UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to _______
Commission File No. 0-4678
Pancho's Mexican Buffet, Inc.
(Exact name of registrant as specified in its charter)
DELAWARE 75-1292166
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3500 Noble Avenue, Fort Worth, Texas 76111
(Address of principal executive offices) (Zip Code)
817-831-0081
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Sections 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 of Common Stock outstanding as of April 28,
1999: 1,463,606.
<PAGE>
PANCHO'S MEXICAN BUFFET, INC. AND SUBSIDIARIES
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements:
Introduction 1
Consolidated Condensed Balance Sheets,
March 31, 1999 and September 30,1998 2
Consolidated Condensed Statements of Operations
for the Three-Months and Six-Months Ended
March 31, 1999 and 1998 3
Consolidated Condensed Statements of Cash Flows
for the Six-Months Ended March 31, 1999 and 1998 4
Notes to Consolidated Condensed Financial Statements 5
Independent Accountants' Review Report 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures About
Market Risk (no response required)
Part II. Other Information
Item 1. Legal Proceedings (no response required)
Item 2. Changes in Securities (no response required)
Item 3. Defaults Upon Senior Securities (no response required)
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information (no response required)
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
<PAGE>
PANCHO'S MEXICAN BUFFET, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
The consolidated condensed financial statements included herein
have been prepared by the company without audit as of March 31,
1999 and for the three-month and six-month periods ended March
31, 1999 and 1998 pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and
footnote disclosures normally included in annual financial
statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to
such rules and regulations, although the company believes that
the disclosures are adequate to make the information presented
not misleading. It is suggested that these consolidated
condensed financial statements be read in conjunction with the
consolidated financial statements and the notes thereto included
in the company's annual report on Form 10-K for the fiscal year
ended September 30, 1998. The results of operations for such
interim periods are not necessarily indicative of the results to
be expected for the fiscal year ending September 30, 1999.
Deloitte & Touche LLP, independent public accountants, has made
a limited review of the consolidated condensed financial
statements as of March 31, 1999, and for the three-month and
six-month periods ended March 31, 1999 and 1998, included herein.
page 1
<PAGE>
<TABLE>
PANCHO'S MEXICAN BUFFET, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<CAPTION>
March 31, September 30,
1999 1998
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,509,000 $ 546,000
Accounts and notes receivable, current portion 215,000 184,000
Inventories 474,000 473,000
Prepaid expenses 237,000 443,000
Total current assets 2,435,000 1,646,000
Property, plant and equipment:
Land 1,867,000 1,867,000
Buildings 6,885,000 6,885,000
Leasehold improvements 17,660,000 17,472,000
Equipment and furniture 22,119,000 22,965,000
Total 48,531,000 49,189,000
Less accumulated depreciation and amortization (33,040,000) (33,136,000)
Property, plant and equipment - net 15,491,000 16,053,000
Other assets:
Land and buildings held for sale 608,000 2,380,000
Other, including noncurrent part of receivables 311,000 339,000
Total other assets 919,000 2,719,000
Total assets $ 18,845,000 $ 20,418,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,324,000 $ 1,227,000
Debt classified as current 150,000 490,000
Accrued wages and bonuses 1,533,000 1,420,000
Accrued insurance costs, current 1,004,000 1,150,000
Other current liabilities 1,591,000 1,864,000
Total current liabilities 5,602,000 6,151,000
Other liabilities:
Long-term debt 279,000 1,761,000
Accrued insurance costs, non-current 2,249,000 2,417,000
Restructuring reserves, non-current 293,000 365,000
Total other liabilities 2,821,000 4,543,000
Commitments and Contingencies
Stockholders' equity:
Preferred stock
Common stock 148,000 148,000
Additional paid-in capital 18,976,000 18,954,000
Retained earnings (accumulated deficit) (8,409,000) (9,085,000)
Treasury stock at cost (68,000) (68,000)
Stock notes receivable (225,000) (225,000)
Stockholders' equity 10,422,000 9,724,000
Total liabilities and stockholders' equity $ 18,845,000 $ 20,418,000
<FN>
See notes to consolidated condensed financial statements.
