<PAGE> 1
UNITED STATES
SECURITIES & 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 28, 1998
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
--- ---
Number of shares outstanding of each of the issuer's classes of common stock,
as of July 27, 1998: 3,597,705 shares of common stock, par value $.01.
<PAGE> 2
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CASA OLE' RESTAURANTS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS 6/28/98 12/28/97
------------ ------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,344,358 $ 986,024
Royalties receivable 84,416 111,964
Receivables from affiliates 0 13,000
Other receivables 279,466 338,599
Inventory 414,768 423,237
Taxes receivable 0 102,409
Prepaid expenses and other current assets 581,644 546,287
------------ ------------
Total current assets 2,704,652 2,521,520
------------ ------------
Property, plant and equipment 15,275,199 21,748,741
Less accumulated depreciation 4,321,977 4,450,221
------------ ------------
Net property, plant and equipment 10,953,222 17,298,520
Deferred tax assets 1,522,671 156,164
Other assets 6,756,316 6,531,934
------------ ------------
$ 21,936,861 $ 26,508,138
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 0 $ 1,150,000
Accounts payable 1,643,326 1,097,238
Income taxes payable 1,384,784 0
Accrued sales and liquor taxes 333,590 348,397
Accrued payroll and taxes 912,974 1,121,011
Accrued expenses 468,575 828,356
------------ ------------
Total current liabilities 4,743,249 4,545,002
------------ ------------
Long-term debt 910,000 10,106,871
Other liabilities 109,201 121,075
Deferred gain 3,459,513 0
Stockholders' equity:
Preferred stock, $.01 par value, 1,000,000 shares
authorized 0 0
Capital stock, $0.01 par value, 20,000,000 shares
authorized, 4,732,705 shares issued 47,327 47,327
Additional paid-in capital 20,685,610 20,685,610
Retained earnings 3,331,961 2,352,253
Treasury stock, cost of 1,135,000 shares (11,350,000) (11,350,000)
------------ ------------
Total stockholders' equity 12,714,898 11,735,190
------------ ------------
$ 21,936,861 $ 26,508,138
============ ============
</TABLE>
2
<PAGE> 3
CASA OLE' RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
13-WEEK PERIODS ENDED 26-WEEK PERIODS ENDED
6/28/98 6/29/97 6/28/98 6/29/97
------------ ------------ ------------ ------------
(AS RESTATED) (AS RESTATED)
<S> <C> <C> <C> <C>
Revenues:
Restaurant sales $ 11,677,863 $ 5,670,639 $ 23,197,059 $ 11,088,546
Franchise fees 290,000 215,190 562,230 485,860
Other 39,800 9,641 93,299 26,466
------------ ------------ ------------ ------------
12,007,663 5,895,470 23,852,588 11,600,872
------------ ------------ ------------ ------------
Costs and expenses:
Cost of sales 3,213,461 1,427,773 6,292,647 2,749,027
Labor 3,909,799 1,933,104 7,781,350 3,767,614
Restaurant operating expenses 2,381,740 1,276,530 4,914,285 2,481,696
General and administrative 1,067,439 614,745 2,143,616 1,218,574
Depreciation and amortization 389,824 152,558 812,538 260,582
------------ ------------ ------------ ------------
10,962,263 5,404,710 21,944,436 10,477,493
------------ ------------ ------------ ------------
Operating income 1,045,400 490,760 1,908,152 1,123,379
------------ ------------ ------------ ------------
Other income (expense):
Interest income 8,409 81,517 11,767 140,729
Interest expense (215,020) (6,026) (429,925) (17,590)
Other, net 13,016 (4,186) 51,877 (1,973)
------------ ------------ ------------ ------------
(193,595) 71,305 (366,281) 121,166
------------ ------------ ------------ ------------
Income before income taxes expense and extraordinary item 851,805 562,065 1,541,871 1,244,545
Income tax expense 336,463 220,457 602,138 477,203
------------ ------------ ------------ ------------
Net income before extraordinary item 515,342 341,608 939,733 767,342
Extraordinary item (net of tax of $25,025) -- -- 39,975 --
------------ ------------ ------------ ------------
Net income $ 515,342 $ 341,608 $ 979,708 $ 767,342
============ ============ ============ ============
Basic and diluted income per share (before extraordinary item) $ 0.14 $ 0.09 $ 0.26 $ 0.21
============ ============ ============ ============
Basic and diluted income per share (extraordinary item) -- -- 0.01 --
