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%.

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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.”

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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
=========== =========== =========== ===========