<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 October 9, 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 November
20, 1996 was 2,493,218 shares.
<PAGE>
STACEY'S BUFFET, INC.
INDEX
----- PAGE #
-------
Balance Sheets as of October 9, 1996 and January 3, 1996............. 3
Statements of Operations for the Sixteen Weeks and Forty
Weeks Ended October 9, 1996 and October 4, 1995.............. 4
Statements of Stockholders' Equity for the Sixteen Weeks
and Forty Weeks Ended October 9, 1996 and October 4, 1995......... 5
Statements of Cash Flows for the Forty Weeks Ended
October 9, 1996 and October 4, 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.............................. 13
Item 4. Submission of Matters to a Vote of Security Holders.......... 13
Item 5. Other Information............................................ 13
Item 6. Exhibits and Reports on Form 8-K............................. 13
Signatures.............................................. 14
<PAGE>
STACEY'S BUFFET, INC.
Balance Sheets
October 9, 1996 and January 3, 1996
<TABLE>
<CAPTION>
October 9, January 3,
1996 1996
---- ----
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 58,597 548,791
Short-term investments 799,051 769,668
Receivables 122,647 101,208
Inventory 294,450 356,667
Prepaid expenses and other 35,285 80,590
----------- -----------
Total current assets 1,310,030 1,856,924
Property and equipment, net of accumulated depreciation 7,207,089 7,846,665
Deposits and other assets 177,262 173,545
Goodwill, net of accumulated amortization 8,219,488 8,584,488
----------- -----------
$ 16,913,869 18,461,622
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 3,040,330 2,988,571
Line of credit 107,341 175,000
Current portion of obligations under capital leases 78,016 159,704
Accrued expenses 1,579,883 1,820,051
Accrued rent 567,562 708,991
Reserve for restaurant renovations and closings 1,744,681 2,064,406
----------- -----------
Total current liabilities 7,117,813 7,916,723
Obligations under capital leases,
excluding current portion 10,118 11,694
Other liabilities - 27,578
----------- -----------
Total liabilities 7,127,931 7,955,995
Stockholders' equity:
Common stock, $.01 par value. Authorized 25,000,000
shares; issued 2,493,217 shares at October 9, 1996
and January 3, 1996 24,931 24,931
Additional paid in capital 42,787,838 42,787,838
Accumulated deficit (33,026,831) (32,307,142)
----------- -----------
Net stockholders' equity 9,785,938 10,505,627
Commitments and contingencies
----------- -----------
$ 16,913,869 18,461,622
=========== ===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
STACEY'S BUFFET, INC.
Statements of Operations
For the Sixteen Weeks and Forty Weeks Ended
October 9, 1996 and October 4, 1995
(Unaudited)
<TABLE>
<CAPTION>
Third Quarter Ended Year to Date Ended
------------------------ -----------------------
October 9, October 4, October 9, October 4,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Restaurant sales $ 10,240,110 12,276,450 30,755,810 38,934,434
Cost of restaurant sales:
Food cost 4,160,126 4,941,340 11,892,810 15,304,352
Labor cost 3,386,652 3,858,781 9,292,085 11,666,282
Operating cost 1,938,601 2,103,408 5,067,450 5,927,277
Occupancy cost 1,071,969 1,196,550 2,632,519 3,399,457
Depreciation and amortization 324,913 461,803 740,249 1,331,688
----------- ----------- ----------- -----------
Total restaurant costs 10,882,261 12,561,882 29,625,113 37,629,056
----------- ----------- ----------- -----------
Restaurant profit (loss) (642,151) (285,432) 1,130,698 1,305,378
Selling, general and
administrative expenses 668,847 756,652 1,733,407 2,008,903
Amortization of goodwill 146,000 154,165 365,000 422,153
Provision for restaurant closings - 1,100,000 - 1,100,000
----------- ----------- ----------- -----------
Operating income (loss) (1,456,998) (2,296,249) (967,710) (2,225,678)
Other income (expense) 74,712 128,271 248,021 360,856
----------- ----------- ----------- -----------
Earnings (loss) before income
taxes (1,382,286) (2,167,978) (719,689) (1,864,822)
Income taxes - - - -
----------- ----------- ----------- -----------
Net earnings (loss) $ (1,382,286) (2,167,978) (719,689) (1,864,822)
=========== =========== =========== ===========
Net earnings (loss) per share
of common stock $ (0.55) (0.84) (0.29) (0.67)
======= ======= ======= =======
Weighted average number of
common shares outstanding 2,493,217 2,593,217 2,493,217 2,773,217
=========== =========== =========== ===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
STACEY'S BUFFET, INC.
