Back to GetFilings.com
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2004
---------------------
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 0-11877
---------
ELXSI CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 77-0151523
------------------------------- ------------------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
3600 Rio Vista Avenue, Suite A, Orlando, Florida 32805
- ------------------------------------------------- ------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (407) 849-1090
--------------------
------------------------------------------------------
(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 [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
On August 11, 2004, the registrant had outstanding 4,012,197 shares of Common
Stock, par value $0.001 per share.
This Quarterly Report on Form 10-Q (this "10-Q") includes forward-looking
statements, particularly in the "Management's Discussion and Analysis of
Financial Condition and Results of Operations" section (Part I, Item 2 herein).
Additional written or oral forward-looking statements may be made by or on
behalf of the Company from time to time, in filings with the Securities and
Exchange Commission, in press releases and other public announcements, or
otherwise. All such forward-looking statements are within the meaning of that
term in Section 27A of the Securities Act of 1933, as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended. Such statements may include,
but not be limited to, projections of revenue, income, losses and cash flows,
plans for future capital and other expenditures, plans for future operations,
financing needs or plans, plans relating to products or services, estimates
concerning the effects of litigation or other disputes, as well as expectations
and assumptions relating to any or all of the foregoing, relating to the
Company, its subsidiaries and/or divisions.
Although the Company believes that its forward-looking statements are based on
expectations and assumptions that are reasonable, forward-looking statements are
inherently subject to risks and uncertainties, some of which can not be
predicted. Accordingly, no assurance can be given that such expectations or
assumptions will prove to have been correct, and future events and actual
results could differ materially from those described in or underlying the
forward-looking statements. Among the factors that could cause future events and
actual results to differ materially are: the demand for the Company's products
and services and other market acceptance risks; the presence in the Company's
markets of competitors with greater financial resources, and the impact of
competitive products and services and pricing; the loss of any significant
customers or group of customers; general economic and market conditions
nationally and (in the case of Bickford's) in New England; the ability of Cues
to develop new products; capacity and supply constraints or difficulties; the
emergence of future opportunities; the Company's ability to collect certain
related party notes receivable; changes in the value of certain investments
pledged to secure related party notes receivable; the Company's ability to meet
certain covenant requirements under its borrowing agreements; the ability of the
Company to utilize its deferred tax assets; the Company's ability to collect
outstanding accounts receivable; and the effects of the Company's accounting
policies.
More detail regarding these and other important factors that could cause actual
results to differ materially from such expectations, assumptions and
forward-looking statements ("Cautionary Statements") may be disclosed in this
10-Q, other Securities and Exchange Commission filings and other public
announcements of the Company. All subsequent written and oral forward-looking
statements attributable to the Company, its subsidiaries and/or divisions or
persons acting on their behalf are expressly qualified in their entirety by the
Cautionary Statements.
The Company assumes no obligation to update its forward-looking statements or
advise of changes in the expectations, assumptions and factors on which they are
based.
2
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
ELXSI CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
A S S E T S
June 30, December 31,
2004 2003
------------ ------------
(Unaudited)
Current assets:
Cash and cash equivalents $ 707 $ 733
Accounts receivable, less allowance for
doubtful accounts of $283 and $217 in
2004 and 2003, respectively 5,304 3,330
Inventories 14,142 12,845
Prepaid expenses and other current assets 946 859
Deferred tax asset 4,885 5,764
------------ ------------
Total current assets 25,984 23,531
Property, buildings and equipment, net 28,464 30,537
Intangible assets, net 1,742 1,757
Deferred tax asset - noncurrent 10,993 10,924
Deferred charge 6,777 7,072
Other 997 484
------------ ------------
Total assets $ 74,957 $ 74,305
============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
3
ELXSI CORPORATION
CONSOLIDATED BALANCE SHEETS (Continued)
(Dollars in Thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, December 31,
2004 2003
------------ ------------
(Unaudited)
Current liabilities:
Accounts payable $ 7,616 $ 3,276
Accrued expenses 6,910 5,863
Capital lease obligations - current 55 51
Current portion of long-term debt 3,309 4,009
------------ ------------
Total current liabilities 17,890 13,199
Capital lease obligations - non current 494 523
Long-term debt 2,682 5,034
Other non current liabilities 5,715 3,638
------------ ------------
Total liabilities 26,781 22,394
------------ ------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, Series A Non-voting
Convertible, par value $0.002 per share
Authorized--5,000,000 shares
Issued and outstanding--none -- --
Common stock, par value $0.001 per share
Authorized--60,000,000 shares
Issued and outstanding -- 4,012,197
at June 30, 2004 and
December 31, 2003 4 4
Additional paid-in capital 221,194 221,194
Notes receivable - related parties (11,972) (11,972)
Accumulated deficit (160,847) (157,255)
Accumulated other comprehensive loss (203) (60)
------------ ------------
Total stockholders' equity 48,176 51,911
------------ ------------
Total liabilities and stockholders' equity $ 74,957 $ 74,305
============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
4
ELXSI CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE
INCOME (LOSS)
(Amounts in Thousands, Except Per Share Data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- ----------------------------
2004 2003 2004 2003
------------ ------------ ------------ ------------
Net sales $ 25,379 $ 26,182 $ 48,144 $ 49,498
Costs and expenses:
Cost of sales 21,392 22,066 41,522 42,611
Selling, general and administrative 3,388 2,753 5,969 5,269
Depreciation and amortization 963 1,040 1,939 2,098
------------ ------------ ------------ ------------
25,743 25,859 49,430 49,978
------------ ------------ ------------ ------------
Gain (loss) on sales and closure of