</FN>
<PAGE>
</TABLE>
<TABLE>
PANCHO'S MEXICAN BUFFET, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Sales $ 14,350,000 $ 16,128,000 $ 28,117,000 $31,830,000
Costs and Expenses:
Food costs 3,801,000 4,423,000 7,481,000 8,567,000
Restaurant labor and related expenses 5,310,000 6,458,000 10,634,000 12,722,000
Restaurant operating expenses 2,974,000 3,536,000 6,034,000 7,251,000
Depreciation and amortization 485,000 759,000 985,000 1,538,000
General and administrative expenses 1,356,000 1,299,000 2,552,000 2,535,000
Total 13,926,000 16,475,000 27,686,000 32,622,000
Operating Income (loss) 424,000 (347,000) 431,000 (819,000)
Interest Expense (5,000) (65,000) (22,000) (114,000)
Other, including interest income 131,000 39,000 255,000 120,000
Earnings (loss) before income taxes 550,000 (373,000) 664,000 (813,000)
Benefit for income taxes (12,000) (127,000) (12,000) (269,000)
Net earnings (loss) $ 562,000 $ (246,000) $ 676,000 $ (544,000)
Basic and diluted earnings (loss)
per share $ 0.38 $ (0.17) $ 0.46 $ (0.37)
<FN>
See notes to consolidated condensed financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
PANCHO'S MEXICAN BUFFET, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Six Months Ended March 31,
1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ 676,000 $ (544,000)
Adjustments to reconcile net earnings (loss)
to net cash provided by operating activities:
Depreciation and amortization 985,000 1,538,000
Benefit for deferred income taxes (269,000)
Gain on sale of assets (237,000) (92,000)
Stock compensation to directors 22,000
Changes in operating assets and liabilities:
Accounts and notes receivable (32,000) 48,000
Income taxes receivable 538,000
Inventories, prepaid expenses and other a 212,000 (122,000)
Accounts payable and accrued expenses (155,000) 362,000
Restructuring reserves (318,000) (170,000)
Net cash provided by operating activities 1,153,000 1,289,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions (391,000) (290,000)
Proceeds from sale of assets 2,023,000 121,000
Net cash provided (used)
by investing activities 1,632,000 (169,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term borrowings, net (340,000) (63,000)
Long-term borrowings 6,650,000 8,871,000
Repayments of long-term borrowings (8,132,000) (9,584,000)
Dividends paid (66,000)
Net cash used by financing activities (1,822,000) (842,000)
Net increase in cash and cash equivalents 963,000 278,000
Cash and cash equivalents, beginning of period 546,000 429,000
Cash and cash equivalents, end of period $ 1,509,000 $ 707,000
SUPPLEMENTAL INFORMATION:
Income tax paid and refunds received, net $ 12,000 $ 541,000
Interest paid, net of capitalized amounts 35,000 119,000
<FN>
See notes to consolidated condensed financial statements.
</FN>
</TABLE>
<PAGE>
PANCHO'S MEXICAN BUFFET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. NET EARNINGS (LOSS) PER SHARE
The company reports earnings per share in accordance with
Statement of Financial Accounting Standards (SFAS) No. 128,
"Earnings per Share." Because it has potential common shares,
the company has a complex capital structure and must disclose
both basic and diluted EPS. Basic EPS is computed by dividing
income available to common shareholders by the weighted average
number of shares outstanding. Diluted EPS adds the effect of
all dilutive potential shares to the weighted average number of
shares outstanding.
The weighted average outstanding shares were 1,458,974 and
1,455,905 for the three-months and six-months ended March 31,
1999, respectively, and 1,464,666 and 1,464,000 for the same
periods in 1998. The average prices of the company's common
stock for the quarter and six months ended March 31, 1999 were
below the strike price of all outstanding options, therefore all
the potential common shares were anti dilutive and excluded from
the earnings per share calculation for those periods. Due to
the net losses for the quarter and six months ended March 31,
1998, the company's potential common shares were anti dilutive
and excluded from the loss per share calculations for those
periods. Therefore, there was no difference between basic and
diluted earnings (loss) per share among the periods ended March
31, 1999 and 1998. At March 31, 1999, there were 108,974
options outstanding which represented potential common shares
which could be dilutive in the future.
2. LONG-TERM DEBT
In February 1999, the company paid off its outstanding bank
debt. In April 1999, the company terminated its revolving
credit and term loan agreement with the bank.
The company's remaining long-term debt at March 31, 1999
represents notes payable issued in 1996 - 1998 to buy out
remaining lease terms of certain closed locations. The current
portion of those notes is included in debt classified as current
at March 31, 1999 and September 30, 1998.
