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 April 27, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to ______________
Commission file number 0-12145
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 X No .
---- ----
As of April 27, 1997, 7,088,691 shares of common stock $.01 par value were
outstanding.
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
MAVERICK RESTAURANT CORPORATION
BALANCE SHEETS
(Unaudited)
ASSETS April 27, January 26,
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1997 1997
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Current assets:
Cash and cash equivalents $ 404,486 $ 328,285
Accounts receivable - trade 34,025 22,058
Inventories 164,314 219,315
Prepaid expenses 56,040 130,902
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Total current assets 658,865 700,560
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Property and equipment:
Buildings 497,060 224,178
Leasehold improvements 1,421,765 1,433,338
Equipment and fixtures 2,918,685 3,901,586
Leased property under capital lease 1,234,626 1,903,191
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6,072,136 7,462,293
Less: accumulated depreciation and amortization 1,290,826 2,860,486
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4,781,310 4,601,807
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Other assets:
Cost in excess of net tangible assets of purchased
business, net of amortization of $60,700 and $436,309 886,311 1,012,496
License fees, net of amortization of $8,590 and $52,361 52,410 63,327
Deposits 79,658 79,504
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1,018,379 1,155,327
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$6,458,554 $6,457,694
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long term debt $1,743,912 $1,014,778
Current portion of obligation under capital lease 32,649 95,947
Accounts payable 1,151,428 1,039,399
Accrued payroll 172,572 205,373
Other accrued liabilities 476,110 575,514
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Total current liabilities 3,576,671 2,931,011
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Long-term debt, less current portion 1,448,349 1,506,421
Obligation under capital lease, less current portion 1,074,699 1,500,618
Deferred credits 6,789
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 7,148,691, outstanding 7,088,691 71,487 71,414
Additional paid-in capital 6,522,289 6,491,984
Accumulated deficit (5,964,941) (5,780,543)
Treasury stock, 60,000 shares of common stock (270,000) (270,000)
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Total stockholders' equity 358,835 512,855
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$6,458,554 $6,457,694
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See notes to financial statements
2
MAVERICK RESTAURANT CORPORATION
STATEMENT OF OPERATIONS
(Unaudited)
Thirteen Weeks Ended
April 27 April 28
----------------------------
1997 1996
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Net sales $3,902,648 $2,762,316
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Costs and expenses:
Cost of goods sold 1,425,504 878,369
Operating expenses 2,406,843 1,669,202
Depreciation and amortization 147,557 134,067
General and administrative 242,652 125,268
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4,222,556 2,806,906
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Operating income (loss) (319,908) (44,590)
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Other income (expense)
Interest expense (94,358) (61,143)
Noncash expense from issuance
of stock options pursuant to
debt guarantees (24,460) -
Gain on sale of assets 254,328 -
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135,540 (61,413)
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Earnings (loss) before income taxes (184,398) (105,733)
Provision for income taxes - -
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Net earnings (loss) $ (184,398) $ (105,733)
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Net earnings (loss) per common share $ (.03) $ (.02)
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---------- ----------
Average shares outstanding 7,088,691 6,081,458
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See notes to financial statements.
3
MAVERICK RESTAURANT CORPORATION
STATEMENTS OF CASH FLOW
(Unaudited)
Thirteen Weeks Ended
April 27 April 28
-----------------------------
1996 1996
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Operating Activities
Net loss $ (184,398) (105,733)
Adjustments to reconcile net earnings
to net cash provided by operations:
Depreciation and amortization 147,557 134,067
Changes in assets and liabilities
(Increase) decrease in accounts receivable (11,967) ( 6,862)
(Increase) decrease in inventories (11,174) (13,780)
(Increase) decrease in prepaid expenses 80,347 36,757
Increase (decrease) in accounts payable 112,029 16,830
Increase (decrease) in accrued expenses (132,205) ( 9,824)
Gain on sale of assets (254,328)
Noncash expense from issuance of stock
options pursuant to debt guarantees 24,460
Other net (6,854) 1,500
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Net cash provided (used) by operating activities (236,533) 52,955
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Investing activities
Purchase of property and equipment (784,039) (88,585)
Purchase of license fees - (9,000)
Proceeds from sale of assets 435,000 -
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Net cash provided (used) by investing activities (349,039) ( 97,585)
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Financing activities
Sale of common stock 5,918 -
Short-term borrowings 750,000 75,000
Repayment of long-term borrowings
and capital lease obligations (94,145) (55,553)
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Net cash provided (used) by financing activities 661,773 19,447
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Net increase (decrease) in cash and cash equivalents 76,201 (25,183)
Cash and cash equivalents at beginning of period 328,285 195,365
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Cash and cash equivalents at the end of period $ 404,486 $ 170,182
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See notes to financial statements.