property and buildings -- 1,053 (319) 1,068
------------ ------------ ------------ ------------
Operating (loss) income (364) 1,376 (1,605) 588
Other income (expense):
Interest income -- 1 -- 27
Interest expense (284) (558) (590) (992)
Other (23) (28) (23) (58)
------------ ------------ ------------ ------------
(Loss) income before income taxes (671) 791 (2,218) (435)
(Provision) benefit for income taxes (753) (291) (1,374) 185
------------ ------------ ------------ ------------
Net (loss) income (1,424) 500 (3,592) (250)
Other comprehensive (loss) income net of tax:
Foreign currency translation adjustment (34) 86 (143) 16
------------ ------------ ------------ ------------
Comprehensive (loss) income $ (1,458) $ 586 $ (3,735) $ (234)
============ ============ ============ ============
Basic and diluted net (loss) income
per common share: $ (0.36) $ 0.13 $ (0.90) $ (0.06)
============ ============ ============ ============
Basic and diluted weighted average
number of common and common
equivalent shares 4,012 4,012 4,012 4,012
============ ============ ============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
5
ELXSI CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Amounts in Thousands, Except Common Shares)
(Unaudited)
Accumulated
Common Stock Additional Related Accum- Other
--------------------- Paid-In- Party ulated Comprehensive
Shares Dollars Capital Notes Deficit Income (Loss)
--------- --------- --------- --------- --------- ---------
Balance at December 31, 2003 4,012,197 $ 4 $ 221,194 $ (11,972) $(157,255) $ (60)
Foreign currency translation
adjustment, net of tax -- -- -- -- -- (143)
Net loss -- -- -- -- (3,592) --
--------- --------- --------- --------- --------- ---------
Balance at June 30, 2004 4,012,197 $ 4 $ 221,194 $ (11,972) $(160,847) $ (203)
========= ========= ========= ========= ========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
6
ELXSI CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
Six Months Ended June 30,
---------------------------
2004 2003
------------ ------------
Cash flows provided by (used in) operating activities:
Net loss $ (3,592) $ (250)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 1,939 2,098
Loss on restaurant closure 375 --
Amortization of deferred debt costs 68 295
Gain on sales of property and building (56) (1,053)
(Increase) decrease in assets:
Accounts receivable (1,974) (1,034)
Income tax receivable -- 221
Inventories (1,297) 1,925
Prepaid expenses and other current assets (87) (667)
Deferred tax asset 810 (969)
Deferred charge 295 492
Other (344) (248)
Increase (decrease) in liabilities:
Accounts payable 4,340 (383)
Accrued expenses 1,047 810
Other non-current liabilities 2,077 --
------------ ------------
Net cash provided by operating activities 3,601 1,237
------------ ------------
Cash flows (used in) provided by investing activities:
Purchase of property, building and equipment (1,192) (2,355)
Proceeds from the sale of property and building 1,022 2,380
------------ ------------
Net cash (used in) provided by investing activities (170) 25
------------ ------------
Cash flows used in financing activities:
Net (repayments) borrowings on line of credit (6,749) 878
Borrowings (payments) of long-term debt 3,697 (1,877)
Payment of deferred fees (380) --
Net repayments of capital lease obligations (25) (27)
------------ ------------
Net cash used in financing activities (3,457) (1,026)
------------ ------------
The accompanying notes are an integral part of these consolidated financial
statements.
7
ELXSI CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Dollars in Thousands)
(Unaudited)
Six Months Ended June 30,
---------------------------
2004 2003
------------ ------------
(Decrease) increase in cash and cash equivalents (26) 236
Cash and cash equivalents, beginning of period 733 777
------------ ------------
Cash and cash equivalents, end of period $ 707 $ 1,013
============ ============
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for:
Income taxes $ 350 $ 180
Interest 521 750
The accompanying notes are an integral part of these consolidated financial
statements.
8
ELXSI CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2004
(Unaudited)
Note 1. The Company
General. ELXSI Corporation (together with its subsidiaries, the "Company")
operates principally through its two wholly-owned subsidiaries, ELXSI, a
California corporation ("ELXSI"), and Bickford's Family Restaurants, Inc., a
Delaware corporation ("BFRI"). Operations consist of the following business
segments: a restaurant chain in New England, an equipment manufacturer in
Orlando, Florida and a retail environment manufacturer and installer in
Lincolnshire, Illinois.
Restaurant Operations. On July 1, 1991, ELXSI acquired 30 Bickford's restaurants
and 12 Howard Johnson's restaurants from Marriott Family Restaurants, Inc. These
restaurants were located in Massachusetts, Vermont, New Hampshire, Rhode Island
and Connecticut.
On December 30, 2000, ELXSI contributed and transferred to a newly-formed,
wholly owned subsidiary, Bickford's Holdings Company, Inc. ("BHC"), all of the
Bickford's Restaurants and substantially all of its related operations, assets
and liabilities. Immediately thereafter, these restaurants, operations, assets
and liabilities were contributed and transferred by BHC to another newly-formed,
wholly-owned subsidiary, BFRI. In January 2004, the Company implemented a
corporate restructuring of its subsidiaries as a result of which: (1) ELXSI (New
Hampshire), Inc., a Delaware corporation ("ELXSI NH"), became a wholly-owned
direct subsidiary of ELXSI; (2) Bickford's Restaurants, LLC ("Bickford's LLC"),
a Delaware limited liability company, became 99% owned by ELXSI NH and 1% owned
by ELXSI and (3) BHC became a direct wholly-owned subsidiary of Bickford's LLC.
BFRI remained a wholly-owned direct subsidiary of BHC.
During the first quarter of 2004, the Company sold one Bickford's Restaurant in
Brockton, MA for approximately $1 million. This sale resulted in a gain of
approximately $56,000. In addition, during the first quarter of 2004 the Company
terminated the lease for its Stoneham, MA location and this location has been
closed. The Company recorded total losses of $375,000 from the retirement of
leasehold improvements and equipment in connection with the closing of this
Restaurant.
In April 2004 the Company sold two other Bickford's Restaurants, one in Seekonk,
MA ("the "Seekonk Property") and the other in Burlington, MA (the "Burlington
Property"), for approximately $1.2 million and $1 million, respectively. The
purchasers of the Seekonk and Burlington Properties then leased the properties
back to the Company, as described in Note 8 to the Consolidated Financial
Statements. Proceeds from all of the aforementioned sales were used to reduce
the Company's outstanding term loans and revolving line of credit issued by
Wells Fargo Foothill, Inc. ("WFF").
As of June 30, 2004, the Company had 59 restaurants owned and operated by BFRI
(hereinafter referred to as the "Restaurants", "Restaurant Operations").
