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| S | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| Delaware | 74-1335253 | |
| (State or other jurisdiction of incorporation or organization) | (IRS Employer Identification Number) | |
| Title of Each Class | Name of Each Exchange onwhich registered | |
Common Stock ($0.32 par value per share) | New York Stock Exchange | |
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| Large accelerated filer ☐ | Accelerated filer |
Non-accelerated filer ☐ | Smaller reporting company ☐ |
| Emerging growth company ☐ | |
| If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ | |
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This Annual Report on 27, 201430, 2017PagePart IPage Item 1Business6Risk Factors101515161617192040418181818282828282838728, 2013.31, 2016. We expect to submit the CEO certification with respect to our fiscal year ended August 27, 201430, 2017 to the NYSE within 30 days after our annual meeting of shareholders. We are filing as an exhibit to this Form 10-K the certifications required by Section 302 of the Sarbanes-Oxley Act of 2002.FORWARD-LOOKING STATEMENTS“Form(this "Form 10-K”) contains statements that are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements contained in this Form 10-K, other than statements of historical facts, are “forward-looking statements” for purposes of these provisions, including any statements regarding:●future operating results;●future capital expenditures, including expected reductions in capital expenditures;●future debt, including liquidity and the sources and availability of funds related to debt;●plans for our new prototype restaurants;●plans for expansion of our business;●scheduled openings of new units;●closing existing units;●effectiveness of management’s disposal plans;●future sales of assets and the gains or losses that may be recognized as a result of any such sales; and●continued compliance with the terms of our 2013 Credit Facility, as amended.●general business and economic conditions;●the impact of competition;●our operating initiatives, changes in promotional, couponing and advertising strategies and the success of management’s business plans;●fluctuations in the costs of commodities, including beef, poultry, seafood, dairy, cheese, oils and produce;●ability to raise menu prices and customers acceptance of changes in menu items;●increases in utility costs, including the costs of natural gas and other energy supplies;●changes in the availability and cost of labor, including the ability to attract qualified managers and team members;●the seasonality of the business;●collectability of accounts receivable;●changes in governmental regulations, including changes in minimum wages and health care benefit regulation;●the effects of inflation and changes in our customers’ disposable income, spending trends and habits;●the ability to realize property values;●the availability and cost of credit;●weather conditions in the regions in which our restaurants operate;●costs relating to legal proceedings;●impact of adoption of new accounting standards;●effects of actual or threatened future terrorist attacks in the United States;●unfavorable publicity relating to operations, including publicity concerning food quality, illness or other health concerns or labor relations; and●the continued service of key management personnel.
PART I
Inc. References to “Luby’s Cafeteria” refer specifically to the Luby’s Cafeteria brand restaurant. San Antonio Metro Rio Grande Valley Dallas/Fort Worth Metro Austin Other Texas Markets California Arizona Virginia Other States Total Total orders which comprise approximately 13% of our Luby's Cafeteria restaurant sales. the area supervised. 2017. At Fuddruckers, our mission is to serve the Food-to-go sales comprise approximately 8% of Fuddruckers restaurant sales. 2017, we had contracts with 14 long-term acute care hospitals, five acute care hospitals, three business and industry clients, one sport stadium, one medical office building, and one freestanding coffee venue located inside an office building. We have the unique ability to deliver quality services that include facility design and procurement as well as nutrition and branded food services to our clients. 2016. Luby’s, Inc. owns or is licensed to use valuable intellectual property including trademarks, service marks, patents, copyrights, trade secrets and other proprietary information, including the Luby’s and Fuddruckers logos, trade names and trademarks, which are of material importance to our business. Depending on the jurisdiction, trademarks, and service marks generally are valid as long as they are used and/or registered. Patents, copyrights, and licenses are of varying durations. The success of our business depends on the continued ability to use existing trademarks, service marks, and other components of our brands in order to increase brand awareness and further develop branded products. We take prudent actions to protect our intellectual property. Our ability to service our debt obligations is primarily dependent upon our future financial performance. healthcare benefits, worker’s compensation and employee injury claims. Workers’ November 8, 2021. For a more detailed discussion of our credit agreement please review the footnotes to our financial statements located in Part II, Item 8 of this Form 10-K. If we are unable to anticipate and react to changes in food, utility and other costs, our results of operations could be materially adversely affected. of Cheeseburger in Paradise. restaurants. We own the underlying land and buildings on which We negotiated a new lease in December 2016 and reduced the amount of office space from approximately 31,000 square feet to approximately 26,000 square feet. The new lease has a 5-year term. Fiscal Quarter Ended High Low November 21, 2012 February 13, 2013 May 8, 2013 August 28, 2013 November 20, 2013 February 12, 2014 May 7, 2014 August 27, 2014 $2.37. (a) (b) (c) Plan Category Number of Securities to be Issued Upon Exercise of Outstanding Options, Weighted-Average Number of Securities Equity compensation plans previously approved by security holders Equity compensation plans not previously approved by security holders(1) Total The following graph compares the cumulative total stockholder return on our common stock for the five fiscal years ended August 2009 2010 2011 2012 2013 2014 Luby’s, Inc. S&P 500 Index—Total Return S&P 500 Restaurant Index Peer Group Index Only Peer Group Index + Luby’s Inc. Fiscal Year Ended August 27, August 28, August 29, August 31, August 25, (364 days) (364 days) (364 days) (371 days) (364 days) (In thousands except per share data) Sales Restaurant sales Culinary contract services Franchise revenue Vending revenue Total sales Income (loss) from continuing operations ) ) Income (loss) from discontinued operations (a) ) ) ) ) Net income (loss) ) ) Income (loss) per share from continuing operations: Basic ) ) Assuming dilution ) ) Income (loss) per share from discontinued operation: Basic ) ) ) ) Assuming dilution ) ) ) ) Net income (loss) per share: Basic ) ) Assuming dilution ) ) Weighted-average shares outstanding: Basic Assuming dilution Total assets Total debt Number of restaurants at fiscal year end Number of franchised restaurants at fiscal year end Number of Culinary Contract Services contracts at fiscal year end Costs and Expenses (As a percentage of restaurant sales) Cost of food % % % % % Payroll and related costs % % % % % Other operating expenses % % % % % Occupancy costs % % % % % . sales through retail grocery outlets. this front, we made significant strides in reducing overhead costs, including reduced headcount, corporate travel expense, and associated other overhead costs. Our long-term plan continues to focus on expanding each of our core brands, including the Fuddruckers franchise network, as well as growing our The following table shows the same-store sales change for comparative historical quarters: Fiscal 2014 Fiscal 2013 Fiscal 2012 Increase (Decrease) Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Same-store sales )% % )% )% % % % % % were generated. 2015 which was comprised of a typical 52 weeks. The additional week of operations in fiscal 2016 generated approximately $6.7 million in restaurant sales. were generated. Payroll and Related Costs 2016 compared to fiscal 2015. Payroll and related costs as a percentage of restaurant sales increased 0.7% due to (1) higher average hourly wage rates reflective of market pressures; (2) a greater usage of overtime pay necessary to staff our restaurants to maintain a high level of guest service; and (3) higher average restaurant management compensation; partially offset by (4) lower workers' compensation insurance expense. supplies costs, restaurant services costs, insurance costs, and other restaurant operating costs. 2016 or beyond have been classified as pre-opening cost and reflected in our Opening costs expense line. that were in operation throughout fiscal 2016 and fiscal 2017. Cost of 2015. conversion from Cheeseburger in Paradise to Fuddruckers; three of these locations opened as a Fuddruckers during fiscal 2015, two of these locations opened as a Fuddruckers subsequent to end of fiscal 2015. 2016. terms. 2015 reflects the impairment of three leased Fuddruckers locations. 2016, and compared to $4 thousand in fiscal 2015. programs to the full extent in fiscal 2017. Other income (expense), net, discounts related to sale of pre-paid gift cards. increase in cash provided by operations. Fiscal Year Ended August 27, August 28, August 29, (In thousands) Total cash provided by (used in): Operating activities Investing activities ) ) ) Financing activities ) Increase (decrease) in cash and cash equivalents ) corporate overhead costs, exclusive of non-cash share-based compensation expense. 2016. Investing Activities.We generally reinvest available cash flows from operations to develop new restaurants, maintain and enhance existing restaurants, and to support equipment of approximately $18.3 million in fiscal 2016 included $17.3 million in capital expenditures related to Company-owned restaurants and $1.0 million in corporate related capital expenditures. received approximately $82 thousand in proceeds from the exercise of employee stock options. Capital expenditures consist of purchases of real estate for future restaurant sites, culinary contract services investments, new unit construction, purchases of new and replacement restaurant furniture and equipment, and ongoing remodeling programs. Capital expenditures for fiscal The 2013 Credit Facility At February 12, 2014, as the result of losses incurred from our was removed. Credit Agreement). Payments due by Period Contractual Obligations Total Less than 1 Year 1-3 Years 3-5 Years After (In thousands) Long-term debt(a) Capital lease and other obligations(b) Operating lease obligations(c) Uncertain tax positions liability(d) Total Amount of Commitment by Expiration Period Other Commercial Commitments Total Fiscal Fiscal Fiscal Thereafter (In thousands) Letters of credit Capital lease obligations contain leases Operating Leases Year Ended August 27, August 28, August 29, (364 days) (364 days) (364 days) (In thousands) AFFILIATED COSTS INCURRED: General and administrative expenses—professional and other costs Capital expenditures—custom-fabricated and refurbished equipment Other operating expenses, occupancy costs and opening costs, including property leases Total RELATIVE TOTAL COMPANY COSTS: General and administrative expenses Capital expenditures Other operating expenses, occupancy costs and opening costs Total AFFILIATED COSTS INCURRED AS A PERCENTAGE OF RELATIVE TOTAL COMPANY COSTS % % % sale. Tangible Property Regulations our Consolidated Financial Statements. The significant assumptions made by the actuary to estimate self-insurance reserves, including incurred but not reported claims, are as follows: (1) historical patterns of loss development will continue in the future as they have in the past (Loss Development Method), (2) historical trend patterns and loss cost levels will continue in the future as they have in the past (Bornhuetter-Ferguson Method), and (3) historical claim counts and exposures are used to calculate historical frequency rates and average claim costs are analyzed to get a projected severity (Frequency and Severity Method). The results of these methods are blended by the actuary to provide the reserves estimates. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). This update provides a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. The guidance also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts. This update is effective for annual this foreign currency exchange risk. August 27, August 28, (In thousands, except share data) ASSETS Current Assets: Cash and cash equivalents Trade accounts and other receivables, net Food and supply inventories Prepaid expenses Assets related to discontinued operations Deferred income taxes Total current assets Property held for sale Assets related to discontinued operations Property and equipment, net Intangible assets, net Goodwill Deferred income taxes Other assets Total assets LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities: Accounts payable Liabilities related to discontinued operations Accrued expenses and other liabilities Total current liabilities Credit facility debt Liabilities related to discontinued operations Other liabilities Total liabilities Commitments and Contingencies SHAREHOLDERS’ EQUITY Common stock, $0.32 par value; 100,000,000 shares authorized; Shares issued were 28,949,523 and 28,804,344, respectively; Shares outstanding were 28,449,523 and 28,304,344, respectively Paid-in capital Retained earnings Less cost of treasury stock, 500,000 shares ) ) Total shareholders’ equity Total liabilities and shareholders’ equity Year Ended August 27, August 28, August 29, (In thousands except per share data) SALES: Restaurant sales Culinary contract services Franchise revenue Vending revenue TOTAL SALES COSTS AND EXPENSES: Cost of food Payroll and related costs Other operating expenses Occupancy costs Opening costs Cost of culinary contract services Depreciation and amortization General and administrative expenses Provision for asset impairments, net Net loss (gain) on disposition of property and equipment ) ) Total costs and expenses INCOME FROM OPERATIONS ) Interest expense ) ) ) Other income, net Income (loss) before income taxes and discontinued operations ) Provision (benefit) for income taxes, net ) Income (loss) from continuing operations ) Income (loss) from discontinued operations, net of income taxes ) ) ) NET INCOME (LOSS) ) Income (loss) per share from continuing operations: Basic ) Assuming dilution ) Income (loss) per share from discontinued operations: Basic ) ) ) Assuming dilution ) ) ) Net income (loss) per share: Basic ) Assuming dilution ) Weighted-average shares outstanding: Basic Assuming dilution Common Stock Issued Treasury Shares Amount Shares Amount Paid-In Retained Total Balance at August 31, 2011 ) ) Correction of prior years cumulative error ) Revised Balance at August 31, 2011 ) ) Net income for the year Reduction in excess tax benefits from share-based compensation ) ) Share-based compensation expense Balance at August 29, 2012 ) ) Net income for the year Common stock issued under nonemployee director benefit plans Common stock issued under employee benefit plans Increase in excess tax benefits from share-based compensation Share-based compensation expense Balance at August 28, 2013 ) ) Net loss for the year ) ) Common stock issued under nonemployee director benefit plans Common stock issued under employee benefit plans Increase in excess tax benefits from share-based compensation Share-based compensation expense Balance at August 27, 2014 ) ) Year Ended August 27, August 28, August 29, (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net income ) Adjustments to reconcile net income to net cash provided by operating activities: Provision for asset impairments, net of gains/losses on property sales ) Depreciation and amortization Provision for doubtful accounts Amortization of debt issuance cost Non-cash compensation expense Share-based compensation expense (Increase) reduction in tax benefits from share-based compensation ) ) Deferred tax expense (benefit) ) ) Cash provided by operating activities before changes in operating asset and liabilities Changes in operating assets and liabilities: Decrease (increase) in trade accounts and other receivables ) Decrease (increase) in food and supply inventories ) ) Decrease (increase) in prepaid expenses and other assets ) Increase in accounts payable, accrued expenses and other liabilities Net cash provided by operating activities CASH FLOWS FROM INVESTING ACTIVITIES: Repayment (issuance) of note receivable ) Acquisition of Cheeseburger in Paradise ) Proceeds from disposal of assets, insurance proceeds and property held for sale Purchases of property and equipment ) ) ) Net cash used in investing activities ) ) ) CASH FLOWS FROM FINANCING ACTIVITIES: Credit facility borrowings Credit facility repayments ) ) ) Debt issuance costs ) ) ) Tax benefit on stock option expense Proceeds received on the exercise of employee stock options Net cash provided by (used in) financing activities ) Net increase (decrease) in cash and cash equivalents ) Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Balance Sheet August 28, 2013 (In thousands) As Reported Reclassifications1 Adjustments Revised ASSETS Current Assets: Cash and cash equivalents Trade accounts and other receivables, net Food and supply inventories ) Prepaid expenses ) Assets related to discontinued operations Deferred income taxes Total current assets Property held for sale Assets related to discontinued operations Property and equipment, net ) Intangible assets, net Goodwill Deferred income taxes Other assets ) Total assets LIABILITIES AND SHAREHOLDER EQUITY Current Liabilities: Accounts payable Liabilities related to discontinued operations Accrued expenses and other liabilities ) Total current liabilities Credit facility debt Liabilities related to discontinued operations Other liabilities ) Total liabilities ) SHAREHOLDER'S EQUITY Common Stock Paid-in capital Retained earnings ) Less cost of treasury stock ) ) Total shareholders' equity ) Total liabilities and shareholders' equity Balance Sheet August 29, 2012 (In thousands) As Reported Reclassifications(1) Adjustments Revised ASSETS Current Assets: Cash and cash equivalents Trade accounts and other receivables, net Food and supply inventories Prepaid expenses ) Assets related to discontinued operations ) Deferred income taxes Total current assets ) Property held for sale Assets related to discontinued operations Property and equipment, net ) Intangible assets, net Goodwill Deferred income taxes Other assets Total assets ) LIABILITIES AND SHAREHOLDER EQUITY Current Liabilities: Accounts payable Liabilities related to discontinued operations Accrued expenses and other liabilities ) Total current liabilities Credit facility debt Liabilities related to discontinued operations ) Other liabilities(1) Total liabilities(1) SHAREHOLDER'S EQUITY Common Stock Paid-in capital Retained earnings(1) ) Less cost of treasury stock ) ) Total shareholders' equity ) Total liabilities and shareholders' equity ) Fiscal Year Ended August 28, 