FORM 10-KUNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D. C.
WASHINGTON, D.C. 20549(Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FORM 10-K
[X]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the
fiscal year endedFiscal Year Ended August31, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 193428, 2002
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the
transition period from _________________Transition Period From _____ to__________________________
Commission file
number:number1-8308LUBY'S, INC. ______________________________________________________________________________ (ExactLuby's, Inc.
(Exact name of registrant as specified in its charter)Delaware 74-1335253 _________________________ ____________________________________ (State of Incorporation) (I.R.S. Employer Identification No.) 2211 Northeast Loop 410 Post Office Box 33069 San Antonio, Texas 78265-3069 Area Code 210 654-9000 _______________________________________ _______________________________ (Address of principal executive office) (Registrant's
Delaware
74-1335253
(State of incorporation)
(IRS Employer Identification Number)
2211 Northeast Loop 410
San Antonio, Texas 78217(Address of principal executive offices, including zip code)
(210) 654-9000
(Registrant's telephone
number)number, including area code)Securities registered pursuant to Section 12(b) of the Act:
Title of ClassName of
exchange on Title of Class which registered ______________ ______________________ Common Stock ($.32 par value) New York Stock Exchange Common Stock Purchase Rights New York StockExchange on
which registeredCommon Stock Par Value ($.32 par value)
New York Stock Exchange
Common Stock Purchase Rights
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
____Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes X No
___ ___Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of the shares of Common Stock of the registrant held by
non-affiliatesnonaffiliates of the registrant as of November 14,2001,2002, was approximately$133,439,000$84,847,000 (based upon the assumption that directors and executive officers are the only affiliates).The aggregate market value of the shares of Common Stock of the registrant held by nonaffiliates of the registrant as of February 13, 2002, was approximately $128,279,000 (based upon the assumption that directors and executive officers are the only affiliates).
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes X No
As of November 14,
2001,2002, there were22,422,94322,448,574 shares of the registrant's Common Stock outstanding,exclusive of 4,980,124which does not include 4,954,493 treasury shares.DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following document are incorporated by reference into the designated parts of this Form 10-K:
proxy statementProxy Statement relating to
20022003 annual meeting of shareholders (in Part III).Luby's, Inc.
Form 10-K
Year ended August 28, 2002
Table of Contents
Page
Part I
4
5
6
6
7
Part II
Market for Registrant's Common Equity and Related Stockholder Matters
8
9
Management's Discussion and Analysis of Financial Condition and Results of Operations
10
18
19
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
40
Part III
41
41
Security Ownership of Certain Beneficial Owners and Management
41
41
Part IV
42
42
47
48
49
50
51
Part I
Overview
Luby's, Inc. (formerly, Luby's Cafeterias, Inc.) was originally incorporated in Texas in 1959 and was reincorporated in Delaware on December 31, 1991. The Company'sexecutiveadministrative offices are at 2211 Northeast Loop 410, P. O. Box 33069, San Antonio, Texas 78265-3069.Luby's, Inc. was restructured into a holding company on February 1, 1997, at which time all of the operating assets were transferred to Luby's Restaurants Limited Partnership, a Texas limited partnership composed of two wholly owned, indirect corporate subsidiaries of the Company. All restaurant operations are conducted by the partnership. Unless the context indicates otherwise, the word "Company" as used herein includes the partnership and the consolidated corporate subsidiaries of Luby's, Inc.
As of
December 5, 2001,November 14, 2002, the Companyoperates 202 cafeteria-styleoperated 193 restaurants under the name"Luby's""Luby's." These establishments are located in close proximity to retail centers, business developments, and residential areasin Arizona, Arkansas, Florida, Louisiana, Mississippi, Missouri, New Mexico, Oklahoma, Tennessee, and Texas.throughout ten states (listed below under Item 2). Of the202193 restaurants,operated by the Company, 125124 are at locations owned by the Company and7769 are on leased premises. Additionally, one of the restaurants primarily serves seafood, 26 are all-you-can-eat concepts, and 166 are traditional cafeterias.The Company's restaurants constructed prior to 1999 typically contain 9,000 to 10,500 square feet of floor space and can seat 250 to 300
guests.guests simultaneously. In more recent years, the Company built several more-contemporary units. They contain 6,000 to 8,600 square feet of floor space and can seat 170 to 214guests. Marketingguests simultaneously.Operations
The Company'sproduct strategy is tooperations provide customers with a wide variety offreshly cooked foodstasty food with most served cafeteria-style at reasonable prices. Daily, each restaurant offers 12 to 14 entrees, 12 to 14 vegetable dishes, 12 to 16 salads, and 15 to 18 desserts. Food is prepared inan attractivesmall quantities throughout serving hours andinformal environment.frequent quality checks are conducted.The Company's marketing research has shown that its products appeal to a broad range of value-oriented consumers with particular success among families with children, seniors, shoppers, travelers, and business people looking for a quick, homestyle meal at a reasonable price. During fiscal
2001,2002, the Company spent approximately1.6%.2% of sales on traditional marketing venues, including newsprint, radio,and television advertising and product-specific promotions. The marketing budget for fiscal 2002 is approximately 0.7% of sales, with most of the amount allocated topoint-of-purchase, andlocallocal-store marketing. The Company also invested approximately $600,000 in distinct storemarketing. Operations The Company's operations provide customers with a wide varietymarquees at 72 ofgreat tasting food served cafeteria-style at reasonable prices. Food is prepared in small quantities throughout serving hours, and frequent quality checksits restaurants, which enhance customer awareness of specific store promotions.Luby's restaurants are
made. Toward the end of fiscal year 2001, the Company created a team of chefs focused on recipe enhancement and consistent execution guidelines. Each restaurant offers a broad and varied menu and normally serves 12 to 14 entrees, 12 to 14 vegetable dishes, 15 to 20 salads, and 18 to 20 desserts. The Company's restaurants appeal primarily to shoppers, office or store personnel for lunch, and to families for dinner. The Company's restaurants aregenerally open for lunch and dinner seven days aweekweek. Breakfast has been tested successfully inmost markets.several markets; however, it is too early to predict if it will ultimately be rolled out Company-wide or, if so, when that might occur. All of the restaurants sell take-out orders, andmostmany of them have separate food-to-go entrances. Take-out orders accounted for approximately14.6%12.8% of sales in fiscal2001.2002.Each restaurant is operated as a separate unit under the control of a general manager who has responsibility for day-to-day operations, including
menu planningfood production and personnel employment and supervision.Each restaurant managerThe Company's philosophy iscompensated on the basis of his or her restaurant's profits. Management believes that grantingto grant broad authority to its restaurant managers andcompensatingcompensate them on the basis of their performance, believing these are significant factors inthe profitability of its restaurants.restaurant profitability. Of the202193 general managers employed by the Company,155135 have beenwith the Companyemployed for more than ten years. Typically, an individual is employed for a period offivefour to seven years before he or she is considered qualified to become a general manager.In 1999, theThe Company
implementedoperates from a centralized purchasing arrangement to obtain the economies of bulk purchasing andvolume pricinglower prices forsubstantially allmost of its foodproducts used in the Company's restaurants.products. The arrangement involves a competitively selected prime vendor for each ofthe Company'sits three majorregions. The Company believes that alternative sources of supply are readily available in the event the centralizedpurchasingarrangement is terminated.regions.Each restaurant prepares
substantiallyvirtually all of the food served, including breads and pastries. Menus are reviewed periodically by a committee of managers and chefs. Therestaurants follow Companycommittee introduces newly developed recipeswith minor variationstosuit local tastes. Menus vary among the Company's restaurants each day to reflect localensure offerings are varied and that seasonal foodpreferences. The Company also takes advantage of any special food purchasing opportunities.preferences are incorporated.Quality control teams also help to maintain uniform standards of food preparation. The teams visit each restaurant
periodicallyas necessary and work with the staff to check adherence tothe Company'sCompany recipes, train personnel in new techniques, andevaluateimplement systems and proceduresfor possible useused universally throughout the Company.During the fiscal year ended August 28, 2002, the Company closed 18 underperforming units and reopened one unit as a new seafood restaurant. Since August 28, 2002, the Company has closed four underperforming restaurants and reopened one previously closed cafeteria as a steak buffet. Additionally, in fiscal 2003, the Company plans to close additional units and reopen three restaurants as other concepts. In addition to changing the concepts in some locations based upon their surrounding demographics, the Company believes one of its primary opportunities for growth centers around improving same-store sales growth at existing locations.
As of
November 2001,year-end, the Company had a workforce of approximately 11,000,employees,consisting of10,24010,200 nonmanagement restaurantpersonnel;workers; 600 restaurant managers, associate managers, and assistant managers; and160 executive,200 clerical, administrative, andclerical personnel.executive employees. Employee relations are considered to begood, and thegood. The Company has never had a strike or workstoppage. The Companystoppage and is not subject toanycollective bargaining agreements.Restaurant Growth During the fiscal year ended August 31, 2001, the Company opened one new restaurant and closed 19 underperforming units. Since August 31, 2001, the Company has closed 11 underperforming restaurants. During fiscal 2002, the Company expects six others to be closed. Openings of new ground-up stores will not occur in fiscal year 2002. The Company believes its opportunities for growth currently center around improving same-store sales growth at existing locations and changing the concepts in some locations that demographically would support different types of food. Accordingly, the Company has plans to reopen two currently closed stores under new concepts. At least one of the two will serve an appealing variety of seafood.Service Marks
The Company uses several service marks, including "Luby's," and believes that such marks are of material importance to its business. The Company has federal service mark registrations for severalofsuch marks.The Company is not the sole user of the name
"Luby's"Luby's in the cafeteria business.OneA cafeteria using the name"Luby's" and one cafeteria using the name "Pat Luby's" areLuby's is being operated intwo different cities inTexas bytwo different owners not affiliated with the Company.an unaffiliated company. The Company's legal counsel is of the opinion that the Company has the paramount right to use the name"Luby's"Luby's as a service mark in thecafeteria business in theUnited States and thatsuchthe otherusersuser can be precluded from expandingtheirits use of the name as a service mark.Competition and Other Factors
The foodservice business is highly competitive, and there are numerous restaurants and other foodservice operations in each of the markets where the Company operates. The quality ofthefood served, in relation toitsprice and public reputation,areis an importantfactorsfactor in foodservice competition. Neither the Company nor any of its competitors has a significant share of the total market in any area in which the Company competes. The Company believes that its principal competitors include family-style andcasual-diningfast-casual restaurants, buffets, and quick-servicerestaurantsestablishments in thehome-meal- replacementhome-meal-replacement category.The Company's facilities and food products are subject to state and local health and sanitation laws. In addition, the Company's operations are subject to federal, state, and local regulations with respect to environmental and safety matters, including regulations concerning air and water pollution and regulations under the Americans with Disabilities Act and the Federal Occupational Safety and Health Act. Such laws and regulations, in the Company's opinion, have not materially affected its operations, although improved compliance has resulted in some increased costs.
The terrorist attacks of September 11, 2001, have had a devastating and immeasurable effect on all Americans and the business climate in general. We are staying focused on all of our original quality and operational improvements as briefly described above. Forward-Looking Statements Certain statements made in this report are forward looking regarding cash flow from operations, restaurant growth, operating margins, capital requirements, the availability of credit, and other matters. In addition, efforts to close, sell, or improve operating results of underperforming stores depend on many factors not within the Company's control, such as the negotiation of settlements of existing lease obligations under acceptable terms, availability of qualified buyers for owned locations, and customer traffic. These forward-looking statements involve risks and uncertainties and, consequently, could be affected by general business conditions, the impact of competition, the success of operating initiatives, changes in cost and supply of food and labor, the seasonality of the Company's business, taxes, inflation, and governmental regulations, which could cause actual results to differ materially from current plans.As of November 14, 2002, the Company owns the underlying land and buildings in which
125124 of its restaurants are located. In addition, the Company ownsseveral restaurantsix sites being held for possible future restaurant development, andseveral11 properties are held for sale.Of the
202193 restaurants currently operated by the Company,7769 are at locations held under leases, including4237 in regional shopping malls. Most of the leases provide for a combination of fixed-dollar and percentage rentals.Most of the leasesMany require thelesseeCompany to pay additional amounts related to property taxes, hazard insurance, and maintenance of common areas.See Note
610 of the Notes to Consolidated Financial Statements for information concerning the Company's lease rental expenses and lease commitments. Of the7769 restaurant leases, the current terms of 31 expire before 2008, 26 from20022008 to2006, 25 from 2007 to 2011,2012, and2112 thereafter.Sixty-sevenFifty-nine of the leases can be extended beyond their current terms at the Company's option.Most of theLuby's restaurants are
located in modern buildingswell maintained andall arein good condition.It is the Company's policy to refurbishThe Company refurbishes andmodernizeupdates restaurants and equipment as necessary to maintain their appearance and utility.The equipment in all restaurants is well maintained.Several of the Company's restaurant properties contain excess building space, which is rented to tenants unaffiliated with the Company.The Company's restaurants are located
in ten statesas follows:Eightsix in Arizona, five in Arkansas, one in Florida, two in Louisiana, two in Mississippi, two in Missouri,threetwo in New Mexico, seven in Oklahoma,eightseven in Tennessee, and164159 in Texas.The Company's
corporateprimary administrative offices are located in a building owned by the Company containing approximately 40,000 square feet of useable office space.The Company utilizes the space for its executive offices and related facilities.The Company maintains public liability insurance and property damage insurance on its properties in amounts which management believes to be adequate.
Two former restaurant assistant managers have filed suit in federal district court alleging violations of the Fair Labor Standards Act and the commission of certain fraudulent acts by the Company. The plaintiffs also seek authorization to represent a class of all assistant managers employed by the Company throughout the United States who they claim, on information and belief, are similarly without the requisite job duties and responsibilities to be considered exempt from the overtime requirements of the Fair Labor Standards Act. The Company has asserted that no class is appropriate, that plaintiffs were exempt from
timethe right totime subjectovertime compensation under the Fair Labor Standards Act under the white collar exemptions, and has denied any misrepresentations. The complaint does not specify the total amount of damages being sought. The court denied plaintiffs' request topending claimscertify a nationwide class, andlawsuits arisinginstead certified a class consisting of assistant managers that worked in theordinary course of business. InMemphis area from August 1999 to July 2002. The plaintiffs are still seeking to expand theopinion of management,class beyond Memphis. The Company believes that theultimate resolution of suchallegations are unfounded and intends to continue to diligently contest the claimsand lawsuits will not have a material adverse effect on the Company's operations or consolidated financial position. There are no material legal proceedings to which any director, officer, or affiliateof theCompany, or any associate of any such director or officer, is a party, or has a material interest, adverse to the Company.plaintiffs.Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted during the fourth quarter of the fiscal year ended August
31, 2001,28, 2002, to a vote of security holders of the Company.Item 4A. Executive Officers of the Registrant
Certain information is set forth below concerning the executive officers of the Company, each of whom has been elected to serve until
the 2002 annual meeting of shareholders and untilhisor hersuccessor is duly elected andqualified. Served as Officer Positions with Company and Name Since Principal Occupation Last Five Years Age ________________________ ________ ____________________________________ ___ Christopher J. Pappas 2001 President and CEO (since March 2001); 54 CEO of Pappas Restaurants, Inc. Harris J. Pappas 2001 Chief Operating Officer (since March 57 2001); President of Pappas Restaurants, Inc. Ernest Pekmezaris 2001 Senior Vice President and CFO (since 57 March 2001); Treasurer and CFO of Pappas Restaurants, Inc. since 1992 S. Darrell Wood 1997 Senior Vice President-Head of Field 39 Operations (since October 2000); Senior Vice President-Operations (April 1999 - October 2000); Vice President- New Concept Development (1998-1999); Area Vice President (1997-1998); Restaurant Manager prior to 1997. PART IIqualified:
Name
Served as Officer Since
Positions with Company and
Principal Occupation Last Five Years
AgeChristopher J. Pappas
2001
President and CEO (since March 2001), CEO of Pappas Restaurants, Inc.
55
Harris J. Pappas
2001
Chief Operating Officer (since March 2001), President of Pappas Restaurants, Inc.
58
Ernest Pekmezaris
2001
Senior Vice President and CFO (since March 2001), Treasurer and former CFO of Pappas Restaurants, Inc.
58
Peter Tropoli
2001
Senior Vice President-Administration (since March 2001), attorney in private practice.
30
Part II |
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Stock Prices and Dividends
The Company's common stock is traded on the New York Stock Exchange under the symbol LUB. The following table sets forth, for the last two fiscal years, the high and low sales prices on the New York Stock Exchange from the consolidated transaction reporting system and the per share cash dividends declared on the common stock. Fiscal Quarter Quarterly
Ended High Low Cash
|
|
| Quarterly Cash Dividend* | |
November 30, 2000 | 5.88 | 4.25 | .00 |
|
February 28, 2001 | 7.99 | 3.50 | .00 |
|
May 31, 2001 | 8.98 | 6.65 | .00 |
|
August 31, 2001 | 10.05 | 8.40 | .00 |
|
November 21, 2001 | 9.49 | 5.90 | .00 |
|
February 13, 2002 | 7.80 | 5.50 | .00 |
|
May 8, 2002 | 7.33 | 6.00 | .00 |
|
August 28, 2002 | 7.05 | 5.00 | .00 |
|
*Dividend
_________________ ______ ______ ______________
November 30, 1999 $14.13 $11.31 $.20
February 29, 2000 11.94 9.69 .20
May 31, 2000 10.69 8.75 .20
August 31, 2000 9.63 5.63 .10
November 30, 2000 5.88 4.25 .00*
February 28, 2001 7.99 3.50 .00
May 31, 2001 8.98 6.65 .00
August 31, 2001 10.05 8.40 .00
*Dividend suspended October 26, 2000.
As of SeptemberNovember 14, 2001,2002, there were approximately 3,9393,942 record holders of the Company's common stock.
Item 6. Selected Financial Data.
Data
Five-Year Summary of Operations
(Thousands of dollars except per share data)
Year ended August 31,
2001 2000 1999 1998 1997
_________ ________ ________ ________ ________
Sales $467,161 $493,384 $501,493 $508,871 $495,446
Costs and expenses:
Cost of food 117,774 125,167 122,418 129,126 121,287
Payroll and related costs 166,404 155,769 154,817 155,152 146,940
Occupancy and other operating
expenses 166,533 159,793 155,828 154,501 150,638
General and administrative
expenses 25,355 20,999 22,031 22,061 19,451
Provision for asset impairments
and store closings 30,402 14,544 - 36,852 12,432
________ ________ ________ ________ ________
506,468 476,272 455,094 497,692 450,748
________ ________ ________ ________ ________
Income (loss) from
Operations (39,307) 17,112 46,399 11,179 44,698
________ ________ ________ ________ ________
Other income (expenses):
Interest expense (11,660) (5,908) (4,761) (5,078) (4,037)
Other income, net 2,188 2,217 1,846 1,778 2,001
________ ________ ________ ________ ________
(9,472) (3,691) (2,915) (3,300) (2,036)
________ ________ ________ ________ ________
Income (loss) before
income taxes (48,779) 13,421 43,484 7,879 42,662
Provision (benefit) for
income taxes (16,898) 4,296 14,871 2,798 14,215
________ ________ ________ ________ ________
Net income (loss) $(31,881) $ 9,125 $ 28,613 $ 5,081 $ 28,447
________ ________ ________ ________ ________
Net income (loss) per common
share - basic $ (1.42) $ 0.41 $ 1.27 $ 0.22 $ 1.22
________ ________ ________ ________ ________
Net income (loss) per common
share - assuming dilution $ (1.42) $ 0.41 $ 1.26 $ 0.22 $ 1.21
________ ________ ________ ________ ________
Cash dividend declared per common
share $ 0.00 $ 0.70 $ 0.80 $ 0.80 $ 0.80
________ ________ ________ ________ ________
At year-end:
Total assets $353,462 $370,843 $346,025 $339,041 $368,778
Long-term debt $127,401 $116,000 $ 78,000 $ 73,000 $ 84,000
Number of restaurants 213 231 223 229 229
Note: In fiscal year 2002, the Company will move from 12 calendar months to 13
four-week periods. The first period of fiscal year 2002 will begin September 1,
2001, and will cover 26 days. All subsequent periods will cover 28 days.
Fiscal years prior to 2002 were 365 days in length. Fiscal year 2002, the
Company's conversion year from months to periods, will be 362 days in length.
Fiscal years subsequent to 2002 will be 364 days in length.
Five-Year Summary of Operations
Year Ended | ||||||||||||||||||||||||
August 28, | August 31, | August 31, | August 31, | August 31, | ||||||||||||||||||||
2002 | 2001 | 2000 | 1999 | 1998 | ||||||||||||||||||||
(In thousands except per share data) | ||||||||||||||||||||||||
Sales | $ | 399,065 | $ | 467,161 | $ | 493,384 | $ | 501,493 | $ | 508,871 | ||||||||||||||
Costs and Expenses: | ||||||||||||||||||||||||
Cost of food | 103,435 | 117,774 | 125,167 | 122,418 | 129,126 | |||||||||||||||||||
Payroll and related costs | 131,919 | 166,404 | 155,769 | 154,817 | 155,152 | |||||||||||||||||||
Occupancy and other operating expenses | 148,576 | 166,533 | 159,793 | 155,828 | 154,501 | |||||||||||||||||||
General and administrative expenses | 21,311 | 25,355 | 20,999 | 22,031 | 22,061 | |||||||||||||||||||
Provision for asset impairments and | 314 | 30,402 | 14,544 | -- | 36,852 | |||||||||||||||||||
405,555 | 506,468 | 476,272 | 455,094 | 497,692 | ||||||||||||||||||||
Income (loss) from operations | (6,490 | ) | (39,307 | ) | 17,112 | 46,399 | 11,179 | |||||||||||||||||
Other income (expenses): | ||||||||||||||||||||||||
Interest expense | (10,263 | ) | (11,660 | ) | (5,908 | ) | (4,761 | ) | (5,078 | ) | ||||||||||||||
Other income, net | 2,393 | 2,188 | 2,217 | 1,846 | 1,778 | |||||||||||||||||||
(7,870 | ) | (9,472 | ) | (3,691 | ) | (2,915 | ) | (3,300 | ) | |||||||||||||||
Income (loss) before income taxes | (14,360 | ) | (48,779 | ) | 13,421 | 43,484 | 7,879 | |||||||||||||||||
Provision (benefit) for income taxes | (4,707 | ) | (16,898 | ) | 4,296 | 14,871 | 2,798 | |||||||||||||||||
Net income (loss) | $ | (9,653 | ) | $ | (31,881 | ) | $ | 9,125 | $ | 28,613 | $ | 5,081 | ||||||||||||
Net income (loss) per common share -- | ||||||||||||||||||||||||
basic | $ | (0.43 | ) | $ | (1.42 | ) | $ | 0.41 | $ | 1.27 | $ | 0.22 | ||||||||||||
Net income (loss) per common share -- | ||||||||||||||||||||||||
assuming dilution | $ | (0.43 | ) | $ | (1.42 | ) | $ | 0.41 | $ | 1.26 | $ | 0.22 | ||||||||||||
Cash dividend declared per | ||||||||||||||||||||||||
common share | $ | 0.00 | $ | 0.00 | $ | 0.70 | $ | 0.80 | $ | 0.80 | ||||||||||||||
At year-end: | ||||||||||||||||||||||||
Total assets | $ | 342,479 | $ | 353,864 | $ | 370,843 | $ | 346,025 | $ | 339,041 | ||||||||||||||
Long-term debt (including net convertible subordinated debt) (a) | $ | 5,883 | $ | 127,401 | $ | 116,000 | $ | 78,000 | $ | 73,000 | ||||||||||||||
EBITDA(b) | $ | 16,777 | $ | 16,103 | $ | 54,440 | $ | 66,423 | $ | 69,250 | ||||||||||||||
EBITDA per share -- basic | $ | 0.75 | $ | 0.72 | $ | 2.43 | $ | 2.94 | $ | 2.98 | ||||||||||||||
Number of restaurants | 196 | 213 | 231 | 223 | 229 | |||||||||||||||||||
(a) Fiscal 2002 excludes current portion of debt ($118.4 million) as described in Note 6 of the Notes to Consolidated Financial Statements.
(b) The Company defines EBITDA as operating income before interest, taxes, depreciation, amortization, and the noncash portion of the President and CEO's and the COO's stock option compensation.
Note: In fiscal year 2002, the Company moved from 12 calendar months to 13 four-week periods. The first period of fiscal year 2002 began September 1, 2001, and covered 26 days. All subsequent periods covered 28 days. Fiscal years prior to 2002 were 365 days in length. Fiscal year 2002, the Company's conversion year from months to periods, was 362 days in length. Most fiscal years subsequent to 2002 will be 364 days in length.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Liquidity and Capital Resources
_______________________________
During
RESULTS OF OPERATIONS
Fiscal 2002 Compared to Fiscal 2001
Sales decreased $68.1 million, or 14.6%, in fiscal 2002 compared to fiscal 2001. Revenues were $24.2 million lower due to the last several years,closure of 37 restaurants since August 31, 2000. Three fewer days in fiscal 2002 accounted for approximately $3.5 million of the Company has funded all capital expenditures
from internally generated funds, cash equivalents, and credit-facility debt.