3. INCOME TAXES
In the quarter ended June 30, 1998, the company increased its
valuation allowance for deferred tax assets to offset all of its
net deferred tax assets. This was considered necessary due to
the company's net losses for that quarter and the previous three
years.
The net deferred tax assets were reduced by $202,000 and
$243,000 for the three and six months ended March 31, 1999 due
to the net earnings for those periods. The valuation allowance
was reduced by the same amounts to fully offset the net deferred
tax asset balance. Accordingly, the company recognized no net
tax expense in the quarter and half ended March 31, 1999. The
company received a $12,000 tax refund which it reported as
income tax benefit in the quarter ended March 31, 1999. At
March 31, 1999, the valuation allowance offset the full amount
of net deferred tax assets.
Despite the valuation allowance, the deferred tax assets are
still available to the company for future use. If the company
maintains profitability, the company may recognize tax benefits
for all or a portion of the deferred tax assets realized. The
deferred tax assets include federal employer tax credits and net
operating loss (NOL) carryforwards which expire in years 2009
through 2013, and state NOL carryforwards which expire in years
1999 through 2013.
4. 1-FOR-3 REVERSE STOCK SPLIT
At the Annual Meeting of Stockholders on January 27, 1999, the
stockholders of the company approved a one-for-three reverse
stock split for the company's common stock, effective January
27, 1999. All common stock share data and related stock option
and earnings per share data in this report has been adjusted to
reflect the reverse split. Under the reverse split, the common
stock retained its previous par value of $.10 per share after
the reverse split. Therefore, the dollar amount of Common stock
on the balance sheet was reduced to one-third of its previous
balance, and Additional paid-in capital was increased by that
dollar amount.
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
Pancho's Mexican Buffet, Inc.:
We have reviewed the accompanying consolidated condensed balance
sheet of Pancho's Mexican Buffet, Inc. and subsidiaries as of
March 31, 1999, and the related consolidated condensed
statements of operations for the three-month and six-month
periods ended March 31, 1999 and 1998 and of cash flows for the
six-month periods then ended. These financial statements are
the responsibility of the company's management.
We conducted our review in accordance with standards established
by the American Institute of Certified Public Accountants. A
review of interim financial information consists principally of
applying analytical review procedures to financial data and of
making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an
audit conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an
opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to such consolidated condensed
financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
We previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet as of
September 30, 1998, and the related consolidated statements of
operations, stockholders' equity and cash flows for the year
then ended (not presented herein), and in our report dated
November 13, 1998, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the
information set forth in the accompanying consolidated condensed
balance sheet as of September 30, 1998, is fairly stated in all
material respects in relation to the consolidated balance sheet
from which it has been derived.
/s/Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Fort Worth, Texas
April 21, 1999
<PAGE>
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Financial Condition
As of March 31, 1999, the company's current ratio was 0.4 to 1,
up from 0.3 to 1 on September 30, 1998. Like many restaurant
chains, the company maintains a current ratio well below 1.
Most of its current liabilities, primarily accounts payable,
accrued payroll and accrued insurance costs, flow through
operations and roll over rather than being reduced to zero in
subsequent periods. The company's cash and cash equivalents
balance has increased $963,000 since September 30, 1998.
Operations provided $1.2 million and $1.3 million cash in the
six-months ended March 31, 1999 and 1998, respectively. The
cash flow from the net profit of $676,000 in the first half of
fiscal 1999 was improved by noncash depreciation and
amortization of $985,000.
In the first six months of 1999, the company received over $2
million from the sale of three closed restaurant sites and other
assets. The company has two other restaurant sites held for
sale. The company spent $391,000 for property additions in the
first half of 1999, resulting in a net of $1.6 million cash
provided by investing activities.
Capital additions of $391,000 in the first half of 1999 included
$123,000 to remodel an existing restaurant in Fort Worth as a
test site for developing a revitalized restaurant format. The
company plans to continue to invest in developing an updated
restaurant format and appearance, with the remodel of at least
one more test location planned for the summer of 1999. The
company also plans to complete an upgrade of its restaurant
point-of-sale systems by replacing eight systems in the second
half of 1999. The company plans to pay for these development
and upgrade projects with cash on hand, operating cash flow and
the proceeds from the sale of two closed restaurant sites held
for sale. No new restaurants are currently planned as the
company continues to test changes to revitalize the restaurant
format, and none were added last year.
