FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended August 31, 19981999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _________________ to ______________________
Commission file number: 1-8308
LUBY'S, CAFETERIAS, 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 telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Name of exchange on
Title of Class which registered
______________ ______________________
Common Stock ($.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-affiliates of the registrant as of November 10, 1998,16, 1999, was
approximately $329,676,000$256,515,000 (based upon the assumption that directors and
officers are the only affiliates).
As of November 10, 1998,16, 1999, there were 22,964,47522,420,375 shares of the registrant's
Common Stock outstanding, exclusive of 4,438,5924,982,692 treasury shares.
Portions of the following documentsdocument are incorporated by reference into the
designated parts of this Form 10-K: annual report to shareholders for the
fiscal year ended August 31, 1998, (in Part II) and proxy statement relating to 19992000 annual
meeting of shareholders (in Part III).
Item 1. Business.
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's executive offices are at 2211 Northeast Loop 410, P. O.
Box 33069, San Antonio, Texas 78265-3069.
Luby's, Cafeterias, 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 cafeteriarestaurant 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, Cafeterias, Inc.
The Company operates 223226 cafeteria-style restaurants under the name
"Luby's" located in close proximity to retail centers, business developments,
and residential areas in Arizona, Arkansas, Florida, Kansas, Louisiana, Mississippi,
Missouri, New Mexico, Oklahoma, Tennessee, and Texas. Of the 223226 restaurants
operated by the Company, 133136 are at locations owned by the Company and 90 are on
leased premises.
Strategic Plan
In August 1998 the Company announced plansbegan implementation of a long-range strategic plan to
closeimprove its operations and enhance its future prospects. The plan involved the
closing of 14 restaurants overunderperforming units, 12 of which were closed prior to the
next year as partbeginning of its strategic planning efforts.the current fiscal year. The strategic plan also includes relocating several
restaurants over the next few years, improving current store sales and profits,
creating a more profitable business in markets outside of Texas, building new
restaurants in smaller Texas markets, and building the food-to-go business. The
Company is testing a variety of initiatives, including expanded beverage and
menu offerings, breakfast, extended hours of operation, and the addition of
drive-thru windows to selected restaurants.
Management believes there is excellent potential in smaller Texas
communities forThe Company's restaurants constructed prior to 1999 typically contain 9,000
to 10,500 square feet of floor space and seat 250 to 300 guests. The Company
has redesigned its standard restaurant building to be more contemporary and more
efficient and to appeal to a smaller prototype restaurant. Awider range of customers. The new prototype
building, which contains 8,600 square feet of floor space and seats 214 guests,
is beingnow in use at five locations.
The Company, as part of its strategic plan, has also developed a new
prototype restaurant building for introductionsmaller markets which contains 6,000 square
feet of floor space and seats 170 guests. One restaurant utilizing the small-
market prototype is in operation, with several more scheduled to open later in
the current fiscal year.
Marketing
The Company's product strategy is to provide a wide variety of freshly
preparedcooked foods in an attractive and informal environment. The Company's research
has shown that its products appeal to a broad range of value-oriented consumers
with particular success among families with children, seniors, shoppers, and
business people looking for a quick, healthyhomestyle meal at a reasonable price.
Prior to 1991During fiscal 1999 the Company relied primarily on customers' word-of-mouth
recommendations and community relations activities to promote its business,
spendingspent approximately .5%2.4% of sales annually on
these efforts. In 1991 the
Company began developing a new marketing, program. Based on favorable
results ofincluding radio and television advertising tests, theand product-specific
promotions. The marketing budget increased tofor fiscal 2000 is approximately two percent of sales. During fiscal 1998, the
Company ran a series of product-specific promotions, including the Chicken
Lover's Special, Seafarer's Special, and Pasta Fest, which were well-received
by customers and positively impacted customer traffic. The Company intends to
increase the marketing budget in fiscal 1999 to approximatley two and one-half
percent2.5% of
sales, and to continue expending the majoritywith most of the marketing budget
onamount allocated to radio and television and radio advertising.
Operations
The Company's operations combine theprovide customers with a wide variety of great
tasting food quality and atmosphere of a
good restaurant with the simplicity and visual food selection of cafeteria
service.served cafeteria-style at reasonable prices. Food is prepared in
small quantities throughout serving hours, and frequent quality checks are made.
Each cafeteriarestaurant 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 cater primarily to shoppers and office or store
personnel for lunch and to families for dinner. The Company's restaurants are
open for lunch and dinner seven days a week. All of the restaurants sell take-outtake-
out orders, and most of them have separate food-to-go entrances. Take-
outTake-out
orders accounted for approximately 11 percent12% of sales in fiscal 1998.1999.
During fiscal 1999 the Company tested the addition of drive-thru windows,
and the results were a resounding success. By the end of fiscal 1999, 15
restaurants had drive-thrus, and the Company plans to remodel 45 to 50 of the
existing restaurants to include drive-thrus and expanded food-to-go areas. The
Company believes there is excellent potential for growth in the Company's food-
to-go business.
Each restaurant is operated as a separate unit under the control of a
manager who has responsibility for day-to-day operations, including food
purchasing, menu
planning and personnel employment and supervision. Each restaurant manager is
compensated on the basis of his or her restaurant's profits. Management
believes that granting broad authority to its restaurant managers and
compensating them on the basis of their performance are significant factors in
the profitability of its restaurants. Of the 223226 senior managers employed by
the Company, 177173 have been with the Company for more than ten years. Generally,
an individual is employed for a period of seven to eight years before he or she
is considered qualified to become a senior manager.
In 1999 the Company implemented a centralized purchasing arrangement to
obtain the economies of bulk purchasing and volume pricing for most of the food
products used in the Company's restaurants. The arrangement involves a prime
vendor for each of the Company's three major market segments. The Company
believes that alternative sources of supply are readily available in the event
the centralized purchasing arrangement is terminated.
Each restaurant cooks or prepares substantially all of the food served,
including breads and pastries. The restaurants prepare food from the same
recipes, with minor variations to suit local tastes, although menus are not
uniform in all of the Company's restaurants on any particular day. Menus are
prepared to reflect local and seasonal food preferences and to take advantage of
any special food purchasing opportunities.
The restaurants are not dependent
upon any one supplier, and the Company believes that alternative sources of
supply are readily available.
Quality control teams, each consisting of experienced cooks and a
supervisor, help to maintain uniform standards of food preparation. The teams
primarily assist in the training of new personnel during the opening of new
restaurants. The teams also visit the restaurants periodically and work with
the regular staffs to check adherence to the Company's recipes, train personnel
in new techniques, and evaluate procedures for possible use throughout the
Company.
The Company conducts a training program comprised of both on-the-job
training and classroom instruction in its training facilities in San Antonio.
The training program is approximately three months in duration. Management
personnel receive one week of classroom instruction and spend the remaining time
on practical training in operating restaurants. In order to draw management
trainees from regional talent pools, the Company has set up satellite training
schools in several key restaurants to make on-the-job training more accessible
on a local level.
As of August 31, 1998,1999, the Company had approximately 12,80014,000 employees,
consisting of 11,91913,070 nonmanagement restaurant personnel; 739800 restaurant
managers, associate managers, and assistant managers; and 142130 executive,
administrative, and clerical personnel. Employee relations are considered to be
good, and the Company has never had a strike or work stoppage. The Company is
not subject to any collective bargaining agreements.
Expansion
During the fiscal year ended August 31, 1998,1999, the Company opened fivefour new
restaurants in Phoenix, Arizona; Clearwater, Florida; Meridian, Mississippi;Tulsa, Oklahoma, and GreenvilleGeorgetown, Houston, and Tyler,Seguin, Texas. DuringOne
unit in Abilene, Texas, was relocated from a leased location to an owned site.
Ten underperforming units were closed during the 1998 fiscal year the Company closed
five cafeterias in Little Rock, Arkansas; Leavenworth, Kansas; Albuquerque,
New Mexico; Muskogee, Oklahoma; and Dallas, Texas. There was no net increase
in the number of restaurants for the 1998 fiscal year.
Since August 31, 1998,1999, the Company has opened athree new restaurant in
Tulsa, Oklahoma, and has closed seven restaurants in
PhoenixAllen, Plano, and Scottsdale,
Arizona; Wichita, Kansas; Joplin, Missouri; Albuquerque, New Mexico, and
Memphis, Tennessee.Garland, Texas. During fiscal 19992000, the Company expects to
relocate four restaurants and to open aproximately
sixapproximately 14 new restaurants,
inclusive ofincluding the onethree already opened. The Company expects
to close approximately 12 restaurants during the 1999 fiscal year, inclusive of
the ones already closed.
The Company continually evaluates prospective new restaurant sites and
typically has several sites for new restaurants under active consideration at
any given time. The rate at which new restaurants are opened is governed by the
Company's policy of controlled growth, which takes into account the resources
and capabilities of all departments involved, including real estate,
construction, equipment, and operations. It has been the Company's experience
that new restaurants generally become profitable within a few months after
opening.
The costs of opening new restaurants vary widely, depending on whether the
facilities are to be leased or owned, and if owned, on site acquisition and
construction costs. The Company estimates that in recent years it has cost
$2,500,000 to $2,700,000 to construct, equip, and furnish a new restaurant in a
freestanding building under normal conditions, including land acquisition costs.
The approximate cost to finish out, equip, and furnish a new restaurant in a
leased facility has ranged from $1,200,000 to $1,400,000. The Company
is
reviewinganticipates that such costs will be slightly higher for its current restaurant designnew large prototype
due to higher real estate costs for prime sites and plans to reduce the size and change
the physical features of the restaurant to make it more appealing to guests. In
addition, the Company is working on plansapproximately 30% lower for
an even smaller prototype
(approximately 6,000 square feet) to be built in smaller Texas markets.its new small market prototype.
Waterstreet Joint Venture
In January 1996 the Company announced a joint venture agreement with
Waterstreet, Inc., a seafood restaurant company operating in Corpus Christi,
Fort Worth and San Antonio, Texas. The agreement provides for the opening of up
to five "Water Street Seafood Company" restaurants during the term of the joint
venture. ThreeFour restaurants were opened by the joint venture, two of the restaurants are open in Austin, Lewisville, and
San Antonio, Texas. One of the restaurants which opened in Houston, Texas, waswere
subsequently closed.
Service Marks
The Company uses several service marks, including "Luby's""Luby's," and believes
that such marks are of material importance to its business. The Company has
federal service mark registrations for several of such marks.
The Company is not the sole user of the name "Luby's" in the cafeteriarestaurant
business. One cafeteriarestaurant using the name "Luby's" and one cafeteriarestaurant using the
name "Pat Luby's" are being operated in two different cities in Texas by two
different owners not affiliated with the Company. The Company's legal counsel
is of the opinion that the Company has the paramount right to use the name
"Luby's" as a service mark in the cafeteriarestaurant business in the United States and
that such other users can be precluded from expanding their 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 of the food served, in relation to its price, and
public reputation are important factors 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 principalCompany's primary competitors
are conventionalinclude contemporary family-style and casual dining restaurants, buffets, and
other
cafeterias.quick-service restaurants in the home-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 compliance has
resulted in some increased costs.
Forward-lookingForward-Looking Statements
Certain statements made in this report are forward-looking statementsforward looking regarding cash
flow from operations, restaurant openings, operating margins, capital
requirements, the availability of acceptable real estate locations for new
restaurants, and the Company can give no assurance that the expectations or potential occurrences
reflected in such statements will be realized. Effortsother 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,traffic. These forward-looking statements involve risks
and uncertainties and, consequently, could be affected by general business
conditions.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.