Capital expenditures for fiscal 2001 were $17,630,000. This 69% decrease from
fiscal 2000 was a resulttotal sales decline. Excluding the effect of fewer new restaurant openingsrestaurants and relocationsfewer days this fiscal year, same-store sales declined $40.4 million, or 9.3%, for the fiscal year.
Cost of food decreased $14.3 million, or 12.2%, due primarily to fewer restaurants and the decline in same-store sales. Food cost as a percentage of sales increased from 25.2% to 25.9% in the current fiscal year in comparison with the previousprior fiscal year. InVarious "manager's special" promotions coupled with new "all-you-can-eat" offerings at selected locations have contributed to higher food costs as a percent of sales.
Payroll and related costs decreased $34.5 million, or 20.7%, due primarily to restaurant closures, lower workers' compensation expense, and three fewer days in the current fiscal year. Of the total reduction, $20.4 million is due to lower wages resulting from numerous store closures and $12.0 million is due to lower workers' compensation costs. Relative to the latter, in the prior year, there was a large increase for estimated claims expense under the Company's historical third-party program. The Company initiated a safety training and accident prevention program in October 2001 one restaurant was
opened, one was relocated,that substantially lowered current year costs.
Occupancy and no restaurantsother operating expenses decreased $18.0 million, or 10.8%. Although the dollar decrease is primarily due to store closures, other factors contributed to the fluctuation. Utility costs decreased due to lower energy costs coupled with moderate temperatures and conservation. Depreciation expense decreased due to less depreciable properties resulting from previous impairments and property sales. Advertising costs declined due to reduced emphasis on television advertising. Food-to-go packaging costs further declined due to the intentional redirection at many locations to inside dining coupled with less expensive packaging.
General and administrative expenses decreased $4.0 million, or 15.9%. Several factors contributed to the decline. Officers' compensation decreased principally due to a reduction in relative headcount coupled with accelerated vesting of noncash compensation in the prior year. Charges related to the proxy and restructuring advice contributed to the higher professional costs in the prior year. Consulting fees were under construction at August
31, 2001. In comparison,less principally due to a preliminary search for new senior management in fiscal 2001.
The provision for asset impairments and restaurant closings decreased by $30.1 million due to numerous impairments and provisions for impairment recorded in the prior year. Charges of $314,000 were provided for in the current year 2000, 11 restaurantsprincipally to account for labor termination costs and an additional store closing, net of unrelated lease settlements that were opened, fourmore favorable than anticipated.
Interest expense decreased $1.4 million, or 12.0%, due primarily to lower effective interest rates on outstanding debt, the payoff of the loans on surrendered officers' life insurance policies, and payment reductions in the line of credit. These factors were relocated,offset by interest on the $10 million in subordinated debt, amortization of the loss on interest rate Swaps, and two restaurants were under construction at August 31, 2000.
Fiscal 2001 capital expenditures included approximately $4.1the amortization of amendment fees for the credit facility.
The income tax benefit decreased by $12.2 million, relatedor 72.1%, primarily due to remodelsa significantly lower incurred loss in 17 restaurants.
Capital expenditures for fiscal 2002 are expected to approximate $15 million.
The Company will focus on improving the appearance, functionality,versus fiscal 2001.
At August 28, 2002, and sales at
existing restaurants. These efforts will include changing several locations to
other dining concepts, where feasible. As a start, the Company plans to remodel
two currently closed units. One will reopen as a new seafood restaurant. The
new dining theme for the other restaurant is still under development.
At August 31, 2001, the Company had a working capital deficitreserve for store closings of $8,975,000,
which compares to$3.1 million and $4.5 million, respectively. Excluding lease settlements, it is anticipated that all material cash outlays required for the prior year's working capital deficitstore closings originally planned as of $31,420,000. The
working capital position improved during fiscal 2001 due primarily to expense-
control initiatives, price increases in the latter half of the year, and a $10
million loan from the CEO and COO. See Note 5 of the Consolidated Financial
Statements for additional information regarding the loan. The Company typically
carries current liabilities in excess of current assets because cash generated
from operating activities is reinvested in capital expenditures.
In the fourth quarter, the Company entered into an amendment of its credit-
facility agreement with a syndicate of four banks. Among other things, the
amendment provides for a reduction in commitment with each principal payment,
securing the credit-facility debt with real property, the modification of
financial compliance evaluations from three criteria to one criterion focused on
EBITDA, and a change in the interest rate. The Company made a $1 million
principal payment on July 6, 2001. At August 31, 2001, the Company had
$122,000,000 outstanding under its credit facility. The maturity date of the
amended credit facility is April 30, 2003, with a provision for extensionwill be made prior to April 30, 2004, given satisfactory conditions.
Subsequent to fiscal year-end 2001, the terrorist attacks of September 11 and
resulting recessionary trends negatively impacted the Company's ability to meet
its first quarterly EBITDA covenant for fiscal year 2002. Accordingly, the
Company obtained a waiver and amendment to its credit agreement dated December
5, 2001, which waives its noncompliance with first-quarter EBITDA levels, resets
remaining fiscal 2002 quarterly EBITDA targets, and limits capital expenditures
for the year to $15 million. The Company expects to beAugust 27, 2003. See further discussion in compliance with its
revised covenants for fiscal year 2002. See Note 57 of the Notes to Consolidated Financial Statements.
EBITDA
EBITDA, excluding noncash stock compensation, increased by $.7 million for the current fiscal year in comparison with the prior fiscal year.
The operating performance of the Company believes that funds generated from operations are adequate for its
foreseeable needs.
Interest Rate Protection Agreementsis evaluated using several measures, one of which is EBITDA. The Company had two Interest Rate Protection Agreements (Swaps) that effectively
fixedCompany's amended credit agreement defines EBITDA as operating income before interest, taxes, depreciation, amortization, and the rate on anoncash portion of the floating-rate debt outstanding under its
revolving line of credit. The Swaps fixed interest at a rate of 6.50%CEO's and the COO's stock option compensation. While the Company and many in the notional amounts of $30 million and $15 million; both were scheduled to
terminate as of June 30, 2002. The differentialfinancial community consider EBITDA to be paidan important measure of operating performance, it should be considered in addition to, but not as a substitute for or received as
interest rates changed was accrued and recognized as an adjustmentsuperior to, interest
expense related to the debt. Due to declining interest rates andother measures of financial performance prepared in anticipation of additional future unfavorable interest rate changes, the Company
terminated its Swaps effective July 2, 2001, for a cash payment of $1,255,000,
including accrued interest of $163,000.
Change in Accounting Estimate
Throughout the first three quarters of the fiscal year, the Company observed
increased costs relative to insurance. The costs primarily escalatedaccordance with accounting principles generally accepted in the area of workers' compensation.United States, such as operating income and net income. In the fourth quarter, the Company consulted
with an outside actuarial firm that reassessed losses based upon increasing cost
trends and other pertinent information. The results indicated that a change in
accounting estimate was necessary. The effect of this change in the fourth
quarter was a reduction in pretax earnings of $6.6 million. The Company last
obtained a similar actuarial report for claim cost estimation purposes as of
December 15, 1997. Subsequent to August 31, 2001, the Company launched a new
in-house safety and claims program in order to decrease the incidence of
accidents and injuries and to better control expenses related to claims costs.
Trends and Uncertainties
The tragic events of September 11, 2001, increased concerns over national
security, fueled the development of recessionary trends, and cast uncertainty on
the general economic outlook of the country. The long-term impact of these
trends and uncertainties on the Company will ultimately depend on their
resulting severity and duration and their effect on consumer spending. The
short-term effect onaddition, the Company's sales and cash flow was immediate and
contributeddefinition of EBITDA is not necessarily comparable to its inability to meet its EBITDA covenant for the first quarter
of fiscal 2002. In response to these events, the Company obtained a waiver and
amendment from its syndicate of banks on December 5, 2001, which waived its
noncompliance with the first-quarter EBITDA and reset quarterly EBITDA and
capital spending targets for the remainder of fiscal 2002. For further
discussion, see Note 5 of the Notes to Consolidated Financial statements.
Statement of Financial Accounting Standards No. 121 (SFAS 121) requires the
Company to review long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The Company considers a history of operating losses or negative
cash flows and unfavorable changes in market conditions to be its main
indicators of potential impairment. Assets are evaluated for impairment at the
restaurant level. As a result of these indicators, impairment or restaurant
closure charges may be recognized in future periods. See Note 2 of the Notes to
Consolidated Financial Statements for the year ended August 31, 2001, for
further discussion of 2001 and 2000 pretax impairment and store closure costs.
Reserve for Store Closings
As of August 31, 2001, 15 restaurants were designated for closure. The reserve
for store closings was increased from $1.8 million at August 31, 2000, to $4.5
million at August 31, 2001, in anticipation of lease settlement costs, legal and
professional fees, andsimilarly titled measures reported by other exit costs related to these stores.
During fiscal year 2001, the Company had cash outlays related to the reserve,
which originally resulted from provisions for closure costs made in fiscal year
2000. See further discussion of the 2001 and 2000 pretax store-closure costs in
Note 2 of the Notes to Consolidated Financial Statements for the year ended
August 31, 2001.
Results of Operations
companies.
Fiscal 2001 Compared to Fiscal 2000
___________________________________
Sales decreased $26,223,000,$26.2 million, or 5.3%, primarily due to 19 store closures as well as market conditions in the fiscal year. The closing of three restaurants in
fiscal 2000 contributed in part to the decrease in sales. This decline was partially offset by a price increase on the Lu Ann platter. Additionally, the heavily discounted Luby's platter and "Big2Do" bundled offerings that were launched in the fourth quarter of 2000 were discontinued in the third quarter of 2001. Excluding leap day in fiscal 2000, same-store sales decreased $11.9 million in fiscal 2001, or 2.6%, compared to fiscal 2000.
Cost of food decreased $7,393,000,$7.4 million, or 5.9%, due to various factors, including store closures and discontinuing "value-added" products in most restaurants.
Value-added products are typicallythe discontinuance of more expensive as they have a built-in labor
component.
costly product purchases.
Although sales decreased, payroll and related costs increased by $10,635,000,$10.6 million, or 6.8%, in comparison to the prior year. A significant portion of this, $9,222,000,$9.2 million, was due to higher claims accruals. The Company incurred higher than average and more frequent workers' compensation claims than were experienced in prior years. To(To help prevent injuries and better control costs, in the future, the Company launched a new in-house safety and claims program effective October
1, 2001.
the following fiscal year.)
Occupancy and other operating expenses increased $6,740,000,$6.7 million, or 4.3%4.2%. This increase was due primarily to higher utility costs resulting from increased commodity rates, higher property taxes related to new stores and remodels, and higher repair expenses incurred as part of an initiative by new management to bring all stores up to a higher standard of maintenance and appearance. These increases were partially offset by lower advertising expense due to a new strategic focus. Lower preopening expenses due to opening fewer restaurants in the current fiscal year also contributed to the offset of these expenses.
offset.
General and administrative expenses increased by $4,356,000,$4.4 million, or 20.8%20.7%, in comparison to the prior year. The increase was due primarily to noncash compensation of $1,942,000$1.9 million related to stock options granted to the Company's CEO and the COO. Other costs that contributed to the increase included legal and consulting fees primarily related to restructuring advice and bank negotiations, related to the fourth amendment agreement, the proxy, and the transaction to hire the CEO and the COO.
As a result of its continuing efforts to redeploy both capital and human resources to improve financial performance and strengthen the organization, the Company recorded a pretax charge of $30.4 million during the year for store closings, associated costs, and asset impairment charges. The principal components of the 2001 charge were as follows: - $11.6 million for the closing of 15 underperforming restaurants. This
charge included the cost to write down the properties and equipment to net
realizable value and estimated costs for the settlement of lease
obligations, legal and professional fees, and other exit costs. Employee
severance costs were not accrued.
- $17.0 million for asset impairment of 13 restaurants that the Company
continues to operate. In accordance with SFAS 121, the properties were
written down to the estimated future discounted cash flows or fully
written off in the case of negative future cash flows.
- $0.8 million primarily for the impairment of one property operated under a
joint venture with Waterstreet, Inc. The joint venture, L&W Seafood,
Inc., was terminated in 1999. This property was written down to its
estimated net realizable value and was sold in fiscal year 2001.
- $1.0 million associated with the write-off of assets for two locations
that will be remodeled and reopened before the end of fiscal year 2002.
Property that cannot be salvaged, transferred, or effectively reused has
been written off.
At August 31, 2001 and 2000, the Company had a reserve for store closings of
$4.5 million and $1.8 million, respectively. Excluding lease settlements, it
is anticipated that all material cash outlays required for the store closings
planned as of August 31, 2001, will be made prior to August 31, 2002. The
following is a summary of the types and amounts recognized as accrued expenses
together with cash payments made against such accruals for the three years
ended August 31, 2001:
Reserve Balance
_____________________________________________
Legal
and
Lease Profes- Other
Settlement sional Workforce Exit Total
Costs Fees Severance Costs Reserve
______________________________________________
(Thousands of dollars)
As of August 31, 1998 $ 4,537 $ 985 $ 260 $ 390 $ 6,172
Additions(reductions) (224) 150 56 (257) (275)
Cash payments (406) (135) (244) (45) (830)
______________________________________________
As of August 31, 1999 3,907 1,000 72 88 5,067
Additions(reductions) 675 350 375 300 1,700
Cash payments (3,817) (975) (72) (88) (4,952)
______________________________________________
As of August 31, 2000 765 375 375 300 1,815
Additions(reductions) 4,196 (375) (59) 693 4,455
Cash payments (755) - (316) (693) (1,764)
______________________________________________
As of August 31, 2001 $ 4,206 $ - $ - $ 300 $ 4,506
______________________________________________
See further discussion in Note 2 of the Consolidated Financial Statements.
- | $11.6 million for the closing of 15 underperforming restaurants, two of which the Company continues to operate. This charge included the cost to write down the properties and equipment to net realizable value and estimated costs for the settlement of lease obligations, legal and professional fees, and other exit costs. Employee severance costs were not accrued. |
- | $17.0 million for asset impairment of 13 restaurants that the Company planned to keep open. Due to other subsequent events, the Company later closed three of these units. In accordance with Statement of Financial Standards (SFAS) No. 121, the properties were written down to the estimated future discounted cash flows or fully written off in the case of negative future cash flows. |
- | $.8 million primarily for the impairment of one property operated under a joint venture with Waterstreet, Inc. The joint venture, L&W Seafood, Inc., was terminated in 1999. This property was written down to its estimated net realizable value and was sold in fiscal year 2001. |
- | $1.0 million associated with the write-off of assets for two locations that were remodeled and reopened before the end of fiscal year 2002. Property that cannot be salvaged, transferred, or effectively reused has been written off. |
See further discussion in Note 7 of the Notes to Consolidated Financial Statements. | |
Interest expense of $11,660,000$11.7 million for fiscal 2001 was incurred in conjunction with borrowings under the credit facility and is net of $336,000 capitalized on qualifying properties. The increase from fiscal 2000 of $5,752,000,$5.8 million, or 97%97.4%, was due primarily to higher average borrowings under the credit-facility agreement and less capitalized interest in the current year due to decreased construction.
The provision for income taxes decreased $21,194,000,$21.2 million, or 493%493.3%, due primarily to lower income before income taxes.
LIQUIDITY AND CAPITAL RESOURCES
Cash and Working Capital
Cash decreased by $2.5 million from the end of the preceding fiscal year to August 28, 2002, primarily due to an increase in short-term investments.
The $7.2 million total income tax receivable balance as of August 28, 2002, relates to current year tax benefits that are recoverable in the form of refunds in fiscal 2003. These refunds accrued from recently enacted changes in tax legislation that extended carrybacks of net operating losses.
Excluding the reclassification of the credit facility balance as explained in theDebt section below, the Company had a working capital deficit of $1.1 million at August 28, 2002, in comparison to a working capital deficit of $2.2 million at August 31, 2001. The decline in the deficit was primarily attributable to lower accruals for claims and insurance under the Company's new safety training and accident prevention programs offset by an increase in payables associated with the Company's new accounting close system. Under this system, the Company closes each period on Wednesdays. Fiscal 2001 ended on a Friday, while Company disbursement runs were consistently on Fridays for both fiscal years.
As of August 28, 2002, the Company owned 15 properties held for sale, including six undeveloped land sites. The Company anticipatesalso had six properties held for future use.
Capital expenditures for the fiscal year ended August 28, 2002, were $13.1 million. The Company intends to fund all capital expenditures for fiscal 2003 from cash flows from operations and expects them to be no more than $15 million for that fiscal year. Management continues to focus on improving the appearance, functionality, and sales at existing restaurants. These efforts also include, where feasible, remodeling certain locations to other dining concepts. In the second quarter of fiscal 2002, one existing property was remodeled to create the Company's first new concept, Luby's Seafood, in Huntsville, Texas. After year-end, the Company remodeled and reopened another previously closed location as its first Steak Buffet. Potential dining themes for the three planned remodels in fiscal 2003 are still under consideration.
Debt
As of September 1, 2001, the Company had a balance of $122 million outstanding under its credit facility. In fiscal year 2002, five principal payments totaling $3.6 million reduced the loan balance to $118.4 million as of August 28, 2002. There is no provision for additional borrowing under the existing agreement.
Under the agreement terms that were in place during fiscal 2002 and through the first quarter of fiscal 2003, the Company was required to meet certain indicated EBITDA levels. EBITDA is defined in the agreement as earnings before interest, taxes, depreciation, amortization, and noncash executive compensation. The annual EBITDA requirement was met for fiscal year 2002. However, the Company fell short of its fourth-quarter EBITDA requirement. After the end of the 2002 fiscal year, management obtained a waiver for the fourth-quarter requirement and an amendment to the debt agreement.
The amendment extended the debt's maturity to October 31, 2004, and increased the applicable interest rate from prime plus 1.5% to prime plus 2.5%. Additionally, the financial covenant was changed from quarterly and annual EBITDA measurements to one that assesses liquidity and future debt service. Management believes the new covenant is achievable and considers it to be more appropriate for the collateralized credit facility.
Meanwhile, the Company has executed a commitment letter with another financial entity for an $80 million loan. Its purpose is to replace that amount of debt in the existing credit facility. Thus, the amendment discussed above requires that the entire proceeds from this other financial entity be used to pay down the credit facility. In the event the Company is unable to make the $80 million payment as currently planned, the amended loan would be in default. The existing lenders would then have the right to exercise any and all remedies, including the right to demand immediate repayment of the entire outstanding balance or the right to pursue foreclosure on the assets pledged as collateral. As of August 28, 2002, $246.4 million of the Company's total book value, or 71.9% of its total assets, including the Company's owned real estate, improvements, equipment, and fixtures, was pledged as collateral under the credit facility. Th e nonbinding commitment letter with the new lender is subject to conditions the Company must satisfy before the actual financing can occur. Management is currently working toward this goal and has high confidence that the transaction will be completed and the financing closed by January 31, 2003.
The Company also could pursue other options if its current refinancing plans cannot be finalized. Those options include financing through high-yield debt at higher than commercial rates or conducting additional equity security sales through public or private offerings. Dilution to existing shareholders would result in the case of equity security sales.
Assuming the $80 million requirement is met, the amended facility also includes two principal payments. The first is a target of $15 million that is also to be paid by January 31, 2003, from either operating cash flow or proceeds from the sale of property. Failure to pay the entire $15 million would result in a 1% increase in the applicable interest rate from prime plus 2.5% to prime plus 3.5%. The second payment, from operating cash flow or property sales, is an additional $10 million by September 1, 2003. Again, payment of any amount less than $10 million would result in another 1% increase in the applicable interest rate.
While negotiations and plan execution are under way, the Company continues to take steps to improve its cash position, operating results and cash flows, including the launch of new restaurant offerings and cost-saving initiatives in the areas of risk management, labor optimization, and purchasing.
Variable-Rate Debt
As of the year-end, the Company currently had a total of $128.4 million in variable-rate debt: $118.4 million under its credit facility at prime plus 1.5% and $10 million in subordinated convertible notes loaned to the Company by its CEO and COO at LIBOR (London InterBank Offered Rate) plus 2%. (See Note 6 of the Notes to Consolidated Financial Statements.)
In prior fiscal years, the Company had Interest Rate Protection Agreements (Swaps) that effectively fixed the interest rate on a portion of its floating-rate debt under its line of credit. The Company terminated its Swaps effective taxJuly 2, 2001, due to declining interest rates. (See Note 12 of the Notes to Consolidated Financial Statements.)
COMMITMENTS AND CONTINGENCIES
In connection with the Luby's Incentive Stock Plan as approved by the shareholders of the Company at the January 8, 1999, annual meeting of shareholders, the Company guaranteed loans in fiscal 1999 of approximately $1.9 million to enable officers to purchase stock in the Company. As of August 28, 2002, the notes, which each officer obtained from JPMorgan Chase Bank and mature in fiscal 2004, have a total outstanding balance of approximately $1.6 million. The purchased Company stock has been and can be used by the borrowers to satisfy a portion of their obligation. The Company does not anticipate default on the loans by any of the borrowers; however, in the event of default, the Company is obligated to purchase the specific borrower's loan from JPMorgan Chase Bank and would therefore become the holder of the note. If the Company becomes the holder of any defaulted notes, it intends to pursue collection using all available remedies. ; (See Note 8 of the Notes to Consolidated Financial Statements.)
AFFILIATE SERVICES
The Company entered into an Affiliate Services Agreement effective August 31, 2001, with two companies, Pappas Partners, L.P. and Pappas Restaurants, Inc., which are restaurant entities owned by Christopher J. Pappas and Harris J. Pappas. That agreement, as amended on July 23, 2002, limited the scope of expenditures therein to professional and consulting services. The Company completed this amendment due to a significant decline in the use of professional and consulting services from Pappas entities. In hiring its own employees to internally provide these services, the Company's relative costs decreased from $51,000 in fiscal 2001 to $8,000 in fiscal 2002.
Additionally, on July 23, 2002, the Company entered into a Master Sales Agreement with the same Pappas entities. Through this agreement, the Company contractually separated the design and fabrication of equipment and furnishings from the Affiliate Services Agreement. The Master Sales Agreement covers the costs incurred for modifications to existing equipment, as well as custom fabrication, including stainless steel stoves, shelving, rolling carts, and chef tables. These items are custom-designed and built to fit the designated kitchens and are also engineered to give a longer service life than comparably manufactured equipment.
The pricing of equipment, repair, and maintenance is set and evaluated periodically and is considered by management to be primarily at or below market for comparable goods and services. The Finance and Audit Committee of the Company's Board of Directors also uses independent valuation consultants to assist in periodically monitoring pricing of the transactions associated with the Master Sales Agreement and the Affiliate Services Agreement. The Company's external auditors performed agreed upon procedures related to the affiliate services. The scope and sufficiency of such procedures are determined by management and the Board of Directors, and results are submitted to the Board for its use in evaluating the fairness of the transactions.
As part of the affiliation with the Pappas entities, the Company leases a facility, the Houston Service Center, in which Luby's has installed a centralized restaurant service center to support field operations. The building at this location has 21,000 square feet of warehouse space and 5,664 square feet of office space. It is leased from the Pappas entities by the Company at a monthly rate of $.24 per square foot. From this center, Luby's repair and service teams are dispatched to the Company's restaurants when facility or equipment maintenance and servicing are needed. The facility is also used for repair and storage of new and used equipment.
The following compares fiscal and inception-to-date charges incurred under the Master Sales Agreement and the Affiliate Services Agreement to total general and administrative expenses, capital expenditures, and occupancy and other operating expenses:
Fiscal Year 2002 | Fiscal Year 2001 | Total For All Periods | % of Total | ||||||||||||||
(In thousands) | |||||||||||||||||
Affiliate Services Incurred Costs: | |||||||||||||||||
General and administrative expenses -- professional | $ | 8 | $ | 51 | $ | 59 | 9.0 | % | |||||||||
Capital expenditures -- custom-fabricated and | 506 | 200 | 706 | 107.1 | % | ||||||||||||
Occupancy and other operating expenses, including | 130 | 20 | 150 | 22.8 | % | ||||||||||||
Less pass-through amounts to third parties | (154 | ) | (102 | ) | (256 | ) | (38.9 | )% | |||||||||
Total | $ | 490 | $ | 169 | $ | 659 | 100.0 | % | |||||||||
Applicable Total Company Costs: | |||||||||||||||||
General and administrative expenses | $ | 21,311 | $ | 25,355 | $ | 46,666 | 11.9 | % | |||||||||
Capital expenditures | 13,097 | 17,630 | 30,727 | 7.8 | % | ||||||||||||
Occupancy and other operating expenses | 148,576 | 166,533 | 315,109 | 80.3 | % | ||||||||||||
Total | $ | 182,984 | $ | 209,518 | $ | 392,502 | 100.0 | % | |||||||||
Affiliate Services Incurred Costs As a percentage | 0.27 | % | 0.08 | % | 0.17 | % | |||||||||||
TRENDS AND UNCERTAINTIES
Same-Store Sales
The restaurant business is highly competitive with respect to food quality, concept, location, price, and service. The Company has experienced declining same-store sales since 1996 as a result of previous execution strategies, as well as increased industry-wide competition. The Company competes with a large number of other restaurants, many of which have greater financial resources. Management believes the Company's success will depend largely on its ability to execute its new strategies, optimize its financial resources, and respond to changes in consumer preferences, as well as to general economic conditions.
