<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 April 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 X No .
----- -----
As of April 28, 1996, 6,081,458 shares of common stock $.01 par value were
outstanding.
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PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
MAVERICK RESTAURANT CORPORATION
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
ASSETS April 28, January 31,
---------- -----------
1996 1996
---------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 170,182 $ 195,365
Accounts receivable - trade 19,868 13,006
Inventories 122,854 109,074
Prepaid expenses 66,489 103,246
---------- ----------
Total current assets 379,393 420,691
---------- ----------
Property and equipment:
Land 168,800 168,800
Buildings 291,249 288,449
Leasehold improvements 1,374,221 1,333,727
Equipment and fixtures 3,534,161 3,488,869
Leased property under capital lease 2,217,980 1,832,176
---------- ----------
7,586,411 7,112,021
Less: accumulated depreciation and amortization 3,192,701 3,070,944
---------- ----------
4,393,710 4,041,077
---------- ----------
Other assets:
Cost in excess of net tangible assets of purchased
business, net of amortization of $423,077 and $412,040 198,425 209,462
License fees, net of amortization of $61,916 and $60,067 100,147 92,996
Deposits 6,054 7,554
---------- ----------
304,626 310,012
---------- ----------
$5,077,729 $4,771,780
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long term debt $ 201,827 $ 234,729
Current portion of obligation under capital lease 63,540 63,540
Accounts payable 550,134 533,304
Accrued payroll 136,656 137,589
Other accrued liabilities 250,856 259,747
---------- ----------
Total current liabilities 1,203,013 1,288,909
---------- ----------
Long-term debt, less current portion 401,307 332,475
Obligation under capital lease, less current portion 1,826,383 1,457,062
Deferred credits 23,629 24,204
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 6,141,458, outstanding 6,081,458 61,414 61,414
Additional paid-in capital 6,131,984 6,131,984
Accumulated deficit (4,300,001) (4,194,268)
Treasury stock, 60,000 shares of common stock ( 270,000) ( 270,000)
---------- ----------
Total stockholders' equity 1,623,397 1,729,130
---------- ----------
$5,077,729 $4,771,780
---------- ----------
---------- ----------
</TABLE>
See notes to financial statements
2
<PAGE>
MAVERICK RESTAURANT CORPORATION
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
April 28 April 30
------------------------------
1996 1995
---------- ----------
<S> <C> <C>
Net sales $2,762,316 $2,736,676
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Costs and expenses:
Cost of goods sold 878,369 849,915
Operating expenses 1,669,202 1,485,874
Depreciation and amortization 134,067 113,612
General and administrative 125,268 116,976
---------- ----------
2,806,906 2,566,377
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Operating income (loss) (44,590) 170,299
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Other income (expense)
Interest income - 10,156
Interest expense (61,143) (57,428)
(61,143) (47,272)
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Earnings (loss) before income taxes (105,733) 123,027
Provision for income taxes - -
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Net earnings (loss) $ (105,733) $ 123,027
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---------- ----------
Net earnings (loss) per common share $ (.02) $ .02
---------- ----------
---------- ----------
Average shares outstanding 6,081,458 6,081,458
---------- ----------
---------- ----------
</TABLE>
See notes to financial statements.
3
<PAGE>
MAVERICK RESTAURANT CORPORATION
STATEMENTS OF CASH FLOW
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
April 28 April 30
------------------------------
1996 1995
---------- ----------
<S> <C> <C>
Operating Activities
Net earnings $ (105,733) 101,325
Adjustments to reconcile net earnings
to net cash provided by operations:
Depreciation and amortization 134,067 85,971
Changes in assets and liabilities
(Increase) decrease in accounts receivable ( 6,862) (15,640)
(Increase) decrease in inventories (13,780) (17,385)
(Increase) decrease in prepaid expenses 36,757 10,807
Increase (decrease) in accounts payable 16,830 ( 5,353)
Increase (decrease) in accrued expenses ( 9,824) 17,364
Other - net 1,500 ( 504)
---------- ----------
Net cash provided (used) by operating activities 52,955 157,426
---------- ----------
Investing activities
Purchase of property and equipment ( 88,585) (310,939)
Purchase of license fees ( 9,000) ( 9,000)
---------- ----------
Net cash provided (used) by investing activities ( 97,585) (319,939)
Financing activities
Long-term borrowings 75,000 -
Repayment of long-term borrowings
and capital lease obligations ( 55,553) (52,367)
---------- ----------
Net cash provided (used) by financing activities 19,447 (52,367)
---------- ----------
Net increase (decrease) in cash and cash equivalents ( 25,183) (214,880)
Cash and cash equivalents at beginning of period 195,365 1,506,290
---------- ----------
Cash and cash equivalents at the end of period $ 170,182 $1,291,410
---------- ----------
---------- ----------
</TABLE>
See notes to financial statements.