The company reduced its total debt by $1.8 million in the first
six months of 1999, paid off its bank debt in February and
terminated the restrictive credit line agreement on that bank
debt in April.
The company has not declared a cash dividend in 1999. Future
dividends may be declared at the discretion of the company's
board of directors.
Results of Operations
Same-store sales rose 1.2% and 0.4% for the three months and six
months ended March 31, 1999 compared with the same periods last
year. More customer traffic in the quarter just ended and a
price increase of about .5% in April 1998 contributed to the
increases. Pancho's restaurants near those closed last year
reported the most significant volume increases.
Total sales for the quarter and half-year decreased $1.8 million
and $3.7 million compared with last year's periods,
respectively. The nine units closed under the 1998
restructuring plan accounted for $1.9 million and $3.8 million
in sales in the quarter and half-year ended March 31, 1998,
respectively.
Average sales for restaurants open throughout the quarter and
half-year ended March 31, 1999 grew 5.7% and 5%, to $298,000 and
$585,000, respectively, compared with the same periods in 1998.
Average sales increased mainly due to the closing of nine lower
volume stores in 1998.
The company plans to continue its neighborhood marketing
strategy using company-wide and store-specific neighborhood
marketing tactics. Neighborhood marketing strengthens Pancho's
ties to each restaurant's immediate community with a portfolio
of specific tactics developed for each location. A series of
company-wide tactics and existing programs such as the Birthday
Club and School Rewards programs complement the local tactics.
In the first half of 1999, the main company promotions have used
newspaper inserts to distribute discount coupons. The company
plans to continue using newspaper inserts with discounts to
increase customer frequency and attract new customer trials.
Customer discounts were 4.4% and 4.1% of sales for the quarter
and half ended March 31, 1999, compared with 2.6% for the same
periods in 1998.
Stable or lower food prices helped the company reduce food cost
0.9% and 0.4% of sales for the current quarter and half-year,
respectively, compared with the same periods in fiscal 1998.
The company recognized benefits of $199,000 to reduce employee
injury insurance reserves in the quarter ended March 31, 1999.
After eliminating that gain, labor and related costs
decreased1.6% and 1.5% of sales for the three months and six
months ended March 31, 1999, compared with the same periods in
1998. This cost factor declined because labor costs include a
semi-fixed element which declines as a percent of sales as sales
volume increases. Therefore, closing nine lower volume stores
in 1998 helped the company reduce labor as a percentage of sales
despite market pressures which caused about 4% hourly wage
inflation. If the company is unable to further reduce labor
cost factors with management efficiencies and sales growth, or
if the minimum wage is increased, the company will consider
additional price increases.
Restaurant operating expenses include store marketing,
maintenance, supplies, utilities and occupancy costs.
Effective case and risk management contributed credits of
$50,000 and $212,000 to reduce general liability insurance
reserves in the quarters ended March 31, 1999 and 1998,
respectively. Excluding those benefits, restaurant operating
expenses decreased 2.1% and 1.9% of sales for the three months
and six months just ended, respectively. Closing nine lower
sales units in 1998 helped reduce the cost-to-sales ratio of
this category, particularly for maintenance, utilities and
occupancy costs.
Store marketing costs declined 1% of sales for the second
quarter of 1999 versus the same period last year. The company
spent $89,000 less on direct mail in the 1999 quarter by
substituting newspaper inserts for promotions. Spending on
marketing consulting and research decreased by about $69,000 as
the company limited the involvement of outside marketing
consultants.
Restaurant marketing and promotion costs were 2.2% and 2.9% of
sales for the first half of 1999 and 1998, respectively.
Spending on direct mail declined $152,000 in 1999,
partially-offset by $56,000 more spent for newspaper insert
promotions. The company also saved about $138,000 on marketing
consulting and research compared with the first half of 1998.
Due to the impairment of fixed assets for 22 locations in June
1998, depreciation and amortization decreased $274,000 and
$553,000 for the quarter and six-months ended March 31, 1999,
respectively, compared to the same 1998 periods.
General and administrative expenses rose 1.3% and 1.1% of sales
for the quarter and six months ended March 31, 1998, mainly due
to the effect of lower total sales.
In the quarter ended June 30, 1998, the company increased its
valuation allowance for deferred tax assets to fully offset all
of its net deferred tax assets. This was considered necessary
due to the company's net losses for that quarter and the
previous three years.