Item 2. Properties.
The Company owns the underlying land and buildings in which 133136 of its
restaurants are located. In addition, the Company owns several restaurant sites
being held for future development and several properties are held for sale.
Of the 223226 restaurants operated by the Company, 90 are at locations held
under leases, including 5452 in regional shopping malls. Most of the leases
provide for a combination of fixed-dollar and percentage rentals. Most of the
leases require the lessee to pay additional amounts related to property taxes,
hazard insurance, and maintenance of common areas.
See Notes 5 and 8 of Notes to Financial Statements for information
concerning the Company's lease rental expenses, lease commitments, and
construction commitments. Of the 90 restaurant leases, the current terms of 3132
expire from 19992000 to 2003, 232004, 25 from 20042005 to 2008,2009, and 3633 thereafter. Seventy-threeSeventy-two
of the leases can be extended beyond their current terms at the Company's
option.
A typical restaurant seats 250 to 300 guests and contains 9,000 to 10,500
square feet of floor space.
Most of the restaurants are located in modern buildings and all are in good
condition. It is the Company's policy to refurbish and modernize restaurants 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 towns and cities in which the Company's 223 cafeterias226 restaurants are located are
listed below, with numbers in parentheses indicating the number of units in each
locale:
Arizona (12)
BaytownChandler (1)
ChandlerGlendale (1)
Mesa (2)
Peoria (1)
Phoenix (4)
Surprise (1)
Tucson (2)
Arkansas (5)
Fayetteville (1)
Fort Smith (1)
Little Rock (2)
North Little Rock (1)
Florida (7)
Clearwater (2)
Pinellas Park (1)
St. Petersburg (1)
Sebring (1)
Tampa (2)
Louisiana (2)
Bossier City (1)
Shreveport (1)
Mississippi (2)
Hattiesburg (1)
Meridian (1)
Missouri (2)
Independence (1)
Kansas City (1)
New Mexico (3)
Albuquerque (1)
Las Cruces (1)
Santa Fe (1)
Oklahoma (9)
Bartlesville (1)
Broken Arrow (1)
Oklahoma City (3)
Shawnee (1)
Tulsa (3)
Tennessee (11)
Franklin (1)
Memphis (4)
Morristown (1)
Murfreesboro (1)
Nashville (3)
Oak Ridge (1)
Texas (173)
Abilene (2)
Allen (1)
Amarillo (2)
Arlington (3)
Austin (7)
Baytown (1)
Beaumont (1)
Glendale (1) Bedford (1)
Mesa (2) Bellmead (1)
Peoria (1)
Brownsville (2)
Phoenix (4) Bryan/College Station (2)
SurpriseBryan (1)
Carrollton (1)
Tucson (2)College Station (1)
Conroe (1)
Corpus Christi (4)
Dallas (11)
Arkansas (6) Deer Park (1)
Fayetteville (1)
Del Rio (1)
Fort Smith (1) Denton (1)
Hot Springs (1)
DeSoto (1)
Little Rock (2) Duncanville (1)
North Little Rock (1)
El Paso (5)
Fort Worth (8)
Florida (7) Galveston (1)
ClearwaterGarland (2)
Garland (1)
Pinellas ParkGeorgetown (1)
Grand Prairie (1)
St. Petersburg (1) Grapevine (1)
Sebring (1)
Greenville (1)
Tampa (2) Harlingen (2)
Houston (31)
Kansas (1)(32)
Humble (1)
Mission (1)
Irving/Las Colinas (2)
Jacinto City (1)
Kerrville (1)
Louisiana (2) Killeen (1)
Bossier City (1) Kingwood (1)
Shreveport (1)
Lake Jackson (1)
Laredo (2)
Mississippi (2) Lewisville (1)
Hattiesburg (1) Longview (1)
Meridian (1)
Lubbock (1)
Lufkin (1)
Missouri (3) McAllen (3)
Independence (1) McKinney (1)
Kansas City (2)
Mesquite (3)
Midland (1)
Mission (1)
New Mexico (3) New Braunfels (1)
Albuquerque (1)
North Richland Hills (1)
Las Cruces (1) Odessa (1)
Santa Fe (1)
Orange (1)
Pasadena (1)
Oklahoma (9) Pharr (1)
Bartlesville (1) Plano (2)
Broken Arrow (1)(3)
Port Arthur (2)
Oklahoma City (3) Richardson (1)
Shawnee (1)
Rosenberg (1)
Tulsa (3)
Round Rock (1)
San Angelo (1)
Tennessee (11) San Antonio (21)
Franklin (1) San Marcos (1)
Memphis (4)Seguin (1)
Sherman (1)
Morristown (1) Stafford (1)
Murfreesboro (1)
Sugar Land (1)
Nashville (3) Temple (1)
Oak Ridge (1)
Texarkana (1)
The Woodlands (1)
Texas (167) Tomball (1)
Abilene (2) Tyler (3)
Amarillo (2) Victoria (1)
Arlington (3) Waco (1)
Austin (7) Weslaco(1)Weslaco (1)
The Company's corporate offices are located in a building owned by the
Company containing approximately 40,000 square feet of office space. The
Company utilizes the space for its executive offices and related facilitiesfacilities.
The Company maintains public liability insurance and property damage
insurance on its properties in amounts which management believes to be adequate.
Item 3. Legal Proceedings.
The Company is from time to time subject to pending claims and lawsuits
arising in the ordinary course of business. In the opinion of management, the
ultimate resolution of such claims and lawsuits will not have a material adverse
effect on the Company's operations or consolidated financial positionposition. There are
no material legal proceedings to which any director, officer, or affiliate of
the Company, or any associate of any such director or officer, is a party, or
has a material interest, adverse to the Company.
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, 1998,1999, 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 19992000 annual
meeting of shareholders and until his or her successor is duly elected and
qualified.
Served as
Officer Positions with Company and
Name Since Principal Occupation Last Five Years Age
________________________ ________ ____________________________________ ___
David B. Daviss 1997 Chairman of the Board (since Oct. 6263
1997); Acting Chief Executive
Officer (May-Oct. 1997); Director
since 1984; Chairman of the
Executive Committee and member of
the Corporate Governance Committee;
investor.
Barry J.C. Parker 1997 President, Chief Executive Officer, 5152
and Director (since Oct. 1997);
member of the Executive Committee;
Chairman of the Board, President,
and Chief Executive Officer of
County Seat Stores, Inc. (1989-1996);
principal of Hoak Capital Corp.Corporation
(1997).
Laura M. Bishop 1995 Senior Vice President and Chief 3738
Financial Officer (since Jan. 1997);
Vice President-Finance (1996); Vice
President-Financial Planning (1995);
Director of Financial Planning
(1993-1995); Director of Internal
Audit (1992-1993).
Robert P. Burke 1996 Senior Vice President-Marketing 4950
(since Jan. 1997); Vice President-
Marketing (1996); Vice President of
Sales and Marketing, Pace Foods/
Campbell Soup Company prior to 1996.
Alan M. Davis 1998 Senior Vice President-Real Estate 4647
Development (since May 1988); Vice
President of Real Estate, Boston
Chicken, Inc. and Boston Chicken
Real Estate Investments, Inc.
prior to May 1998.
Boston Chicken,
Inc. filed a petition for reorgani-
zation under Chapter 11 of the U.S.
Bankruptcy Code in October 1998.
Sue Elliott 1998 Senior Vice President-Human 4849
Resources (since May 1998); Vice
President of Friday's Hospitality
prior to May 1998.
Raymond C. Gabrysch 1988 Senior Vice President-Operations 4748
(since Sept. 1997); Senior Vice
President-Human Resources (Jan.-
Aug. 1997); Vice President-Human
Resources (1996); Area Vice
President prior to 1996.
Clyde C. Hays III 1985 Senior Vice President-Operations 4748
(since Jan. 1996); Vice President-
Operations prior to 1996.
James R. Hale 1980 Secretary; Member of law firm of 6970
Cauthorn Hale Hornberger Fuller
Sheehan & Becker Incorporated.
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 Quarters Quarterly
Ended High Low Cash Dividend
_________________ ______ ______ ______________
November 30, 1996 $24.38 $20.751997 $21.38 $18.88 $.20
February 28, 1997 22.88 19.88 .20
May 31, 1997 20.63 17.63 .20
August 31, 1997 20.63 18.81 .20
November 30, 1997 21.38 18.88 .20
February 28, 1998 19.69 16.00 .20
May 31, 1998 19.50 17.13 .20
August 31, 1998 18.94 15.25 .20
November 30, 1998 16.25 13.38 .20
February 28, 1999 16.00 13.59 .20
May 31, 1999 18.63 13.50 .20
August 31, 1999 17.13 13.31 .20
As of September 11, 1998,10, 1999, there were approximately 5,0364,690 record holders
of the Company's common stock.
Item 6. Selected Financial Data.
Five YearFive-Year Summary of Operations
(Thousands of dollars except per share data)
Years ended August 31,
1999 1998 1997 1996 1995 1994
________ ________ ________ ________ ________
Sales $501,493 $508,871 $495,446 $450,128 $419,024 $390,692
Costs and expenses:
Cost of food 122,418 129,126 121,287 110,008 103,611
98,223
Payroll and related costs 154,817 155,152 146,940 124,333 113,952 104,543
Occupancy and other operating
expenses 155,828 154,501 150,638 132,595 123,907
113,546
General and administrative
expenses 22,031 22,061 19,451 20,217 18,672 15,330
Provision for asset impairments
and store closings - 36,852 12,432 - - -
________ ________ ________ ________ ________
455,094 497,692 450,748 387,153 360,142 331,642
________ ________ ________ ________ ________
Income from operations 46,399 11,179 44,698 62,975 58,882
59,050________ ________ ________ ________ ________
Other income (expenses):
Interest expense (4,761) (5,078) (4,037) (2,130) (1,749)
-
Interest and other 1,846 1,778 2,001 1,697 1,805 1,385
________ ________ ________ ________ ________
(2,915) (3,300) (2,036) (433) 56 1,385
________ ________ ________ ________ ________
Income before income taxes and accounting change43,484 7,879 42,662 62,542 58,938
60,435
Provision for income taxes 14,871 2,798 14,215 23,334 21,923 22,663
________ ________ ________ ________ ________
Income before accounting
change 5,081 28,447 39,208 37,015 37,772
Cumulative effect of change in
accounting for income taxes - - - - 1,563
________ ________ ________ ________ ________
Net income (a)$ 28,613 $ 5,081 $ 28,447 $ 39,208 $ 37,015
________ ________ ________ ________ ________
Net income per common share -
basic $ 39,335
Income per share before accounting
change1.27 $ 0.22 $ 1.22 $ 1.66 $ 1.55
$ 1.45
Net income per common share -
basic $ 0.22 $ 1.22 $ 1.66 $ 1.55 $ 1.51________ ________ ________ ________ ________
Net income per common share -
assuming dilution $ 1.26 $ 0.22 $ 1.21 $ 1.64 $ 1.53
$ 1.49________ ________ ________ ________ ________
Cash dividend declared per common
share $ .80 $ .80 $ .80 $ .74 $ .68
$ .62________ ________ ________ ________ ________
At year-end:
Total assets $346,025 $339,041 $368,778 $335,290 $312,380
$289,668
Long-term debt $ 78,000 $ 73,000 $ 84,000 $ 41,000 $ -
$ -
Number of cafeterias 223 229 229 204 187
176
(a) Net income in 1994 includes the cumulative effect of change in accounting
for income taxes of $1,563, or $.06 per share.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Liquidity and Capital Resources
During the last three years the Company has funded all capital expenditures
from internally generated funds, cash equivalents, and long-term debt. Capital
expenditures for fiscal 19981999 were $26,015,000,$38,699,000, a 58% decrease49% increase from fiscal 1997. This decrease1998.
