<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 March 26, 1997.
/ / 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 May 8,
1997 was 2,493,144 shares.
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STACEY'S BUFFET, INC.
INDEX
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PAGE #
PART I: FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements:
Balance Sheets as of March 26, 1997 and January 1, 1997 ............... 3
Statements of Operations for the Twelve Weeks
Ended March 26, 1997 and March 27, 1996 .............................. 4
Statements of Stockholders' Equity for the Twelve
Weeks Ended March 26, 1997 and March 27, 1996 ........................ 5
Statements of Cash Flows for the Twelve Weeks
Ended March 26, 1997 and March 27, 1996 .............................. 6
Notes to Financial Statements ......................................... 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ......................... 8
PART II: OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings ............................................... 10
Item 2. Changes in Securities ........................................... 10
Item 3. Defaults Upon Senior Securities ................................. 10
Item 4. Submission of Matters to a Vote of Security Holders ............. 10
Item 5. Other Information ............................................... 10
Item 6. Exhibits and Reports on Form 8-K ................................ 10
Signatures .............................................................. 11
2
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<TABLE>
<CAPTION>
STACEY'S BUFFET, INC.
Balance Sheets
March 26, 1997 and January 1, 1997
(Unaudited)
March 26, January 1,
Assets 1997 1997
- ------ ---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 174,006 252,991
Short-term investments 252,603 806,194
Receivables 116,628 162,993
Inventory 331,400 309,013
Prepaid expenses and other 91,950 35,352
------------ ------------
Total current assets 966,587 1,566,543
Property and equipment, less accumulated
depreciation 6,713,656 6,939,536
Deposits and other assets 162,388 162,588
Goodwill, less accumulated amortization 8,000,488 8,109,988
------------ ------------
$ 15,843,119 16,778,655
============ ============
Liabilities and Stockholders' Equity
- ------------------------------------
Current liabilities:
Accounts payable $ 1,886,468 2,638,948
Line of credit - 340,000
Current portion of obligations under
capital leases 15,241 16,168
Accrued expenses 1,910,647 2,052,122
Accrued rent 513,565 607,818
Reserve for restaurant closings 1,872,008 2,174,623
------------ ------------
Total current liabilities 6,197,929 7,829,679
Obligations under capital leases, excluding
current portion 5,008 8,840
------------ ------------
Total liabilities 6,202,937 7,838,519
Stockholders' equity:
Common stock, $.01 par value. Authorized
25,000,000 shares; issued 2,493,144
shares at March 26, 1997 and January 1,
1997 24,931 24,931
Additional paid in capital 42,787,602 42,787,602
Accumulated deficit (33,172,351) (33,872,397)
------------ ------------
Net stockholders' equity 9,640,182 8,940,136
Commitments and contingencies
------------ ------------
$ 15,843,119 16,778,655
============ ============
3
See accompanying notes to financial statements.
</TABLE>
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<TABLE>
<CAPTION>
STACEY'S BUFFET, INC.
Statements of Operations
For the Twelve Weeks Ended March 26, 1997
and March 27, 1996
(Unaudited)
March 26, March 27,
1997 1996
------ ------
<S> <C> <C>
Restaurant sales $ 10,187,511 11,195,694
Cost of restaurant sales:
Food cost 3,772,997 4,126,431
Labor cost 2,783,715 3,130,152
Operating cost 1,448,713 1,584,850
Occupancy cost 639,694 745,718
Depreciation and amortization 235,870 234,848
------------ ------------
Total restaurant costs 8,880,989 9,821,999
------------ ------------
Restaurant profit 1,306,522 1,373,695
General and administrative expenses 533,204 573,352
Amortization of goodwill 109,500 109,500
------------ ------------
Operating profit 663,818 690,843
Other income 36,228 98,172
------------ ------------
Income before income taxes 700,046 789,015
Income taxes - -
------------ ------------
Net income $ 700,046 789,015
============ ============
Net income per share of common stock $ 0.28 0.32
============ ============
Weighted average number of
common shares outstanding 2,493,144 2,493,144
============ ============
4
See accompanying notes to financial statements.