The net deferred tax assets were reduced by $202,000 and
$243,000 in the quarter and half ended March 31, 1999,
respectively, due to the net earnings for those periods. The
valuation allowance was reduced by the same amounts to fully
offset the net deferred tax asset balance of $7,896,000 at March
31, 1999. Accordingly, the company recognized no net tax
expense for the quarter and six months ended March 31, 1999.
The company received a $12,000 tax refund which it reported as
income tax benefit in the quarter ended March 31, 1999. At
March 31, 1999, the valuation allowance offset the full amount
of net deferred tax assets.
Despite the valuation allowance, the deferred tax assets are
still available to the company for future use. If the company
maintains profitability, the company may recognize tax benefits
for all or a portion of the deferred tax assets realized. The
deferred tax assets include federal employer tax credits and net
operating loss (NOL) carryforwards which expire in years 2009
through 2013, and state NOL carryforwards which expire in years
1999 through 2013.
After excluding gains from reducing insurance reserves from all
periods, the company improved operating income by $734,000 and
$1,213,000 for the quarter and six months ended March 31, 1999,
respectively, from significant losses for the same periods in
1998. The company's future profitability depends on its ability
to continue to improve sales and manage costs.
Net earnings improved due to the increase in operating results
and greater gains on asset sales. Gains on sale of assets were
$127,000 and $237,000 for the quarter and half ended March 31,
1999, compared with $18,000 and $92,000 for the same periods in
1998. Results of asset sales are included in Other, including
interest income on the Statement of Operations.
Market Listing of the Company's Common Stock
On March 12, 1999, the market listing of the company's common
stock was moved to the Nasdaq SmallCap Market from the Nasdaq
National Market.
Impact of Year 2000
Some computer hardware and software use only two digits to
identify the year in date information. If not corrected, such
systems could fail when processing dates for the year 2000 (Y2K)
or later. The company is in the process of evaluating its risk
and the related costs of updating its computer systems to
properly process Y2K and later dates.
The company has identified all significant hardware and
applications that it believes will require modification to
provide Y2K processing compliance. Internal and external
resources are being used to make the required modifications and
test Y2K processing. The key company systems for which Y2K
problems might pose a significant risk are the company's
restaurant point-of-sale (POS) register systems and the
company's corporate accounting system. The company plans to
complete the testing process for all significant applications by
September 30, 1999.
The company's stores depend on the POS systems for recording
sales data, credit card processing, labor scheduling, time and
attendance tracking, and certain order entry and inventory
functions. Other technology-dependent functions at the stores
are not significant. If the POS software is not fully
remediated by December 31, 1999, current contingency plans call
for using the existing software, which tests indicate is Y2K
capable for the most significant functions. Restaurant
management might have to perform labor scheduling manually, as
was done for years, and do without certain management reports
until complete remediation is achieved.
If the company's corporate accounting system is not fully
remediated by October 31, 1999, the current contingency plan
calls for the company to acquire alternate accounting software
which is certified Y2K compliant. Conversion to new accounting
software under such time pressure would increase the company's
accounting costs, but would not be expected to affect the
operations of the company's restaurants.
The company has communicated with others with whom it does
significant business to determine their Y2K readiness and the
extent to which the company may be vulnerable to third-party Y2K
problems. However, there can be no guarantee that the systems
of other companies will be converted timely, or that a failure
to convert by another company will not have a material adverse
effect on the company. Any material disruption in utility
services or the general economy due to Y2K problems could
adversely affect the company's operations.
The total cost to the company of these Y2K compliance activities
has not been and is not expected to be material to its financial
position, results of operations or cash flows. These costs and
the date on which the company plans to complete the Y2K
modifications and testing are based on management's best
estimates, which were derived using numerous assumptions about
future events, including the continued availability of certain
resources, third-party modification plans and other factors.
However, there can be no guarantee that these estimates will be
achieved, and actual results could differ from those plans.
Other Uncertainties and Trends
SFAS No. 121 requires the company to review long-lived assets
for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be
recoverable. The company considers a history of operating
losses or negative cash flows to be its main indicators of
potential impairment. Assets are generally evaluated for
impairment at the restaurant level. If a restaurant continues
to incur negative cash flows or operating losses, an impairment
or restaurant closing charge may be recognized in future periods.