2013 (In thousands) As Reported Reclassifications(1) Adjustments Revised Restaurant sales ) Cost of food ) Payroll and related costs ) Other operating expenses ) Occupancy costs ) General and administrative expenses Provision for income taxes ) Income from continuing operations ) Fiscal Year Ended August 29, 2012 (In thousands) As Reported Reclassifications(1) Adjustments Revised Restaurant sales Cost of foods Payroll and related costs Other operating expenses ) Occupancy costs General and administrative expenses Provision (benefit) for income taxes ) Income (loss) from continuing operations ) ) Principles of Consolidation which generally occurs upon the opening of the new restaurant. Until earned, these fees are accounted for as an accrued liability. We record advertising attributable to local store marketing and local community involvement efforts in other operating expenses; we record advertising attributable to our brand identity, our promotional offers, and our other marketing messages intended to drive guest awareness of our brands, in selling, general, and administrative expenses. We believe this separation of our marketing and advertising costs assists with measurement of the profitability of individual restaurant locations by associating only the local store marketing efforts with the operations of each restaurant. Share-based compensation expense is estimated for equity awards at fair value at the grant date. The Company determines fair value of restricted stock awards based on the average of the high and low price of its common stock on the date awarded by the Board of Directors. The Company determines the fair value of stock option awards using a Cash and cash equivalents Accounts receivable Inventories Other current assets Property and equipment Liquor licenses and permits Favorable leases License agreement and trade name Goodwill Accrued liabilities ) Net acquisition cost Fiscal Year Ended August 26, August 31, August 30, August 29, August __ (In thousands) Favorable Year Ended August 28, 2013 August 29, 2012 (Unaudited) (Unaudited) (In thousands, except per share data) Pro forma total sales Pro forma income from continuing operations Pro forma net income Pro forma income from continuing operations per share Basic Diluted Pro forma net income per share Basic Diluted The total number of Years Ended August 27, August 28, August 29, (In thousands) Sales: Company-owned restaurants Culinary contract services Franchising Total Segment level profit: Company-owned restaurants Culinary contract services Franchising Total Depreciation and amortization: Company-owned restaurants Culinary contract services Franchising Corporate Total Total assets: Company-owned restaurants Culinary contract services Franchising Corporate Total Capital expenditures: Company-owned restaurants Culinary contract services Franchising Corporate Total Income (loss) before income taxes and discontinued operations: Segment level profit Opening costs ) ) ) Depreciation and amortization ) ) ) General and administrative expenses ) ) ) Provision for asset impairments, net ) ) ) Net gain (loss) on disposition of property and equipment ) Interest income Interest expense ) ) ) Other income, net Total ) Year Ended August 27, 2014 Quoted Significant Significant Total (In thousands) Continuing Operations Property and equipment related to company-owned restaurants ) Property and equipment related to corporate assets ) Discontinued Operations Property and equipment related to corporate assets ) Fair Value Year Ended August 28, 2013 Quoted Significant Significant Total (In thousands) Continuing Operations Property and equipment related to company-owned restaurants ) Property and equipment related to corporate assets ) ) Discontinued Operations Property and equipment related to corporate assets ) Fair Value Year Ended August 29, 2012 Quoted Significant Significant Total (In thousands) Continuing Operations Property and equipment related to Culinary Contract Services ) Property and equipment related to company-owned restaurants ) ) Discontinued Operations Property and equipment related to corporate assets ) August 27, August 28, (In thousands) Trade and other receivables Franchise royalties and marketing and advertising receivables Trade receivables, unbilled Allowance for doubtful accounts ) ) Total, net The Company's fiscal 2017 ended one day prior to calendar month end and fiscal 2016 ended at a calendar month end. Trade receivables, unbilled, was approximately $1.6 million at August 30, 2017 and $0.0 million at August 31, 2016. CCS contracts are billed on a calendar month end basis and represent the total balance of Trade receivables, unbilled. Year Ended August 27, August 28, August 29, (In thousands) Beginning balance Provisions for doubtful accounts ) Write-offs ) ) ) Ending balance August 27, August 28, (In thousands) Deferred income tax assets: Workers’ compensation, employee injury, and general liability claims Deferred compensation Net operating losses General business and foreign tax credits Depreciation, amortization and impairments Straight-line rent, dining cards, accruals, and other Total deferred income tax assets Deferred income tax liabilities: Depreciation, amortization and impairments Property taxes and other Total deferred income tax liabilities Net deferred income tax asset planning strategy. August 27, August 28, August 29, (In thousands) Current federal and state income tax expense Current foreign income tax expense Deferred income tax expense (benefit) ) ) Total income tax expense ) Year Ended August 27, August 28, August 29, Amount % Amount % Amount % (In thousands and as a percent of pretax income from continuing operations) Income tax expense (benefit) from continuing operations at the federal rate ) % % % Permanent and other differences: Federal jobs tax credits (wage deductions) ) Stock options and restricted stock ) Other permanent differences ) State income tax, net of federal benefit ) General Business Tax Credits ) ) ) ) ) Other ) ) ) ) ) Change in valuation allowance ) ) Income tax expense from continuing operations ) % % % For the fiscal year ended August 2015, respectively. Balance at August 31, 2011 Increase (decrease) based on prior year tax positions Interest Expense Balance as of August 29, 2012 Increase (decrease) based on prior year tax positions ) Interest Expense Balance as of August 28, 2013 Increase (decrease) based on prior year tax positions ) Interest Expense Balance as of August 27, 2014 30, 2017. August 27, August 28, Estimated (In thousands) Land — Restaurant equipment and furnishings 3to15 Buildings 20to33 Leasehold and leasehold improvements Lesser of lease term or estimated useful life Office furniture and equipment 3to10 Construction in progress — Less accumulated depreciation and amortization ) ) Property and equipment, net Intangible assets, net 21 Goodwill August 27, August 28, (In thousands) Salaries, compensated absences, incentives, and bonuses Operating expenses Unredeemed gift cards and certificates Taxes, other than income Accrued claims and insurance Income taxes, legal and other Total August 27, August 28, (In thousands) Workers’ compensation and general liability insurance reserve Term debt Deferred rent and unfavorable leases Deferred compensation Other ) Total 31, 2016: Commitment, which was $30.0 million as of November 8, 2016. The 2016 Credit Agreement is guaranteed by all of the Company’s present subsidiaries and will be guaranteed by the Company's future subsidiaries. other indebtedness. The Company 2013 Credit Facility. Year Ended August 27, August 28, August 29, (In thousands, except per share data) Provision for asset impairments Net loss (gain) on disposition of property and equipment ) ) ) Effect on EPS: Basic ) Assuming dilution ) fiscal 2017 is primarily related to the gain on the sale of six properties of approximately $2.4 million partially offset by routine asset retirements. approximately 1.0 million partially offset by routine asset retirements. Discontinued Operations operations in this plan. August 27, August 28, (in thousands) Trade accounts and other receivable, net Food and supply inventories Prepaid expenses Assets related to discontinued operations—current Property and equipment Other assets Assets related to discontinued operations—non-current Deferred income taxes Accrued expenses and other liabilities Liabilities related to discontinued operations—current Other liabilities Deferred income taxes Liabilities related to discontinued operations—non-current The following table sets forth the sales and pretax losses reported for all discontinued locations: Year Ended August 27, August 28, August 29, (In thousands, except locations) Sales Pretax income (loss) ) ) ) Income tax (expense) benefit on discontinued operations Income (loss) on discontinued operations ) ) ) Discontinued locations closed during the period Year Ended August 27, August 28, August 29, (In thousands, except per share data) Impairments ) ) ) Gains ) Net impairments ) ) ) Other ) ) ) Discontinued operations, net of taxes ) ) ) Effect on EPS from discontinued operations—decrease—basic ) ) ) 2015: The Company actively markets all locations classified as property held for sale. The Company’s results of continuing operations will be affected to the extent proceeds from sales exceed or are less than net book value. Balance as of August 31, 2011 Disposals ) Net impairment charges Balance as of August 29, 2012 Disposals Net impairment charges ) Balance as of August 28, 2013 Disposals ) Net transfers to property held for sale Balance as of August 27, 2014 Year Ending: (In thousands) August 26, 2015 August 31, 2016 August 30, 2017 August 29, 2018 August 28, 2019 Thereafter Total minimum lease payments Year Ended August 27, August 28, August 29, (In thousands, except percentages) Minimum rent-facilities Contingent rentals Minimum rent-equipment Total rent expense (including amounts in discontinued operations) Percent of sales % % % Included in these costs for fiscal 2016 was approximately $252 thousand, which represented accelerated share-based compensation expense as a result of the rescission of 312,663 stock options. 30, 2017. 30, 2017. The fair value of each option award is estimated on the date of the grant using the Black-Scholes option pricing model which determine inputs as shown in the following table for options granted under the Employee Stock Plan: Year Ended August 28, August 29, Dividend yield % % Volatility % % Risk-free interest rate % % Expected life (in years) Shares Under Weighted-Average Weighted-Average Aggregate Intrinsic (Years) (In thousands) Outstanding at August 31, 2011 Granted Forfeited/Expired ) Outstanding at August 29, 2012 Granted Exercised ) Forfeited/Expired ) Outstanding at August 28, 2013 Exercised ) Forfeited/Expired ) Outstanding at August 27, 2014 Exercisable at August 27, 2014 Restricted Stock Weighted Weighted- (Per share) (In years) Unvested at August 31, 2011 Granted – Forfeited ) – Unvested at August 29, 2012 Granted – Vested ) – Unvested at August 28, 2013 Granted – Vested ) – Forfeited ) – Unvested at August 27, 2014 The Company has a voluntary 401(k) employee savings plan to provide substantially all employees of the Company an opportunity to accumulate personal funds for their retirement. The Company matches 25% of participants’ contributions made to the plan up to 6% of their Key Management Personnel Year Ended August 27, August 28, August 29, (In thousands, except per share data) Numerator: Income from continuing operations ) Net income ) Denominator: Denominator for basic earnings per share—weighted-average shares Effect of potentially dilutive securities: Employee and non-employee stock options Denominator for earnings per share assuming dilution Income from continuing operations: Basic ) Assuming dilution(a) ) Net income per share: Basic ) Assuming dilution(a) ) Quarter Ended(a) August 27, May 7, February 12, November 20, (As Revised) (112 days) (84 days) (84 days) (84 days) (In thousands except per share data) Restaurant sales(c) Franchise revenue Culinary contract services Total sales Income from continuing operations(b) (c) ) ) ) Discontinued operations(c) ) ) ) ) Net income (loss) ) ) ) Net income (loss) per share: Basic ) ) ) Assuming dilution ) ) ) Costs and Expenses (As a percentage of restaurant sales) Cost of food % % % % Payroll and related costs % % % % Other operating expenses % % % % Occupancy costs % % % % Quarter Ended(a) August 28, May 8, February 13, November 21, (112 days) (84 days) (84 days) (84 days) (In thousands except per share data) Restaurant sales(c) Franchise revenue Culinary contract services Total sales Income from continuing operations(b) (c) Discontinued operations(c) ) ) ) ) Net income Net income per share: Basic Assuming dilution Costs and Expenses (As a percentage of restaurant sales) Cost of food % % % % Payroll and related costs % % % % Other operating expenses % % % % Occupancy costs % % % % 30, 2017. Financial Statements Financial Statement Schedules Exhibits 3(b) 14(a) 14(b) 21 23.1 31.1 31.2 32.1 32.2 99(a) 101.INS XBRL Instance Document 101.CAL XBRL Calculation Linkbase Document 101.DEF XBRL Definition Linkbase Document 101.LAB XBRL Label Linkbase Document 101.PRE XBRL Presentation Linkbase Document Information required to be presented in Exhibit 11 is provided in Note 17 “Earnings Per Share” of the Notes to Consolidated Financial Statements under Part II, Item 8 of this Form 10-K in accordance with the provisions of FASB Statement of Financial Accounting Standards (SFAS) No. 128, Earnings per Share. 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. LUBY’S, INC. Christopher J. Pappas President and Chief Executive Officer /S/ GASPER MIR, III November Gasper Mir, III, Director and Chairman of the Board /S/ CHRISTOPHER J. PAPPAS November /S/ PETER TROPOLI November Peter Tropoli, Director and Chief Operating Officer /S/ K. SCOTT GRAY November /S/ HARRIS J. PAPPAS November Harris J. Pappas, Director /S/ GERALD W. BODZY November Judith B. Craven, Director /S/ ARTHUR R. EMERSON November Arthur R. Emerson, Director /S/ JILL GRIFFIN November Jill Griffin, Director /S/ FRANK MARKANTONIS November Frank Markantonis, Director /S/ JOE C. MCKINNEY November Joe C. McKinney, Director, and Luby’s Culinary Contract Services,Services. We also operate another brand named Cheeseburger in Paradise. Our other brands include are BobSeafood,Inc., Luby's Fuddruckers Restaurants, LLC, a Texas Limited Liability Company ("LFR") and the consolidated subsidiaries of Luby’s, Etc. and Koo Koo Roo Chicken Bistro.August 27, 2014,November 7, 2017, we operated 174163 restaurants located throughout the United States, as set forth in the table below. These establishments are located in close proximity to retail centers, business developments and residential areas. Of the 174 1639287 are located on property that we own and 8276 are located on property that we lease. FiveSix locations consist of a side-by-side Luby’s Cafeteria and Fuddruckers restaurant, to which we refer herein to as a “Combo location”. Total Total Texas:53 Houston Metro5416 1812 1314 9 1117 10 9Illinois4 65 Maryland4 52 Georgia 3 Georgia2 3Oklahoma2 310 13163 1744, 2014,7, 2017, we operated culinary contract services at 25 locations; 1823 locations through our Culinary Contract Services (“CCS”). We operated 14 of these locations in the Houston, Texas area, 3two in Louisiana, 2San Antonio, Texas, two in Austin, 1the Texas Lower Rio Grande Valley, and one in OklahomaDallas, Texas. Outside of Texas, we operated one in each of the following states: Georgia, Missouri, North Carolina, and 1 in Florida. Luby’s Culinary Contract ServicesOklahoma. CCS provides food service management to healthcare, educational andsports stadiums, corporate dining facilities.4, 2014,7, 2017, we had 5148 franchisees operating 110 Fuddruckers restaurants in locations as set forth in the table below. Our largest sixfive franchisees own five to twelve12 restaurants each. TwelveSixteen franchise owners each own two to four restaurants. The thirty-threetwenty-seven remaining franchise owners each own one restaurant. FuddruckersFranchises Texas:10 Other Texas Markets 10 California 7 Connecticut 1 Delaware 1 Florida 8 Georgia 2 Iowa 1 Louisiana 3 Maine 1 Maryland 1 Massachusetts 4 Michigan 4 Missouri 3 Montana 5 Nebraska 1 Nevada 3 New Jersey 2 New Mexico 4 North Carolina 1 North Dakota 1 Oklahoma 1 Oregon 1 Pennsylvania 5 South Carolina 8 South Dakota 2 Tennessee 2 Virginia 3 Wisconsin 1 International: Houston Metro2 Colombia 3 Dominican Republic 1 Dallas/Fort Worth Metro1 10Other Texas Markets13California8Florida7GeorgiaMexico 3 Idaho3 Puerto Rico 1 Louisiana3Maryland2Massachusetts5Michigan5Missouri3Montana5Nebraska1Nevada2New Jersey2New Mexico3North Carolina2North Dakota2Oregon1Pennsylvania4South Carolina7South Dakota2Tennessee3Virginia3Wisconsin2Other States2International:Canada1Chile1Dominican Republie1Mexico1Italy2Panama1Puerto Rico1110 19, 1997, a prior owner of the Fuddruckers - World’s Greatest Hamburgers®brand granted to a licensee the exclusive right to use the Fuddruckers proprietary marks, trade dress, and system to develop Fuddruckers restaurants in a territory consisting of certain countries in Africa, the Middle East, and parts of Asia. In addition to the above table,As of November 7, 2017, this licensee operates 3134 restaurants that are licensed to use the Fuddruckers Proprietary Marksproprietary marks in Saudi Arabia, Egypt, Lebanon, United Arab Emirates, Qatar, Jordon,Jordan, Bahrain, and Kuwait. The Company does not receive revenue or royalties from these restaurants.In this Form 10-K, unless otherwise specified, “Luby’s,” “we,” “our,” “us” and “Company” refer to Luby’s, Inc., LFR and the consolidated subsidiaries of Luby’s, Inc. References to “Luby’s Cafeteria” refer specifically to the Luby’s Cafeteria brand restaurant.New York Stock ExchangeNYSE in 1982.Luby’s Fuddruckers Restaurants, LLC, a Texas limited liability company (“LFR”).LFR. All restaurant operations are conducted by LFR.restaurantsrestaurant operations continue to be conducted by LFR and Paradise Cheeseburger, LLC. Our operating restaurant locations remain unchanged by these events.to orderin small batches from scratch using real food, real ingredients prepared fresh daily, and our employees and our company get involved and support the fabric of our local communities. We buy local produce as much as possible. We promise to breathe life into the experience of dining out and make every meal meaningful. We were founded in San Antonio, Texas in 1947.orders.of oneled by a general manager, onean associate manager and one to two assistant managers including wait staff.managers. We grant authority to our restaurant managers to direct the daily operations of their stores and, in turn, we compensate them on the basis of their performance. We believe this strategy is a significant factor contributing to the profitability of our restaurants. Each general manager is supervised by an area leader. Each area leader is responsible for approximately 7 to 10 units, depending on location.9688 at fiscal year-end 2014.Combinationcombination Luby’s and Fuddruckers Restaurant unitrestaurant location featuring a Luby’s Cafeteria and a Fuddruckers Restaurant on the same property with a common wall but separate kitchens and dining areas (“Combo Unit”location”). Since 2012, we have built fourfive more Combo Units.
