<PAGE>
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 JULY 28, 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 July 28, 1996, 7,081,458 shares of common stock $.01 par value were
outstanding.
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
MAVERICK RESTAURANT CORPORATION
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
ASSETS July 28, January 28,
----------- ------------
1996 1996
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 351,977 $ 195,365
Accounts receivable - trade 40,826 13,006
Inventories 156,056 109,074
Prepaid expenses 360,313 103,246
----------- -----------
Total current assets 909,172 420,691
----------- -----------
Property and equipment:
Land - 168,800
Buildings 160,966 288,449
Leasehold improvements 1,331,092 1,333,727
Equipment and fixtures 3,472,792 3,488,869
Leased property under capital lease 1,903,191 1,832,176
----------- -----------
6,868,041 7,112,021
Less: accumulated depreciation and amortization 2,606,575 3,070,944
----------- -----------
4,261,466 4,041,077
----------- -----------
Other assets:
Cost in excess of net tangible assets of purchased
business, net of amortization of $381,737 and $412,040 1,029,843 209,462
License fees, net of amortization of $51,600 and $60,067 82,088 92,996
Deposits 8,921 7,554
----------- -----------
1,120,852 310,012
----------- -----------
$ 6,291,490 $ 4,771,780
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long term debt $ 242,356 $ 234,729
Current portion of obligation under capital lease 58,154 63,540
Accounts payable 756,089 533,304
Accrued payroll 190,281 137,589
Other accrued liabilities 339,715 259,747
----------- -----------
Total current liabilities 1,586,595 1,228,909
----------- -----------
Long-term debt, less current portion 1,763,679 332,475
Obligation under capital lease, less current portion 1,567,520 1,457,062
Deferred credits 7,153 24,204
Reserve for future losses 240,000 -
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 (5,096,855) (4,194,268)
Treasury stock, 60,000 shares of common stock ( 270,000) ( 270,000)
----------- -----------
Total stockholders' equity 1,126,543 1,729,130
----------- -----------
$ 6,291,490 $4,771,780
----------- -----------
----------- -----------
</TABLE>
See notes to financial statements
2
<PAGE>
MAVERICK RESTAURANT CORPORATION
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
July 28, July 31, July 28, July 31,
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $3,314,884 $2,832,743 $6,077,200 $5,569,419
----------- ----------- ----------- -----------
Costs and expenses:
Cost of goods sold 1,094,818 884,627 1,973,187 1,734,542
Operating expenses 1,972,884 1,643,792 3,642,085 3,129,666
Depreciation and amortization 145,198 115,259 279,266 228,871
General and administrative 182,110 115,470 307,378 232,446
----------- ----------- ----------- -----------
3,395,010 2,759,148 6,201,916 5,325,525
----------- ----------- ----------- -----------
Operating income (loss) (80,126) 73,595 (124,716) 243,894
----------- ----------- ----------- -----------
Other income (expense)
Interest expense (68,862) (56,447) (130,005) (113,875)
Interest income - 7,018 - 17,174
Loss on sale of asset (52,268) - (52,268)
Provision for restaurant
closings and dispositions (595,598) (595,598)
----------- ----------- ----------- -----------
(716,728) (49,429) (777,871) (96,701)
----------- ----------- ----------- -----------
Earnings (loss) before income taxes (796,854) $ 24,166 $ (902,587) $ 147,193
Provision for income taxes - - - -
Net earnings (loss) $ (796,854) $ 24,166 $ 902,587 $ 147,193
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net earnings(loss) per common share $ (.12) $ - $ (.14) $ .02
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Average shares outstanding 6,542,966 6,081,458 6,312,227 6,081,458
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
See notes to financial statements.