Statements of Stockholders' Equity
For the Forty Weeks Ended October 9, 1996 and October 4, 1995
(Unaudited)
<TABLE>
<CAPTION>
Common stock Additional Net
---------------------- paid-in Treasury Accumulated stockholders'
Shares Amount capital stock deficit equity
-------- -------- --------- ------- --------- --------
<S> <C> <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 loss - - - - (719,689) (719,689)
----------- ---------- ----------- ---------- ----------- -----------
Balances at October 9, 1996 2,493,217 $ 24,931 42,787,838 - (33,026,831) 9,785,938
=========== ========== =========== ========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Common stock Additional Net
---------------------- paid-in Treasury Accumulated stockholders'
Shares Amount capital stock deficit equity
-------- -------- --------- ------- --------- --------
<S> <C> <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 - - -
Purchase of 400,000 shares - - - (2,500,000) - (2,500,000)
Net loss - - - - (1,864,822) (1,864,822)
----------- ---------- ----------- ----------- ----------- -----------
Balances at October 4, 1995 2,893,218 $ 28,931 45,283,838 (2,500,000) (26,062,785) 16,749,984
=========== ========== =========== =========== =========== ===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
STACEY'S BUFFET, INC.
Statements of Cash Flows
For the Forty Weeks Ended
October 9, 1996 and October 4, 1995
(Unaudited)
<TABLE>
<CAPTION>
Year to Date Ended
-------------------------
October 9, October 4,
1996 1995
---- ----
<S> <C> <C>
Cash flow from operating activities:
Net earnings (loss) $ (719,689) (1,864,822)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,313,638 1,867,698
Change in assets and liabilities:
(Increase) decrease in assets:
Short-term investments (29,383) 86,029
Receivables (21,439) 140,774
Inventory 62,217 198,057
Income tax refund receivable - 19,199
Prepaid expenses and other 45,306 152,188
Deposits and other assets (3,717) (13,414)
Increase (decrease) in liabilities:
Accounts payable 51,759 314,889
Line of credit (67,659) (88,000)
Accrued expenses (381,597) (2,148,169)
Other liabilities (27,578) (18,099)
Reserve for restaurant renovations
and closings, net (319,725) 1,783,390
---------- ----------
Net cash provided by (used in)
operating activities (97,868) 429,720
Cash flows from investing activities:
Capital expenditures, net (309,061) (314,098)
---------- ----------
Net cash used in investing activities (309,061) (314,098)
Cash flows from financing activities:
Payments on capital lease obligations (83,264) (51,648)
---------- ----------
Net cash (used in) provided by
financing activities (83,264) (51,648)
---------- ----------
Net (decrease) increase in cash (490,194) 63,974
Cash and cash equivalents at beginning of period 548,791 30,207
---------- ----------
Cash and cash equivalents at end of period $ 58,597 94,181
========== ==========
(Continued)
</TABLE>
<PAGE>
STACEY'S BUFFET, INC.
Statements of Cash Flows, Continued
(Unaudited)
<TABLE>
<CAPTION>
Year to Date Ended
-------------------------
October 9, October 4,
1996 1995
---- ----
<S> <C> <C>
Supplemental disclosure of cash flow information:
Cash payments during the period for:
Interest paid $ 27,319 35,168
========== ==========
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 $ - 9,086,695
========== ==========
Write-off of deposits against the reserve for
restaurant renovations and closings $ - 41,663
========== ==========
Spin off of three restaurants to former Chairman
of the Board for return to Company of 400,000
shares of common stock $ - 2,500,000
========== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
STACEY'S BUFFET, INC.
NOTES TO FINANCIAL STATMENTS
---------------------------------------
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 sixteen and forty weeks ended
October 9, 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 sixteen weeks ("third quarter")
and forty weeks ended October 9, 1996, as compared to the
same periods last year:
RESTAURANT SALES of $10,240,110 for the third quarter ended
October 9, 1996 represents a decrease of $2,036,340 or 16.6%
from the same quarter in 1995 and net sales of $30,755,810
for the year-to-date represents an decrease of $8,178,624 or
21.0%. The decrease in sales reflects the fewer number of
restaurants operating in 1996 compared to 1995 along with a
lower average weekly sales per restaurant. Average weekly
sales per restaurant location decreased to $25,098 compared
to $26,922 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
sixteen weeks ended October 9, 1996 increased to 73.7%
compared to 71.7% for the comparable period in 1995. The
increase in these costs for the quarter ended October 9,
1996, were attributable almost entirely to higher labor costs
as a percentage of sales. Cost of food and labor as a
percentage of sales for the forty weeks ended October 9, 1996
decreased to 68.9% compared to 69.3% for the comparable
period 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.