Special Note Regarding Forward-Looking Information
Certain statements in this report are forward-looking statements
which represent the company's expectations or beliefs concerning
future events, including, but not limited to the following:
statements regarding restaurant format or concept changes, plans
to sell assets, unit growth, future capital expenditures, future
borrowings, future cash flows, future results of operations and
Year 2000 remediation. The company warns that many factors
could, individually or in aggregate, cause actual results to
differ materially from those included in the forward-looking
statements, including, without limitation, the following:
consumer spending trends and habits; increased competition in
the restaurant industry; weather conditions; laws and
regulations affecting labor and employee benefit costs; and the
availability and performance of internal and external Year 2000
remediation resources.
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The company held its annual meeting of stockholders on
January 27, 1999. Proxies were solicited by the company
pursuant to Regulation 14 under the Securities and Exchange Act
of 1934.
(b) There was no solicitation in opposition to management's
nominees for directors in the proxy statement dated December 22,
1998, and all such nominees were elected, as detailed below.
Name For Withheld
Jesse Arrambide, III 3,746,991 69,687
Tomas Orendain 3,742,603 74,075
The following directors were not subject to election at this
meeting and their terms continued after the meeting: Hollis
Taylor, Robert L. List, George N. Riordan, Rudolph Rodriguez,
Jr., Samuel L. Carlson and David Oden.
(c) On October 17, 1998, the board of directors unanimously
approved an amendment to the company's Certificate of
Incorporation, subject to stockholders' approval. The proposal
for stockholders to approve the amendment was voted on at the
annual meeting. The amendment would cause a one-for-three
reverse split of the outstanding shares of common stock, but
would maintain the authorized number of shares of common stock
at 20,000,000 shares and the par value at $.10 per share. The
proposal to approve the amendment was approved by a vote of
stockholders at the meeting, as detailed below.
Proposal For Against Abstained Not Voted
Proposed Amendment 3,250,459 388,273 27,838 150,108
No other items were voted on at the annual meeting.
(d) not applicable.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits Required by Item 601 of Regulation S-K
Exhibit
Number
2 Not applicable
3 Certificate of Amendment to Certificate of Incorporation
4 Not applicable
10 Not applicable
11 Not required -- explanation of net earnings (loss) per
share computation is contained in notes to consolidated
condensed financial statements.
15 Letter re: unaudited interim financial
information
18 Not applicable
19 Not applicable
22 Not applicable
23 Not applicable
24 Not applicable
27 Financial Data Schedule
(b) Reports on Form 8-K
A report on Form 8-K was filed on February 4, 1999 reporting
the approval of the company's shareholders of an amendment
to the company's Certificate of Incorporation affecting a
one-for-three reverse stock split of the company's common
stock. No financial statements were filed with this 8-K.
A report on Form 8-K was filed on March 22, 1999 reporting the
change to the Nasdaq SmallCap Market from the Nasdaq National
Market for the company's common stock, effective March 12, 1999.
No financial statements were filed with this 8-K.
No other reports on Form 8-K were filed in the quarter ended
March 31, 1999.
<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.
PANCHO'S MEXICAN BUFFET, INC.
May 13, 1999 /s/ Hollis Taylor
Hollis Taylor, President and Chief Executive Officer (Principal
Executive Officer)
May 13, 1999 /s/ W. Brad Fagan
Brad Fagan, Vice President, Treasurer, Chief Financial Officer
and Assistant Secretary (Principal Financial and Accounting
Officer)
<PAGE>
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
Pancho's Mexican Buffet, Inc., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), does hereby certify:
FIRST: That the Board of Directors of said Corporation, duly adopted a
resolution proposing and declaring advisable the following amendment to the
Certificate of Incorporation of said corporation:
RESOLVED, that it is advisable and in the best interest of the Corporation
to amend the Certificate by replacing the first paragraph of Section Fourth
of the Certificate with the paragraph as forth below; and that the amendment as
set forth below be and hereby is approved, adopted, ratified and confirmed; and
that the amendment be submitted to the stockholders for approval and adoption at
the Annual Meeting of the Stockholders of the Corporation (the "Meeting"):
Fourth: This corporation is authorized to issue twenty
million five hundred thousand (20,500,000) shares of capital stock.
Twenty million (20,000,000) of the authorized shares shall be
common stock, ten cents ($0.10) par value each; and five hundred
thousand (500,000) of the authorized shares shall be preferred
stock, ten dollars ($10.00) par value each.