9
Equipment Manufacturer. On October 30, 1992, ELXSI acquired Cues, Inc. of
Orlando, Florida and its two wholly-owned subsidiaries Knopafex, Ltd., a
Canadian company, and Cues B.V., a Dutch company, collectively referred to
herein as "Cues" or the "Cues Division".
Cues is engaged in the business of manufacturing and servicing of video
inspection and repair equipment for wastewater and drainage systems primarily
for governmental municipalities, service contractors and industrial users.
Retail Environment Manufacturer and Installer. On March 11, 2004, Cues entered
into an asset purchase agreement to purchase certain assets of Contempo Design,
Inc. (the "Contempo Assets") from Fleet Capital Corporation, Contempo's
creditor, for $443,000 (the "Contempo Purchase"). The Company is using the
Contempo Assets for the design, production and installation of cabinetry and
kiosks and related products for retailers. Cues operates this business as a
division called Custom Commercial Environments ("CCE").
The acquisition was accounted for under the purchase method of accounting;
accordingly, the purchase price has been allocated to reflect the fair value of
assets acquired at the date of acquisition. No goodwill resulted from the
acquisition.
The following table summarizes the estimate fair values of the assets acquired
on the March 11, 2004 date of acquisition:
Inventory $ 189,000
Equipment 254,000
------------
$ 443,000
============
Note 2. Basis of Presentation
The unaudited consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission and in accordance with accounting
principles generally accepted in the United States of America ("US GAAP") for
interim financial reporting. Certain information and note disclosures normally
included in financial statements prepared in accordance with US GAAP have been
omitted pursuant to such rules and regulations, although the Company believes
that the disclosures are adequate to make the information presented not
misleading. It is suggested that these financial statements be read in
conjunction with the financial statements and the notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 2003, as
amended. In the opinion of the Company, all adjustments (solely of a normal
recurring nature) necessary to present fairly the consolidated financial
position of ELXSI Corporation and its subsidiaries as of June 30, 2004, and the
results of their operations and cash flows for the six months ended June 30,
2004 and 2003, have been included in these unaudited consolidated financial
statements. Readers of these financial statements are cautioned, however, that
the results of operations for such interim periods are not necessarily
indicative of the results for the entire year.
10
Note 3. Earnings (Loss) Per Share.
Basic earnings (loss) per share is calculated by dividing net income (loss) by
the weighted-average number of shares of common stock outstanding during the
reporting period. Diluted earnings (loss) per share is computed in a manner
consistent with that of basic earnings (loss) per share but also gives effect to
the potential dilution that could occur if dilutive options or warrants to issue
common stock were exercised. The weighted-average number of shares used in
calculating diluted earnings (loss) per share was 4,012,000 for the three and
six months ended June 30, 2004 and 2003, respectively. Options and warrants to
purchase an aggregate 1,007,000 and 1,106,000 shares of Common Stock at June 30,
2004 and 2003, respectively, were not included in the diluted loss per share
calculations for the three and six months then ended, since the effect of their
exercise would have been anti-dilutive.
Note 4. Notes Receivable - Related Party
As of December 31, 2001, the Company restructured the notes receivable from two
related parties, ELX Limited Partnership ("ELX") and Cadmus Corporation
("Cadmus"). The due dates of the notes were extended to April 1, 2005 in
exchange for collateralization of the notes receivable under pledge and security
agreements. In addition, Alexander M. Milley, the Company's Chairman, President
and Chief Executive Officer and most significant stockholder, and certain other
entities that he controls personally guaranteed the Cadmus and ELX notes
receivable. Under the restructured notes receivable, approximately 821,705 of
issued and outstanding shares of Common Stock of the Company held by these
companies under Mr. Milley's control serve as the primary collateral. All
interest and principal payable under these notes receivable is due on the
maturity date at rates or rate formulas in effect prior to their restructuring.
As a result of these extensions and revisions in the underlying collateral, the
aggregate balance of these notes receivable at June 30, 2004 and December 31,
2003 has been reflected in the stockholders' equity section of the consolidated
balance sheets as a $11,972,000 contra-equity entry. Interest will be recorded
as income when actually received, as the underlying collateral included in the
pledge and security agreements will not support an increase to the related party
notes receivable balance.
Note 5. Composition of Inventory. Inventory is summarized in the following
table.
June 30, December 31,
2004 2003
------------ ------------
(unaudited)
Inventories:
Raw materials and finished goods $ 9,294,000 $ 8,459,000
Work in process 4,848,000 4,386,000
------------ ------------
$ 14,142,000 $ 12,845,000
============ ============
Note 6. Segment Reporting.
The Company has three reportable segments: restaurant operations, equipment
manufacturing and a retail environment manufacturer and installer. The Company
is primarily organized into three strategic business units, which have separate
management teams and infrastructures and that offer different products and
services. Each business unit requires different employee skills,
11
technology and marketing strategies. As of June 30, 2004, the restaurant
operations segment included 59 restaurants located in the New England States
operating primarily under the Bickford's brand name. The equipment manufacturing
segment produces sewer inspection equipment for sale to municipalities,
contractors, and foreign governments. The retail environment manufacturing
segment produces and installs branded environments for the retail, banking and
corporate marketplace.
The Company evaluates the performance of each segment based upon profit or loss
from operations before income taxes, interest, non-recurring gains and losses
and foreign exchange gains and losses.
There has been no significant difference in the basis of segmentation or in the
measurement of segment profit since the Company's Annual Report on Form 10-K for
the year ended December 31, 2003, as amended, except for the addition of the
Company's retail environment manufacturing segment which the Company acquired in
March 2004 (see Note 1). The "Other" line items in the chart below include
corporate related items, results of insignificant operations and, as they relate
to profit and losses, income and expense not allocated to reportable segments.
Restaurants revenues and profit and, consequently the consolidated total revenue
and profit for the six months ended June 30, 2004 and 2003, includes gains from
the sales of property and buildings totaling $56,000 and $1,068,000,
respectively and losses from restaurant closures of $375,000 and $-0-,
respectively.
Summarized financial information by business segment for the six months ended
June 30, 2004 and 2003 is presented in the following table.