3
<PAGE>
MAVERICK RESTAURANT CORPORATION
STATEMENTS OF CASH FLOW
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
July 28, July 31,
1996 1995
------------ -----------
<S> <C> <C>
Operating Activities
Net earnings(loss) $ (902,587) 147,193
Adjustments to reconcile net earnings
to net cash provided by operations:
Depreciation and amortization 279,266 228,871
Changes in assets and liabilities
(Increase) decrease in accounts receivable (27,820) (21,492)
(Increase) decrease in inventories (46,982) 11,065
(Increase) decrease in prepaid expenses (257,067) (158,711)
Increase (decrease) in accounts payable 222,785 153,517
Increase (decrease) in accrued expenses 132,660 (2,138)
Loss on sale of asset 52,268 -
Provision for restaurant closings
and dispositions 595,598
Other - net ( 1,367) ( 270)
------------ -----------
Net cash provided (used) by operating activities 46,754 (358,035)
------------ -----------
Investing activities
Proceeds from sale of asset 235,747 -
Purchase of property and equipment (911,865) (502,789)
Purchase of other assets (618,786) ( 9,000)
------------ -----------
Net cash provided (used) by investing activities (1,294,904) (511,789)
------------ -----------
Financing activities
Long term borrowing 1,775,000 -
Repayment of long-term borrowing
and capital lease obligations (370,238) ( 89,933)
------------ -----------
Net cash provided (used) by financing activities 1,404,762 (89,933)
------------ -----------
Net increase (decrease) in cash and cash equivalents 156,612 (243,687)
Cash and cash equivalents at beginning of period 195,365 801,429
------------ -----------
Cash and cash equivalents at the end of period $ 351,977 $ 557,742
------------ -----------
------------ -----------
</TABLE>
See notes to financial statements.
4
<PAGE>
MAVERICK RESTAURANT CORPORATION
Notes to Financial Statements
(Unaudited)
July 28, 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 three month period ended July 28, 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.
5
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JULY 28, 1996 COMPARED TO THREE MONTHS ENDED JULY 31, 1995.
During the second quarter ending July 28, 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 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 Grill is a casual -
dining restaurant concept that specializes in 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.
For the three months ended July 28, 1996, sales increased to $3,314,884 as
compared to sales of $2,832,743 for the six months ended July 31, 1995. All of
the sales increase can be attributed to the purchase of four Amarillo Grill
restaurants which were owned and operated for six weeks during the quarter. The
Company operated eight Grandy's restaurants, seven Cotton Patch Cafe's and four
Amarillo Grill restaurants as of July 28, 1996, as compared to eight Grandy's
restaurants and six Cotton Patch Cafes as of July 31, 1995.
Cost of sales, as a percentage of total sales, was 33.0% and 31.2% for the
1996 and 1995 periods respectively. The higher cost of sales, as a percentage
of total sales, can be attributed to the Amarillo Grill restaurants which
operate at a higher cost of sales percentage than do the Grandy's or Cotton
Patch Cafes.
Operating expenses as a percentage of total sales, was 59.5% and 58.0% 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. Depreciation and amortization is
directly related to the acquisition or disposition of fixed assets. The Company
operated nineteen restaurants as of July 28, 1996, as compared to fourteen as of
July 31, 1995.
General and administrative expense, as a percentage of total sales, was
5.5% and 4.1% for the 1996 and 1995 periods respectively. This increase can be
attributed to the acquisition of the Amarillo Grill concept. The Company plans
to expand the Amarillo concept. Consequently, the Company has retained all of
Amarillo's office staff including officers and supervisory personnel. During
the short-term general and administrative expense will run higher as a
percentage of total sales. As the Company opens new restaurants general and
administrative, as a percentage of total sales, should return to historical
levels.
SIX MONTHS ENDED JULY 28, 1996 COMPARED TO SIX MONTHS JULY 31, 1995.
For the six months ended July 28, 1996, sales increased to $6,077,200 as
compared to sales of $5,569,419 for the six months ended July 31, 1995. All of
the sales increase can be attributed to the purchase of four Amarillo Grill
restaurants which were owned and operated for six weeks during the period. The
Company operated eight Grandy's restaurants, seven Cotton Patch Cafe's and four
Amarillo Grill restaurants as of July 28, 1996, as compared to eight Grandy's
restaurants and six Cotton Patch Cafes as of July 31, 1995.
