FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended October 27, 1996
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 0-12145
MAVERICK RESTAURANT CORPORATION
Exact name of registrant as specified in its charter)
Kansas 48-0936946
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
Suite 200
302 North Rock Road
Wichita, Kansas 67206
(Address of principal executive offices)
(Zip Code)
(316) 685-8281
(Registrant's telephone number, including area code)
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 No X .
----- -----
As of October 27, 1996, 7,081,458 shares of common stock $.01 par value
were outstanding.
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
MAVERICK RESTAURANT CORPORATION
BALANCE SHEETS
(Unaudited)
ASSETS
October 27, January 28,
1996 1996
----------- -----------
Current assets:
Cash and cash equivalents $ 289,658 $ 195,365
Accounts receivable - trade 11,867 13,006
Inventories 156,456 109,074
Prepaid expenses 318,713 103,246
----------- -----------
Total current assets 776,694 420,691
----------- -----------
Property and equipment:
Land - 168,800
Buildings 163,731 288,449
Leasehold improvements 1,347,780 1,333,727
Equipment and fixtures 3,542,157 3,488,869
Leased property under capital lease 1,903,191 1,832,176
----------- -----------
6,956,859 7,112,021
Less: accumulated depreciation and amortization 2,736,982 3,070,944
----------- -----------
4,219,877 4,041,077
----------- -----------
Other assets:
Cost in excess of net tangible assets of purchased
business, net of amortization of $409,939 and $412,040 1,007,666 209,462
License fees, net of amortization of $53,088 and $60,067 80,600 92,996
Deposits 25,154 7,554
----------- -----------
1,113,420 310,012
----------- -----------
$6,109,991 $4,771,780
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long term debt $ 382,955 $ 234,729
Current portion of obligation under capital lease 58,154 63,540
Accounts payable 841,544 533,304
Accrued payroll 206,732 137,589
Other accrued liabilities 407,854 259,747
----------- -----------
Total current liabilities 1,897,239 1,228,909
----------- -----------
Long-term debt, less current portion 1,550,257 332,475
Obligation under capital lease, less current portion 1,552,876 1,457,062
Deferred credits 6,939 24,204
Reserve for future losses 178,836 -
Stockholders' equity:
Preferred stock, $.01 par value, authorized 10,000,000
shares, none issued - -
Common stock, $.01 par value, authorized 20,000,000 shares,
issued 7,141,458, outstanding 7,081,458 71,414 61,414
Additional paid-in capital 6,421,984 6,131,984
Accumulated deficit (5,299,554) (4,194,268)
Treasury stock, 60,000 shares of common stock (270,000) (270,000)
----------- -----------
Total stockholders' equity 923,844 1,729,130
----------- -----------
$6,109,991 $4,771,780
----------- -----------
----------- -----------
See notes to financial statements
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MAVERICK RESTAURANT CORPORATION
STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
October 27, October 31, October 27, October 31,
1996 1995 1996 1995
----------- ----------- ----------- -----------
Net sales $3,793,810 $2,696,893 $ 9,871,010 $8,266,312
----------- ----------- ----------- -----------
Costs and expenses:
Cost of goods sold 1,294,704 860,024 3,267,891 2,594,566
Operating expenses 2,194,375 1,669,656 5,836,460 4,799,321
Depreciation and amortization 159,883 120,564 439,149 349,436
General and administrative 260,998 118,750 568,376 351,196
----------- ----------- ----------- -----------
3,909,960 2,768,994 10,111,876 8,094,519
----------- ----------- ----------- -----------
Operating income (loss) (116,150) (72,101) (240,866) 171,793
----------- ----------- ----------- -----------
Other income (expense)
Interest expense (86,549) (55,875) (216,554) (169,750)
Interest income - 1,401 - 18,575
Loss on sale of asset - - (52,268) -
Provision for restaurant closings
and dispositions - (595,598)
----------- ----------- ----------- -----------
(86,549) (54,474) (864,420) (151,175)
----------- ----------- ----------- -----------
Earnings (loss) before income taxes (202,699) $ (126,575) $(1,105,286) $ 20,618
Provision for income taxes - - - -
----------- ----------- ----------- -----------
Net earnings (loss) $ (202,699) $ (126,575) $(1,105,286) $ 20,618
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net earnings(loss) per common share $ (.03) $ (.02) $ (.17) $ -
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Average shares outstanding 7,081,458 6,081,458 6,524,758 6,081,458
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
See notes to financial statements.