The following shows the comparative change in same-store sales:
Fiscal Year 2002 |
| Fiscal Year 2001 | ||||||
Q4 | Q3 | Q2 | Q1 |
| Q4 | Q3 | Q2 | Q1 |
(13.0)% | (13.2)% | (8.6)% | (2.7)% |
| 1.9% | (0.4)% | (5.3)% | (6.8)% |
The Company enacted price increases in the third and fourth quarters of fiscal 2001. The first quarter of fiscal 2002 includes September 11, 2001. In the third and fourth quarters of fiscal 2002, the Company was able to maintain its comparative cash flow level with declining sales by lowering operating costs.
The Company may find additional opportunities to lower costs; however, continued declines in net same-store sales could reduce operating cash flow. If severe declines in cash flow were to develop without offsetting reductions in uses of cash, such as capital expenditures, the Company's ability to maintain compliance with the financial covenants of the amended credit facility may be impaired. In such an event, the lender would have the right to terminate the credit facility, accelerate the maturity of any outstanding obligation under that facility, and pursue foreclosure on assets pledged as collateral.
New Programs
In addition to those alluded to earlier, the Company has initiated a number of programs since March 2001. These programs, as listed below, are intended to address the decline in total and same-store sales, while prudently managing costs and increasing overall profitability:
- | Food excellence; |
- | Service excellence; |
- | Emphasis on value, including all-you-can-eat promotions; |
- | Increased emphasis on employee training and development; |
- | Targeted marketing, especially directed at families; |
- | Closure of certain underperforming restaurants; |
- | New concept conversions; and |
- | Continued emphasis on in-house safety training, accident prevention, and claims management. |
Impairment
Statement of Financial Accounting Standards (SFAS) 121 requires the Company to review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company considers a history of operating losses or negative cash flows and unfavorable changes in market conditions to be its main indicators of potential impairment. Assets are generally evaluated for impairment at the restaurant level. If a restaurant does not meet its financial investment objectives or continues to incur negative cash flows or operating losses, an impairment charge may be recognized in future periods.
Insurance and Claims
Workers' compensation and employee injury claims expense decreased substantially in comparison with the prior fiscal year due to improved cost control, safety training and accident prevention efforts, well as the management of new claims in-house. Actual claims settlements and expenses may differ from estimated interim loss provisions. The Company cannot make any assurances as to the ultimate level of claims under the in-house safety program or whether declines in incidence of claims as well as claims costs experienced in fiscal 2002 will continue in future periods.
The Company may be approximately 35%.
Fiscal 2000 Comparedthe subject of claims or litigation from guests and employees alleging injuries as a result of its operations. In addition, unfavorable publicity from such allegations could have an adverse impact on financial results, regardless of their validity or ultimate outcome.
Minimum Wage and Labor Costs
From time to Fiscal 1999
___________________________________
Sales decreased $8,109,000,time, the U.S. Congress considers an increase in the federal minimum wage. The restaurant industry is intensely competitive, and in such case, the Company may not be able to transfer all of the resulting increases in operating costs to its customers in the form of price increases. In addition, since the Company's business is labor-intensive, shortages in the labor pool or 1.6%,other inflationary pressure could increase labor costs.
RESERVE FOR RESTAURANT CLOSINGS
The reserve for restaurant closings declined from $4.5 million at August 31, 2001, to $3.1 million at August 28, 2002, primarily due to the decline in sales
volumes at restaurants open over 18 monthspayment of lease settlement costs of approximately 3.9%. Part of the
decrease was also caused by the closing of ten restaurants in fiscal 1999$856,000 and three restaurants in fiscal 2000. This decline was partially offset by the
addition of 11 new restaurants in fiscal 2000 and four in fiscal 1999.
Cost of food increased $2,749,000, or 2.2%, due to various factors, including
efforts to increase dinner sales by offering additional higher-end entrees such
as steak, shrimp, and prime rib and efforts to drive customer traffic in
various markets by offering discount coupons. Also, higher commodity prices,
especially for pork, beef, and vegetables, had a negative impact on food costs.
In the second half of the fiscal year, food costs were also impacted by the
testing of various "value-added" products in most of the restaurants, which by
their nature are more expensive since they have a built-in labor component. In
restaurants where the Company was unsuccessful in lowering the labor hours due
to minimum production deployments, the usage of these products was cut back
beginning in July 2000.
Although sales decreased, payroll and related costs increased by $952,000, or
0.6%, in comparison to the prior year. Pressure from higher hourly wage rates
was partially offset by the usage of fewer labor hours in the restaurants.
Occupancy and other operating expenses increased $3,965,000, or 2.5%, due
primarily to higher utility costs resulting from increased rates; higher
property taxes related to new stores and remodels; higher preopening expensesfurther reductions associated with more new store openingsfavorable lease settlements than originally anticipated. (See Note 7 of the Notes to Consolidated Financial Statements.)
CRITICAL ACCOUNTING POLICIES
The Company has identified the following policies as comparedcritical to its business and the understanding of its results of operations. The Company believes it is improbable that materially different amounts would be reported relating to the accounting policies described below if other acceptable approaches were adopted. However, the application of these accounting policies, as described below, involve the exercise of judgment and use of assumptions as to future uncertainties; therefore, actual results could differ from estimates generated from their use.
Income Taxes
The Company records the estimated future tax effects of temporary differences between the tax bases of assets and liabilities and amounts reported in the accompanying consolidated balance sheets, as well as operating loss and tax credit carrybacks and carryforwards. The Company periodically reviews the recoverability of tax assets recorded on the balance sheet and provides valuation allowances as management deems necessary. Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management's opinion, adequate provisions for income taxes have been made for all years.
Impairment of Long-Lived Assets
The Company periodically evaluates long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In performing impairment reviews of such restaurants, the Company estimates future cash flows expected to result from the use of the asset and the possible residual value associated with their eventual disposition. The estimates of future cash flows, based on reasonable and supportable assumptions and projections, require management's subjective judgments. The time periods for estimating future cash flows is often lengthy, which increases the sensitivity to assumptions made. Depending on the assumptions and estimates used, the estimated future cash flows projected in the evaluation of long-lived assets can vary within a wide range of outcomes. The Company considers the likelihood of possible outcomes in determining the best estimate of future cash flows.
Insurance and Claims
The Company periodically reviews its workers' compensation and general liability reserves to ensure reasonableness. In fiscal 2001, the Company initiated an in-house safety and claims program focused on safety training and rigorous scrutiny of new claims, which has reduced costs significantly. Consistent with the prior year; higher
credit card feesyear, the Company's liability is based upon estimates obtained from both an actuarial firm and internal risk management staff. Assumptions and judgments are used in evaluating these costs. The possibility exists that future claims-related liabilities could increase due to increased credit card usage versus prior year; higher
food-to-go packaging costs related to increased food-to-go sales;unforeseen circumstances.
NEW ACCOUNTING PRONOUNCEMENTS
In August 2001, the Financial Accounting Standards Board (FASB) issued SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." This Standard requires the recognition and higher
depreciation expense associated with the new stores, restaurant remodels, and an
increase in technology-related spending. These increases were partially offset
by lower uniform expense due to the completionmeasurement of the rolloutimpairment of long-lived assets to be held and used and the measurement of long-lived assets to be disposed of by sale. The Company plans to adopt the pronouncement in fiscal 2003. The Company does not expect a uniform
program and lower management incentive paymaterial impact on its results of operations or financial condition as a result of lower sales and
profits. General and administrative expenses declined $1,032,000, or 4.7%,
primarily becausethe adoption of lower expenses for profit sharing and bonuses.
this Standard.
The Company recorded a pretax charge of $14.5 million during the fourth quarter
of the fiscal year for store closings, associated costs, asset impairments,
and other unusual charges. The principal components of the 2000 charge were as
follows:
- $7.7 millionhas accounted for the closingcessation of 15 restaurants that didoperations under the provisions of Emerging Issues Task Force No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity." In June 2002, FASB issued SFAS 146, "Accounting for Costs Associated with Exit or Disposal Activities." The Company will also adopt the accounting requirement of SFAS 146 in fiscal 2003 and does not meetanticipate the Company's return on invested capital and sales growth requirements. All
were closed by August 31, 2001. This charge included the cost to write
down the properties and equipment to net realizable value and estimated
costs for the settlement of lease obligations, legal and professional
fees, severance costs, and other exit costs. Prior to August 31, 2000,
all restaurant employees of the Company were notified of the possibility
of their termination due to planned restaurant closures. Approximately
300 employees were terminated. The severance costs for these employees
were accrued for and included in the store closing costs.
- $3.2 million for asset impairment of six properties that the Company did
not plan to close. The carrying value of the assets was written down to
estimated future discounted cash flows or fully written off in the case of
negative future cash flows.
- $1.3 million for the write-down of computer-related equipment and
software. The write-down included the abandonment of a payroll-related
software package and several point-of-sale (POS) systems.
- $1.2 million additional write-down on surplus properties held for sale.
These properties were written downeffects to the lower of their historical
carrying costs or estimated net realizable values.
- $1.1 million relatedfinancial statements to other unusual charges. The primary component of
this charge was the write-off of the remaining asset balance related to
L&W Seafood, Inc., a joint venture with Waterstreet, Inc.
See Note 2 of the Consolidated Financial Statements.
Interest expense of $5,908,000, net of $958,000 capitalized on qualifying
properties for fiscal 2000, was incurred in conjunction with borrowings under
the credit facility. The increase from fiscal 1999 of $1,147,000, or 24%, was
due primarily to higher average borrowings under the credit-facility agreement
and a higher weighted average interest rate.
Other income increased $371,000 due primarily to recorded gains on the sale of
properties that were held for sale and a recorded tenant lease buyout.
The provision for income taxes decreased $10,575,000, or 71%, due primarily to
lower income before income taxes. In addition, the effective tax rate
decreased from 34.2% to 32.0%. This was due to the completion of a federal tax
audit covering several periods, which resulted in favorable determinations in
several areas. The Company anticipated that the effective tax rate for fiscal
2001 would be approximately 35%.
material.
Inflation
_________
The Company's policy is to maintain stable menu prices without regard to seasonal variations in food costs. General increases in costs of food, wages, supplies, and services make it necessary for the Company to increase its menu prices from time to time. To the extent prevailing market conditions allow, the Company intends to adjust menu prices to maintain profit margins.
Forward-Looking Statements
__________________________
The Company wishes to caution readers that various factors could cause its actual financial and operational results to differ materially from those indicated by forward-looking statements made from time to time in news releases, reports, proxy statements, registration statements, and other written communications (including the preceding sections of this Management's Discussion and Analysis), as well as oral statements made from time to time by representatives of the Company. Except for the historical information, containedmatters discussed in this annual report, certainsuch oral and written communications are forward-looking statements made herein are forward looking regarding cash flow from operations,
restaurant openings, operating margins, capital requirements, and other
matters. In addition, efforts to close, sell, or improve operating results of
underperforming stores depend on many factors not within the Company's control
such as the negotiation of settlements of existing lease obligations under
acceptable terms, availability of qualified buyers for owned locations, and
customer traffic. These forward-looking statementsthat involve risks and uncertainties, and, consequently, could be affected byincluding but not limited to general business conditions, the impact of competition, the success of operating initiatives, changes in the cost and supply of food and labor, the seasonality of the Company's business, taxes, inflation, and governmental regulations, which could cause
actual results to differ materially from current plans. Management does not
expect to update such forward-looking statements continuallyand the availability of credit, as conditions
change,well as other risks and readers should consider that such statements pertain only to the
date hereof.
uncertainties disclosed in per iodic reports on Form 10-K and Form 10-Q.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The
At year-end, the Company has $122had $118.4 million outstanding under its credit facility at prime plus an applicable margin.1.5%. Additionally, the Company hashad $10 million in notes which bearsbear interest at LIBOR plus 2%. At August 31, 2001, theThe total amount of debt subject to interest rate fluctuations was $132$128.4 million. AAssuming a consistent level of debt, a 1% change in interest rate effective from the beginning of the year would result in an increase or decrease in annual interest expense of $1,320,000.
$1.3 million.
Item 8. Financial Statements and Supplementary Data
LUBY'S, INC.
FINANCIAL STATEMENTS
Years Ended August 28, 2002, and August 31, 2001 2000, and 1999
2000
with Report of Independent Auditors
Report of Independent Auditors
The Board of Directors and Shareholders of Luby's, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Luby's, Inc. and Subsidiaries at August 28, 2002, and August 31, 2001, and 2000, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended August 31, 2001.28, 2002. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Luby's, Inc. and Subsidiaries at August 28, 2002, and August 31, 2001, and 2000, and the results of itstheir operations and itstheir cash flows for each of the three years in the period ended August 31, 2001,28, 2002, in conformity with accounting principles generally accepted in the United States. /s/
The accompanying consolidated financial statements have been prepared assuming that Luby's, Inc. and Subsidiaries will continue as a going concern. As more fully described in Note 6, there are no assurances that the Company will be able to obtain financing necessary to satisfy payments required by the Company's amended bank facility. This condition raises substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to this matter are also described in Note 6. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.
/s/ERNST & YOUNG LLP
San Antonio, Texas
October 15, 2001,
2002
except for the third
paragraph of Note 5,
6as
to which the date is December 5, 2001
November 25, 2002
Luby's, Inc.
Consolidated Balance Sheets
August 31,
2001 2000
________ _______
(Thousands of dollars)
Assets
Current assets:
Cash and cash equivalents $ 4,099 $ 679
Short-term investments 19,984 -
Trade accounts and other receivables 358 403
Food and supply inventories 2,701 3,853
Income tax receivable 4,468 3,749
Prepaid expenses 2,765 4,481
Deferred income taxes 4,931 1,540
________ ________
Total current assets 39,306 14,705
________ ________
Property held for sale 3,047 13,156
Investments and other assets:
Land held for future use 5,333 756
Other assets 596 4,102
________ ________
Total investments and other assets 5,929 4,858
________ ________
Property, plant, and equipment - at cost, less
accumulated depreciation and amortization 305,180 338,124
________ ________
Total assets $353,462 $370,843
________ ________
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 13,696 $ 19,843
Dividends payable - 2,242
Accrued expenses and other liabilities 34,585 24,040
________ ________
Total current liabilities 48,281 46,125
________ ________
Long-term debt 127,401 116,000
Deferred income taxes and other liabilities 2,271 10,162
Reserve for store closings 4,506 1,815
Commitments and contingencies - -
Shareholders' equity:
Common stock, $.32 par value; authorized
100,000,000 shares, issued 27,403,067 shares 8,769 8,769
Paid-in capital 33,882 27,202
Accumulated other comprehensive income (loss) (592) -
Retained earnings 234,715 266,596
Less cost of treasury stock, 4,980,124 and
4,982,692 shares in 2001 and 2000, respectively (105,771) (105,826)
________ ________
Total shareholders' equity 171,003 196,741
________ ________
Total liabilities and shareholders' equity $353,462 $370,843
________ ________
See accompanying notes.
August 28, | August 31, | ||||||||||||||||
2002 | 2001 | ||||||||||||||||
(In thousands) | |||||||||||||||||
Assets | |||||||||||||||||
Current Assets: | |||||||||||||||||
Cash | $ | 1,584 | $ | 4,099 | |||||||||||||
Short-term investments (see Note 2) | 24,122 | 19,984 | |||||||||||||||
Trade accounts and other receivables | 185 | 358 | |||||||||||||||
Food and supply inventories | 2,197 | 2,701 | |||||||||||||||
Prepaid expenses | 1,667 | 2,765 | |||||||||||||||
Income tax receivable | 7,245 | 6,608 | |||||||||||||||
Deferred income taxes (see Note 3) | 2,726 | 3,192 | |||||||||||||||
Total current assets | 39,726 | 39,707 | |||||||||||||||
Property held for sale | 8,144 | 3,048 | |||||||||||||||
Investments and other assets | 4,642 | 5,929 | |||||||||||||||
Property, plant, and equipment -- at cost, net (see Note 4) | 289,967 | 305,180 | |||||||||||||||
Total assets | $ | 342,479 | $ | 353,864 | |||||||||||||
Liabilities and shareholders' equity | |||||||||||||||||
Current Liabilities: | |||||||||||||||||
Accounts payable | $ | 19,077 | $ | 13,696 | |||||||||||||
Accrued expenses and other liabilities (see Note 5) | 21,735 | 28,193 | |||||||||||||||
Current portion of debt (see Note 6) | 118,448 | -- | |||||||||||||||
Total current liabilities | 159,260 | 41,889 | |||||||||||||||
Long-term debt (see Note 6) | -- | 122,000 | |||||||||||||||
Convertible subordinated notes, net - related party (see Note 6) | 5,883 | 5,401 | |||||||||||||||
Accrued claims and insurance | 5,142 | 6,392 | |||||||||||||||
Deferred income taxes and other credits (see Note 3) | 5,460 | 2,673 | |||||||||||||||
Reserve for restaurant closings (see Note 7) | 3,114 | 4,506 | |||||||||||||||
Commitments and contingencies (see Note 8) | -- | -- | |||||||||||||||
Total liabilities | 178,859 | 182,861 | |||||||||||||||
Shareholders' equity | |||||||||||||||||
Common stock, $.32 par value; authorized 100,000,000 shares, issued 27,403,067 shares in 2002 and 2001 | 8,769 | 8,769 | |||||||||||||||
Paid-in capital | 37,335 | 37,181 | |||||||||||||||
Deferred compensation | (1,989 | ) | (3,299 | ) | |||||||||||||
Retained earnings | 225,062 | 234,715 | |||||||||||||||
Accumulated other comprehensive income (loss) (see Note 9) | -- | (592 | ) | ||||||||||||||
Less cost of treasury stock, 4,970,024 and 4,980,124 shares in 2002 and 2001, respectively | (105,557 | ) | (105,771 | ) | |||||||||||||
Total shareholders' equity | 163,620 | 171,003 | |||||||||||||||
Total liabilities and shareholders' equity | $ | 342,479 | $ | 353,864 | |||||||||||||
See accompanying notes. | |||||||||||||||||
Luby's, Inc.
Consolidated Statements of Operations
Year Ended August 31,
2001 2000 1999
____ ____ ____
(Thousands of dollars except per share data)
Sales $467,161 $493,384 $501,493
Costs and expenses:
Cost of food 117,774 125,167 122,418
Payroll and related costs 166,404 155,769 154,817
Occupancy and other operating
expenses 166,533 159,793 155,828
General and administrative expenses 25,355 20,999 22,031
Provision for asset impairments
and store closings 30,402 14,544 -
________ ________ ________
506,468 476,272 455,094
_______ ________
Income (loss) from operations (39,307) 17,112 46,399
Interest expense (11,660) (5,908) (4,761)
Other income, net 2,188 2,217 1,846
________ ________ ________
Income (loss) before
income taxes (48,779) 13,421 43,484
Provision (benefit) for income taxes:
Current (6,276) 4,528 11,558
Deferred (10,622) (232) 3,313
________ ________ ________
(16,898) 4,296 14,871
________ ________ ________
Net income (loss) $(31,881) $ 9,125 $ 28,613
________ ________ ________
Net income (loss) per share -
basic $ (1.42) $ 0.41 $ 1.27
________ ________ ________
Net income (loss) per share -
assuming dilution $ (1.42) $ 0.41 $ 1.26
________ ________ ________
See accompanying notes.
Luby's, Inc.
Consolidated Statements of Shareholders' Equity
Accumu-
lated
Compre- Compre- Total
hensive Common Stock hensive Share-
Income Issued Treasury Paid-In Retained Income holders'
(Loss) Shares Amount Shares Amount Capital Earnings (loss) Equity
_____________________________________________________________________________________________
(Amounts in thousands except per share data)
Balance at
August 31,
1998 27,403 $8,769 (4,132) $ (92,907) $27,012 $262,540 $ - $205,414
Net income
(loss) for
the year $28,613 - - - - - 28,613 - 28,613
Common stock
issued under
benefit plans,
net of shares
tendered in
partial pay-
ment and
including
tax benefits - - - - 84 - - 84
Cash dividends,
$.80 per share - - - - - (17,988) - (17,988)
Purchases of
treasury stock - - (851) (12,919) - - - (12,919)
______ _______ ______ ______ ________ _______ _______ ____ _______
Balance at
August 31,
1999 28,613 27,403 8,769 (4,983) (105,826) 27,096 273,165 - 203,204
_______
Net income
(loss) for
the year 9,125 - - - - - 9,125 - 9,125
Common stock
issued under
benefit plans,
net of shares
tendered in
partial pay-
ment and
including
tax benefits - - - - 106 - - 106
Cash dividends,
$.70 per share - - - - - (15,694) - (15,694)
______ _______ ______ ______ ________ _______ _______ ____ _______
Balance at
August 31,
2000 9,125 27,403 8,769 (4,983) (105,826) 27,202 266,596 - 196,741
________
Other com-
prehensive
income (loss),
net of taxes:
Cumulative
effect of a
change in
accounting
for deriva-
tive finan-
cial instru-
ments upon
adoption of
SFAS 133,
net of
taxes of
$61 114 - - - - - - 114 114
Net deriva-
tive loss,
net of
taxes of
$514 (958) - - - - - - (958) (958)
Reclassifi-
cation ad-
justment for
loss included
in net income
(loss), net
of taxes of
$71 133 - - - - - - 133 133
Reclassifi-
cation ad-
justment for
loss recog-
nized on
termination
of interest
rate swaps,
net of taxes
of $64 119 - - - - - - 119 119
________
(592)
Net income
(loss) for
the year (31,881) - - - - - (31,881) - (31,881)
Common stock
issued under
benefit plans,
net of shares
tendered in
partial pay-
ment and
including
tax benefits - - 3 55 58 - - 113
Noncash stock
compensation
expense - - - - 1,942 - - 1,942
Intrinsic value
of beneficial
conversion
feature on
convertible
subordinated
notes - - - - 4,680 - - 4,680
______ _______ ______ ______ ________ _______ _______ ____ _______
Balance at
August 31,
2001 $(32,473) 27,403 $8,769 (4,980) $(105,771) $33,882 $234,715 $(592) $171,003
______ _______ ______ ______ ________ _______ _______ ____ _______
See accompanying notes.
Year Ended | |||||||||||
August 28, | August 31, | August 31, | |||||||||
2002 | 2001 | 2000 | |||||||||
(In thousands except per share data) | |||||||||||
Sales | $ | 399,065 | $ | 467,161 | $ | 493,384 | |||||
Costs and expenses: | |||||||||||
Cost of food | 103,435 | 117,774 | 125,167 | ||||||||
Payroll and related costs | 131,919 | 166,404 | 155,769 | ||||||||
Occupancy and other operating expenses | 148,576 | 166,533 | 159,793 | ||||||||
General and administrative expenses | 21,311 | 25,355 | 20,999 | ||||||||
Provision for asset impairments and | 314 | 30,402 | 14,544 | ||||||||
405,555 | 506,468 | 476,272 | |||||||||
Income (loss) from operations | (6,490 | ) | (39,307 | ) | 17,112 | ||||||
Interest expense | (10,263 | ) | (11,660 | ) | (5,908 | ) | |||||
Other income, net | 2,393 | 2,188 | 2,217 | ||||||||
Income (loss) before income taxes | (14,360 | ) | (48,779 | ) | 13,421 | ||||||
Provision (benefit) for income taxes: | |||||||||||
Current | (7,841 | ) | (6,276 | ) | 4,528 | ||||||
Deferred | 3,134 | (10,622 | ) | (232 | ) | ||||||
(4,707 | ) | (16,898 | ) | 4,296 | |||||||
Net income (loss) | $ | (9,653 | ) | $ | (31,881 | ) | $ | 9,125 | |||
Net income (loss) per share -- basic and assuming | $ | (0.43 | ) | $ | (1.42 | ) | $ | .41 | |||
See accompanying notes. | |||||||||||
Luby's, Inc.