Operating costs and occupancy costs increased as a percentage
of sales for the sixteen and forty weeks ended October 9,
1996 to 29.4% and 25.1% respectively compared to 26.9% and
24.0% 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.
Depreciation and amortization expense decreased as a
percentage of sales a percentage of sales for the sixteen and
forty weeks ended October 9, 1996 to 3.2% and 2.4%,
respectively, compared to 3.8% and 3.4% 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.
<PAGE>
STACEY'S BUFFET, INC.
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------------------------------
(continued)
SELLING, GENERAL AND ADMINISTRATIVE COSTS decreased by
$87,805, or 11.6% for the third quarter, 1996 and by
$275,496, or 13.7% for the first three quarters of 1996 as
compared to the same periods in the previous year. These
decreases were realized in several areas: the elimination of
additional corporate personnel; the reduction of some
insurance costs due to the conversion to a self-insurance
program; and an overall reduction in legal and auditing fees
by more efficient use of these outside services.
Amortization of goodwill was $146,000 for the third quarter,
1996, compared to $154,165 for the third 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
$74,712 and $248,021, respectively, compared to $128,271 and
$360,856 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 third quarter of 1996, and there have not
been any noticeable increases in supplies and other costs.
The Company expects the increase in the minimum wage will
result in an additional increase in direct labor costs when
the additional increase is 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, accrued expenses
and capital expenditures. The significant portion of the
capital expenditures made during the first three quarters of
1996 were related to opening a new restaurant in Florida.
Historically, 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 or in
accordance with terms agreed to with significant vendors.
As of October 9, 1996, Stacey's ratio of current assets to
current liabilities was .18 as compared to .23 at January 3, 1996.
Included in current liabilities at October 9, 1996, is
the reserve for restaurant closings of $1,744,681. 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
-----------------
See "Item 1 - Legal Proceedings" for the Company's
Form 10-Q dated June 19, 1996.
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.
As previously reported, the Board of Directors
authorized management on June 21, 1996, to design
and approve a Shareholders Rights Plan (the "Plan").
On November 4, 1996, the Company announced that it
had formally implemented the Plan. Under the Plan,
each of the Company's outstanding shares is now
accompanied by a Right that would become exercisable
at the close of business on the tenth day following
the earlier to occur of:
1) a public announcement that a person or group
had acquired beneficial ownership of 15% or more of
the Company's common stock, or
2) the commencement of, or the first public
announcement of announcement of an intention of
any person or group to commence, a tender offer
or exchange offer which would result in that
person or group acquiring beneficial ownership
of 15% or more of the Company's common stock.
Once the Rights become exercisable, each Right
would give its holder the right to purchase nine
shares of the Company's common stock at a purchase
price of $.01 per share.
The Rights may be redeemed by the Company at a redemption
price of $0.001 per Right at anytime prior to Rights
becoming exercisable.
<PAGE>
STACEY'S BUFFET, INC.
PART II: OTHER INFORMATION
----------------------------------
(continued)
Item 3. Defaults Upon Senior Securities
-------------------------------
Not Applicable
Item 4. Submission of Matter to a Vote of Security Holders
--------------------------------------------------
Not Applicable
Item 5. Other Information
-----------------
Not Applicable
Item 6. Exhibits and Reports on Form 8K
-------------------------------
a) Exhibits: None
b) Reports on Form 8K:
i) The Company filed a Form 8-K dated 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.
ii) The Company filed a Form 8-K dated November 1, 1996
reporting that Stacey's Buffet, Inc. had implemented
its Shareholder Rights Plan.
<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 FORTY WEEKS
ENDED OCTOBER 9, 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> OCT-09-1996
<CASH> 58,597
<SECURITIES> 799,051
<RECEIVABLES> 122,647
<ALLOWANCES> 0
<INVENTORY> 294,450
<CURRENT-ASSETS> 1,310,030
<PP&E> 16,144,916
<DEPRECIATION> 8,937,827
<TOTAL-ASSETS> 16,913,869
<CURRENT-LIABILITIES> 7,117,813
<BONDS> 0
<COMMON> 24,931
0
0
<OTHER-SE> 9,761,007
<TOTAL-LIABILITY-AND-EQUITY> 16,913,869
<SALES> 30,755,810
<TOTAL-REVENUES> 30,755,810
<CGS> 29,625,113
<TOTAL-COSTS> 29,625,113
<OTHER-EXPENSES> 1,815,218
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 35,168
<INCOME-PRETAX> (719,689)
<INCOME-TAX> 0
<INCOME-CONTINUING> (719,689)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (719,689)
<EPS-PRIMARY> (.29)
<EPS-DILUTED> (.29)
</TABLE>