2004 2003
------------ ------------
Revenues from external customers:
Restaurants $ 30,915,000 $ 33,582,000
Equipment 15,378,000 15,916,000
Retail environments 1,851,000 --
------------ ------------
$ 48,144,000 $ 49,498,000
============ ============
Segment (loss) profit:
Restaurants $ (2,045,000) $ 360,000
Equipment 1,250,000 1,014,000
Retail environments (206,000) --
Other (604,000) (786,000)
------------ ------------
$ (1,605,000) $ 588,000
============ ============
Segment assets:
Restaurants $ 36,987,000 $ 37,346,000
Equipment 22,169,000 22,500,000
Retail environments 2,568,000 --
Other 13,233,000 18,020,000
------------ ------------
$ 74,957,000 $ 77,866,000
============ ============
Summarized financial information by business segment for the three months ended
June 30, 2004 and 2003 is presented in the following table. Restaurants revenues
and profit and, consequently the consolidated total revenue and profit for the
three months ended June 30, 2004 and 2003, includes gains from the sales of
property and buildings totaling $0 and $1,053,000, respectively.
12
2004 2003
------------ ------------
Revenues from external customers:
Restaurants $ 15,857,000 $ 17,660,000
Equipment 8,045,000 8,522,000
Retail environments 1,477,000 --
------------ ------------
$ 25,379,000 $ 26,182,000
============ ============
Segment (loss) profit:
Restaurants $ (602,000) $ 1,123,000
Equipment 796,000 726,000
Retail environments (214,000) --
Other (344,000) (473,000)
------------ ------------
$ (364,000) $ 1,376,000
============ ============
There were no inter-segment sales or transfers during the three or six months
ended June 30, 2004 or 2003. Segment (loss) or profit excludes interest income,
interest expense, other income and expenses and taxes. "Segment assets - Other"
consists principally of the Company's deferred tax asset and the deferred
charge.
Foreign assets, revenues, and export sales each represent less than 10% of the
Company's totals. No material amounts of the Company's sales are dependent upon
a single customer.
Note 7. Long-Term Debt.
In June 2003, Bank of America N.A. ("BofA") assigned to Wells Fargo Foothill,
Inc. ("WFF"), its rights and obligations under the Amended and Restated Loan and
Security Agreement dated April 22, 2002, as amended ("BofA Agreement").
On January 30, 2004, the Company and WFF entered into a new $15.0 million
Amended and Restated Loan and Security Agreement ("WFF Agreement"). The WFF
Agreement provided waivers of certain 2003 covenant violations under the BofA
Agreement and included restated financial covenants for 2004 and beyond. The WFF
Agreement consisted of a three-year $8.0 million line of credit, a three-year
$4.5 million Term Loan A and a $2.5 million Term Loan B, which was repaid in
full in April 2004. The line of credit and Term Loan A bear interest at the
Wells Fargo Bank, N.A., prime rate (the "Prime Rate") plus 3.5%. Term Loan A
requires monthly principal payments of $125,000 which began on March 1, 2004.
Term Loan B bore interest at the Prime Rate plus 6%. In connection with the WFF
Agreement, the Company became obligated to pay a closing fee of $150,000 in
three equal installments of $50,000 on March 31, 2004, June 30, 2004 and
September 30, 2004. The WFF Agreement also contains a $75,000 anniversary fee
which must be paid each year. In addition, the Company paid a $500,000 fee
related to Term Loan B, of which WFF rebated $400,000 in April 2004 when the
Company fully repaid that loan. The financial covenants contained in the WFF
Agreement, which have since been amended as discussed below, consist of minimum
earnings before interest, taxes, depreciation and amortization ("EBITDA") for
Bickford's and the Company, a maximum leverage ratio and a limit on capital
expenditures. In addition, the WFF Agreement prohibits the Company from
declaring or paying cash dividends. The maximum outstanding debt under the WFF
Agreement is also limited by multiples of consolidated EBITDA under borrowing
base calculations. As of June 30, 2004, the borrowing base calculation under the
WFF Agreement, after giving effect to the amendments to the WFF Agreement
discussed below
13
resulted in a maximum debt of approximately $5.2 million. The Company had
approximately $2.0 available for borrowing under the WFF Agreement at June 30,
2004 after reducing availability for outstanding contingent letters of credit of
approximately $3.0 million.
The Company signed a First Amendment to Amended and Restated Loan and Security
Agreement with WFF dated as of April 21, 2004 (the "First Amendment") under
which WFF agreed to, among other things, for consideration of $100,000, to be
paid in three monthly installments beginning upon execution, (1) extend the date
upon which the Company could receive a $400,000 rebate from WFF if Term Loan B
was paid in full by such date (which rebate the Company received when it paid
off Term Loan B in Full in April 2004); (2) consent to the sale of the Seekonk
and Burlington Properties, as discussed above and in Note 8; and (3) consent to
the purchase of the Contempo Assets. The First Amendment also required that the
Company apply the proceeds from the aforementioned sales of the Burlington
Property and the Seekonk Property towards the remaining principal balance of
Term Loan B with the excess proceeds being applied to Term Loan A. Term Loan B
was completely repaid in April 2004 and Term Loan A was reduced by approximately
$197,000 as a result of applying proceeds from these two restaurant sales.
The Company also signed a Second Amendment to Amended and Restated Loan and
Security Agreement with WFF dated as of June 30, 2004 (the "Second Amendment").
Under the Second Amendment, WFF agreed to, among other things, for consideration
of fees totaling $370,000 (some of which may be rebated to the Company by WFF,
as discussed below) (the "Second Amendment Fees") provide a new $3.3 million
Term Loan B (the "New Term Loan B") maturing on December 31, 2006. The proceeds
of the New Term Loan B have been applied to reduce outstanding advances under
the Company's line of credit with WFF. The New Term Loan B bears interest at the
Prime Rate plus 6% and is repayable as follows: (i) $500,000 on September 30,
2004, (ii) $300,000 on November 30, 2004 and (iii) $500,000 on each of January
31, 2005, April 30, 2005, July 31, 2005, October 30, 2005 and December 31, 2005.
