##### Table of Contents



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 27, 2011
 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
 þ o
 o o
  Large Accelerated Filer o
    
    Accelerated Filer o
    
    Non-Accelerated Filer þ
    
    Smaller Reporting Company o
 o þ




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##### 



Real Mex Restaurants, Inc.
 Index
 PART I FINANCIAL INFORMATION
    
    
    4Item 1. Financial Statements (Unaudited)
    
    
    4Consolidated 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
    
    
    14Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    20Item 4. Controls and Procedures
    
    
    21PART II OTHER INFORMATION
    
    
    22Item 1. Legal Proceedings
    
    
    22Item 1A. Risk Factors
    
    
    22Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    22Item 3. Defaults Upon Senior Securities
    
    
    22Item 4. (Removed and Reserved)
    
    
    22Item 5. Other Information
    
    
    22Item 6. Exhibits
    
    
    23SIGNATURE
    
    
    24Exhibit 31.1Exhibit 32.1
   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 26, 2010. 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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##### Table of Contents



PART I
FINANCIAL INFORMATION
 
 Item 1.
    
    Financial Statements
 Real Mex Restaurants, Inc.
 
 Consolidated Balance Sheets

(unaudited)
 (in thousands, except for share data)
 March 27,
    
    
    December 26,2011
    
    
    2010AssetsCurrent assets:Cash and cash equivalents
    
    $
    1,732
    
    
    $
    3,359Trade receivables, net
    
    
    9,515
    
    
    
    8,295Other receivables
    
    
    707
    
    
    
    621Inventories, net
    
    
    13,181
    
    
    
    11,618Prepaid expenses
    
    
    2,080
    
    
    
    2,877Current portion of favorable lease asset, net
    
    
    3,355
    
    
    
    3,357Other current assets
    
    
    225
    
    
    
    248Total current assets
    
    
    30,795
    
    
    
    30,375Property and equipment, net
    
    
    69,082
    
    
    
    72,730Goodwill
    
    
    113,721
    
    
    
    113,721Trademarks and other intangible assets
    
    
    42,100
    
    
    
    42,100Deferred charges
    
    
    4,091
    
    
    
    4,710Favorable lease asset, less current portion, net
    
    
    10,817
    
    
    
    11,655Other assets
    
    
    6,036
    
    
    
    6,154Total assets
    
    $
    276,642
    
    
    $
    281,445Liabilities and stockholders equityCurrent liabilities:Accounts payable
    
    $
    23,583
    
    
    $
    18,745Accrued self-insurance reserves
    
    
    10,584
    
    
    
    13,212Accrued compensation and benefits
    
    
    8,832
    
    
    
    12,091Accrued interest
    
    
    5,723
    
    
    
    10,188Other accrued liabilities
    
    
    10,738
    
    
    
    10,146Current portion of long-term debt
    
    
    4,793
    
    
    
    507Current portion of capital lease obligations
    
    
    262
    
    
    
    269Total current liabilities
    
    
    64,515
    
    
    
    65,158Long-term debt, less current portion
    
    
    161,993
    
    
    
    160,693Capital lease obligations, less current portion
    
    
    452
    
    
    
    514Deferred tax liabilities
    
    
    19,522
    
    
    
    19,522Unfavorable lease liability, less current portion, net
    
    
    5,508
    
    
    
    5,870Other liabilities
    
    
    3,366
    
    
    
    2,211Total liabilities
    
    
    255,356
    
    
    
    253,968Commitments and contingencies
    
    
    
    
    
    
    Stockholders equity:Common stock, $.001 par value, 1,000 shares
authorized, issued and outstanding at March 27,
2011 and December 26, 2010
    
    
    
    
    
    
    Additional paid-in capital
    
    
    45,301
    
    
    
    45,260Accumulated deficit
    
    
    (24,015
    )
    
    
    (17,783
    )Total stockholders equity
    
    
    21,286
    
    
    
    27,477Total liabilities and stockholders equity
    
    $
    276,642
    
    
    $
    281,445
   4




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Real Mex Restaurants, Inc.
 
