<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/X/ Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the quarterly period ended June 19, 1996.
/ / 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 000-16791
STACEY'S BUFFET, INC.
---------------------
(Exact Name of Registrant as specified in its Charter)
Florida 59-2736736
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
801 West Bay Drive, Suite #704, Largo, FL 34640
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (813) 581-4492
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 periods 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 / /
The number of shares outstanding of registrant's common stock as of July 24,
1996 was 2,493,218 shares.
<PAGE>
STACEY'S BUFFET, INC.
INDEX
----- PAGE #
------
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements:
Balance Sheets as of June 19, 1996 and January 3, 1996 .................3
Statements of Operations for the Twelve Weeks and Twenty-
four Weeks Ended June 19, 1996 and June 14, 1995 ...................4
Statements of Stockholders' Equity for the Twelve and Twenty-
four Weeks Ended June 19, 1996 and June 14, 1995 ...................5
Statements of Cash Flows for the Twelve Weeks and Twenty-
four Weeks Ended June 19, 1996 and June 14, 1995 ...................6
Notes to Financial Statements ..........................................8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ..........................9
PART II: OTHER INFORMATION
Item 1. Legal Proceedings ............................................12
Item 2. Changes in Securities ........................................12
Item 3. Defaults Upon Senior Securities ..............................12
Item 4. Submission of Matters to a Vote of Security Holders ..........12
Item 5. Other Information ............................................13
Item 6. Exhibits and Reports on Form 8-K .............................13
Signatures .......................................................14
<PAGE>
<TABLE>
STACEY'S BUFFET, INC.
Balance Sheets
June 19, 1996 and January 3, 1996
<CAPTION>
June 19, January 3,
Assets 1996 1996
------ --------- ---------
<S> <C> <C>
(Unaudited)
Current assets:
Cash and cash equivalents $ 171,206 548,791
Short-term investments 784,820 769,668
Receivables 113,783 101,208
Inventory 312,087 356,667
Income tax refund receivable - -
Prepaid expenses and other 85,395 80,590
---------- ----------
Total current assets 1,467,292 1,856,924
Property and equipment, net of accumulated deprecation 7,524,884 7,846,665
Deposits and other assets 173,545 173,545
Goodwill, net of accumulated amortization 8,365,488 8,584,488
---------- ----------
$ 17,531,208 18,461,622
========== ==========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable $ 1,812,605 2,988,571
Line of credit 251,000 175,000
Current portion of obligations under
capital leases 134,024 159,704
Accrued expenses 1,741,929 1,820,051
Accrued rent 592,914 708,991
Reserve for restaurant renovations and closings 1,830,511 2,064,406
---------- ----------
Total current liabilities 6,362,983 7,916,723
Obligations under capital leases, excluding
current portion - 11,694
Other liabilities - 27,578
---------- ----------
Total liabilities 6,362,983 7,955,99
Stockholders' equity:
Common stock, $.01 par value. Authorized
25,000,000 shares; issued 2,493,217 shares
at June 19, 1996 and January 3, 1996 24,931 24,931
Additional paid in capital 42,787,838 42,787,838
Accumulated deficit (31,644,544) (32,307,142)
---------- ----------
Net stockholders' equity 11,168,225 10,505,627
Commitments and contingencies
---------- ----------
$ 17,531,208 18,461,622
========== ==========
See accompanying notes to financial statements. PAGE 3
</TABLE>
<PAGE>
<TABLE>
STACEY'S BUFFET, INC.