The increase in fiscal 1999 resulted in part from the opening of four new
restaurants and six restaurants under construction at August 31, 1999, as
compared to the opening of five new restaurants in fiscal 1998 as compared to 29 in fiscal 1997, which included two
relocations. Fiscal 1997 capital expenditures included the purchase of 20
locations from Triangle FoodService Corporation, formerly Wyatt Cafeterias,
Inc., for approximately $14 million in cash. After additional capital
expenditures of approximately $5 million to repair and refurbish these units,
15one
restaurant under construction at August 31, 1998. As part of the 20 locations were opened as "Luby's" and areCompany's
strategic initiative to expand into smaller Texas markets, included in the 29
openingsfour
new restaurants in fiscal 1997.1999 is the Company's first small prototype
restaurant. Fiscal 1999 capital expenditures also included approximately
$7 million relating to other strategic initiatives, primarily food-to-go
expansions in several restaurants and new self-service drink stations and
condiment stands in all restaurants. In addition, during fiscal 19981999 the
Company purchased one siteten sites as land held for future use compared to eightone in
fiscal 1997. The
Company also spent approximately $5 million1998.
Capital expenditures for fiscal 2000 are expected to upgrade the restaurant
information systems during fiscal 1998.approximate $60 million.
Plans for fiscal 19992000 include the opening of approximately six14 new restaurants
and the relocation of four restaurants - four14 on sites owned by the Company and
twofour on land held under long-term ground leases. The Company also expects fiscal 1999 capital
expenditures to include approximately $12 million related to strategic
initiatives, including food-to-go expansions, new self-service drink stations,
and 10 to 15 remodels with updated design features. In addition, as part of
its strategic initiative to expand into smaller Texas markets, planned
expenditures for fiscal 1999 include approximately $5 million for the opening
of the first location by the end of the fiscal year and the purchase of several
other land sites for fiscal 2000 openings. The Company anticipates that
proceeds from property held for sale will partially offset future capital
requirements.
As part of a joint venture agreement with Waterstreet, Inc. signed in
January 1996, the Company opened two seafood restaurants in fiscal 1998.
During fiscal 1998, the company closed one seafood restaurant which was opened
the prior year. No seafood restaurants are planned to open in fiscal 1999.
These "Water Street Seafood Company" restaurants are leased by the joint
venture from the Company and operated by Waterstreet, Inc.
As of August 31, 1998,1999, the
Company owned threefive undeveloped restaurant sites, and several land site
acquisitions were in varying stages of negotiation. As a resultpart of more new store openings planned for next year, the Company expects an increase in totalCompany's
strategic plan, fiscal 2000 capital expenditures for fiscal 1999.also include approximately
$16 million related to food-to-go expansions with the addition of drive-thrus
and 10 to 15 remodels that will incorporate the Company's new updated design
features. Construction costs for new restaurants, food-to-go expansions, and
remodels are expected to be funded by cash flow from operations cash currentlyand long-term
debt. The Company also anticipates that proceeds from property held in cash equivalent investments, and long-
term debt.for sale
will partially offset future capital requirements.
The Company generated cash from operations of $47,957,000$55,274,000 in fiscal 1998.1999. The
Company had $73,000,000$78,000,000 outstanding at August 31, 1998,1999, under a $125,000,000
credit facility with a syndication of four banks. At August 31, 1998,1999, the
Company had a working capital deficit of $32,324,000$39,748,000 which compares to the
prior year's working capital deficit of $29,711,000.$32,324,000. The working capital
position declined slightly during fiscal 19981999 due primarily to the decrease in cash and
cash equivalents of $2,670,000.$3,474,000 and the increase in accounts payable of
$7,204,000, partially offset by the decrease in accrued expenses and other
liabilities. The Company typically carries current liabilities in excess of
current assets because cash generated from operating activities is reinvested
in capital expenditures.
The Board of Directors authorized the purchase in the open market of up to
1,000,000 shares of the Company's outstanding common stock through December 31,
1998. During fiscal 1999 the Company purchased 850,300 shares of its common
stock at a cost of $12,919,000, which are being held as treasury stock.
The Company believes that funds generated from operations and short-term or
long-term financing from external sources, which can be obtained on terms
acceptable to the Company, are adequate for its foreseeable needs.
Results of Operations
Fiscal 1999 Compared to Fiscal 1998
Sales decreased $7,378,000, or 1%, due to the closing of ten restaurants in
fiscal 1999 and five restaurants in fiscal 1998. This decrease was partially
offset by the opening of four new restaurants during fiscal 1999 and five
during fiscal 1998. The average sales volume for all restaurants that were
open in both years increased slightly to $2,255,000 in fiscal 1999 from
$2,253,000 in fiscal 1998.
Cost of food decreased $6,708,000, or 5%, due primarily to the savings
associated with the consolidation of our purchasing under a prime vendor
program and the decline in sales. As a percentage of sales, food costs were
lower versus the prior year due to various additional factors including
increased drink sales from new self-serve drink counters and other sales mix
changes, the impact of a new manager compensation plan which provides more of
an incentive to improve margins at all sales volumes, and certain menu price
increases. Although total sales declined, payroll and related costs remained
fairly flat due to higher hourly wage rates related to tight labor markets for
entry-level employees. Occupancy and other operating expenses increased
$1,327,000, or 1%, due to an increase in advertising expenditures, higher
food-to-go packaging costs, and higher costs associated with the rollout of a
new uniform program for all hourly employees. This increase was partially
offset by fewer restaurants and lower depreciation expense associated with
store closings and asset impairments. General and administrative expenses
declined slightly due to the recording of a lump sum severance agreement and
professional fees associated with the company's strategic plan recorded in the
prior year which were offset by higher corporate salaries and benefits
associated with the addition of new positions to support the implementation of
the Company's strategic plan and costs relating to increased recruiting and
training efforts for store management in the current year.
As part of its strategic planning efforts, the Company completed an assessment
of underperforming restaurants and recorded a $36.9 million pretax charge
during the fourth quarter of fiscal 1998 for stores to be closed, relocated, or
impaired. As of August 31, 1999, the Company had closed 12 of the 14
restaurants designated for closure in 1998 and had relocated one of the 16
restaurants designated for relocation. Plans for the closing and relocation of
the remaining restaurants are in different stages of negotiation and planning.
At August 31, 1999 and 1998, the Company had a reserve for store closings of
$5.1 million and $6.2 million, respectively, for settlement of lease
obligations, professional fees, severance costs, and other costs related to the
closings of restaurants. During 1999 and 1998 the Company charged $830,000 and
$664,000, respectively, against these reserves for settlement of lease
obligations, severance costs, and professional fees. Additionally, the Company
reduced its liability by $275,000 in 1999, which is included in other income,
as a result of a favorable change in management's estimate of lease settlement
costs. See further discussion in Note 2 of the Consolidated Financial
Statements.
Interest expense of $4,761,000 for fiscal 1999 was incurred in conjunction with
borrowings under the credit facility and is net of $409,000 capitalized on
qualifying properties. The decrease from fiscal 1998 of $317,000, or 6%, was
due primarily to higher capitalized interest on qualifying properties as a
result of more construction in the current period. The average borrowing rate
was also slightly lower in fiscal 1999.
The provision for income taxes increased $12,073,000 due to higher income
before income taxes. The Company's effective income tax rate decreased from
35.5% in fiscal 1998 to 34.2% in fiscal 1999 due primarily to higher than
expected tax credits. The Company anticipates that the effective tax rate for
fiscal 2000 will be approximately 35%.
Fiscal 1998 Compared to Fiscal 1997
Sales increased $13,425,000, or 3%, due to the addition of five new restaurants
in fiscal 1998 and 27 restaurants in fiscal 1997. This increase was partially
offset by the closing of two restaurants on August 31, 1997, and three others
during fiscal 1998. The average sales volume for all restaurants that were
open in both years increased slightly to $2,250,000 in fiscal 1998 from
$2,244,000 in fiscal 1997.
The same-store customer counts were down by 1%
but were offset by higher average tray revenues.
Cost of food increased $7,839,000, or 6%, due primarily to the increase in
sales, new menu item testing, and higher fish and other commodity prices
overall. Payroll and related costs increased $8,212,000, or 6%, due primarily
to the increase in sales and the higher Federalfederal minimum wage which increased
first on October 1, 1996, and again on September 1, 1997. Occupancy and other
operating expenses increased $3,863,000, or 3%, due primarily to the increase
in sales and the opening of five new restaurants. This increase was partially
offset by lower managers' salaries, which are based on the profitability of the
restaurants. General and administrative expenses increased $2,610,000, or 13%,
due primarily to higher legal and professional fees associated with the
Company's strategic planning project. In addition, fiscal 1998 included a
higher provision for bonuses since none were incurred in fiscal 1997 and a
higher Company contribution to the profit sharing plan.
As part of its strategic planning efforts, the Company completed an assessment
of underperforming restaurants and recorded a $36.9 million pretax charge
during the fourth quarter of fiscal 1998. The charge included $14.7 million
for the closing of 14 underperforming restaurants, $10.7 million for the
write-down of 16 restaurants which will be relocated to optimize their market
potential, and $11.4 million for the write-down of certain restaurant
properties which the Company plans to continue to operate. Additionally, the
Company revised its estimate of the net realizable value of surplus properties
which the Company plans to sell resulting in an additional write-down of
$0.1 million. The charge for the closing of the 14 underperforming restaurants
and the restaurants to be relocated related to the write-down of property and
equipment to net realizable value, costs to settle lease obligations, and
severance costs. As of August 31, 1998, two of the 14 restaurants were closed,
and the remaining restaurants are planned for closure during fiscal 1999.
Interest expense of $5,078,000 for fiscal 1998 was incurred in conjunction with
borrowings under the credit facility and is net of $276,000 capitalized on
qualifying properties. The increase over fiscal 1997 of $1,041,000, or 26%, was
due primarily to lower capitalized interest on qualifying properties as
a result of less construction in the current period. The average borrowing
rate was also slightly higher in fiscal 1998.
The provision for income taxes decreased $11,417,000, or 80%, due to lower
income before income taxes. The Company's effective income tax rate increased
from 33.3% in fiscal 1997 to 35.5% in fiscal 1998. The fiscal 1997 rate
was low due to a nonrecurring decrease in the deferred tax liability resulting
from a lower expected state tax rate.
The Company anticipates that the effective
tax rate for fiscal 1999 will approximate the rate during fiscal 1998.
Fiscal 1997 Compared to Fiscal 1996
Sales increased $45,318,000, or 10%, due to the addition of 27 new
restaurants in fiscal 1997 and 18 restaurants in fiscal 1996. The average
sales volume of restaurants opened over one year decreased to $2,264,000 in
fiscal 1997 from $2,332,000 in fiscal 1996 due primarily to a negative trend in
customer counts. This trend was a result of intense competition in the
restaurant industry and sales transfer from our established restaurants caused
by the significant number of fiscal 1997 and 1996 openings in our existing
markets. The impact of the same-store customer count decline was partially
offset by a 3.5% increase in average tray revenues. The Company implemented a
price increase on September 15, 1996, to help offset the pressure on profit
margins from the increase in the Federal minimum wage.