FuddruckersIn 2014 we opened one prototype ground-up new construction Fuddruckers Restaurant in Houston, Texas.We anticipate using and further modifying both of these prototype designs as we execute our strategy to build new restaurants in markets where we believe we can achieve superior restaurant cash flows.Fuddruckersworld’s greatest hamburger,World’s Greatest Hamburgers® using only 100% fresh, never frozen, all American premium beef, buns baked daily in our kitchens, and the freshest, highest quality ingredients on our “you top it” produce bar. With a focus on excellent food, attentive guest service and an inviting atmosphere, we are committed to making every guest happy, one burger at a time! Fuddruckers restaurants feature casual, welcoming dining areas where Americana-themed décor is featured. We wereFuddruckers was founded in San Antonio, Texas in 1980.burgerburgers and fries accountsaccount for the majority of its restaurant sales, its menu also includes exotic burgers, such as buffalo and elk, steak sandwiches, various grilled and breaded chicken breast sandwiches, hot dogs, a variety of salads, chicken tenders, fish sandwiches, hand breaded onion rings, soft drinks, handmade milkshakes, and bakery items. BeerA variety of over 100 carbonated soft drinks including our own unique Sweet Cherry Soda, which is exclusively offered at Fuddruckers restaurants, along with other varieties such as Powerade®, and flavored waters are offered through Coke Freestyle®self-service dispensers. Additionally, beer and wine are served and, generally, account for less than 2% of restaurant sales.a total staff of one general manager with two or three assistant managers and 25 to 45 other associates, includinga number of full-time and part-time associates working in overlapping shifts. Since Fuddruckers generally utilizes a self-service concept, similar to fast casual, it typically does not employ waiters or waitresses. Fuddruckers restaurant operations are currently divided into three geographic regions, each supervised by an area vice president. The three regions are divided into a total of eightten geographic areas, each supervised by an area leader. On average, each area leader supervises 5-10five to nine restaurants.year 2014,2017, we opened fourone new Company-owned Fuddruckers restaurant and new Luby’s Cafeteria onclosed five Company-owned Fuddruckers restaurants. Of the same propertyfive closed Fuddruckers restaurants, we sold one to an existing franchisee with that restaurant becoming a common wall but separate kitchens and dining areas and converted three franchised restaurant. The number of Fuddruckers restaurants was 71 at fiscal year-end 2017.Fuddruckers restaurants, resultingre-define the contract food industry by providing tasty and healthy menus with customized solutions for healthcare, senior living, business and industry and higher education facilities. We seek to provide the quality of a restaurant dining experience in aan institutional setting. At of fiscal 2014 year-end count of 71 Fuddruckers restaurants.by us for compliance with franchise agreements, including standards and specifications through the use of periodic, unannounced on-site inspections, and standards evaluation reports.110113 at fiscal year-end 20142017 and 116113 at fiscal year-end 2013.1. Consistently successful execution: Every day, with every guest, at every restaurant we operate. 2. Growing our human capital: Our team members are the most critical factor in ensuring our Company’s success. Our relentless focus as a company must be inspiring and developing our team members to delight our guests. 3. Raising awareness of our brand: Our restaurants provide guests in our local communities with memories of family, friends, childhood, a great date, a memorable birthday, or a significant accomplishment. The most reliable ways to grow and sustain our business is to perpetuate word of mouth and remain involved in the community. We must share our story with our guests in our restaurants. This allows new guests to learn our brand story and also reaffirms it with legacy and loyal guests. Loyal guests spread and preach the word about our brand. Our most loyal guests typically agree to be in our E-club so we can communicate with them and reward them. 4. Improving restaurant appearances: We recognize the importance of remodeling our legacy restaurants to remain relevant and appealing to keep loyal guests coming back and draw new ones in, and to convert occasional guests into loyal fans who give us free word-of-mouth advertising and ultimately to increase sales and profitability. 5. Effective cost management: We evaluate each area of our business to assess that we are spending and investing at appropriate levels. This includes restaurant operating costs and corporate overhead costs. Within our restaurants, we seek opportunities with our food and supplies purchasing, menu offerings, labor productivity, and contracts with restaurant service providers to maintain an appropriate restaurant level cost structure. Within our corporate overhead, we seek opportunities to leverage technology and efficient work processes to maintain a stream-lined corporate overhead. Cheeseburger in ParadiseWe operate 8 Cheeseburger in Paradise Full Service restaurants. Cheeseburger in Paradise is known for its inviting beach-party atmosphere, its big, juicy burgers, salads, coastal fare and other tasty and unique items. Cheeseburger in Paradise is a full-service island-themed restaurant and bar developed ten years ago in collaboration with legendary entertainer Jimmy Buffet based on one of his most popular songs. The restaurants also feature a unique tropical-themed island bar with many televisions and tasty “boat drinks.”Intellectual PropertyCulinary Contract ServicesOur Culinary Contract Services (“CCS”) segment consists of a business line servicing healthcare, higher education and corporate dining clients. The healthcare accounts are full service and typically include in-room delivery, catering, vending, coffee service and retail dining. Our mission is to re-define the contract food industry by providing tasty and healthy menus with customized solutions for health care, senior living, business and industry and higher education facilities. We seek to provide the quality of a restaurant dining experience in an institutional setting. 4, 2014, we had contracts with 13 long-term acute care hospitals, one acute care medical center, one ambulatory surgical center, one behavioral hospital, two business and industry clients, three higher education institutions, one Children’s Hospital, two Medical office building and one freestanding coffee venue located inside an office building. We have the unique ability to deliver quality services that include facility design and procurement as well as nutrition and branded food services to our clients. We anticipate allocating capital expenditures as needed to further develop our CCS business in fiscal year 2015.EmployeesAs of November 4, 2014,7, 2017, we had an active workforce of 8,4907,320 employees consisting of restaurant management employees, non-management restaurants employees, CCS management employees, CCS non-management employees, and office and facility service employees. Employee relations are considered to be good. We have never had a strike or work stoppage, and we are not subject to collective bargaining agreements.27, 2014,30, 2017, we had shareholders’ equity of approximately $175.0$144 million compared to approximately:●$42.0 million of long-term debt;●$71.1 million of minimum operating and capital lease commitments; and●$1.1 million of standby letters of credit.●delay spending on maintenance projects and other capital projects, including new restaurant development;●sell assets;●restructure or refinance our debt; or●sell equity securities.●result in a reduction of our credit rating, which would make it more difficult for us to obtain additional financing on acceptable terms;●require us to dedicate a substantial portion of our cash flows from operating activities to the repayment of our debt and the interest associated with our debt;●limit our operating flexibility due to financial and other restrictive covenants, including restrictions on incurring additional debt and creating liens on our properties;●place us at a competitive disadvantage compared with our competitors that have relatively less debt;●expose us to interest rate risk because certain of our borrowings are at variable rates of interest; and●make us more vulnerable to downturns in our business.health care benefits.Compensationcompensation coverage is provided through “self-insurance” by Luby’s Fuddruckers Restaurants, LLC.LFR. We record expenses under the plan based on estimates of the costs of expected claims, administrative costs, stop-loss insurance premiums, and expected trends. These estimates are then adjusted each year to reflect actual costs incurred. Actual costs under these plans are subject to variability that is dependent upon demographics and the actual costs of claims made. In the event our cost estimates differ from actual costs, we could incur additional unplanned costs, which could adversely impact our financial condition.health carehealthcare reform legislation under the Patient Protection and Affordable Care Act (the "Affordable Care Act") and Health CareHealthcare Education and Affordability Reconciliation Act was passed and signed into law. Among other things, the health carehealthcare reform legislation includes mandated coverage requirements, eliminates pre-existing condition exclusions and annual and lifetime maximum limits, restricts the extent to which policies can be rescinded, and imposes new and significant taxes on health insurers and health carehealthcare benefits. Although requirements will bewere phased in over a period of time, many of the most impactful provisions are presently anticipated to beginbegan in the secondthird quarter of fiscal 2015.health carehealthcare reform legislation, the lack of implementing regulations in some cases, and interpretive guidance, and the phased-in nature of the implementation, it is difficult to predict the overall impact of the health carehealthcare reform legislation on our business and the businesses of our franchisees over the coming years. Possible adverse effects of the health carehealthcare reform legislation include reduced revenues, increased costs and exposure to expanded liability and requirements for us to revise the ways in which we conduct business or risk of loss of business. It is also possible that healthcare plans offered by other companies with which we compete for employees will make us less attractive to our current or potential employees. And in any event, implementing the requirements of the Affordable Care Act has imposed some additional administrative costs on us, and those costs may increase over time. In addition, our results of operations, financial position and cash flows could be materially adversely affected. Our franchisees face the potential of similar adverse effects, and many of them are small business owners who may have significant difficulty absorbing the increased costs.and Fuddruckers brandsbrand offer a large variety of entrées, side dishes and desserts and our continued success depends, in part, on the popularity of our cuisine and cafeteria-style dining. A change away from this cuisine or dining style could have a material adverse effect on our results of operations. Our Fuddruckers brand offers grilled-to-order burgers that feature always fresh and never frozen, 100% USDA premium-cut beef with no fillers or additives and sesame-topped buns baked from scratch on-site throughout the day. While burgers are the signature, the engaging menu offers variety for many tastes with an array of sandwiches, platters and salads. Changing customer preferences, tastes and dietary habits can adversely affect our business and financial performance. We compete on quality, variety, value, service, concept, price, and location with well-established national and regional chains, as well as with locally owned and operated restaurants. We face significant competition from family-style restaurants, fast-casual restaurants, and buffets as well as fast food restaurants. In addition, we also face growing competition as a result of the trend toward convergence in grocery, deli,delicatessen, and restaurant services, particularly in the supermarket industry, which offers “convenient meals” in the form of improved entrées and side dishes from the delidelicatessen section. Many of our competitors have significantly greater financial resources than we do. We also compete with other restaurants and retail establishments for restaurant sites and personnel. We anticipate that intense competition will continue. If we are unable to compete effectively, our business, financial condition, and results of operations may be adversely affected.As of August 27, 2014hadrefinanced our outstanding long-term debt of $37.0 million with a new senior secured $65.0 million credit agreement which includes a $35.0 million five-year term loan and an up to $30.0 million bank revolver. At the time of the refinancing, our long term debt balance was $42.0 million. In August 2013, we amended and restatedmillion, of which $7.0 million was outstanding on our revolving credit facility to, among other things, expand the facility size to $70.0 million and to add certain financial covenants.new bank revolver. Our debt covenants require certain minimum levels of financial performance as well as certain financial ratios, which can limit our credit availability. To provide for our credit requirements going forward we have amended our credit agreement, in which we discuss in more detail in the footnotes to our financial statements located in Part II, Item 8 of this Form 10-K.ratios. Our failure to comply with these covenants could result in an event of default that, if not cured or waived, could result in the acceleration of our loans outstanding and affect our ability to refinance by the termination date of September 1, 2017.as and when recognized byin accordance with generally accepted accounting principles in the United States (“GAAP”) and determine when they are impaired. Based on market conditions and operating results, we may be required to record additional impairment charges, which would reduce expected earnings for the periods in which they are recorded.establish aadjust our valuation allowance related to our remaining net deferred tax assets which would reduce expected earnings for the periods in which they are recorded.passpace of new restaurant openings.health care,healthcare, employee medical plans, sanitation, safety and fire standards, building codes and liquor licenses, federal and state laws governing our relationships with employees (including the Fair Labor Standards Act and applicable minimum wage requirements, overtime, unemployment tax rates, family leave, tip credits, working conditions, safety standards, healthcare and citizenship requirements), federal and state laws which prohibit discrimination, potential healthcare benefits legislative mandates, and other laws regulating the design and operation of facilities, such as the Americans With Disabilities Act of 1990.If we doWe might not successfully integrate Cheeseburger in Paradise into our operations,fully realize the anticipated benefits from the acquisition may not be fully realized.has presented significant difficulties and hasdid not resultedresult in realization of the full benefits of synergies, cost savings and operational efficiencies that we expected. We closed 15 locations in fiscal 2014. Additionally, weWe converted threeseveral closed Cheeseburger in Paradise locations to Fuddruckers restaurants and plancontinue to convert six moreconsider this as an alternative for remaining closed locations. As of November 7, 2017 we continue to operate 7 locations into Fuddruckers restaurants. The diversion of the attention of management to the integration effort and any difficulties encountered in combining our operations could adversely affect our business and results of operations. In addition, we may not have discovered prior to acquiringas Cheeseburger in Paradise all known and unknown factors regarding these assets that could produce unintended and unexpected consequences for us. Undiscovered factors could result in us incurring financial liabilities, which could be material, and in us not achieving the expected benefits from the acquisition within our desired time frames, if at all.The syndicate of banks may not have the abilityprovide us with capital under our existing revolvinga new senior secured credit facility. Our existing revolving credit facilityagreement and it matures in September 2017 and weon November 8, 2021. We may not be able to amend or renew the new facility with terms and conditions consistent withfavorable to our operating needs.existing facility.value of our brands and adversely affect our business.4, 2014,7, 2017, we operated 174163 restaurants at 169157 property locations. FiveSix of the operating locations are Combo locations and are considered two restaurants. Two operating locations are primarily Luby’s Cafeterias, but also serve Fuddruckers hamburgers. One operating location is a Bob Luby’s Seafood Grill. Luby’s Cafeterias have seating capacity for 250 to 300 customers at each location while Fuddruckers locations generally seat 125 to 200 customers and Cheeseburger in Paradise locations generally seat 180 andto 220.7165 of our Luby’s Cafeteria and 22 of our Fuddruckers restaurants are located. FiveFour of these restaurant properties contain excess building space or an extra building on the property which have ten9 tenants unaffiliated with Luby’s, Inc.2523 Luby’s Cafeteria restaurants, 4846 Fuddruckers restaurants, and 87 Cheeseburger in Paradise restaurants are held under 75 leases. The majority of the leases are fixed-dollar rentals, which require us to pay additional amounts related to property taxes, hazard insurance, and maintenance of common areas. Of the 8175 restaurant leases, the current terms of 23five expire in less than one year, 51 expire between 2014one and 2016,five years, and 5819 expire thereafter. Of the 81 restaurantAdditionally, 62 leases 64 can be extended beyond their current terms at our option. Two of the leased properties have extra building space and currently have two tenants that offset the lease and expenses of approximately $179,000.4, 2014,7, 2017, we had three owned properties and sevenhave one leased propertiesproperty we plan to develop for future use.4, 2014,7, 2017, we had onefour owned and one leased non-operating properties with a carrying value of approximately $1.0$3.4 million in continuing operations recorded in property held for sale. In addition, we had threeone owned and four leased propertiesproperty with a carrying value of $3.4approximately $1.9 million and we had one leased property with a carrying value of zero, that are included in assets related to discontinued operations. Ground leases have a carrying value of zero.fourone owned other-use properties; oneproperty which is used as a bake shop that supports the baked products forsupporting our operating restaurants. One location is currentlytolocations that have two third party tenants utilizing the entire building and two are leased tothree Fuddruckers franchisees.In addition to the four owned other-use properties, we have approximately 31,000 square feet of space, under lease through 2016. The space is located on the Northwest Freeway in Houston, Texas in close proximity to many of our Houston restaurant locations.3,200630 square feet of warehouse and office space in Arlington, Texas.We also leaseFarmers Branch, Texas and an executive suite in N.North Andover, MA forwhere we have additional legal personnel.Not applicable. 6.89 5.72 7.89 5.99 8.63 6.50 9.19 6.97 8.23 6.49 9.15 6.00 6.91 4.93 6.01 4.83 Fiscal Quarter Ended High Low December 16, 2015 5.21 4.26 March 9, 2016 5.01 3.71 June 1, 2016 5.10 4.61 August 31, 2016 5.10 4.47 December 21, 2016 4.50 4.03 March 15, 2017 4.33 3.30 June 7, 2017 3.41 2.46 August 30, 2017 3.12 2.63 4, 2014,7, 2017, there were 2,2412,028 holders of record of our common stock. No cash dividends have been paid on our common stock since fiscal year 2000, and we currently have no intention to pay a cash dividend on our common stock. On November 4, 2014,7, 2017, the closing price of our common stock on the NYSE was $5.05.27, 2014,30, 2017, were as follows:
Warrants and Rights
Exercise Price of
Outstanding Options,
Warrants and Rights
Remaining Available for Future Issuance Under Equity Compensation Plans Excluding Securities Reflected in Column (a) 665,729 $ 4.83 1,481,927 29,627 0 0 695,356 $ 4.83 1,481,927 (a) (b) (c) Plan Category Equity compensation plans previously approved by security holders 872,216 $ 4.74 1,774,104 29,627 0 0 Total 901,843 $ 4.62 1,774,104 Non-employeeNonemployee Director Phantom Stock Plan.27, 2014,30, 2017, with the cumulative total return on the S&P SmallCap 600 Index and an industry peer group index. The peer group index consists of Bob Evans Farms, Inc., CBRL Group, Inc., Darden Restaurants, Inc., Denny’s Corporation, FrischDiversified Restaurant Group,Holdings, Inc., Red Robin Gourmet Burgers andas well as Ruby Tuesday Inc. These companies are multi-unit family and casual dining restaurant operators in the mid-price range.26, 2009,30, 2012, and the reinvestment of all dividends. The returns of each company in the peer group index have been weighed according to that company’s stock market capitalization.
100.00 112.63 104.60 145.06 166.67 124.60 100.00 104.91 124.32 147.09 174.31 217.70 100.00 130.48 175.55 191.35 228.77 249.63 100.00 112.07 129.31 162.98 232.61 228.78 100.00 111.98 127.97 161.88 229.18 223.59 
2012 2013 2014 2015 2016 2017 Luby’s, Inc. 100.00 114.90 85.90 73.85 71.32 41.84 S&P 500 Index—Total Return 100.00 118.51 148.01 146.55 167.69 193.80 S&P 500 Restaurant Index 100.00 119.55 130.46 152.63 168.63 202.23 New Peer Group Index Only 100.00 111.76 114.22 162.72 161.69 207.48 New Peer Group Index + Luby’s, Inc. 100.00 111.81 113.76 161.23 160.18 204.50 Old Peer Group 100.00 111.76 114.64 164.37 163.74 209.95 Old Peer Group Index + Luby's, Inc. 100.00 111.81 114.17 162.83 162.16 206.88 Five-Year Summary of Operations
2014
2013
2012
2011