 Consolidated Statements of Operations

(unaudited)
 (in thousands)
 Successor
    
    
    PredecessorThree months
    
    
    Three monthsended
    
    
    endedMarch 27,
    
    
    March 28,2011
    
    
    2010Revenues:Restaurant revenues
    
    $
    106,114
    
    
    $
    110,135Manufacturing and distribution revenues
    
    
    9,384
    
    
    
    9,447Franchise and other revenues
    
    
    735
    
    
    
    837Total revenues
    
    
    116,233
    
    
    
    120,419Costs and expenses:Restaurant costsCost of sales
    
    
    25,897
    
    
    
    26,743Labor
    
    
    37,922
    
    
    
    40,724Direct operating and occupancy expense
    
    
    31,170
    
    
    
    32,172Total restaurant costs
    
    
    94,989
    
    
    
    99,639Manufacturing and distribution costs
    
    
    8,337
    
    
    
    6,836General and administrative expense
    
    
    6,504
    
    
    
    5,593Depreciation and amortization
    
    
    5,521
    
    
    
    6,314Total costs and expenses
    
    
    115,351
    
    
    
    118,382Operating income
    
    
    882
    
    
    
    2,037Other income (expense):Interest expense
    
    
    (7,019
    )
    
    
    (7,663
    )Other income (expense), net
    
    
    (51
    )
    
    
    115Total other expense, net
    
    
    (7,070
    )
    
    
    (7,548
    )Loss before income tax provision
    
    
    (6,188
    )
    
    
    (5,511
    )Income tax provision (benefit)
    
    
    44
    
    
    
    (12
    )Net loss
    
    $
    (6,232
    )
    
    $
    (5,499
    )
   5




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Real Mex Restaurants, Inc.
 
 Consolidated Statements of Cash Flows

(unaudited)
 (in thousands)
 Successor
    
    
    PredecessorThree months
    
    
    Three monthsended
    
    
    endedMarch 27,
    
    
    March 28,2011
    
    
    2010Operating activitiesNet loss
    
    $
    (6,232
    )
    
    $
    (5,499
    )Adjustments to reconcile net loss to net cash (used in) provided by operating activities:Depreciation
    
    
    5,044
    
    
    
    5,435Amortization of:Favorable lease asset and unfavorable lease liability, net
    
    
    477
    
    
    
    879Debt discount
    
    
    32
    
    
    
    929Deferred financing costs
    
    
    619
    
    
    
    616Loss on disposal of property and equipment
    
    
    8
    
    
    
    10Stock-based compensation expense
    
    
    41
    
    
    
    9Changes in operating assets and liabilities:Trade and other receivables
    
    
    (1,306
    )
    
    
    (463
    )Inventories
    
    
    (1,563
    )
    
    
    303Prepaid expenses and other current assets
    
    
    820
    
    
    
    (2,903
    )Other assets
    
    
    118
    
    
    
    58Accounts payable and accrued liabilities
    
    
    (3,551
    )
    
    
    1,770Other liabilities
    
    
    1,156
    
    
    
    898Net cash (used in) provided by operating activities
    
    
    (4,337
    )
    
    
    2,042Investing activitiesPurchases of property and equipment
    
    
    (1,485
    )
    
    
    (1,982
    )Net proceeds from disposal of property and equipment
    
    
    
    
    
    
    2Net cash used in investing activities
    
    
    (1,485
    )
    
    
    (1,980
    )Financing activitiesNet borrowings under revolving credit facility
    
    
    4,600
    
    
    
    Payments on long-term debt agreements and capital lease obligations
    
    
    (405
    )
    
    
    (487
    )Payments of financing costs
    
    
    
    
    
    
    (22
    )Net cash provided by (used in) financing activities
    
    
    4,195
    
    
    
    (509
    )Net decrease in cash and cash equivalents
    
    
    (1,627
    )
    
    
    (447
    )Cash and cash equivalents at beginning of period
    
    
    3,359
    
    
    
    3,317Cash and cash equivalents at end of period
    
    $
    1,732
    
    
    $
    2,870Supplemental disclosure of cash flow informationInterest paid
    
    $
    9,542
    
    
    $
    9,219Income taxes paid (refunded)
    
    $
    44
    
    
    $
    (12
    )Supplemental disclosure of noncash investing and financing activitiesIn-kind interest on senior unsecured credit facility added to principal
    
    $
    1,290
    
    
    $
    1,095
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Real Mex Restaurants, Inc.
 