Cost of food increased $11,279,000, or 10%, due primarily to the increase
in sales. Payroll and related costs increased $22,607,000, or 18%, due
primarily to the increase in sales, the increase in the Federal minimum wage
which became effective October 1, 1996, and higher wage costs associated with
increased expansion over the prior year. Although a price increase was
implemented to help offset higher wage rates, the decline in same-store sales
experienced during fiscal 1997 resulted in significant pressure on labor costs.
Occupancy and other operating expenses increased $18,043,000, or 14%, due
primarily to the increase in sales and the opening of 27 new restaurants.
Preopening expenses and start-up costs, which are expensed as incurred, totaled
approximately $3 million for new openings in fiscal 1997. The decline in same-
store sales caused fixed costs within this expense category to increase as a
percent of sales. However, managers' salaries, which are based on the
profitability of the restaurants, decreased as a percent of sales due to lower
store profits. General and administrative expenses decreased $766,000, or 4%.
As a result of lower earnings, the Company's contribution to the profit sharing
plan totaled $1.5 million, or $3.6 million less than fiscal 1996. This
decrease was partially offset by retirement costs, executive search firm fees,
and higher legal and professional fees associated with the Company's
restructuring into a holding company. In addition, manager trainee salaries
and moving expenses were higher than fiscal 1996 due to the increased
expansion.
During fiscal 1997 the Company adopted Financial Accounting Standards
No. 121 (FAS 121), "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of," and recorded a $12.4 million pretax
charge during the fourth quarter. The charge included $4.6 million for the
closing of four restaurants, $3 million for the write-down of certain cafeteria
properties which the Company plans to continue to operate, the write-down of
$2.1 million for surplus properties the Company plans to sell, $1.4 million for
the write-down of computer hardware, and $1.3 million for various other
charges.
Interest expense of $4,037,000 for fiscal 1997 was incurred in conjunction
with borrowings under the credit facility and is net of $1,029,000 capitalized
on qualifying properties. The increase over fiscal 1996 of $1,907,000, or 86%,
was due to higher average outstanding borrowings relating to the increase in
expansion during fiscal 1997 and the purchase of treasury stock.
The provision for income taxes decreased $9,119,000, or 39%, due to lower
income before income taxes and lower state taxes resulting from the Company's
restructuring into a holding company. The Company's effective income tax rate
decreased from 37.3% in fiscal 1996 to 33.3% in fiscal 1997. A portion of the
decline in the provision for income taxes in fiscal 1997 was nonrecurring since
it resulted from lowering the deferred tax liability based on a lower expected
state tax rate.
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.
The Year 2000
SomeDuring 1998 the Company, in the ordinary course of business, decided to migrate
its information technology from internally developed systems to commercially
available products. This decision was made for a variety of business reasons,
and the new systems are designed to provide the infrastructure to support
corporate and restaurant-based systems. The newly implemented systems are Year
2000 compliant. The transition to the new technology was completed in January
1999. The Company believes the Year 2000 will not pose significant operational
problems for its computer systems. The cost of the Company's older computer programs were written using two
digits rather than four to define the applicable year. As a result, those
computer programs have time-sensitive software that recognizes a date using
"00" as the year 1900 rather than the year 2000. This could cause a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, code invoices, or
engage in similar normal business activities. The Company does not expect
that the year 2000 issue will materially affect future financial results.
The Company has formed a Year 2000 committee and has developed a plan
to inventory critical systems and replace or develop solutions to those systems
that are found to have date-related deficiencies. The completion of the
solution phaseproject is
estimated to be prior$200,000, primarily for services and costs of updating some
existing software. The Company has established a committee which initiated
communications with various third parties with which it has significant
relationships to determine their readiness with respect to the Year 2000 issue.
These third parties include food and paper distributors, banks, and other
entities. Based on responses received from these third parties, it appears
that the Year 2000 issues are being addressed. The Company has not been
informed of significant Year 2000 issues by third parties with which it has
material relationships. The Company intends to continue communications and
monitor Year 2000 concerns that might develop.
The Company has obtained assurances that our primary food and paper
distributors will have ample stock on hand should any anticipated impactsecondary distributors
experience unanticipated Year 2000 issues. Based on our systems. Thefindings and
discussions with all significant vendors, the Company believes the likelihood
is also surveying suppliersremote that its vendors have not fully addressed the Year 2000 issues.
However, despite the Company's diligent preparation, some of its vendors may
fail to perform effectively or may fail to timely or completely deliver
products or services. In those circumstances, the Company expects to be able
to conduct normal business operations and customers to determinebe able to obtain necessary
products from alternative vendors; however, there would be some disruption
which could have an adverse effect on the statusCompany's consolidated financial
position, results of their year 2000 compliance programs.operations, and cash flows.
Forward-Looking Statements
Except for the historical information contained in this annual report, certain
statements made herein are forward looking regarding cash flow from operations,
restaurant openings, operating margins, capital requirements, the availability
of acceptable real estate locations for new restaurants, 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. Management does not
expect to update such forward-looking statements continually as conditions
change, and readers should consider that such statements pertain only to the
date hereof.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
See information in Item 8 of Part II of this Report appearing
in the Notes to Consolidated Financial Statements under the caption
"Interest-Rate Swap Agreements" in Note 1 and in Note 4.
Item 8. Financial Statements and Supplementary Data.
LUBY'S, CAFETERIAS, INC.
FINANCIAL STATEMENTS
Years Ended August 31, 1999, 1998, 1997, and 19961997
with Report of Independent Auditors
Report of Independent Auditors
The Board of Directors and Shareholders
Luby's, Cafeterias, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Luby's, Cafeterias, Inc.
and Subsidiaries at August 31, 19981999 and 1997,1998, and the related consolidated
statements of income, shareholders' equity, and cash flows for each of the
three years in the period ended August 31, 1998.1999. 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 generally accepted auditing
standards. 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, Cafeterias, Inc. and Subsidiaries at August 31, 19981999 and 1997,1998, and the results
of its operations and its cash flows for each of the three years in the period
ended August 31, 1998,1999, in conformity with generally accepted accounting
principles.
As discussed in Note 2 to the consolidated financial statements, in
fiscal 1997 the Company changed its method of accounting for the impairment of
long-lived assets and for long-lived assets to be disposed of.
ERNST & YOUNG LLP
San Antonio, Texas
October 5, 1998
1999
Luby's, Cafeterias, Inc.
Consolidated Balance Sheets
August 31,
1999 1998 1997
________ _______
(Thousands of dollars)
Assets
Current assets:
Cash and cash equivalents $ 3,760286 $ 6,4303,760
Trade accounts and other receivables 584 704 510
Food and supply inventories 3,686 5,072 4,507
Prepaid expenses 4,552 4,375 3,586
Deferred income taxes 956 1,201 937
________ ________
Total current assets 10,064 15,112 15,970
Property held for sale 12,322 17,340 12,680
Investments and other assets - at cost:assets:
Land held for future use 1,5823,739 1,582
Other assets 5,482 6,410 4,529
________ ________
Total investments and other assets 9,221 7,992 6,111
Property, plant, and equipment - at cost, less
accumulated depreciation and amortization 314,418 298,597 334,017
________ ________
Total assets $346,025 $339,041 $368,778
________ ________
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable - trade$ 19,686 $ 12,482
$ 13,584
Dividends payable 4,484 4,654 4,653
Accrued expenses and other liabilities 25,260 28,231 25,038
Income taxes payable 382 2,069 2,406
________ ________
Total current liabilities 49,812 47,436 45,681
Long-term debt 78,000 73,000 84,000
Deferred income taxes and other credits 9,942 7,019 19,018
Reserve for store closings 5,067 6,172 1,239
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 27,096 27,012 26,945
Retained earnings 273,165 262,540 276,140
Less cost of treasury stock, 4,982,692
shares in 1999 and 4,132,392 shares in
1998 and 4,136,693 shares in
1997(105,826) (92,907) (93,014)
________ ________
Total shareholders' equity 203,204 205,414 218,840
________ ________
Total liabilities and shareholders' equity $346,025 $339,041 $368,778
________ ________
See accompanying notes.
Luby's, Cafeterias, Inc.
Consolidated Statements of Income
Years Ended August 31,
1999 1998 1997 1996
________ ________ ________
(Thousands of dollars except per share data)
Sales $501,493 $508,871 $495,446 $450,128
Costs and expenses:
Cost of food 122,418 129,126 121,287 110,008
Payroll and related costs 154,817 155,152 146,940 124,333
Occupancy and other operating
expenses 155,828 154,501 150,638 132,595
General and administrative expenses 22,031 22,061 19,451 20,217
Provision for asset impairments
and store closings - 36,852 12,432 -
________ ________ ________
455,094 497,692 450,748 387,153
________ ________ ________
Income from operations 46,399 11,179 44,698
62,975
Interest expense (4,761) (5,078) (4,037) (2,130)
Other income, net 1,846 1,778 2,001 1,697
________ ________ ________
Income before income taxes 43,484 7,879 42,662 62,542
Provision (benefit) for income taxes:
Current 11,558 15,515 17,616
20,940
Deferred 3,313 (12,717) (3,401) 2,394
________ ________ ________
14,871 2,798 14,215 23,334
________ ________ ________
Net income $ 28,613 $ 5,081 $ 28,447 $ 39,208
________ ________ ________
Net income per share - basic $ 1.27 $ 0.22 $ 1.22 $ 1.66
________ ________ ________
Net income per share - assuming
dilution $ 1.26 $ 0.22 $ 1.21 $ 1.64
________ ________ ________
See accompanying notes.
Luby's, Cafeterias, Inc.
Consolidated Statements of Shareholders' Equity
Common Stock Total
Issued Treasury Paid-In Retained Shareholders'
Shares Amount Shares Amount Capital Earnings Equity
__________________________________________________________________________________________
(Amounts in thousands except per share data)
Balance at
August 31, 19951996 27,403 $8,769 (4,090) $(91,983)(3,426) $ (77,415) $26,945 $248,973 $192,704
Net income for the
year - - - - - 39,208 39,208
Common stock issued
under employee bene-
fit plans, net of
shares tendered in
partial payment
and including
tax benefits - - 916 20,565 - (3,218) 17,347
Cash dividends,
$.74 per share - - - - - (17,589) (17,589)
Purchases of treasury
stock - - (252) (5,997) - - (5,997)
______ ______ ______ _______ _______ _______ _______
Balance at
August 31, 1996 27,403 8,769 (3,426) (77,415) 26,945 267,374 225,673$267,374 $225,673
Net income for the
year - - - - - 28,447 28,447
Common stock issued
under employee bene-
fit plans, net of
shares tendered in
partial payment and
including tax benefits - - 186 4,319 - (1,027) 3,292
Cash dividends,
$.80 per share - - - - - (18,654) (18,654)
Purchases of treasury
stock - - (897) (19,918) - - (19,918)
______ ______ ______ _______ _______ _______ _______
Balance at
August 31, 1997 27,403 8,769 (4,137) (93,014) 26,945 276,140 218,840
Net income for the
year - - - - - 5,081 5,081
Common stock issued
under employee bene-
fit plans, net of
shares tendered in
partial payment and
including tax benefits - - 5 107 67 (65) 109
Cash dividends,
$.80 per share - - - - - (18,616) (18,616)
______ ______ ______ _______ _______ _______ _______
Balance at
August 31, 1998 27,403 8,769 (4,132) (92,907) 27,012 262,540 205,414
Net income for the
year - - - - - 28,613 28,613
Common stock issued
under employee bene-
fit plans, net of
shares tendered in
partial payment 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 27,403 $8,769 (4,132) $(92,907) $27,012 $262,540 $205,414(4,983) $(105,826) $27,096 $273,165 $203,204
______ ______ ______ _______ _______ ________ ________
See accompanying notes.