2010 $ 368,267 $ 360,001 $ 324,536 $ 325,383 $ 230,342 18,555 16,693 17,711 15,619 13,728 7,027 6,937 7,232 7,092 645 532 565 618 654 44 394,381 384,196 350,097 348,748 244,759 (1,613 4,547 7,398 2,572 (662 (1,834 (1,386 (645 301 (2,256 $ (3,447 $ 3,161 $ 6,753 $ 2,873 $ (2,918 $ (0.06 $ 0.16 $ 0.26 $ 0.09 $ (0.02 $ (0.06 $ 0.16 $ 0.26 $ 0.09 $ (0.02 $ (0.06 $ (0.05 $ (0.02 $ 0.01 $ (0.08 $ (0.06 $ (0.05 $ (0.02 $ 0.01 $ (0.08 $ (0.12 $ 0.11 $ 0.24 $ 0.10 $ (0.10 $ (0.12 $ 0.11 $ 0.24 $ 0.10 $ (0.10 28,812 28,618 28,351 28,237 28,129 28,812 28,866 28,429 28,297 28,129 $ 275,435 $ 250,645 $ 230,889 $ 228,102 $ 242,378 $ 42,000 $ 19,200 $ 13,000 $ 21,500 $ 41,500 174 180 154 156 154 110 116 125 122 130 25 21 18 22 18 28.9 28.6 27.9 28.9 27.6 34.7 34.4 34.6 35.6 36.7 18.7 18.0 16.6 17.3 17.5 5.7 5.8 5.6 5.6 4.0 (a)For comparison purposes, fiscal 2013 and 2012 results have been adjusted to reflect the reclassification of certain Cheeseburger in Paradise leasehold locations to discontinued operations. See Note 11 to our consolidated financial statements in Part II, Item 8 in this Form 10-K for further discussion of discontinued operations. Fiscal Year Ended August 30, 2017 August 31, 2016 August 26, 2015 August 27, 2014 August 29, 2013 (364 days) (371 days) (364 days) (364 days) (364 days) (In thousands, except per share data) Sales Restaurant sales $ 350,818 $ 378,111 $ 370,192 $ 369,808 $ 361,291 Culinary contract services 17,943 16,695 16,401 18,555 16,693 Franchise revenue 6,723 7,250 6,961 7,027 6,937 Vending revenue 547 583 531 532 565 Total sales 376,031 402,639 394,085 395,922 385,486 Provision for asset impairments and restaurant closings 10,567 1,442 636 2,717 615 Income (loss) from continuing operations (22,796 ) (10,256 ) (1,616 ) (2,011 ) 4,479 (466 ) (90 ) (458 ) (1,436 ) (1,318 ) Net income (loss) $ (23,262 ) $ (10,346 ) $ (2,074 ) $ (3,447 ) $ 3,161 Income (loss) per share from continuing operations: Basic $ (0.77 ) $ (0.35 ) $ (0.05 ) $ (0.06 ) $ 0.16 Assuming dilution $ (0.77 ) $ (0.35 ) $ (0.05 ) $ (0.06 ) $ 0.16 Loss per share from discontinued operation: Basic $ (0.02 ) $ (0.00 ) $ (0.02 ) $ (0.06 ) $ (0.05 ) Assuming dilution $ (0.02 ) $ (0.00 ) $ (0.02 ) $ (0.06 ) $ (0.05 ) Net income (loss) per share: Basic $ (0.79 ) $ (0.35 ) $ (0.07 ) $ (0.12 ) $ 0.11 Assuming dilution $ (0.79 ) $ (0.35 ) $ (0.07 ) $ (0.12 ) $ 0.11 Weighted-average shares outstanding: Basic 29,476 29,226 28,974 28,812 28,618 Assuming dilution 29,476 29,226 28,974 28,812 28,866 Total assets $ 226,457 $ 252,225 $ 264,258 $ 275,435 $ 250,645 Total debt $ 30,985 $ 37,000 $ 37,500 $ 42,000 $ 19,200 Number of restaurants at fiscal year end 167 175 177 174 180 Number of franchised restaurants at fiscal year end 113 113 106 110 116 Number of Culinary Contract Services contracts at fiscal year end 25 24 23 25 21 Costs and Expenses (As a percentage of restaurant sales) Cost of food 28.1 % 28.9 % 28.9 % 28.6 % 27.9 % Payroll and related costs 35.9 % 34.5 % 34.3 % 34.1 % 34.3 % Other operating expenses 17.7 % 17.1 % 16.8 % 16.4 % 15.4 % Occupancy costs 6.2 % 5.7 % 6.0 % 6.0 % 5.9 % 27, 201430, 2017 (“fiscal 2014”2017”), August 28, 2013,31, 2016, (“fiscal 2013”2016”), and August 29, 201226, 2015 (“fiscal 2012”2015”) included in Part II, Item 8 of this Form 10-K. August 30,
2017 August 31,
2016 August 26,
2015 (52 weeks) (53 weeks) (52 weeks) Restaurant sales 93.3 % 93.9 % 93.9 % Culinary contract services 4.8 % 4.1 % 4.2 % Franchise revenue 1.8 % 1.8 % 1.8 % Vending revenue 0.1 % 0.1 % 0.1 % TOTAL SALES 100.0 % 100.0 % 100.0 % STORE COSTS AND EXPENSES: (As a percentage of restaurant sales) Cost of food 28.1 % 28.3 % 28.9 % Payroll and related costs 35.9 % 35.2 % 34.5 % Other operating expenses 17.7 % 16.1 % 17.1 % Occupancy costs 6.2 % 5.9 % 5.7 % Vending revenue (0.2 )% (0.2 )% (0.1 )% Store level profit 12.2 % 14.7 % 14.0 % Opening costs 0.1 % 0.2 % 0.7 % Depreciation and amortization 5.4 % 5.4 % 5.4 % Selling, general and administrative expenses 10.1 % 10.5 % 9.8 % Provision for asset impairments and restaurant closings 3.0 % 0.4 % 0.2 % Net gain on disposition of property and equipment (0.5 )% (0.2 )% (1.1 )% Cost of culinary contract services 87.9 % 89.6 % 90.2 % Culinary income 12.1 % 10.4 % 9.8 % Cost of franchise operations 25.8 % 25.9 % 24.0 % Franchise income 74.2 % 74.1 % 76.0 % (As a percentage of total sales) LOSS FROM OPERATIONS (4.6 )% (0.8 )% (0.2 )% Interest income 0.0 % 0.0 % 0.0 % Interest expense (0.6 )% (0.6 )% (0.6 )% Other income (expense), net (0.1 )% 0.0 % 0.1 % Loss before income taxes and discontinued operations (5.3 )% (1.4 )% (0.7 )% Provision (benefit) for income taxes 0.6 % 1.2 % (0.3 )% Loss from continuing operations (5.9 )% (2.6 )% (0.4 )% Loss from discontinued operations, net of income taxes (0.1 )% 0.0 % (0.1 )% NET LOSS (6.0 )% (2.6 )% (0.5 )% August 30, 2017 August 31, 2016 August 26, 2015 (52 weeks) (53 weeks) (52 weeks) (In thousands) Store level profit $ 42,943 $ 55,419 $ 51,763 Plus: Sales from culinary contract services 17,943 16,695 16,401 Sales from franchise operations 6,723 7,250 6,961 Less: Opening costs 492 787 2,743 Cost of culinary contract services 15,774 14,955 14,786 Cost of franchise operations 1,733 1,877 1,668 Depreciation and amortization 20,438 21,889 21,407 37,878 42,422 38,759 Provision for asset impairments and restaurant closings 10,567 1,442 636 Net gain on disposition of property and equipment (1,804 ) (684 ) (3,994 ) Interest income (8 ) (4 ) (4 ) Interest expense 2,443 2,247 2,337 Other income (expense), net 454 (186 ) (521 ) Provision (benefit) for income taxes 2,438 4,875 (1,076 ) Loss from continuing operations $ (22,796 ) $ (10,256 ) $ (1,616 ) Fiscal 2017 Year Begin Fiscal 2017 Openings Fiscal 2017 Closings Fiscal 2017 Year End 91 — (3 ) 88 75 1 (5 ) 71 Cheeseburger in Paradise 8 — — 8 1 — (1 ) — Total 175 1 (9 ) 167 9588 Luby’s branded restaurants located mostly in Texas, 71 Fuddruckers restaurants located throughout the United States, 8 Cheeseburger in Paradise Restaurants,restaurants primarily located in the eastern United States, and 110113 Fuddruckers franchises located primarily in the United States. On July 26, 2010, we became a multi-brand restaurant company with a national footprint through the acquisition of substantially all of the assets of Fuddruckers. The Fuddruckers acquisition added 59 Company-operated restaurants and a franchise network of 130 franchisee-operated units. This acquisition further expanded our family-friendly, value-oriented portfolio of restaurants located in close proximity to retail centers, business developments and residential areas. On December 6, 2012, we further expanded our brand family with the addition of the Cheeseburger in Paradise brand. This added full service restaurant and bar locations that complemented our core family-friendly brands and provided an entry point to operate at, or acquire a valuable leasehold interest in, 23 new locations at a cost of less than $0.5 million per location. In addition to our restaurant business model, we also provide culinary contract services for organizations that offer on-site food service, such as health carehealthcare facilities, colleges and universities, sports stadiums, businesses and institutions, as well as businesses and institutions.2014 and 2013, we continued to operate our two core brands, Luby’s Cafeterias and Fuddruckers, in the competitive fast casual segment of the restaurant industry. Much2017, much of our strategic focus concentrated on further enhancing the guest experience at each of our restaurant brands, growing our Fuddruckers franchise network, and building our pipeline for new business within our Culinary Contract Services business segment.constructing, staffing, opening,developing an even better understanding of our guests by focusing on the total guest experience and operatingdeploying technology to improve and personalize the experience. Technology deployed includes mobile ordering, third-party delivery aggregators, self-order abilities in the restaurants, and early stage development of a digital loyalty and recognition program. We have also engaged an outside consultancy firm to help us craft the next phase of our loyalty and recognition programs for all our brands. We continue to make these investments as part of our long-term strategy to increase our brand awareness and motivate new and more frequent guest visits. As we evaluated our portfolio of restaurant locations, we closed nine restaurants so that resources could be focused on the locations that exhibit the most promise for enhanced profitability. Over the long term, our strategy is to continue to refine our restaurant protoype design and build new restaurants in markets where we believe we can achieve superior restaurant cash flows.cure restaurant brands. Of particular focus was the opening of four Combo locations. Other areas of focus included re-investing in our core restaurant models via remodel activity,Fuddruckers franchise business segment continued supporting our growth initiatives with various marketing techniques, furtherloyal franchisees and developing our franchisee pipeline both domestically and supportinginternationally. In addition, we continue to pursue opportunities to re-franchise company-owned Fuddruckers locations as part of our franchisees asstrategy to grow franchise revenues. Our Culinary Contract Services segment continues its focus on expanding the Fuddruckers brand expanded again internationally, and seeking out and earning new business in our CCS business segment. Lastly, we developed a revised strategy for maximizing the value from the 23 Cheeseburger in Paradise leaseholdnumber of locations that we purchasedserve and developing business partnerships for the long-term, while servicing our existing agreements with our customized and high-level of client service. We are working to ensure that we have the right corporate headcount and overhead to support each of our business segments while balancing our corporate overhead costs: on December 6, 2012.2014Financial Performance●Total Company sales increased approximately $10.2 million, or 2.7%, in fiscal 2014 compared to fiscal 2013, consisting primarily of an $8.3 million increase in restaurant sales and a $1.9 million increase in CCS sales. The other components of total sales are franchise revenue and vending revenue. The $8.3 million increase in restaurant sales consisted of a $5.3 million increase in sales at Combo locations, $4.0 million increase in sales at stand-alone Luby’s Cafeterias, a $1.9 million increase in sales at Cheeseburger in Paradise reflecting a greater number of store operating weeks, a $1.4 million decrease in sales at stand-alone Fuddruckers restaurants, and a $1.6 million decrease in sales at our Koo Koo Roo brand, as we ceased operations at these two locations during fiscal 2014.●Total segment profit decreased $2.3 million to $54.2 million in fiscal 2014 compared to $56.5 million in fiscal 2013. The $2.3 million decrease in total segment profit resulted from 1) a decrease of $2.9 in Company-owned restaurant segment profit, partially offset by 2) a $0.6 million increase in Culinary Contract Services segment profit and 3) a $0.1 million increase in franchising segment profit. The $2.9 million decrease in Company-owned restaurant segment profit resulted from restaurant sales and vending income increasing $8.2 million and the cost of food, payroll and related, other operating expenses, and occupancy costs increasing $11.1 million.●Income or loss from Continuing Operations was a loss of $1.6 million in fiscal 2014 compared to income of $4.5 million in fiscal 2013.MilestoneMilestones• ●New RestaurantOpenings.Core restaurant brands.Our core Luby’s Cafeteria and Fuddruckers brands continued to develop and evolve. While our core menu remains stable, we introduce and rotate new menu offerings throughout the year to remain relevant to both our existing customer base and attract new customers. We offer a range of price points which include premium items featured on weekend nights as well as more price-sensitive manager specials throughout the week. In fiscal 2014, we also continued to promote our “Eating Smart” line of offerings by highlighting these offerings on our menu boards and on the cafeteria line. At our Luby’s Cafeteria brand we relocated one existing restaurant from its location in a shopping mall to a new building that we constructed on a pad site in front of the mall. This location in south Texas repeated the success in growing sales and profitability that we realized at a similar rebuild at another location in Houston in the prior fiscal year. Luby’s Cafeterias same store sales grew 1.4% through guest traffic increases. At Fuddruckers, we continue to evolve The World’s Greatest Hamburgers®, with new specialty burger combinations and toppings and expanded offerings beyond the core hamburger. In fiscal 2014, we instituted an enhanced guest service program whereby a designated restaurant employee engages guests throughout the dining room and ensures that all elements of the dining experience occur at our high standards. We also installed kitchen display monitors to build our customer orders and ensure that guest orders are delivered accurately and on time. Much of our focus in fiscal 2014 at Fuddruckers was on speed of service and an enhanced ordering experience. We are confident the focus on great food and enhanced service will in the long run lead to increased guest frequency and loyalty. Since the service aspect of the program has been instituted, we have seen increases in overall customer satisfaction scores at Fuddruckers. However, the sales at the Fuddruckers brand remained below our expectations for fiscal 2014 with a same store sales decline of 3.5% as a result of diminished guest traffic. This decline in same store sales in fiscal 2014 followed three consecutive years of same store sales gains.●Franchise Network.As of August 27, 2014, we supported a franchise network of 110 Fuddruckers franchise locations. For fiscal 2014, our franchisees opened six new Fuddruckers restaurants. Three of these locations were in the United States, one was in the Dominican Republic, and two were in Italy. For fiscal 2014, there were 12 Fuddruckers franchise locations that closed as franchise-operated restaurants. Our franchise network generated $7.0 million in revenue in fiscal 2014 ended August 27, 2014.●Luby’s Culinary Contract Services.Our CCS business generated $18.6 million in revenue during fiscal 2014 compared to $16.7 million in revenue during fiscal 2013. We view this area as a growth business that generally requires less capital investment and more favorable percentage returns on invested capital.●Cheeseburger in Paradise Location Strategy.On December 6, 2012, we acquired 23 Cheeseburger in Paradise restaurants and the associated leasehold interest in those locations. We understood that several of the locations achieved financial results below that of our core Luby’s Cafeteria and Fuddruckers brand and below acceptable levels. We embarked on a strategy to first attempt to improve the financial performance of the 23 locations and if not successful after one year, we would convert some of these locations into Fuddruckers restaurants. As of our fiscal year-end on August 27, 2014, we operated eight of the original Cheeseburger in Paradise locations, completed three conversions to Fuddruckers restaurants, have selected six additional locations expected to be converted into Fuddruckers, and another six locations which we expect to dispose. One of the locations, located in Newport News, VA was converted to a full service Fuddruckers Deluxe Bar and Grill and the other two converted locations were converted to Fuddruckers fast casual format, but retain some of the bar elements inherent in the Cheeseburger in Paradise restaurants.●New Restaurant Development.In the fiscal year 2014 ended on August 27, 2014, we opened 15 restaurants. Eight of these restaurants were at four Combo locations. These Combo locations are a key component of our long term growth strategy. In addition to these Combo locations,2017, we opened one stand-alone Luby’s Cafeteria in a new market in Eagle Pass, Texas, and six Fuddruckers locations. These six Fuddruckers locations consistedrestaurant north of 1) three locations that were previously operated as Cheeseburger in Paradise restaurants and were converted and re-opened as Fuddruckers, oneHouston, Texas. At this location, we introduced the first self-ordering stations to offer guests an additional method of which re-opened as a full service Deluxe Fuddruckers Bar and Grill and 2) three new Fuddruckers locations, including one location where we built on a property that we own and currently operate a Lubys’ Cafeteria, one in converted retail space, and one that was purchased from a franchise owner. During fiscal 2014 ended on August 27, 2014, we also closed a total of 21 restaurants. Fifteen of these 21 closures were Cheeseburger in Paradise restaurants whereby we had converted three to Fuddruckers byordering the end of fiscal 2014 and have selected six additional locations for conversion and re-opening as Fuddruckers. The remaining six of these 21 closures consisted of three Luby’s Cafeteria locations, two Koo Koo Roo locations, and one Fuddruckers location. "World's Greatest Hamburger●Capital Spending. Purchases of property and equipment were $46.2 million in fiscal 2014 up from $31.3 million in fiscal 2013. These capital investments were funded through a combination of cash from operations, sale of property and utilization of our revolving credit facility. Capital investments in fiscal 2014 included 1) $16.9 million on new restaurant development for the locations described above as well as construction in progress on our next combo location which will open in Jackson, Mississippi in the second half of fiscal 2015; 2) $12.2 million on the purchase of parcels of land for current and future development; 3) $6.5 million on the remodeling of existing restaurants and conversion of Cheeseburger in Paradise restaurants to Fuddruckers restaurants; and 4) $10.6 million for recurring capital expenditures and technology infrastructure investments. Our debt balance at the end of fiscal 2014 was $42.0 million with $5.1 million of available credit. We remain committed to maintaining the attractiveness of all of our restaurant locations where we anticipate operating over the long term. In fiscal 2015, we anticipate making capital investments of between $20 and $25 million, primarily for construction of new restaurants with opening dates in fiscal 2015, conversion of Cheeseburger in Paradise locations to Fuddruckers, and recurring maintenance of all of our restaurant properties and for new point-of-sale hardware associated with our technology infrastructure.CCSculinary contract service business. We are also committed to reducing our debt balances and making capital investments with suitable return characteristics. We plan to use cash generated from operations, combined with our borrowing capacity, when necessary, in order to seize these capital investment opportunities. We believe our operational execution has improved through our commitment to higher operating standards, and we believe that we are well-positioned to enhance shareholder value over the long term.EachFiscal year 2016 is such a year that contained 53 weeks, accounting for 371 days in the aggregate. In fiscal year 2015, and prior, each of the first three quarters of each fiscal year consistsconsisted of three four-week periods, while the fourth quarter normally consistsconsisted of four four-week periods. Beginning in fiscal 2016, the first quarter consisted of four four-week periods, while the last three quarters normally consist of three four-week periods. However, fiscal 2016 is a fiscal year consisting of 53 weeks, accounting for 371 days in the aggregate. As such, the fourth quarter of fiscal year 2011, as a result of the additional week, consisted of three four-week periods and2016 contained one five-week period, accounting for 17 weeks,resulting in a 13-week fourth quarter, or 11991 days in the aggregate. Fiscal 2014, 2013 and 2012 contained 52 weeks. Comparability between quarters may be affected by the varying lengths of the quarters, as well as the seasonality associated with the restaurant business.The Fuddruckers restaurants that were acquired in July 2010 were included in the same-store grouping beginning with the third quarter of fiscal 2012. The Cheeseburger in Paradise stores that were acquired in December 2012 will be included in the same store metric beginning with the first quarter fiscal 2015. Stores that close on a permanent basis (or on a temporary basis for remodeling) are removed from the group in the fiscal quarter when operations cease at the restaurant, but remain in the same-store group for previously reported fiscal quarters. Although management believes this approach leads to more effective year-over-year comparisons, neither the time frame nor the exact practice may be similar to those used by other restaurant companies. Same-store sales at our restaurant units were unchangeddecreased 3.4% for fiscal 2014 and2017, increased 0.7% for fiscal 2013,2016, and increased 2.2%0.5% for fiscal 2012. (1.0 %) 0.3 % 2.5 % (1.3 0.5 (0.1 (0.6 0.2 2.4 1.1 2.2 3.5 Fiscal 2017 Fiscal 2016 Fiscal 2015 Increase (Decrease) Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Same-store sales (5.1 )% (2.7 )% (3.8 )% (2.3 )% (0.5 )% (0.6 )% 2.2 % 1.4 % 0.7 % (1.1 )% 2.5 % (0.1 )% recently acquired Cheeseburger in Paradise leasehold units. This underperforming Cheeseburger in Paradise leasehold disposal plan called for five or more locations to be closed by the end of fiscal 2014.In2014. In accordance with the plan, the entire fiscal activity of the applicable locations closed after the inception of the plan has been classified as discontinued operations. Results related to these same locations have also been classified as discontinued operations for all periods presented.20142017 (52 weeks) compared to Fiscal 20132016 (53 weeks) and Fiscal 2015 (52 weeks)Sales Fiscal Year 2017 Ended Fiscal Year 2016 Ended Fiscal 2017 vs Fiscal 2016 Fiscal Year 2015 Ended Fiscal 2016 vs Fiscal 2015 ($000s) August 30, 2017 August 31, 2016 Higher/(Lower) August 26, 2015 Higher/(Lower) (52 weeks) (53 weeks) (52 vs 53 weeks) (52 weeks) (53 vs 52 weeks) Restaurant sales $ 350,818 $ 378,111 (7.2 )% $ 370,192 2.1 % Culinary contract services 17,943 16,695 7.5 % 16,401 1.8 % Franchise revenue 6,723 7,250 (7.3 )% 6,961 4.2 % Vending revenue 547 583 (6.2 )% 531 9.8 % TOTAL SALES $ 376,031 $ 402,639 (6.6 )% $ 394,085 2.2 % $10.2$8.6 million, or 2.7%2.2%, in fiscal 20142016 compared to fiscal 2013,2015, consisting primarily of an $8.3approximate $7.9 million increase in restaurant sales, and a $1.9an approximate $0.3 million increase in CCS sales. The other componentsfranchise revenue, an approximate $0.3 million increase in Culinary contract service sales, and a less than $0.1 million increase in vending revenue. Fiscal 2016 contained one additional week of operations during which approximately $6.7 million in restaurant sales were generated and approximately $7.1 million in total sales are franchise revenue and vending revenue.restaurants, franchise operations,Restaurants, Franchise Operations, and Culinary Contract Services.RestaurantRestaurant Brand Fiscal Year 2017 Ended Fiscal Year 2016 Ended Fiscal 2017 vs Fiscal 2016 Fiscal Year 2015 Ended Fiscal 2016 vs Fiscal 2015 August 30, 2017 August 31, 2016 Higher/(Lower) August 26, 2015 Higher/(Lower) (52 weeks) (53 weeks) (52 vs 53 weeks) (52 weeks) (53 vs 52 weeks) Luby’s Cafeterias $ 214,976 $ 229,880 (6.5 )% $ 226,970 1.3 % Fuddruckers Restaurants 98,115 106,456 (7.8 )% 101,290 5.1 % Combo locations 21,304 23,107 (7.8 )% 23,734 (2.6 )% Cheeseburger in Paradise 16,423 18,668 (12.0 )% 18,198 2.6 % Restaurant Sales $ 350,818 $ 378,111 (7.2 )% $ 370,192 2.1 % $8.3$7.9 million in fiscal 20142016 compared to fiscal 2013.2015. The increase in restaurant sales included a $5.3$5.1 million increase in sales from Combo locations,at stand-alone Fuddruckers restaurants, a $4.0$2.9 million increase in sales at stand-alone Luby’s Cafeteria branded restaurants,Cafeterias, and a $1.4 million decrease in sales at stand-alone Fuddruckers restaurants. Also included in the increase in restaurant sales is a $1.9$0.5 million increase at sales from our Cheeseburger in Paradise restaurants, which primarily reflects more weeks of operation for this brand in fiscal 2014 compared to fiscal 2013; and a $1.6partially offset by $0.6 million decrease in sales at our Koo Koo Roo brand