Consolidated Statements of Cash Flows
Year Ended August 31,
2001 2000 1999
_____ _____ _____
(Thousands
Year Ended | |||||||||||
August 28, | August 31, | August 31, | |||||||||
2002 | 2001 | 2000 | |||||||||
(In thousands) | |||||||||||
Cash flows from operating activities: | |||||||||||
Net income (loss) | $ | (9,653 | ) | $ | (31,881 | ) | $ | 9,125 | |||
Adjustments to reconcile net income (loss) to net cash | |||||||||||
Depreciation and amortization | 21,642 | 23,065 | 22,784 | ||||||||
Amortization of deferred loss on interest rate swaps | 910 | 183 | -- | ||||||||
Amortization of discount on convertible subordinated notes | 482 | 81 | -- | ||||||||
Provision for asset impairments and restaurant closings | 314 | 30,402 | 14,544 | ||||||||
Gain on disposal of property held for sale | (1,330 | ) | (1,741 | ) | (397 | ) | |||||
Loss on disposal of property, plant, and equipment | 270 | 547 | 11 | ||||||||
Settlements associated with restaurant closings | -- | -- | (125 | ) | |||||||
Noncash directors' fees | 313 | 112 | -- | ||||||||
Noncash compensation expense | 1,310 | 1,942 | -- | ||||||||
Cash provided by operating activities before | 14,258 | 22,710 | 45,942 | ||||||||
Changes in operating assets and liabilities: | |||||||||||
(Increase) decrease in trade accounts and other receivables | 173 | 45 | 181 | ||||||||
(Increase) decrease in food and supply inventories | 504 | 1,152 | (167 | ) | |||||||
(Increase) decrease in income tax receivable | (637 | ) | (2,859 | ) | -- | ||||||
(Increase) decrease in prepaid expenses | 1,098 | 1,716 | 71 | ||||||||
(Increase) decrease in other assets | 251 | (117 | ) | (232 | ) | ||||||
Increase (decrease) in accounts payable | 5,381 | (6,147 | ) | (93 | ) | ||||||
Increase (decrease) in accrued insurance, accrued expenses and | (7,708 | ) | 10,545 | (1,114 | ) | ||||||
Increase (decrease) in income taxes payable | -- | -- | (4,131 | ) | |||||||
Increase (decrease) in deferred income taxes and other credits | 2,939 | (8,824 | ) | (364 | ) | ||||||
Increase (decrease) in reserve for restaurant closings | (1,651 | ) | (1,301 | ) | (4,827 | ) | |||||
Net cash provided by (used in) operating activities | $ | 14,608 | $ | 16,920 | $ | 35,266 | |||||
Luby's, Inc.
Consolidated Statements of dollars)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(31,881) $ 9,125 $28,613
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 23,065 22,784 20,025
AmortizationCash Flows
Year Ended | |||||||||||
August 28, | August 31, | August 31, | |||||||||
2002 | 2001 | 2000 | |||||||||
(In thousands) | |||||||||||
Cash flows from investing activities: | |||||||||||
(Increase) decrease in short-term investments | $ | (4,138 | ) | $ | (19,984 | ) | $ | -- | |||
Proceeds from disposal of property held for sale | 3,609 | 7,825 | 1,861 | ||||||||
Proceeds from disposal of property, plant, and equipment | -- | -- | 74 | ||||||||
Purchases of land held for future use | -- | -- | (3,378 | ) | |||||||
Purchases of property, plant, and equipment | (13,097 | ) | (17,630 | ) | (53,494 | ) | |||||
Net cash provided by (used in) investing activities | (13,626 | ) | (29,789 | ) | (54,937 | ) | |||||
Cash flows from financing activities: | |||||||||||
Proceeds from convertible subordinated notes | -- | 10,000 | -- | ||||||||
Issuance (repayment) of long-term borrowings | (3,552 | ) | 6,000 | 38,000 | |||||||
Cash paid upon termination of interest rate swaps | -- | (1,092 | ) | -- | |||||||
Proceeds from (payments on) borrowing against cash surrender | -- | 3,623 | -- | ||||||||
Proceeds received on the exercise of employee stock options | 55 | -- | -- | ||||||||
Dividends paid | -- | (2,242 | ) | (17,936 | ) | ||||||
Net cash provided by (used in) financing activities | (3,497 | ) | 16,289 | 20,064 | |||||||
Net increase (decrease) in cash | (2,515 | ) | 3,420 | 393 | |||||||
Cash at beginning of year | 4,099 | 679 | 286 | ||||||||
Cash at end of year | $ | 1,584 | $ | 4,099 | $ | 679 | |||||
See accompanying notes. |
Luby's, Inc.
Consolidated Statements of deferred loss on
interest rate swaps 183 - -
Amortization of discount on
convertible subordinated notes 81 - -
Noncash directors' fees 112 - -
Noncash compensation expense 1,942 - -
Provision for asset impairments
and store closings 30,402 14,544 -
Gain on disposal of property
held for sale (1,741) (397) (382)
Loss on disposal of property,
plant, and equipment 547 11 84
Settlements associated with store
closings - (125) (275)
________ ________ ________
Cash provided by operating
activities before changes in
operating assets and liabilities 22,710 45,942 48,065
Changes in operating assets and
liabilities:
(Increase) decrease in trade
accounts and other receivables 45 181 120
(Increase) decrease in food and
supply inventories 1,152 (167) 1,386
(Increase) decrease in income tax
receivable (719) - -
(Increase) decrease in prepaid
expenses 1,716 71 (177)
(Increase) decrease in other assets (117) (232) 912
Increase (decrease) in accounts
payable (6,147) (93) 7,204
Increase (decrease) in accrued
expenses and other liabilities 10,545 (1,114) (2,887)
Increase (decrease) in income taxes
payable - (4,131) (1,687)
Increase (decrease) in deferred
income taxes and other credits (10,964) (364) 3,168
Increase (decrease) in reserve for
store closings (1,301) (4,827) (830)
________ ________ ________
Net cash provided by operating
activities $ 16,920 $35,266 $55,274
________ ________ ________
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) decrease in short-term
investments (19,984) - -
Proceeds from disposal of property
held for sale 7,825 1,861 5,850
Proceeds from disposal of property,
plant, and equipment - 74 178
Purchases of land held for future use - (3,378) (6,926)
Purchases of property, plant, and
equipment (17,630) (53,494) (31,773)
________ ________ ________
Net cash used in investing
activities (29,789) (54,937) (32,671)
________ ________ ________
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from convertible subordinated
notes 10,000 - -
Net borrowings under credit facility 6,000 38,000 5,000
Purchases of treasury stock - - (12,919)
Dividends paid (2,242) (17,936) (18,158)
Cash paid upon termination of
interest rate swaps (1,092) - -
Proceeds from borrowing against cash
surrender value of officers' life
insurance 3,623 - -
________ ________ ________
Net cash provided by
(used in) financing activities 16,289 20,064 (26,077)
________ ________ ________
Net increase (decrease) in cash
and cash equivalents 3,420 393 (3,474)
Cash and cash equivalents at
beginning of year 679 286 3,760
________ ________ ________
Cash and cash equivalents at end
of year $ 4,099 $ 679 $ 286
________ ________ ________
See accompanying notes.
Shareholders' Equity
Accumulated | ||||||||||||||||||||||||||||||||
Common Stock | Other | Total | ||||||||||||||||||||||||||||||
Issued | Treasury | Paid-In | Deferred | Retained | Comprehensive | Shareholders' | ||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Compensation | Earnings | Income (Loss) | Equity | ||||||||||||||||||||||||
Balance at August 31, 1999 | 27,403 | $ | 8,769 | (4,983 | ) | $ | (105,826 | ) | $ | 27,096 | $ | -- | $ | 273,165 | $ | -- | $ | 203,204 | ||||||||||||||
Net income (loss) for the year | -- | -- | -- | -- | -- | -- | 9,125 | -- | 9,125 | |||||||||||||||||||||||
Common stock issued under benefit plans, net of shares tendered in partial payment and including tax benefits | -- | -- | -- | -- | 106 | -- | -- | 106 | ||||||||||||||||||||||||
Common stock issued under benefit plans, net of | -- | -- | -- | -- | 106 | -- | -- | -- | 106 | |||||||||||||||||||||||
Cash dividends, $.70 per share | -- | -- | -- | -- | -- | -- | (15,694 | ) | -- | (15,694 | ) | |||||||||||||||||||||
Balance at August 31, 2000 | 27,403 | 8,769 | (4,983 | ) | (105,826 | ) | 27,202 | -- | 266,596 | -- | 196,741 | |||||||||||||||||||||
Net income (loss) for the year | -- | -- | -- | -- | -- | -- | (31,881 | ) | -- | (31,881 | ) | |||||||||||||||||||||
Other comprehensive income (loss), net of taxes: | ||||||||||||||||||||||||||||||||
Cumulative effect of a change in accounting for |
-- |
-- |
-- |
-- |
-- | -- |
-- | 114 | 114 | |||||||||||||||||||||||
Net derivative loss, net of taxes of $514 | -- | -- | -- | -- | -- | -- | -- | (958 | ) | (958 | ) | |||||||||||||||||||||
Reclassification adjustment for loss included in | -- | -- | -- | -- | -- | -- | -- | 133 | 133 | |||||||||||||||||||||||
Reclassification adjustment for loss recognized | -- | -- | -- | -- | -- | -- | -- | 119 | 119 | |||||||||||||||||||||||
Common stock issued under benefit plans, net of | -- | -- | 3 | 55 | 58 | -- | -- | -- | 113 | |||||||||||||||||||||||
Deferred Compensation/Options | -- | -- | -- | -- | 5,241 | (5,241 | ) | -- | -- | -- | ||||||||||||||||||||||
Noncash stock compensation expense | -- | -- | -- | -- | -- | 1,942 | -- | -- | 1,942 | |||||||||||||||||||||||
Intrinsic value of beneficial conversion feature on | -- | -- | -- | -- | 4,680 | -- | -- | -- | 4,680 | |||||||||||||||||||||||
Balance at August 31, 2001 | 27,403 | 8,769 | (4,980 | ) | (105,771 | ) | 37,181 | (3,299 | ) | 234,715 | (592 | ) | 171,003 | |||||||||||||||||||
Net income (loss) for the year | -- | -- | -- | -- | -- | -- | (9,653 | ) | -- | (9,653 | ) | |||||||||||||||||||||
Reclassification adjustment for loss recognized | -- | -- | -- | -- | -- | -- | -- | 592 | 592 | |||||||||||||||||||||||
Noncash stock compensation expense | -- | -- | -- | -- | -- | 1,310 | -- | -- | 1,310 | |||||||||||||||||||||||
Common stock issued under benefit plans, net of | -- | -- | 10 | 214 | 154 | -- | -- | -- | 368 | |||||||||||||||||||||||
Balance at August 28, 2002 | 27,403 | $ | 8,769 | (4,970 | ) | $ | (105,557 | ) | $ | 37,335 | $ | (1,989 | ) | $ | 225,062 | $ | -- | $ | 163,620 | |||||||||||||
See accompanying notes. | ||||||||||||||||||||||||||||||||
Luby's, Inc.
Notes to Consolidated Financial Statements
August 31,
Fiscal Years 2002, 2001, 2000, and 19992000
Note 1. Nature of Operations and Significant Accounting Policies
Nature of Operations
Luby's, Inc. and Subsidiaries (the Company), based in San Antonio, Texas, ownsown and operatesoperate restaurants in the southern and southwestern United States. As of August 31, 2001,28, 2002, the Company operated a total of 213196 units. The Company locates its restaurants convenient to shopping and business developments as well as to residential areas. Accordingly, the restaurants appeal primarily to shoppers, travelers, store and office personnel at lunch, and to families at dinner.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Luby's, Inc. and its wholly owned and majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.
Inventories
The food and supply inventories are stated at the lower of cost (first-in, first-out) or market.
Property Held for Sale
Property held for sale is stated at the lower of cost or estimated net realizable value.
Depreciation and Amortization
The Company depreciates the cost of plant and equipment over their estimated useful lives using both straight-line and accelerated methods. Leasehold improvements are amortized over the related lease lives, which are in some cases shorter than the estimated useful lives of the improvements.
Long-Lived Assets
Impairment losses are recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount. The Company evaluates impairments on a restaurant-by-restaurant basis and uses three or more years of negative cash flows and other market conditions as indicators of impairment. Impairment losses are also recorded for long-lived assets that are expected to be disposed of. Statement of Cash Flows
For purposes of the statement of cash flows, the Company considers all highly
liquid financial instruments purchased with an original maturity of three
months or less to be cash equivalents.
Preopening Expenses
New store preopening costs are expensed as incurred.
Fiscal Year
In fiscal year 2002, the Company will movechanged its reporting-period measurement to 13 four-week periods from 12 calendar months to 13 four-
week periods.months. The first period of fiscal year 2002 will beginbegan September 1, 2001, and will covercovered 26 days. Alldays, and all subsequent period will coverperiods covered 28 days. Fiscal year 2002 will endended on August 28, 2002.
2002, and contained 362 days, compared to 365 days in fiscal 2001.
Advertising Expenses
Advertising costs are expensed as incurred. Advertising expense as a percentage of sales approximatesapproximated 0.2%, 1.6%, 2.1%, and 2.4%2.1% for fiscal years 2002, 2001, and 2000, and 1999, respectively.
Income Taxes
Deferred income taxes are computed using the liability method. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities (temporary differences) and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Reclassifications
Certain prior year amounts have been reclassified to conform to
Financial Instruments
The estimated fair value of financial instruments held by the current
year presentation.
Company approximates the carrying value.
Stock-Based Compensation
The Company accounts for its employee stock compensation arrangements underplans using the provisionsintrinsic value method of accounting set forth in Accounting Principles Board (APB)Opinion No. 25, "Accounting for Stock Issued to Employees," and makes the pro forma information disclosures required
underrelated interpretations. Accordingly, compensation cost for stock options is measured as the provisionsexcess, if any, of Statementthe quoted market price of Financial Accounting Standards No. 123
(SFAS 123), "Accountingthe Company's stock at the date of grant over the amount an employee must pay to acquire the stock.
Comprehensive Income
Comprehensive income (loss) includes adjustments for Stock-Based Compensation.certain revenues, expenses, gains, and losses that are excluded from net income in accordance with accounting principles generally accepted in the United States, such as adjustments to the interest rate swaps.
Earnings Per Share
The Company presents basic income (loss) per common share and diluted loss per common share in accordance with SFAS 128, "Earnings Per Share." Stock-based
compensation expenseBasic income (loss) per share is recognized as vested on a straight-line basis.
computed by dividing net income (loss) by the weighted-average number of shares outstanding during each period presented. In fiscal years 2002 and 2001, basic and diluted loss per share were the same due to the antidilutive effect of options in loss periods. In fiscal year 2000, basic and diluted earnings per share were equal due to the minimal dilutive effect of stock options that year.
Derivative Financial Instruments
The Company adopted Statement of Financial Accounting Standards No.SFAS 133, (SFAS
133), "Accounting for Derivative Instruments and Hedging Activities," and its amendments, Statements No. 137 and 138, on September 1, 2000. SFAS 133 requires that all derivative instruments be recorded on the balance sheet at fair value. Pursuant to this standard, the Company designated its Interest
Rate Protection Agreements (Swaps) as cash flow hedge instruments. Swaps
Reclassifications
Certain prior year amounts have been usedreclassified to manage exposureconform to interest rate movement by effectively
changing the variable rate to a fixed rate. The critical terms of the Swaps
and the interest-bearing debt associated with the Swaps were the same;
therefore, the Company assumed that there was no ineffectiveness in the hedge
relationship. Changes in fair value of the Swaps are recognized in other
comprehensive income (loss), net of tax effects, until the hedged items are
recognized in earnings.
current year presentation.
Use of Estimates
In preparing financial statements in conformity with accounting principles generally accepted in the United States, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from these estimates.
New Accounting Pronouncements The Company reviewed recent accounting pronouncements, including
In August 2001, the Financial Accounting Standards Board (FASB) issued SFAS 144,
entitled "Accounting for the Impairment or Disposal of Long-Lived Assets." This Standard requires the recognition and measurement of the impairment of long-lived assets to be held and used and the measurement of long-lived assets to be disposed of by sale. The Company plans to adopt the pronouncement in fiscal 2003. The Company does not expect a material impact on its results of operations or financial condition as a result of the adoption of this Standard.
The Company has accounted for the cessation of operations under the provisions of Emerging Issues Task Force No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity." In June 2002, FASB issued SFAS 144 supersede SFAS 121,146, "Accounting for Costs Associated with Exit or Disposal Activities." The Company will also adopt the Impairmentaccounting requirement of Long-Lived Assets and for Long-Lived Assets to be Disposed of," and will take
effectSFAS 146 in fiscal 2003 and does not anticipate the effects to the financial statements to be material.
Note 2. Short-Term Investments
The Company maintained a balance of $24.1 million and $20.0 million in short-term investments as of August 28, 2002, and August 31, 2001, respectively. This cash is invested in money-market funds and time deposits.
Note 3. Income Taxes
Following is a recap of deferred income tax assets and liabilities as of the fiscal year-end:
August 28, | August 31, | ||||||
2002 | 2001 | ||||||
(In thousands) | |||||||
Net deferred long-term income tax liability | $ | (5,460 | ) | $ | (2,673 | ) | |
Less: other credits | 1,653 | 1,852 | |||||
Net deferred long-term income tax liability | (3,807 | ) | (821 | ) | |||
Net deferred short-term income tax asset | 2,726 | 3,192 | |||||
Net deferred income tax asset (liability) | $ | (1,081 | ) | $ | 2,371 | ||
The tax effect of temporary differences results in deferred income tax assets and liabilities as of the fiscal year-end as follows:
August 28, | August 31, | ||||||
2002 | 2001 | ||||||
(In thousands) | |||||||
Deferred tax assets: | |||||||
Workers' compensation, employee injury, and | $ | 3,501 | $ | 4,613 | |||
Deferred compensation | 1,806 | 1,482 | |||||
Asset impairments and restaurant closure reserves | 19,243 | 21,108 | |||||
Other | -- | 318 | |||||
Total deferred tax assets | 24,550 | 27,521 | |||||
Deferred tax liabilities: | |||||||
Amortization of capitalized interest | 7 | 484 | |||||
Depreciation and amortization | 23,643 | 22,023 | |||||
Other | 1,981 | 2,643 | |||||
Total deferred tax liabilities | 25,631 | 25,150 | |||||
Net deferred tax asset (liability) | $ | (1,081 | ) | $ | 2,371 | ||
The reconciliation of the (benefit) provision for income taxes to the expected income tax (benefit) expense (computed using the statutory tax rate) is as follows:
2002 | 2001 | 2000 | |||||||||||||||||||||
Amount | % | Amount | % | Amount | % | ||||||||||||||||||
(In thousands and as a percent of pretax income) | |||||||||||||||||||||||
Normally expected income tax | |||||||||||||||||||||||
(benefit) expense | $ | (5,026 | ) | (35.0 | )% | $ | (17,073 | ) | (35.0 | )% | $ | 4,697 | 35.0 | % | |||||||||
State income taxes | -- | -- | 125 | .3 | 163 | 1.2 | |||||||||||||||||
Jobs tax credits | (218 | ) | (1.5 | ) | (381 | ) | (.8 | ) | (152 | ) | (1.1 | ) | |||||||||||
Other differences | 537 | 3.7 | 431 | .9 | (412 | ) | (3.1 | ) | |||||||||||||||
$ | (4,707 | ) | (32.8 | )% | $ | (16,898 | ) | (34.6 | )% | $ | 4,296 | 32.0 | % | ||||||||||
Cash payments for state and federal income taxes for 2002, 2001, and 2000 were $19,000, $92,000, and $8.7 million, respectively.
Note 4. Property, Plant, and Equipment
The cost and accumulated depreciation of property, plant, and equipment at August 28, 2002, and August 31, 2001, together with the related estimated useful lives used in computing depreciation and amortization, were as follows:
August 28, | August 31, | Estimated | ||||||
2002 | 2001 | Useful Lives | ||||||
(In thousands) | ||||||||
Land | $ | 73,664 | $ | 79,977 | ─ | |||
Restaurant equipment and furnishings | 138,846 | 135,670 | 3 to 15 years | |||||
Buildings | 236,806 | 236,091 | 20 to 40 years | |||||
Leasehold and leasehold improvements | 33,107 | 35,582 | Term of leases | |||||
Office furniture and equipment | 12,330 | 11,486 | 5 to 10 years | |||||
Transportation equipment | 811 | 937 | 5 years | |||||
Construction in progress | ─ | 289 | ─ | |||||
495,564 | 500,032 | |||||||
Less accumulated depreciation and | 205,597 | 194,852 | ||||||
$ | 289,967 | $ | 305,180 |
| ||||
Note 5. Current Accrued Expenses and Other Liabilities
Current accrued expenses and other liabilities at August 28, 2002, consist of:
August 28, | August 31, | ||||||
2002 | 2001 | ||||||
(In thousands) | |||||||
Salaries and bonuses | $ | 4,986 | $ | 6,017 | |||
Taxes, other than income | 6,833 | 10,124 | |||||
Accrued claims and insurance | 7,888 | 9,808 | |||||
Legal, rent, and other | 2,028 | 2,244 | |||||
$ | 21,735 | $ | 28,193 | ||||
Note 6. Debt
Senior Debt
Five payments totaling $3.6 million were made in fiscal 2002 which reduced the balance of the credit facility to $118.4 million. These payments were made in compliance with the credit agreement, which requires that the Company pay the outstanding balance down in amounts equal to all proceeds received from the sale of real and personal property. The interest rate was prime plus 1.5% at both August 28, 2002, and August 31, 2001.
Under the agreement terms that were in place during fiscal 2002 and through the first quarter of fiscal 2003, the Company was required to meet certain indicated EBITDA levels. EBITDA is defined in the agreement as earnings before interest, taxes, depreciation, amortization, and noncash executive compensation. The annual EBITDA requirement was met for fiscal year 2002. However, the Company fell short of its fourth-quarter EBITDA requirement. After the end of the 2002 fiscal year, management obtained a waiver for the Company. Atfourth-quarter requirement and an amendment to the debt agreement.
The amendment extended the debt's maturity to October 31, 2004, and increased the applicable interest rate from prime plus 1.5% to prime plus 2.5%. Additionally, the financial covenant was changed from quarterly and annual EBITDA measurements to one that time,assesses liquidity and future debt service. Management believes the new covenant is achievable and considers it to be more appropriate for the collateralized credit facility.
Meanwhile, the Company has executed a commitment letter with another financial entity for an $80 million loan. Its purpose is to replace that amount of debt in the existing credit facility. Thus, the amendment discussed above requires that the entire proceeds from the other financial entity be used to pay down the credit facility. In the event the Company is unable to make the $80 million payment as currently planned, the amended loan would be in default. The existing lenders would then have the right to exercise any and all remedies, including the right to demand immediate repayment of the entire outstanding balance or the right to pursue foreclosure on the assets pledged as collateral. As of August 28, 2002, $246.4 million of the Company's total book value, or 71.9% of its total assets, including the Company's owned real estate, improvements, equipment, and fixtures, was pledged as collateral under the credit facility. The nonbinding commitment letter with the new lender is subject to conditions the Company must satisfy before the actual financing can occur. Management is currently working toward this goal and has high confidence that the transaction will be completed and the financing closed by January 31, 2003.
The Company also could pursue other options if its current refinancing plans cannot be finalized. Those options include financing through high-yield debt at higher than commercial rates or conducting additional equity security sales through public or private offerings. Dilution to existing shareholders would result in the case of equity security sales.
Assuming the $80 million requirement is met, the amended facility also includes two principal payments. The first is a target of $15 million that is also to be paid by January 31, 2003, from either operating cash flow or proceeds from the sale of property. Failure to pay the entire $15 million would result in a 1% increase in the applicable interest rate from prime plus 2.5% to prime plus 3.5%. The second payment, from operating cash flow or property sales, is an additional $10 million by September 1, 2003. Again, payment of any amount less than $10 million would result in another 1% increase in the applicable interest rate.
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the ordinary course of business. As explained above, the Company amended its credit facility after August 28, 2002, to change certain financial covenants, extend the term, and amend various provisions. As referenced above, the amended bank facility requires that the $80 million in proceeds from the new asset-based lender be used to pay down the credit facility by January 31, 2003. There are no assurances, however, that the Company will ensure
existing policiesbe able to close the pending financing that is necessary to satisfy payments required by the Company's amended bank facility.
The credit facility includes a provision for the issuance of letters of credit in the amount of $1,184,000 and allows the Company to acquire additional letters of credit in the ordinary course of business.
Interest Rate Protection Agreements
The Company had two Swaps, which effectively fixed the rate on a portion of the floating-rate debt outstanding under its line of credit. The Swaps were fixed-rate agreements in the notional amounts of $30 million and $15 million. Both Swaps offered fixed rates at 6.50% in exchange for the Company's floating line of credit rate. The original termination date for each Swap was June 30, 2002. Due to declining interest rates and in anticipation of additional future unfavorable interest rate changes, the Company terminated its Swaps on July 2, 2001, for a cash payment of $1.3 million, including accrued interest of $163,000. In accordance with SFAS 133, the loss of $1.1 million was recognized as interest expense over the original term of the Swaps through June 30, 2002. Accumulated other comprehensive income (loss) was fully amortized before the end of fiscal year 2002.
