For the Company's 2006 fiscal year ended December 31, 2006, the Company reported net income of $1,138,334 or $0.32 per diluted share compared with net income of $2,316,997 or $0.63 per diluted share for fiscal year 2005. For the fourth quarter ended December 31, 2006, the Company reported net loss of $1,009,469 or $0.30 per diluted share compared with net income of $1,108,481 or $0.30 per diluted share for the same quarter in fiscal year 2005.

The Company's revenues for the fiscal year ended December 31, 2006 were up $4.1 million or 5.3% to $82.3 million compared with fiscal year 2005. Restaurant sales for fiscal year 2006 increased $4.5 million or 5.8% to $81.4 million compared with fiscal year 2005. The increase in restaurant sales reflects the opening of two new restaurants, the full year impact of one restaurant opened in fiscal year 2005, and the acquisition of Mission Burritos (two restaurants), offset in part by a 0.9% decline in same-restaurant sales.

For the fourth quarter 2006 same-store sales were down 8%. This compares to the 12% same store sales growth achieved in fourth quarter 2005. The fourth quarter of 2005 was unusual, reflecting the temporary population shifts after Hurricanes Rita and Katrina and the relative speed with which the Company was able to re-open closed stores after Hurricane Rita.

For fiscal year 2006, total system same-restaurant sales decreased 1.2%, Company-owned same-restaurant sales decreased 0.9% and franchise-owned same-restaurant sales decreased 1.9% from fiscal year 2005.

Commenting on the Company's year-end results for fiscal year 2006, Lou Neeb, Chief Executive Officer, stated, ?Despite solid fundamentals and continued improvements in service and value propositions, the fourth quarter was one with many challenges. Sales momentum slowed due to shrinking consumer discretionary spending, while profit margins were impacted by rising commodity and utility costs, higher insurance premiums, and selected higher security costs. Notwithstanding these factors, we are confident about our future with the results of new restaurant openings and the acquisition of Mission Burritos, a new fast casual concept.?

Mr. Neeb added, ?In the fourth quarter of fiscal year 2006, we also incurred $596,764 in vested option compensation expense as part of a Separation Agreement between Curt Glowacki, the Company's former Chief Executive Officer, and the Company. From our operating point of view, and as shown in the following table, income on an adjusted basis, excluding non recurring items in both fiscal years, was $0.48 per share compared to $0.51 per share.?

The following table has been provided to reconcile the Company's net income, which is a measure based on GAAP (?generally accepted accounting principles?), for the fiscal years and quarters ended December 31, 2006 and January 1, 2006 to adjusted income, which is a non-GAAP measure. The adjusted income excludes the impact of the non-cash impairment charges, business interruption revenue, Hurricane Rita gain, loss on sale of assets, vested option compensation, and executive search fees. The adjusted income has been included as it is deemed to provide meaningful, alternative information regarding the Company's fiscal years 2006 and 2005 and respective fourth quarter performance for these fiscal years. The non-GAAP measure is not in accordance with, or a substitute for, GAAP, and may be different from or inconsistent with non-GAAP financial measures used by other companies, and is not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP.

 

 

Non-GAAP Calculation

Fiscal Year Ended 12/31/06

(52 Weeks)

Fiscal Year Ended 01/01/06

(52 Weeks)

Fourth

Quarter

Ended 12/31/06

(13 Weeks)

Fourth Quarter

Ended 01/01/06

(13 Weeks)

Income (loss) from continuing operations $2,743,775  $4,471,020  $ (665,406) $2,523,420 
Impairment costs 543,777  --  448,188  -- 
Business Interruption Proceeds (59,621) (534,163) --  (534,163)
Hurricane Rita Gains (366,808) (471,622) --  (745,030)
(Gain) loss on sale of assets 32,282  367,711  33,388  75,450 
Purchase of vested options 596,764  --  596,764  -- 
Executive search fee 31,250  --  31,250  -- 

Income from continuing operations before taxes, as adjusted

3,521,419 

3,832,946 

444,184 

1,319,677 

Income tax expense (benefit)

1,089,879 

1,264,106 

189,444 

441,300 
Income from continuing operations, as adjusted 2,431,540  2,568,840  254,740  878,377 

