<PAGE> 1
FORM 10-Q
SECURITIES & 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 19, 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: 0-28234
CASA OLE RESTAURANTS, INC.
(Exact name of registrant as specified in its charter)
TEXAS 76-0493269
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
1135 EDGEBROOK, HOUSTON, TEXAS 77034-1899
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: 713/943-7574
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of June 4, 1996: 3,597,705 SHARES OF COMMON STOCK, PAR VALUE
$.01.
<PAGE> 2
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CASA OLE' RESTAURANTS, INC.
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS 12/29/95 4/19/96
----------- -----------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,003,585 $ 1,414,565
Royalties receivable 125,983 47,644
Receivables from affiliates 32,701 15,223
Other receivables 33,554 164,449
Notes receivable from related parties 38,964 43,964
Inventory 160,442 149,326
Prepaid expenses and other current assets 84,337 206,948
----------- -----------
Total current assets 1,479,566 2,042,119
----------- -----------
Property, plant and equipment 4,787,706 4,781,085
Less accumulated depreciation 3,408,945 3,460,500
----------- -----------
Net property, plant and equipment 1,378,761 1,320,585
----------- -----------
Other assets 0 24,349
----------- -----------
$ 2,858,327 $ 3,387,053
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 182,959 $ 182,959
Accounts payable 267,956 237,376
Accrued sales and liquor taxes 116,474 78,798
Accrued payroll and taxes 127,951 124,072
Accrued expenses 166,261 260,989
----------- -----------
Total current liabilities 861,601 884,194
----------- -----------
Long-term debt 62,486 37,885
Stockholders' equity:
Preferred stock, $.01 par value, 1,000,000 shares
authorized -- --
Capital stock 141,660 141,660
Additional paid-in capital 2,069,922 2,069,922
Retained earnings (deficit) (77,342) 453,392
Treasury stock, at cost (200,000) (200,000)
----------- -----------
Total stockholders' equity 1,934,240 2,464,974
----------- -----------
$ 2,858,327 $ 3,387,053
=========== ===========
</TABLE>
<PAGE> 3
CASA OLE' RESTAURANTS, INC.
COMBINED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
16-Week Periods Ended
---------------------
4/21/95 4/19/96
----------- -----------
<S> <C> <C>
Revenues:
Restaurant sales $ 5,145,146 $ 5,113,540
Franchise fees 205,496 232,188
Other 13,569 19,672
----------- -----------
5,364,211 5,365,400
----------- -----------
Costs and expenses:
Cost of sales 1,281,905 1,282,986
Restaurant operating expenses 3,077,652 2,789,854
General and administrative 606,609 722,254
Depreciation and amortization 86,344 54,435
----------- -----------
5,052,510 4,849,529
----------- -----------
Operating income 311,701 515,871
Other income (expense):
Interest (14,085) (13,828)
Other, net 41,653 101,356
----------- -----------
27,568 87,528
Income before income tax expense 339,269 603,399
Income tax expense 22,743 72,665
----------- -----------
Net income $ 316,526 $ 530,734
=========== ===========
Pro forma income statement data:
Net income as reported $ 316,526 $ 530,734
Pro forma adjustments:
Compensation and related party
expense arrangements 252,308 161,700
Provision for income taxes (196,140) (210,422)
----------- -----------
Pro forma net income $ 372,694 $ 482,012
=========== ===========
Pro forma net income per share $ 0.13 $ 0.17
=========== ===========
Pro forma weighted average number of shares 2,793,116 2,793,116
=========== ===========
</TABLE>
<PAGE> 4
CASA OLE' RESTAURANTS, INC.
COMBINED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
16-Week Periods Ended
--------------------------
4/21/95 4/19/96
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 316,526 $ 530,734
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 86,344 54,435
Loss on sale of fixed assets 690 13,005
Changes in assets and liabilities:
Royalties receivable -- 78,339
Receivable from affiliates 10,052 17,478
Other receivables (32,975) (130,895)
Inventory (5,312) 11,116
Prepaids and other current assets 15,584 (122,611)
Accounts payable (55,053) (30,580)
Accrued expenses and other liabilities 177,957 53,173
Other assets (28,903) (24,349)
----------- -----------
Total adjustments 168,384 (80,889)
----------- -----------
Net cash provided by operating activities 484,910 449,845
----------- -----------
Cash flows from investing activities:
Proceeds from issuance of notes receivable (44,500) (5,000)
Purchase of property, plant and equipment (27,329) (15,364)
Proceeds from sale of property, plant
and equipment -- 6,100
----------- -----------
Net cash used in investing activities (71,829) (14,264)
----------- -----------
Cash flows from financing activities:
Payment of dividends (275,000) --
Payments of notes payable (117,221) (24,601)
----------- -----------
Net cash used in financing activities (392,221) (24,601)
----------- -----------
Increase in cash and cash equivalents 20,860 410,980
Cash and cash equivalents at beginning of period 947,497 1,003,585
----------- -----------
Cash and cash equivalents at end of period $ 968,357 $ 1,414,565
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the period:
Interest $ 20,658 $ 15,402
Income taxes $ -- $ --
</TABLE>
<PAGE> 5
CASA OLE RESTAURANTS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
In the opinion of Casa Ole Restaurants, Inc. (the "Company"),
the accompanying combined financial statements contain all adjustments
(consisting only of normal recurring accruals and adjustments)
necessary for a fair presentation of the combined financial position
as of April 19, 1996 and the combined statements of income and cash
flows for the 16-week periods ended April 19, 1996 and April 21, 1995.