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MAVERICK RESTAURANT CORPORATION
Notes to Financial Statements
(Unaudited)
April 27, 1997
(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
three month period ended April 27, 1997 are not necessarily indicative of
the results that may be expected for the year ended January 31, 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, 1997.
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation.
RESULTS OF OPERATIONS
THREE MONTHS ENDED APRIL 27, 1997 COMPARED TO THREE MONTHS ENDED APRIL 28, 1996.
For the three months ended April 27, 1997, sales increased 41.3% to
$3,902,648 as compared to sales of $2,762,316 for the first quarter of the prior
year. As of April 27, 1997, the Company operated seven Amarillo Mesquite Grills
and four Cotton Patch Cafes as compared to eight Grandy's restaurants and eight
Cotton Patch Cafes as of April 28, 1996. All of the sales increase can be
attributed to the seven Amarillo Grills. During the quarter the Company sold
its eight Grandy's restaurants and converted two Cotton Patch Cafes to Amarillo
Mesquite Grills.
Cost of sales, as a percentage of total sales, was 36.5% and 31.8% for the
1997 and 1996 periods respectively. The increase in cost of sales, as a
percentage of total sales, is the result of a change in direction by the Company
from fast food restaurants such as our Grandy's which historically have had a
31.0% cost of sales to an upscale, full service restaurant concept, Amarillo
Mesquite Grill, which has a higher cost of sales.
Operating expenses, as a percentage of total sales were 61.7% and 60.4% for
the 1997 and 1996 periods respectively. The increase in operating expenses, as
a percentage of total sales, can be attributed to training expenses and pre-
opening costs relating to expansion of the Amarillo Mesquite Grill concept.
During the quarter the Company incurred approximately $210,000 in recruiting and
training expenses relating to the development of management personnel for future
restaurants. The Company has adopted a policy of expensing all pre-opening
expenses as incurred. During the first quarter, the Company opened two Amarillo
Mesquite Grills which resulted in expensing approximately $165,000 for pre-
opening costs.
General and administrative expenses, as a percentage of total sales, were
6.2% and 4.5% for the 1997 and 1996 periods respectively. The increase in
general and administrative expenses can be attributed to an increase in
management and supervisory personnel in anticipation of growth and expansion of
the Amarillo Grill concept.
The increase in the dollar amount of interest expense from 1996 to 1997 is
the result of an increase in bank debt relating to new store development and the
acquisition of four Amarillo Grills.
The Company incurred noncash expenses of $24,460 in the first quarter
related to the issuance of stock options pursuant to debt guarantees.
The Company has determined that it is in its best interest to focus its
efforts and financial resources on the Amarillo Grill concept. Therefore,
effective March 24, 1997, the Company sold to Red Apple Corporation all of the
assets of the eight Grandy's restaurants owned and operated by the Company. Red
Apple Corporation is owned by five individuals, four of which are officers and
directors of the Company. The consideration received for these assets consisted
of $435,000 in cash. Red Apple Corporation also assumed the lease obligations
associated with these restaurants. The Company recognized a gain of
approximately $254,000 on this disposition. The sales price was computed as
three times last year's store level cash flow before overhead or administrative
expenses.
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 the sale of the Company's
common stock. At April 27, 1997, the Company had a working capital deficit of
$2,917,806 compared to working capital deficit of $2,230,451 as of January 26,
1997. The Company does have available $600,000 of unused funds from a
$2,000,000 bank line of credit. While the line of credit expires in June 1997,
management anticipates the loan agreement will be renewed at that time under
comparable terms.
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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. The expenditures are primarily made for the purchase
and development of new restaurants. Capital expenditures were $784,039 for
three months ended April 27, 1997, compared to $310,939 for the three months
ended April 28, 1996. These capital expenditures have resulted in an
increase in property and equipment and a decrease in working capital.
The Company plans to continue expansion of the Amarillo Mesquite Grill
concept in fiscal 1998. The Company intends to lease existing restaurant
properties which are suitable for conversion to the Amarillo Mesquite Grill
concept. It is expected that each conversion will require approximately
$300,000 to $500,000 for equipment and remodel costs. A ground-up proto-type
restaurant will cost approximately $1.7 million for the land, building and
equipment. New restaurants will be financed with proceeds received as a result
of bank debt.
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.
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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 June 9, 1997 /s/ LINN F. HOHL
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Linn F. Hohl - Vice President
of Finance,
Secretary and
Treasurer
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