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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 28, 2010
 Or
 o
    
    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 333-116310
 REAL MEX RESTAURANTS, INC.
  Delaware
    
    13-4012902(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 5660 Katella Avenue, Suite 100
Cypress, CA 90630     (562)-346-1200
 Yes þ No o
 Yes o No o
  Large Accelerated Filer o
    
    Accelerated Filer o
    
    Non-Accelerated Filer þ
    
    Smaller Reporting Company o
 Yes o No þ




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##### 



Real Mex Restaurants, Inc.
 Index
 PART I FINANCIAL INFORMATIONItem 1. Financial Statements (Unaudited)Consolidated Balance Sheets
    
    
    4Consolidated Statements of Operations
    
    
    5Consolidated Statements of Cash Flows
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    13Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    19Item 4. Controls and Procedures
    
    
    19PART II OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    20Item 1A. Risk Factors
    
    
    20Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    20Item 3. Defaults Upon Senior Securities
    
    
    20Item 4. (Removed and Reserved)
    
    
    20Item 5. Other Information
    
    
    20Item 6. Exhibits
    
    
    21SIGNATURE
    
    
    22Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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FORWARD-LOOKING STATEMENTS
 This report includes forward looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended (the Securities Act) and Section 21E of the Securities
Exchange Act of 1934, as amended (the Exchange Act). Forward looking statements are those that do
not relate solely to historical fact. They include, but are not limited to, any statement that
may predict, forecast, indicate or imply future results, performance, achievements or events. They
may contain words such as believe, anticipate, expect, estimate, intend, project,
plan, will, should, may, or could or words or phrases of similar meaning. They may relate
to, among other things: our liquidity and capital resources; legal proceedings and regulatory
matters involving our Company; food-borne illness incidents; increases in the cost of ingredients;
our dependence upon frequent deliveries of food and other supplies; our vulnerability to changes in
consumer preferences and economic conditions; our ability to compete successfully with other casual
dining restaurants; our ability to expand; and anticipated growth in the restaurant industry and
our markets.
 These forward looking statements reflect our current views with respect to future events and
are based on assumptions and subject to risks and uncertainties, including, but not limited to,
economic, competitive, governmental and technological factors outside of our control, that
may cause actual results to differ materially from trends, plans or expectations set forth in the
forward looking statements. These risks and uncertainties may include these factors and the risks
and uncertainties described elsewhere in this report and other filings with the Securities and
Exchange Commission, including the Item 1A. Risk Factors section of our annual report on Form
10-K for the year ended December 27, 2009. Given these risks and uncertainties, we urge you to read
this report completely and with the understanding that actual future results may be materially
different from what we plan or expect. All of the forward-looking statements made in this Form 10-Q
are qualified by these cautionary statements and we cannot assure you that the actual results or
developments anticipated by our Company will be realized or, even if substantially realized, that
they will have the expected consequences to or effects on our Company or our business or
operations. In addition, these forward-looking statements present our estimates and assumptions
only as of the date of this report. Except for our ongoing obligation to disclose material
information as required by federal securities laws, we do not intend to update you concerning any
future revisions to any forward looking statements to reflect events or circumstances occurring
after the date of this report.
 Unless otherwise provided in this report, references to we, us, our and Company refer
to Real Mex Restaurants, Inc. and its consolidated subsidiaries.
  3




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PART I
FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 Real Mex Restaurants, Inc.
 
 Consolidated Balance Sheets
 (unaudited)
 (in thousands, except for share data)
 March 28,
    
    
    December 27,2010
    
    
    2009AssetsCurrent assets:Cash and cash equivalents
    
    $
    2,870
    
    
    $
    3,317Trade receivables, net
    
    
    9,992
    
    
    
    9,491Other receivables
    
    
    565
    
    
    
    603Inventories, net
    
    
    10,531
    
    
    
    10,834Prepaid expenses
    
    
    6,110
    
    
    
    3,206Current portion of favorable lease asset, net
    
    
    5,242
    
    
    
    5,418Other current assets
    
    
    358
    
    
    
    359Total current assets
    
    
    35,668
    
    
    