Subordinated Debt
On March 9, 2001, the Company's newly appointed CEO and COO, Christopher J. Pappas and Harris J. Pappas, respectively, committed to loaning the Company a total of $10 million in exchange for convertible subordinated notes that were funded in the fourth quarter of fiscal 2001. The notes, as formally executed, bear interest at LIBOR plus 2%, payable quarterly, and have a stated redemption date of March 1, 2011. Interest through September 1, 2003, may be paid in a combination of cash, common stock, or both at the Company's election, subject to certain restrictions on the amount of stock issued. All interest to date has been paid in cash.
Notwithstanding any accrued interest that may also be converted to stock, the notes are consistent withconvertible into the provisionsCompany's common stock at $5.00 per share for 2.0 million shares at the option of SFAS 144. Relativethe holders at any time after January 2, 2003, and prior to the other recent pronouncements, management does not anticipate that their
effect upon adoption, if applicable, will have a significant effect on earnings
or the financial positionstated redemption date. The market price of the Company.
2.Company's stock on the commitment date (as determined by the closing price on the New York Stock Exchange on the date of issue) was $7.34. The difference between the market price and strike price of $5.00, or $2.34 per share, multiplied by the 2.0 million convertible shares equaled approximately $4.7 million. Under the Company's adopted intrinsic value method, applicable accounting principles require that this amount, which represents the beneficial conversion feature, be recorded as both a component of paid-in capital and a discount from the $10 million.
The conversion feature is being amortized over the term of the notes. The carrying value of the notes at August 28, 2002, net of the unamortized discount, was approximately $5.9 million. The comparative carrying value of the notes at August 31, 2001, was approximately $5.4 million.
Interest Expense
Total interest expense incurred for 2002, 2001, and 2000 was $10.3 million, $12.0 million, and $6.9 million, respectively, which approximated the amount paid in each year. The amounts capitalized on qualifying properties in 2002, 2001, and 2000 were $0, $336,000, and $958,000, respectively.
Note 7. Impairment of Long-Lived Assets and Store Closings
In 20012002 and 2000,2001, the Company recorded a charge to operating costs of $30.4
million$314,000 and $14.5$30.4 million, respectively, for asset impairment and store closure costs. In accordance with Company guidelines, management periodically reviews the financial performance of each store for indicators of impairment or indicators that closure would be appropriate. Where indicators are present, such as three full fiscal years of negative cash flows or other unfavorable market conditions, the carrying values of assets are written down to the estimated future discounted cash flows or fully written off in the case of negative cash flows anticipated in the future. Estimated future cash flows are based upon regression analyses generated from similar Company restaurants, discounted at the Company's weighted averageweighted-average cost of capital.
Fiscal 2002 Restaurant Impairments and Closings
No restaurants were impaired during fiscal 2002. The Company closed one restaurant not previously designated for closure. The net provision for asset impairment and restaurant closings includes the labor termination costs and the loss associated with closing the restaurant, which were both offset by the charge reversals for two lease settlements that were slightly more favorable than originally anticipated.
Fiscal 2001 Restaurant Impairments and Closings
During fiscal 2001, the Company recorded a pretax charge of $30.4 million as a result of its reviews for impairments in accordance with SFAS 121 and assessments of closure costs. The principal components of the fiscal 2001 charge were as follows:
Restaurants Designated for Closure - Charges of $11.6 million were incurred for the closing of 15 underperforming restaurants.restaurants, two of which are still operating. This charge included the cost to write down the properties and equipment to net realizable value and estimated costs for the settlement of lease obligations, legal and professional fees, and other exit costs. Employee severance costs were not accrued.accrued as of August 31, 2001, but were paid out and primarily expensed in the period of closure. (As explained below, two other restaurants were closed for remodel and conversion to new concepts.)
Impaired Restaurants - Charges of $17.0 million were incurred for asset impairment of 13 restaurants, thatten of which the Company continues to operate. In accordance with SFAS 121, the properties were written down to the estimated future discounted cash flows or fully written off in the case of negative future cash flows.
Property Under Dissolved Joint Venture - $0.8Charges of $.8 million were incurred primarily for the impairment of one property operated under a joint venture with Waterstreet, Inc. The joint venture, L&W Seafood, Inc., was terminated in 1999. However, the property used by the joint venture was retained for a time to evaluate its potential use. This location remained vacant for over a year, after which time the Company decided against retaining it. This property was written down to its estimated net realizable value and was sold in fiscal year 2001.
New Concepts - Charges of $1.0 million were associated with the write-off of assets for two locations that will be remodeledwere slated for remodel and reopenedconversion to new concepts before the end of fiscal year 2002. The Company closed theseboth units by October 31, 2001. Property that cannotcould not be salvaged, transferred, or effectively reused has beenwas written off. One of the two locations was reopened as a seafood restaurant in the second quarter of fiscal 2002. Plans for the second conversion are still in progress.
Operating Results for Restaurants Designated for Closure
The results of operations for the 15 restaurants designated for closure atwere as follows:
Year Ended | |||||||||||||
August 28, | August 31, | August 31, | |||||||||||
2002 | 2001 | 2000 | |||||||||||
(In thousands) | |||||||||||||
Sales | $ | 6,479 | $ | 19,327 | $ | 19,190 | |||||||
Operating loss | (3,262 | ) | (4,289 | ) | (3,145 | ) | |||||||
Reserve for Restaurant Closings
At August 28, 2002, and August 31, 2001, were as follows:
Year Ended August 31,
2001 2000 1999
__________________________
(Thousands of dollars)
Sales $19,327 $19,190 $16,669
Operating loss (4,289) (3,145) (1,245)
The Company recorded a pretax charge of $14.5 million during the fourth quarter
of fiscal year 2000 for store closures, associated costs, asset impairments in
accordance with SFAS 121, and other unusual charges. The principal components
of the charge were as follows:
- $7.7 million for the closing of 15 restaurants that did not meet the
Company's return on invested capital and sales growth requirements. All
were closed by August 31, 2001. This charge included the cost to write
down the properties and equipment to net realizable value and estimated
costs for the settlement of lease obligations, legal and professional
fees, severance costs, and other exit costs. Prior to August 31, 2000,
all restaurant employees of the Company were notified of the possibility
of their termination due to planned restaurant closures. Approximately
300 employees were terminated. The severance costs for these employees
were accrued for and included in the store closing costs.
- $3.2 million for asset impairment of six properties that the Company did
not plan to close. The carrying value of the assets was written down to
estimated future discounted cash flows or fully written off in the case of
negative future cash flows.
- $1.3 million for the write-down of computer-related equipment and
software. The write-down included the abandonment of a payroll-related
software package and several point-of-sale (POS) systems.
- $1.2 million additional write-down on surplus properties held for sale.
These properties were written down to the lower of their historical
carrying costs or estimated net realizable values.
- $1.1 million related to other unusual charges. The primary component of
this charge was the write-off of the remaining asset balance related to
L&W Seafood, Inc.
The results of operations for the 15 restaurants designated for closure at
August 31, 2000, were as follows:
Year Ended August 31,
2001 2000 1999
__________________________
(Thousands of dollars)
Sales $2,632 $19,296 $21,244
Operating loss (923) (1,470) (205)
At August 31, 2001 and 2000, the Company had a reserve for storerestaurant closings of $3.1 million and $4.5 million, and $1.8 million, respectively. All material cash outlays
associated with the closures planned as of August 31, 2000, were completed by
August 31, 2001. Excluding lease termination settlements, it is anticipated that all material cash outlays required for the store closings planned as of August 31, 2001, will be made prior to August 31, 2002.the end of fiscal 2003. The following is a summary of the types and amounts recognized as accrued expenses together with cash payments made against such accruals for the three years ended August 31,
2001:
Reserve Balance
_____________________________________________
Legal28, 2002:
Reserve Balance | |||||||||||||||||||
Lease | Legal and |
|
|
| |||||||||||||||
(In thousands) | |||||||||||||||||||
As of August 31, 1999 | $ | 3,907 | $ | 1,000 | $ | 72 | $ | 88 | $ | 5,067 | |||||||||
Additions (reductions) | 675 | 350 | 375 | 300 | 1,700 | ||||||||||||||
Cash payments | (3,817 | ) | (975 | ) | (72 | ) | (88 | ) | (4,952 | ) | |||||||||
As of August 31, 2000 | 765 | 375 | 375 | 300 | 1,815 | ||||||||||||||
Additions (reductions) | 4,196 | (375 | ) | (59 | ) | 693 | 4,455 | ||||||||||||
Cash payments | (755 | ) | -- | (316 | ) | (693 | ) | (1,764 | ) | ||||||||||
As of August 31, 2001 | 4,206 | -- | -- | 300 | 4,506 | ||||||||||||||
Additions (reductions) | (373 | ) | -- | -- | -- | (373 | ) | ||||||||||||
Cash payments | (856 | ) | -- | -- | (163 | ) | (1,019 | ) | |||||||||||
As of August 28, 2002 | $ | 2,977 | $ | -- | $ | -- | $ | 137 | $ | 3,114 | |||||||||
Note 8. Commitments and Lease Profes- Other
Settlement sional Workforce Exit Total
Costs Fees Severance Costs Reserve
______________________________________________
(ThousandsContingencies
Officer Loans
In fiscal 1999, the Company guaranteed loans of dollars)approximately $1.9 million relating to purchases of Company stock by officers of the Company. Under the officer loan program, shares were purchased and funding was obtained from JPMorgan Chase Bank. As of August 31, 1998 $ 4,537 $ 985 $ 260 $ 390 $ 6,172
Additions(reductions) (224) 150 56 (257) (275)
Cash payments (406) (135) (244) (45) (830)
______________________________________________28, 2002, the notes, which mature in fiscal 2004, have an outstanding balance of approximately $1.6 million. In the event of possible default, the Company would purchase the loans from JPMorgan Chase Bank, become holder of the notes, record the receivables, and pursue collection in the event that note requirements are not met. The purchased Company stock has been and can be used by borrowers to satisfy a portion of their loan obligation. As of August 31, 1999 3,907 1,000 72 88 5,067
Additions(reductions) 675 350 375 300 1,700
Cash payments (3,817) (975) (72) (88) (4,952)
______________________________________________
As28, 2002, based on the market price on that day, approximately $505,000, or 31.6% of August 31, 2000 765 375 375 300 1,815
Additions(reductions) 4,196 (375) (59) 693 4,455
Cash payments (755) - (316) (693) (1,764)
______________________________________________
Asthe note balances, could have been covered by stock, while approximately $1.1 million, or 68.4%, would have remained outstanding.
Pending Claims
Two former restaurant assistant managers have filed suit in federal district court alleging violations of August 31, 2001 $ 4,206 $ - $ - $ 300 $ 4,506
______________________________________________
3. Property, Plant,the Fair Labor Standards Act and Equipmentthe commission of certain fraudulent acts by the Company. The cost and accumulated depreciationplaintiffs also seek authorization to represent a class of property, plant, and equipment at
August 31, 2001 and 2000, together with the related estimated useful lives
used in computing depreciation and amortization, are reflected below:
Estimated
2001 2000 Useful Lives
________ ________ _______________
(Thousands of dollars)
Land $ 79,977 $ 79,279 -
Restaurant equipment and
furnishings 135,670 144,160 3 to 15 years
Buildings 236,091 251,260 20 to 40 years
Leasehold and leasehold
improvements 35,582 41,215 Term of leases
Office furniture and equipment 11,486 10,504 5 to 10 years
Transportation equipment 937 975 5 years
Construction in progress 289 3,382 -
________ ________
500,032 530,775
Less accumulated depreciation
and amortization 194,852 192,651
________ ________
$305,180 $338,124
________ ________
4. Change in Accounting Estimate
Throughout the first three quarters of fiscal year 2001,all assistant managers employed by the Company observed
increased costs relativethroughout the United States who they claim, on information and belief, are similarly without the requisite job duties and responsibilities to insurance.be considered exempt from the overtime requirements of the Fair Labor Standards Act. The costs primarily escalatedCompany has asserted that no class is appropriate, that plaintiffs were exempt from the right to overtime compensation under the Fair Labor Standards Act under the white collar exemptions, and has denied any misrepresentations. The complaint does not specify the total amount of damages being sought. The court denied plaintiffs' request to certify a nationwide class, and instead certified a class consisting of assist ant managers that worked in the Memphis area of workers' compensation. Infrom August 1999 to July 2002. The plaintiffs are still seeking to expand the fourth quarter, the Company consulted
with an outside actuarial firm that reassessed losses based upon increasing
cost trends and other pertinent information. The results indicated that a
change in accounting estimate was necessary. The after-tax effect of this
change in the fourth quarter was a reduction in earnings of $4.3 million, or
$0.19 per share.class beyond Memphis. The Company last obtained a similar actuarial report for
claim cost estimation purposes asbelieves that the allegations are unfounded and intends to continue to diligently contest the claims of December 15, 1997. Subsequent to August
31, 2001, the Company launched a new in-house safety and claims program in
order to decrease the incidence of accidents and injuries and better control
expenses related to claims costs.
5. Debt
Credit Facility
plaintiffs.
The Company had a $125 million credit facility with a syndicate of four banks.
Effective June 29, 2001, the Company amended its credit facilityis presently, and from time to include a
reduction in commitment with each principal payment, securing of the debt with
real property,time, subject to pending claims and the modification of financial compliance requirements to one
criterion focused on EBITDA levels.
The Company made a $1 million principal payment on July 6, 2001, which reduced
the balance of the credit facility to $122 million. In cases where the
Company's performance exceeds EBITDA levels required in the amended credit
facility, a portion of that excess will be paid as additional principal
reductions. Per the amendment, the Company is also required to pay the
facility down in amounts equal to all proceeds received from the sale of real
and personal property. The maturity date of the amended credit facility is
April 30, 2003, with an extension provision to April 30, 2004, given
satisfaction of certain conditions. The interest rate on the outstanding
balance of the credit facility is the prime rate plus an applicable margin as
required by the amended credit facility.
Subsequent to fiscal year-end 2001, the terrorist attacks of September 11 and
increased recessionary trends resulted in the Company's inability to meet its
first quarterly EBITDA covenant for fiscal year 2002. Accordingly, the Company
obtained a waiver and amendment to its credit agreement dated December 5, 2001,
which waives its noncompliance with first-quarter EBITDA levels, resets
remaining fiscal 2002 quarterly EBITDA targets, and limits capital expenditures
for the year to $15 million. The Company expects to be in compliance with its
revised covenants for fiscal year 2002.
The credit facility includes a provision for the issuance of letters of credit
in the amount of $1,184,000. The credit facility allows the Company to acquire
additional letters of creditlawsuits arising in the ordinary course of business. The Company had two Swaps,In the opinion of management, other than the litigation described above, the outcome of which effectively fixedis not yet determined, the rateresolution of all other pending legal proceedings will not have a material adverse effect on a portion of the
floating-rate debt outstanding under its line of credit. The Swaps were fixed-
rate agreements in the notional amounts of $30 million and $15 million. Both
Swaps offered fixed rates, at 6.50%, in exchange for the Company's floating
line of credit rate. The original termination date for each Swap was June 30,
2002. At September 1, 2000, the Swaps wereoperations or consolidated financial position.
Surety Bonds
At August 28, 2002, surety bonds in a favorable position by
approximately $175,000. In accordance with the transition provisions of SFAS
133, the net-of-tax cumulative effect of an accounting change adjustment on
September 1, 2000, was $114,000 in accumulated other comprehensive income
(loss), with a deferred income tax liability of $61,000. Due to declining
interest rates and in anticipation of additional future unfavorable interest
rate changes, the Company terminated its Swaps on July 2, 2001, for a cash
payment of $1,255,000, including accrued interest of $163,000. In accordance
with SFAS 133, the loss of $1,092,000 is being recognized as interest expense
over the original term of the Swaps. At August 31, 2001, $592,000, net of taxes
of $318,000, remains in accumulated other comprehensive loss.
Convertible Subordinated Notes
On March 9, 2001, the Company's newly appointed CEO and COO, Christopher J.
Pappas and Harris J. Pappas, respectively, made a commitment to loan the
Company $10 million in exchange for convertible subordinated notes that were
funded in the fourth quarter of fiscal 2001. The notes bear interest at LIBOR
plus 2%, payable quarterly, and have a stated redemption date of March 1, 2011.
Interest through September 1, 2003, may be paid in a combination of cash,
common stock, or both at the Company's election, subject to certain
restrictions on the amount of stock issued. Notwithstanding any$10.1 million have been issued as security for the payment of insurance obligations classified as accrued interest that may also be converted to options, the notes are convertible into
the Company's common stock at $5.00 per share, or 2,000,000 shares, at the
option of the holders at any time after January 2, 2003, and prior to the
stated redemption date.
The conversion priceexpenses on the notes was less than the market valuebalance sheet.
Note 9. Comprehensive Income (Loss)
The Company's comprehensive income (loss) is comprised of the
Company's common stock (as determined by the closing price on the New York
Stock Exchange on the datenet income (loss) and adjustments to derivative financial instruments. The components of issue). The intrinsic value of this beneficial
conversion feature of $4,680,000 has been recordedcomprehensive income (loss) were as a component of paid-in
capital and a discount on the notes, which will be amortized to interest
expense through the redemption date. The Company has amortized $81,000 of this
discount through August 31, 2001. The carrying value of the notes at August
31, 2001, net of the unamortized discount, was approximately $5,401,000.
Interest Expense
Total interest expense incurred for 2001, 2000, and 1999 was $11,996,000,
$6,866,000, and $5,170,000, respectively, which approximated the amount paid
in each year. The amounts capitalized on qualifying properties in 2001, 2000,
and 1999 were $336,000, $958,000, and $409,000, respectively.
6.follows:
August 28, | August 31, | ||||||
2002 | 2001 | ||||||
(In thousands) | |||||||
Net income (loss) | $ | (9,653 | ) | $ | (31,881 | ) | |
Other comprehensive income (loss), net of taxes: | |||||||
Cumulative effect of a change in accounting for derivative financial | -- | 114 | |||||
Net derivative loss, net of taxes of $514 | -- | (958 | ) | ||||
Reclassification adjustment for loss included in net income (loss), | -- | 133 | |||||
Reclassification adjustment for loss recognized on termination of | -- | 119 | |||||
Reclassification adjustment for loss recognized on termination of | 592 | -- | |||||
Comprehensive income (loss) | $ | (9,061 | ) | $ | (32,473 | ) | |
Note 10. Leases
The Company conducts part of its operations from facilities that are leased under noncancelable lease agreements. Most of the leases are for periods of ten to twenty-five years and provide for contingent rentals based on sales in excess of a base amount. Approximately 80%87% of the leases contain renewal options ranging from five to thirty years.
Annual future minimum lease payments under noncancelable operating leases as of August 31, 2001,28, 2002, are as follows: Year ending August 31: (Thousands of dollars)
2002 $ 6,502
2003 6,154
2004 5,890
2005 5,472
2006 4,830
Thereafter 29,126
_______
Total minimum lease payments $57,974
_______
Year Ending: | (In thousands) | |||||
August 27, 2003 | $ | 6,028 | ||||
August 25, 2004 | 5,655 | |||||
August 31, 2005 | 5,261 | |||||
August 30, 2006 | 4,672 | |||||
August 29, 2007 | 4,288 | |||||
Thereafter | 22,245 | |||||
Total minimum lease payments | $ | 48,149 | ||||
Total rent expense for operating leases for the last three fiscal years ended August 31, 2001,
2000, and 1999, was as follows: 2001 2000 1999
____ ____ _____
(Thousands of dollars)
Minimum rentals $6,914 $6,829 $7,052
Contingent rentals 437 660 843
______ ______ ______
$7,351 $7,489 $7,895
______ ______ ______
7.
Year Ended | |||||||||||
August 28, | August 31, | August 31, | |||||||||
2002 | 2001 | 2000 | |||||||||
(In thousands) | |||||||||||
Minimum rentals | $ | 6,512 | $ | 6,914 | $ | 6,829 | |||||
Contingent rentals | 770 | 437 | 660 | ||||||||
$ | 7,282 | $ | 7,351 | $ | 7,489 | ||||||
Note 11. Employee Benefit Plans and Agreements
Incentive Compensation
The Company has various incentive compensation plans covering officers and
other key employees that are based upon the achievement of specified earnings
goals and performance factors. Awards under the plans are payable in cash
and/or in shares of common stock. Charges to expense for distributions under
the plans amounted to $0, $0, and $355,000 in 2001, 2000, and 1999,
respectively.
Executive Stock Options
In conjunctionconnection with their employment agreements effective March 9, 2001, the CEO and the COO were each granted 1,120,000approximately 2.2 million stock options with an exerciseat a strike price of $5.00 per share, and a vesting period of three years. Aswhich was below the exercisequoted market price was
less than market value of the Company's common stock on the date of grant,grant. From that date through fiscal 2004, the Company will recognize $5,242,000a total of $5.2 million in noncash compensation expense overassociated with these options. Totals of $1.3 million and $1.9 million were recognized for fiscal 2002 and 2001, respectively. Of the vesting
period of the options. Vesting was accelerated on 25% of the options in
accordance with the agreements when the closing price of the Company's common
stock reached and maintained a predetermined price for 20 consecutive trading
days. The weighted average exercise price and the Black-Scholes fair value of
these options at August 31, 2001, are $5.00 and $4.05, respectively.
Approximately $1,942,000 in compensation expense was$5.2 million to be recognized, in fiscal
year 2001.
Other$3.2 million has been recognized to date, while $2.0 million remains to be amortized.
All Stock Options
The Company has an Incentive Stock Plan (ISP)incentive stock plan to provide for market-based incentive awards, including stock options, stock appreciation rights, and restricted stock. Under this plan, stock options may be granted at prices not less than 100% of fair market value on the date of grant. Options granted to the participants of the plan are exercisable over staggered periods and expire, depending upon the type of grant, in five to ten years. The plan provides for various vesting methods, depending upon the category of personnel.
During 1999, the Company authorized 2,000,0002.0 million shares of the Company's common stock for the ISP.plan. Under theits terms, of the ISP, including the 1999 authorization, nonqualified stock options, incentive stock options, and other types of awards for not more than 4,900,0004.9 million shares of the Company's common stock may be granted to eligible employees of the Company. As previously stated, the Company also granted 2.2 million options to the CEO and the COO in conjunction with their employment agreements. Neither individual has exercised any of these options.
Following is a summary of activity in the Company's ISPincentive stock plan and the executive stock options for the three years ended August 31, 2001, 2000,28, 2002, and 1999:
Weighted Average
Exercise Price Per
Share-Options Options Options
Outstanding Outstanding Exercisable
________________ ___________ ___________
Balances - August 31, 1998 $20.17 764,246 225,704
Granted 15.18 1,532,732 -
Became exercisable - - 113,732
Canceled or expired 19.49 (260,350) (161,662)
Exercised - - -
_________ _________
Balances - August 31, 1999 16.47 2,036,628 177,774
Granted 11.40 622,000 -
Became exercisable - - 406,001
Canceled or expired 15.21 (363,087) (58,836)
Exercised - - -
_________ _________
Balances - August 31, 2000 $15.30 2,295,541 524,939
Granted 5.26 2,958,000 -
Became exercisable - - 993,803
Canceled or expired 13.95 (747,300) (77,252)
Exercised - - -
_________ _________
Balances - August 31, 2001 $ 8.93 4,506,241 1,441,490
_________ _________
and 2000:
Weighted- | ||||||
Average Exercise | ||||||
Price Per Share - | Options | |||||
Options Outstanding | Outstanding | |||||
Balances - August 31, 1999 | $16.47 | 2,036,628 | ||||
Granted | 11.40 | 622,000 | ||||
Cancelled or expired | 15.21 | (363,087 | ) | |||
Exercised | -- | -- | ||||
Balances - August 31, 2000 | 15.30 | 2,295,541 | ||||
Granted | 5.26 | 2,958,000 | ||||
Cancelled or expired | 13.95 | (747,300 | ) | |||
Exercised | -- | -- | ||||
Balances - August 31, 2001 | 8.93 | 4,506,241 | ||||
Granted | 6.21 | 133,500 | ||||
Cancelled or expired | 14.10 | (435,306 | ) | |||
Exercised | 5.44 | (10,100 | ) | |||
Balances - August 28, 2002 | $ 8.31 | 4,194,335 | ||||
Balances of Exercisable Options as of: | ||
August 31, 2000 | 524,939 | |
August 31, 2001 | 1,441,490 | |
August 28, 2002 | 2,242,095 | |
Exercise prices for options outstanding as of August 31, 2001,28, 2002, range from $5.00 to $23.13$23.125 per share. The weighted averageweighted-average remaining contractual life of these options is 6.746.1 years. The options exercisable as of August 31, 2001,
excluding 560,000Excluding 1,120,000 executive stock options which havewith an exercise price of $5.00 per share, the exercisable options as of August 28, 2002, have a weighted averageweighted-average exercise price of $16.09$14.12 per share.