============ ============ ============ ============
Basic and diluted income per share $ 0.14 0.09 0.27 0.21
============ ============ ============ ============
Weighted average number of shares (diluted) 3,604,827 3,598,679 3,604,777 3,598,416
============ ============ ============ ============
</TABLE>
3
<PAGE> 4
CASA OLE' RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
26-WEEK PERIODS ENDED
6/28/1998 6/29/1997
------------ -------------
(AS RESTATED)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 979,708 $ 767,342
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 812,538 260,582
Deferred taxes (1,366,507) 0
Gain on early extinguishment of debt (39,975) 0
Gain on sale of fixed assets (7,188) 0
Changes in assets and liabilities, net of effects of acquisition:
Royalties receivable 27,548 (39,726)
Receivable from affiliates 13,000 1,000
Other receivables 59,133 35,326
Income tax receivable/payable 1,462,168 (284,906)
Inventory 673 (28,504)
Prepaids and other current assets (134,733) (293,530)
Other assets (137,365) (203)
Accounts payable 546,088 81,745
Accrued expenses and other liabilities (594,499) (4,827)
------------ ------------
Total adjustments 640,881 (273,043)
------------ ------------
Net cash provided by operating activities 1,620,589 494,299
------------ ------------
Cash flows from investing activities:
Sale of property 11,360,632 0
Proceeds from minority partners' contribution 0 21,000
Issuance of notes receivable 0 (115,000)
Purchase of property, plant and equipment (2,341,016) (3,976,648)
------------ ------------
Net cash provided by (used in) investing activities 9,019,616 (4,070,648)
------------ ------------
Cash flows from financing activities:
Net borrowings under line of credit agreement 287,153 0
Payments of notes payable (10,569,024) (153,015)
------------ ------------
Net cash provided by (used in) investing activities (10,281,871) (153,015)
------------ ------------
Increase (decrease) in cash and cash equivalents 358,334 (3,729,364)
Cash and cash equivalents at beginning of period 986,024 6,419,305
------------ ------------
Cash and cash equivalents at end of period $ 1,344,358 $ 2,689,941
============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period:
Interest $ 401,332 $ 17,590
Income taxes $ 351,745 $ 705,000
Non-cash activities:
Exchange of note for equipment and inventory $ 207,800 $ 0
Note issued for purchase of restaurant $ 0 $ 750,000
</TABLE>
4
<PAGE> 5
CASA OLE RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
In the opinion of Casa Ole Restaurants, Inc. (the "Company"),
the accompanying consolidated financial statements contain all
adjustments (consisting only of normal recurring accruals and
adjustments) necessary for a fair presentation of the consolidated
financial position as of June 28, 1998, and the consolidated
statements of income and cash flows for the 26-week and 13-week
periods ended June 28, 1998 and June 29, 1997. The consolidated
statements of income for the 26-week and 13-week periods ended June
28, 1998 are not necessarily indicative of the results to be expected
for the full year.
Beginning in fiscal 1998, the Company changed its fiscal
quarters to four thirteen week quarters. For comparative purposes,
fiscal 1997 consolidated statements of income and cash flows have
been restated for the 26-week and 13-week periods ended June 29,
1997.
2. ACCOUNTING POLICIES
During the interim periods the Company follows the accounting
policies set forth in its consolidated financial statements in its
Annual Report and Form 10-K (file number 0-28234). Reference should
be made to such financial statements for information on such
accounting policies and further financial details.
Effective the first quarter of fiscal 1998, the Company
changed its estimate of the useful lives of certain recently acquired
fixed assets, primarily those belonging to Monterey's Acquisition
Corp. ("MAC"). The purpose of the change was to bring the asset lives
of Casa Ole and MAC into conformity with each other and with industry
norms. As a result of this change, income before income taxes
increased approximately $264,000, net income increased approximately
$162,000 and basic and diluted earnings per share increased
approximately $0.04 for the 26-weeks ended June 28, 1998.