    33,228Property and equipment, net
    
    
    81,035
    
    
    
    84,524Goodwill, net
    
    
    43,812
    
    
    
    43,812Trademarks and other intangible assets
    
    
    55,700
    
    
    
    55,700Deferred charges
    
    
    6,501
    
    
    
    7,108Favorable lease asset, less current portion, net
    
    
    18,361
    
    
    
    19,599Other assets
    
    
    8,353
    
    
    
    8,390Total assets
    
    $
    249,430
    
    
    $
    252,361Liabilities and stockholders equityCurrent liabilities:Accounts payable
    
    $
    26,733
    
    
    $
    16,785Accrued self-insurance reserves
    
    
    14,221
    
    
    
    14,790Accrued compensation and benefits
    
    
    9,531
    
    
    
    12,923Accrued interest
    
    
    5,564
    
    
    
    9,759Other accrued liabilities
    
    
    10,713
    
    
    
    11,966Current portion of long-term debt
    
    
    301
    
    
    
    657Current portion of capital lease obligations
    
    
    362
    
    
    
    402Total current liabilities
    
    
    67,425
    
    
    
    67,282Long-term debt, less current portion
    
    
    147,274
    
    
    
    145,271Capital lease obligations, less current portion
    
    
    714
    
    
    
    784Deferred tax liabilities
    
    
    26,059
    
    
    
    26,059Unfavorable lease liability, less current portion, net
    
    
    6,000
    
    
    
    6,415Other liabilities
    
    
    5,128
    
    
    
    4,230Total liabilities
    
    
    252,600
    
    
    
    250,041Commitments and contingencies
    
    
    
    
    
    
    Stockholders equity (deficit):Common stock, $.001 par value, 1,000 shares
authorized, issued and outstanding at March 28,
2010 and December 27, 2009
    
    
    
    
    
    
    Additional paid-in capital
    
    
    56,030
    
    
    
    56,021Accumulated deficit
    
    
    (59,200
    )
    
    
    (53,701
    )Total stockholders equity (deficit)
    
    
    (3,170
    )
    
    
    2,320Total liabilities and stockholders equity
    
    $
    249,430
    
    
    $
    252,361
   4




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Real Mex Restaurants, Inc.
 
 Consolidated Statements of Operations
 (unaudited)
 (in thousands)
 Three Months EndedMarch 28,
    
    
    March 29,2010
    
    
    2009Revenues:Restaurant revenues
    
    $
    110,135
    
    
    $
    117,413Manufacturing and distribution revenues
    
    
    9,447
    
    
    
    10,177Franchise and other revenues
    
    
    837
    
    
    
    902Total revenues
    
    
    120,419
    
    
    
    128,492Costs and expenses:Cost of sales
    
    
    29,104
    
    
    
    31,110Labor
    
    
    43,634
    
    
    
    47,616Direct operating and occupancy expense
    
    
    33,737
    
    
    
    34,699General and administrative expense
    
    
    5,593
    
    
    
    6,722Depreciation and amortization
    
    
    6,314
    
    
    
    8,137Operating income
    
    
    2,037
    
    
    
    208Other income (expense):Interest expense
    
    
    (7,663
    )
    
    
    (9,220
    )Other income, net
    
    
    115
    
    
    
    71Total other expense, net
    
    
    (7,548
    )
    
    
    (9,149
    )Loss before income tax provision
    
    
    (5,511
    )
    
    
    (8,941
    )Income tax (benefit) provision
    
    
    (12
    )
    
    
    6Net loss
    
    $
    (5,499
    )
    
    $
    (8,947
    )
   5




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Real Mex Restaurants, Inc.
 