Options Outstanding and Exercisable by Price Range
As of August 28, 2002
Options Outstanding | Options Exercisable | |||||||||||||||||||||||||
Weighted- | ||||||||||||||||||||||||||
Number | Average | Weighted- | Number | Weighted- | ||||||||||||||||||||||
Range of | Outstanding | Remaining | Average | Exercisable | Average | |||||||||||||||||||||
Exercise Prices | As of 8/28/02 | Contractual Life | Exercise Price | As of 8/28/02 | Exercise Price | |||||||||||||||||||||
$ | 5.0000 |
| - | $ | 5.0000 |
|
| 2,240,000 |
|
|
| 8.53 |
|
| $ | 5.0000 |
|
| 1,120,000 |
|
| $ | 5.0000 |
| ||
| 5.4375 |
| - |
| 5.5200 |
|
| 425,150 |
|
|
| 4.34 |
|
|
| 5.4469 |
|
| 102,900 |
|
|
| 5.4375 |
| ||
| 6.0000 |
| - |
| 12.0625 |
|
| 511,250 |
|
|
| 4.44 |
|
|
| 9.8347 |
|
| 218,500 |
|
|
| 10.4661 |
| ||
| 13.9375 |
| - |
| 15.3750 |
|
| 308,255 |
|
|
| 2.34 |
|
|
| 14.6679 |
|
| 225,454 |
|
|
| 14.6627 |
| ||
| 15.4375 |
| - |
| 15.4375 |
|
| 480,762 |
|
|
| 2.53 |
|
|
| 15.4375 |
|
| 364,870 |
|
|
| 15.4375 |
| ||
| 15.9375 |
| - |
| 19.1250 |
|
| 181,895 |
|
|
| 1.79 |
|
|
| 18.3417 |
|
| 163,348 |
|
|
| 18.5402 |
| ||
| 20.2500 |
| - |
| 20.2500 |
|
| 10,750 |
|
|
| 4.10 |
|
|
| 20.2500 |
|
| 10,750 |
|
|
| 20.2500 |
| ||
| 21.6250 |
| - |
| 21.6250 |
|
| 10,000 |
|
|
| 3.38 |
|
|
| 21.6250 |
|
| 10,000 |
|
|
| 21.6250 |
| ||
| 22.7500 |
| - |
| 22.7500 |
|
| 14,998 |
|
|
| 2.38 |
|
|
| 22.7500 |
|
| 14,998 |
|
|
| 22.7500 |
| ||
| 23.1250 |
| - |
| 23.1250 |
|
| 11,275 |
|
|
| 0.13 |
|
|
| 23.1250 |
|
| 11,275 |
|
|
| 23.1250 |
| ||
$ | 5.0000 |
| - | $ | 23.1250 |
|
| 4,194,335 |
|
|
| 6.10 |
|
| $ | 8.3110 |
|
| 2,242,095 |
|
| $ | 9.5666 |
| ||
At August 28, 2002, and August 31, 2001, and 2000, the number of incentive stock option shares available to be granted under the plans was 874,810653,561 and 845,510874,810 shares, respectively.
The Company has elected to follow APB 25, "Accounting for Stock Issued to
Employees." Accordingly, since employee stock options, with the exception of
the executive stock options discussed above, are granted at market price on the
date of grant, no compensation expense is recognized. However, SFAS 123
requires presentation of pro forma net income and earnings per share as if the
Company had accounted for its employee stock options granted under the fair
value method of that statement.
The weighted averageweighted-average fair value of the individual options granted during 2002, 2001, 2000, and 19992000 is estimated asat $3.38, $3.16, $1.51, and $3.00,$1.51, respectively, on the date of grant. The impact on net income is minimal; therefore, the pro forma
disclosure requirements of SFAS 123 are not significant to the Company. The fair values were determined using a Black-Scholes option pricing model with the following assumptions:
2002 | 2001 | 2000 | ||||||
Dividend yield | -- | -- | 6.90 | % | ||||
Volatility | .35 | .41 | .22 | |||||
Risk-free interest rate | 3.56 | % | 4.44 | % | 7.00 | % | ||
Expected life | 6.18 | 8.65 | 6.11 | |||||
If the Company had converted to the fair-value method of expensing stock options as alternatively allowed under FAS 123, its net income (loss) would have been $(10.4) million, $(31.6) million, and $8.9 million in fiscal 2002, 2001, and 2000, 1999
____ ____ ____
Dividend yield - 6.90% 5.20%
Volatility .41 .22 .19
Risk-free interest rate 4.44% 7.00% 7.00%
Expected life 8.65 6.11 6.07
Deferred Compensation
respectively. Earnings (loss) per share would have been $(.47), $(1.41), and $.40 for fiscal 2002, 2001, and 2000, respectively.
Supplemental Executive Retirement Plan
The Company has a Supplemental Executive Retirement Plan (SERP) for key executives and officers. The SERP is a "target" benefit plan, with the annual lifetime benefit based upon a percentage of average salary during the final five years of service at age 65, offset by several sources of income including benefits payable under deferred compensation agreements, if applicable, the profit sharing plan, and Social Security. SERP benefits will be paid from the Company's assets. The net expense incurred for this plan for the years ended August 28, 2002, and August 31, 2001 and 2000, was $64,000, $296,000, and 1999, was $296,000, $161,000, and $150,000, respectively, and the unfunded accrued pension liability as of August 28, 2002, and August 31, 2001 2000, and 1999,2000, was approximately $665,000, $622,000, and $692,000, and $564,000,
respectively. The current year expense was partially offset by a net curtailment gain of
$197,000. The gain was recorded due to forfeited benefits for employees who
terminated during the fiscal year.
The Company also has a voluntary 401(k) employee savings plan to provide substantially all salaried and hourly employees of the Company an opportunity to accumulate personal funds for their retirement. These contributions may be made on a before-taxpre-tax basis to the plan. TheIn 2001, the Company matchesbegan matching 25% of the
participant'sparticipants' contributions up to 4% of their salary. The net expense recognized in connection with the participant's salary.
employer match feature of the voluntary 401(k) employee savings plan for the years ended August 28, 2002, and August 31, 2001, was $311,000 and $270,000, respectively.
During 1999, the Company established a nonqualified deferred compensation plan for highly compensated executives allowing deferral of a portion of their annual salary and up to 100% of bonuses before taxes. The Company does not match any deferral amounts and retains ownership of all assets until distributed. The liability under this deferred compensation plan at August 28, 2002, and August 31, 2001, and 2000, was approximately $54,000 and $70,000, and $287,000, respectively.
Profit Sharing
The Company has a profit sharing and retirement trust plan (the Plan) covering substantially all employees who have attained the age of 21 years and have completed one year of continuous service. The Plan is administered by a corporate trustee, is a "qualified plan" under Section 401(a) of the Internal Revenue Code, and provides for the payment of the employee's vested portion of the Plan upon retirement, termination, disability, or death. The Plan has been funded by contributions of a portion of the net earnings of the Company. The Plan was amended effective August 31, 2001, to make all contributions discretionary. The Company'sNo annual contributioncontributions to the Plan amountedwere made in fiscal 2002 or 2001, while $700,000 was contributed in fiscal 2000.
Note 12. Derivative Financial Instruments
The Company adopted Statement of Financial Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative Instruments and Hedging Activities," and its amendments, Statement Nos. 137 and 138, on September 1, 2000. SFAS 133 requires that all derivative instruments be recorded on the balance sheet at fair value. Pursuant to $0,
$700,000, and $1,700,000, for 2001, 2000, and 1999, respectively.
8. Related Parties
A directorthis Standard, the Company designated its Interest Rate Protection Agreements (Swaps) as cash flow hedge instruments. Swaps have been used to manage exposure to interest rate movement by effectively changing the variable rate to a fixed rate. The critical terms of the Swaps and the interest-bearing debt associated with the Swaps were the same; therefore, the Company assumed that there was no ineffectiveness in the hedge relationship. Due to declining interest rates and in anticipation of additional future unfavorable interest rate changes, the Company terminated the Swaps on July 2, 2001, for a cash payment of $1.3 million, including accrued interest of $163,000. Changes in fair value of the Swaps were recognized in other comprehensive income (loss), net of tax effects, until the hedged items were recognized in earnings.
In accordance with SFAS 133, the loss of $1.1 million was recognized as interest expense over the original term of the Swaps (through June 30, 2002). At August 28, 2002, there was no balance in accumulated other comprehensive loss.
Note 13. Related Parties
Profit Sharing and Retirement Trust Plan Investment Advisors
Austin, Calvert & Flavin, Inc. is also a director of an investment firm that provides investment services for the Company's profit sharing and retirement trust plan (the Plan). DuringEffective October 25, 2002, Ronald K. Calgaard, a director of Austin, Calvert & Flavin, Inc., resigned from his position as a member of Luby's Board of Directors. Mr. Calgaard had previously resigned his position as Chairman of the year ended August 31, 2001,Finance and Audit Committee of Luby's board on September 23, 2002.
The Company currently uses the services of four investment advisors for its profit sharing and retirement trust plan. The Plan paid the
investment firmAustin, Calvert & Flavin, Inc. approximately $60,000, $74,000, for its services.
and $100,000 in fiscal 2002, 2001, and 2000, respectively.
Affiliate Services
The recently hired CEO and COO of the Company, Christopher J. Pappas and Harris J. Pappas, respectively, own atwo restaurant companyentities that providesprovide services to Luby's, Inc. as detailed in the Company. The services includeAffiliate Services Agreement and the Master Sales Agreement. Under the terms of the agreements, the Pappas entities have provided specialized equipment fabrication; warehouse leasing; basic equipment maintenance; and accounting, architectural, and general business consulting, basicservices. The scope and pricing of services rendered under the agreements are reviewed periodically by the Finance and Audit Committee of the Company's Board. The Committee uses the services of the Company's external auditors and independent valuation consultants to monitor the transactions associated with the agreement.
As part of the affiliated relationship, the Company entered into a three-year lease which commenced on June 1, 2001, and ends May 31, 2004. The amount paid by the Company pursuant to the terms of this lease was approximately $78,000 for the year ended August 28, 2002. The agreement also includes the costs incurred for modifications to existing equipment, maintenance, specialized equipment fabrication,as well as custom-fabrication, including stainless steel stoves, shelving, rolling carts, and warehousing support.chef tables. The total cost of these servicesthe custom-fabricated and refurbished equipment for fiscal 2002 was $506,000. All amounts charged under the agreements were paid in fiscal 2002 except for the most recent expenditures of approximately $104,000, which were paid in the first quarter of fiscal 2003.
Operating Lease
In a separate contract from the Affiliate Services Agreement, pursuant to the terms of a ground lease dated March 25, 1994, the Company paid rent to PHCG Investments for a Luby's restaurant operating in Dallas, Texas. Christopher J. Pappas and Harris J. Pappas are general partners of PHCG Investments. The amount paid by the Company to PHCG Investments pursuant to the terms of the lease agreement during fiscal year 2002 was approximately $85,000. Rents paid for both the ground lease and the Affiliate Services Agreement lease combined represent 2.2% of total rents paid by the Company for the year ended August 31, 2001, was $271,000. All costs28, 2002.
The Company has entered into a Lease Termination Agreement, with a third party unaffiliated with the Pappas entities, to date were incurredsever its interest in the leased property in exchange for a payment of cash, obtain the right to remove fixtures and equipment from the premises, and finalize the release of any future obligations under the lease agreement now owned by PHCG Investments. The closing of the transaction is conditioned upon the third and
fourth quarters afterparty acquiring fee simple title to the chief officers were hired.
Theproperty from PHCG Investments.
Subordinated Debt
As described in Note 6 of the Notes to Consolidated Financial Statements in the section entitled "Subordinated Debt," the CEO and the COO loaned the Company a total of $10 million in the form of convertible subordinated notes to support the Company's future dailyoperating cash needs. The entire balance was outstanding as of August 31, 2001.
The recently hired CFO and the Senior Vice President-Administration provide
financial and legal services28, 2002.
Board of Directors
Pursuant to the restaurant companyterms of a separate Purchase Agreement dated March 9, 2001, entered into by and among the Company, Christopher J. Pappas and Harris J. Pappas, the Company agreed to submit three persons designated by Christopher J. Pappas and Harris J. Pappas as nominees for election for directors. Messrs. Pappas designated themselves and Frank Markantonis as their nominees for directors, all of whom were subsequently elected. Christopher J. Pappas and Harris J. Pappas are brothers. As disclosed in the proxy statement for the January 11, 2002, annual meeting of shareholders, Frank Markantonis is an attorney whose principal client is Pappas Restaurants, Inc., an entity owned by Harris J. Pappas and Christopher J. Pappas.
Key Management Personnel
Ernest Pekmezaris, the CEO and the
COOChief Financial Officer of the Company; compensationCompany, is also the Treasurer of Pappas Restaurants, Inc. Compensation for the services provided by the CFO andMr. Pekmezaris to Pappas Restaurants, Inc. is paid entirely by that entity.
Peter Tropoli, the Senior Vice President-Administration to the separate restaurant company are
funded by that organization.
9. Income Taxes
The tax effect of temporary differences results in deferred income tax assets
and liabilities as of August 31 as follows:
2001 2000
________ _________
(Thousands of dollars)
Deferred tax assets:
Workers' compensation insurance $ 4,613 $ 1,540
Deferred compensation 1,482 722
Asset impairments and store closure reserves 21,108 14,074
Other 318 -
_______ _______
Total deferred tax assets 27,521 16,336
Deferred tax liabilities:
Amortization of capitalized interest 484 641
Depreciation and amortization 22,023 20,477
Other 502 1,646
_______ _______
Total deferred tax liabilities 23,009 22,764
_______ _______
Net deferred tax asset (liability) $ 4,512 $(6,428)
_______ _______
The reconciliation of the (benefit) provision for income taxes to the expected
income tax (benefit) expense (computed using the statutory tax rate) is as
follows:
2001 2000 1999
____ ____ ____
Amount % Amount % Amount %
______ ____ _______ ____ _______ ____
(Thousands of dollars and as a percent of pretax income)
Normally expected
income tax
(benefit) expense $(17,073) (35.0)% $4,697 35.0% $15,219 35.0%
State income taxes 125 .3 163 1.2 156 .4
Jobs tax credits (381) (.8) (152) (1.1) (155) (.4)
Other differences 431 .9 (412) (3.1) (349) (.8)
______ ____ _______ ____ _______ ____
$(16,898) (34.6)% $4,296 32.0% $14,871 34.2%
______ ____ _______ ____ _______ ____
Cash payments for state and federal income taxes for 2001, 2000, and 1999 were
$92,000, $8,659,000 and $13,245,000, respectively.
10. Commitments and Contingencies
The Company has guaranteed loan balances outstanding at August 31, 2001, of
$1,651,000 relating to purchases of Company stock made by officers of the Company, underis an officer loan program. Under the program, officers purchased
shares; funding, if necessary, was obtained from an unrelated third party.
The Company is presently, andattorney who, from time to time, subjecthas provided litigation services to pending claimsentities controlled by Christopher J. Pappas and lawsuits arising inHarris J. Pappas. Mr. Tropoli is the ordinary coursestepson of business. InFrank Markantonis, who, as previously mentioned, is a director of the opinionCompany.
Paulette Gerukos, Administration Assistant of management, resolutionthe Human Resources Department of these pending legal proceedings will not have a
material adverse effect on the Company's operations or consolidated financial
position.
At August 31, 2001, surety bonds inCompany, is the amountsister-in-law of $10,115,000 have been issued
as security forHarris J. Pappas, the payment of insurance obligations classified as accrued
expenses on the balance sheet.
11.Chief Operating Officer.
Note 14. Common Stock
In 1991, the Board of Directors adopted a Shareholder Rights Plan and declared a dividend of one common stock purchase right for each outstanding share of common stock. The rights are not initially exercisable. The Company amended the Shareholder Rights Plan effective March 8, 2001. The rights may become exercisable under circumstances described in the plan if any person or group becomes the beneficial owner of 15% or more of the common stock or announces a tender or exchange offer, the completion of which would result in the ownership by a person or group of 15% or more of the common stock (either, an Acquiring Person). Once the rights become exercisable, each right will be exercisable to purchase, for $27.50 (the Purchase Price), one-half of one share of common stock, par value $.32 per share, of the Company. If any person becomes an Acquiring Person, each right will entitle the holder, other than the Acquiring Person, to purchasepurch ase for the Purchase Price a number of shares of the Company's common stock having a market value of four times the Purchase Price.
In connection with the employment of Christopher J. Pappas, the Company's President and Chief Executive Officer, and Harris J. Pappas, the Company's Chief Operating Officer, the Shareholder Rights Plan was amended to exempt from the operation of the plan Messrs. Pappas' ownership of the Company,Company's common stock, which was acquired prior to March 8, 2001 (and certain additional shares permitted to be acquired) and certain shares of common stock which may be acquired in connection with options issued on the date of their employment and the convertible notes subsequently purchased from the Company.
The Board of Directors periodically authorizes the purchase in the open market of shares of the Company's outstanding common stock. Under such authorizations, the Company purchased 850,300 shares of its common stock at a cost of $12,919,000 in 1999, which are being held as treasury stock.
Common stock is reserved for approximately 4,506,000 shares4,194,000 for issuance upon the exercise of outstanding stock options and 2,000,0002.0 million shares for issuance upon the conversion of subordinated notes. In the second quarter of fiscal year 2001, in accordance with the nonemployee
director phantom stock plan, the Company distributed 2,568 shares of treasury
stock to a retiring Board member.
12.
Note 15. Per Share Information
A reconciliation of the numerators and denominators of basic earnings per share and earnings per share assuming dilution is shown in the table below: August 31,
2001 2000 1999
____ ____ ____
(Thousands of dollars except per share data)
Numerator:
Net income (loss) $(31,881) $ 9,125 $28,613
________ _______ _______
Effect of dilutive securities:
Interest on convertible
subordinated notes 194 - -
________ _______ _______
Numerator for net income (loss)
per common share - diluted $(31,687) $ 9,125 $28,613
Denominator for basic earnings
per share -
weighted average shares 22,422 22,420 22,614
Effect of dilutive securities:
Employee stock options 96 2 23
Convertible subordinated notes 312 - -
________ _______ _______
Denominator for earnings
per share - assuming
dilution - adjusted
weighted average shares 22,830 22,422 22,637
________ _______ _______
Net income (loss) per share - basic $ (1.42) $ 0.41 $ 1.27
________ _______ _______
Net income (loss) per share -
assuming dilution(a) $ (1.42) $ 0.41 $ 1.26
________ _______ _______
August 28, | August 31, | August 31, | |||||||||
2002 | 2001 | 2000 | |||||||||
(In thousands) | |||||||||||
Numerator: | |||||||||||
Net income (loss) | $ | (9,653 | ) | $ | (31,881 | ) | $ | 9,125 | |||
Effect of potentially dilutive securities: | |||||||||||
Interest on convertible | |||||||||||
subordinated notes | 585 | 194 | -- | ||||||||
Numerator for net income (loss) | |||||||||||
per common share-- diluted | $ | (9,068 | ) | $ | (31,687 | ) | $ | 9,125 | |||
Denominator for basic | |||||||||||
earnings per share-- | |||||||||||
weighted-average shares | 22,428 | 22,422 | 22,420 | ||||||||
Effect of potentially dilutive securities: | |||||||||||
Employee stock options | 165 | 96 | 2 | ||||||||
Convertible subordinated notes | 2,000 | 312 | -- | ||||||||
Denominator for earnings per share-- | |||||||||||
assuming dilution-- adjusted | |||||||||||
weighted-average shares | 24,593 | 22,830 | 22,422 | ||||||||
Net income (loss) per share-- | |||||||||||
basic | $ | (0.43 | ) | $ | (1.42 | ) | $ | 0.41 | |||
Net income (loss) per share-- | |||||||||||
assuming dilution(a) | $ | (0.43 | ) | $ | (1.42 | ) | $ | 0.41 | |||
(a) As the Company had a net loss for the yearyears ended August 28, 2002, and August 31, 2001, earnings per share assuming dilution equals basic earnings per share assince potentially dilutive securities are antidilutive in loss periods. 13. Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities at August 31 consist of:
2001 2000
_______ _______
(Thousands of dollars)
Salaries and bonuses $ 6,017 $ 7,467
Rent 453 537
Taxes, other than income 10,124 6,115
Profit sharing plan - 702
Workers' compensation and
general liability insurance 16,199 7,112
Other 1,792 2,107
_______ _______
$34,585 $24,040
_______ _______
14.
Note 16. Quarterly Financial Information (Unaudited)
The following is a summary of quarterly unaudited financial information for 20012002 and 2000:
Three Months Ended
__________________
November 30, February 28, May 31, August 31,
2000 2001 2001 2001
________ ________ ________ _________
(Thousands2001:
Quarter Ended August 28, May 8, February 13, November 21, 2002 2002 2002 2001 (112 days) (84 days) (84 days) (82 days) (In thousands except per share data) Sales $ 119,543 $ 93,070 $ 91,257 $ 95,195 Gross profits 48,600 40,771 38,387 35,953 Net income (loss) (1,971 ) (174 ) (2,163 ) (5,345 ) Net income (loss) per share $ (.09 ) $ (.01 ) $ (.09 ) $ (.24 ) Quarter Ended August 31, May 31, February 28, November 30, 2001 2001 2001 2000 (92 days) (92 days) (90 days) (91 days) (In thousands except per share data) Sales $ 119,365 $ 121,677 $ 112,219 $ 113,900 Gross profits 41,676 50,118 45,859 45,330 Net income (loss) (19,383 )* (1,066 ) (9,424 )* (2,008 ) Net income (loss) per share $ (.86 )* $ (.05 ) $ (.42 )* $ (.09 )
*See Note 7 of dollars except per share data)
Sales $113,900 $112,219 $121,677 $119,365
Gross profit 45,330 45,859 50,118 41,676
Net income (loss) (2,008) (9,424)* (1,066) (19,383)*
Net income (loss) per share (.09) (.42)* (.05) (.86)*
Three Months Ended
__________________
November 30, February 29, May 31, August 31,
1999 2000 2000 2000
________ ________ ________ _________
(Thousands of dollars except per share data)
Sales $123,144 $121,924 $126,281 $122,035
Gross profit 54,219 54,417 54,071 49,741
Net income (loss) 6,171 5,617 5,835 (8,498)*
Net income (loss) per share .28 .25 .26 (.38)*
*Seethe Notes 2 and 4to Consolidated Financial Statements for discussion of impairment charges recorded during the second quarter
of 2001 and the fourth quarters of 2001 and 2000.
fiscal year 2001.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Disclosure
None.
PART III
Part III |
Item 10. Directors and Executive Officers of the Registrant.
Registrant
There is incorporated in this Item 10 by reference that portion of the Company's definitive proxy statement for the 20022003 annual meeting of shareholders appearing therein under the captions "Election of Directors," "Information Concerning Directors and Committees," and "Certain Relationships and Related Transactions.Transactions," and "Section 16(a) Ownership Reporting Compliance." See also the information in Item 4A of Part I of this Report.
Item 11. Executive Compensation.
Compensation
There is incorporated in this Item 11 by reference that portion of the Company's definitive proxy statement for the 20022003 annual meeting of shareholders appearing therein under the captions "Compensation of Directors," "Personnel and Administrative Policy Committee Report," "Executive Compensation," "Deferred Compensation," and "Certain Relationships and Related Transactions."
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Management
There is incorporated in this Item 12 by reference that portion of the Company's definitive proxy statement for the 20022003 annual meeting of shareholders appearing therein under the captions "Principal Shareholders"
and "Management Shareholders""Ownership of Equity Securities in the Company" and "Principal Shareholders."
Securities authorized under equity compensation plans as of August 28, 2002, were as follows:
|
| (a) |
| (b) |
| (c) | ||||||
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation plans approved by security holders |
|
|
|
|
|
|
|
|
| 653,561 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation plans not approved by security holders |
|
| 2,322,630 |
|
|
| 5.10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
| 4,276,965 |
|
| $ | 8.30 |
|
| 653,561 |
|
|
Item 13. Certain Relationships and Related Transactions.
Transactions
There is incorporated in this Item 13 by reference that portion of the Company's definitive proxy statement for the 20022003 annual meeting of Shareholdersshareholders appearing therein under the caption "Certain Relationships and Related Transactions." PART IV
Part IV |
Item 14. Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the Company's management, including its President and CEO and its CFO, as appropriate, to allow timely decisions regarding required disclosure. Management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures which, by their nature, can provide only reasonable assurance regarding management's control objectives.
During the 90 days prior to November 26, 2002, the Company carried out an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. The Company's President and CEO and the CFO participated and provided input into this process. Based upon the foregoing, these senior officers concluded that the Company's disclosure controls and procedures are effective in timely alerting them to material information relating to the Company required to be included in the Company's Exchange Act reports.
There have been no significant changes in the Company's internal controls or in other factors which could significantly affect internal controls subsequent to the date the President and CEO and the CFO carried out their evaluation.
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
8-K
(a) Documents.
