UNITED STATES
SECURITIES & EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended SEPTEMBER 29, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ______________
Commission file number: 0-28234
MEXICAN RESTAURANTS, INC.
(Exact name of registrant as specified in its charter)
TEXAS 76-0493269
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
1135 EDGEBROOK, HOUSTON, TEXAS 77034-1899
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: 713-943-7574
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule b-2 of the Exchange Act).
Yes No X
----- -----
Number of shares outstanding of each of the issuer's classes of common stock, as
of October 22, 2002: 3,410,605 SHARES OF COMMON STOCK, PAR VALUE $.01.
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MEXICAN RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED) (AUDITED)
ASSETS 9/29/2002 12/30/2001
------------ ------------
Current assets:
Cash and cash equivalents $ 283,154 $ 311,423
Royalties receivable 146,003 113,329
Other receivables 813,152 554,211
Inventory 608,077 654,237
Taxes receivable 132,334 333,038
Prepaid expenses and other current assets 575,448 682,058
------------ ------------
Total current assets 2,558,168 2,648,296
------------ ------------
Property, plant and equipment 26,425,198 25,500,483
Less accumulated depreciation (10,172,012) (8,749,475)
------------ ------------
Net property, plant and equipment 16,253,186 16,751,008
Deferred tax assets 817,545 1,145,360
Property held for resale 958,487 1,399,672
Other assets 8,433,377 8,122,278
------------ ------------
$ 29,020,763 $ 30,066,614
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 1,000,000 $ 1,000,000
Accounts payable 1,870,702 1,947,973
Accrued sales and liquor taxes 568,440 464,495
Accrued payroll and taxes 900,221 1,123,083
Accrued expenses 762,464 1,266,786
------------ ------------
Total current liabilities 5,101,827 5,802,337
------------ ------------
Long-term debt, net of current portion 3,972,729 5,572,729
Other liabilities 834,336 580,696
Deferred gain 2,237,533 2,393,639
Stockholders' equity:
Preferred stock, $.01 par value, 1,000,000 shares
authorized -- --
Capital stock, $0.01 par value, 20,000,000 shares
authorized, 4,732,705 shares issued 47,327 47,327
Additional paid-in capital 20,121,076 20,121,076
Retained earnings 8,423,465 6,873,797
Deferred compensation (99,237) (130,215)
Treasury stock, cost of 1,181,600 and 1,191,000 shares, respectively (11,618,293) (11,194,772)
------------ ------------
Total stockholders' equity 16,874,338 15,717,213
------------ ------------
$ 29,020,763 $ 30,066,614
============ ============
2
MEXICAN RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
13-WEEK 13-WEEK 39-WEEK 39-WEEK
PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED
09/29/02 09/30/01 09/29/02 09/30/01
------------ ------------ ------------ ------------
Revenues:
Restaurant sales $ 14,758,163 $ 16,147,855 $ 44,995,194 $ 47,119,290
Franchise fees and royalties 331,690 353,661 954,533 960,147
Other 26,872 26,019 44,530 111,501
------------ ------------ ------------ ------------
15,116,725 16,527,535 45,994,257 48,190,938
------------ ------------ ------------ ------------
Costs and expenses:
Cost of sales 3,961,890 4,540,844 12,206,950 13,090,479
Labor 4,916,765 5,252,917 14,799,075 15,469,390
Restaurant operating expenses 3,776,927 4,067,795 11,091,564 11,834,513
General and administrative 1,282,531 1,425,416 3,905,510 4,084,011
Depreciation and amortization 562,967 632,675 1,660,018 1,782,685
Pre-opening costs -- -- -- 254
------------ ------------ ------------ ------------
14,501,080 15,919,647 43,663,117 46,261,332
------------ ------------ ------------ ------------
Operating income 615,645 607,888 2,331,140 1,929,606
------------ ------------ ------------ ------------
Other income (expense):
Interest income 71,617 30,300 98,789 44,346
Interest expense (97,339) (156,856) (301,288) (567,724)
Other, net 70,674 83,357 100,053 338,165
------------ ------------ ------------ ------------
44,952 (43,199) (102,446) (185,213)
------------ ------------ ------------ ------------
Income before income tax expense 660,597 564,689 2,228,694 1,744,393
Income tax expense 202,803 197,711 679,025 610,537
------------ ------------ ------------ ------------
Net income $ 457,794 $ 366,978 $ 1,549,669 $ 1,133,856
============ ============ ============ ============
Basic income per share $ 0.13 $ 0.10 $ 0.45 $ 0.32