Statements of Operations
For the Twelve Weeks and Twenty-Four Weeks Ended
June 19, 1996 and June 14, 1995
(Unaudited)
<CAPTION> Second Quarter Ended Year to Date Ended
------------------------- -----------------------
June 19, June 14, June 19, June 14,
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Restaurant sales $ 9,320,006 11,342,992 20,515,700 26,657,984
Cost of restaurant sales:
Food cost 3,606,251 4,488,034 7,732,682 10,363,012
Labor cost 2,775,281 3,399,254 5,905,433 7,807,501
Operating cost 1,543,999 1,735,531 3,128,849 3,823,869
Occupancy cost 814,832 922,983 1,560,550 2,202,907
Depreciation and amortization 209,966 366,139 415,336 869,885
----------- ----------- ----------- -----------
Total restaurant costs 8,950,329 10,911,941 18,742,850 25,067,174
Restaurant profit 369,677 431,051 1,772,850 1,590,810
Selling, general and administrative expenses 461,731 635,140 1,064,561 1,252,251
Amortization of goodwill 109,500 133,994 219,000 267,988
----------- ----------- ----------- -----------
Operating income (loss) (201,554) (338,083) 489,289 70,571
Other income (expense) 75,137 81,275 173,309 232,585
----------- ----------- ----------- -----------
Earnings (loss) before income taxes (126,417) (256,808) 662,598 303,156
Income taxes
----------- ----------- ----------- -----------
Net earnings (loss) $ (126,417) (256,808) 662,598 303,156
=========== =========== =========== ===========
Net earnings (loss) per share
of common stock $ (0.05) (0.09) 0.27 0.10
======== ======== ======== ========
Weighted average number of
common shares outstanding 2,493,217 2,893,217 2,493,217 2,893,217
========== ========== ========== ==========
See accompanying notes to financial statements. PAGE 4
</TABLE>
<PAGE>
<TABLE>
STACEY'S BUFFET, INC.
Statements of Stockholders' Equity
For the Twenty-four Weeks Ended June 19, 1996
and June 14, 1995
(Unaudited)
<CAPTION>
Common stock Additional Net
-------------------- paid-in Accumulated stockholders'
Shares Amount capital deficit equity
-------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Balances at January 3, 1996 12,466,089 $ 124,660 42,688,109 (32,307,142) 10,505,627
Effect of July 17, 1996 five-for-one
reverse stock split (9,972,872) (99,729) 99,729 - -
Net earnings - - - 662,598 662,598
---------- --------- ----------- ----------- -----------
Balances at June 19, 1996" 2,493,217 $ 24,931 42,787,838 (31,644,544) 11,168,225
========== ========= =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION> Common stock Additional Net
-------------------- paid-in Accumulated stockholders'
Shares Amount capital deficit equity
-------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Balances at December 27, 1994 14,466,089 $ 144,660 45,168,109 (24,197,963) 21,114,806
Effect of July 17, 1996 five-for-one
reverse stock split (11,572,871) (115,729) 115,729 - -
Net earnings - - - 303,156 303,156
---------- --------- ----------- ----------- -----------
Balances at June 14, 1995 2,893,218 $ 28,931 45,283,838 (23,894,807) 21,417,962
========== ========= =========== =========== ===========
See accompanying notes to financial statements. PAGE 5
</TABLE>
<PAGE>
<TABLE>
STACEY'S BUFFET, INC.
Statements of Cash Flows
For the Twelve and Twenty-Four Weeks Ended
June 19, 1996 and June 14, 1995
(Unaudited)
<CAPTION> Second Quarter Ended Year to Date Ended
----------------------- ---------------------
June 19, June 14, June 19, June 14,
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Cash flow from operating activities:
Net earnings $ (126,417) (256,808) 662,598 303,156
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization 383,322 566,660 762,597 1,204,400
Change in assets and liabilities:
(Increase) decrease in assets:
Short-term investments (4,259) 714,646 (15,152) (280,540)
Receivables 37,666 69,523 (12,575) 29,751
Inventory 61,711 90,187 44,580 158,868
Income tax refund receivable - - - 19,199
Prepaid expenses and other (18,067) (8,265) (4,805) 266,941
Deposits and other assets - - - (23,621)
Increase (decrease) in liabilities:
Accounts payable (323,021) (606,407) (1,175,966) (118,447)
Line of credit 251,000 58,000 76,000 (130,000)
Accrued expenses (255,365) (863,085) (194,199) (1,657,964)
Other liabilities (24,737) (3,414) (27,578) (7,752)
Reserve for restaurant renovations
and closings, net (84,167) 247,692 (233,895) 361,349
--------- --------- --------- ---------
Net cash (used in ) provided by
operating activities (102,335) 8,729 (118,396) 125,340
Cash flows from investing activities:
Capital expenditures, net (54,649) (38,334) (221,815) (60,033)
--------- --------- --------- ---------
Net cash used in investing activities (54,649) (38,334) (221,815) (60,033)
Cash flows from financing activities:
Payments on capital lease obligations (15,324) (25,123) (37,374) (49,999)
--------- --------- --------- ---------
Net cash used in financing activities (15,324) (25,123) (37,374) (49,999)
--------- --------- --------- ---------
Net (decrease) increase in cash (172,308) (54,728) (377,585) 15,308
Cash and cash equivalents at beginning of period 343,514 100,243 548,791 30,207
--------- --------- --------- ---------
Cash and cash equivalents at end of period $ 171,206 45,515 171,206 45,515
========= ========= ========= =========
See accompanying notes to financial statements. PAGE 6
</TABLE>
<PAGE>
<TABLE>
STACEY'S BUFFET, INC.