4
<PAGE>
MAVERICK RESTAURANT CORPORATION
Notes to Financial Statements
(Unaudited)
April 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 April 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 APRIL 28, 1996 COMPARED TO THREE MONTHS ENDED APRIL 30, 1995.
For the three months ended April 28, 1996, sales were $2,762,316 as compared
to sales of $2,736,676 for the first quarter of the prior year. The Company
operated eight Grandy's restaurants and eight Cotton Patch Cafes as of April 28,
1996 as compared to nine Grandy's restaurants and five Cotton Patch Cafes as of
April 30, 1995. Same store sales from the eight Grandy's restaurants, for the
first quarter ended April 28, 1996, were down 2.2% as compared to the first
quarter of the prior year.
Cost of sales, as a percentage of total sales, was 31.8% and 31.1% for the
1996 and 1995 periods respectively. Management does not expect any significant
change in cost of sales as a percentage of total sales during the second
quarter.
Operating expenses as a percentage of total sales was 60.4% and 54.3% for
the 1996 and 1995 periods respectively. The increase in operating expenses, as
a percentage of total sales, can be attributed primarily to the spreading of
certain fixed and semi-variable costs over lower per unit sales.
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 sixteen restaurants as of April 28, 1996 as compared to fourteen as of
April 30, 1995.
General and administrative expense, as a percentage of total sales, was
4.5% and 4.3% for the 1996 and 1995 periods respectively. Management expects
these costs to remain around 5.0% of sales the remainder of the year.
Interest expense for the three months ended April 28, 1996 was $61,143 as
compared to $57,428 for the three months ended April 30, 1995. Interest
represents interest expense on all debt.
The Company recorded a loss of $105,733 for the first quarter ended April
28, 1996, as compared to earnings of $123,027. This poor performance can be
attributed to a sales decline from our eight unit Cotton Patch division. The
sales decline is the result of substantial competitive intrusion in our small
town markets from concepts such as Red Lobster, Golden Corral, Garfields,
Perkins, El Chico, Cafe U.S.A. and others. As a result we have stepped up our
marketing efforts and believe we are gaining back some of our market share.
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 28, 1996, the Company had a working capital deficit of
$823,620 compared to working capital of $238,239 as of April 30, 1994.
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
development of new restaurants. Capital expenditures were $97,585 for three
months ended April 28, 1996, compared to $61,477 for the three months ended
April 30, 1995. These capital expenditures have resulted in an increase in
property and equipment and a decrease in working capital.
6
<PAGE>
The Company will actively pursue the sale of our eight store Grandy's
division. The Company intends to continue expansion of the eight store Cotton
Patch concept, but only on a very selected basis. The Company intends to lease
existing restaurant properties which are suitable for conversion to the Cotton
Patch concept. It is expected that each conversion will require approximately
$300,000 for equipment and remodel costs. Also, the Company will continue to
look at different franchise or acquisition opportunities. Any growth or
acquisitions would be financed with 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.
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.
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.
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 June 10, 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 APRIL 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> JAN-29-1996
<PERIOD-END> APR-28-1996
<CASH> 170,182
<SECURITIES> 0
<RECEIVABLES> 19,868
<ALLOWANCES> 0
<INVENTORY> 122,854
<CURRENT-ASSETS> 379,393
<PP&E> 7,586,411
<DEPRECIATION> 3,192,701
<TOTAL-ASSETS> 5,077,729
<CURRENT-LIABILITIES> 1,203,013
<BONDS> 0
0
0
<COMMON> 61,414
<OTHER-SE> 6,131,984
<TOTAL-LIABILITY-AND-EQUITY> 1,623,397
<SALES> 2,762,316
<TOTAL-REVENUES> 2,762,316
<CGS> 878,369
<TOTAL-COSTS> 2,806,906
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 61,143
<INCOME-PRETAX> (105,733)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (105,733)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