6
<PAGE>
Cost of sales, as a percentage of total sales, was 32.5% and 31.1% for the
1996 and 1995 periods respectively. The higher cost of sales, as a percentage
of total sales, can be attributed to the Amarillo Grill restaurants which
operate at a higher cost of sales percentage than do the Grandy's or Cotton
Patch Cafes.
Operating expenses as a percentage of total sales, was 59.9% and 56.2% for
the 1996 and 1995 period respectively.
Depreciation and amortization has increased for the 1995 period to 1996 as
a result of operating more restaurants. Depreciation and amortization is
directly related to the acquisition or disposition of fixed assets. The Company
operated nineteen restaurants as of July 28, 1996, as compared to twelve as of
July 31, 1995.
General and administrative expenses as percentage of sales, was 5.1% and
4.2% for the 1996 and 1995 periods respectively. This increase can be
attributed to the acquisition of the Amarillo Grill concept. The Company plans
to expand the Amarillo concept. Consequently, the Company has retained all of
Amarillo's office staff including officers and supervisory personnel. During
the short-term general and administrative expense will run higher as a
percentage of total sales. As the Company opens new restaurants general and
administrative, as a percentage of total sales, should return to historical
levels.
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 July 28,
1996, the Company had a working capital deficit of $677,423 compared to working
capital deficit of $122,174 as of July 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 $1,530,651 for
six months ended July 28, 1996, compared to $511,789 for the three months ended
July 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.
7
<PAGE>
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.
On May 24, 1996, the Company held its Annual meeting of Stockholders.
The matters and the vote tabulation for each matter voted upon at such
meeting are as follows:
1. Election of Directors. The following directors were elected to
serve on the Board of Directors:
FOR WITHHELD
Chris F. Hotze 4,055,045 11,684
Linn F. Hohl 4,055,547 11,184
Andres Mouland 4,055,547 11,184
C. Howard Wilkins Jr. 4,055,847 10,884
2. Election of Auditors. the stokcholders of the Company elect KPMG
Peat Marwick, the independent certified public accountants, as
auditors for the Company for the fiscal year ending January 26,
1997. The vote was as follows:
FOR AGAINST ABSTAINED
4,063,447 1,884 1,400
Item 5. Other Information.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Not applicable.
(b) On July 1, 1996, the Company filed Form 8-K with
respect to the purchase of four Amarillo Grill
restaurants.
8
<PAGE>
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 September 16, 1996 /s/ LINN F. HOHL
---------------------- ---------------------------------------
Linn F. Hohl - Vice President
of Finance,
Secretary and
Treasurer
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS OF MAVERICK RESTAURANT CORPORATION FOR THE
THREE MONTHS ENDED JULY 28, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-28-1996
<PERIOD-START> APR-29-1996
<PERIOD-END> JUL-28-1996
<CASH> 351,977
<SECURITIES> 0
<RECEIVABLES> 40,826
<ALLOWANCES> 0
<INVENTORY> 156,056
<CURRENT-ASSETS> 909,172
<PP&E> 6,868,041
<DEPRECIATION> 2,606,575
<TOTAL-ASSETS> 6,291,490
<CURRENT-LIABILITIES> 1,586,595
<BONDS> 0
0
0
<COMMON> 71,414
<OTHER-SE> 6,421,984
<TOTAL-LIABILITY-AND-EQUITY> 6,291,490
<SALES> 3,314,884
<TOTAL-REVENUES> 3,314,884
<CGS> 1,094,818
<TOTAL-COSTS> 3,395,010
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 68,862
<INCOME-PRETAX> (796,854)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (796,854)
<EPS-PRIMARY> (.12)
<EPS-DILUTED> (.12)
</TABLE>