Loss from discontinued operations, net of taxes

(756,339)

(679,417)

(627,848)

(571,131)

Net Income (loss), as adjusted

$1,675,201 

$1,889,423 

$ (373,108)

$ 307,246 

 
Weighted average number of shares (diluted) 3,521,587  3,700,876  3,413,066  3,656,484 
 
Diluted income (loss) per share, as adjusted $0.48  $0.51  $(0.11) $0.08 

Mexican Restaurants, Inc. (NASDAQ:CASA) operates and franchises 79 Mexican restaurants. The current system includes 60 Company-operated restaurants, 18 franchisee-operated restaurants and one licensed restaurant.

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: growth strategy; dependence on executive officers; geographic concentration; increasing susceptibility to adverse conditions in the region; changes in consumer tastes and eating and discretionary spending habits; the risk of food-borne illness; 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 most recently filed Annual Report and Form 10-K 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 Operations
(unaudited)
 
13-Week 13-Week 52-Week 52-Week

Period
Ended

Period
Ended

Period
Ended

Period
Ended

12/31/2006  1/1/2006  12/31/2006  1/1/2006 
Revenues:
Restaurant sales $19,755,282  $19,496,901  $81,379,597  $76,901,353 
Franchise fees, royalties and other 196,001  161,846  825,115  694,302 
Business interruption -  534,163  59,621  534,163 
19,951,283  20,192,910  82,264,333  78,129,818 
 
Costs and expenses:
Cost of sales 5,472,349  5,139,118  22,429,076  20,914,871 
Labor 6,426,934  6,154,861  26,358,576  25,048,534 
Restaurant operating expenses 4,979,831  4,481,052  19,263,309  17,692,164 
General and administrative 2,313,152  1,764,278  7,716,786  6,941,683 
Depreciation and amortization 828,862  703,733  3,131,399  2,683,651 
Pre-opening costs 44,599  22,066  108,847  77,942 
Impairment costs 448,188  -  543,777  - 
Hurricane Rita gain -  (745,030) (366,808) (471,622)
Loss on sale of assets 33,388  75,450  32,282  367,711 
20,547,303  17,595,528  79,217,244  73,254,934 
       
Operating income (596,020) 2,597,382  3,047,089  4,874,884 
 
Other income (expense):
Interest income 631  630  6,239  3,451 
Interest expense (82,317) (98,010) (390,539) (521,161)
Other, net 12,300  23,418  80,986  113,846 
(69,386) (73,962) (303,314) (403,864)
 
Income (loss) from continuing operations before income taxes (665,406) 2,523,420  2,743,775  4,471,020 
Income tax expense (benefit) (283,785) 843,808  849,102  1,474,606 
Income (loss) from continuing operations (381,621) 1,679,612  1,894,673  2,996,414 
 
Discontinued Operations:
Loss from discontinued operations (159,924) (126,026) (364,352) (303,448)
Restaurant closure costs (832,179) (790,708) (832,179) (790,708)
Loss on sale of assets (9,830) (1,290) (10,449) (2,420)
Loss from discontinued operations before income taxes (1,001,933) (918,024) (1,206,980) (1,096,576)
Income tax benefit 374,085  346,893  450,641  417,159 
Loss from discontinued operations (627,848) (571,131) (756,339) (679,417)
 
Net income (loss) $(1,009,469) $1,108,481  $1,138,334  $2,316,997 
 
Basic income (loss) per share
Income (loss) from continuing operations $(0.12) $0.50  $0.55  $0.88 
Loss from discontinued operations (0.18) (0.17) (0.22) (0.20)
Net income (loss) $(0.30) $0.33  $0.33  $0.68 
 
Diluted income (loss) per share
Income (loss) from continuing operations $(0.12) $0.46  $0.53  $0.81 
Loss from discontinued operations (0.18) (0.16) (0.21) (0.18)
Net income (loss) $(0.30) $0.30  $0.32  $0.63 
 
Weighted average number of shares (basic) 3,413,066  3,403,719  3,402,207  3,415,806 
 
Weighted average number of shares (diluted) 3,413,066  3,656,484  3,521,587  3,700,876