3
MAVERICK RESTAURANT CORPORATION
STATEMENTS OF CASH FLOW
(Unaudited)
Nine Months Ended
October 27, October 31,
1996 1995
----------- -----------
Operating Activities
Net earnings (loss) $(1,105,286) $ 20,618
Adjustments to reconcile net earnings
to net cash provided by operations:
Depreciation and amortization 439,149 349,436
Changes in assets and liabilities
(Increase) decrease in accounts receivable 1,139 (3,196)
(Increase) decrease in inventories (47,382) 4,940
(Increase) decrease in prepaid expenses (215,467) (106,163)
Increase (decrease) in accounts payable 308,240 186,988
Increase (decrease) in accrued expenses 217,250 48,428
Loss on sale of asset 52,268 -
Provision for restaurant closings and dispositions 534,434
Other - net (17,600) (270)
------------ ----------
Net cash provided (used) by operating activities 166,745 500,781
------------ ----------
Investing activities
Proceeds from sale of asset 235,747 -
Purchase of property and equipment (1,000,683) (969,527)
Purchase of other assets (624,811) (18,000)
------------ ----------
Net cash provided (used) by investing activities (1,389,747) (987,527)
------------ ----------
Financing activities
Long term borrowing 1,775,000 -
Repayment of long-term borrowing and capital
lease obligations (457,705) (135,962)
------------ ----------
Net cash provided (used) by financing activities 1,317,295 (135,962)
------------ ----------
Net increase (decrease) in cash and cash equivalents 94,293 (622,708)
Cash and cash equivalents at beginning of period 195,365 801,429
------------ ----------
Cash and cash equivalents at the end of period $ 289,658 $ 178,721
------------ ----------
------------ ----------
See notes to financial statements.
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MAVERICK RESTAURANT CORPORATION
Notes to Financial Statements
(Unaudited)
October 27, 1996
(1) BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01
of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the nine month period
ended October 27, 1996, are not necessarily indicative of the results that
may be expected for the year ended January 26, 1997. For further
information, refer to the financial statements and footnotes thereto included
in the Company's 10-K and Annual Report to Stockholders as filed on April 24,
1996.
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation.
RESULTS OF OPERATIONS
THREE MONTHS ENDED OCTOBER 27, 1996, COMPARED TO THREE MONTHS ENDED
OCTOBER 31, 1995.
For the three months ended October 27, 1996, sales increased 40.7% to
$3,793,810 as compared to 2,696,893 for the third quarter of the prior year.
All of the sales increase can be attributed to the acquisition of four
Amarillo Mesquite Grill restaurants during the second quarter of this year.
The Company operated sixteen restaurants as of October 27, 1996, as compared
to fifteen restaurants as of October 31, 1995. During the quarter the
Company closed one Cotton Patch Cafe which is being converted to an Amarillo
Grill.
Cost of sales, as a percentage of total sales, was 34.1% and 31.9% for
the 1996 and 1995 period respectively. The increase in cost of sales, as a
percentage of total sales, can be attributed to the acquisition of the four
Amarillo Mesquite Grills which run a higher cost of sales percentage than do
the Grandy's or Cotton Patch Cafes.
Operating expenses, as a percentage of total sales, was 57.8% and 61.9%
for the 1996 and 1995 period respectively. The decrease in operating
expense, as a percentage of total sales, can be attributed to the acquisition
of the four Amarillo Mesquite Grill's which run substantially lower operating
costs than do the Grandy's and Cotton Patch Cafes.
Depreciation and amortization has increased from the 1995 period to 1996
as a result of operating more restaurants and amortization of costs
associated with the acquisition of the four Amarillo Mesquite Grills.
General and administrative expense, as a percentage of total sales, was
6.9% and 4.4% for the 1996 and 1995 periods respectively. The increase in
general and administrative expenses, as a percentage of total sales, can be
attributed to an increase in management and supervisory personnel in
anticipation of growth and expansion of the Amarillo Mesquite Grill concept.
NINE MONTHS ENDED OCTOBER 27, 1996, COMPARED TO NINE MONTHS OCTOBER 31, 1995.