Luby's, Cafeterias, Inc.
Consolidated Statements of Cash Flows
Years Ended August 31,
1999 1998 1997 1996
________ ________ ________
(Thousands of dollars)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $28,613 $ 5,081 $28,447 $ 39,20828,447
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 20,025 21,121 20,196 17,693
Provision for asset impairments
and store closings - 36,852 12,132 -
Gain on disposal of property
held for sale - -(382) (704) -
(Gain) loss on disposal of
property, plant, and equipment 84 142 (110)
31Settlements associated with store
closings (275) - -
________ ________ _______________
Cash provided by operating
activities before changes in
operating assets and liabilities 48,065 62,492 60,665 56,932
Changes in operating assets and
liabilities:
(Increase) decrease in trade
accounts and other receivables 120 (194) 31 (230)
(Increase) decrease in food and
supply inventories 1,386 (565) 10 (483)
Increase in prepaid expenses (177) (789) (391)
(346)
Increase(Increase) decrease in other assets 912 (1,881) (226) (1,115)
Increase (decrease )in accounts
payable-tradepayable 7,204 (1,102) 174 2,441
Increase (decrease) in accrued
expenses and other liabilities (2,887) 3,260 817
(337)
Increase (decrease)Decrease in income taxes payable (1,687) (337) (48) 1,263
Increase (decrease) in deferred
income taxes and other credits 3,168 (12,263) (3,664) 2,229
Decrease in reserve for store
closings (830) (664) - -
_______ ________ ________
Net cash provided by operating
activities 55,274 47,957 57,368 60,354
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposal of property
held for sale 5,850 4,888 - -
Proceeds from disposal of property,
plant, and equipment 178 73 2,803 153
Purchases of land held for future use (6,926) (933) (11,649) (5,776)
Purchases of property, plant, and
equipment (31,773) (25,082) (50,783) (42,753)
_______ ________ ________
Net cash used in investing
activities (32,671) (21,054) (59,629) (48,376)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common
stock under stock option plansplan - 42 2,878
16,145
Net payments of short-term
borrowings - - (57,000)
Proceeds from long-term debt 908,000 979,000 268,000
Reductions of long-term debt (919,000) (936,000) (227,000)(payments)
under revolving credit agreement 5,000 (11,000) 43,000
Purchases of treasury stock (12,919) - (21,077)
(4,839)
Dividends paid (18,158) (18,615) (18,797) (16,989)
_______ _______ _______
Net cash provided by
(used in) financing activities (26,077) (29,573) 6,004 (21,683)
_______ _______ _______
Net increase (decrease) in cash
and cash equivalents (3,474) (2,670) 3,743 (9,705)
Cash and cash equivalents at
beginning of year 3,760 6,430 2,687 12,392
________ ________ ________
Cash and cash equivalents at end
of year $ 286 $ 3,760 $ 6,430 $ 2,687
________ ________ ________
See accompanying notes.
Luby's, Cafeterias, Inc.
Notes to Consolidated Financial Statements
August 31, 1999, 1998, 1997, and 19961997
1. Nature of Operations and Significant Accounting Policies
Nature of Operations
Luby's, Cafeterias, Inc. and Subsidiaries (the Company), based in San Antonio, Texas,
owns and operates restaurants in the southern United States. As of
August 31, 1998,1999, the Company operated a total of 229223 units. The Company
locates its restaurants convenient to shopping and business developments as
well as to residential areas. Accordingly, the restaurants cater primarily
to shoppers and store and office personnel at lunch and to families at
dinner.
Principles of Consolidation
Effective February 1, 1997, the Company was restructured into a holding
company. The accompanying consolidated financial statements include the
accounts of Luby's, Cafeterias, 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 as an indicator 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.
Advertising Expenses
Advertising costs are expensed as incurred. Advertising expense as a
percentage of sales approximates two percent2.4% for fiscal year 1999 and 2.0% for
fiscal years 1998 1997, and 1996.1997.
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.
Stock-Based Compensation
During 1997 the Company adopted FAS Statement No. 123, "Accounting for
Stock-Based Compensation" (FAS 123), which encourages, but does not require,
the Company to record compensation cost for stock-based compensation plans
at fair value. The Company has chosen to continue to account for stock-based
compensation using the intrinsic value method prescribed in APB 25.
Earnings Per Share
During 1998 the Company adopted FAS Statement No. 128, "Earnings Per
Share" (FAS 128). FAS 128 replaced the previously reported primary and fully
diluted earnings per share with basic and diluted earnings per share.share,
respectively. Unlike primary earnings per share, basic earnings per share
excludes any dilutive effects of options, warrants, and convertible
securities. Diluted earnings per share is very similar to the previously
reported fully diluted earnings per share. Earnings per share amounts for
all periods have been restated to conform to the requirements of FAS 128.
Interest-Rate Swap Agreements
The Company enters into interest-rate swap agreements to modify the
interest characteristics of its outstanding debt. Each interest-rate swap
agreement is designated with all or a portion of the principal balance and
term of a specific debt obligation. These agreements involve the exchange of
amounts based on a fixed interest rate for amounts based on variable
interest rates over the life of the agreement without an exchange of the
notional amount upon which the payments are based. The differential to be
paid or received as interest rates change is accrued and recognized as an
adjustment to interest expense related to the debt. The related amount
payable to or receivable from counterparties is included in other
liabilities or assets. The fair values of these agreements are estimated
by obtaining quoted market prices.
Use of Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, 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
In June 1998 the Financial Accounting Standards Board issued Statement
No. 133, "Accounting for Derivative Instruments and Hedging Activities," which
is required to be adopted in years beginning after June 15, 2000. Because
of the Company's minimal use of derivatives, management does not anticipate
that the adoption of the new statement will have a significant effect on
earnings or the financial position of the Company.
2. Impairment of Long-Lived Assets Theand Store Closings
In 1998 and 1997 the Company recorded a charge to operating costs of
$36.9 million charge duringand $12.4 million, respectively, for asset impairments and
store closings. In 1998 the fourth quarter
of 1998charge related to the adoption of itsthe Company's
strategic plan which includesincluded the disposition relocation, or write-downrelocation of several
restaurants that havehad not met management's financial return expectations.expectations,
and led management to exit or scale down the Company's presence in certain
markets and reevaluate the market potential of certain locations. The 1997
charge related to asset impairments that were recognized upon the initial
adoption of FAS Statement No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of" (FAS 121).
The 1998 charge included $14.7 million for the closing of 14 underperforming
restaurants, $10.7 million for the write-downasset impairment and other costs of 16
restaurants which will be relocated to optimize their market potential, and
$11.4 million for the write-down of certain restaurant properties which the
Company plans to continue to operate. Additionally, the Company revised its
estimate of the net realizable value of surplus properties which the Company
plans to sell, resulting in an additional write-down of $0.1 million. The
1997 charge included $4.6 million for the closing of four underperforming
restaurants, $3.0 million for the 14write-down of certain properties which the
Company planned to continue to operate, $2.1 million for the write-down of
surplus properties the Company plans to sell, $1.4 million for the write-down
of computer hardware which was replaced by a new point-of-sale system, and
$1.3 million for various costs consisting primarily of the write-off of
development costs of future sites the Company no longer intends to pursue.
All charges were recorded in the provision for asset impairments and store
closings.
Charges for the closing of the underperforming restaurants and the
restaurants to be relocated related toinclude the write-down of property and equipment
to net realizable value, costs to settle lease obligations, professional
fees, and severance costs. For those assets which the Company plans to
continue to operate, the carrying values were written down to estimated
future discounted cash flows or fully written off in the case of negative
future cash flows.
All charges were recorded in the provision for asset impairments and store
closings. The Company expects to dispose of closed restaurant properties and
surplus properties held for sale within two year.
As a result of the Company adopting FAS Statement No. 121, "Accounting
For the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of," during 1997, a charge to operating costs of $12.4 million was
recorded. The charge included $4.6 million for the closing of four
underperforming restaurants, $3 million for the write-down of certain
restaurant properties which the Company plans to continue to operate, the
write-down of $2.1 million for surplus properties the Company plans to sell,
$1.4 million for the write-down of computer hardware, and $1.3 million for
various costs consisting primarily of the write-off of development costs
of future sites the Company no longer intends to pursue. The charge for the
restaurant closings and asset impairments was based on the same factors as
discussed above in the 1998 charge. The surplus properties which the Company previously
intended to use for future development are now being actively marketed and
were written down to the lower of their carrying amount or estimated net
realizable value.
At August 31, 1999 and 1998, the Company had a reserve for store closings of
$5.1 million and $6.2 million, respectively, for settlement of lease
obligations, professional fees, severance costs, and other costs related to
the closings of restaurants. During 1999 and 1998 the Company charged
$830,000 and $664,000, respectively, against these reserves for settlement of
lease obligations, severance costs, and professional fees. Additionally, the
Company reduced its liability by $275,000 in 1999, which is included in other
income, as a result of a favorable change in management's estimate of lease
settlement costs. The Company also made a decisionexpects to implement
a new point-of-sale system, andutilize the remaining book valuereserves for
lease and other costs associated with anticipated settlement agreements in 2000
and beyond.
As of August 31, 1999, the Company had closed 12 of the old computer
equipment14 restaurants
designated for closure in 1998 and had relocated one of the 16 restaurants
designated for relocation. Plans for the closing and relocation of the
remaining restaurants are in different stages of negotiation and planning.
Each of the four restaurants designated for closing in 1997 has been closed.
As of August 31, 1999, the Company is responsible for minimum rent obligations
of approximately $6,943,000 related to be replaced was written off. All charges were recorded in the
provisionrestaurants designated for asset impairments and store closings.closure,
but lease termination settlements have not been completed.
The results of operations from the restaurants to be disposed of are not
material.
3. Property, Plant, and Equipment
The cost and accumulated depreciation of property, plant, and equipment at
August 31, 19981999 and 1997,1998, together with the related estimated useful lives
used in computing depreciation and amortization, are reflected below:
Estimated
1999 1998 1997 Useful Lives
________ ________ _______________
(Thousands of dollars)
Land $ 71,24475,446 $ 78,54071,244 -
Restaurant equipment and
furnishings 130,533 124,334 124,188 3 to 1015 years
Buildings 221,024 209,276 222,316 20 to 40 years
Leasehold and leasehold
improvements 42,727 41,314 52,833 Term of leases
Office furniture and equipment 9,599 4,759 3,540 5 to 10 years
Transportation equipment 772 738 657 5 years
Construction in progress 7,812 3,846 8,788 -
________ ________
487,913 455,511 490,862
Less accumulated depreciation
and amortization 173,495 156,914 156,845
________ ________
$314,418 $298,597 $334,017
________ ________
Total interest expense incurred for 1999, 1998, and 1997 was $5,170,000,
$5,354,000, and 1996 was $5,354,000,
$5,066,000, and $3,230,000, respectively, which approximated the amount paid
in each year. The amounts capitalized on qualifying properties in 1999,
1998, and 1997 were $409,000, $276,000, and 1996 were $276,000, $1,029,000, and $1,100,000, respectively.