Statements of Cash Flows, Continued
(Unaudited)
<CAPTION> Second Quarter Ended Year to Date Ended
----------------------- ---------------------
June 19, June 14, June 19, June 14,
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Supplemental disclosure of cash flow information:
Cash payments during the period for:
Interest paid $ 5,529 7,117 12,385 22,009
========= ========= ========= =========
Excluded from the statements of cash flows
are the following noncash transactions:
Write-off of leasehold improvements and
equipment (net of accumulated depreciation)
against the reserve for restaurant
renovations and closings $ - 902,867 - 6,608,743
========= ========= ========= =========
Write-off of deposits against the reserve for
restaurant renovations and closings $ - - - 41,663
========= ========= ========= =========
See accompanying notes to financial statements. PAGE 7
</TABLE>
<PAGE>
STACEY'S BUFFET, INC.
NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
1. The financial statements are unaudited and reflect all adjustments which
are, in the opinion of management, necessary for a fair presentation of
the financial position and operating results for the interim period.
The financial statements should be read in conjunction with the financial
statements and notes thereto contained in the Company's Annual Report to
Stockholders for the fiscal year ended January 3, 1996. The results of
operations for the twelve and twenty-four weeks ended March 27, 1996 are
not necessarily indicative of the results for the entire fiscal year ending
January 1, 1997.
2. On July 17, 1996, the Company effected a five-for-one reverse stock split
that had been previously approved by the Board of Directors and was
approved by the shareholders at the annual shareholders meeting on June 21,
1996. All references to the number of shares and per share amounts have
been restated to reflect the effect of the reverse split in the financial
statements for all periods presented.
3. Earnings per share is based on the weighted average number of common shares
and common share equivalents outstanding in each period.
4. Effective January 4, 1996, the Company adopted Statement of Financial
Accounting Standard No. 123, "Accounting for Stock Based Compensation."
This standard allows the Company to select either a fair value based method
or it's current intrinsic value based method of accounting for employee
stock-based compensation. The Company retained it's intrinsic value method
of accounting and, therefore, the adoption of this standard did not have a
material effect on the Company's financial statements.
<PAGE>
STACEY'S BUFFET, INC.
Item 2 : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
- -------------------------------------------------------------------------------
RESULTS OF OPERATIONS
- ---------------------
Results of operations for the twelve weeks ("second quarter") and twenty-four
weeks ("first half") ended June 19, 1996, as compared to the same periods
last year:
RESTAURANT SALES of $9,320,006 for the quarter ended June 19, 1996 represents
a decrease of $2,022,986 or 17.8% from the same quarter in 1995 and net sales
of $20,515,700 for the first half represents an decrease of $6,142,284 or
23.0%. The decrease in sales reflects the fewer number of restaurants
operating in 1996 compared to 1995. Average weekly sales per restaurant
location decreased to $28,765 compared to $30,472 for the same quarter, 1995.
COST OF RESTAURANT SALES includes food, labor, operating, occupancy and
depreciation and amortization expenses. Operating costs consist primarily of
costs of supplies, utilities, maintenance, personal property taxes, and
insurance.
Cost of food and labor as a percentage of sales for the twelve and twenty-four
weeks ended June 19, 1996 decreased to 68.5% and 66.5%, respectively, compared
to 69.6% and 68.2% for the comparable periods in 1995. These reductions were
due to continuing to monitor the food and labor costs, and providing product
mix in our menus that yield more favorable results.
Food and labor costs as a percentage of sales for the twelve and twenty-four
weeks ended June 14, 1995 compared favorably with the food and labor costs for
same periods in 1994 of 76.5% and 72.7%, respectfully. The reduction in the
1995 costs compared to 1994, was partially due to a slight price increase in
the Northeast taken in the latter part of 1994, but the primary factor in
reducing the overall costs was the constant monitoring and the scrutiny of all
operating costs. In 1995, we instituted a strategic planning committee,
comprised of top management and regional supervisors to meet periodically to
review and discuss all areas of cost containment, and restaurant operations
in general. Additionally, a formal management training program was initiated
early in the third quarter of 1995 to provide a source of experienced managers
for turnover and new locations.