In addition, $320,000 of the Second Amendment Fees were added to the Term Loan B
principal balance. $100,000 of the Second Amendment Fees will be rebated to the
Company by WFF if all of the Company's obligations under the WFF agreement are
repaid by June 30, 2005. The following portions of the Second Amendment Fees may
also be rebated to the Company by WFF: (a) $200,000 will be rebated if the New
Term Loan B is repaid in full by September 30, 2004; (b) $150,000 will be
rebated if New Term Loan B is repaid in full by October 31, 2004; and (c)
$100,000 will be rebated if the New Term Loan B is repaid in full by December
31, 2004. The Second Amendment also reduced the maximum amount that the Company
can borrow under the Company's line of credit from $8,000,000 to $7,000,000.
Furthermore, in the Second Amendment WFF waived all covenant violations by the
Company under the WFF Agreement for all periods ended on or before May 31, 2004
and established new and revised financial covenants for the Company's minimum
EBITDA, Bickford's minimum EBITDA, and maximum leverage ratios. As of June 30,
2004, the Company was in compliance with all covenants contained in the WFF
Agreement, as amended.
14
Note 8. Related Parties.
In April 2004, Bickford's sold the Seekonk Property to The SBL Company LLC
("SBL") for approximately $1,200,000. The sale price was determined using an
independent appraisal based upon an amount that was greater than the real estate
alone and less than the maximum value of the real estate potential and was
approved by the Board of Directors. SBL is owned by Alexander M. Milley,
Chairman, Chief Executive Officer, President and a Director of the Company,
Lawrence Pszenny, a Vice President of the Company, and Robert Germaine, a Vice
President of the Company. Upon consummation of the sale of the Seekonk Property,
SBL leased the Seekonk Property back to BFRI for a term of fifteen years, with
three five-year renewal options (the "Seekonk Lease"). Under the Seekonk Lease,
the base annual rent for the Seekonk Property is $132,000. During the first two
years of the term of the Seekonk Lease, BFRI has the right to repurchase the
Seekonk Property from SBL for $1,320,000. Thereafter, BFRI may repurchase the
Seekonk Property at the greater of: (a) the fair market value of the property;
or (b) $1,320,000. In connection with the lease of the Seekonk Property, the
Company was required to guaranty to SBL the prompt payment of all amounts and
performance and observance of all other obligations to be paid, performed or
observed by BFRI under the Seekonk Lease. The Company recognized no gain or loss
on the sale of the Seekonk Property.
In April 2004, BFRI also sold the Burlington Property to Alexander Milley for
approximately $1,000,000. Alexander Milley is the father of Alexander M. Milley,
the Chairman, Chief Executive Officer, President and a Director of the Company.
The sale price was determined using an independent appraisal based upon an
amount that was greater than the real estate alone and less than the maximum
value of the real estate potential and was approved by the Board of Directors.
Upon consummation of the sale, Alexander Milley leased the Burlington Property
back to BFRI for a term of fifteen years, with three five-year renewal options
(the "Burlington Lease"). The Burlington lease provides that the base annual
rent for the Burlington Property is $110,000. During the first two years of the
Burlington Lease, BFRI has the right to repurchase the Burlington Property from
Alexander Milley for $1,100,000. Thereafter, BFRI may repurchase the Burlington
Property at the greater of: (a) the fair market value of the property; or (b)
$1,100,000.
As a result of the repurchase options contained in the Seekonk and Burlington
leases described above, the Company recorded the proceeds from the Seekonk
Property and Burlington Property sales in accordance with finance lease
accounting provisions. As a result the proceeds have been recorded as a
long-term liability and the assets are still included in the accompanying
balance sheet. Additionally, no gain was recognized on the sale of these
properties. Future rent payments by the Company will reduce the long-term
liability and a portion will be recorded as interest expense.
15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company's revenues and expenses result from the operation of the Restaurant
Operations, Cues Division, CCE Division and the Company's corporate expenses
("Corporate").
COMPARISON OF FIRST HALF 2004 RESULTS TO FIRST HALF 2003 RESULTS
Six-month sales decreased $1,354,000 and gross profit decreased $265,000 as
compared to the corresponding period in the prior year. Selling, general and
administrative expense increased $700,000, depreciation and amortization expense
decreased $159,000, gains on sales of property and building decreased
$1,012,000, losses on restaurant closures increased $375,000, resulting in an
operating income decrease of $2,193,000. Interest expense decreased $402,000,
interest income decreased $27,000, other expense decreased $35,000 and income
tax expense increased by $1,559,000. The Company recorded a net loss of
$3,592,000 in the first half of 2004 compared to a net loss of $250,000 in the
corresponding period in the previous year.
Included in the results for the first half of 2004 are losses from the closure
of the Stoneham, MA Restaurant, totaling $375,000 and gains from the sale of
property and building totaling $56,000 as a result of selling the Brockton, MA
Restaurant.
Restaurant Operations. Restaurant sales decreased $2,667,000, or 7.9%, in the
first half of 2004 compared to the same period in the prior year. Same store
sales decreased $1,330,000, or 4.4%, in the first half of 2004 compared to the
first half of 2003. Also contributing to the 2004 first quarter sales decrease
were lost sales of $1,382,000 due to closed Restaurants which losses were
partially offset by an increase in sales at non-comparable Restaurants of
$45,000. The same store Restaurant sales decrease was mainly the result of a
decrease in customer counts of 9.4% during the first half of 2004, which was
partially offset by menu price increases. During the first half of 2004, the
average guest check increased $0.45 compared to the same period in the prior
year. The Company believes that continuing weakness in the New England economy
and an increase in competition during the first half of 2004 contributed
significantly to the same store sales and customer count declines during the
period.
The gross profit percentage decreased 3.3% from 7.1% to 3.8%, which along with
the sales decrease caused Restaurant gross profit to decrease $1,191,000, or
50.2%, in the first half of 2004 compared to the same period in 2003. The
decline in customers and sales discussed above resulted in higher fixed, labor
and variable costs as percentages of sales, which led to the gross profit
percentage decline. Food costs as a percentage of sales also increased primarily
as a result of the higher cost of the new lunch and dinner menu items.