The combined statement of income for the 16-week period ended April
19, 1996, is not necessarily indicative of the results to be expected
for the full year.
2. ACCOUNTING POLICIES
During the interim periods the Company follows the accounting
policies set forth in its combined financial statements in its
Prospectus dated April 25, 1996. Reference should be made to such
financial statements for information on such accounting policies and
further financial details.
3. PRO FORMA DATA
The pro forma income statement data reflects adjustments to
compensation and related party expense arrangements, and reflects an
adjustment to the provision for income taxes to reflect a 37%
effective tax rate, as if the Company had been taxed as a C
corporation.
Pro forma weighted average shares represent the number of
shares (2,732,705) issued pursuant to the contribution agreement for
the predecessor companies (effective April 24, 1996) and 60,411 shares
assumed to be issued to fund certain S corporation distributions.
4. SUBSEQUENT EVENTS
The Company announced its initial public offering of
2,000,000 shares of Common Stock at a price of $11.00 per share on
April 25, 1996. On May 1, 1996, the Company redeemed 1,135,000 shares
of Common Stock for $10.00 per share from a principal of the Company.
S corporation distributions of approximately $1.2 million
that relate to undistributed income through the date of the initial
public offering will be made during the second quarter to shareholders
of the predecessor corporations.
<PAGE> 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Revenues. The Company's revenues for the first quarter of fiscal 1996
of $5.4 million were unchanged from the same quarter a year ago. Restaurant
sales for the first quarter of 1996 remained at $5.1 million; however, sales at
restaurants operating in both fiscal quarters were up 5.4% over last year's
same quarter. This increase was principally the result of increased volume for
the operating restaurants, although conforming changes in operating periods for
predecessor companies also contributed to the increase. Exclusive of the effect
of the conforming changes in the operating periods, comparable store sales were
up 4.1% for the first quarter of 1996.
During the first quarter of 1995, the Company operated two restaurants
that did not conform to the Company's current operating model. One of those
restaurants was closed during the first quarter of 1995 and the other
restaurant was closed during the second quarter of 1995. During the first
quarter of 1995 the two restaurants generated sales of approximately $294,000.
Costs and Expenses. Cost of sales as a percentage of restaurant sales
during the current quarter increased slightly to 25.1% from 24.9% in the same
quarter last year. This increase was attributed to modest fluctuations in
ingredient costs.
Restaurant operating expenses decreased $288,000, or 9.4%, in the
first quarter of 1996 as compared with the first quarter of 1995. As a
percentage of restaurant sales, restaurant operating expenses decreased to
54.6% in the current quarter as compared to 59.8% in the same quarter last
year. This decrease was attributed to two items. First, the restaurant
operating expenses in the two stores that were closed during 1995 were
significantly greater than those in ongoing restaurants. Second, the 1995
restaurant operating expenses included approximately $90,000 of related party
salary expense that is not a component of the current quarter expenses. After
giving effect to these two components, restaurant operating expenses as a
percentage of restaurant sales would have been 55.5% for the first quarter of
1995.
General and administrative expenses (G&A) increased $116,000, or
19.1%, in the current quarter as compared with the prior year's same quarter.
As a percentage of total revenues, G&A increased to 13.5% in the first quarter
of 1996 from 11.3% in the first quarter of 1995. Of the increase, $50,000
related to an allowance for past due royalties, and approximately $33,000 was
due to the addition of three administrative employees subsequent to June 1995.
Depreciation and amortization expense as a percentage of total
revenues decreased from 1.6% in the first quarter of 1995 to 1.0% in the first
quarter of 1996. This decrease
<PAGE> 7
was the result of using accelerated methods of depreciation on equipment in the
early years of equipment life, combined with the relatively small amount of
equipment additions made by the Company during the current quarter.