The Company does not have or participate in transactions
involving derivative, financial and commodity instruments.
3. PRO FORMA DATA
On July 2, 1997, the Company purchased 100% of the
outstanding stock of MAC. The Company purchased the shares of common
stock for $4.0 million, paid off outstanding debt and accrued
interest totaling $7.1 million and funded various other agreed upon
items approximating $500,000. Approximately $6.0 million of goodwill
was recorded as a result of this purchase. At the time of the
acquisition, MAC owned and operated 26 restaurants in Texas and
Oklahoma under the names "Monterey's Tex-Mex Cafe," "Monterey's
Little Mexico" and "Tortuga Cantina."
5
<PAGE> 6
The table below presents unaudited pro forma income statement
information as if the Company had purchased MAC at the beginning of
fiscal 1997. Pro forma adjustments were made to remove consulting
fees that are non-continuing, amortize the resulting goodwill over 40
years and remove the pre-acquisition goodwill amortization, reflect
net interest expense on the debt resulting from the acquisition and
record additional income tax at an effective rate of 39.0% on the
combined income of the Company and MAC. The acquisition was accounted
for as a purchase.
<TABLE>
<CAPTION>
26 Week 13 Week
Period Ending Period Ending
6/29/97 6/29/97
------------- ------------
<S> <C> <C>
Revenues................................$ 22,066,628 $ 11,270,358
Net income..............................$ 1,010,430 $ 449,024
Diluted income per share................$ 0.28 $ 0.12
</TABLE>
The pro forma information does not purport to be indicative
of results of operations which would have occurred had the
acquisition been consummated on the date indicated or future results
of operations.
4. NEW FINANCIAL ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards No. 128,
"Earnings per Share", specifies new measurement, presentation and
disclosure requirements for earnings per share and is required to be
applied retroactively upon initial adoption. The Company has adopted
SFAS No. 128 effective with the release of December 28, 1997 earnings
data, and accordingly, has restated herein all previously reported
income per share data. Basic income per share is based on the
weighted average shares outstanding without any dilutive effects
considered. Diluted income per share reflects dilution from all
continently issuable shares, including options and warrants. For the
26-week and 13-week periods ended June 29, 1997, the effect of
dilutive stock options increased the weighted average shares
outstanding by 711 and 974 shares respectively, which does not affect
the determination of diluted income per share. For the 26-week and
13-week periods ended June 28, 1998, the effect of dilutive stock
options increased the weighted average shares outstanding by 7,072
and 7,122 shares respectively, which does not affect the
determination of diluted income per share.
AICPA Statement of Position 98-5, "Reporting on the Costs of
Start-up Activities" ("SOP 98-5"), requires that costs of start-up
activities be expensed as incurred and to report the initial adoption
as a cumulative effect of a change in accounting principle. SOP 98-5
is effective for financial statements for fiscal years beginning after
December 15, 1998. Deferred start-up costs as of June 28, 1998 and
December 28, 1997 were $169,819 and $206,755, respectively.
5. EXTINGUISHMENT OF DEBT
In fiscal 1997, the Company acquired the assets of one of its
franchise locations for a $750,000 note payable to the prior
franchisee. During the first quarter of 1998, the Company accepted an
offer from the prior franchisee to prepay the remaining $450,000
balance of the note for a discounted sum of $385,000, resulting in a
gain, net of taxes, of $39,975.
6
<PAGE> 7
6. SALE-LEASEBACK TRANSACTION
On June 25, 1998, the Company completed a sale and leaseback
transaction involving the sale and lease back of the land, building
and improvements of 13 company-owned restaurants. The properties were
sold for $11.5 million and resulted in a gain of approximately $3.5
million that will be deferred and amortized over the terms of the
leases, which are 15 years each. The leases are classified as
operating leases in accordance with SFAS No. 13 "Accounting for
Leases".