============ ============ ============ ============
Diluted income per share $ 0.13 $ 0.10 $ 0.44 $ 0.32
============ ============ ============ ============
Weighted average number of shares (basic) 3,417,748 3,532,427 3,464,295 3,533,971
============ ============ ============ ============
Weighted average number of shares (diluted) 3,489,274 3,532,427 3,540,345 3,533,971
============ ============ ============ ============
3
MEXICAN RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
39-WEEK PERIODS ENDED
9/29/2002 9/30/2001
----------- -----------
Cash flows from operating activities:
Net income $ 1,549,669 $ 1,133,856
Adjustments to reconcile net income to net cash
provided by operating activities:
Deferred compensation 30,978 30,978
Depreciation and amortization 1,660,018 1,782,685
Deferred gain amortization (156,106) (172,179)
Deferred taxes 327,815 181,229
Loss (gain) on sale of property, plant & equipment 12,998 (284,302)
Changes in assets and liabilities:
Royalties receivable (32,674) 1,726
Other receivables (21,514) (108,781)
Income tax receivable/payable 200,704 575,393
Inventory 46,160 80,673
Prepaid and other current assets 56,466 (554,704)
Other assets 5,318 (176,214)
Accounts payable (77,271) (749,353)
Accrued expenses and other liabilities (623,239) 522,645
Other liabilities 218,394 140,597
----------- -----------
Total adjustments 1,648,047 1,270,393
----------- -----------
Net cash provided by operating activities 3,197,716 2,404,249
----------- -----------
Cash flows from investing activities:
Purchase of property, plant and equipment (1,298,355) (1,439,531)
Proceeds from sale of property, plant and equipment 78,000 108,738
Payment received on note for sale of property 17,891 --
----------- -----------
Net cash used in investing activities (1,202,464) (1,330,793)
----------- -----------
Cash flows from financing activities:
Net borrowings (payments) under line of credit (1,600,000) (1,277,271)
Purchase of treasury stock (423,521) (61,429)
----------- -----------
Net cash used in financing activities (2,023,521) (1,338,700)
----------- -----------
----------- -----------
Decrease in cash and cash equivalents (28,269) (265,244)
----------- -----------
Cash and cash equivalents at beginning of period 311,423 636,334
----------- -----------
Cash and cash equivalents at end of period $ 283,154 $ 371,090
=========== ===========
Supplemental disclosure of cash flow information: Cash paid during the period:
Interest $ 269,665 $ 550,708
Income Taxes $ 401,459 $ 152,597
Non-cash investing and financing activity:
Sale of property for note receivable $ 398,047 $ 244,109
Purchase of property for note receivable $ -- $ 207,800
4
MEXICAN RESTAURANTS, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
In the opinion of Mexican Restaurants, Inc. (the "Company"),
the accompanying consolidated financial statements contain all
adjustments (consisting only of normal recurring accruals and
adjustments) necessary for a fair presentation of the consolidated
financial position as of September 29, 2002, and the consolidated
statements of income and cash flows for the 39-week and 13-week periods
ended September 29, 2002 and September 30, 2001. The consolidated
statements of income for the 39-week and 13-week periods ended
September 29, 2002 are not necessarily indicative of the results to be
expected for the full year.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In July 2001, the FASB issued Statement on Financial
Accounting Standards No. 142, "Goodwill and Other Intangible Assets,"
(SFAS 142) which became effective for our Company the beginning of
fiscal 2002. SFAS 142 requires goodwill and other intangible assets
with indefinite lives no longer be amortized. SFAS 142 further requires
the fair value of goodwill and other intangible assets with indefinite
lives be tested for impairment upon adoption of this statement,
annually and upon the occurrence of certain events, and be written down
to fair value if considered impaired. The adoption of SFAS 142 resulted
in the elimination of annual amortization expense related to goodwill
in the amount of approximately $329,468. If SFAS had been adopted in
fiscal 2001, adjusted net income for the third quarter and the 39-week
period would have been $420,516 and $1,294,471 or $0.12 and $0.37 per
share, respectively. Our management has evaluated goodwill as required
by SFAS 142 and has determined that no impairment of goodwill exists.