 Notes to Consolidated Financial Statements (unaudited)
 March 27, 2011
 (in thousands, except for share data)
 1. Basis of Presentation
 ® ® ®
     2. Liquidity
    7




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3. Share Purchase  Successor
    Cash and cash equivalents
    
    $
    8,361Trade and other accounts receivable
    
    
    10,248Inventories
    
    
    11,719Other current assets
    
    
    3,131Property and equipment
    
    
    78,990Other assets
    
    
    12,182Trademarks and other intangibles
    
    
    43,200Favorable and unfavorable lease asset/liability, net
    
    
    8,415Goodwill
    
    
    113,989Total assets acquired
    
    
    290,235Accounts payable and accrued liabilities
    
    
    62,532Long-term debt
    
    
    160,249Deferred tax liability
    
    
    20,045Other liabilities
    
    
    2,213Total liabilities assumed
    
    
    245,039Net assets
    
    $
    45,196
   8




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4. Intangible Assets
  March 27,
    
    
    December 26,2011
    
    
    2010Trademarks
    
    $
    37,000
    
    
    $
    37,000Franchise agreements
    
    
    5,100
    
    
    
    5,100$
    42,100
    
    
    $
    42,100
 5. Self Insurance
  6. Long-Term Debt
  March 27,
    
    
    December 26,2011
    
    
    2010Senior Secured Notes due 2013
    
    $
    130,000
    
    
    $
    130,000Senior Secured Notes unamortized debt discount
    
    
    (228
    )
    
    
    (260
    )Senior Secured Revolving Credit Facility
    
    
    4,600
    
    
    
    Senior Unsecured Credit Facility  Related Party
    
    
    31,890
    
    
    
    30,599Mortgage
    
    
    419
    
    
    
    440Other
    
    
    105
    
    
    
    421166,786
    
    
    
    161,200Less current portion
    
    
    (4,793
    )
    
    
    (507
    )$
    161,993
    
    
    $
    160,693
 Senior Secured Notes due 2013
   9




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Senior Secured Revolving Credit Facilities
   10




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Senior Unsecured Credit Facility
  Mortgage.
  March 27,
    
    
    December 26,2011
    
    
    2010Senior Secured Notes due 2013
    
    
    14.00
    %
    
    
    14.00
    %Senior Secured Revolving Credit Facilities
    
    
    9.25
    %
    
    
    9.25
    %Senior Unsecured Credit Facility  Related Party
    
    
    16.50
    %
    
    
    16.50
    %Mortgage
    
    
    9.28
    %
    
    
    9.28
    %Other
    
    
    3.19 to 3.20
    %
    
    
    3.20 to 4.70
    %
 7. Capitalization
 Common Stock
   11




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Stock Option Plans
    WeightedAverageShares
    
    
    Exercise PriceOutstanding at December 26, 2010
    
    
    194
    
    
    $
    8,150Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Forfeited/expired
    
    
    
    
    
    
    Outstanding at March 27, 2011
    
    
    194
    
    
    $
    8,150Vested and expected to vest at March 27, 2011
    
    
    193
    
    
    $
    8,150Exercisable at March 27, 2011
    
    
    152
    
    
    $
    8,150
  8. Fair Value of Financial Instruments
  9. Fair Value Measurement
      12




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Level 1
    
    
    Level 2
    
    
    Level 3Assets:Property and equipment
    
    $
    
    
    
    $
    78,990
    
    
    $
    Liquor licenses
    
    
    
    
    
    
    5,082
    
    
    
    Goodwill
    
    
    
    
    
    
    
    
    
    
    113,989Trademarks and other intangible assets
    
    
    