 Consolidated Statements of Cash Flows
 (unaudited)
 (in thousands)
 Three Months EndedMarch 28,
    
    
    March 29,2010
    
    
    2009Operating activitiesNet loss
    
    $
    (5,499
    )
    
    $
    (8,947
    )Adjustments to reconcile net loss to net cash provided by operating activities:Depreciation
    
    
    5,435
    
    
    
    7,234Amortization of:Favorable lease asset and unfavorable lease liability, net
    
    
    879
    
    
    
    903Debt discount
    
    
    929
    
    
    
    3,683Deferred financing costs
    
    
    616
    
    
    
    300Loss on disposal of property and equipment
    
    
    10
    
    
    
    8Stock-based compensation expense
    
    
    9
    
    
    
    66Non-cash consulting expense
    
    
    
    
    
    
    190Changes in operating assets and liabilities:Trade and other receivables
    
    
    (463
    )
    
    
    (594
    )Inventories
    
    
    303
    
    
    
    1,290Deferred compensation plan assets
    
    
    
    
    
    
    1,677Prepaid expenses and other current assets
    
    
    (2,903
    )
    
    
    815Other assets
    
    
    58
    
    
    
    17Accounts payable and accrued liabilities
    
    
    1,770
    
    
    
    1,753Other liabilities
    
    
    898
    
    
    
    1,128Net cash provided by operating activities
    
    
    2,042
    
    
    
    9,523Investing activitiesPurchases of property and equipment
    
    
    (1,982
    )
    
    
    (1,540
    )Exchange transaction costs
    
    
    
    
    
    
    (198
    )Net proceeds from disposal of property and equipment
    
    
    2
    
    
    
    65Net cash used in investing activities
    
    
    (1,980
    )
    
    
    (1,673
    )Financing activitiesNet payment under revolving credit facility
    
    
    
    
    
    
    (7,200
    )Payments on long-term debt agreements and capital lease obligations
    
    
    (487
    )
    
    
    (514
    )Payments of financing costs
    
    
    (22
    )
    
    
    Net cash used in financing activities
    
    
    (509
    )
    
    
    (7,714
    )Net (decrease) increase in cash and cash equivalents
    
    
    (447
    )
    
    
    136Cash and cash equivalents at beginning of period
    
    
    3,317
    
    
    
    2,099Cash and cash equivalents at end of period
    
    $
    2,870
    
    
    $
    2,235Supplemental disclosure of cash flow informationInterest paid
    
    $
    9,219
    
    
    $
    1,250Income taxes (received) paid
    
    $
    (12
    )
    
    $
    6Supplemental disclosure of noncash investing and financing activitiesIn-kind interest on senior unsecured credit facility added to principal
    
    $
    1,095
    
    
    $
    
   6




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Real Mex Restaurants, Inc. and Subsidiaries
 
 Notes to Consolidated Financial Statements (unaudited)
 March 28, 2010
 (in thousands, except for share data)
 1. Basis of Presentation
 ® ® ®
     2. Exchange Agreement
  3. Intangible Assets
  March 28,
    
    
    December 27,2010
    
    
    2009Trademarks
    
    $
    46,800
    
    
    $
    46,800Franchise agreements
    
    
    8,900
    
    
    
    8,900$
    55,700
    
    
    $
    55,700
  7




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4. Long-Term Debt
  March 28,
    
    
    December 27,2010
    
    
    2009Senior Secured Notes due 2013
    
    $
    130,000
    
    
    $
    130,000Senior Secured Notes unamortized debt discount
    
    
    (10,214
    )
    
    
    (11,143
    )Senior Secured Revolving Credit Facility
    
    
    
    
    
    
    Senior Unsecured Credit Facility
    
    
    27,069
    
    
    
    25,974Mortgage
    
    
    500
    
    
    
    519Other
    
    
    220
    
    
    
    578147,575
    
    
    
    145,928Less current portion
    
    
    (301
    )
    
    
    (657
    )$
    147,274
    
    
    $
    145,271
 Senior Secured Notes due 2013
      8




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Senior Secured Revolving Credit Facilities
         9




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Senior Unsecured Credit Facility
      10




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Mortgage.
  March 28,
    
    
    December 27,2010
    
    
    2009Senior Secured Notes due 2013
    
    
    14.00
    %
    
    
    14.00
    %Senior Secured Revolving Credit Facilities
    
    
    9.25
    %
    
    
    7.42 to 9.25
    %Senior Unsecured Credit Facility
    
    
    16.50
    %
    
    
    16.50
    %Mortgage
    
    
    9.28
    %
    
    
    9.28
    %Other
    
    
    3.20 to 3.59
    %
    
    
    3.20 to 4.70
    %
 5. Capitalization
 Common Stock
  Stock Option Plans
    WeightedAverageShares
    