Selling, general and administrative expense decreased $6,000, or 0.5%, primarily
due to a decrease in labor costs. Restaurant depreciation and amortization
expense decreased by $152,000, or 8.1%, compared to the same period in the prior
year. During the first half of 2004, the Restaurants recorded: (a) a loss of
$375,000 from the closure of the Stoneham, MA Restaurant; and (b) a gain of
$56,000 from the sale of the Brockton, MA Restaurant compared to a gain of
$1,068,000 during the first half of 2003.
16
As a result of the above items, the Restaurant's operating loss increased
$2,405,000, or 668.1%, during the first half of 2004 compared to the same period
in the prior year. Excluding the 2004 gains from the sale of property and
building and losses from restaurant closures and 2003 gains from the sales of
property and buildings, the Restaurant's operating loss increased $1,033,000, or
149.1%, during the first half of 2004 compared to the same period in the prior
year.
Operationally, we have chosen to focus attention on improving the customers'
experience in order to reverse the continued negative customer count trend. A
combination of food, service and facility improvements are being heavily
emphasized throughout the chain. These improvements are not requiring
significant capital expenditures. Recently, we introduced a selection of
exciting new top quality dinner products featuring high quality fresh (never
frozen) seafood, including broiled or fried haddock and scallop dinners, jumbo
shrimp cocktails, fresh clams, lobster rolls and lobster casserole dinners along
with a unique homemade fresh clam chowder. Breakfast menus are now featuring an
already popular lobster omelet and lobster benedict dish. Complementing these
items are high quality choice 12-ounce sirloin strip steaks and a totally fresh
approach on all vegetables served. Our goal is to make Bickford's the best
value, high quality lunch and dinner destination available in the New England
market. By dramatically repositioning our lunch and dinner offerings and
generally improving our execution, we expect to attract new customers. Although
it is taking some time to see results, we are optimistic that this strategy will
have a positive impact on customer counts and profits in the future.
During the first half of 2004, the Company sold one of its Brockton, MA
restaurant for approximately $1 million. This sale resulted in a gain of
approximately $56,000. The Company also recorded total losses of $375,000 from
the retirement of leasehold improvements and equipment in connection with the
closing of the Stoneham, MA Restaurant during this period. In addition, the
Company sold two other Bickford's Restaurants, one in Seekonk, MA and the other
in Burlington, MA, for approximately $1.2 million and $1 million, respectively.
The new owners of these properties then leased these Restaurants back to the
Company, as described in Note 8 to the Consolidated Financial Statements. The
proceeds from these sales were used to reduce the Company's outstanding term
debt and revolving line of credit under the WFF Agreement.
Cues Division. Cues's sales decreased $538,000, or 3.4%, in the first half of
2004 compared to the same period in the prior year. The gross profit percentage
increased 4.0%, resulting in a gross profit increase of $460,000, or 10.2%, in
the first half of 2004 compared to the same period in the prior year. The
increase in the gross profit percentage was primarily the result of a more
favorable mix of products sold during the recent period. Selling, general and
administrative expense increased $234,000, or 7.1%, in the first half of 2004,
compared to the corresponding period in the prior year primarily due to an
increase in administrative expenses including lease facility expense, health
benefits and salary expense. Depreciation and amortization expense decreased
$25,000, or 11.5%, in the first half of 2004. Losses on disposal of property and
buildings decreased $15,000. As a result of the above items, operating income
increased by $236,000, or 23.3%, in the first half of 2004 compared to the same
period in 2003.
CCE Division. CCE contributed $1,851,000 in sales and incurred an operating loss
of $206,000 from the period of its acquisition in March 2004 until June 30,
2004.
17
Corporate. Corporate general and administrative expenses decreased by $182,000,
or 23.2%, during the first half of 2004 compared with the same period in 2003.
This decrease was due to a decrease in professional fees and bank fees during
the first half of 2004 compared to the first half of 2003.
Income Taxes. During the first half of 2004, the Company recorded consolidated
income tax expense of $1,374,000 compared to a benefit of $185,000 in the first
half of 2003. The income tax expense of $1,374,000 recorded in the first half of
2004 is a combination of the tax provision provided for the taxable income
generated by Cues division and the fact that no tax benefit was realized for the
loss generated by the Restaurant operation during the first half of 2004.
Earnings (Loss) Per Share. The basic and diluted loss per share for the first
half of the year were both $0.90 per share. The basic and diluted weighted
average number of shares outstanding for the six months ended June 30, 2004 and
2003 were both 4,012,000. For the first half of 2003, the basic and diluted loss
per share were both $0.06 per share. The average market price per share of
Company Common Stock for the first half of 2004 was $4.23 compared to an average
of $2.97 in the corresponding period of 2003.
COMPARISON OF SECOND QUARTER 2004 RESULTS TO SECOND QUARTER 2003 RESULTS
The 2004 second quarter sales decreased $803,000 and gross profit decreased
$129,000 as compared to 2003 second quarter sales and gross profit figures.
Selling, general and administrative expense increased $635,000, depreciation and
amortization expense decreased $77,000 and gains on sales of property and
buildings decreased $1,053,000, resulting in an operating loss increase of
$1,740,000. Interest expense decreased $274,000, interest income decreased
$1,000, other expense decreased $5,000 and income tax expense increased by
$462,000 resulting in a net loss increase of $1,924,000. The Company recorded a
net loss of $1,424,000 in the second quarter of 2004 compared to net income of
$500,000 in the corresponding period in the previous year.
There were no gains or losses included in the second quarter 2004 results from
the sales of property and buildings.
Restaurant Division. Restaurant sales decreased by $1,803,000, or 10.2%, in the
second quarter of 2004 compared to the same period in the prior year. Same store
sales decreased $1,035,000, or 6.6%, in the second quarter of 2004 compared to
2003. During the second quarter of 2004, the Company had lost sales of $737,000
due to closed Restaurants and decreased sales at new and non-comparable
Restaurants of $31,000. The same store Restaurant sales decrease was mainly the
result of a decrease in customer counts of 10.5%, which was partially offset by
menu price increases. During the second quarter of 2004, the average guest check
increased $0.37 compared to the same period in the prior year.
The gross profit percentage decreased 3.2% from 9.0% to 5.8%, which along with
the sales decrease caused gross profit to decrease $683,000, or 42.8%, in the
second quarter of 2004 compared to the same period in 2003. The decline in
customers resulted in higher fixed, labor and variable costs as percentages of
sales consequently creating the gross profit percentage decline. Food costs as a
percentage of sales also increased primarily as a result of the higher cost of
new lunch and dinner menu items.