Operating costs and occupancy costs increased as a percentage of sales for the
twelve and twenty-four weeks ended June 19, 1996 to 25.3% and 22.8%,
respectively, compared to 23.4% and 22.6% for the same periods in 1995. The
increase as a percentage of sales results from these costs that are less
variable in nature to sales volumes being computed as a percentage of lower
sales levels per store.
<PAGE>
STACEY'S BUFFET, INC.
Item 2 : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
- ------------------------------------------------------------------------------
(continued)
Depreciation and amortization expense decreased as a percentage of sales a
percentage of sales for the twelve and twenty-four weeks ended June 19, 1996
to 2.3% and 2.0% respectively compared to 3.2% and 3.3% for the same periods
in 1995. The lower deprecation and amortization expense is a result of the
adjustment to the carrying value of certain restaurant equipment and leasehold
improvements upon the implementation of Financial Accounting Standard 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of," in the fourth quarter of the year ended January 3, 1996.
Total operating costs and depreciation costs as a percentage of sales for the
second quarter of 1995 showed no change when compared to the same quarter of
1994. Occupancy costs as a percentage of sales decreased to 8.1% in the 1995
second quarter, compared to 9.0% in the second quarter of 1994. This
improvement was derived from the elimination of several Northeastern
restaurants with higher than average rents and related factors.
SELLING, GENERAL AND ADMINISTRATIVE COSTS decreased by $173,409, or 27.3% for
the second quarter, 1996 and by $187,690, or 15.0% for the first half of 1996
as compared to the previous year. These decreases were realized in several
areas: the elimination of overlapping management from the December, 1993
merger; the reduction of some insurance costs, due to the conversion to a
self-insurance program; an overall reduction in legal and auditing fees by
more efficient use of these outside services.
Amortization of goodwill was $109,500 for the second quarter, 1996, compared
to $133,994 for the second quarter of 1995. This non-cash expense is the
result of the 1993 merger.
OTHER INCOME for the quarter and year-to-date, 1996 was $75,137 and $173,309,
respectively, compared to $81,275 and $232,585 for the prior year. Most of
the other income was from royalty fees.
INFLATIONARY FACTORS had minimal impact on the operating results of the
Company. Wholesale food costs have remained stable during the second quarter
of 1996, and there have not been any noticeable increases in supplies and other
costs. The Company expects the proposed increase in the minimum wage will
result in an increase in direct labor costs when the increases are required
to be implemented.
<PAGE>
STACEY'S BUFFET, INC.
Item 2 : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
- ------------------------------------------------------------------------------
(continued)
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The principal changes in the Company's financial condition from January 3, 1996
were decreases in cash, accounts payable and accrued expenses that were
offset by an increase in the line of credit. The significant portion of the
capital expenditures made during the first half of 1996 were related to opening
a new restaurant in Florida.
The Company's capital has been obtained through cash from operations, credit
from trade suppliers, and the sale of common stock related to the merger in
December 1993, with the Stacey Lynn Group. The remodeling and conversion
program undertaken during 1994 and the operational losses incurred in prior
years used up most of the Company's cash reserves. Based on current operating
results and management's projected operating results, the Company believes
cash flow generated from restaurant operations will be sufficient to pay debts
as they become due.
As of June 19, 1996, Stacey's ratio of current assets to current liabilities
was .23 as compared to .23 at January 3, 1996. Included in current liabilities
at June 19, 1996, is the reserve for restaurant closings of $1,830,511. This
amount provides for some additional asset write-offs and the payout for lease
terminations, which are payable over the next five years.
<PAGE>
STACEY'S BUFFET, INC.
PART II: OTHER INFORMATION
- ------------------------------------------------------------------------------
Item 1. Legal Proceedings
On April 5, 1996, the Company was sued in the Circuit Court of the
Eighteenth Judicial Circuit, Brevard County, Florida (Docket Nos.
96-05403-CA-F, 96-05407-CA-F, 96-05408-CA-F and 96-05409-CA-F) by
several current/and former employees alleging sexual harassment by
a store manager at one of the Company's stores. The plaintiffs have
sought specified damages of $240,000 in the aggregate.
Although the Company believes that such suits are to be expected in
the normal course of its business, and has retained counsel to defend
such actions, due to the recent nature of the filings, the Company or
its counsel has not been able to form a judgment as to the validity of
the claims, the likelihood of successfully defending against such
claims, or the materiality of the Company's potential liability, if
any, when all factors are considered.