4. Debt
During 1996 the Company entered into a $100 million credit facility with a
syndication of four banks. As part of this credit facility, the Company has
a revolving credit agreement which allows borrowings for varying periods
through February 27, 2001, at the lower of the prime rate or other rate
options available at the time of borrowing. The credit facility includes a
maximum commitment for letters of credit of $20 million. The credit facility
contains business covenants which, among other things, impose certain
financial restrictions on the Company relating primarily to leverage and net
worth.
During 1997 the Company increased the credit facility to $125 million,
extended the agreement through June 30, 2002, and negotiated a facility fee
of .085% on the total commitment. Additionally, the Company entered into two
Interest Rate Protection Agreements (swaps) to fix the rate on a portion of
the floating-rate debt outstanding under its revolving line of credit. The
swaps are fixed-rate agreements in the notional amounts of $30 million and
$15 million. Both swaps have an interest rate of 6.4975%6.50% and a termination
date of June 30, 2002. At August 31, 1998, the Company estimates it would
have to pay $1,670,000 to terminate the agreements.1999, these swaps were in a net
unfavorable position of approximately $190,000.
As of August 31, 1998,1999, the balance outstanding under the revolving credit
agreement was $73,000,000is $78,000,000 at an interest rate of 6.46%6.2%.
At August 31, 1998,1999, letters of credit of approximately $7,234,000$8,652,000 have been
issued as security for the payment of insurance obligations classified as
accrued expenses on the balance sheets.
5. Leases
The Company conducts a major part of its operations from facilities which are leased
under noncancelable lease agreements. Most of the leases are for periods of
ten to 25twenty-five years and provide for contingent rentals based on sales in
excess of a base amount. Approximately 80% of the leases contain renewal
options ranging from five to 30thirty years.
Annual future minimum lease payments under noncancelable operating leases as
of August 31, 1998,1999, are as follows:
Years ending August 31: (Thousands of dollars)
19992000 $ 6,686
2000 6,6077,059
2001 6,2426,579
2002 5,8276,147
2003 5,5236,010
2004 5,705
Thereafter 37,92438,241
_______
Total minimum lease payments $68,809$69,741
_______
Total rent expense for operating leases for the years ended August 31, 1999,
1998, 1997, and 19961997, was as follows:
1999 1998 1997 1996
_______ ________ ________
(Thousands of dollars)
Minimum rentals $7,052 $7,286 $6,884
$5,807
Contingent rentals 843 976 996 1,126
______ ______ ______
$7,895 $8,262 $7,880 $6,933
______ ______ ______
6. 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 current and
future distributions under
the plans amounted to $355,000, $658,000, $-0-, and $400,000$-0- in 1999, 1998, 1997, and 1996,1997,
respectively. During the yearsyear ended August 31, 1998,
1997, and 1996, -0-, 4,790 and 10,590 shares of common
stock were issued under the plans out of treasury stock, respectively.stock.
Stock Option PlansPlan
The Company has a Managementan Incentive Stock Plan (Stock Plan) to provide for market-basedmarket-
based incentive awards, including stock options, stock appreciation rights,
restricted stock, and performance share awards. Under the terms of
the Management Incentive Stock Plan, nonqualified stock options, incentive
stock options, and other types of awards for not more than 2,700,000 shares of
the Company's common stock may be granted to eligible employees of the
Company, including officers. Stock options may be granted
at prices not less than 100% of fair market value at 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 2,000,000 shares of the Company's common
stock for the Stock Plan. Under the terms of the Stock Plan, including the
1999 authorization, nonqualified stock options, incentive stock options, and
other types of awards for not more than 4,800,000 shares of the Company's
common stock may be granted to eligible employees of the Company, including
officers.
Following is a summary of activity in the stock option plansplan for the three
years ended August 31, 1999, 1998, 1997 and 1996:
Weightd1997:
Weighted Average
Exercise Price Per
Share-Options Options Options
Outstanding Outstanding Exercisable
________________ ___________ ___________
Balances - August 31, 1995 $19.07 1,747,114 554,836
Granted 21.62 223,648 -
Became exercisable - - 1,167,766
Cancelled or expired 20.59 (53,415) (38,903)
Exercised 18.23 (980,600) (980,600)
_________ _________
Balances - August 31, 1996 20.48$20.48 936,747 703,099
Granted 22.90 33,675 -
Became exercisable - - 173,658
CancelledCanceled or expired 21.55 (295,623) (281,723)
Exercised 17.80 (277,501) (277,501)
_________ _________
Balances - August 31, 1997 21.76 397,298 317,533
Granted 19.33 488,498 -
Became exercisable - - 11,119
CancelledCanceled or expired 22.63 (111,175) (92,573)
Exercised 16.25 (10,375) (10,375)
_________ _________
Balances - August 31, 1998 $20.1720.17 764,246 225,704
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
_________ _________
Exercise prices for options outstanding as of August 31, 1998, ranged1999, range from
$16.50$13.94 to $23.75 per share. The weighted average remaining contractual life
of these options is 5.85.2 years. The options exercisable as of August 31, 1998,1999,
have a weighted average exercise price of $21.47$20.59 per share.
At August 31, 19981999 and 1997,1998, the number of stock option shares available to
be granted under the planplans was 277,2301,004,423 and 654,553277,230 shares, respectively.
The Company has elected to follow APB 25, "Accounting for Stock Issued to
Employees." Accordingly, since employee stock options are granted at market
price on the date of grant, no compensation expense is recognized. However,
FAS 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 average fair value of the individual options granted during
1999, 1998, 1997, and 19961997 is estimated atas $3.00, $3.25, $4.42, and $3.22,$4.42, respectively,
on the date of grant. The impact on net income is minimal; therefore, the
pro forma disclosure requirements prescribed by FAS 123 are not significant
to the Company. The fair values were determined using a Black-Scholes option
pricing model with the following assumptions:
1999 1998 1997 1996
____ ____ ____
Dividend yield 4.4% 3.5% 3.3%5.20% 4.40% 3.50%
Volatility .19 .18 .14 .12
Risk-free interest rate 7.0% 7.0% 7.0%7.00% 7.00% 7.00%
Expected life 6.07 5.16 6.86
4.13
Deferred Compensation
Deferred compensation agreements exist for several key management
employees, all of whom are current or former officers. Under the agreements,
the Company is obligated to provide for each such employee or his
beneficiaries, during a period of ten years after the employee's death,
disability, or retirement, annual benefits ranging from $15,500 to $43,400.
The estimated present value of future benefits to be paid is being
accrued over the period from the effective date of the agreements until the
expected retirement dates of the participants. The net expense incurred for
this plan for the years ended August 31, 1998, 1997, and 1996, amounted to
$49,000, $47,000, and $239,000, respectively.
The Company also 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 31, 1999, 1998, and 1997 was $150,000, $163,000,
and $120,000, respectively, and the unfunded accumulated benefit obligation
as of August 31, 1999, 1998, and 1997 was approximately $284,000$564,000, $447,000,
and $315,400,$315,000, respectively.
During 1997 the Company established 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-tax basis to the plan. The Company
does not match the participants' contributions to the plan.
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 31, 1999, was approximately $39,000.
Profit Sharing
The Company has a profit sharing plan and retirement trust 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 is
funded by contributions of a portion of the net earnings of the Company. The
plan provides that for each fiscal year in which the Company's net income
(before income taxes and before any contribution to the plan) meets certain
minimum standards, the Company is obligated to contribute to the plan, at a
minimum, an amount equal to a defined percentage of the participants'
compensation. In no event will the required contribution exceed 10% of the
Company's income before income taxes and before any contribution to the plan.
At the discretion of the board of directors, the Company can make a greater
contribution than required, subject to certain limitations. The Company's
annual contribution to the plan amounted to $1,700,000, $1,800,000, and
$1,500,000 for 1999, 1998, and $5,100,000 for 1998, 1997, and 1996, respectively.
During 1997 the Company established 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-tax basis to the
plan. The Company does not match the participants' contributions to the
plan.
7. Income Taxes
The tax effect of temporary differences results in deferred income tax assets
and liabilities as of August 31 as follows:
1999 1998 1997
________ ___________
(Thousands of dollars)
Deferred tax assets:
Workers' compensation insurance $ 1,201956 $ 9371,201
Deferred compensation 775 827 651
Asset impairments and store closing reserves 14,523 16,135 3,453
_______ _______
Total deferred tax assets 16,254 18,163 5,041
Deferred tax liabilities:
Amortization of capitalized interest 495 414 439
Depreciation and amortization 20,544 19,573
18,960
Other 1,875 1,523 1,706
_______ _______
Total deferred tax liabilities 22,914 21,510 21,105
_______ _______
Net deferred tax liability $ 6,660 $ 3,347 $16,064
_______ _______
The reconciliation of the provision for income taxes to the expected income
tax expense (computed using the statutory tax rate) is as follows:
1999 1998 1997 1996
Amount % Amount % Amount %
______ ____ _______ ____ _______ ____
(Thousands of dollars and as a percent of pretax income)
Normally expected
income tax expense $15,219 35.0% $2,758 35.0% $14,932 35.0%
$21,890 35.0%
State income taxes 156 .4 114 1.4 745 1.7
1,488 2.4
Jobs tax credits (155) (.4) (26) (.3) (101) (.2)
(1) -
Other differences (349) (.8) (48) (.6) (1,361) (3.2) (43) (.1)
______ ____ _______ ____ _______ ____
$14,871 34.2% $2,798 35.5% $14,215 33.3% $23,334 37.3%
______ ____ _______ ____ _______ ____
During 1997 the Company restructured into a holding company which effectively
decreased future expected state taxes. The deferred tax assets and
liabilities were reduced accordingly, and the effect on total income tax
expense is included above with "Other differences."
Cash payments for income taxes for 1999, 1998, and 1997 were $13,245,000,
$15,852,000, and 1996 were $15,852,000,
$17,664,000, and $19,677,000, respectively.
8. Commitments and Contingencies
At August 31, 1998,1999, the Company had onesix restaurants and several restaurant
remodels under construction. The aggregate unexpended cost under the
construction contractcontracts was approximately $484,000.$3,450,000.
The Company has unconditionally guaranteed a $2,000,000 loan balances outstanding at August 31, 1999, of
$1,867,000 relating to purchases of Company stock made by officers of the
Company under a line
of credit foran officer loan program. Under the program, shares were
purchased by officers; and funding, if necessary, was obtained from an
unrelated limited partnership in exchange for advertising
rights and a participation in future profits of the venture.third party.
The Company is presently, and from time to time, subject to pending claims
and lawsuits arising in the ordinary course of business. In the opinion of
management, the ultimate resolution of these pending legal proceedings will
not have a material adverse effect on the Company's operations or
consolidated financial position.
9. 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 rights may
become exercisable under circumstances described in the Planplan if any person or
group (an Acquiring Person) becomes the beneficial owner of 15% or more of
the common stock. 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 the beneficial owner of 15% or more of the common stock, each
right will entitle the holder, other than the Acquiring Person, to purchase
for the Purchase Price a number of shares of the Company's common stock
having a market value of four times the Purchase Price.