18
Selling, general and administrative expense increased $72,000, or 12.2%.
Restaurant depreciation and amortization expense decreased by $83,000, or 8.9%
during the second quarter of 2004 compared to the same period in the prior year.
There are no gains or losses included in the Restaurant's second quarter 2004
results from the sales of property and buildings compared to gains of $1,053,000
in the corresponding period in the prior year.
As a result of the above items, Restaurant operating income decreased
$1,725,000, or 153.6%, during the second quarter ended June 30, 2004 compared to
the same period in the prior year. Excluding the 2003 gains from the sales of
property and buildings, Restaurant operating income decreased $672,000 during
the second quarter of 2004 compared to the same period in the prior year.
Cues Division. Cues's sales decreased by $477,000, or 5.6%, in the second
quarter of 2004 compared to the same period in the prior year mainly due to a
decrease in sales of truck-mounted systems. The gross profit percentage
increased 3.8% resulting in a gross profit increase of $162,000, or 6.4%, in the
second quarter of 2004 compared to the same period in the prior year. The
increase in the gross profit percentage was primarily the result of the more
favorable mix of products sold. Selling, general and administrative expense
increased $100,000, or 5.9%, in the second quarter of 2004 compared to the
corresponding period in the prior year primarily due to a an increase in
administrative expenses including leased facility expense and health benefits
and salary expenses. Depreciation and amortization expense decreased $8,000, or
7.8% in the second quarter of 2004. As a result of the above items, operating
income increased by $70,000, or 9.6%, in the second quarter of 2004 compared to
the same period in 2003.
CCE Division. CCE contributed $1,477,000 in sales and incurred an operating loss
of $214,000 during the second quarter of 2004. Since the Contempo Assets were
acquired in March 2004, there were no comparable results during the prior year.
Corporate. Corporate general and administrative expenses decreased by $129,000,
or 27.3%, during the second quarter of 2004 compared with the same period in
2003 due to the decrease in professional fees and bank fees.
Income Taxes. During the second quarter of 2004, the Company recorded a
consolidated income tax expense of $753,000 compared to a consolidated tax
expense of $291,000 in the second quarter of 2003. The increase in the tax
expense resulted primarily from the increase in profit generated by the Cues
division and the fact that no benefit was realized for the taxable loss
generated by the Restaurant operation during the second quarter of 2004.
Earnings (Loss) Per Share. The basic and diluted loss per share for the second
quarter ended June 30, 2004 were both $.36 per share. The basic and diluted
weighted average number of shares outstanding for the three months ended June
30, 2004 and 2003 were both 4,012,000. For the second quarter of 2003, the basic
and diluted income per share were both $.13 per share. The average market price
per share of Company Common Stock for the second quarter of 2004 was $4.04
compared to an average of $3.16 in the corresponding period of 2003.
19
Liquidity and Capital Resources
Available Resources. The Company's consolidated cash positions at June 30, 2004
and December 31 2003, were $707,000 and $733,000, respectively. The Company has
a cash management system whereby cash generated by operations is used to reduce
bank debt under the WFF Agreement. The Company believe that the reduction of
outstanding debt provides the Company with a reduction in interest expense
greater than the interest income that cash could safely earn from alternative
investments. Working capital needs, when they arise, are met by daily
borrowings.
In June of 2003, BofA assigned to WFF, its rights and obligations under the BofA
Agreement.
On January 30, 2004, the Company and WFF entered into a the WFF Agreement. The
WFF Agreement provided waivers of certain 2003 covenant violations under the
BofA Agreement and included restated financial covenants for 2004 and beyond.
The WFF Agreement consisted of a three-year $8.0 million line of credit, a
three-year $4.5 million Term Loan A and a $2.5 million Term Loan B, which was
repaid in full in April 2004. The line of credit and Term Loan A bear interest
at the Prime Rate plus 3.5%. Term Loan A requires monthly principal payments of
$125,000 which began on March 1, 2004. Term Loan B bore interest at the Prime
Rate plus 6%. In connection with the WFF Agreement, the Company became obligated
to pay a closing fee of $150,000 in three equal installments of $50,000 on March
31, 2004, June 30, 2004 and September 30, 2004. The WFF Agreement also contains
a $75,000 anniversary fee which must be paid each year. In addition, the Company
paid a $500,000 fee related to Term Loan B, of which WFF rebated $400,000 in
April 2004 when the Company fully repaid that loan. The financial covenants
contained in the WFF Agreement, which have since been amended as discussed
below, consist of minimum EBITDA for Bickford's and the Company, a maximum
leverage ratio and a limit on capital expenditures. In addition, the WFF
Agreement prohibits the Company from declaring or paying cash dividends. The
maximum outstanding debt under the WFF Agreement is also limited by multiples of
consolidated EBITDA under borrowing base calculations. As of June 30, 2004, the
borrowing base calculation under the WFF Agreement, resulted in maximum debt of
approximately $5.2 million. The Company had approximately $2.0 available for
borrowing under the WFF Agreement at June 30, 2004 after reducing availability
for outstanding contingent letters of credit of approximately $3.0 million.
The Company and WFF also signed the First Amendment under which WFF agreed to,
among other things, for consideration of $100,000, to be paid in three monthly
installments beginning upon execution, (1) extend the date upon which the
Company could receive a $400,000 rebate from WFF if Term Loan B was paid in full
by such date (which rebate the Company received when it paid off Term Loan B in
Full in April 2004); (2) consent to the sale of the Seekonk and Burlington
Properties, as discussed above and in Note 8; and (3) consent to the purchase of
the Contempo Assets. The First Amendment also required that the Company apply
the proceeds from the aforementioned sales of the Burlington Property and the
Seekonk Property towards the remaining principal balance of Term Loan B with the
excess proceeds being applied to Term Loan A. Term Loan B was completely repaid
in April 2004 and Term Loan A was reduced by approximately $197,000 as a result
of applying proceeds from these two restaurant sales.