    
    
    
    
    
    
    
    43,200Favorable lease asset
    
    
    
    
    
    
    
    
    
    
    16,456Liabilities:Senior secured notes due 2013
    
    
    129,675
    
    
    
    
    
    
    
    Unfavorable lease liability
    
    
    
    
    
    
    
    
    
    
    8,041
 10. Related Party Transactions
     13




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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
  ·
           14




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Critical Accounting Policies
   Results of Operations
   Successor
    
    
    PredecessorThree months
    
    
    Three monthsended
    
    
    endedMarch 27,
    
    
    March 28,2011
    
    
    2010Total revenues
    
    
    100.0
    %
    
    
    100.0
    %Restaurant costs:Cost of sales
    
    
    22.3
    
    
    
    22.2Labor
    
    
    32.6
    
    
    
    33.8Direct operating and occupancy expense
    
    
    26.8
    
    
    
    26.7Total restaurant costs
    
    
    81.7
    
    
    
    82.7Manufacturing and distribution costs
    
    
    7.2
    
    
    
    5.7General and administrative expense
    
    
    5.6
    
    
    
    4.6Depreciation and amortization
    
    
    4.7
    
    
    
    5.2Operating income
    
    
    0.8
    
    
    
    1.7Interest expense
    
    
    6.0
    
    
    
    6.4Loss before income tax provision
    
    
    (5.3
    )
    
    
    (4.6
    )Net loss
    
    
    (5.4
    )
    
    
    (4.6
    )
  Successor
    
    
    PredecessorThree months
    
    
    Three monthsended
    
    
    endedMarch 27,
    
    
    March 28,2011
    
    
    2010Restaurant revenues
    
    
    100.0
    %
    
    
    100.0
    %Restaurant costs:Cost of sales
    
    
    24.2
    
    
    
    24.1Labor
    
    
    35.5
    
    
    
    36.7Direct operating and occupancy expense
    
    
    29.2
    
    
    
    29.0Total restaurant costs
    
    
    88.9
    
    
    
    89.8Manufacturing and distribution revenues
    
    
    100.0
    
    
    
    100.0Manufacturing and distribution costs
    
    
    88.8
    
    
    
    72.4
  15




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Three months ended March 27, 2011 compared to the three months ended March 28, 2010
 Total Revenues
 Restaurant Cost of Sales
 Restaurant Labor
 Restaurant Direct Operating and Occupancy Expense
 Manufacturing and Distribution Costs
 General and Administrative Expense
 Depreciation and amortization
 Interest Expense
 Income tax provision.
  16




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Liquidity and Capital Resources
    Working Capital and Cash Flows
  Operating Activities
 Investing Activities
   17




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Financing Activities
 Debt and Other Obligations
         18




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Senior Secured Revolving Credit Facilities
    Senior Unsecured Credit Facility
  Mortgage.
  19




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March 27,
    
    
    December 26,2011
    
    
    2010Senior Secured Notes due 2013
    
    
    14.00
    %
    
    
    14.00
    %Senior Secured Revolving Credit Facilities
    
    
    9.25
    %
    
    
    9.25
    %Senior Unsecured Credit Facility  Related Party
    
    
    16.50
    %
    
    
    16.50
    %Mortgage
    
    
    9.28
    %
    
    
    9.28
    %Other
    
    
    3.19 to 3.20
    %
    
    
    3.20 to 4.70
    %
 Capital Leases
 Inflation
   
 Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
      20




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Item 4.
    
    Controls and Procedures
 Disclosure Controls and Procedures
  Changes In Internal Controls Over Financial Reporting
   21




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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
   22




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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 Principal
Executive and 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 Principal Executive and Financial Officer.
 *
    
    Filed herewith
  23




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SIGNATURE
  REAL MEX RESTAURANTS, INC.Dated: May 6, 2011
    By:
    /s/ Richard P. DutkiewiczRichard P. DutkiewiczInterim Chief Executive Officer and
Chief Financial Officer
(Principal Executive, Financial and
Accounting Officer)  24