Documents
1. Financial Statements
The following financial statements are filed as part of this Report:
Consolidated balance sheets at August 28, 2002, and August 31, 2001 and 2000
Consolidated statements of operations for each of the three years in the period ended August 31, 200128, 2002
Consolidated statements of shareholders' equity for each of the three years in the period ended August 31, 200128, 2002
Consolidated statements of cash flows for each of the three years in the period ended August 31, 200128, 2002
Notes to consolidated financial statements
Report of independent auditors
2. Financial Statement Schedules
All schedules are omitted since the required information is not present or is not present in amounts sufficient to
require submission of the schedule or because the information required is included in the financial statements and
notes thereto.
3. Exhibits
The following exhibits are filed as a part of this Report: 3(a)
3(a) | Certificate of Incorporation of Luby's, Inc. | |
3(b) | Bylaws of Luby's, Inc. as currently in effect (filed as Exhibit 3(c) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1998, and incorporated herein by reference). | |
4(a) | Description of Common Stock Purchase Rights of Luby's Cafeterias, Inc., in Form 8-A (filed April 17, 1991, effective April 26, 1991, File No. 1-8308, and incorporated herein by reference). | |
4(b) | Amendment No. 1 dated December 19, 1991, to Rights Agreement dated April 16, 1991 (filed as Exhibit 4(b) to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 1991, and incorporated herein by reference). | |
4(c) | Amendment No. 2 dated February 7, 1995, to Rights Agreement dated April 16, 1991 (filed as Exhibit 4(d) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1995, and incorporated herein by reference). | |
4(d) | Amendment No. 3 dated May 29, 1995, to Rights Agreement dated April 16, 1991 (filed as Exhibit 4(d) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 1995, and incorporated herein by reference). | |
4(e) | Amendment No. 4 dated March 8, 2001, to Rights Agreement dated April 16, 1991 (filed as Exhibit 99.1 to the Company's Report on Form 8-A12B/A on March 22, 2001, and incorporated herein by reference). | |
4(f) | Credit Agreement dated February 27, 1996, among Luby's Cafeterias, Inc., Certain Lenders, and NationsBank of Texas, N.A. (filed as Exhibit 4(e) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 29, 1996, and incorporated herein by reference). | |
4(g) | First Amendment to Credit Agreement dated January 24, 1997, among Luby's Cafeterias, Inc., Certain Lenders, and NationsBank of Texas, N.A. (filed as Exhibit 4(f) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1997, and incorporated herein by reference). | |
4(j) | Second Amendment to Credit Agreement dated July 3, 1997, among Luby's Cafeterias, Inc., Certain Lenders, and NationsBank of Texas, N.A. (filed as Exhibit 4(i) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1997, and incorporated herein by reference). | |
4(k) | Third Amendment to Credit Agreement dated October 27, 2000, among Luby's, Inc., Certain Lenders, and Bank of America, N.A. (filed as Exhibit 4(j) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2000, and incorporated herein by reference). | |
4(l) | Fourth Amendment to Credit Agreement dated July 9, 2001, among Luby's, Inc., Bank of America, N.A. and other creditors of its bank group (filed as Exhibit 4(l) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 2001, and incorporated herein by reference). | |
4(m) | Deed of Trust, Assignment, Security Agreement, and Financing Statement dated July 2001, executed as part of the Fourth Amended to Credit Agreement (filed as Exhibit 4(m) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 2001, and incorporated herein by reference). | |
4(n) | Subordination and Intercreditor Agreement dated June 29, 2001, between Harris J. Pappas and Christopher J. Pappas, Bank of America, N.A. Agreement [as the bank group agent], and Luby's, Inc. (filed as Exhibit 4(n) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 2001, and incorporated herein by reference). | |
4(o) | Convertible Subordinated Promissory Note dated June 29, 2001, between Christopher J. Pappas and Luby's, Inc. in the amount of $1,500,000 (filed as Exhibit 4(o) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 2001, and incorporated herein by reference). | |
4(p) | Convertible Subordinated Promissory Note dated June 29, 2001, between Harris J. Pappas and Luby's, Inc. in the amount of $1,500,000 (filed as Exhibit 4(p) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 2001, and incorporated herein by reference). | |
4(q) | Convertible Subordinated Promissory Note dated June 29, 2001, between Christopher J. Pappas and Luby's, Inc. in the amount of $3,500,000 (filed as Exhibit 4(q) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 2001, and incorporated herein by reference). | |
4(r) | Convertible Subordinated Promissory Note dated June 29, 2001, between Harris J. Pappas and Luby's, Inc. in the amount of $3,500,000 (filed as Exhibit 4(r) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 2001, and incorporated herein by reference). | |
4(s) | Fifth Amendment to Credit Agreement dated December 5, 2001, among Luby's, Inc., Bank of America, N.A. and other creditors of its bank group (filed as Exhibit 4(s) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2001, and incorporated herein by reference). | |
4(t) | Sixth Amendment to Credit Agreement dated November 25, 2002, by and among Luby's, Inc., Bank of America, N.A. and other creditors of its bank group. | |
10(c) | Management Incentive Stock Plan of Luby's Cafeterias, Inc. (filed as Exhibit 10(i) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1989, and incorporated herein by reference).* | |
10(d) | Amendment to Management Incentive Stock Plan of Luby's Cafeterias, Inc. adopted January 14, 1997 (filed as Exhibit 10(k) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1997, and incorporated herein by reference).* | |
10(e) | Nonemployee Director Deferred Compensation Plan of Luby's Cafeterias, Inc. adopted October 27, 1994 (filed as Exhibit 10(g) to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 1994, and incorporated herein by reference).* | |
10(f) | Amendment to Nonemployee Director Deferred Compensation Plan of Luby's Cafeterias, Inc. adopted January 14, 1997 (filed as Exhibit 10(m) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1997, and incorporated herein by reference).* | |
10(g) | Amendment to Nonemployee Director Deferred Compensation Plan of Luby's Cafeterias, Inc. adopted March 19, 1998 (filed as Exhibit 10(o) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1998, and incorporated herein by reference).* | |
10(h) | Amended and Restated Nonemployee Director Stock Option Plan of Luby's, Inc. approved by the shareholders of Luby's, Inc. on January 14, 2000 (filed as Exhibit 10(j) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 29, 2000, and incorporated herein by reference).* | |
10(i) | Luby's Cafeterias, Inc. Supplemental Executive Retirement Plan dated May 30, 1996 (filed as Exhibit 10(j) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1996, and incorporated herein by reference).* | |
10(j) | Amendment to Luby's Cafeterias, Inc. Supplemental Executive Retirement Plan adopted January 14, 1997 (filed as Exhibit 10(r) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1997, and incorporated herein by reference).* | |
10(k) | Amendment to Luby's Cafeterias, Inc. Supplemental Executive Retirement Plan adopted January 9, 1998 (filed as Exhibit 10(u) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1998, and incorporated herein by reference).* | |
10(l) | Amendment to Luby's Cafeterias, Inc. Supplemental Executive Retirement Plan adopted May 21, 1999 (filed as Exhibit 10(q) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 1999, and incorporated herein by reference.)* | |
10(m) | Severance Agreement between Luby's, Inc. and Barry J.C. Parker dated December 19, 2000 (filed as Exhibit 10(r) to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 2000, and incorporated herein by reference.)* | |
10(o) | Luby's Incentive Stock Plan adopted October 16, 1998 (filed as Exhibit 10(cc) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1998, and incorporated herein by reference).* | |
10(p) | Form of Change in Control Agreement entered into between Luby's, Inc. and each of its Senior Vice Presidents as of January 8, 1999 (filed as Exhibit 10(aa) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1999, and incorporated herein by reference).* | |
10(q) | Luby's, Inc. Deferred Compensation Plan effective June 1, 1999 (filed as Exhibit 10(cc) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 1999, and incorporated herein by reference).* | |
10(r) | Registration Rights Agreement dated March 9, 2001, by and among Luby's, Inc., Christopher J. Pappas, and Harris J. Pappas (filed as Exhibit 10.4 to the Company's Current Report on Form 8-K dated March 9, 2001, and incorporated herein by reference). | |
10(s) | Purchase Agreement dated March 9, 2001, by and among Luby's, Inc. Harris J. Pappas, and Christopher J. Pappas (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K dated March 9, 2001, and incorporated herein by reference). | |
10(t) | Employment Agreement dated March 9, 2001, between Luby's, Inc. and Christopher J. Pappas (filed as Exhibit 10.2 to the Company's Current Report on Form 8-K dated March 9, 2001, and incorporated herein by reference).* | |
10(u) | Employment Agreement dated March 9, 2001, between Luby's, Inc. and Harris J. Pappas (filed as Exhibit 10.3 to the Company's Current Report on Form 8-K dated March 9, 2001, and incorporated herein by reference).* | |
10(v) | Luby's, Inc. Incentive Bonus Plan for Fiscal 2001 (filed as Exhibit 10(z) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2000, and incorporated herein by reference).* | |
10(w) | Luby's, Inc. Stock Option granted to Christopher J. Pappas on March 9, 2001 (filed as Exhibit 10(w) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 2001, and incorporated herein by reference).* | |
10(x) | Luby's, Inc. Stock Option granted to Harris J. Pappas on March 9, 2001 (filed as Exhibit 10(x) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 2001, and incorporated herein by reference).* | |
10(y) | Affiliate Services Agreement dated August 31, 2001, by and among Luby's, Inc., Christopher J. Pappas, Harris J. Pappas, Pappas Restaurants, L.P., and Pappas Restaurants, Inc. (filed as Exhibit 10(y) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2001, refiled as Exhibit 10(y) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 13, 2002, to include signature reference and an exhibit that were inadvertently omitted, and incorporated herein by reference). | |
10(z) | Ground Lease for a cafeteria site dated March 25, 1994, by and between Luby's Cafeterias, Inc. and PHCG Investments, as amended by Lease Amendment dated July 6, 1994 (filed as Exhibit 10(z) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2001, and incorporated herein by reference). | |
10(aa) | Lease Agreement for dated June 1, 2001, by and between Luby's, Inc. and Pappas Restaurants, Inc. (filed as Exhibit 10(aa) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2001, and incorporated herein by reference). | |
10(bb) | Final Severance Agreement and Release between Luby's, Inc. and Alan M. Davis dated July 20, 2001 (filed as Exhibit 10(bb) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2001, and incorporated herein by reference). While in search for new executive management, the Company entered into an employment agreement with Mr. Davis in January 2001. The value of that one-year contract was a year's salary upon termination. After new management was secured, the Company finalized the exhibited agreement that provides for the payment of monthly consulting fees to Mr. Davis until July 2002, but releases the Company from all prior employment commitments.* | |
10(cc) | Consultant Agreement between Luby's Restaurants Limited Partnership and Alan M. Davis dated July 20, 2001 (filed as Exhibit 10(cc) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2001, and incorporated herein by reference).* | |
10(dd) | Luby's, Inc. Amended and Restated Nonemployee Director Phantom Stock Plan effective September 28, 2001 (filed as Exhibit 10(dd) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 13, 2002, and incorporated herein by reference).* | |
10(ee) | Final Severance Agreement and Release between Luby's, Inc. and S. Darrell Wood effective July 28, 2002.* | |
10(ff) | Consultant Agreement dated August 30, 2002, between Luby's Restaurants Limited Partnership and S. Darrell Wood.* | |
10(gg) | Form of Indemnification Agreement entered into between Luby's, Inc. and each member of its Board of Directors initially dated July 23, 2002. | |
10(hh) | Amended and Restated Affiliate Services Agreement dated July 23, 2002, by and among Luby's, Inc., Pappas Restaurants, L.P., and Pappas Restaurants, Inc. | |
10(ii) | Master Sales Agreement dated July 23, 2002, by and among Luby's, Inc., Pappas Restaurants, L.P., and Pappas Restaurants, Inc. and Procedure adopted by the Finance and Audit Committee of the Board of Directors on July 23, 2002, pursuant to Section 2.3 of the Master Sales Agreement. | |
11 | Statement re computation of per share earnings. | |
21 | Subsidiaries of Luby's, Inc. (filed as Exhibit 21 to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2001, and incorporated herein by reference). | |
99(a) | Corporate Governance Guidelines of Luby's, Inc., as amended October 25, 2001 (filed as Exhibit 99(a) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 13, 2002, and incorporated herein by reference). | |
99(b) | Consent of Ernst & Young LLP. | |
*
10(b) Form of Amendment to Deferred Compensation Agreement between Luby's
Cafeterias, Inc. and various officers and former officers adopted
January 14, 1997 (filed as Exhibit 10(b) to the Company's Quarterly
Report on Form 10-Q for the quarter ended February 28, 1997, and
incorporated herein by reference).*
10(c) Management Incentive Stock Plan of Luby's Cafeterias, Inc. (filed as
Exhibit 10(i) to the Company's Annual Report on Form 10-K for the
fiscal year ended August 31, 1989, and incorporated herein by
reference).*
10(d) Amendment to Management Incentive Stock Plan of Luby's Cafeterias,
Inc. adopted January 14, 1997 (filed as Exhibit 10(k) to the Company's
Quarterly Report on Form 10-Q for the quarter ended February 28, 1997,
and incorporated herein by reference).*
10(e) Nonemployee Director Deferred Compensation Plan of Luby's Cafeterias,
Inc. adopted October 27, 1994 (filed as Exhibit 10(g) to the Company's
Quarterly Report on Form 10-Q for the quarter ended November 30, 1994,
and incorporated herein by reference).*
10(f) Amendment to Nonemployee Director Deferred Compensation Plan of Luby's
Cafeterias, Inc. adopted January 14, 1997 (filed as Exhibit 10(m) to
the Company's Quarterly Report on Form 10-Q for the quarter ended
February 28, 1997, and incorporated herein by reference).*
10(g) Amendment to Nonemployee Director Deferred Compensation Plan of Luby's
Cafeterias, Inc. adopted March 19, 1998 (filed as Exhibit 10(o) to the
Company's Quarterly Report on Form 10-Q for the quarter ended
February 28, 1998, and incorporated herein by reference).*
10(h) Amended and Restated Nonemployee Director Stock Option Plan of Luby's,
Inc. approved by the shareholders of Luby's, Inc. on January 14, 2000
(filed as Exhibit 10(j) to the Company's Quarterly Report on Form 10-Q
for the quarter ended February 29, 2000, and incorporated herein by
reference).*
10(i) Luby's Cafeterias, Inc. Supplemental Executive Retirement Plan dated
May 30, 1996 (filed as Exhibit 10(j) to the Company's Annual Report on
Form 10-K for the fiscal year ended August 31, 1996, and incorporated
herein by reference).*
10(j) Amendment to Luby's Cafeterias, Inc. Supplemental Executive Retirement
Plan adopted January 14, 1997 (filed as Exhibit 10(r) to the Company's
Quarterly Report on Form 10-Q for the quarter ended February 28, 1997,
and incorporated herein by reference).*
10(k) Amendment to Luby's Cafeterias, Inc. Supplemental Executive Retirement
Plan adopted January 9, 1998 (filed as Exhibit 10(u) to the Company's
Quarterly Report on Form 10-Q for the quarter ended February 28, 1998,
and incorporated herein by reference).*
10(l) Amendment to Luby's Cafeterias, Inc. Supplemental Executive Retirement
Plan adopted May 21, 1999 (filed as Exhibit 10(q) to the Company's
Quarterly Report on Form 10-Q for the quarter ended May 31, 1999, and
incorporated herein by reference.)*
10(m) Severance Agreement between Luby's, Inc. and Barry J.C. Parker dated
December 19, 2000 (filed as Exhibit 10(r) to the Company's Quarterly
Report on Form 10-Q for the quarter ended November 30, 2000, and
incorporated herein by reference.)*
10(n) Luby's Cafeterias, Inc. Nonemployee Director Phantom Stock Plan
adopted March 19, 1998 (filed as Exhibit 10(aa) to the Company's
Quarterly Report on Form 10-Q for the quarter ended February 28, 1998,
and incorporated herein by reference).*
10(o) Luby's Incentive Stock Plan adopted October 16, 1998 (filed as Exhibit
10(cc) to the Company's Annual Report on Form 10-K for the fiscal year
ended August 31, 1998, and incorporated herein by reference).*
10(p) Form of Change in Control Agreement entered into between Luby's, Inc.,
and each of its Senior Vice Presidents as of January 8, 1999 (filed as
Exhibit 10(aa) to the Company's Quarterly Report on Form 10-Q for the
quarter ended February 28, 1999, and incorporated herein by
reference).*
10(q) Luby's, Inc. Deferred Compensation Plan effective June 1, 1999 (filed
as Exhibit 10(cc) to the Company's Quarterly Report on Form 10-Q for
the quarter ended May 31, 1999, and incorporated herein by
reference).*
10(r) Registration Rights Agreement dated March 9, 2001, by and among
Luby's, Inc., Christopher J. Pappas, and Harris J. Pappas (filed as
Exhibit 10.4 to the Company's Current Report on Form 8-K dated
March 9, 2001, and incorporated herein by reference).
10(s) Purchase Agreement dated March 9, 2001, by and among Luby's, Inc.
Harris J. Pappas, and Christopher J. Pappas (filed as Exhibit 10.1 to
the Company's Current Report on Form 8-K dated March 9, 2001, and
incorporated herein by reference).
10(t) Employment Agreement dated March 9, 2001, between Luby's, Inc. and
Christopher J. Pappas (filed as Exhibit 10.2 to the Company's Current
Report on Form 8-K dated March 9, 2001, and incorporated herein by
reference).*
10(u) Employment Agreement dated March 9, 2001, between Luby's, Inc. and
Harris J. Pappas (filed as Exhibit 10.3 to the Company's Current
Report on Form 8-K dated March 9, 2001, and incorporated herein by
reference).*
10(v) Luby's, Inc. Incentive Bonus Plan for Fiscal 2001 (filed as Exhibit
10(z) to the Company's Annual Report on Form 10-K for the fiscal year
ended August 31, 2000, and incorporated herein by reference).*
10(w) Luby's, Inc. Stock Option granted to Christopher J. Pappas on March 9,
2001 (filed as Exhibit 10(w) to the Company's Quarterly Report on Form
10-Q for the quarter ended May 31, 2001 and incorporated herein by
reference).*
10(x) Luby's, Inc. Stock Option granted to Harris J. Pappas on March 9, 2001
(filed as Exhibit 10(x) to the Company's Quarterly Report on Form 10-Q
for the quarter ended May 31, 2001 and incorporated herein by
reference).*
10(y) Affiliate Services Agreement dated August 31, 2001, by and among
Luby's, Inc., Christopher J. Pappas, Harris J. Pappas, Pappas
Restaurants, L.P., and Pappas Restaurants, Inc.
10(Z) Ground Lease dated March 25, 1994, by and between Luby's Cafeterias,
Inc. and PHCG Investments, as amended by Lease Amendment dated July 6,
1994.
10(aa) Lease Agreement dated June 1, 2001, by and between Luby's, Inc. and
Pappas Restaurants, Inc.
10(bb) Final Severance Agreement and Release between Luby's, Inc. and Alan M.
Davis dated July 20, 2001.*
10(cc) Consultant Agreement between Luby's Restaurants Limited Partnership and
Alan M. Davis dated July 20, 2001.*
11 Statement re computation of per share earnings.
13 Luby's, Inc. 2001 annual report to shareholders (furnished for the
information of the Commission and not deemed to be "filed" except for
those portions expressly incorporated by reference).
21 Subsidiaries of Luby's, Inc. (filed as Exhibit 21 to the Company's
Annual Report on Form 10-K for the fiscal year ended August 31, 2001,
and incorporated herein by reference).
99(a) Corporate Governance Guidelines of Luby's, Inc., as amended
July 26, 2001.
99(b) Consent of Ernst & Young LLP.
*DenotesDenotes management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed during the last quarter of the period covered by this Report.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: December 5, 2001 LUBY'S, INC.
(Registrant)
November 25, 2002 | LUBY'S, INC. | |
Date | (Registrant) |
By: /s/ CHRISTOPHER J. PAPPAS
____________________________
/s/Christopher J. Pappas President
and Chief Executive Officer
Christopher J. Pappas |
President and Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature and Date Name and Title
__________________ __________________________
/s/ROBERT T. HERRES
Signature and Date | Name and Title | |
/s/ROBERT T. HERRES | Robert T. Herres, Director and | |
November 22, 2002 | ||
/s/CHRISTOPHER J. PAPPAS | Christopher J. Pappas, Director, President and Chief Executive Officer | |
November 22, 2002 | ||
/s/HARRIS J. PAPPAS | Harris J. Pappas, Director, Chief Operating Officer | |
November 22, 2002 | ||
/s/ERNEST PEKMEZARIS | Ernest Pekmezaris, Senior Vice President and Chief Financial Officer | |
November 22, 2002 | ||
/s/JUDITH B. CRAVEN | Judith B. Craven, Director | |
November 22, 2002 | ||
/s/ARTHUR R. EMERSON | Arthur R. Emerson, Director | |
November 22, 2002 | ||
/s/ROGER R. HEMMINGHAUS | Roger R. Hemminghaus, Director | |
November 22, 2002 | ||
/s/FRANK MARKANTONIS | Frank Markantonis, Director | |
November 22, 2002 | ||
/s/GASPER MIR, III | Gasper Mir, III, Director | |
November 22, 2002 | ||
/s/WALTER J. SALMON | Walter J. Salmon, Director | |
November 22, 2002 | ||
/s/JOANNE WINIK | Joanne Winik, Director | |
November 22, 2002 | ||
/s/JIM W. WOLIVER | Jim W. Woliver, Director | |
November 22, 2002 |
Certification Pursuant to
18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Board
December 5, 2001
/s/CHRISTOPHER J. PAPPAS Christopher J. Pappas, Director
________________________________ and President and Chief Executive
December 5, 2001 Officer
/s/HARRIS J. PAPPAS Harris J. Pappas, Director and
________________________________ Chief Operating Officer
December 5, 2001
/s/ERNEST PEKMEZARIS Ernest Pekmezaris, Senior Vice
________________________________ President and Chief Financial
December 5, 2001 Officer
/s/RONALD K. CALGAARD Ronald K. Calgaard, Director
________________________________
December 5, 2001
/s/JUDITH B. CRAVEN Judith B. Craven, Director
________________________________
December 5, 2001
/s/DAVID B. DAVISS David B. Daviss, Director
________________________________
December 5, 2001
/s/ARTHUR R. EMERSON Arthur R. Emerson, Director
________________________________
December 5, 2001
/s/ROGER R. HEMMINGHAUS Roger R. Hemminghaus, Director
________________________________
December 5, 2001
/s/WALTER J. SALMON Walter J. Salmon, Director
________________________________
December 5, 2001
/s/JOANNE WINIK Joanne Winik, Director
________________________________
December 5, 2001
/s/JIM W. WOLIVER Jim W. Woliver, Director
________________________________
December 5, 2001
EXHIBIT INDEX
3(a) CertificateSarbanes-Oxley Act of Incorporation2002
In connection with the Annual Report of Luby's, Inc., as currently in effect
(filed as Exhibit 3(b) to the Company's Quarterly Report on Form 10-Q
for the quarter ended May 31, 1999, and incorporated herein by
reference).
3(b) Bylaws of Luby's, Inc. as currently in effect (filed as Exhibit 3(c)
to the Company's Quarterly Report on Form 10-Q for the quarter ended
February 28, 1998, and incorporated herein by reference).
4(a) Description of Common Stock Purchase Rights of Luby's Cafeterias,
Inc., in Form 8-A (filed April 17, 1991, effective April 26, 1991,
File No. 1-8308, and incorporated herein by reference).
4(b) Amendment No. 1 dated December 19, 1991, to Rights Agreement dated
April 16, 1991 (filed as Exhibit 4(b) to the Company's Quarterly
Report on Form 10-Q for the quarter ended November 30, 1991, and
incorporated herein by reference).
4(c) Amendment No. 2 dated February 7, 1995, to Rights Agreement dated
April 16, 1991 (filed as Exhibit 4(d) to the Company's Quarterly
Report on Form 10-Q for the quarter ended February 28, 1995, and
incorporated herein by reference).
4(d) Amendment No. 3 dated May 29, 1995, to Rights Agreement dated
April 16, 1991 (filed as Exhibit 4(d) to the Company's Quarterly
Report on Form 10-Q for the quarter ended May 31, 1995, and
incorporated herein by reference).
4(e) Amendment No. 4 dated March 8, 2001, to Rights Agreement dated
April 16, 1991 (filed as Exhibit 99.1 to the Company's Report on Form
8-A12B/A on March 22, 2001, and incorporated herein by reference).
4(f) Credit Agreement dated February 27, 1996, among Luby's Cafeterias,
Inc., Certain Lenders, and NationsBank of Texas, N.A. (filed as
Exhibit 4(e) to the Company's Quarterly Report on Form 10-Q for the
quarter ended February 29, 1996, and incorporated herein by
reference).
4(g) First Amendment to Credit Agreement dated January 24, 1997, among
Luby's Cafeterias, Inc., Certain Lenders, and NationsBank of Texas,
N.A. (filed as Exhibit 4(f) to the Company's Quarterly Report on Form
10-Q for the quarter ended February 28, 1997, and incorporated herein
by reference).