</TABLE>
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[CAPTION]
<TABLE>
STACEY'S BUFFET, INC.
Statements of Stockholders' Equity
For the Twelve Weeks Ended March 26, 1997
and March 27, 1996
(Unaudited)
Common stock Additional Net
------------------ paid-in Accumulated stockholders'
Shares Amount capital deficit equity
------ ------ ------- ------- ------
<S> <C> <C> <C> <C> <C>
Balances at January 1, 1997 2,493,144 $ 24,931 42,787,602 (33,872,397) 8,940,136
Net income - - - 700,046 700,046
---------- -------- ----------- ------------ ----------
Balances at March 26, 1997 2,493,144 $ 24,931 42,787,602 (33,172,351) 9,640,182
========== ======== =========== ============ ==========
Common stock Additional Net
------------------ paid-in Accumulated stockholders'
Shares Amount capital deficit equity
------ ------ ------- ------- ------
<S> <C> <C> <C> <C> <C>
Balances at January 3, 1996 2,493,144 $ 24,931 42,787,602 (32,307,142) 10,505,391
Net income - - - 789,015 789,015
---------- -------- ----------- ------------ ----------
Balances at March 27, 1996 2,493,144 $ 24,931 42,787,602 (31,518,127) 11,294,406
========== ======== =========== ============ ==========
5
See accompanying notes to financial statements.
</TABLE>
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<TABLE>
<CAPTION>
STACEY'S BUFFET, INC.
Statements of Cash Flows
For the Twelve Weeks Ended March 26, 1997
and March 27, 1996
(Unaudited)
March 26, March 27,
1997 1996
------ ------
<S> <C> <C>
Cash flow from operating activities:
Net earnings (loss) $ 700,046 789,015
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 412,949 379,275
Change in assets and liabilities:
(Increase) decrease in assets:
Short-term investments 553,591 (10,893)
Receivables 46,365 (50,241)
Inventory (22,387) (17,131)
Prepaid expenses and other (56,598) 13,262
Deposits and other assets 200 -
Increase (decrease) in liabilities:
Accounts payable (752,480) (852,945)
Line of credit (340,000) (175,000)
Accrued expenses (235,728) 61,166
Other liabilities - (2,841)
Reserve for restaurant closings (302,615) (149,728)
----------- ----------
Net cash provided by (used in)
operating activities 3,343 (16,061)
Cash flows from investing activities:
Capital expenditures (77,569) (167,166)
----------- ----------
Net cash used in investing activities (77,569) (167,166)
Cash flows from financing activities:
Payments on capital lease obligations (4,759) (22,050)
Net cash used in financing activities (4,759) (22,050)
----------- ----------
Net decrease in cash (78,985) (205,277)
Cash and cash equivalents at beginning of period 252,991 548,791
----------- ----------
Cash and cash equivalents at end of period $ 174,006 343,514
=========== ==========
Supplemental disclosure of cash flow information:
Cash payments during the period for:
Interest paid $ 2,563 6,856
=========== ==========
6
See accompanying notes to financial statements.
</TABLE>
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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 1, 1997. The results of
operations for the twelve weeks ended March 26, 1997, are not necessarily
indicative of the results for the entire fiscal year ending December 31,
1997.
2. Earnings per share is based on the weighted average number of common shares
and common share equivalents outstanding in each period.
3. 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.
7
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STACEY'S BUFFET, INC.
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
Results of operations are for the twelve weeks ("first quarter") ended March
26, 1997, as compared to the twelve weeks ended March 27, 1996. During January
1996, two underperforming restaurants located in the Northeast were closed. In
March 1996, a new restaurant in Florida was opened. At the end of the first
quarter 1997 and 1996, there were 24 Company-owned restaurants in operation.
RESTAURANT SALES of $10,187,511 for the quarter ended March 26, 1997,
represents a decrease of $1,008,183 or 9.0% from the same quarter in 1996.
The decrease in sales is primarily due to more stores open during the first
quarter of 1996 compared to 1997.