In August, 2001, the FASB issued Statement on Financial
Accounting Standards No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" (SFAS 144), which became effective for
our Company the beginning of fiscal 2002. SFAS 144 requires that
long-lived assets to be disposed of by sale be measured at the lower of
carrying amount or fair value less cost to sell, whether reported in
continuing operations or in discontinued operations. SFAS 144 broadens
the reporting of discontinued operations to include all components of
an entity with operations that can be distinguished from the rest of
the entity and that will be eliminated from the ongoing operations of
the entity in a disposal transaction. There has been no impact on our
financial position or results of operations due to the adoption of SFAS
144.
SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and
64, Amendment of FASB Statement No. 13 and Technical Corrections," was
issued in April 2002. SFAS No. 145 provides guidance for income
statement classification of gains and losses on extinguishment of debt
and accounting for certain lease modifications that have economic
effects that are similar to sale-leaseback transactions. SFAS No. 145
is effective for the Company in January 2003. The Company is evaluating
the impact of SFAS No. 145 on its financial position and results of
operations.
SFAS No. 146, "Accounting for Exit or Disposal Activities" was
issued in June 2002. SFAS No. 146 addresses significant issues
regarding the recognition, measurement, and reporting of costs that are
associated with exit and disposal activities, including restructuring
activities that are currently accounted for pursuant to the guidance
set forth in EITF Issue No. 94-3, "Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity."
SFAS No. 146 is effective for the Company in January 2003. The Company
is evaluating the impact of SFAS No. 146 on its financial position and
results of operations.
5
2. ACCOUNTING POLICIES
During the interim periods the Company follows the accounting
policies set forth in its consolidated financial statements in its
Annual Report and Form 10-K (file number 0-28234). Reference should be
made to such financial statements for information on such accounting
policies and further financial details.
3. NET INCOME (LOSS) PER COMMON SHARE
Basic income per share is based on the weighted average shares
outstanding without any dilutive effects considered. Diluted income per
share reflects dilution from all contingently issuable shares,
including options and warrants. As of September 29, 2002 and September
30, 2001, the Company had 1,048,470 and 902,270 options and warrants
outstanding, respectively. As of September 29, 2002 and September 30,
2001, such stock options and warrants have the effect of increasing
basic weighted average shares outstanding by 71,526 and 0 for the
13-week periods and by 76,050 and 0 for the 39-week periods,
respectively.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Form 10-Q contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results,
performance or achievements of the Company to be materially different
from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such factors include, among
others, the following: growth strategy; dependence on executive
officers; geographic concentration; increasing susceptibility to
adverse conditions in the region; changes in consumer tastes and eating
habits; national, regional or local economic and real estate
conditions; demographic trends; inclement weather; traffic patterns;
the type, number and location of competing restaurants; inflation;
increased food, labor and benefit costs; the availability of
experienced management and hourly employees; seasonality and the timing
of new restaurant openings; changes in governmental regulations; dram
shop exposure; and other factors not yet experienced by the Company.
The use of words such as "believes", "anticipates", "expects",
"intends" and similar expressions are intended to identify
forward-looking statements, but are not the exclusive means of
identifying such statements. Readers are urged to carefully review and
consider the various disclosures made by the Company in this report and
in the Company's Annual Report and Form 10-K for the fiscal year ended
December 30, 2001, that attempt to advise interested parties of the
risks and factors that may affect the Company's business.
6
RESULTS OF OPERATIONS
Revenues. The Company's revenues for the third quarter of
fiscal year 2002 were down $1,410,810 or 8.5% to $15.1 million compared
with the same quarter one year ago. Restaurant sales for the third
quarter of fiscal year 2002 were down $1,389,692 compared with the same
quarter one year ago, to $14.8 million. The decline, in part, reflects
the December 30, 2001 closure of three under-performing restaurants in
Boise, Idaho. In the fiscal quarter ended September 30, 2001, the three
restaurants located in Boise, Idaho accounted for $411,447 in
restaurant sales. In addition to the three restaurants that were
closed, another restaurant was temporarily closed due to fire damage,
and one restaurant was acquired from a franchisee. Total system sales
at restaurants operating in both fiscal quarters ("same-stores")
decreased 2.5%. Company-owned same-store sales for the quarter
decreased 4.4%. Franchise-owned same-store sales for the quarter
increased 0.1%. The decline in Company same-store sales was primarily
limited to the Houston, Texas market, a market that has experienced
same-store sales declines across the restaurant industry. Also, a part
of the decline in Company same-store sales is due to the Company's
decision to improve consumer price value by reducing selective prices
and offering greater consumer value items. In addition, tropical storms
that occurred in the third quarter of fiscal 2002 impacted same-store
sales in Southeast Texas and Louisiana markets.