4(h) ISDA Master Agreement dated June 17, 1997, between Luby's Cafeterias,
Inc. and NationsBank, N.A., with Schedule and Confirmation dated
July 7, 1997 (filed as Exhibit 4(g) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1997,28, 2002, as filed with the Securities and incorporated
herein by reference).
4(i) ISDA Master Agreement dated July 2, 1997, betweenExchange Commission on the date hereof, I, Christopher J. Pappas, President and Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: | November 25, 2002 | /s/Christopher J. Pappas | ||
Christopher J. Pappas | ||||
President and | ||||
Chief Executive Officer | ||||
Certification Pursuant to
18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Annual Report of Luby's, Cafeterias,
Inc. and Texas Commerce Bank National Association, with Schedule and
Confirmation dated July 2, 1997 (filed as Exhibit 4(h) to the
Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1997,28, 2002, as filed with the Securities and incorporated herein by reference).
4(j) Second Amendment to Credit Agreement dated July 3, 1997, among Luby's
Cafeterias, Inc., Certain Lenders,Exchange Commission on the date hereof, I, Ernest Pekmezaris, Senior Vice President and NationsBank of Texas, N.A.
(filed as Exhibit 4(i) to the Company's Annual Report on Form 10-K for
the fiscal year ended August 31, 1997, and incorporated herein by
reference).
4(k) Third Amendment to Credit Agreement dated October 27, 2000, among
Luby's, Inc., Certain Lenders, and Bank of America, N.A. (filed as
Exhibit 4(j) to the Company's Annual Report on Form 10-K for the
fiscal year ended August 31, 2000, and incorporated herein by
reference).
4(l) Fourth Amendment to Credit Agreement dated July 9, 2001, among Luby's,
Inc., Bank of America and other creditors of its bank group (filed as
Exhibit 4(l) to the Company's Quarterly Report on Form 10-Q for the
quarter ended May 31, 2001, and incorporated herein by reference).
4(m) Deed of Trust, Assignment, Security Agreement, and Financing Statement
dated July 2001, executed as partChief Financial Officer of the Fourth AmendedCompany, hereby certify, pursuant to Credit
Agreement (filed18 U.S.C. Section 1350, as Exhibit 4(m)adopted pursuant to Section 906 of the Company's Quarterly Report on
Form 10-Q forSarbanes-Oxley Act of 2002, that:
(1) The report fully complies with the quarter ended May 31, 2001,requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and incorporated herein
by reference).
4(n) Subordination
(2) The information contained in the report fairly presents, in all material respects, the financial condition and Intercreditor Agreement dated June 29, 2001, between
Harris J. Pappasresults of operations of the Company.
Date: | November 25, 2002 | /s/Ernest Pekmezaris | ||
Ernest Pekmezaris | ||||
Senior Vice President and | ||||
Chief Financial Officer | ||||
I, Christopher J. Pappas, Bank of American N.A.
Agreement [as the bank group agent], and Luby's, Inc. (filed as
Exhibit 4(n) to the Company's Quarterly Report on Form 10-Q for the
quarter ended May 31, 2001, and incorporated herein by reference).
4(o) Convertible Subordinated Promissory Note dated June 29, 2001, between
Christopher J. Pappas and Luby's, Inc. in the amount of $1,500,000
(filed as Exhibit 4(o) to the Company's Quarterly Report on Form 10-Q
for the quarter ended May 31, 2001, and incorporated herein by
reference).
4(p) Convertible Subordinated Promissory Note dated June 29, 2001, between
Harris J. Pappas and Luby's, Inc. in the amount of $1,500,000 (filed
as Exhibit 4(p) to the Company's Quarterly Report on Form 10-Q for the
quarter ended May 31, 2001, and incorporated herein by reference).
4(q) Convertible Subordinated Promissory Note dated June 29, 2001, between
Christopher J. Pappas and Luby's, Inc. in the amount of $3,500,000
(filed as Exhibit 4(q) to the Company's Quarterly Report on Form 10-Q
for the quarter ended May 31, 2001, and incorporated herein by
reference).
4(r) Convertible Subordinated Promissory Note dated June 29, 2001, between
Harris J. Pappas and Luby's, Inc. in the amount of $3,500,000 (filed
as Exhibit 4(r) to the Company's Quarterly Report on Form 10-Q for the
quarter ended May 31, 2001, and incorporated herein by reference).
4(s) Fifth Amendment to Credit Agreement dated December 5, 2001, among
Luby's, Inc., Bank of America and other creditors of its bank group.
10(a) Form of Deferred Compensation Agreement entered into between Luby's
Cafeterias, Inc. and various officers (filed as Exhibit 10(b) to the
Company's Annual Report on Form 10-K for the fiscal year ended
August 31, 1981,certify that:
1. | I have reviewed this Annual Report on Form 10-K of Luby's, Inc.; | |||||||
2. | Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; | |||||||
3. | Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects, the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; | |||||||
4. | The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and I have: | |||||||
a) | designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; | |||||||
b) | evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of the annual report (the "Evaluation Date"); and | |||||||
c) | presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; | |||||||
5. | The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): | |||||||
a) | all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and | |||||||
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and | |||||||
6. | The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. | |||||||
Date: | November 25, 2002 | |||||||
/s/Christopher J. Pappas | ||||||||
Christopher J. Pappas | ||||||||
President and | ||||||||
Chief Executive Officer | ||||||||
I, Ernest Pekmezaris, certify that:
1. | I have reviewed this Annual Report on Form 10-K of Luby's, Inc.; | |||||||
2. | Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; | |||||||
3. | Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects, the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; | |||||||
4. | The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and I have: | |||||||
a) | designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; | |||||||
b) | evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of the annual report (the "Evaluation Date"); and | |||||||
c) | presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; | |||||||
5. | The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): | |||||||
a) | all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and | |||||||
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and | |||||||
6. | The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. | |||||||
Date: | November 25, 2002 | |||||||
/s/Ernest Pekmezaris | ||||||||
Ernest Pekmezaris | ||||||||
Senior Vice President and | ||||||||
Chief Financial Officer | ||||||||
EXHIBIT INDEX
3(a) | Certificate of Incorporation of Luby's, Inc. as currently in effect (filed as Exhibit 3(b) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 1999, and incorporated herein by reference). | |
3(b) | Bylaws of Luby's, Inc. as currently in effect (filed as Exhibit 3(c) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1998, and incorporated herein by reference). | |
4(a) | Description of Common Stock Purchase Rights of Luby's Cafeterias, Inc., in Form 8-A (filed April 17, 1991, effective April 26, 1991, File No. 1-8308, and incorporated herein by reference). | |
4(b) | Amendment No. 1 dated December 19, 1991, to Rights Agreement dated April 16, 1991 (filed as Exhibit 4(b) to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 1991, and incorporated herein by reference). | |
4(c) | Amendment No. 2 dated February 7, 1995, to Rights Agreement dated April 16, 1991 (filed as Exhibit 4(d) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1995, and incorporated herein by reference). | |
4(d) | Amendment No. 3 dated May 29, 1995, to Rights Agreement dated April 16, 1991 (filed as Exhibit 4(d) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 1995, and incorporated herein by reference). | |
4(e) | Amendment No. 4 dated March 8, 2001, to Rights Agreement dated April 16, 1991 (filed as Exhibit 99.1 to the Company's Report on Form 8-A12B/A on March 22, 2001, and incorporated herein by reference). | |
4(f) | Credit Agreement dated February 27, 1996, among Luby's Cafeterias, Inc., Certain Lenders, and NationsBank of Texas, N.A. (filed as Exhibit 4(e) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 29, 1996, and incorporated herein by reference). | |
4(g) | First Amendment to Credit Agreement dated January 24, 1997, among Luby's Cafeterias, Inc., Certain Lenders, and NationsBank of Texas, N.A. (filed as Exhibit 4(f) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1997, and incorporated herein by reference). | |
4(j) | Second Amendment to Credit Agreement dated July 3, 1997, among Luby's Cafeterias, Inc., Certain Lenders, and NationsBank of Texas, N.A. (filed as Exhibit 4(i) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1997, and incorporated herein by reference). | |
4(k) | Third Amendment to Credit Agreement dated October 27, 2000, among Luby's, Inc., Certain Lenders, and Bank of America, N.A. (filed as Exhibit 4(j) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2000, and incorporated herein by reference). | |
4(l) | Fourth Amendment to Credit Agreement dated July 9, 2001, among Luby's, Inc., Bank of America, N.A. and other creditors of its bank group (filed as Exhibit 4(l) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 2001, and incorporated herein by reference). | |
4(m) | Deed of Trust, Assignment, Security Agreement, and Financing Statement dated July 2001, executed as part of the Fourth Amended to Credit Agreement (filed as Exhibit 4(m) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 2001, and incorporated herein by reference). | |
4(n) | Subordination and Intercreditor Agreement dated June 29, 2001, between Harris J. Pappas and Christopher J. Pappas, Bank of America, N.A. Agreement [as the bank group agent], and Luby's, Inc. (filed as Exhibit 4(n) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 2001, and incorporated herein by reference). | |
4(o) | Convertible Subordinated Promissory Note dated June 29, 2001, between Christopher J. Pappas and Luby's, Inc. in the amount of $1,500,000 (filed as Exhibit 4(o) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 2001, and incorporated herein by reference). | |
4(p) | Convertible Subordinated Promissory Note dated June 29, 2001, between Harris J. Pappas and Luby's, Inc. in the amount of $1,500,000 (filed as Exhibit 4(p) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 2001, and incorporated herein by reference). | |
4(q) | Convertible Subordinated Promissory Note dated June 29, 2001, between Christopher J. Pappas and Luby's, Inc. in the amount of $3,500,000 (filed as Exhibit 4(q) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 2001, and incorporated herein by reference). | |
4(r) | Convertible Subordinated Promissory Note dated June 29, 2001, between Harris J. Pappas and Luby's, Inc. in the amount of $3,500,000 (filed as Exhibit 4(r) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 2001, and incorporated herein by reference). | |
4(s) | Fifth Amendment to Credit Agreement dated December 5, 2001, among Luby's, Inc., Bank of America, N.A. and other creditors of its bank group (filed as Exhibit 4(s) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2001, and incorporated herein by reference). | |
4(t) | Sixth Amendment to Credit Agreement dated November 25, 2002, by and among Luby's, Inc., Bank of America, N.A. and other creditors of its bank group. | |
10(c) | Management Incentive Stock Plan of Luby's Cafeterias, Inc. (filed as Exhibit 10(i) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1989, and incorporated herein by reference).* | |
10(d) | Amendment to Management Incentive Stock Plan of Luby's Cafeterias, Inc. adopted January 14, 1997 (filed as Exhibit 10(k) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1997, and incorporated herein by reference).* | |
10(e) | Nonemployee Director Deferred Compensation Plan of Luby's Cafeterias, Inc. adopted October 27, 1994 (filed as Exhibit 10(g) to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 1994, and incorporated herein by reference).* | |
10(f) | Amendment to Nonemployee Director Deferred Compensation Plan of Luby's Cafeterias, Inc. adopted January 14, 1997 (filed as Exhibit 10(m) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1997, and incorporated herein by reference).* | |
10(g) | Amendment to Nonemployee Director Deferred Compensation Plan of Luby's Cafeterias, Inc. adopted March 19, 1998 (filed as Exhibit 10(o) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1998, and incorporated herein by reference).* | |
10(h) | Amended and Restated Nonemployee Director Stock Option Plan of Luby's, Inc. approved by the shareholders of Luby's, Inc. on January 14, 2000 (filed as Exhibit 10(j) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 29, 2000, and incorporated herein by reference).* | |
10(i) | Luby's Cafeterias, Inc. Supplemental Executive Retirement Plan dated May 30, 1996 (filed as Exhibit 10(j) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1996, and incorporated herein by reference).* | |
10(j) | Amendment to Luby's Cafeterias, Inc. Supplemental Executive Retirement Plan adopted January 14, 1997 (filed as Exhibit 10(r) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1997, and incorporated herein by reference).* | |
10(k) | Amendment to Luby's Cafeterias, Inc. Supplemental Executive Retirement Plan adopted January 9, 1998 (filed as Exhibit 10(u) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1998, and incorporated herein by reference).* | |
10(l) | Amendment to Luby's Cafeterias, Inc. Supplemental Executive Retirement Plan adopted May 21, 1999 (filed as Exhibit 10(q) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 1999, and incorporated herein by reference.)* | |
10(m) | Severance Agreement between Luby's, Inc. and Barry J.C. Parker dated December 19, 2000 (filed as Exhibit 10(r) to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 2000, and incorporated herein by reference.)* | |
10(o) | Luby's Incentive Stock Plan adopted October 16, 1998 (filed as Exhibit 10(cc) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1998, and incorporated herein by reference).* | |
10(p) | Form of Change in Control Agreement entered into between Luby's, Inc. and each of its Senior Vice Presidents as of January 8, 1999 (filed as Exhibit 10(aa) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1999, and incorporated herein by reference).* | |
10(q) | Luby's, Inc. Deferred Compensation Plan effective June 1, 1999 (filed as Exhibit 10(cc) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 1999, and incorporated herein by reference).* | |
10(r) | Registration Rights Agreement dated March 9, 2001, by and among Luby's, Inc., Christopher J. Pappas, and Harris J. Pappas (filed as Exhibit 10.4 to the Company's Current Report on Form 8-K dated March 9, 2001, and incorporated herein by reference). | |
10(s) | Purchase Agreement dated March 9, 2001, by and among Luby's, Inc. Harris J. Pappas, and Christopher J. Pappas (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K dated March 9, 2001, and incorporated herein by reference). | |
10(t) | Employment Agreement dated March 9, 2001, between Luby's, Inc. and Christopher J. Pappas (filed as Exhibit 10.2 to the Company's Current Report on Form 8-K dated March 9, 2001, and incorporated herein by reference).* | |
10(u) | Employment Agreement dated March 9, 2001, between Luby's, Inc. and Harris J. Pappas (filed as Exhibit 10.3 to the Company's Current Report on Form 8-K dated March 9, 2001, and incorporated herein by reference).* | |
10(v) | Luby's, Inc. Incentive Bonus Plan for Fiscal 2001 (filed as Exhibit 10(z) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2000, and incorporated herein by reference).* | |
10(w) | Luby's, Inc. Stock Option granted to Christopher J. Pappas on March 9, 2001 (filed as Exhibit 10(w) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 2001, and incorporated herein by reference).* | |
10(x) | Luby's, Inc. Stock Option granted to Harris J. Pappas on March 9, 2001 (filed as Exhibit 10(x) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 2001, and incorporated herein by reference).* | |
10(y) | Affiliate Services Agreement dated August 31, 2001, by and among Luby's, Inc., Christopher J. Pappas, Harris J. Pappas, Pappas Restaurants, L.P., and Pappas Restaurants, Inc. (filed as Exhibit 10(y) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2001, refiled as Exhibit 10(y) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 13, 2002, to include signature reference and an exhibit that were inadvertently omitted, and incorporated herein by reference). | |
10(z) | Ground Lease for a cafeteria site dated March 25, 1994, by and between Luby's Cafeterias, Inc. and PHCG Investments, as amended by Lease Amendment dated July 6, 1994 (filed as Exhibit 10(z) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2001, and incorporated herein by reference). | |
10(aa) | Lease Agreement for dated June 1, 2001, by and between Luby's, Inc. and Pappas Restaurants, Inc. (filed as Exhibit 10(aa) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2001, and incorporated herein by reference). | |
10(bb) | Final Severance Agreement and Release between Luby's, Inc. and Alan M. Davis dated July 20, 2001 (filed as Exhibit 10(bb) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2001, and incorporated herein by reference). While in search for new executive management, the Company entered into an employment agreement with Mr. Davis in January 2001. The value of that one-year contract was a year's salary upon termination. After new management was secured, the Company finalized the exhibited agreement that provides for the payment of monthly consulting fees to Mr. Davis until July 2002, but releases the Company from all prior employment commitments.* | |
10(cc) | Consultant Agreement between Luby's Restaurants Limited Partnership and Alan M. Davis dated July 20, 2001 (filed as Exhibit 10(cc) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2001, and incorporated herein by reference).* | |
10(dd) | Luby's, Inc. Amended and Restated Nonemployee Director Phantom Stock Plan effective September 28, 2001 (filed as Exhibit 10(dd) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 13, 2002, and incorporated herein by reference).* | |
10(ee) | Final Severance Agreement and Release between Luby's, Inc. and S. Darrell Wood effective July 28, 2002.* | |
10(ff) | Consultant Agreement dated August 30, 2002, between Luby's Restaurants Limited Partnership and Darrell Wood* | |
10(gg) | Form of Indemnification Agreement entered into between Luby's, Inc. and each member of its Board of Directors initially dated July 23, 2002. | |
10(hh) | Amended and Restated Affiliate Services Agreement dated July 23, 2002, by and among Luby's, Inc., Pappas Restaurants, L.P., and Pappas Restaurants, Inc. | |
10(ii) | Master Sales Agreement dated July 23, 2002, by and among Luby's, Inc., Pappas Restaurants, L.P., and Pappas Restaurants, Inc. and Procedure adopted by the Finance and Audit Committee of the Board of Directors on July 23, 2002, pursuant to Section 2.3 of the Master Sales Agreement. | |
11 | Statement re computation of per share earnings. | |
21 | Subsidiaries of Luby's, Inc. (filed as Exhibit 21 to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2001, and incorporated herein by reference). | |
99(a) | Corporate Governance Guidelines of Luby's, Inc., as amended October 25, 2001 (filed as Exhibit 99(a) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 13, 2002, and incorporated herein by reference). | |
99(b) | Consent of Ernst & Young LLP. | |
*
10(b) Form of Amendment to Deferred Compensation Agreement between Luby's
Cafeterias, Inc. and various officers and former officers adopted
January 14, 1997 (filed as Exhibit 10(b) to the Company's Quarterly
Report on Form 10-Q for the quarter ended February 28, 1997, and
incorporated herein by reference).*
10(c) Management Incentive Stock Plan of Luby's Cafeterias, Inc. (filed as
Exhibit 10(i) to the Company's Annual Report on Form 10-K for the
fiscal year ended August 31, 1989, and incorporated herein by
reference).*
10(d) Amendment to Management Incentive Stock Plan of Luby's Cafeterias,
Inc. adopted January 14, 1997 (filed as Exhibit 10(k) to the Company's
Quarterly Report on Form 10-Q for the quarter ended February 28, 1997,
and incorporated herein by reference).*
10(e) Nonemployee Director Deferred Compensation Plan of Luby's Cafeterias,
Inc. adopted October 27, 1994 (filed as Exhibit 10(g) to the Company's
Quarterly Report on Form 10-Q for the quarter ended November 30, 1994,
and incorporated herein by reference).*
10(f) Amendment to Nonemployee Director Deferred Compensation Plan of Luby's
Cafeterias, Inc. adopted January 14, 1997 (filed as Exhibit 10(m) to
the Company's Quarterly Report on Form 10-Q for the quarter ended
February 28, 1997, and incorporated herein by reference).*
10(g) Amendment to Nonemployee Director Deferred Compensation Plan of Luby's
Cafeterias, Inc. adopted March 19, 1998 (filed as Exhibit 10(o) to the
Company's Quarterly Report on Form 10-Q for the quarter ended
February 28, 1998, and incorporated herein by reference).*
10(h) Amended and Restated Nonemployee Director Stock Option Plan of Luby's,
Inc. approved by the shareholders of Luby's, Inc. on January 14, 2000
(filed as Exhibit 10(j) to the Company's Quarterly Report on Form 10-Q
for the quarter ended February 29, 2000, and incorporated herein by
reference).*
10(i) Luby's Cafeterias, Inc. Supplemental Executive Retirement Plan dated
May 30, 1996 (filed as Exhibit 10(j) to the Company's Annual Report on
Form 10-K for the fiscal year ended August 31, 1996, and incorporated
herein by reference).*
10(j) Amendment to Luby's Cafeterias, Inc. Supplemental Executive Retirement
Plan adopted January 14, 1997 (filed as Exhibit 10(r) to the Company's
Quarterly Report on Form 10-Q for the quarter ended February 28, 1997,
and incorporated herein by reference).*
10(k) Amendment to Luby's Cafeterias, Inc. Supplemental Executive Retirement
Plan adopted January 9, 1998 (filed as Exhibit 10(u) to the Company's
Quarterly Report on Form 10-Q for the quarter ended February 28, 1998,
and incorporated herein by reference).*
10(l) Amendment to Luby's Cafeterias, Inc. Supplemental Executive Retirement
Plan adopted May 21, 1999 (filed as Exhibit 10(q) to the Company's
Quarterly Report on Form 10-Q for the quarter ended May 31, 1999, and
incorporated herein by reference.)*
10(m) Severance Agreement between Luby's, Inc. and Barry J.C. Parker dated
December 19, 2000 (filed as Exhibit 10(r) to the Company's Quarterly
Report on Form 10-Q for the quarter ended November 30, 2000, and
incorporated herein by reference.)*
10(n) Luby's Cafeterias, Inc. Nonemployee Director Phantom Stock Plan
adopted March 19, 1998 (filed as Exhibit 10(aa) to the Company's
Quarterly Report on Form 10-Q for the quarter ended February 28, 1998,
and incorporated herein by reference).*
10(o) Luby's Incentive Stock Plan adopted October 16, 1998 (filed as Exhibit
10(cc) to the Company's Annual Report on Form 10-K for the fiscal year
ended August 31, 1998, and incorporated herein by reference).*
10(p) Form of Change in Control Agreement entered into between Luby's, Inc.,
and each of its Senior Vice Presidents as of January 8, 1999 (filed as
Exhibit 10(aa) to the Company's Quarterly Report on Form 10-Q for the
quarter ended February 28, 1999, and incorporated herein by
reference).*
10(q) Luby's, Inc. Deferred Compensation Plan effective June 1, 1999 (filed
as Exhibit 10(cc) to the Company's Quarterly Report on Form 10-Q for
the quarter ended May 31, 1999, and incorporated herein by
reference).*
10(r) Registration Rights Agreement dated March 9, 2001, by and among
Luby's, Inc., Christopher J. Pappas, and Harris J. Pappas (filed as
Exhibit 10.4 to the Company's Current Report on Form 8-K dated
March 9, 2001, and incorporated herein by reference).
10(s) Purchase Agreement dated March 9, 2001, by and among Luby's, Inc.
Harris J. Pappas, and Christopher J. Pappas (filed as Exhibit 10.1 to
the Company's Current Report on Form 8-K dated March 9, 2001, and
incorporated herein by reference).
10(t) Employment Agreement dated March 9, 2001, between Luby's, Inc. and
Christopher J. Pappas (filed as Exhibit 10.2 to the Company's Current
Report on Form 8-K dated March 9, 2001, and incorporated herein by
reference).*
10(u) Employment Agreement dated March 9, 2001, between Luby's, Inc. and
Harris J. Pappas (filed as Exhibit 10.3 to the Company's Current
Report on Form 8-K dated March 9, 2001, and incorporated herein by
reference).*
10(v) Luby's, Inc. Incentive Bonus Plan for Fiscal 2001 (filed as Exhibit
10(z) to the Company's Annual Report on Form 10-K for the fiscal year
ended August 31, 2000, and incorporated herein by reference).*
10(w) Luby's, Inc. Stock Option granted to Christopher J. Pappas on March 9,
2001 (filed as Exhibit 10(w) to the Company's Quarterly Report on Form
10-Q for the quarter ended May 31, 2001 and incorporated herein by
reference).*
10(x) Luby's, Inc. Stock Option granted to Harris J. Pappas on March 9, 2001
(filed as Exhibit 10(x) to the Company's Quarterly Report on Form 10-Q
for the quarter ended May 31, 2001 and incorporated herein by
reference).*
10(y) Affiliate Services Agreement dated August 31, 2001, by and among
Luby's, Inc., Christopher J. Pappas, Harris J. Pappas, Pappas
Restaurants, L.P., and Pappas Restaurants, Inc.
10(Z) Ground Lease dated March 25, 1994, by and between Luby's Cafeterias,
Inc. and PHCG Investments, as amended by Lease Amendment dated July 6,
1994.
10(aa) Lease Agreement dated June 1, 2001, by and between Luby's, Inc. and
Pappas Restaurants, Inc.
10(bb) Final Severance Agreement and Release between Luby's, Inc. and Alan M.
Davis dated July 20, 2001.*
10(cc) Consultant Agreement between Luby's Restaurants Limited Partnership and
Alan M. Davis dated July 20, 2001.*
11 Statement re computation of per share earnings.
13 Luby's, Inc. 2001 annual report to shareholders (furnished for the
information of the Commission and not deemed to be "filed" except for
those portions expressly incorporated by reference).
21 Subsidiaries of Luby's, Inc. (filed as Exhibit 21 to the Company's
Annual Report on Form 10-K for the fiscal year ended August 31, 2001,
and incorporated herein by reference).
99(a) Corporate Governance Guidelines of Luby's, Inc., as amended July 26,
2001.
99(b) Consent of Ernst & Young LLP.
*DenotesDenotes management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed during the last quarter of the period
covered by this Report.