of approximately $594,000. The decrease was a result of cash used for
8
<PAGE>
reduction in accrued income taxes of $248,000 and increases in other current
assets of $153,000. Cash used in financing activities was $62,000 primarily from
payments on notes payable of $262,000 offset by an increase in a revolving line
of credit of $200,000. Cash used in investing activities was $1.1 million for
additions to property, buildings and equipment and the purchase and remodeling
of the new Springfield location.
The Company's primary liquidity needs arise from debt service on indebtedness,
operating lease requirements and the funding of capital expenditures. As of
October 16, 2000, the Company had outstanding indebtedness for borrowed money of
$1.92 million under a term loan facility and $2.23 million real estate loan
facilities with Wells Fargo Bank and $1.25 million under a term loan facility
with Eagle's View Management Company, Inc. ("EVM"), assumed at the time of the
merger with CBW, Inc. The Wells Fargo loans have a weighted-average maturity of
9 years, bear interest at an average of 8.2%, require monthly payments of
principal and interest, are collateralized by substantially all of the assets
owned by Elmer's Restaurants, Inc. and impose certain financial restrictions and
covenants, the most restrictive of which, require the Company to maintain a
maximum ratio of total liabilities, excluding subordinated debt, to tangible net
worth plus subordinated debt of 5.5 to 1.0. In addition, on a trailing four
quarter basis as of the end of each fiscal quarter, the Company is required to
maintain a ratio of cash generation to total interest expense plus the prior
period current maturities of long-term debt of at least 2.25 to 1.0. The Company
was in compliance with these covenants as of October 16, 2000. The Company also
has available a $250,000 line of credit (of which approximately $50,000 remained
available at October 16, 2000) with Wells Fargo Bank through September 1, 2001.
The EVM loan has a maturity of approximately 5 years, an interest rate of 15%,
requires monthly payments of interest only, and is collateralized by a second
position on substantially all the assets owned by Elmer's Restaurants, Inc. and
does not impose financial covenants upon the Company.
The Company's primary source of liquidity during the year was the operation of
the restaurants, franchise fees earned from its franchisees, internal cash and
borrowings as discussed above.
In the future, the Company's liquidity and capital resources will primarily
depend on the operations of Elmer's Restaurants, Inc. and its wholly owned
subsidiary, Grass Valley Ltd. (`GVL') which, under the provisions of the
Company's loan agreements, would permit, under certain conditions, distributions
and dividends to the Company's shareholders and early reduction of the EVM
indebtedness. Elmer's Restaurants, Inc. and GVL, like most restaurant
businesses, are able to operate with nominal or deficit working capital because
sales are for cash and inventory turnover is rapid. Renovation and/or remodeling
of existing restaurants is either funded directly from available cash or, in
some instances, is financed through outside lenders. Construction or acquisition
of new restaurants is generally, although not always (as in the case of the
Springfield property), is financed by outside lenders.
The Company believes that it will continue to be able to obtain adequate
financing on acceptable terms for new restaurant construction and acquisitions
and that cash generated from operations will be adequate to meet its financial
needs and to pay operating expenses for the foreseeable future, although no
assurances can be given.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS:
CERTAIN STATEMENTS IN THIS FORM 10-Q CONSTITUTE "FORWARD-LOOKING STATEMENTS"
WHICH WE BELIEVE ARE REASONABLE AND WITHIN THE MEANING OF THE SECURITIES ACT OF
1933, AS AMENDED AND THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. SUCH
FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES, AND
OTHER FACTORS RELATING TO THE COMPANY'S BUSINESS, FINANCIAL CONDITION, AND
OPERATIONS WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE, OR ACHIEVEMENTS OF
THE COMPANY TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE, OR
ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. SUCH
FACTORS INCLUDE, AMONG OTHERS, THE FOLLOWING: GENERAL ECONOMIC AND BUSINESS
9
<PAGE>
CONDITIONS; THE ABILITY TO ACCOMPLISH STATED GOALS AND OBJECTIVES; SUCCESSFUL
INTEGRATION OF ACQUISITIONS; THE IMPACT OF COMPETITIVE PRODUCTS AND PRICING;
SUCCESS OF OPERATING INITIATIVES; DEVELOPMENT AND OPERATING COSTS; ADVERTISING
AND PROMOTIONAL EFFORTS; ADVERSE PUBLICITY; ACCEPTANCE OF NEW PRODUCT OFFERINGS;
CONSUMER TRIAL AND FREQUENCY; AVAILABILITY, LOCATIONS, AND TERMS OF SITES FOR
RESTAURANT DEVELOPMENT; CHANGES IN BUSINESS STRATEGY OR DEVELOPMENT PLANS;
CHANGES IN REGULATIONS EFFECTING LOTTERY COMMISSIONS; QUALITY OF MANAGEMENT;
AVAILABILITY, TERMS AND DEPLOYMENT OF CAPITAL; THE RESULTS OF FINANCING EFFORTS;
BUSINESS ABILITIES AND JUDGMENT OF PERSONNEL; AVAILABILITY OF QUALIFIED
PERSONNEL; FOOD, LABOR AND EMPLOYEE BENEFIT COSTS; CHANGES IN, OR THE FAILURE TO
COMPLY WITH, GOVERNMENT REGULATIONS; IMPACT OF YEAR 2000; CONTINUED NASDAQ
LISTING; WEATHER CONDITIONS; CONSTRUCTION SCHEDULES; AND OTHER FACTORS
REFERENCED IN THIS FORM 10-Q.