On a year-to-date basis, the Company's revenues were down
$2,196,681 or 4.6% to $46.0 million compared with the same 39-week
period one year ago. Restaurant sales were down $2,124,096 or 4.5%
compared with the same 39-week period one year ago. The decrease was
due to the various factors discussed above. Year-to-date total system
same-store sales increased 0.2%. Company-owned same-store sales for the
39-week period decreased 2.4%. Franchise-owned same-store sales for the
39-week period increased 3.8%.
Costs and Expenses. Cost of sales, consisting primarily of
food and beverage costs, but also including paper and supplies,
decreased as a percentage of restaurant sales in the third quarter of
fiscal 2002 to 26.8% as compared with 28.1% in the same quarter in
fiscal 2001. While a small portion of the improvement was due to the
closure of under-performing restaurants, most of the improvement was
the result of buying efficiencies.
On a year-to-date basis, cost of sales decreased as a
percentage of restaurant sales to 27.1% as compared with 27.8% in the
same period in fiscal 2001. The decrease was due to the same factors
discussed above.
Labor and other related expenses increased as a percentage of
restaurant sales to 33.3% in the third quarter of fiscal 2002 as
compared with 32.5% in the same quarter in fiscal 2001. The increase in
labor as a percentage of restaurant sales reflects the semi-fixed
nature of management costs relative to declining same-store sales.
On a year-to-date basis, labor and other related expenses
increased as a percentage of restaurant sales to 32.9% in the 39-week
period ended September 29, 2002 compared with 32.8% in the same 39-week
period one year ago. The increase was primarily due to the same factors
discussed above.
Restaurant operating expenses, which primarily includes rent,
property taxes, utilities, repair and maintenance, liquor taxes and
advertising, increased as a percentage of restaurant sales to 25.6% in
the third quarter of fiscal 2002 as compared with 25.2% in the same
quarter in fiscal 2001. The increase reflects higher repair and
maintenance, insurance and property tax expenses.
On a year-to-date basis, restaurant operating expenses
decreased as a percentage of restaurant sales to 24.7% in the 39-week
period ended September 29, 2002 compared with 25.1% in the same 39-week
period one year ago. The improvement reflects lower utility and
occupancy expenses.
General and administrative expenses decreased as a percentage
of total sales to 8.5% in the third quarter of fiscal 2002 from 8.6% in
the same quarter in fiscal year 2001. Actual general and administrative
expenses decreased $142,885 compared with the same quarter one year
ago. The
7
decrease in general and administrative expenses reflects lower
manager-in-training and accounting expenses.
On a year-to-date basis, general and administrative expenses
remained constant as a percentage of total sales at 8.5%. Actual
general and administrative expenses decreased $178,501 compared with
the same 39-week period on year ago. The decrease was primarily due to
the same factors discussed above.
Depreciation and amortization expense decreased as a
percentage of total sales to 3.7% in the third quarter of fiscal 2002
compared with 3.8% the same quarter in fiscal 2001. In fiscal year
2002, the Company adopted SFAS 142, "Goodwill and Other Intangible
Assets," which requires goodwill and other intangible assets with
indefinite lives no longer be amortized. During the third quarter of
fiscal year 2001, amortization expense was $82,367.
On a year-to-date basis, depreciation and amortization expense
decreased as a percentage of total sales to 3.6% for the 39-week period
ended September 29, 2002 compared with 3.7% the same 39-week period one
year ago. For the 39-week period ended September 30, 2001, amortization
expense was $247,101.
The Company has not opened any new restaurants in fiscal year
2002; consequently, there were no pre-opening costs.
Other Income (Expense). Net other income (expense) decreased
from an expense to income by $88,151 compared with the third quarter in
fiscal 2001. Interest expense decreased by $59,517 compared with the
same quarter one year ago. Debt decreased $2.0 million since the third
quarter one year ago. In the third quarter of fiscal 2002, the Company
recorded $60,103 of business interruption insurance due to fire damage
at the Humble, Texas location. Also in the third quarter of fiscal
2002, the Company received $53,935 of interest income from the IRS for
tax refunds previously recorded. The third quarter ended September 30,
2001 included a $48,000 gain from an insurance settlement and $13,170
interest income from a tax refund.
On a year-to-date basis, net other income (expense) decreased
by $82,767 compared with the 39-week period in fiscal 2001. Interest
expense decreased by $266,436 compared with the same 39-week period one
year ago. The 39-week period in fiscal 2001 included a $226,000 gain on
the sale of one restaurant as well as the factors discussed above.