Item 2. Changes in Securities
On July 17, 1996, the Company effected a five-for-one reverse stock
split that had been previously approved by the Board of Directors and
was approved by the shareholders at the annual shareholders meeting on
June 21, 1996. All references to the number of shares and per share
amounts have been restated to reflect the effect of the reverse split
in the financial statements for all periods presented.
On June 21, 1996, the Board of Directors authorized management to
design and approve a Shareholders Rights Plan (the "Plan"), the terms
of which were being finalized as of the date hereof. It is expected
that the Plan will become effective during the third fiscal period of
the current year, at which time the Company will file a Current Report
on Form 8-K.
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matter to a Vote of Security Holders
The annual meeting of shareholders of Stacey's Buffet, Inc. was held on
June 21, 1996, for the following purposes:
1. To elect a Board of Directors consisting of five directors.
2. To consider and vote upon a proposal to ratify the appointment of
KPMG Peat Marwick as independent auditors for Stacey's Buffet, Inc.
3. To consider and vote upon a proposal to amend the Company's
Articles of Incorporation to effect a one-for-five reverse stock
split of the outstanding shares of Common Stock.
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
<PAGE>
STACEY'S BUFFET, INC.
PART II: OTHER INFORMATION
- ------------------------------------------------------------------------------
(continued)
Proxies for the meeting were solicited pursuant to Section 14(a) of the
Securities and Exchange Act of 1934. There was no solicitation in
opposition to management solicitation, and all of management's nominees
for directors as listed in the proxy statement were elected.
The election of the Board of Directors, each to serve until the next
annual meeting of stockholders or as otherwise provided, was approved by
the following vote:
Shares Voted Shares Voted Shares Voted
Director For Against Abstaining
------------------ --------- ------- ----------
Garrett B. Hunter 2,151,518 82,405 1,500
Peter J. Hurley 2,151,523 82,400 1,500
Stephen J. Marrier 2,151,714 82,209 1,500
John F. Robenalt 2,151,143 82,780 1,500
Scott W. Ryan 2,152,318 81,605 1,500
The proposal to ratify the appointment of KPMG Peat Marwick as independent
auditors for Stacey's Buffet, Inc. was approved by the following vote:
Shares Voted Shares Voted Shares Voted
For Against Abstaining
---------- ------------ ----------
2,206,582 19,104 9,737
The proposal of an amendment to the Company's Articles of Incorporation
to effect a one-for-five reverse stock split of the outstanding shares of
Common was approved by the following vote:
Shares Voted Shares Voted Shares Voted
For Against Abstaining
---------- ------------ ----------
2,057,250 132,546 14,926
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8K
a)Exhibits: None
b)Reports on Form 8K:
The Company filed a Form 8-K on July 17, 1996 reporting that
Stacey's Buffet, Inc. had effected the five-for-one reverse stock
split approved at the annual shareholders meeting on June 21, 1996.
<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.
STACEY'S BUFFET, INC.
--------------------------
(Registrant)
By /s/ Daniel J. Sullivan
---------------------------
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF STACEY'S BUFFET, INC. FOR THE TWENTY FOUR WEEKS
ENDED MARCH 27, 1996, AND IS QUALIFIED IN ITS ENTRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> JAN-01-1997
<PERIOD-END> JUN-19-1996
<CASH> 171,206
<SECURITIES> 784,820
<RECEIVABLES> 113,783
<ALLOWANCES> 0
<INVENTORY> 312,087
<CURRENT-ASSETS> 1,467,292
<PP&E> 15,768,342
<DEPRECIATION> 7,744,056
<TOTAL-ASSETS> 17,531,208
<CURRENT-LIABILITIES> 6,382,983
<BONDS> 0
<COMMON> 24,931
0
0
<OTHER-SE> 11,168,225
<TOTAL-LIABILITY-AND-EQUITY> 17,531,208
<SALES> 11,195,694
<TOTAL-REVENUES> 20,515,700
<CGS> 18,742,850
<TOTAL-COSTS> 18,742,850
<OTHER-EXPENSES> 1,283,561
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,385
<INCOME-PRETAX> 662,598
<INCOME-TAX> 0
<INCOME-CONTINUING> 662,598
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 662,598
<EPS-PRIMARY> .27
<EPS-DILUTED> .27
</TABLE>