Other Income (Expense). Net other income as a percentage of total
revenues increased from 0.5% in the first quarter of 1995 to 1.6% in the first
quarter of 1996. This increase was due to the refund of over paid rent at one
of the restaurants. The overpayment of approximately $60,000 occurred over the
past four years and was discovered and refunded during the first quarter of
1996.
Income Tax Expense. Prior to the Company's initial public offering,
substantially all of the predecessor corporations elected to be taxed as S
corporations under the provisions of Subchapter S of the Internal Revenue Code.
As a result of such election, federal income taxes on the net income of these
corporations were payable personally by the shareholders. The provision for
income taxes reflected in the financial statements is for state franchise taxes
on all restaurants and for federal income taxes on the predecessor corporations
that were taxable as C corporations. The effective tax rates on those
corporations were less than the expected rates due to applicable graduated tax
rates.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $450,000 for the first
quarter of 1996 compared to $485,000 for the same period last year. This
decrease is attributed to changes in certain components of working capital
coupled with an increase in net income. The most significant change in the
working capital components was the increase in prepaid assets for various
expenditures related to the initial public offering.
Capital expenditures were approximately $15,000 for the first quarter
of 1996 compared to approximately $27,000 for the first quarter of 1995. Such
expenditures were for replacement equipment in various restaurants.
In late April 1996, the Company received the proceeds from its initial
public offering of 2,000,000 shares of Common Stock. On May 1, the Company used
$11.35 million of the proceeds to redeem 1,135,000 shares of Common Stock owned
by Michael D. Domec. The remainder of the proceeds, net of offering expenses,
will be used to finance the development of additional restaurants, remodel
existing restaurants, install point of sale systems and fund general corporate
expenses.
The Company is under contract on a site in Copperas Cove, Texas, which
is anticipated to be the first of three Company-operated openings during 1996.
The Company also has a signed letter of intent on a location in Bellmead
(Waco), Texas. In addition to the construction of new restaurants, the Company
will be remodeling several of its older locations and installing a point of
sale system. Expenditures over the next 12 months for planned capital
improvements are currently anticipated to approximate $4.5 million.
<PAGE> 8
Pursuant to the terms of the reorganization of the Company,
distributions of approximately $1.2 million that relate to undistributed income
through the date of the initial public offering will be made during the second
quarter to shareholders of the predecessor S corporations. Cash flow from
operations, combined with the proceeds from the initial public offering, will
be sufficient to fund planned capital expenditures for the next 12 months, as
well as the distributions to the shareholders of the predecessor S
corporations.
<PAGE> 9
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS
Exhibit
Number: Document Description
------- --------------------
3.1 Articles of Incorporation of the Company (incorporated by reference
to Exhibit 3.1 to Registrant's Form S-1 Registration Statement No.
333-1678 dated February 27, 1996).
3.2 Bylaws of the Company (incorporated by reference to Exhibit 3.1 to
Registrant's Form S-1 Registration Statement No. 333-1678 dated
February 27, 1996).
27.1 Financial Data Schedule
<PAGE> 10
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CASA OLE RESTAURANTS, INC.
Dated: June 6, 1996
------------ By: /s/ Louis P. Neeb
---------------------
Louis P. Neeb
Chairman and Chief Executive Officer
(Principal Executive Officer)
Dated: June 6, 1996
------------ By: /s/Stacy M. Riffe
---------------------
Stacy M. Riffe
Vice President, Chief Financial Officer,
Secretary & Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
<PAGE> 11
EXHIBIT INDEX
27.1 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-27-1996
<PERIOD-END> APR-19-1996
<CASH> 1,414,565
<SECURITIES> 0
<RECEIVABLES> 271,280
<ALLOWANCES> 0
<INVENTORY> 149,326
<CURRENT-ASSETS> 2,042,119
<PP&E> 4,781,085
<DEPRECIATION> 3,460,500
<TOTAL-ASSETS> 3,387,053
<CURRENT-LIABILITIES> 884,194
<BONDS> 0
<COMMON> 141,660
0
0
<OTHER-SE> 2,323,314
<TOTAL-LIABILITY-AND-EQUITY> 3,387,053
<SALES> 5,113,540
<TOTAL-REVENUES> 5,365,400
<CGS> 1,282,986
<TOTAL-COSTS> 4,072,840
<OTHER-EXPENSES> 776,689
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,828
<INCOME-PRETAX> 603,399
<INCOME-TAX> 72,665
<INCOME-CONTINUING> 530,734
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 530,734
<EPS-PRIMARY> .17
<EPS-DILUTED> .17
</TABLE>