Income Tax Expense. For the third quarter of fiscal 2002, the
Company's effective tax rate was 30.7% as compared with 35.0% in the
same quarter in fiscal 2001. On a year-to-date basis, the Company's
effective tax rate was 30.5% compared with 35.0% in the same 39-week
period one year ago. The decrease was due to the utilization of tax
credit carryforwards and the adjustment of tax basis assets related to
previous acquisitions.
LIQUIDITY AND CAPITAL RESOURCES
The Company met capital requirements for the 39-week period
ended September 29, 2002 with cash generated by operations. As of
September 29, 2002, the Company's operations generated approximately
$3.2 million in cash, as compared with $2.4 million in the 39-week
period one year ago. As of September 29, 2002, the Company had a
working capital deficit of approximately $2.5 million. A working
capital deficit is common in the restaurant industry, since restaurant
companies do not typically require a significant investment in either
accounts receivable or inventory.
The Company's principal capital requirements are the funding
of new restaurant development or acquisitions and remodeling of older
units. During the 39-week period of fiscal 2002, capital expenditures
on property, plant and equipment were approximately $1.3 million as
compared to $1.4 million for the 39-week period of fiscal 2001.
Year-to-date fiscal 2002 capital expenditures included the remodeling
of five restaurants. In fiscal 2002, the Company also sold a previously
closed restaurant for $78,000 in cash and a note for $400,000, for a
total of $478,000. Additionally, the Company had
8
cash outlays for necessary replacement of equipment and leasehold
improvements in various older units. There are no new restaurants
planned for fiscal year 2002. The Company estimates its capital
expenditures for the remainder of the fiscal year will be approximately
$350,000.
On July 9, 2002, a fire damaged and caused the closure of a
Company-leased restaurant. The restaurant, which was insured for both
property damage and business interruption, will likely be reopened by
December 15, 2002. The Company does not expect any material losses as a
result of this fire.
On June 29, 2001, the Company re-financed $7.8 million of its
debt with Fleet National Bank. The new credit facility is for $10.0
million. The credit facility consists of a $5.0 million term note that
requires quarterly principal payments of $250,000 and matures on June
29, 2006. The credit facility also includes a $5.0 million revolving
line of credit that matures on June 29, 2004. The interest rate is
either the prime rate or LIBOR plus a stipulated percentage.
Accordingly, the Company is impacted by changes in the prime rate and
LIBOR. The Company is subject to a non-use fee of 0.5% on the unused
portion of the revolver from the date of the credit agreement. As of
September 29, 2002, the Company had $5.0 million outstanding on the
credit facility and is in full compliance with all debt covenants. Over
the last several years, the Company's debt was incurred to carry out
the July 1997 acquisition of Monterey's Acquisition Corp., the April
1999 acquisition of La Senorita Restaurants, to develop new
restaurants, and to remodel existing restaurants, as well as to
accommodate other working capital needs. The Company paid down $1.6
million of its indebtedness during the 39-week period of fiscal 2002.
The Company anticipates that it will use up to approximately $400,000
of excess cash flow during the remainder of fiscal 2002 to pay down
debt in a total aggregate amount of approximately $2.0 million for
fiscal year 2002, although there can be no assurance that the Company's
operations for the balance of fiscal 2002 will provide it with
sufficient excess cash flow to pay down outstanding indebtedness in
such amount.
During fiscal year 2002, the Company's Board of Directors
authorized management to implement a limited stock repurchase program
in the amount of $500,000. As of September 29, 2002, the Company has
bought back 93,500 common shares for $394,381, or $4.22 per share. The
Company also purchased 12,425 vested options for $13,838 and 9,400
common shares for $40,068 from former employees and a former director
of the Company. The shares acquired are being held for general
corporate purposes, including the offset of the dilutive effect on
shareholders from the exercise of stock options.
The Company's management believes that with its operating
cash flow and the Company's revolving line of credit with Fleet
National Bank, funds will be sufficient to meet operating requirements
and to finance routine capital expenditures and remodels through the
end of the 2002 fiscal year. Unless the Company violates an important
debt covenant, the Company's credit facility with Fleet National Bank
is not subject to triggering events that would cause the credit
facility to become due sooner than the maturity dates described in the
previous paragraph.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company does not have or participate in transactions
involving derivative, financial and commodity instruments. The
Company's long-term debt bears interest at floating market rates. Based
on amount outstanding at September 29, 2002, a 1% change in interest
rates would change interest expense by $12,432.