reflecting fewerfrom Combo locations. The $7.9 million increase in total restaurant sales reflects one additional week of operations since fiscal 2016 comprised 53 weeks of operation for this brand in fiscal 2014 compared to fiscal 2013.same storesame-store basis, restaurantFuddruckers sales were unchanged foron par with fiscal 20142016 compared to fiscal 2013. Same store2015. Average spend per guest increased approximately 2.7% and was offset by a similar decrease in guest traffic.Luby’s Cafeteria restaurants increased 1.4%same-store-grouping.fiscal 2014 compared to fiscal 2013 while same storesales from Combo locations includes approximately $0.4 million in sales generated in the additional week offset by decreases in sales at our Fuddruckers restaurants decreased 3.5%. The increase in same storetwo locations that experienced sales at our Luby’s Cafeteria restaurants reflectsdeclines when compared against the benefits realized from remodel stores and the relocationmonths immediately following their opening when a high-volume of one store into a newly constructed building on a pad site in front of the previous mall location as well as favorable customer responses to our new and existing menu offerings. The decline in same-store sales at our Fuddruckers restaurants partially reflects a continued very competitive burger segment of the restaurant industry despite increased marketing efforts and service improvements. The decrease in same store sales follows three years of increasing same stores for the Fuddruckers brand. Fiscal Year 2017 Ended Fiscal Year 2016 Ended Fiscal 2017 vs Fiscal 2016 Fiscal Year 2015 Ended Fiscal 2016 vs Fiscal 2015 ($000s) August 30, 2017 August 31, 2016 Higher/(Lower) August 26, 2015 Higher/(Lower) (52 weeks) (53 weeks) (52 vs 53 weeks) (52 weeks) (53 vs 52 weeks) Cost of food $ 98,714 $ 106,980 (7.7 )% $ 107,052 (0.1 )% As a percentage of restaurant sales 28.1 % 28.3 % (0.2 )% 28.9 % (0.6 )% increaseddecreased approximately $3.2$8.3 million, or 3.1%7.7%, in fiscal 20142017 compared to fiscal 2013.2016. Cost of food areis variable and generally fluctuatefluctuates with sales volume. As a percentage of restaurant sales, food costs increased 0.3%decreased 0.2% to 28.9%28.1% in fiscal 20142017 compared to 28.6%28.3% in fiscal 2013.2016. The Cost of food as percentage of sales increased primarily from higherdecreased with lower average food commodity costs, which impacted each of our restaurant brands.higher realized average menu prices, and continued careful food cost controls. At our Luby’s CafeteriaCafeterias we experienced an approximate 1% decrease in the cost of our basket of food commodity purchases, occurring as a result of decreases in the cost in our primary commodities of beef and poultry as well as in our other commodities of eggs and oils and shortenings partially offset by increases in the cost of seafood, dairy and butter, and fresh produce. At our Fuddruckers, the cost of our basket of food commodity purchases was stable, with modest increases in the cost of beef, cheese and dairy, and produce offset by decreases in the cost of poultry, pork, and dough used in the production of buns.were able to offset a 3% increaseexperienced an approximate 7% decrease in our basket of food commodity purchases, with effective food controls onsignificant decreases in the cafeteria line and managingcost of beef having the mix of menu items offered by us and selected by our guests. The 3% increase in our basketgreatest impact. Our cost of food, commodity purchases at our Luby’s Cafeteria restaurants occurred as a resulthowever, was also impacted by decreases in the cost of commodity price increase in beef, poultry,oils and shortenings, cheese, and dairy butter, and cheese; these increases wereproducts, partially offset by decrease in seafood and oils and shortenings. At Fuddruckers, our basket of food commodity purchases also increased 3%, driven almost entirely from beef prices increasing approximately 10% for the fiscal year as beef prices spiked in the last several months of fiscal 2014. Cost of food as a percentage of sales increased 60 basis points at our Fuddruckers restaurants and are attributed to this increase in food commodity prices offset by careful control of food product.higher other protein costs. Fiscal Year 2017 Ended Fiscal Year 2016 Ended Fiscal 2017 vs Fiscal 2016 Fiscal Year 2015 Ended Fiscal 2016 vs Fiscal 2015 ($000s) August 30, 2017 August 31, 2016 Higher/(Lower) August 26, 2015 Higher/(Lower) (52 weeks) (53 weeks) (52 vs 53 weeks) (52 weeks) (53 vs 52 weeks) Payroll and related costs $ 125,997 $ 132,960 (5.2 )% $ 127,691 4.1 % As a percentage of restaurant sales 35.9 % 35.2 % 0.7 % 34.5 % 0.7 % for initial and continuedwhile training, as well as management salaries and incentive payments. Payroll and related costs also include the payroll taxes, workers’ compensation expense, group health insurance costs, and 401-K401(k) matching expense for all restaurant-level hourly and management employees. Payroll and related costs increaseddecreased approximately $3.9$7.0 million, or 3.2%5.2%, in fiscal 20142017 compared to fiscal 2013. Hourly labor costs increased approximately $0.9 million2016 due in part to (1) operating ten fewer restaurants; (2) an additional week of operations in fiscal 2014 compared to fiscal 2013 due to 1) the addition of four new restaurants2016; (3) an approximate $0.7 million decrease in the side-by-side Luby’s Cafeterias and Fuddruckers configuration, 2) more operating weeks for the Cheeseburger in Paradise brand, and 3) higher group health insuranceworkers' compensation expense; partially offset by 4) the closure of four Luby’s Cafeteria restaurants and 5) continued enhanced labor scheduling processes at each of our restaurant brands with Fuddruckers realizing the greatest impact from these improvements. Management labor costs increased approximately $3.0 million in fiscal 2014 compared to fiscal 2013 due to the store openings and increased operating weeks for the Cheeseburger in Paradise brand, offset by store closures as enumerated above.(4) higher average wage rates. Payroll and related costs also included an approximate $0.4 million increase in group health insurance costs. Asas a percentage of restaurant sales payrollincreased 0.7% due to (1) the fixed cost component of labor costs (mainly management labor) with lower same-store sales levels; (2) higher average hourly wage rates reflective of market pressures; (3) higher average restaurant management compensation; partially offset by (4) lower workers' compensation insurance expense.0.3% to 34.7%approximately $5.3 million, or 4.1%, in fiscal 20142016 compared to 34.4%fiscal 2015 due primarily to an additional week of operations in fiscal 2013. Fiscal Year 2017 Ended Fiscal Year 2016 Ended Fiscal 2017 vs Fiscal 2016 Fiscal Year 2015 Ended Fiscal 2016 vs Fiscal 2015 ($000s) August 30, 2017 August 31, 2016 Higher/(Lower) August 26, 2015 Higher/(Lower) (52 weeks) (53 weeks) (52 vs 53 weeks) (52 weeks) (53 vs 52 weeks) Other operating expenses $ 61,924 $ 60,961 1.6 % $ 63,133 (3.4 )% As a percentage of restaurant sales 17.7 % 16.1 % 1.6 % 17.1 % (1.0 )% $3.9$1.0 million, or 6.0%1.6%, in fiscal 20142017 compared to fiscal 2013.2016. As a percentage of restaurant sales, Other operating expenses increased 0.7%1.6% to 18.7%17.7% in fiscal 20142017 compared to 18.0%16.1% in fiscal 2013.2016. The 0.7%1.6% increase in Other operating expenses as a percentage of restaurant sales was due to 1)(1) a 0.6% increase in restaurant services including higher computer network connectivity, point of sale software, food-to-go delivery charges to third parties, increased store security costs, and higher fees associated with armored car services; (2) a 0.6% increase in repairs and maintenance costs; (3) a 0.3% increase in utilities as a percentage of restaurant salescosts due to higher average utility rates; 2)and (4) a 0.2%0.1% increase in marketingrestaurant supplies expense with typical inflationary cost increases on lower same-store sales volumes.expense asinsurance, and services. Other operating expenses decreased approximately $2.2 million, or 3.4%, in fiscal 2016 compared to fiscal 2015. As a percentage of restaurant sales, dueOther operating expenses decreased 1.0% to further investment16.1% in marketing programs including more frequent and regular direct mail campaigns, a full year schedule on a selected radio station, and more cable television spotsfiscal 2016 compared to 17.1% in fiscal 2013; 3) a 0.3% increase2015. The 1.0% decrease in restaurant services and other restaurantOther operating expenses as a percentage of restaurant sales was due primarily to higher credit card transaction fees from increased credit card usage; increased restaurant network(1) a 0.7% decrease in repairs and technology costs;maintenance cost; (2) a 0.3% decrease in utilities costs due to lower average utility rates; and higher travel costs for our restaurant level employees; all offset by; 4)(3) a 0.1% decrease in restaurant repairsindividual store marketing and maintenanceadvertising costs as advertising spend was re-directed into more corporate-wide marketing initiatives; partially offset by (4) a percentage ofnet 0.1% increase in restaurant sales. Fiscal Year 2017 Ended Fiscal Year 2016 Ended Fiscal 2017 vs Fiscal 2016 Fiscal Year 2015 Ended Fiscal 2016 vs Fiscal 2015 ($000s) August 30, 2017 August 31, 2016 Higher/(Lower) August 26, 2015 Higher/(Lower) (52 weeks) (53 weeks) (52 vs 53 weeks) (52 weeks) (53 vs 52 weeks) Occupancy costs $ 21,787 $ 22,374 (2.6 )% $ 21,084 6.1 % As a percentage of restaurant sales 6.2 % 5.9 % 0.3 % 5.7 % 0.2 % $48 thousand$1.3 million in fiscal 20142016 compared to fiscal 2013, in large part2015 due to highera net increase of three restaurant locations, increased property tax expensesexpense at certainexisting locations, offset by lower overall rental expenses. The lower overall rental expenses were due in large part to closing three Koo Koo Roo branded restaurantincreased property insurance expense at existing locations, and recording accelerated rental expense in prior fiscal 2013. Permitting and licensing expenses were also reducedone additional week of operations in fiscal 2014 compared2016. The occupancy costs of closed locations previously operated as Cheeseburger in Paradise, but selected for conversion to Fuddruckers restaurants in fiscal 2013. Fiscal Year 2017 Ended Fiscal Year 2016 Ended Fiscal 2017 vs Fiscal 2016 Fiscal Year 2015 Ended Fiscal 2016 vs Fiscal 2015 ($000s) August 30, 2017 August 31, 2016 Higher/(Lower) August 26, 2015 Higher/(Lower) (52 weeks) (53 weeks) (52 vs 53 weeks) (52 weeks) (53 vs 52 weeks) Franchise revenue $ 6,723 $ 7,250 (7.3 )% $ 6,961 4.2 % Cost of franchise operations 1,733 1,877 (7.7 )% 1,668 12.5 % Franchise profit $ 4,990 $ 5,373 (7.1 )% $ 5,293 1.5 % Franchise profit as percent of Franchise revenue 74.2 % 74.1 % 0.1 % 76.0 % (1.9 )% paid to us as the franchisor for the Fuddruckers brand;and (2) franchise fees paid to us when franchiseand area development agreements are executed and when franchise units are opened for business or transferred to new owners.agreement fees. Franchise revenue increased $91 thousanddecreased approximately $0.5 million in fiscal 20142017 compared to fiscal 20132016 which included a $125 thousandan approximate $0.6 million decrease in franchise royalties, partially offset by an approximate $0.1 million increase in franchise feesfees. Cost of franchise operations decreased approximately $0.1 million, or 7.7%, in fiscal 2017 compared to fiscal 2016, primarily as a result of decreased overhead cost to support franchise operations and a $34 thousand decreasethe opening of fewer franchise locations. Franchisees opened four international locations (one in Panama; one in Colombia; one in the Dominican Republic; and one in Canada) in fiscal 2017. Franchise profit, defined as Franchise revenue less Cost of franchise royalties.operations, decreased approximately $0.4 million in fiscal 2017 compared to fiscal 2016. During fiscal 2017, we opened the year,eight franchise locations enumerated above and there were 12also eight franchise units that closed on a permanent basis. We ended fiscal 20142017 with 110113 Fuddruckers franchise restaurants. Two franchisee-operatedopened(one in each of Mexico and Panama; two in each of Italy and Columbia) and seven domestic locations (one in each of Michigan, Montana, California, Florida, and Texas; and two franchisee-operatedin Virgina) in fiscal 2016. Franchise profit, defined as Franchise revenue less Cost of franchise operations, increased approximately $0.1 million in fiscal 2016 compared to fiscal 2015. During fiscal 2016, we opened 13 franchise locations and there were six franchise units that closed subsequent to the end of theon a permanent basis. We ended fiscal year on August 27, 2014. As of November 4, 2013, we had 1102016 with 113 Fuddruckers franchise restaurants.CCS Segment Profithigher education, and corporate dining clients.clients, sports stadiums, and sales through retail grocery outlets. The healthcare accounts are full service and typically include in-room delivery, catering, vending, coffee service and retail dining. This business line varied between 2123 and 2625 client locations through fiscal 20142017 and between 1824 and 2128 client locations in fiscal 2013.2016. In fiscal 2014,2017 and fiscal 2016, we continued concentrating on clients able to enter into agreements where all operating costs are reimbursed to us and we charge a generally fixed fee. These agreements typically present lower financial risk to the company. Fiscal Year 2017 Ended Fiscal Year 2016 Ended Fiscal 2017 vs Fiscal 2016 Fiscal Year 2015 Ended Fiscal 2016 vs Fiscal 2015 ($000s) August 30, 2017 August 31, 2016 Higher/(Lower) August 26, 2015 Higher/(Lower) (52 weeks) (53 weeks) (52 vs 53 weeks) (52 weeks) (53 vs 52 weeks) Culinary contract services $ 17,943 $ 16,695 7.5 % $ 16,401 1.8 % Cost of culinary contract services 15,774 14,955 5.5 % 14,786 1.1 % Culinary contract profit $ 2,169 $ 1,740 24.7 % $ 1,615 7.7 % Culinary contract profit as percent of Culinary contract services sales 12.1 % 10.4 % 1.7 % 9.8 % 0.6 % Contract Services RevenueCulinary Contract Servicescontract services revenue increased $1.9$1.2 million, or 11.2%7.5%, in fiscal 20142017 compared to fiscal 2013. While the number of locations has varied, we believe we now operate with a stronger mix of clients.2016. The $1.2 million increase in revenue was primarily due to growing(1) twelve new locations opening since the numberbeginning of fiscal 2016 contributing a total of $6.2 million in sales; partially offset by (2) the closure of nine locations where we operatewhich reduced sales by $4.6 million; and (3) a changereduction of $0.4 million in the mix ofsales from locations where we operate.Culinary Contract ServicesCost of Culinary Contract Servicesculinary contract services includes the food, payroll and related andcosts, other direct operating expenses associated with generating culinary contract sales.sales, and the direct overhead costs (primarily salary and related costs) associated with the management of this business segment. Cost of Culinary Contract Servicesculinary contract services increased approximately $1.3$0.8 million, or 8.8%5.5%, in fiscal 20142017 compared to fiscal 20132016 due primarily to ana net increase in culinary contract sales volume.volume, partially offset by an additional week of operations in fiscal 2016. Profit margin in our culinary contract servicesCulinary Contract Services business segment (defined as Culinary Contract Servicescontract cervices revenue less costCost of Culinary Contract Services) expandedculinary contract services) increased in dollar terms by approximately $0.4 million and increased as a percent of Culinary contract services revenue to 12.1% in fiscal 2017 from 10.4% in fiscal 2016.salesbusiness segment (defined as we have executed on our refined operating modelCulinary contract services revenue less Cost of concentrating on clients able to enter into agreements where all operating costs are reimbursed to usculinary contract services) increased in dollar terms by approximately $0.1 million and we chargeincreased as a generally fixed fee. Our profit margin as percent of Culinary Contract Servicescontract services revenue expanded to 12.8%10.4% in fiscal 20142016 from 10.9%9.8% in fiscal year 2013.includeincludes labor, supplies, occupancy, and other costs necessary to support the restaurant through its opening period. Opening costs were approximately $2.2$0.5 million in fiscal 20142017 compared to approximately $0.8 million in fiscal 2013. 2016 and approximately $2.7 million in fiscal 2015.20142016 included the cost associated withcosts of opening four Combothree Fuddruckers locations comprising a total of eightand the carrying costs (mainly rent, property taxes, and utilities) for two locations that were selected for possible conversion from Cheeseburger in Paradise restaurants six stand-aloneto Fuddruckers restaurants, and one stand-alone Luby’s Cafeteria. restaurants.20132015 included the cost associated with opening one Combo location comprising two restaurants, and fivenine stand-alone Fuddruckers restaurants. Also included inrestaurants, including one that opened just prior to the start of fiscal 2015. Opening costs arein fiscal 2015 also included the carrying costs (mainly rent, property taxes, and utilities) for property slatedseven locations that were selected for development. Fiscal Year 2017 Ended Fiscal Year 2016 Ended Fiscal 2017 vs Fiscal 2016 Fiscal Year 2015 Ended Fiscal 2016 vs Fiscal 2015 ($000s) August 30, 2017 August 31, 2016 Higher/(Lower) August 26, 2015 Higher/(Lower) (52 weeks) (53 weeks) (52 vs 53 weeks) (52 weeks) (53 vs 52 weeks) Depreciation and amortization $ 20,438 $ 21,889 (6.6 )% $ 21,407 2.3 % As a percentage of total sales 5.4 % 5.4 % 0.0 % 5.4 % 0.0 % increased $1.7decreased $1.5 million in fiscal 20142017 compared to fiscal 20132016 due primarily to the decrease in capital spending for new store construction, reduced remodel activity, and reduced recurring maintenance capital spending in addition to certain existing assets reaching the end of their depreciable lives during fiscal 2017.as well asand the capital we have used for remodeling existing locations and to a lesser extent the full year impact of depreciating assets acquired with the Cheeseburger in Paradise brand in prior fiscal 2013 as well as depreciation associated with additional infrastructure and technology assets. The increase in depreciation due to investments made in new locations as well as the capital we have used for remodeling existing locations was mostly offset by certain existing assets reaching the end of their depreciable lives during fiscal 2014.General Fiscal Year 2017 Ended Fiscal Year 2016 Ended Fiscal 2017 vs Fiscal 2016 Fiscal Year 2015 Ended Fiscal 2016 vs Fiscal 2015 ($000s) August 30, 2017 August 31, 2016 Higher/(Lower) August 26, 2015 Higher/(Lower) (52 weeks) (53 weeks) (52 vs 53 weeks) (52 weeks) (53 vs 52 weeks) General and administrative expenses $ 32,746 $ 36,808 (11.0 )% $ 35,557 3.5 % Marketing and advertising expenses 5,132 5,614 (8.6 )% 3,202 75.3 % Selling, general and administrative expenses $ 37,878 $ 42,422 (10.7 )% $ 38,759 9.5 % As percent of total sales 10.1 % 10.5 % (0.4 )% 9.8 % 0.7 % GeneralSelling, general and administrative expenses decreased by approximately $4.5 million, or 10.7%, in fiscal 2017 compared to fiscal 2016. Decreases in Selling, general and administrative expenses include (1) an approximate $3.5 million decrease in salaries, benefits, and other compensation expenses due to reduced headcount, significantly reduced bonus and incentive expense (including an adjustment to the estimated fair value of performance awards under an incentive compensation plan), and to a lesser extent, one less operating week in fiscal 2017 compared to fiscal 2016; (2) an approximate $0.7 million decrease in corporate employee travel costs; (3) an approximate $0.5 million reduction in marketing and advertising costs, partially offset by (4) an approximate $0.1 million increase in corporate supplies expense and other overhead expenses, net of a reduction in outside professional service fees. As a percentage of total sales, Selling, general and administrative expenses decreased to 10.1% in fiscal 2017 compared to 10.5% in fiscal 2016 primarily due to decreases in the expenses enumerated above.$2.8$3.7 million, or 8.8%9.5%, in fiscal 20142016 compared to fiscal 2013. The increase was due primarily to2015. Increases in Selling, general and administrative expenses include (1) an approximate $2.4 million increase in salarymarketing and advertising expense; (2) an approximate $0.7 million increase in outside professional service fees and employee moving costs; (3) a net increase of $0.4 million in salaries and benefits expense, outside professional services costs, technology and infrastructurehealth insurance costs and employee travel costs; and (4) an approximate net increase of $0.2 million in corporate travelsupplies and other corporate overhead costs. Certain expenses, were impacted with the additional week of operations in fiscal 2016 with salaries and benefits expense for the additional week comprising the largest portion of this impact. The $2.4 million increase in marketing and advertising expenses is intended to motivate increased guest visits, increased frequency of visits and increased overall brand awareness. This includes sponsorships and partnerships with sports teams that we believe enhance our visibility and appeal within our core markets. As a percentage of total sales, Selling, general and administrative expenses increased to 8.9%10.5% in fiscal 20142016 compared to 8.4%9.8% in fiscal 20132015 primarily due to increases in the expenses enumerated above increasing at a greater rate than our ability to grow total salesabove.2014.Provision for asset impairments, net$2.5$1.4 million in fiscal 20142016 reflects the(1) a $1.2 million impairment offor one owned Fuddruckers location twoand three leased Fuddruckers locations; (2) a $0.2 million charge for restaurant closings related to three Fuddruckers locations and six Cheeseburger in Paradise locations including goodwill relatedone Luby's Cafeteria location; and (3) a $38 thousand impairment of Goodwill. The $0.2 million charge for restaurant closings includes the total amount of rent and other direct costs for the remaining period of time the properties will be unoccupied plus the value of the amount by which the rent we pay to Cheeseburger in Paradise and one favorablethe landlord exceeds any rent paid to us by a tenant under a sublease over the remaining period of the lease asset.2013 is related to one location that is classified as property held for sale and to used equipment at our maintenance facility in Houston.Loss (Gain)Gain on Disposition of Property and Equipment20142017 resulted in a net gain of approximately $2.4$1.8 million, which included (1) the gain on the sale of three properties where we operated a cafeteria up until the time of the sale offset by (2) normal asset retirement activity at operating locations and costs associated with disposal of assets at one leased property we operated up until the time of lease termination.twothree owned Luby’s Cafeteria locations; (2) the gain on the sale of two owned properties which we previously leased to a tenant; offset by (2)(3) normal asset retirement activity in our restaurants.The disposition of property and equipment in fiscal 2013 resulted in a net gain of approximately $1.7 million, which included (1) proceeds from the eminent domain disposition of part of a parking lot at a Luby’s Cafeteria location; (2) the gain on disposal at a Koo Koo Roo leased location, (3) a payment to us for exiting a lease at one cafeteria location prior to the contractual lease expiration date; offset by (4) normal asset retirement activity in our restaurants.