<TABLE>
<CAPTION>
Future minimum lease payments under the non-cancelable
operating lease are:
<S> <C>
1998............................................ $ 546,250
1999............................................ $ 1,092,500
2000............................................ $ 1,114,350
2001............................................ $ 1,136,250
2002............................................ $ 1,158,924
Thereafter...................................... $13,647,203
-----------
$18,695,477
===========
</TABLE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Form 10-Q contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results,
performance or achievements of the Company to be materially different
from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such factors include,
among others, the following: accelerating growth strategy; dependence
on executive officers; geographic concentration; increasing
susceptibility to adverse conditions in the region; changes in
consumer tastes and eating habits; national, regional or local
economic and real estate conditions; demographic trends; inclement
weather; traffic patterns; the type, number and location of competing
restaurants; inflation; increased food, labor and benefit costs; the
availability of experienced management and hourly employees;
seasonality and the timing of new restaurant openings; changes in
governmental regulations; dram shop exposure; and other factors not
yet experienced by the Company. The use of words such as "believes",
"anticipates", "expects", "intends" and similar expressions are
intended to identify forward-looking statements, but are not the
exclusive means of identifying such statements. Readers are urged to
carefully review and consider the various disclosures made by the
Company in this report and in the Company's Annual Report and Form
10-K for the fiscal year ended December 28, 1997, that attempt to
advise interested parties of the risks and factors that may affect
the Company's business.
RESULTS OF OPERATIONS
The Company closed on its purchase of 100% of the outstanding
stock of Monterey's Acquisition Corp. ("MAC") on July 2, 1997.
Accordingly, the results of operations for the second quarter ending
June 28, 1998 presented below include the operations of the 25 MAC
units. Pro forma information as if the Company had owned MAC for the
26-week and 13-week periods ended June 29, 1997 is presented in note
3 of the notes to consolidated financial statements included herein.
Beginning in fiscal 1998, the Company changed its fiscal quarters to
four thirteen week quarters. For comparative purposes, fiscal 1997
consolidated statements of income and cash flows have been restated
for the 26-week and 13-week period ended June 29, 1997.
7
<PAGE> 8
Revenues. The Company's revenues for the second quarter of
fiscal 1998 were up 103.7% to $12.0 million over revenues of $5.9
million for the same quarter a year ago. Restaurant sales for the
second quarter of 1998 were up $6.0 million over the same quarter a
year ago, to $11.7 million. Sales at the thirteen restaurants
operating in both fiscal quarters (same-stores) were down 5.2% over
last year's same quarter, offsetting the overall sales increase by
$227,000. The 25 MAC units contributed $5.8 million in the second
quarter (the 24 MAC same-store sales were up 4.0% over last year's
same quarter). On a pro forma basis, same-store sales were virtually
flat, decreasing 0.2%. The remaining increase was due to the
additional sales contributed by the Company's new stores.
Franchise-owned stores operating in both fiscal quarters were up
5.45%. Total system same store sales were up 1.7%.
On a year-to-date basis, the Company's revenues were up
105.6% to $23.9 million over revenues of $11.6 million for the same
26-week period a year ago. Restaurant sales for the 26-week period
were up $12.1 million over the same 26-week period a year ago. Sales
at the thirteen restaurants operating in both fiscal quarters were
down 4.4% over last year's 26-week period, offsetting the overall
sales increase by $386,000. The 25 MAC units contributed $11.5
million in the 26-week period (the 24 MAC same-store sales were up
4.5% over last year's 26-week period). On a pro forma basis, same
store sales were up slightly by 0.3%. Franchise-owned stores
operating in the same 26-week period were up 5.3%. Total system
same-store sales were up 1.9%.
Costs and Expenses. Cost of sales, consisting primarily of
food and beverage costs but also includes paper, supplies and
franchise expenses, increased in the second quarter of 1998 to 27.5%
of restaurant sales as compared with 25.2% in the same period in
1997. This increase is attributable in part to an increase in the
proportion of MAC units, which have a higher average cost of sales
than Casa Ole units. Also contributing to the increase is the new
emphasis placed on value perception within the Casa Ole concept,
achieved primarily by increasing portion sizes. The Company estimates
that food cost increased 2.0% on a comparable period basis.
Approximately one quarter of that increase was offset by menu price
increases.
On a year-to-date basis, cost of sales increased to 27.1% of
restaurant sales as compared with 24.8% in the same period a year ago.
