Mexican Restaurants Inc. (Nasdaq:CASA) yesterday announced results for the third quarter ended Sept. 30, 2001.

The Company's revenues for the third quarter of fiscal 2001 were up 2.5% or $399,789 to $16.5 million over revenues of $15.8 million for the same quarter one year ago. Restaurant sales for the third quarter of 2001 were up $360,421 to $16.1 million compared with same quarter one year ago. The increase in restaurant sales was due to increased same-store sales. Total system sales at restaurants operating in both fiscal quarters ("same-stores") increased 4.2%. Company-owned same-store sales increased 4.3%. Franchise-owned same-store sales for the quarter increased 4.2%.

For the third quarter ended Sept. 30, 2001, net income was $366,978 or $0.10 per share compared to $313,054 or $0.09 per share the same quarter one year ago. Net income for the third quarter ended Sept. 30, 2001 included a pretax gain of $48,000 from an insurance settlement but also included $100,000 in accruals for litigation. Excluding these items, earnings per share for the Company's fiscal 2001 third quarter would have been $0.11 per share.

Mr. Glowacki, the Company's President and Chief Executive Officer, commenting on the third quarter said, "Third quarter operating results were solid despite the impact of the September 11th terrorist attack. The third quarter marks our seventh straight quarter of positive same-store sales. These positive sales trends have continued to date into the fourth quarter. Core restaurant profit margins improved 40 basis points due to increased management focus, and adjusted menu prices, which more than offset cost pressures, including utilities and insurance."

The Company's Chairman of the Board, Mr. Louis P. Neeb, in commenting on the third quarter said, "The Board is very pleased with the third quarter results. These results reinforce the Board's recent decision to not sell the Company at this time but to focus instead on operations and apply free cash flow to pay down debt. Year-to-date, the Company has paid down $1.3 million, including $750,000 in the third quarter. As of the third quarter, debt outstanding had been reduced to $7.0 million. By fiscal year end, we expect to further reduce our debt to $6.7 million."

Mr. Neeb added, "We continue to believe that the Company's current stock price does not reflect the true value of the Company's restaurants, our dedicated management, and our free cash flow. We will continue to focus on ways to increase shareholder value, including repayment of debt and the possible future adoption of a stock repurchase program in a manner permitted under our financing agreement."

Mexican Restaurants Inc. operates and franchises 88 Mexican restaurants. The current system includes 53 Company-operated restaurants and 35 franchisee-operated restaurants.

Special Note Regarding Forward-Looking Statements

This Press Release 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: accelerating 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 release and in the Company's Annual Report and Form 10-K for the fiscal year ended Dec. 31, 2000, that attempt to advise interested parties of the risks and factors that may affect the Company's business.

               Mexican Restaurants Inc. and Subsidiaries
                   Consolidated Statements of Income

                     13-Week      13-Week      39-Week       39-Week
                  Period Ended Period Ended Period Ended  Period Ended
                    09/30/01      10/01/00     09/30/01      10/01/00
                  ------------ ------------ ------------  ------------
Revenues:
  Restaurant
   sales           $16,147,855  $15,787,434  $47,119,290  $47,066,587
  Franchise fees
   and royalties       353,661      314,974      960,147      972,550
  Other                 26,019       25,338      111,501       51,006
                   -----------  -----------  -----------  -----------
                    16,527,535   16,127,746   48,190,938   48,090,143
                   -----------  -----------  -----------  -----------

Costs and expenses:
  Cost of sales      4,540,844    4,389,553   13,090,479   13,238,103
  Labor              5,252,917    5,265,303   15,469,390   15,723,887
  Restaurant
   operating
   expenses          4,067,795    3,818,364   11,834,513   11,063,969
  General and
   administrative    1,425,416    1,385,869    4,084,011    4,163,595
  Depreciation and
   amortization        632,675      526,984    1,782,685    1,545,441
  Pre-opening costs         --       42,432          254       93,464
  Asset impairments
   and restaurant
   closing costs            --           --           --           --
                   -----------  -----------  -----------  -----------
                    15,919,647   15,428,505   46,261,332   45,828,459
                   -----------  -----------  -----------  -----------
    Operating
     income (loss)     607,888      699,241    1,929,606    2,261,684
                   -----------  -----------  -----------  -----------

Other income
 (expense):
  Interest income       30,300           --       44,346        4,416
  Interest expense    (156,856)    (223,588)    (567,724)    (637,226)
  Other, net            83,357        5,969      338,165       11,312
                   -----------  -----------  -----------  -----------
                       (43,199)    (217,619)    (185,213)    (621,498)
                   -----------  -----------  -----------  -----------
  Income before
   income tax
   expense             564,689      481,622    1,744,393    1,640,186
Income tax expense     197,711      168,568      610,537      554,568
                   -----------  -----------  -----------  -----------
  Net income          $366,978     $313,054   $1,133,856   $1,085,618
                   ===========  ===========  ===========  ===========

Basic and diluted
 income per share        $0.10        $0.09        $0.32        $0.30
                   ===========  ===========  ===========  ===========
Weighted average
 number of shares
 (basic and
 diluted)            3,532,427    3,542,380    3,533,971    3,594,646
                   ===========  ===========  ===========  ===========