$6$8 thousand in fiscal 20142017 compared to $9$4 thousand in fiscal 2013.20142017 increased approximately $0.3$0.2 million compared to fiscal 2013onhigher2016 on marginally higher average debt balances and higher average interest rates. Interest expense in fiscal 2016 decreased approximately $0.1 million compared to fiscal 2015 on slightly lower average debt balances.earned through our participationas we did not participate in state tax prepayment programs; and oil and gas royalty income.wasdecreased approximately $1.1$0.3 million in fiscal 2014 and $1.0 million in2017 compared to fiscal 2013. The increase was2016 primarily related to an increase in net rental income on property for which we are the landlord.benefitprovision related to continuing operations for fiscal 20142017 was $1.7approximately $2.4 million compared to an income tax expenseprovision of $1.8approximately $4.9 million for fiscal 2013.2016 and an income tax benefit of approximately $1.1 million for fiscal 2015. The income tax provision in fiscal 2017 reflects increasing the deferred tax asset valuation allowance by $9.5 million partially offset by recording a tax benefit related to the pre-tax loss for the year adjusted for state income taxes, and general business and foreign tax credits. The income tax provision in fiscal 20142016 reflects recording a deferred tax asset valuation allowance of $6.9 million partially offset by recording a tax benefit related to the pre-tax loss for the year adjusted for state income taxes, and general business and foreign tax credits. The income tax benefit 2015 reflects the tax effect of the pre-tax loss for the year adjusted for state income taxes, and general business and foreign tax credits. August 30, 2017 August 31, 2016 August 26, 2015 (52 weeks) (53 weeks) (52 weeks) Discontinued operating losses $ (28 ) $ (161 ) $ (890 ) Impairments — — (90 ) Gains — 25 116 Pretax loss $ (28 ) $ (136 ) $ (864 ) Income tax benefit (expense) from discontinued operations (438 ) 46 406 Loss from discontinued operations, net of income taxes $ (466 ) $ (90 ) $ (458 ) $1.8approximately $0.5 million in fiscal 20142017 compared to a loss of $1.4approximately $0.1 million in fiscal 2013.2016 and a loss of approximately $0.5 million in fiscal 2015. The loss of $1.8approximately $0.5 million in fiscal 20142017 included (1) $1.6less than $0.1 million in “carrying costs” (typically rent, property taxes, utilities, and maintenance) associated with assets that were related to discontinued operations,operations) and (2) impairment chargesan approximate $0.4 million income tax provision related to increasing the deferred tax asset valuation allowance associated with discontinued operations. The loss of $1.2$0.1 million for certainin fiscal 2016 included (1) an approximate $0.2 million in carrying costs associated with assets that were related to discontinued operationsoperations; offset by (2) a less than $0.1 million gain on sale of assets that were related to discontinued operations; and (3)(4) a $1.0less than $0.1 million income tax benefit related to discontinued operations. The loss of $1.4$0.5 million in fiscal 20132016 included (1) $1.3approximately $0.9 million in “carrying costs” (typically rent, property taxes, utilities, and maintenance)carrying costs associated with assets that were related to discontinued operations; (2) impairment charges of $0.6approximately $0.1 million million for certain assets related to discontinued operations; offset by (3) a $0.5 million income tax benefit related to discontinued operations.Fiscal 2013 (52 weeks) compared to Fiscal 2012 (52 weeks)SalesTotal company sales increased approximately $34.1 million, or 9.7%, in fiscal 2013 compared to fiscal 2012, consisting primarily of a $35.5 million increase in restaurant sales, offset by a $1.0 million decrease in CCS sales, a $0.3 million decrease in franchise revenue, and aan approximate $0.1 million decrease in vending income.The Company operates with three reportable operating segments: Company owned restaurants, franchise operations, and Culinary Contract Services.Company Owned RestaurantsRestaurant SalesRestaurant sales increased approximately $35.5 million in fiscal 2013 compared to fiscal 2012. The increase in restaurant sales included a $29.6 million contribution from the 18 Cheeseburger in Paradise restaurants, a $1.5 million decrease in sales at Luby’s Cafeteria branded restaurants and a $4.0 million increase in sales from Fuddruckers branded restaurants offset by a $1.9 million decrease in Koo Koo Roo branded restaurants.On a same store basis, restaurant sales were unchanged for fiscal 2013 compared to fiscal 2012. The unchanged same-store sales level is primarily due to a continued very competitive operating environment and greater levels of economic uncertainty. Maintaining our level of same store sales was achieved by growth in certain areas of our business, such as catering orders, remodeled restaurants, and in certain geographical markets where we have been able to grow sales, as well as through sustained marketing efforts. These areas of sales growth were offset by other markets where sales growth proved more challenging.Cost of FoodFood costs increased approximately $12.7 million, or 14.0%, in fiscal 2013 compared to fiscal 2012 due primarily to the addition of new restaurants, including 18 Cheeseburger in Paradise-branded stores. Food commodity prices for our basket of food commodity purchases were also higher due to a 3% increase for our Luby’s Cafeteria branded restaurants. Food commodity costs at our cafeteria restaurants were higher across all product categories except for oils and shortenings. The basket of food commodity purchases at Fuddruckers branded restaurants was stable in fiscal 2013 compared to fiscal 2012 as higher commodity prices for poultry, buns, and produce were completely offset by the modest price decreases in our core beef products. In addition, total food rebates were lower by approximately $0.4 million in fiscal 2013 compared to fiscal 2012. As a percentage of restaurant sales, food cost increased 0.8% to 28.6% in fiscal year 2013 compared to 27.9% in fiscal 2012. Removing the impact of Cheeseburger in Paradise, food costs as a percentage of sales increased 0.5% to 28.3% in fiscal 2013 compared to 27.9% in fiscal 2012. Removing the impact of Cheeseburger in Paradise and removing the impact of lower food rebates, our core food cost as a percentage of sales increased by 0.3% to 28.7% in fiscal 2013 compared to 28.4% in fiscal 2012.Payroll and Related CostsPayroll and related costs increased approximately $11.6 million, or 10.3% in fiscal 2013 compared to fiscal 2012. Hourly labor costs increased approximately $8.4 million in fiscal 2013 compared to fiscal 2012 due primarily to the addition of new restaurants, including 18 Cheeseburger in Paradise branded stores, as well as the typically higher initial labor costs associated with new restaurant openings. These labor cost increases were offset by improvements in labor costs at existing restaurants where refined scheduling techniques adopted in fiscal 2012 at our cafeteria restaurants were continued in fiscal 2013 and also deployed into our Fuddruckers restaurants. These enhanced labor scheduling processes include the ability to react more quickly to changes in customer traffic. Restaurant management labor costs increased $3.2 million in fiscal 2013 compared to fiscal 2012 due primarily to the addition of new restaurants, including the 18 Cheeseburger in Paradise branded restaurants. As a percentage of restaurant sales, Payroll and Related costs decreased 0.2% to 34.4% in fiscal 2013 compared to 34.6% in fiscal 2012. Removing the impact of Cheeseburger in Paradise, Payroll and Related costs as a percentage of sales decreased 0.5% to 34.2% from 34.6% in fiscal 2012. The decrease as a percentage of sales was achieved primarily by refined scheduling techniques noted above. Other Operating ExpensesOther operating expenses primarily include restaurant-related expenses for utilities, repairs and maintenance, advertising, insurance, and services. Other operating expenses increased approximately $10.9 million, or 20.2%, in fiscal 2013 compared to fiscal 2012 due in part to an $6.7 million increase from the addition of 18 Cheeseburger in Paradise branded restaurants. Other operating expenses at our Luby’s Cafeteria and Fuddruckers branded restaurants increased $4.2 million due to a net increase in restaurant locations and (1) an approximate $1.2 million increase in utility expense as we realized higher electricity and gas rates; (2) an approximate $1.4 million higher marketing and advertising expense due to increased billboard advertising, direct mail programs, local sponsorships, and enhanced point-of-purchase advertising; (3) an approximate $1.2 million increase in restaurant services, including higher credit card fees due to increased use of credit cards, deployment of new hardware and software into the restaurant operating environment, and higher beverage dispensing costs with the rollout of our Coke FreeStyle offering; (4) $0.9 million higher restaurant supplies and other costs, including increases in food to go packaging to support higher catering volumes; offset by (5) approximately $0.5 million lower repairs and maintenance expense. As a percentage of restaurant sales, Other operating expenses increased 1.4%, to 18.0%, in fiscal year 2013 compared to 16.6% in fiscal 2012. Removing the impact of Cheeseburger in Paradise, Other operating expenses as a percent of sales increased 1.0% to 17.6% in fiscal 2013 compared to 16.6% in fiscal 2012.Occupancy CostsOccupancy costs increased approximately $2.9 million in fiscal 2013 compared to fiscal 2012, in large part due to the 18 acquired Cheeseburger in Paradise branded restaurants contributing $2.2 million in occupancy costs from the acquisition date of December 6, 2012 through the end of fiscal 2013. New leased Fuddruckers locations contributed another $0.4 million to Occupancy costs. Certain locations also realized higher property tax expenses contributing to higher overall Occupancy cost.Franchise OperationsWe offer franchises for the Fuddruckers brand. Franchises are sold in markets where expansion is deemed advantageous to the development of the Fuddruckers concept and system of restaurants. Franchise revenue includes (1) royalties paid to us as the franchisor for the Fuddruckers brand; (2) franchise fees paid to us when franchise development agreements are executed and when franchise units are opened for business or transferred to new owners. Franchise revenue decreased $0.3 million in fiscal 2013 compared to fiscal 2012 which included a $0.2 million decrease in franchise fees and a $0.1 million decrease in franchise royalties. During the year, there were nine franchise units that closed on a permanent basis. We ended fiscal 2013 with 116 Fuddruckers franchise restaurants. As of November 4, 2013, we were the franchisor to 115 franchisee owned and operated restaurants.Culinary Contract ServicesCCS is a business line servicing healthcare, higher education, and corporate dining clients. The healthcare accounts are full service and typically include in-room delivery, catering, vending, coffee service and retail dining. This business line varied between 18 and 21 client locations through fiscal 2013 and also between 18 and 21 client locations in 2012. In fiscal 2012, we refined our operating model by concentrating on clients able to enter into agreements where all operating costs are reimbursed to us and we charge a generally fixed fee. These agreements typically present lower financial risk to the company.Culinary Contract Services RevenueCulinary Contract Services revenue decreased $1.0 million, or 5.7% in fiscal 2013 compared to fiscal 2012. While the number of locations has varied, we believe we now operate with a stronger mix of clients. The decrease in revenue was primarily due to operations ceasing at one high volume location and a change in the mix of locations where we operate.Cost of Culinary Contract ServicesCost of Culinary Contract Services includes the food, payroll and related, and other direct operating expenses associated with generating culinary contract sales. Cost of Culinary Contract Services decreased approximately $1.7 million, or 10.1%, in fiscal 2013 compared to fiscal 2012 due to a decrease in culinary contract sales volume. Profit margin in our culinary contract services business (defined as Culinary Contract Services Revenue less Cost of Culinary Contract Services) expanded in dollar terms and as a percent of Culinary Contract Services sales as we have executed on our refined operating model of concentrating on clients able to enter into agreements where all operating costs are reimbursed to us and we charge a generally fixed fee. Our profit margin as percent of Culinary Contract Services Revenue expanded to 10.9% in fiscal 2013 from 6.6% in fiscal 2012.Opening CostsOpening costs include labor, supplies, occupancy, and other costs necessary to support the restaurant through its opening period. Opening costs were approximately $0.8 million in fiscal 2013 compared to approximately $0.4 million in fiscal 2012. Opening costs in fiscal 2013 included the cost associated with opening four Fuddruckers restaurants and one Luby’s Cafeteria restaurant, as well as the carrying costs for property slated for development. Opening costs in fiscal 2012 included the cost associated with opening three Fuddruckers restaurants and one Luby’s Cafeteria restaurant, as well as the carrying costs for property slated for development.Depreciation and AmortizationDepreciation expense increased $0.5 million in fiscal 2013 compared to fiscal 2012 due primarily to the addition of Cheeseburger in Paradise assets to the depreciable base. The increase in depreciation due to investments made in new locations as well as the capital we have used for remodeling existing locations was mostly offset by certain existing assets reaching the end of their depreciable lives during fiscal 2013.General and Administrative ExpensesGeneral and administrative expenses include corporate salaries and benefits-related costs, including restaurant area leaders, share-based compensation, professional fees, travel and recruiting expenses and other office expenses. General and administrative expenses increased by approximately $1.4 million, or 4.6%, in fiscal 2013 compared to fiscal 2012, due primarily to the inclusion of Cheeseburger in Paradise which contributed $1.3 million in general and administrative expenses. Included in these costs is approximately $0.7 million related to the acquisition and integration of Cheeseburger in Paradise. The remaining increase of $0.1 million was primarily due to higher payments to outside legal and professional service providers offset by lower salary, benefits, and incentive expense. Fiscal 2012 also included a non-recurring receipt of approximately $0.3 million for a settlement in our favor from a class action suit related to credit card interchange fees that was recorded in the quarter ended November 23, 2011. As a percentage of total sales, general and administrative expenses decreased to 8.4% in fiscal 2013 compared to 8.8% in fiscal 2012 primarily due to our ability to leverage our corporate overhead over the larger sales volume resulting from the acquisition of 23 Cheeseburger in Paradise restaurants as well as the sales volume from new Luby’s Cafeteria and Fuddruckers restaurants.Provision for asset impairments, netThe asset impairment of approximately $0.6 million in fiscal 2013 is related to one location that is classified as property held for sale and to used equipment at our maintenance facility in Houston.The asset impairment of approximately $0.5 million in fiscal 2012 related to one terminated CCS location, and two leased restaurant properties that we continued to operate at the end of fiscal 2013.Net Loss (Gain) on Disposition of Property and EquipmentThe disposition of property and equipment in fiscal 2013 resulted in a net gain of approximately $1.7 million, which included (1) proceeds from the eminent domain disposition of part of a parking lot at a Luby’s Cafeteria location; (2) the gain on disposal at a Koo Koo Roo leased location, (3) a payment to us for exiting a lease at one cafeteria location prior to the contractual lease expiration date; offset by (4) normal asset retirement activity in our restaurants.The dispositionsale of property and equipment in fiscal 2012 resulted in a net loss of approximately $0.3 million, which included normal asset retirement activity in our restaurant units as well as the loss on disposition of assets at two restaurant locations that closed during fiscal 2012Interest IncomeInterest income was $9 thousand in fiscal 2013 and fiscal 2012.Interest ExpenseInterest expense in fiscal 2013 decreased approximately $22 thousand compared to fiscal 2012onsimilar average debt balances and interest ratesOther Income, NetOther income, net, consisted primarily of the following components: net rental property income and expenses relating to property for which we are the landlord; prepaid sales tax discounts earned through our participation in state tax prepayment programs; and oil and gas royalty income.Other income, net, was approximately $1.0 million in fiscal 2013 and $1.1 million fiscal 2012.TaxesThe income tax expense related to continuing operations for fiscal 2013 was $1.8 million compared to income tax expense of $1.7 million for fiscal 2012. The expense for income taxes in fiscal 2013 reflects the tax effect of the pre-tax income for the year adjusted for state income taxes, general business and foreign tax credits, and the current year realization of previously unrecognized tax benefit of $0.2 million. Income taxes in fiscal 2012 included a valuation allowance release of $2.6 million offset by an expense for unrecognized tax benefits of $0.9 million The reversal of the valuation allowance amounts in fiscal 2012 were based upon continued improvement in current and projected operational performance, our ability to utilize net operating loss (“NOL”) amounts through carryforward and carryback, as well as recent income from continuing operations. This positive and negative evidence was weighed, and in each year an increasing portion of our deferred tax assets were determined to be realizable, on a more likely than not basis, resulting in reductions of the valuation allowance.Discontinued OperationsThe loss or income from discontinued operations was a $1.4 million loss in fiscal 2013 compared to a loss of $0.6 million in fiscal 2012. The loss of $1.4 million in fiscal 2013 included (1) $1.3 million in losses associated with five discontinued Cheeseburger in Paradise restaurants as well as the “carrying costs” (typically rent, property taxes, utilities, and maintenance) associated with assets that were related to discontinued operations, (2) impairment charges of $0.6 million for certain assets related to discontinued operations and (3) a $0.5 million income tax benefit related to discontinued operations. The loss of $0.6 million in fiscal 2012 included (1) $0.7 million in “carrying costs” (typically rent, property taxes, utilities, and maintenance) associated with assets that were related to discontinued operations; (2) impairment charges of $0.9 million for certain assets related to discontinued operations; offset by (3) $0.5 million in gains on sales of assets related to discontinued assets and (4) aan approximate $0.4 million income tax benefit related to discontinued operations.General.Our primary sources of short-term and long-term liquidity are cash flows from operations and our revolving credit facility.increased $1.3decreased approximately $0.2 million as of the end of fiscal 20142017 compared to the end of fiscal 2013.2016. Cash provided by operating activities of $20.4 million and cash provided by financing activities of $22.9approximately $9.6 million was offset by cash used in investing activities of $42.0approximately $3.2 million and cash used in financing activities of approximately $6.6 million.flowflows from operationsoperating activities of approximately $9.6 million was favorably impacted by increased total revenuea source of cash in fiscal 2014 compared to fiscal 2013 but unfavorably impacted by increased cost2017 and a decrease of food, payroll and related costs, occupancy costs and other operating costs. We increased our net borrowingsapproximately $4.2 million from our revolving credit facilitya source of cash of approximately $13.9 million in fiscal 2014 compared2016. Net cash used in investing activities was approximately $3.2 million representing an approximate $10.2 million decrease from net cash used in investing activities of approximately $13.4 million in fiscal 2016. Cash flows from financing activities was a use of cash of approximately $6.7 million and an increase of approximately $6.1 million from a use of cash of approximately $0.6 million in fiscal 2016. We decreased our total outstanding debt to $31.0 million at the end of fiscal 20132017 from $37.0 million at the end of fiscal 2016 primarily due to increasesthe use of proceeds from property sales to prepay $7.2 million of our Term Loan, cash provided by operations, and decreases in our capital expenditures. We plan to continue the level of capital expenditures necessary to keep our restaurants attractive and operating efficiently.increased $0.3decreased approximately $0.2 million as of the end of fiscal 20132016 compared to the end of fiscal 2012.2015. Cash provided by operating activities of $29.4 million and cash provided by financing activities of $6.3approximately $13.8 million was offset by cash used in investing activities of $35.5approximately $13.4 million and cash used in financing activities of approximately $0.6 million.total revenuerestaurant sales, decreased other operating expenses and cost of food in fiscal 20132016 compared to fiscal 20122015 but unfavorably impacted by increased cost of food, payroll and related costs, occupancy costs and other operating costs. We increaseddecreased our net borrowings from our revolving credit facility in fiscal 20132016 compared to fiscal 20122015 primarily due to the purchase of Cheeseburgerdecreases in Paradise. We also increased our capital expenditures and we plan to continue the level of capital expenditures necessary to keep our restaurants attractive and operating efficiently.20142017 consisted principally of:●payments to reduce our debt;●capital expenditures for construction, restaurant renovations and upgrades, information technology and culinary contract services development; and●working capital primarily for our company-owned restaurants and culinary contract services agreements.for culinary contract servicesin our CCS business segment and franchises.Franchise Operations business segment. We also continually invest in our business through the addition of new restaurant units and refurbishment of existing restaurant units, which are reflected as long-term assets.