Labor and other related expenses decreased as a percentage
of restaurant sales by 60 basis points to 33.5% in the second quarter
of 1998 as compared with 34.1% in the same period in 1997. This
decrease is due in part to the closure of one under-performing store,
the sale of another under-performing store in fiscal 1997 and due to
improved employee utilization in most of the remaining stores.
On a year-to-date basis, labor and other related expenses
decreased as a percentage of restaurant sales by 50 basis points to
33.5% as compared with 34.0% in the same period a year ago.
Restaurant operating expenses, which primarily includes rent,
utilities, repair and maintenance and advertising, decreased as a
percentage of restaurant sales by 210 basis points to 20.4% in the
second quarter of 1998 as compared with 22.5% in the same period in
1997. This dramatic improvement is primarily due to cost cutting
measures made throughout the store system, and especially so in
stores developed since the initial public offering. Expenses showing
the most improvement were smallwares, repair and maintenance, office
expense, utilities, and insurance. Rent expense decreased 100 basis
points on a comparable basis due to the large number of MAC owned
stores. However, due to the sale-leaseback transaction, this trend
will not continue. Again, the closure of one under-performing store
and the sale of another under-performing store in fiscal 1997 also
helped to improve overall operating margins.
On a year-to-date basis, restaurant operating expenses
decreased as a percentage of restaurant sales by 120 basis points to
21.2% as compared with 22.4% in the same period a year ago.
8
<PAGE> 9
General and administrative expenses (G&A) decreased as a
percentage of total revenues by 150 basis points to 8.9% in the
second quarter of 1998 as compared with 10.4% in the same period in
1997. This decrease is due in part to the administrative efficiencies
gained with the purchase of Monterey's Acquisition Corp.
On a year-to-date basis, general and administrative expenses
decreased as a percentage of total revenues by 150 basis points to
9.0% compared with 10.5% in the same period a year ago.
Depreciation and amortization expense increased as a
percentage of total revenues by 60 basis points to 3.2% in the second
quarter of 1998 as compared with 2.6% in the same period in 1997.
This increase is the direct result of the addition of depreciable
assets related to the Company's five new store openings since the
second quarter of 1997, along with added depreciation and
amortization related to the purchase of MAC. Effective the first
quarter of fiscal 1998, the Company changed its estimate of the
useful lives of certain recently acquired fixed assets to reflect
actual useful lives and industry norms (see note 2).
On a year-to-date basis, depreciation and amortization
expense increased as a percentage of total revenues by 120 basis
points to 3.4% compared with 2.2% in the same period a year ago.
Other Income (Expense). Net other income (expense) decreased
from income to an expense for the second quarter of 1998, a change of
approximately $265,000. The net decrease was due to the reduction in
interest income as the proceeds from the 1996 initial public offering
were used for construction projects and the debt incurred related to
the purchase of MAC.
On a year-to-date basis, net other income (expense) decreased
from income to an expense, a change of approximately $487,000.
Income Tax Expense. The Company's effective tax rate for
fiscal 1998 is 39.5%.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $1.6 million
for the 26 weeks ended June 28, 1998, compared to $494,000 for the
same period last year. As of June 28, 1998, the Company had a working
capital deficit of $2.0 million, which is common in the restaurant
industry, since restaurant companies do not typically require a
significant investment in either accounts receivable or inventory.
During the first 26 weeks of 1998, capital expenditures on
property, plant and equipment were approximately $2.3 million as
compared to $4.0 million for the same period of 1997. Capital
expenditures included the remodeling of seven restaurants, one in
Copperas Cove, Texas, five in Houston, Texas, and one in Grand
Prairie, Texas. Immediately after the second quarter ended, the
Company remodeled an eighth restaurant and began remodeling three
other restaurants. One new store opened late in the 2nd quarter in
Boise, Idaho, and an existing store was relocated (primarily paid for
by the landlord) in Houston, Texas. Currently the Company has two new
restaurant sites under construction which are scheduled to open in
the fourth quarter of fiscal 1998. Another two sites are currently
under contract and are scheduled to open in fiscal 1999.
Additionally, the Company had cash outlays for necessary replacement
of equipment in various older units. The Company estimates its
capital expenditures during the third quarter will approximate $1.4
million. During the second quarter, the Company sold a land site,
which no long fit within the Company's strategic plan, for
approximately $200,000, incurring a loss on sale of approximately
$10,000.