The Corporation does, by this Amendment to the
Certificate of Incorporation (such Amendment to the Certificate of
Incorporation being effective upon its filing with the Secretary of
State of the State of Delaware, with the time of such effectiveness
being hereinafter referred to as the "Effective Time"), reclassify its
shares of Common Stock, par value $.10 per share (the "Old
Common Stock") issued and outstanding immediately before the
Effective Time and cancel its unissued shares of Old Common
Stock unissued before the Effective Time, as set forth herein.
All of the shares of Old Common Stock that were
authorized but unissued immediately before the Effective Time, shall,
at the Effective Time, be canceled. The Old Common Stock shall be
superseded by the authorized but unissued shares of Common
Stock, $0.10 par value of the Corporation.
Each three shares of Old Common Stock outstanding
immediately before the Effective Time, and each three shares of
Old Common Stock issuable pursuant to an instrument exercisable
for shares of Old Common Stock, shall, at the Effective Time, be
reclassified as and converted into, and become a right to receive,
and the holders of the outstanding Old Common Stock or
instruments exercisable for such Old Common Stock shall be
entitled to receive therefor upon surrender of the certificates
representing such shares of Old Common Stock to the Corporation,
or upon exercise of such instrument, one share of Common Stock,
$0.10 par value of the Corporation, subject to the treatment of
fractional shares set forth herein.
No scrip or fractional certificates will be issued. In
lieu of fractional shares, the corporation will pay a cash adjustment
in respect of such fraction of a share in an amount equal to the same
fraction of the closing sale price of the Common Stock as quoted on
the Nasdaq National Market System, or such other representative
price as determined by the officers of the corporation, as of the
closing of business on January 27, 1999.
SECOND: That in accordance with Section 211 of the General Corporation
Law of the State of Delaware, the resolution adopted by the Board of Directors
was proposed to the stockholders of the Corporation and duly adopted by the
stockholders as an amendment to the Certificate of Incorporation of the
Corporation.
THIRD: That the aforesaid amendment was duly adopted in accordance
with the applicable provisions of Section 242 of the General Corporation Law of
the State of Delaware. That this Certificate of Amendment of the Certificate of
Incorporation shall be effective upon filing with the Secretary of State of
Delaware.
* * * * *
<PAGE>
IN WITNESS WHEREOF, Pancho's Mexican Buffet, Inc. has caused this
certificate to be executed the 27th day of January 1999.
PANCHO'S MEXICAN BUFFET, INC.
By: /s/ Samuel L. Carlson
Name: Samuel L. Carlson
Title: Secretary
EXHIBIT 15
Pancho's Mexican Buffet, Inc.:
We have made a review, in accordance with standards established by the American
Institute of Certified Public Accountants, of the unaudited interim financial
information of Pancho's Mexican Buffet, Inc. and subsidiaries for the
three-month and six-month periods ended March 31, 1999 and 1998, as indicated in
our report dated April 21, 1999; because we did not perform an audit, we
expressed no opinion on that information.
We are aware that our report referred to above, which is included in your
Quarterly Report on Form 10-Q for the quarter ended March 31, 1999, is
incorporated by reference in Registration Statements No. 2-86238, No. 33-60178
as amended, and No. 333-48295 on Form S-8.
We are also aware that the aforementioned report, pursuant to Rule 436(c) under
the Securities Act of 1933, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that Act.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Fort Worth, Texas
April 21, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated condensed balance sheets as of March 31, 1999 and the consolidated
condensed statements of operations for the six months then ended and is
qualified in its entirety by reference to such consolidated condensed financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,509,000
<SECURITIES> 0
<RECEIVABLES> 215,000
<ALLOWANCES> 0
<INVENTORY> 474,000
<CURRENT-ASSETS> 2,435,000
<PP&E> 48,531,000
<DEPRECIATION> 33,040,000
<TOTAL-ASSETS> 18,845,000
<CURRENT-LIABILITIES> 5,602,000
<BONDS> 0
0
0
<COMMON> 148,000
<OTHER-SE> 10,274,000
<TOTAL-LIABILITY-AND-EQUITY> 18,845,000
<SALES> 28,117,000
<TOTAL-REVENUES> 28,117,000
<CGS> 7,481,000
<TOTAL-COSTS> 25,134,000
<OTHER-EXPENSES> 2,552,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,000
<INCOME-PRETAX> 664,000
<INCOME-TAX> (12,000)
<INCOME-CONTINUING> 676,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 676,000
<EPS-PRIMARY> .46
<EPS-DILUTED> .46
</TABLE>