The Board of Directors authorizedperiodically authorizes the purchase in the open
market of up
to 1,000,000 shares of the Company's outstanding common stock through
December 31, 1998, of which 149,700 shares were purchased in fiscal year 1997.stock. Under this and previoussuch
authorizations, the Company purchased 897,500850,300, -0-, and 252,200897,500 shares of its
common stock at a cost of $12,919,000, $-0-, and $19,918,000 during 1999,
1998, and $5,997,000
during 1997, and 1996, respectively, which are being held as treasury stock.
10. Per Share Information
A reconciliation of the numerators and denominators of basic earnings per
share and diluted earnings per share for the years ended August 31, 1999,
1998, 1997, and 996,1997, is shown in the table below.
August 31,
1999 1998 1997 1996
________ __________ __________
(Thousands of dollars except per share data)
Numerator:
Net income $28,613 $ 5,081 $28,447 $39,208
________ __________ __________
Denominator for basic earnings
per share -
weighted average shares 23,27122,614 23,270 23,406 23,689
Effect of dilutive securities:
Employee stock options 23 2 19 232
________ __________ __________
Denominator for earnings -
per share - assuming
dilution - adjusted
weighted average shares 23,27322,637 23,272 23,425 23,921
________ __________ __________
Net income per share - basic $ 1.27 $ 0.22 $ 1.21 $ 1.661.22
Net income per share - assuming
dilution $ 1.26 $ 0.22 $ 1.21 $ 1.64
________ __________ __________
11. Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities at August 31 consist of:
1999 1998 1997
_______ _______
(Thousands of dollars)
Salaries and bonuses $ 6,815 $ 7,520
$ 6,662
Rent 702 748 721
Taxes, other than income 6,428 6,928 7,245
Profit sharing plan 1,713 1,864
1,452
Insurance 9,134 10,482
7,747
Other 468 689 1,211
_______ _______
$25,260 $28,231 $25,038
_______ _______
12. Quarterly Financial Information (Unaudited)
The following is a summary of quarterly unaudited financial information
for 1999 and 1998:
Three Months Ended
November 30, February 28, May 31, August 31,
1998 and 1997:1999 1999 1999
________ ________ ________ _________
(Thousands of dollars except per share data)
Sales $125,708 $123,771 $127,084 $124,930
Gross profit 53,790 57,214 58,435 54,819
Net income 5,672 7,219 8,776 6,946
Net income per share .25 .32 .39 .31
Three Months Ended
November 30, February 28, May 31, August 31,
1997 1998 1998 1998
________ ________ ________ _________
(Thousands of dollars except per share data)
Sales $124,672 $123,204 $131,230 $129,765
Gross profit 53,505 54,913 59,314 56,861
Net income (loss) 6,207 6,941 8,147 (16,214)*
Net income (loss) per
share .27 .30 .35 (.70)*
Three Months Ended
November 30, February 28, May 31, August 31,
1996 1997 1997 1997
________ ________ ________ _________
(Thousands of dollars except per share data)
Sales $122,287 $118,830 $127,630 $126,699
Gross profit 55,887 54,908 59,387 57,037
Net income 8,166 8,404 9,583 2,294*
Net income per share .35 .36 .41 .10*
*See Note 2 for discussion of charges recorded during the fourth quarter of
1998 and 1997.1998.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant.
There is incorporated in this Item 10 by reference that portion of the
Company's definitive proxy statement for the 19992000 annual meeting of
shareholdersShareholders appearing therein under the captions "Election of Directors,"
"Information Concerning Directors and Committees," and "Certain Relationships
and Related Transactions." See also the information in Item 4A of Part I of
this Report.
Item 11. Executive Compensation.
There is incorporated in this Item 11 by reference that portion of the
Company's definitive proxy statement for the 19992000 annual meeting of
shareholders appearing therein under the captions "Executive Compensation,"
"Deferred Compensation," "Certain Relationships and Related Transactions," and
"Compensation of Chief Executive Officer."
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
There is incorporated in this Item 12 by reference that portion of the
Company's definitive proxy statement for the 19992000 annual meeting of
shareholdersShareholders appearing therein under the captions "Principal Shareholders" and
"Management Shareholders."
Item 13. Certain Relationships and Related Transactions.
There is incorporated in this Item 13 by reference that portion of the
Company's definitive proxy statement for the 19992000 annual meeting of
shareholders appearing therein under the caption "Certain Relationships
and Related Transactions."
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) Documents.
1. Financial Statements
The following financial statements are filed as part of this Report:
Consolidated balance sheets at August 31, 19981999 and 19971998
Consolidated statements of income for each of the three years in the
period ended August 31, 19981999
Consolidated statements of shareholders' equity for each of the three
years in the period ended August 31, 19981999
Consolidated statements of cash flows for each of the three years in the
period ended August 31, 19981999
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:
2 - Agreement and Plan3(a) Certificate of Merger dated November 1, 1991, betweenIncorporation of Luby's, Cafeterias, Inc., a Texas corporation, and Luby's
Cafeterias, Inc., a Delaware corporationas currently in effect
(filed as Exhibit 23(b) to the Company's Quarterly Report on
Form 10-Q for the quarter ended November 30, 1991, and incorporated herein by reference).
3(a) - Certificate of Incorporation of Luby's Cafeterias, Inc., a
Delaware corporation, as currently in effect (filed as
Exhibit 3(a) to the Company's Quarterly Report on Form 10-Q for
the quarter ended February 28, 1994,May 31, 1999, and incorporated
herein by reference).
3(b) - Bylaws of Luby's, Cafeterias, 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,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) - 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(f) - 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(g) - 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, and incorporated herein by reference).
4(h) - ISDA Master Agreement dated July 2, 1997, between 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, and incorporated herein by reference).
4(i) - 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).
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, and incorporated herein by reference).*
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) - Incentive Bonus Plan of Luby's Cafeterias, Inc. adopted
October 19, 1983 (filed as Exhibit 10(e) to the Company's Annual
Report on Form 10-K for the fiscal year ended August 31, 1983,
and incorporated herein by reference).
10(d) - Amendment to Incentive Bonus Plan of Luby's Cafeterias, Inc.
adopted January 14, 1997 (filed as Exhibit 10(f) to the
Company's Quarterly Report on Form 10-Q for the quarter ended
February 28, 1997, and incorporated herein by reference).
10(e) Luby's Cafeterias, Inc. Incentive Bonus Plan for Fiscal 1998 adopted
January 9, 1998 (filed as Exhibit 10(g) to the Company's Quarterly
Report on Form 10-Q for the quarter ended February 28, 1998, and
incorporated herein by reference).
10(f) -*
10(d) Performance Unit Plan of Luby's Cafeterias, Inc. approved by the
shareholders on January 12, 1984 (filed as Exhibit 10(f) to the
Company's Annual Report on Form 10-K for the fiscal year ended
August 31, 1984, and incorporated herein by reference).
10(g) -*
10(e) Amendment to Performance Unit Plan of Luby's Cafeterias, Inc.
adopted January 14, 1997 (filed as Exhibit 10(h) to the Company's
Quarterly Report on Form 10-Q for the quarter ended February 28,
1997, and incorporated herein by reference).
10(h) - Employment Contract dated January 8, 1988, between Luby's
Cafeterias, Inc. and George H. Wenglein (filed as Exhibit 10(h)
to the Company's Annual Report on Form 10-K for the fiscal year
ended August 31, 1988, and incorporated herein by reference).
10(i) -*
10(f) 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(j) -*
10(g) 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(k) -*
10(h) 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(l) -*
10(i) 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(m)*
10(j) 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(n) -*
10(k) Nonemployee Director Stock Option Plan of Luby's Cafeterias, Inc.
approved by the shareholders on January 13, 1995 (filed as
Exhibit 10(h) to the Company's Quarterly Report on Form 10-Q for the
quarter ended February 28, 1995, and incorporated herein by
reference).
10(o) -*
10(l) Amendment to Nonemployee Director Stock Option Plan of Luby's
Cafeterias, Inc. adopted January 14, 1997 (filed as Exhibit 10(o) to
the Company's Quarterly Report on Form 10-Q for the quarter ended
February 28, 1997, and incorporated herein by reference).
10(p) -*
10(m) Employment Contract dated January 12, 1996, between Luby's
Cafeterias, Inc. and John B. Lahourcade (filed as Exhibit 10(i) to
the Company's Quarterly Report on Form 10-Q for the quarter ended
February 29, 1996, and incorporated herein by reference).
10(q) -*
10(n) 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(r) -*
10(o) 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(s)*
10(p) 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(t) - Luby's Cafeterias, Inc. Welfare Benefit Plan Trust dated
July 18, 1996 (filed as Exhibit 10(k) to the Company's Annual
Report on Form 10-K for the fiscal year ended August 31, 1996,
and incorporated herein by reference).
10(u) - Retirement Agreement dated March 17, 1997, between Luby's
Cafeterias, Inc. and Ralph Erben (filed as Exhibit 10(t) to the
Company's Quarterly Report on Form 10-Q for the quarter ended
February 28, 1997, and incorporated herein by reference).
10(v) -*
10(q) Employment Agreement dated September 15, 1997, between Luby's
Cafeterias, Inc. and Barry J.C. Parker (filed as Exhibit 10(u) to
the Company's Annual Report on Form 10-K for the fiscal year ended
August 31, 1997, and incorporated herein by reference).
10(w) -*
10(r) Amendment dated January 8, 1999, to Employment Agreement between
Luby's Cafeterias, Inc. and Barry J.C. Parker (filed as
Exhibit 10(r) to the Company's Quarterly Report on Form 10-Q for the
quarter ended May 31, 1999, and incorporated herein by reference).*
10(s) Amendment dated October 15, 1999, to Employment Agreement between
Luby's, Inc., and Barry J.C. Parker.*
10(t) Term Promissory Note of Barry J.C. Parker in favor of Luby's
Cafeterias, Inc., dated November 10, 1997, in the original principal
sum of $199,999.00 (filed as Exhibit 10(v) to the Company's Annual
Report on Form 10-K for the fiscal year ended August 31, 1997, and
incorporated herein by reference).
10(x) -*
10(u) Stock Agreement dated November 10, 1997, between Barry J.C. Parker
and Luby's Cafeterias, Inc. (filed as Exhibit 10(w) to the Company's
Annual Report on Form 10-K for the fiscal year ended August 31,
1997, and incorporated herein by reference).
10(y)*
10(v) 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(z) Agreement of Resignation, Severance, Confidentiality, Non-
Solicitation, Arbitration and General Release of All Claims
dated April 30, 1998, between Luby's Cafeterias, Inc. and
William E. Robson (filed as Exhibit 10(bb) to the Company's
Quarterly Report on Form 10-Q for the quarter ended May 31,
1998, and incorporated herein by reference).
10(aa)*
10(w) Salary Continuation Agreement dated May 14, 1998, between Luby's
Cafeterias, Inc. and Sue Elliott (filed as Exhibit 10(cc) to the
Company's Quarterly Report on Form 10-Q for the quarter ended
May 31, 1998, and incorporated herein by reference).
10(bb)*
10(x) Salary Continuation Agreement dated June 1, 1998, between Luby's
Cafeterias, Inc. and Alan M. Davis (filed as Exhibit 10(dd) to the
Company's Quarterly Report on Form 10-Q for the quarter ended
May 31, 1998, and incorporated herein by reference).
10(cc)*
10(y) Luby's Incentive Stock Plan adopted October 16, 1998.