On June 25, 1998, the Company completed an $11.5 million
sale-leaseback transaction with Franchise Finance Corporation of
America ("FFCA"). The transaction resulted in a gain of approximately
$3.5 million which will be deferred and amortized over 15 years. The
13 properties sold will be leased-back from FFCA for a minimum of 15
years with five 5-year options to renew. The proceeds from the
sale-leaseback transaction were used to pay down most of the Company's
outstanding debt with NationsBank of Texas ($5.2 million term note and
$5.4 million revolving line note).
9
<PAGE> 10
Separately, the Company negotiated with FFCA a $14.5 million
forward commitment to finance up to 12 new restaurants. The Company
also amended its credit facility with NationsBank of Texas. The terms
of the amended credit facility are similar to those in the original
facility; however, the facility was reduced from a $13.0 million term
and revolving credit facility to a $5.0 million revolving line of
credit. The interest rate is either the prime rate or LIBOR plus a
stipulated percentage. The Company is subject to a non-use fee of
0.35% on the unused portion of the revolver from the date of the
credit agreement. Within the terms of the credit agreement, the
Company must meet certain financial covenants. As of June 28, 1998,
the Company had $910,000 outstanding under the revolving line of
credit.
The Company's management believes that the sale leaseback
arrangements, along with operating cash flow and the Company's
revolving line of credit with Nationsbank, will be sufficient to meet
its operating requirements and to finance its expansion plans
(exclusive of any acquisitions) through the end of the 2000 fiscal
year.
Year 2000. The Company reached a decision to continue
outsourcing its accounting processes. The new outsourcing group will
set up an accounting department on the premises of the Company and
will install new computer hardware and software that is Year 2000
adapted. Further, the Company has reviewed its information systems and
is currently in the process of modifying those systems that are not
Year 2000 compliant. The Company also has initiated discussions with
its significant suppliers and financial institutions to ensure that
those parties have appropriate plans to remediate Year 2000 issues
where their systems interface with the Company's systems or otherwise
impact its operations. The Company is assessing the extent to which
its operations are vulnerable should those organizations fail to
remediate their computer systems properly. Management believes that
the Company's systems are compliant, or will be compliant by June
1999. All maintenance and modification costs will be expensed as
incurred, while the cost of new computer hardware and software, if
material, is being capitalized and depreciated over its expected
useful life. The cost of the Year 2000 compliance program is not
anticipated to be material to the Company's financial position or
results of operations.
PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit
Number Document Description
------- --------------------
27.1 Financial Data Schedule
(b) REPORTS ON FORM 8-K
There were no reports filed on Form 8-K during the
quarter ended June 28, 1998.
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: July 28, 1998 By: /s/ Louis P. Neeb
-----------------
Louis P. Neeb
Chairman of the Board, President
& Chief Executive Officer
(Principal Executive Officer)
Dated: July 28, 1998 By: /s/ Andrew J. Dennard
---------------------
Andrew J. Dennard
Vice President, Chief Financial Officer & Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
10
<PAGE> 11
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
27.1 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-03-1999
<PERIOD-START> MAR-30-1998
<PERIOD-END> JUN-28-1998
<CASH> 1,344,358
<SECURITIES> 0
<RECEIVABLES> 393,882
<ALLOWANCES> (30,000)
<INVENTORY> 414,768
<CURRENT-ASSETS> 2,704,652
<PP&E> 15,275,199
<DEPRECIATION> 4,321,977
<TOTAL-ASSETS> 21,936,861
<CURRENT-LIABILITIES> 4,743,249
<BONDS> 910,000
0
0
<COMMON> 47,327
<OTHER-SE> 12,667,571
<TOTAL-LIABILITY-AND-EQUITY> 21,936,861
<SALES> 11,677,863
<TOTAL-REVENUES> 12,007,663
<CGS> 3,213,461
<TOTAL-COSTS> 7,748,802
<OTHER-EXPENSES> (21,425)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 215,020
<INCOME-PRETAX> 851,805
<INCOME-TAX> 336,463
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 515,342
<EPS-PRIMARY> 0.14
<EPS-DILUTED> 0.14
</TABLE>