2014
2013
2012 $ 20,439 $ 29,442 $ 29,262 (42,031 (35,467 (20,790 22,852 6,330 (8,501 $ 1,260 $ 305 $ (29 Fiscal Year Ended August 30, 2017 August 31, 2016 August 26, 2015 (52 weeks) (53 weeks) (52 weeks) (In thousands) Total cash provided by (used in): Operating activities $ 9,640 $ 13,859 $ 10,316 Investing activities (3,216 ) (13,442 ) (7,043 ) Financing activities (6,667 ) (579 ) (4,560 ) Decrease in cash and cash equivalents $ (243 ) $ (162 ) $ (1,287 ) $29.4approximately $13.8 million in fiscal 20132016 to $20.4approximately $9.6 million in fiscal 2014.2017. The $9.0$4.2 million decrease in cash flow fromprovided by operating activities was primarily due to a $7.2an approximate $8.3 million decrease in cash provided by operations before changes in operating assets and liabilities offset by an approximate $4.1 million decrease in cash used in changes in operating assets and a $1.8liabilities. changes in operating assets and liabilities.The $7.2 million decrease in cash flow from operating activities before changes in operating assets and liabilities was primarily due to a $2.9uses of cash from an approximate $12.4 million decrease total in company-owned restauranttotal segment level profit, a $1.4 million increase in opening costs, a $2.8 million increase in general and administrative costs, a $0.5 million increase in operating losses from discontinued operations and $0.3an approximate $0.2 million increase in interest expense, and an approximate $0.2 million decrease in net rental income, partially offset by a $0.6sources of cash of an approximate $4.5 million increasereduction in CCS profit and a $0.1 million increase in franchise segment level profit.$1.8$4.1 million decrease in cash provided byused in changes in operating assets and liabilities was primarily due to a $2.7an approximate $4.3 million decrease in the change of accounts payable, accrued expenses and other assets offset by a $0.9liabilities, an approximate $0.3 million decrease in the change of trade accountsprepaid expenses and other receivablesassets, and approximately $0.8 million decrease in the change of food and supply inventories, partially offset by an approximate $1.3 million increase in trade accounts receivable and other receivables in fiscal 20142017 compared to fiscal 2013.$29.3approximately $10.3 million in fiscal 20122015 to $29.4approximately $13.8 million in fiscal 2013.2016. The $0.1$3.5 million increase in cash flow fromprovided by operating activities was primarily due to a $0.6an approximate $3.2 million increase in Culinary Contract Services profit offsetcash provided by operations before changes in operating assets and liabilities and an approximate $0.3 million decrease in franchise segment level profit. Total revenue was $40.3 million highercash used in fiscal 2013 than fiscal 2012, offset by higher cost of food, payrollchanges in operating assets and related costs, occupancy costs and other operating costs of $40.2 million net of noncash accrued expense of $4.4 million in fiscal 2013 compared to fiscal 2012. Other operating costs include repairs and maintenance, utilities, services, occupancy costs and insurance costs.culinary contract services. Cash used by investing activities was $42.0 million in fiscal 2014 compared to cash used in investing activities of $35.5 million in fiscal 2013. In fiscal 2014, proceeds from disposal of assets, insurance and property held for sale was $4.1 million including $0.4 million related to discontinued operations. In fiscal 2014, purchases of property and equipment were $46.2 million, including $42.5 million in capital expenditures related to company-owned restaurants, $3.6 million in corporate related capital expenditures and $0.1 million in capital expenditures related to CCS. Company-owned restaurant capital expenditures included purchases of new equipment and new restaurant construction. Our capital expenditure program includes, among other things, investments in new restaurants, and CCS locations, restaurant remodeling, and information technology enhancements.In fiscal 2013 we purchased Cheeseburger in Paradise for $10.2 million. Cash used by investing activities was $35.5 million in fiscal 2013 compared to cash used in investing activities of $20.8 million in fiscal 2012. In fiscal 2013, proceeds from disposal of assets, insurance and property held for sale was $6.0 million including $1.7 million related to discontinued operations. In fiscal 2013, purchases of property and equipment were $31.3 million, including $30.7 million in capital expenditures related to company-owned restaurants, $0.5 million in corporate related capital expenditures and $0.1 million in capital expenditures related to culinary contract services. Company-owned restaurant capital expenditures included purchases of new equipment, restaurant renovations and upgrades and new restaurant construction. Ourexpenditure program includes, among other things, investments in newexpenditures related to Company-owned restaurants and Culinary Contract Services locations, restaurant remodeling,$1.1 million in corporate related capital expenditures. The purchases of property and information technology enhancements.provided byused in financing activities was $23.0approximately $6.7 million in fiscal 2014 and2017, a decrease of $6.1 million from cash used in financing activities of approximately $0.6 million in fiscal 2013 cash provided by financing activities was $6.3 million.2016. Net repayments of debt totaled approximately $6.0 million in fiscal 2017, a reduction of $5.5 million compared to net repayments of approximately $0.5 million in fiscal 2016. In fiscal 20142017, we increasedalso paid approximately $0.6 million in debt issuance costs.$19.2 million at August 28, 2013 to $42.0 million at August 27, 2014. In fiscal 2013 we increased debt from $13.0$37.5 million at the August 29, 2012end of fiscal 2015 to $19.2$37.0 million at August 28, 2013.Statusthe end of Long-Term Investmentsfiscal 2016. In fiscal 2016, we paid approximately $42 thousand in debt issuance costs and Liquidity27, 2014,30, 2017, we did not hold any long-term investments.Status of Trade Accounts and Other Receivables, NetWorking CapitalCurrent$0.3approximately $1.4 million including a $1.3decrease of approximately $0.2 million in cash. Trade accounts and other receivables and food and prepaid expenses increased approximately $2.0 million and $0.3 million, respectively. Deferred income taxes and food and supply inventory decreased approximately $0.5 million and $0.2 million, respectively. The $2.0 million increase in cash. Foodtrade accounts and supply inventories increased $0.5 million. Prepaidother receivables was primarily due to increases in receivables related to our culinary contract services and accrued insurance proceeds on two properties damaged by flooding during Hurricane Harvey and the $0.3 million increase in prepaid expenses and deferred tax assets decreased $0.5was primarily due to discounts on prepaid gift card sales. The $0.2 million and $1.0 million, respectively. The $0.5 million increasedecrease in food and supply inventory was primarily due to equipment and supplies to open new restaurants. The $0.5 million decrease in prepaid expenses was primarily due to prepaid insurance and the $1.0 million decrease in deferred tax assets was primarily due to our realization of deferred tax assets inmoderately lower spending for restaurant supplies.year 2014.Currentyear-end 2017, current liabilities increased $4.0approximately $2.7 million due to a $2.6an approximate $4.3 million increase in accounts payable and accrued expenses and other liabilities of $1.4 million. The $2.6offset by an approximate $1.6 million increasedecrease in accounts payable was due to a $1.5 million increase in checks in transit and a $1.1 million increase in accrued purchases.payable. The increase of $1.4approximately $4.3 million in accrued expenses and other liabilities is primarily a result of increases in accruals for expenses insales tax payable of approximately $1.9 million, accrued salaries and incentives of $0.9 million, deferred franchise fees of $0.8approximately $1.2 million, unredeemed gift cards of approximately $1.1 million, lease termination expense of approximately $0.4 million, accrued interest expense of approximately $0.3 million, and accrued advertising of approximately $0.2 million, deferred income taxes of $0.1 million, utilities of $0.1 million, and employee related insurance of $0.1 millionpartially offset by decreases in taxesdeferred franchise fees of approximately $0.5 million, accrued claims and other than incomeexpenses of approximately $0.1 million, accrued property taxes of $0.3approximately $0.1 million, and income taxes and otheraccrued utility expenses of $0.5approximately $0.1 million.Capital Expenditures20142017 were approximately $46.2$12.5 million consisting of approximately $1.1 million on new restaurant development, approximately $4.5 million on the remodeling of existing restaurants and related totechnology infrastructure investments, and approximately $6.9 million for recurring maintenance of our existing units, to improvement of our culinary contract services business and the development of future restaurant sites.capital expenditures. We expect to be able to fund all capital expenditures in fiscal 20152018 using cash flows from operations, proceeds from the sale of assets cash flows from operations and our available credit. WeIn fiscal 2018, we expect to spendinvest up to $12.0 million for recurring maintenance for our restaurant properties, information technology investments, and for our on-going remodeling program.$20$1.3 million committed under letters of credit, which is used as security for the payment of insurance obligations, and approximately $0.1 million in other indebtedness.$25 million on capital expendituresnegative results in fiscal year 2015.DEBTRevolving2017, continued under performance could cause our financial ratios to exceed the permitted limits under the terms of the 2016 Credit Agreement.National Association,(formerly Amegy Bank, N.A.), as Syndication Agent. Pursuant to the October 2, 2015 amendment, the total aggregate amount of the lenders' commitments was lowered to $60.0 million from $70.0 million. The following description summarizes the material terms of the revolving credit facility, as subsequently amended on March 21, 2014, and November 7, 2014 and October 2, 2015, (the revolving credit facility is referred to as the “2013 Credit Facility”). The 2013 Credit Facility is governed by the credit agreement dated as of August 14, 2013 (the “2013 Credit Agreement”) among us, the lenders from time to time party thereto, Wells Fargo Bank, National Association, as Administrative Agent, and ZB, N.A. dba Amegy Bank National Association,(formerly Amegy Bank, N.A.), as Syndication Agent. The maturity date of the 2013 Credit Facility iswas September 1, 2017.The aggregate amount of the lenders’ commitments under the 2013 Credit Facility was $70.0 million as of August 28, 2013. providesprovided for the issuance of letters of credit in a maximum aggregate amount of $5.0 million outstanding as of August 14, 2013 and $15.0 million outstanding at any one time with prior written consent of the Administrative Agent and the Issuing Bank. At August 27, 2014, under the 2013 Credit Facility, the total available borrowing capacity was up to $49.3 million after applying the Lease Adjusted Leverage Ratio limitation, the available borrowing capacity was $5.1 million.iswas guaranteed by all of our present subsidiaries and willwas to be guaranteed by our future subsidiaries. In addition to the bank’s increased commitment under the 2013 Credit Agreement, it may be increased to a maximum commitment of $90 million.havehad the option to elect one of two bases of interest rates. One interest rate option iswas the greater of (a) the Federal Funds Effective Rate plus 0.50%, or (b) prime, plus, in either case, an applicable spread that rangesranged from 0.75% to 2.25% per annum. The other interest rate option is the London InterBank Offered Rate plus a spread that rangesranged from 2.50% to 4.00% per annum. The applicable spread under each option is dependent upon the ratio of our debt to EBITDA at the most recent determination date.arewere obligated to pay to the Administrative Agent for the account of each lender a quarterly commitment fee based on the average daily unused amount of the commitment of such lender, ranging from 0.30% to 0.40% per annum depending on the Total Leverage Ratio at the most recent determination date.arewere available for our general corporate purposes and general working capital purposes and capital expenditures.Borrowings under the 2013 Credit Facility are subject to mandatory repayment with the proceeds of sales of certain of our real property, subject to certain exceptions.The 2013 Credit Facility is secured by a perfected first priority lien on certain of our real property and all of the material personal property owned by us or any of our subsidiaries, other than certain excluded assets (as defined in the Credit Agreement). At August 27, 2014, the carrying value of the collateral securing the 2013 Credit Facility was $84.4 million.containscontained the following covenants among others:●maintenance of a ratio of (a) EBITDA minus $7.5 million (for maintenance capital expenditures) for the four fiscal quarters ending on the last day of any fiscal quarter to (b) the sum of (x) interest expense (as defined in the 2013 Credit Agreement) for such four fiscal-quarter-period plus (y) the outstanding principal balance of the loans as of the last day of such fiscal quarter divided by ten (the “Debt Service Coverage Ratio), of not less than 1.10 to 1.00 during the first, second and third fiscal quarters of fiscal 2015; 1.25 to 1.00 during the fourth fiscal quarter of fiscal 2015 and the first and second fiscal quarters of fiscal 2016; and 1.50 to 1.00 at all times thereafter.●maintenance of minimum net profit of $1.00 (1) for at least one of any two consecutive fiscal quarters starting with the third fiscal quarter of 2016, and (2) for any period of four consecutive fiscal quarters starting with the fourth fiscal quarter of 2015 (for the fiscal year 2015).●maintenance of a ratio of (a) the sum of (x) indebtedness as of the last day of any fiscal quarter plus (y) eight times rental expense for the four fiscal quarters ending on the last day of any fiscal quarter to (b) the sum of (x) EBITDA for such four fiscal-quarter-period plus (y) rental expense for such four fiscal-quarter-period (the “Lease Adjusted Leverage Ratio”) of no more than (i) 5.75 to 1.00 during the first, second and third fiscal quarters of fiscal 2015, (ii) 5.50 to 1.00 during the fourth fiscal quarter of 2015, (iii) 5.25 to 1.00 during the first fiscal quarter of 2016, (iv) 5.00 to 1.00 during the second fiscal quarter of 2016 and, (v) 4.75 to 1.00 at all times thereafter.●capital expenditures limited to $25.0 million per year,●restrictions on incurring indebtedness, including certain guarantees and capital lease obligations,●restrictions on incurring liens on certain of our property and the property of our subsidiaries,●restrictions on transactions with affiliates and materially changing our business,●restrictions on making certain investments, loans, advances and guarantees,●restrictions on selling assets outside the ordinary course of business,●prohibitions on entering into sale and leaseback transactions,●restrictions on certain acquisitions of all or a substantial portion of the assets, property and/or equity interests of any person, including share repurchases and dividends. recently acquired leaseholds operating as Cheeseburger in Paradise restaurants, we reported our second consecutive quarterly net profit below our required minimum net profit as defined in the credit agreement.2012 Credit Agreement. As part of the March 21, 2014 amendment we received a waiver of non-compliance related to this minimum consecutive quarterly net profit debt covenant for the second quarter fiscal 2014. The November 2014 amendment revised the net profit, debt service, lease adjusted leverage ratio, borrowing rates, provided for a $25.0 million annual capital expenditure limit, and required liens to be perfected on all real property by January 31, 2015. Although we expect to meetAs part of the requirements ofOctober 2, 2015 amendment, the Net Profit – Two Consecutive Quarters covenant in the future, non-compliance could have had a material adverse affect on our financial condition and would have represented an event of default under the 2013 Credit Agreement.We were in compliance with the covenants contained in the 2013 Credit Agreement as of August 27, 2014.includesincluded customary events of default. If a default occursoccurred and iswas continuing, the lenders’ commitments under the 2013 Credit Facility may have be immediately terminated and/and, or we may becould have been required to repay all amounts outstanding under the 2013 Credit Facility.AsAugust 27, 2014, we had $42.0 millionour real property and all of the material personal property owned by us or any of our subsidiaries, other than certain excluded assets (as defined in outstanding loans and $1.1 million committed under letters of credit, which were issued as security for the payment of insurance obligations and $1.1 million in capital lease commitments.restaurants.restaurants and restaurant remodels. This construction activity exposes us to the risks inherent in new constructionthis industry including but not limited to rising material prices, labor shortages, delays in getting required permits and inspections, adverse weather conditions, and injuries sustained by workers.27, 2014,30, 2017, we had contractual obligations and other commercial commitments as described below:
5 Years $ 42,000 $ — $ 42,000 $ — $ — 1,260 481 779 — — 69,873 12,219 18,804 12,696 26,154 62 62 — — — $ 113,195 $ 12,762 $ 61,583 $ 12,696 $ 26,154
2015
2016-2017