Average weekly sales per restaurant for the twelve week quarter ended March 26,
1997 was $35,373, compared to average weekly sales of $35,096 per restaurant
during the same period last year. The increase in average weekly sales in 1997
compared to the same period last year is due largely to modest price increase
for lunches that was put into effect in the last quarter of fiscal 1996.
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 weeks ended
March 26, 1997 totaled 64.3% compared to 64.9% for the twelve weeks ended March
27, 1996. This reduction was achieved by constantly monitoring food and labor
costs to gain further efficiencies. Other operating costs, occupancy and
depreciation as a percentage of sales, were 22.8% for the twelve weeks ended
March 26, 1997 compared to 22.9% in the comparable period in 1996.
GENERAL AND ADMINISTRATIVE EXPENSES decreased by $40,148 or 7.0% for the twelve
weeks ended March 26, 1997 as compared to the same period for the previous
year. Total general and administrative expenses, as a percentage of sales, was
5.2% for the first quarter of 1997, as compared to 5.1% for the first quarter
of 1996. This increase as a percentage of sales is a result of sales for the
first quarter of fiscal 1997 being less than sales for the same period in 1996.
Amortization of goodwill was $109,500 for the first quarter of 1997 and 1996.
8
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STACEY'S BUFFET, INC.
OTHER INCOME (EXPENSE) for the first quarter, 1997 was $36,228 compared to
$98,172 in the same quarter, last year. Other income (expense) consists
primarily of royalty fees earned, interest income, interest expense. The
reduction in other income relates to the reduction in the number of restaurants
being operated under license agreements in 1997 compared to 1996.
INFLATIONARY FACTORS were minimal on the operating results of the Company.
Wholesale food costs have remained stable during the first quarter of 1997,
and there have not been any noticeable increases in supplies and other costs.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The principal changes in the Company's financial condition from January 1, 1997
were decreases in accounts payable, short-term investments, the line of credit,
the reserve for store closings and accrued expenses. As of March 26, 1997,
Stacey's ratio of current assets to current liabilities was .16, as compared
to .20 at January 1, 1997. Current liabilities as of March 26, 1997, include
$1,872,008 for the provision for restaurant closings.
On January 5, 1997, the line of credit facility expired and all amounts
outstanding under the line were repaid. Approximately $581,000 of the
short-term investments were released from the security agreement and converted
to cash for operating working capital.
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
for fiscal 1997 of the remaining twenty-four restaurants, using actual fiscal
1996 results as the basis of these projections, the Company expects cash flows
generated from restaurant operations will be adequate to pay debts in the
ordinary course.
9
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STACEY'S BUFFET, INC.
PART II: OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings
The registrant is not party to any material legal proceedings.
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 8K
a) Exhibits:
None
b) Reports on Form 8K:
No Form 8-K was required to be filed during the first quarter, 1997.
10
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STACEY'S BUFFET, INC.
SIGNATURES
----------
Pursuant to the requirements of the Exchange Act, the registrant 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
--------------------------
Daniel J. Sullivan
Chief Financial Officer
11
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF STACEY'S BUFFET, INC. FOR THE TWELVE WEEKS ENDED
MARCH 26, 1997, AND IS QUALIFIED IN ITS ENTRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-26-1997
<CASH> 174,006
<SECURITIES> 252,603
<RECEIVABLES> 126,628
<ALLOWANCES> 10,000
<INVENTORY> 331,400
<CURRENT-ASSETS> 966,587
<PP&E> 14,999,965
<DEPRECIATION> 8,286,309
<TOTAL-ASSETS> 15,843,119
<CURRENT-LIABILITIES> 6,197,929
<BONDS> 0
<COMMON> 24,931
0
0
<OTHER-SE> 9,615,602
<TOTAL-LIABILITY-AND-EQUITY> 15,843,119
<SALES> 10,187,511
<TOTAL-REVENUES> 10,187,511
<CGS> 8,880,989
<TOTAL-COSTS> 8,880,989
<OTHER-EXPENSES> 663,818
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,563
<INCOME-PRETAX> 700,046
<INCOME-TAX> 0
<INCOME-CONTINUING> 700,046
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 700,046
<EPS-PRIMARY> .28
<EPS-DILUTED> .28
</TABLE>