20
The Company and WFF also signed the Second Amendment under which WFF agreed to,
among other things, for consideration of the Second Amendment Fees (some of
which may be rebated to the Company by WFF, as discussed below) to provide the
$3.3 million New Term Loan B maturing on December 31, 2006. The proceeds of
which have been applied to the outstanding advances under the Company's line of
credit with WFF. The New Term Loan B bears interest at the Prime Rate plus 6%
and is repayable as follows: (i) $500,000 on September 30, 2004, (ii) $300,000
on November 30, 2004 and (iii) $500,000 on each of January 31, 2005, April 30,
2005, July 31, 2005, October 30, 2005 and December 31, 2005. In addition,
$320,000 of the Second Amendment Fees were added to the Term Loan B principal
balance. $100,000 of the Second Amendment Fees will be rebated to the Company by
WFF if all of the Company's obligations under the WFF agreement are repaid by
June 30, 2005. The following portions of the Second Amendment Fees may also be
rebated to the Company by WFF: (a) $200,000 will be rebated if the New Term Loan
B is repaid in full by September 30, 2004; (b) $150,000 will be rebated if New
Term Loan B is repaid in full by October 31, 2004; and (c) $100,000 will be
rebated if the New Term Loan B is repaid in full by December 31, 2004. The
Second Amendment also reduced the maximum amount that the Company can borrow
under the Company's line of credit from $8,000,000 to $7,000,000. Furthermore,
in the Second Amendment WFF waived all covenant violations by the Company under
the WFF Agreement for all periods ended on or before May 31, 2004 and
established new and revised financial covenants for the Company's minimum
EBITDA, Bickford's minimum EBITDA, and maximum leverage ratios. As of June 30,
2004, the Company was in compliance with all covenants contained in the WFF
Agreement, as amended.
During the first half of 2004, the Company generated $3,601,000 of cash from
operations, primarily as a result of increases in accounts payable, accrued
expenses and other non-current liabilities, which was partially offset by an
increase in accounts receivable, inventory and the net operating losses. The
Company used the cash generated from operations plus $1,022,000 of proceeds from
the sale of Restaurants properties and buildings to purchase $1,192,000 of
property, buildings and equipment, repay bank debt of $3,052,000, reduce capital
lease financing by $25,000 and pay deferred fees of $380,000. During the first
half of 2004, current assets increased by $2,453,000 primarily due to an
increase in accounts receivable and inventory associated with the CCE Division
and to a lesser amount increases associated with Cues accounts receivable and
inventory. Current liabilities increased $4,691,000 mainly due to an increase in
Bickford's and Cues accounts payable and accrued expenses partially offset by a
decrease in current bank debt.
Future Needs For and Sources of Capital. Management believes that cash generated
by operations plus anticipated proceeds from the sale of additional restaurant
assets will be sufficient to fund operations in the immediate future, including
interest and principal payments on bank debt incurred under the WFF Agreement.
21
Impact of Inflation. Inflationary factors such as increases in food and labor
costs directly affect the Company's operations. Many of the Restaurants'
employees are paid hourly rates related to the federal minimum wage, and,
accordingly, increases in the minimum wage generally will result in increases in
the Company's labor costs. In addition, the cost of food commodities utilized by
the Company is subject to market supply and demand pressures. Shifts in these
costs may have an impact on the Company's cost of sales. The Company anticipates
that food cost increases can be offset through selective price increases,
although no assurances can be given that the Company will be successful in this
regard.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to market risk from changes in interest rates on borrowed
funds, which could affect its results of operations and financial condition. At
June 30, 2004, the Company has approximately $6 million in variable, market rate
based debt outstanding. A 10% increase in interest rates would result in
approximately $45,000 of additional interest expense annually based on the
current borrowing levels.
ITEM 4. Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to
ensure that information required to be disclosed in our Securities Exchange Act
of 1934, as amended (the "1934 Act") reports is recorded, processed, summarized
and reported within the time periods specified in the rules and forms of the
Securities and Exchange Commission ("SEC"), and that such information is
accumulated and communicated to our management, including our Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure. In designing and evaluating the disclosure
controls and procedures, management recognized that any controls and procedures,
no matter how well designed and operated, can provide only reasonable assurance
of achieving the desired control objectives, as the Company's are designed to
do, and management necessarily was required to apply its judgment in evaluating
the cost-benefit relationship of possible controls and procedures.
As of June 30, 2004, the Company carried out an evaluation, under the
supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures, as defined in
Rules 13a-15(e) and 15d-15(e) under the 1934 Act. Based upon that evaluation,
our Chief Executive Officer and Chief Financial Officer concluded that the
Company's disclosure controls and procedures are effective in enabling us to
record, process, summarize and report information required to be included in our
periodic SEC filings within the required time period.
There have been no changes in the Company's internal control over financial
reporting that occurred during the period covered by this report that have
materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.
22
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits required by Item 601 of Regulation S-K.
4.1* Second Amendment to Amended and Restated Loan and
Security Agreement dated as of June 30, 2004 between
ELXSI, ELXSI (New Hampshire), Inc., Bickford's
Restaurants, LLC, Bickford's Holdings Company, Inc.,
Bickford's Family Restaurants, Inc. and Wells Fargo
Foothill, Inc.
31.1* Certification of Alexander M. Milley Pursuant to Item
601(b)(31) of Regulation S-K, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
31.2* Certification of David M. Doolittle Pursuant to Item
601(b)(31) of Regulation S-K, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
32.1* Certification of Alexander M. Milley pursuant to Item
601(b)(32) of Regulation S-K, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
32.2* Certification of David M. Doolittle pursuant to Item
601(b)(32) of Regulation S-K, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
* Filed herewith.
(b) Reports on Form 8-K.
None
23
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.
ELXSI CORPORATION
-------------------------------------------
(Registrant)
Date: August 20, 2004 /s/ ALEXANDER M. MILLEY
-------------------------------------------
Alexander M. Milley, Chairman of the Board,
President and Chief Executive Officer
(Principal Executive Officer)
Date: August 20, 2004 /s/ DAVID M. DOOLITTLE
-------------------------------------------
David M. Doolittle, Vice President,
Treasurer, Secretary and Chief Financial
Officer (Chief Accounting Officer and
Principal Financial Officer)
24