ITEM 4. CONTROLS AND PROCEDURES
Within the 90 days prior to the filing date of this report,
the Company carried out an evaluation, under the supervision and with
the participation of the Company's management, including the Company's
President and Chief Executive Officer together with the Company's Chief
Financial Officer, of the effectiveness of the design and operation of
the Company's disclosure controls and procedures. Based upon that
evaluation, the Company's President and Chief Executive Officer and the
9
Company's Chief Financial Officer concluded that the Company's
disclosure controls and procedures are effective in timely alerting
them to material information relating to the Company (including its
subsidiaries) required to be included in the Company's periodic SEC
filings. There have been no significant changes in the Company's
internal controls or in other factors that could significantly affect
internal controls subsequent to the date that the Company carried out
its evaluation.
10
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
Exhibit
Number Document Description
------- --------------------
99.1 Certification of Chief Executive Officer Pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
99.2 Certification of Chief Financial Officer Pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
(b) REPORTS ON FORM 8-K
There have been no reports on Form 8-K filed during the
Company's fiscal quarter ended September 29, 2002.
11
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MEXICAN RESTAURANTS, INC.
Dated: October 30, 2002 By: /s/ Curt Glowacki
-------------------------
Curt Glowacki
Chief Executive Officer
(Principal Executive Officer)
Dated: October 30, 2002 By: /s/ Andrew J. Dennard
-------------------------
Andrew J. Dennard
Senior Vice President, Chief Financial
Officer & Treasurer (Principal Financial
Officer and Principal Accounting Officer)
12
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Curt Glowacki, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Mexican Restaurants,
Inc.;
2. Based on my knowledge, the report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by the report;
3. Based on my knowledge, the financial statements, and other financial
information included in the report, fairly present in all material respects the
financial condition, results of operations and cash flows of the issuer as of,
and for, the periods presented in the report;
4. The issuer's other certifying officers and I are responsible for establishing
and maintaining disclosure controls and procedures (as such term is defined in
Exchange Act Rules 13a-14(c)) for the issuer and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the issuer, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period
in which the report is being prepared;
b) evaluated the effectiveness of the issuer's disclosure controls and
procedures as of a date within 90 days prior to the filing date of the report
(the "Evaluation Date"); and
c) presented in the report our conclusions about the effectiveness of the
disclosure controls and procedures based on our evaluation as of the Evaluation
Date;
5. The issuer's other certifying officers and I have disclosed, based on our
most recent evaluation, to the issuer's auditors and the audit committee of the
board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the issuer's ability to record, process,
summarize and report financial data and have identified for the issuer's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the issuer's internal controls; and
6. The issuer's other certifying officers and I have indicated in the report
whether or not there were significant changes in internal controls or in other
factors that could significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
October 30, 2002 By: /s/ Curt Glowacki
--------------------------
Curt Glowacki,
Chief Executive Officer
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Andrew J. Dennard, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Mexican Restaurants,
Inc.;
2. Based on my knowledge, the report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by the report;
3. Based on my knowledge, the financial statements, and other financial
information included in the report, fairly present in all material respects the
financial condition, results of operations and cash flows of the issuer as of,
and for, the periods presented in the report;
4. The issuer's other certifying officers and I are responsible for establishing
and maintaining disclosure controls and procedures (as such term is defined in
Exchange Act Rules 13a-14(c)) for the issuer and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the issuer, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period
in which the report is being prepared;
b) evaluated the effectiveness of the issuer's disclosure controls and
procedures as of a date within 90 days prior to the filing date of the report
(the "Evaluation Date"); and
c) presented in the report our conclusions about the effectiveness of the
disclosure controls and procedures based on our evaluation as of the Evaluation
Date;
5. The issuer's other certifying officers and I have disclosed, based on our
most recent evaluation, to the issuer's auditors and the audit committee of the
board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the issuer's ability to record, process,
summarize and report financial data and have identified for the issuer's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the issuer's internal controls; and
6. The issuer's other certifying officers and I have indicated in the report
whether or not there were significant changes in internal controls or in other
factors that could significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
October 30, 2002 By: /s/ Andrew J. Dennard
--------------------------
Andrew J. Dennard,
Chief Financial Officer
EXHIBIT INDEX
Exhibit
Number Document Description
------- --------------------
99.1 Certification of Chief Executive Officer Pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
99.2 Certification of Chief Financial Officer Pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002