    
    Exercise PriceOutstanding at December 27, 2009
    
    
    330
    
    
    $
    8,150Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Forfeited/expired
    
    
    (44
    )
    
    
    8,150Outstanding at March 28, 2010
    
    
    286
    
    
    $
    8,150Vested and expected to vest at March 28, 2010
    
    
    282
    
    
    $
    8,150Exercisable at March 28, 2010
    
    
    197
    
    
    $
    8,150
  11




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6. Fair Value of Financial Instruments
  7. Related Party Transactions
     8. Impact of Recently Issued Accounting Principles
   12




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion and analysis of our financial condition and results of operations
contains forward looking statements within the meaning of the federal securities laws. See the
discussion under the heading Forward-Looking Statements elsewhere in this report.
 Overview
  ·
         13




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Critical Accounting Policies
   Results of Operations
   13 Weeks EndedMarch 28, 2010
    
    
    March 29, 2009Total revenues
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    24.2
    
    
    
    24.2Labor
    
    
    36.2
    
    
    
    37.1Direct operating and occupancy expense
    
    
    28.0
    
    
    
    27.0Total operating costs
    
    
    88.4
    
    
    
    88.3General and administrative expense
    
    
    4.6
    
    
    
    5.2Depreciation and amortization
    
    
    5.2
    
    
    
    6.3Operating income
    
    
    1.7
    
    
    
    0.2Interest expense
    
    
    6.4
    
    
    
    7.2Loss before tax provision
    
    
    (4.6
    )
    
    
    (7.0
    )Net loss
    
    
    (4.6
    )
    
    
    (7.0
    )
 Thirteen weeks ended March 28, 2010 compared to the thirteen weeks ended March 29, 2009
 Total Revenues
 Cost of Sales
  14




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Labor
 Direct Operating and Occupancy Expense
 General and Administrative Expense
 Depreciation and amortization
 Interest Expense
 Income tax provision.
 Liquidity and Capital Resources
  Working Capital and Cash Flows
   15




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Operating Activities
 Investing Activities
  Financing Activities
 Debt and Other Obligations
      16




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Senior Secured Revolving Credit Facilities
     Senior Unsecured Credit Facility
  17




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Mortgage.
  March 28,
    
    
    December 27,2010
    
    
    2009Senior Secured Notes due 2013
    
    
    14.00
    %
    
    
    14.00
    %Senior Secured Revolving Credit Facilities
    
    
    9.25
    %
    
    
    7.42 to 9.25
    %Senior Unsecured Credit Facility
    
    
    16.50
    %
    
    
    16.50
    %Mortgage
    
    
    9.28
    %
    
    
    9.28
    %Other
    
    
    3.20 to 3.59
    %
    
    
    3.20 to 4.70
    %
 Capital Leases
 Inflation
    18




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Item 3. Quantitative and Qualitative Disclosures About Market Risk
     
 Item 4. Controls and Procedures
 Disclosure Controls and Procedures
  Changes In Internal Controls Over Financial Reporting
   19




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PART II
OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. (Removed and Reserved)
  
 Item 5. Other Information
   20




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Item 6. Exhibits
 Exhibit No.
    
    Description31.1
    *
    
    Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of
the Securities Exchange Act of 1934 of the Chief Executive
Officer.31.2
    *
    
    Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of
the Securities Exchange Act of 1934 of the Chief Financial
Officer.32.1
    *
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of
the Chief Executive Officer.32.2
    *
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of
the Chief Financial Officer.
 *
    
    Filed herewith  21




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SIGNATURE
  REAL MEX RESTAURANTS, INC.Dated: May 12, 2010
    By:
    /s/ Richard E. RiveraRichard E. RiveraPresident, Chief Executive
Officer and Chairman

(Principal Executive Officer)Dated: May 12, 2010
    By:
    /s/ Richard P. DutkiewiczRichard P. DutkiewiczChief Financial Officer

(Principal Financial Officer
and Accounting Officer)  22