10(dd) Executive1998 (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(z) Incentive Bonus Plan for Fiscal 1999 adopted October 16, 1998.
11 - Statement re computation of per share earnings.
21 - Subsidiaries of Luby's Cafeterias, Inc.
27 - Financial Data Schedule.
99(a) - Corporate Governance Guidelines of Luby's Cafeterias, Inc
adopted by the Board of Directors on March 19, 1998 (filed
as Exhibit 9910(dd) to the Company's Annual Report on Form 10-K for
the fiscal year ended August 31, 1998, and incorporated herein by
reference).*
10(aa) Form of Change in Control Agreement entered into between Luby's,
Inc., and Barry J.C. Parker, President and Chief Executive Officer,
as of January 8, 1999 (filed as Exhibit 10(z) to the Company's
Quarterly Report on Form 10-Q for the quarter ended February 28,May 31, 1999,
and incorporated herein by reference).*
10(bb) 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 May 31, 1999, and incorporated
herein by reference).*
10(cc) 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(dd) Luby's, Inc. Incentive Bonus Plan for Fiscal 2000.*
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,
1998, and incorporated herein by reference).
27 Financial Data Schedule.
99(a) Corporate Governance Guidelines of Luby's Cafeterias, Inc., as
amended January 7, 1999 (filed as Exhibit 99(a) to the Company's
Quarterly Report on Form 10-Q for the quarter ended May 31, 1999,
and incorporated herein by reference).
99(b) - Consent of Ernst & Young LLP.
*Denotes 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.
SIGNATURES
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: November 25, 199824, 1999 LUBY'S, CAFETERIAS, INC.
(Registrant)
By: BARRY J.C. PARKER
____________________________
Barry J.C. Parker, 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
__________________ __________________________
DAVID B. DAVISS David B. Daviss, Chairman
_______________________________ of the Board
November 25, 199824, 1999
BARRY J.C. PARKER Barry J.C. Parker, President,
_______________________________ Chief Executive Officer,
November 25, 199824, 1999 and Director
LAURA M. BISHOP Laura M. Bishop, Senior Vice
________________________________ President and Chief Financial
November 25, 199824, 1999 Officer
PAULA Y. GOLD-WILLIAMS Paula Gold-Williams, Controller
________________________________
November 25, 199824, 1999
RONALD K. CALGAARD Ronald K. Calgaard, Director
________________________________
November 25, 199824, 1999
LAURO F. CAVAZOS Lauro F. Cavazos, Director
________________________________
November 25, 199824, 1999
JUDITH B. CRAVEN Judith B. Craven, Director
________________________________
November 25, 199824, 1999
ARTHUR R. EMERSON Arthur R. Emerson, Director
________________________________
November 25, 199824, 1999
ROGER R. HEMMINGHAUS Roger R. Hemminghaus, Director
________________________________
November 25, 199824, 1999
JOHN B. LAHOURCADE John B. Lahourcade, Director
________________________________
November 25, 199824, 1999
WALTER J. SALMON Walter J. Salmon, Director
________________________________
November 25, 199824, 1999
GEORGE H. WENGLEIN George H. Wenglein, Director
________________________________
November 25, 199824, 1999
JOANNE WINIK Joanne Winik, Director
________________________________
November 25, 199824, 1999
EXHIBIT INDEX
Exhibit
2 - Agreement and Plan3(a) Certificate of Merger dated November 1, 1991, betweenIncorporation of Luby's, Cafeterias, Inc., a Texas corporation, and Luby's
Cafeterias, Inc., a Delaware corporationas currently in effect
(filed as Exhibit 23(b) to the Company's Quarterly Report on
Form 10-Q for the quarter ended November 30, 1991, and incorporated herein by reference).
3(a) - Certificate of Incorporation of Luby's Cafeterias, Inc., a
Delaware corporation, as currently in effect (filed as
Exhibit 3(a) to the Company's Quarterly Report on Form 10-Q for
the quarter ended February 28, 1994,May 31, 1999, and incorporated
herein by reference).
3(b) - Bylaws of Luby's, Cafeterias, 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,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) - 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(f) - 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(g) - 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, and incorporated herein by reference).
4(h) - ISDA Master Agreement dated July 2, 1997, between 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, and incorporated herein by reference).
4(i) - 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).
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, and incorporated herein by reference).*
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) - Incentive Bonus Plan of Luby's Cafeterias, Inc. adopted
October 19, 1983 (filed as Exhibit 10(e) to the Company's Annual
Report on Form 10-K for the fiscal year ended August 31, 1983,
and incorporated herein by reference).
10(d) - Amendment to Incentive Bonus Plan of Luby's Cafeterias, Inc.
adopted January 14, 1997 (filed as Exhibit 10(f) to the
Company's Quarterly Report on Form 10-Q for the quarter ended
February 28, 1997, and incorporated herein by reference).
10(e) Luby's Cafeterias, Inc. Incentive Bonus Plan for Fiscal 1998 adopted
January 9, 1998 (filed as Exhibit 10(g) to the Company's Quarterly
Report on Form 10-Q for the quarter ended February 28, 1998, and
incorporated herein by reference).
10(f) -*
10(d) Performance Unit Plan of Luby's Cafeterias, Inc. approved by the
shareholders on January 12, 1984 (filed as Exhibit 10(f) to the
Company's Annual Report on Form 10-K for the fiscal year ended
August 31, 1984, and incorporated herein by reference).
10(g) -*
10(e) Amendment to Performance Unit Plan of Luby's Cafeterias, Inc.
adopted January 14, 1997 (filed as Exhibit 10(h) to the Company's
Quarterly Report on Form 10-Q for the quarter ended February 28,
1997, and incorporated herein by reference).
10(h) - Employment Contract dated January 8, 1988, between Luby's
Cafeterias, Inc. and George H. Wenglein (filed as Exhibit 10(h)
to the Company's Annual Report on Form 10-K for the fiscal year
ended August 31, 1988, and incorporated herein by reference).
10(i) -*
10(f) 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(j) -*
10(g) 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(k) -*
10(h) 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(l) -*
10(i) 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(m)*
10(j) 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(n) -*
10(k) Nonemployee Director Stock Option Plan of Luby's Cafeterias, Inc.
approved by the shareholders on January 13, 1995 (filed as
Exhibit 10(h) to the Company's Quarterly Report on Form 10-Q for the
quarter ended February 28, 1995, and incorporated herein by
reference).
10(o) -*
10(l) Amendment to Nonemployee Director Stock Option Plan of Luby's
Cafeterias, Inc. adopted January 14, 1997 (filed as Exhibit 10(o) to
the Company's Quarterly Report on Form 10-Q for the quarter ended
February 28, 1997, and incorporated herein by reference).
10(p) -*
10(m) Employment Contract dated January 12, 1996, between Luby's
Cafeterias, Inc. and John B. Lahourcade (filed as Exhibit 10(i) to
the Company's Quarterly Report on Form 10-Q for the quarter ended
February 29, 1996, and incorporated herein by reference).
10(q) -*
10(n) 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(r) -*
10(o) 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(s)*
10(p) 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(t) - Luby's Cafeterias, Inc. Welfare Benefit Plan Trust dated
July 18, 1996 (filed as Exhibit 10(k) to the Company's Annual
Report on Form 10-K for the fiscal year ended August 31, 1996,
and incorporated herein by reference).
10(u) - Retirement Agreement dated March 17, 1997, between Luby's
Cafeterias, Inc. and Ralph Erben (filed as Exhibit 10(t) to the
Company's Quarterly Report on Form 10-Q for the quarter ended
February 28, 1997, and incorporated herein by reference).
10(v) -*
10(q) Employment Agreement dated September 15, 1997, between Luby's
Cafeterias, Inc. and Barry J.C. Parker (filed as Exhibit 10(u) to
the Company's Annual Report on Form 10-K for the fiscal year ended
August 31, 1997, and incorporated herein by reference).
10(w) -*
10(r) Amendment dated January 8, 1999, to Employment Agreement between
Luby's Cafeterias, Inc. and Barry J.C. Parker (filed as
Exhibit 10(r) to the Company's Quarterly Report on Form 10-Q for the
quarter ended May 31, 1999, and incorporated herein by reference).*
10(s) Amendment dated October 15, 1999, to Employment Agreement between
Luby's, Inc., and Barry J.C. Parker.*
10(t) Term Promissory Note of Barry J.C. Parker in favor of Luby's
Cafeterias, Inc., dated November 10, 1997, in the original principal
sum of $199,999.00 (filed as Exhibit 10(v) to the Company's Annual
Report on Form 10-K for the fiscal year ended August 31, 1997, and
incorporated herein by reference).
10(x) -*
10(u) Stock Agreement dated November 10, 1997, between Barry J.C. Parker
and Luby's Cafeterias, Inc. (filed as Exhibit 10(w) to the Company's
Annual Report on Form 10-K for the fiscal year ended August 31,
1997, and incorporated herein by reference).
10(y)*
10(v) 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(z) Agreement of Resignation, Severance, Confidentiality, Non-
Solicitation, Arbitration and General Release of All Claims
dated April 30, 1998, between Luby's Cafeterias, Inc. and
William E. Robson (filed as Exhibit 10(bb) to the Company's
Quarterly Report on Form 10-Q for the quarter ended May 31,
1998, and incorporated herein by reference).
10(aa)*
10(w) Salary Continuation Agreement dated May 14, 1998, between Luby's
Cafeterias, Inc. and Sue Elliott (filed as Exhibit 10(cc) to the
Company's Quarterly Report on Form 10-Q for the quarter ended
May 31, 1998, and incorporated herein by reference).
10(bb)*
10(x) Salary Continuation Agreement dated June 1, 1998, between Luby's
Cafeterias, Inc. and Alan M. Davis (filed as Exhibit 10(dd) to the
Company's Quarterly Report on Form 10-Q for the quarter ended
May 31, 1998, and incorporated herein by reference).
10(cc)*
10(y) Luby's Incentive Stock Plan adopted October 16, 1998.
10(dd) Executive1998 (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(z) Incentive Bonus Plan for Fiscal 1999 adopted October 16, 1998.
11 - Statement re computation of per share earnings.
21 - Subsidiaries of Luby's Cafeterias, Inc.
27 - Financial Data Schedule.
99(a) - Corporate Governance Guidelines of Luby's Cafeterias, Inc
adopted by the Board of Directors on March 19, 1998 (filed
as Exhibit 9910(dd) to the Company's Annual Report on Form 10-K for
the fiscal year ended August 31, 1998, and incorporated herein by
reference).*
10(aa) Form of Change in Control Agreement entered into between Luby's,
Inc., and Barry J.C. Parker, President and Chief Executive Officer,
as of January 8, 1999 (filed as Exhibit 10(z) to the Company's
Quarterly Report on Form 10-Q for the quarter ended February 28,May 31, 1999,
and incorporated herein by reference).*
10(bb) 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 May 31, 1999, and incorporated
herein by reference).*
10(cc) 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(dd) Luby's, Inc. Incentive Bonus Plan for Fiscal 2000.*
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,
1998, and incorporated herein by reference).
27 Financial Data Schedule.
99(a) Corporate Governance Guidelines of Luby's Cafeterias, Inc., as
amended January 7, 1999 (filed as Exhibit 99(a) to the Company's
Quarterly Report on Form 10-Q for the quarter ended May 31, 1999,
and incorporated herein by reference).
99(b) - Consent of Ernst & Young LLP.
*Denotes management contract or compensatory plan or arrangement.