For the nine months ended October 27, 1996, sales increased 19.4% to
$9,871,010 as compared to $8,266,312 for the first nine months of the prior
year. All of the sales increase can be attributed to the acquisition of four
Amarillo Mesquite Grill restaurants during the second quarter of this year.
Cost of sales, as a percentage of total sales, was 33.1% and 31.4% for
the 1996 and 1995 periods respectively. The increase in cost of sales, as a
percentage of total sales, can be attributed to the acquisition of the four
Amarillo Mesquite Grills which run a higher cost of sales percentage than do
the Grandy's or Cotton Patch Cafes.
Operating expenses as a percentage of total sales, was 59.1% and 58.1%
for the 1996 and 1995 period respectively.
Depreciation and amortization has increased from the 1995 period to 1996
as a result of operating more restaurants and amortization of costs
associated with the acquisition of four Amarillo Mesquite Grill restaurants.
General and administrative expenses, as a percentage of sales, was 5.8%
and 4.3% for the 1996 and 1995 periods respectively. The increase is
general and administrative expense can be attributed to an increase in
management and supervisory personnel in anticipation of growth and expansion
of the Amarillo Mesquite Grill concept.
During the nine months ending October 27, 1996, the Company took some
major steps toward reorganizing which will change the direction of the
Company in the future. Effective June 17, 1996, the Company purchased four
Amarillo Mesquite Grill restaurants. The purchase price was $1,500,000 cash
and 1,000,000 shares of the Company's common stock valued at $.30 per share.
Amarillo Mesquite Grill is a casual - dining restaurant concept that
specializes in
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aged prime rib and steaks along with chicken and seafood all uniquely grilled
over an open flame of mesquite wood. The Company plans to expand the
Amarillo concept.
In preparation for this expansion the Company has identified several
existing restaurants which have been or will be closed. During the second
quarter the Company sold the real estate of a closed Grandy's restaurant
which has been held as rental property. The Company incurred a loss of
$52,268 from the sale of this property. In addition the Company closed one
Cotton Patch Cafe and identified two Grandy's restaurants to be closed. With
respect to these three restaurants the Company incurred a write off in the
amount of $595,598 which consists of a non-cash write-off of book value of
assets in the amount of $355,598 and $240,000 representing estimated future
costs to be incurred prior to disposing of the restaurants.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds to finance its business have been
its cash flow from operations, and proceeds from bank borrowings. At
October 27, 1996, the Company had a working capital deficit of $1,120,545
compared to working capital deficit of $632,118 as of October 31, 1995.
Substantially, all of the Company's revenues are derived from cash
sales. The Company does not maintain significant receivables and inventories;
therefore, working capital requirements for continuing operations are not
significant.
Additions to property and equipment represent the single largest use of
funds by the Company. These expenditures are primarily made for the purchase
and development of new restaurants. Capital expenditures were $1,000,683 for
nine months ended October 27, 1996, compared to $987,527 for the nine months
ended October 31, 1995. These capital expenditures have resulted in an
increase in property and equipment and a decrease in working capital.
The Company will actively pursue the sale of its six store Grandy's
division. The Company intends to expand the Amarillo Grill concept. Each
new unit will require approximately $1,500,000 for land, building and
equipment. The Company intends to sale-leaseback the real estate cost. The
Company has obtained a two million bank credit line for development of the
Amarillo Grill restaurants.
The Company does not expect to pay dividends in the foreseeable future,
but rather intends to retain all available funds for the development of the
business.
INFLATION
The Company is constantly evaluating ways to improve efficiency,
productivity and operational standards to increase its return on investment.
Management believes it has done an effective job of countering the effects of
inflation on operating costs.
The Company's food costs are closely tied to market conditions. The
Company has been able to maintain its cost of sales percentages by refining
cost controls, directing marketing activities to reemphasize low-cost menu
items and selectively increasing menu prices.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities.
Not applicable.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 5. Other Information.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Not applicable.
(b) No reports on Form 8-K have been filed during the quarter for
which this report is filed.
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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.
MAVERICK RESTAURANT CORPORATION
(Registrant)
Date December 9, 1996 /s/ LINN F. HOHL
--------------------- -----------------------------------
Linn F. Hohl - Vice President of
Finance, Secretary and Treasurer
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