The Company holds no financial instruments of any kind for trading purposes.
Certain of the Company's outstanding financial instruments are subject to market
risks, including interest rate risk. Such financial instruments are not
currently subject to foreign currency risk or commodity price risk. The
Company's major market risk exposure is potential loss arising from changing
interest rates and the impact of such changes on its long-term debt. Of the
Company's long-term debt outstanding at October 16, 2000, $963,200 principal
amount was accruing interest at a variable rate of LIBOR plus 2.25%. A rise in
prevailing interest rates could have adverse effects on the Company's financial
condition and results of operations.
PRINCIPAL AMOUNT BY EXPECTED MATURITY
($ in thousands)
<TABLE><CAPTION>
Fiscal Year 2001 2002 2003 2004 Thereafter Total Fair Value
<S> <C> <C> <C> <C> <C> <C> <C>
Variable rate debt 135.8 236.4 236.4 236.4 118.2 963.2 963.2
Average interest rate 8.5% 8.5% 8.5% 8.5% 8.5%
2.25% above LIBOR
</TABLE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On August 9, 2000, at the Company's Annual Meeting, the holders of the Company's
outstanding Common Stock took the action described below. At August 5, 2000,
1,665,548 shares of Common Stock were issued and outstanding and eligible to
vote at the Annual Meeting.
10
<PAGE>
Proposal I: Election of Directors.
----------------------------------------
The shareholders elected William W. Service and Paul Welch to the Company's
Board of Directors for a three- year term expiring at the year 2003 annual
meeting of Shareholder by the votes indicated below.
William W. Service 1,251,691 shares in favor 6,420 shares against
or withheld
Paul Welch 1,251,691 shares in favor 6,420 shares against
or withheld
Proposal II: Ratification and Approval of Appointment of
-------------------------------------------------------------
PricewaterhouseCoopers, LLP as Independent Public Accountants for the fiscal
----------------------------------------------------------------------------
year ended March 31, 2000
-------------------------
1,257,586 shares in favor 525 shares against
or withheld
Each Director whose term continued after the meeting:
Director Term Expires
William Service 2003
Paul Welch 2003
Bruce Davis 2002
Richard Williams 2002
Donald Woolley 2002
Corydon Jensen 2001
Thomas Connor 2001
ITEM 5. OTHER INFORMATION
In accordance with amendments adopted on May 21, 1998 to Rule 14a-4 under the
Securities and Exchange Act of 1934, if notice of a shareholder proposal to be
raised at the annual meeting of shareholders is received at the principal
executive offices of the Company after May 15, 2001 (45 days prior to the month
and date in 2001 corresponding to the date on which the Company mailed its proxy
materials for the 2000 annual meeting), proxy voting on that proposal when and
if raised at the 2001 annual meeting will be subject to the discretionary voting
authority of the designated proxy holders. Any shareholder proposal to be
considered for inclusion in proxy materials for the Company's 2001 annual
meeting must be received at the principal executive office of the Company no
later than May 15, 2001.
August 9, 2000 the board of directors approved a 10% stock dividend payable to
shareholders of record as of August 18, 2000. The board directed that the
dividend be paid on September 15, 2000 and that no consideration for fractional
shares be issued or paid.
ITEM 6. EXHIBITS AND REPORTS OF FORM 8-K
a) Exhibits:
Exhibits required to be attached by Item 601 of Regulation S-K
are listed in the Index to Exhibits of this Form 10-Q, and are incorporated
herein by this reference.
b) Reports on Form 8-K:
None.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, Elmer's Restaurants, Inc. has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Elmer's Restaurants, Inc.
By: /s/ WILLIAM W. SERVICE
------------------------------
William W. Service
Chief Executive Officer
Dated: November 28, 2000
12
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EXHIBIT INDEX
Exhibit
No. Description
3 (i) * Restated Articles of Incorporation of the Company (Incorporated herein
by reference from Exhibit No. 3.1 to the Company's Annual Report on Form 10-K
for the year ended March 31, 1988.)
3 (ii) * By-Laws of the Company, as amended. (Incorporated herein by reference
from Exhibit 3.2 of the Company's Annual Report on Form 10-K for the year ended
March 31, 1990.)
27 Financial Data Schedule
13