2017-2018 $ 1,102 $ 1,102 $ — $ — $ — Payments due by Period Contractual Obligations Total 1-3 Years 3-5 Years (In thousands) Revolver $ 4,400 $ — $ — $ 4,400 $ — Term Loan 26,585 — 2,360 24,225 — 144 35 104 5 — 66,099 11,747 17,865 11,409 25,078 25 25 — — — Total $ 97,253 $ 11,807 $ 20,329 $ 40,039 $ 25,078 Amount of Commitment by Expiration Period Other Commercial Commitments Total Thereafter (In thousands) Letters of credit $ 1,287 $ 1,287 $ — $ — $ — (a)Long-term debt consists of amounts owed on the 2013 credit facility.(b)for equipment ranging from one to two years and note relating to Fuddruckers Tulsa purchase plus interestnotes on note.(c)(2) Operating lease obligations contain rent escalations and renewal options ranging from one to twenty-five years. (d)(3) The timing and amounts of future cash payments related to these liabilities are uncertain. 27, 201430, 2017 included amounts accrued for benefit payments under our supplemental executive retirement plan of $0.1$45 thousand, accrued non-cash compensation of approximately $0.3 million, accrued insurance reserves of $0.7approximately $0.9 million, and deferred rent liabilities of $2.6approximately $2.5 million.continue tomay provide specialized (customized) equipment fabrication primarily for new construction and basic equipment maintenance, including stainless steel stoves, shelving, rolling carts, and chef tables. The total costs under the Amended and Restated Master Sales Agreement of custom-fabricated and refurbished equipment were $4,000,$4 thousand, $2 thousand, and zero and $139,000 in fiscal 2014, 20132017, 2016, and 2012,2015, respectively. Services provided under this agreement are subject to review and approval by the Finance and Audit Committee of our Board of Directors.ourthe Company’s restaurants has rented approximately 7% of the space in that center since July 1969. No changes were made to ourthe Company’s lease terms as a result of the transfer of ownership of the center to the new partnership. We made payments of approximately $388,000, $426,000 and $332,000 during fiscal 2014, 2013 and 2012, respectively, pursuant to the terms of the lease agreement, which currently includes an annual base rate of $14.64 per square foot per year plus maintenance taxes and insurance.wethe Company executed a new lease agreement with respect to this property. Effective upon ourthe Company’s relocation and occupancy into the new space in July 2008, the new lease agreement provides for a primary term of approximately 12 years with two subsequent five-year options and givesoptions. The new lease also gave the landlord an option to buy out the tenant on or after the calendar year 2015 by paying the then unamortized cost of improvements to the tenant. We are currently obligated to payThe Company paid rent of $20.00$22.00 per square foot ($22.00 per square foot beginning January 2014) plus maintenance, taxes, and insurance duringfor the remaining primary term of the lease. Thereafter, the lease provides for reasonable increases in rent at set intervals. The Company has made payments of approximately $419 thousand, $417 thousand, and $416 thousand during fiscal 2017, 2016, and 2015, respectively. The new lease agreement was approved by the Finance and Audit Committee of our Board of Directors.thethese Houston property leaseleases represented 2.3%2.7%, 2.6%, and 2.7% and 2.6% of the total rents for continuing operations in fiscal 2014, 20132017, 2016, and 2012,2015, respectively.As of March 12, 2014, one location was purchased from a prior landlord by Pappas Restaurants, Inc., a 100% undivided interest. No changes were made to our lease terms as a result of the transfer of ownership.year-to-dateyears charges incurred under the Amended and Restated Master Sales Agreement, affiliated property leases, and other related party agreements to our total capital expenditures, as well as relative Selling, general and administrative expenses, and Otherother operating expenses included in continuing operations:
2014
2013
2012 $ — $ 50 $ 50 4 — 139 388 426 332 $ 392 $ 476 $ 521 $ 35,038 $ 32,217 $ 30,808 46,184 31,339 25,845 92,044 86,713 72,499 $ 173,266 $ 150,269 $ 129,152 0.23 0.32 0.40 On January 24, 2014, the August 30,
2017 August 31,
2016 August 26,
2015 (364 days) (371 days) (364 days) (In thousands, except percentages) AFFILIATED COSTS INCURRED: Selling, general and administrative expenses—professional and other costs $ — $ 1 $ 1 Capital expenditures—custom-fabricated and refurbished equipment 4 2 — Other operating expenses, occupancy costs and opening costs, including property leases 581 576 576 Total $ 585 $ 579 $ 577 RELATIVE TOTAL COMPANY COSTS: Selling, general and administrative expenses $ 37,878 $ 42,422 $ 38,759 Capital expenditures 12,502 18,253 20,378 Other operating expenses, occupancy costs and opening costs 84,203 84,122 86,960 Total $ 134,583 $ 144,797 $ 146,097 AFFILIATED COSTS INCURRED AS A PERCENTAGE OF RELATIVE TOTAL COMPANY COSTS 0.43 % 0.40 % 0.39 % (the “Employment Agreement”) with Christopher J. Pappas on January 24, 2014. The employment agreement was amended on August 2, 2017, to extend the Company’s Presidenttermination date thereof to August 29, 2018. Mr. Pappas continues to devote his primary time and Chief Executive Officer.business efforts to the Company while maintaining his role at Pappas Restaurants, Inc. The Employment Agreement was unanimously approved by the Executive Compensation Committee (the “Committee”) of the Board as well as by the full Board.The Employment Agreement provides forterm that began on January 24, 2014 and expires on December 31, 2014. Pursuant to the Employment Agreement, Mr. Pappas will devote his primary working time, attention, energies and business efforts to his duties to the Company. On January 25, 2013, the Board approved the renewaldirector of a consultant agreement with Ernest Pekmezaris, the Company’s former Chief Financial Officer. Under the agreement, Mr. Pekmezaris furnished to the Company advisory and consulting services related to finance and accounting matters and other related consulting services. The agreement expired on July 31, 2013. Mr. Pekmezaris is also the Treasurer of Pappas Restaurants, Inc. Compensation for the services provided by Mr. Pekmezaris to Pappas Restaurants, Inc. is paid entirely by that entity.Peter Tropoli, ourCompany's Chief Operating Officer, and formerly our Senior Vice President, Administration, General Counsel and Secretary, is an attorney and stepson of Frank Markantonis, who is a director of Luby’s, Inc.U.S.accounting principles generally accepted accounting principles.in the United States. Preparation of the financial statements requires us to make judgments, estimates and assumptions that affect the amounts of assets and liabilities in the financial statements and revenues and expenses during the reporting periods. Management believes the following are critical accounting policies due to the significant, subjective and complex judgments and estimates used when preparing our consolidated financial statements. Management regularly reviews these assumptions and estimates with the Finance and Audit Committee of our Board of Directors.The estimatedeffectsexpense. Recently, the U.S. government has indicated that corporate tax reform is a high priority and has proposed sweeping changes to the U.S. tax system. These reforms may include changes to corporate tax rates, changes in the taxation of income earned outside the United States and taxing previously unremitted foreign earnings at concessional tax rates. We cannot determine whether some or all of these or other proposals will be enacted into law or what, if any, changes may be made to such proposals prior to being enacted into law. If U.S. tax laws change in a manner that increases our tax obligations, our financial position and results of operations could be adversely impacted upon enactment, including potential impacts to our income tax expense and deferred tax balances. Deferred income taxes arise from temporary differences between the tax basesbasis of assets and liabilities and their reported amounts reported in the accompanying consolidated balance sheets,financial statements, which will result in taxable or deductible amounts in the future, as well as operating lossfrom tax Net Operating Losses ("NOL") and tax credit carryforwards are recorded. 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.carryovers. We periodically review the recoverability of tax assets recorded on the balance sheet and assess the need forestablish a valuation allowance by considering both positive and negative evidence. A valuation allowance related towhen we no longer consider it more likely than not that a deferred tax asset will be realized. In evaluating our ability to recover our deferred tax assets, we consider available positive and negative evidence, including scheduled reversals of deferred tax liabilities, tax-planning strategies, projected future taxable income, and results of recent operations.recorded whendependent on numerous factors, including our ability to generate sufficient taxable income prospectively, and if necessary gain on sale of owned property locations, prior to expiration of the tax NOL and tax credit carryovers and the impacts, if any, from potential corporate tax reform legislation. Although realization is not assured, management believes it is more likely than not that all or some portion of the deferred tax asset will not be realized. A three-year cumulative pre-tax loss is an example of negative evidence that raises doubt as to the realizationThe amount of the deferred tax assets.The realizationasset considered realizable, however, could be reduced in the near term if estimates of such net deferred tax asset will generally depend on whether we will have sufficient taxable incomeunrealized appreciation of an appropriate character withinowned properties during the carryforward period permitted by the tax law.General business tax credits carryovers are one of our more significant deferred tax asset items. These may be carried over upreduced or we are unable to twenty years in the futuregenerate positive cash flows from operations and proceeds from assets held for possible utilization in the future. The carryover of general business tax credits and other credits were also impacted by amended federal returns, and subsequent to these filings, general business tax credit amounts carryover beginning in fiscal year 2002 and will begin to expire at the end of fiscal year 2022 through 2033, if not utilized by then.The Company plans to timely adopt theseWe believe our accounting policies comply with the requirements of the repair regulations in its fiscal 2015 and at this time, has not evaluated thethere is no materials impact of these regulations on its consolidated financial statements.174163 restaurants as of November 4, 20147, 2017 and periodically experience unanticipated changes in our assumptions and estimates. Those changes could have a significant impact on discounted cash flow models with a corresponding significant impact on the measurement of an impairment. Gains are not recognized until the assets are disposed.and employee injury and general liability claims expense may differ from estimated loss provisions. The ultimate level of claims under the in-house safety program are not known, and declines in incidence of claims as well as claims costs experiences or reductions in reserve requirements under the program may not continue in future periods.Share-Based CompensationIn July 2012, the Financial Accounting Standards Board (”FASB”) issued Accounting Standards Update (“ASU”) No. 2012-02, Testing Indefinite-Lived Intangible Assets for Impairment (Topic 350). This pronouncement was issued to simplify how entities test for impairment of indefinite-lived intangible assets. Under this pronouncement, an entity has the option first to assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. In conclusion of this assessment, if an entity finds that it is not more likely that not than an indefinite-lived intangible asset is impaired, then the entity is not required to take further action. However, is an entity concludes otherwise, then it is required to determine the fair value of the indefinite-lived intangible asset and perform the quantitative impairment test by comparing the fair value with the carrying amount in accordance with Accounting Standards Codification (“ASC”) Topic 350, “Intangibles—Goodwill and Other.” This pronouncement is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012 with early adoption permitted. The adoption of this pronouncement did not have a material impact on the Company’s consolidated financial statements.In February 2013, the FASB issued ASU No. 2013-02, Comprehensive Income (Topic 220), which updated guidance amending the reporting of amounts reclassified out of accumulated other comprehensive income. These amendments do not change the current requirements for reporting net income or other comprehensive income in the financial statements. However, the guidance requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component, either on the face of the financial statement where net income is presented or in the notes to the financial statements. This guidance is effective for fiscal periods beginning after December 15, 2012, and is to be applied prospectively. The adoption of this pronouncement did not have a material impact on the Company’s consolidated financial statements.In February 2013, the FASB issued ASU No. 2013-04, Liabilities (Topic 405), which provides guidance for the recognition, measurement and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this guidance is fixed at the reporting date. Examples of obligations within this guidance are debt arrangements, other contractual obligations and settled litigation and judicial rulings. The pronouncement is effective for fiscal years and interim periods within those fiscal years, after December 15, 2013. The adoption of this pronouncement did not have a material impact on the Company’s consolidated financial statements.In April 2013, the FASB issued ASU No. 2013-007, Liquidation Basis of Accounting (Topic 205), which requires a company to prepare its financial statements using liquidation basis of accounting (LBA) when liquidation is imminent. The pronouncement is effective for entities that determine liquidation is imminent during annual reporting periods beginning after December 15, 2013. The adoption of this pronouncement did not have a material impact on the Company’s consolidated financial statements.In July 2013, the FASB issued ASU No. 2013-11, Income Taxes (Topic 740), which provides that an unrecognized tax benefit, or a portion thereof, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss or a tax credit carryforward, except to the extent that a net operating loss carryforward, a similar tax loss or a tax credit carryforward is not available at the reporting date to settle any additional income taxes that would result from disallowance or a tax provision or the tax law does not require the entity to use and the entity does not intend to use the deferred tax asset for such purposes, then the unrecognized tax benefit should be presented as a liability. The pronouncement is effective for fiscal years and interim periods within those fiscal years, after December 15, 2013. The adoption of this pronouncement did not have a material impact on the Company’s consolidated financial statements.In April 2014, the FASB issued ASU No 2014-08. The amendments in ASU 2014-08 change the criteria for reporting discontinued operations while enhancing disclosures in this area. It also addresses sources of confusion and inconsistent application related to financial reporting of discontinued operations guidance in U.S. GAAP. Under the new guidance, only disposals representing a strategic shift in operations should be presented as discontinued operations. Those strategic shifts should have a major effect on the organization’s operations and financial results. Examples include a disposal of a major geographic area, a major line of business, or a major equity method investment. In addition, the new guidance requires expanded disclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income, and expenses of discontinued operations. The pronouncement is effective for fiscal years and interim periods within those fiscal years, after December 31, 2015. We are evaluating the impact on the Company’s consolidated financial statements.and interimreporting periods beginning after December 15, 2016,2017, including interim periods within that reporting period, which will require us to adopt these provisions in the first quarter of fiscal 2018.2019. Early application is not permitted. This update permits the use of either the retrospective or cumulative effect transition method. Further, in March 2016, the FASB issued ASU No. 2016–08, “Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net),” which clarifies the guidance in ASU No. 2014–09 for evaluating when another party, along with the entity, is involved in providing a good or service to a customer. In April 2016, the FASB issued ASU No. 2016–10, “Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing,” which clarifies the guidance in ASU No. 2014–09 regarding assessing whether promises to transfer goods or services are distinct, and whether an entity's promise to grant a license provides a customer with a right to use or right to access the entity's intellectual property. The Company plans to adopt the standard in the first quarter of fiscal 2019, which is the first fiscal quarter of the annual reporting period beginning after December 15, 2017. We have not yet decided on a method of transition upon adoption. The Company expects the pronouncement may impact the recognition of the initial franchise fee, which is currently recognized upon the opening of a franchise restaurant. We are further evaluating the effect this guidance will have on our consolidated financial statements and related disclosures. Weare evaluating the impact on the Company’s consolidated financial statements and have not yet selected a transition method.2016.2016, which requires us to adopt these provisions in the first quarter of fiscal 2018. The adoption of this pronouncement is not expected to have a material impact on the Company’s financial statements.marketinterest rate risk fromdue to changes in interest rates affecting our variable-rate debt.debt, Term Loan and borrowings under our 2016 Revolver. As of fiscal year-end 2014,2017, the total amount of debt subject to interest rate fluctuations outstanding under our Amended New Credit FacilityRevolver and Term Loan was $42.0approximately $13.5 million. Assuming an average debt balance with interest rate exposure of $42.0approximately $13.5 million, a 1.0%100 basis point increase in prevailing interest rates would increase our annual interest expense by $0.4approximately $0.1 million.Although The interest rate on our remaining $17.5 million in outstanding debt is fixed plus an applicable margin based on our CTLAL at each determination date, beginning December 14, 2016, under the terms of our interest rate swap agreement. Under the terms of our 2016 Credit Agreement, we are not currently usingrequired to manage interest rate risk, utilizing interest rate swaps, on at least 50% of our 2016 Credit Agreement variable rate debt (Term Loan). Prior to November 8, 2016, we did not utilize any interest rate swaps to manage interest rate risk on our variable rate 2013 Credit Facility debt.previously usedexposure to various foreign currency exchange rate fluctuations for revenues generated by our operations outside of the United States, which can adversely impact our net income and maycash flows. Approximately 0.12%, 0.13%, and 0.12% of our total revenues in fiscal 2017, 2016, and 2015, respectively, were derived from sales to customers and royalties from franchisees outside the contiguous United States. All of this business is conducted in the future use theselocal currency of the country the franchise operates. We do not enter into financial instruments to manage cash flow risk on a portion of our variable-rate debt.dependantdependent on a single vendor for our ingredients. Report of Independent Registered Public Accounting Firm(and subsidiaries)and subsidiaries (the "Company") as of August 27, 201430, 2017 and August 28, 2013,31, 2016, and the related consolidated statements of operations, changes in shareholders’ equity, and cash flows for each of the three years in the period ended August 27, 2014.30, 2017. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.27, 201430, 2017 and August 28, 2013,31, 2016, and the results of their operations and their cash flows for each of the three years in the period ended August 27, 201430, 2017 in conformity with accounting principles generally accepted in the United States of America.27, 2014,30, 2017, based on criteria established in the 1992 Internal Control—Integrated FrameworkFramework-2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO),and our report dated November 10, 201413, 2017 expressed an unqualified opinion.Houston, TexasNovember 10, 2014 Report of Independent Registered Public Accounting Firm (andand its subsidiaries)subsidiaries (the "Company") as of August 27, 2014,30, 2017, based on criteria established in the 1992 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.27, 2014,30, 2017, based on criteria established in the 1992 2013 Internal Control—Integrated Framework issued by COSO.27, 2014,30, 2017, and our report dated November 10, 201413, 2017 expressed an unqualified opinion on those financial statements.Houston, TexasNovember 10, 2014
2014
2013 $ 2,788 $ 1,528 4,112 4,083 5,556 4,908 2,815 3,267 52 196 587 1,635 15,910 15,617 991 449 4,204 4,218 213,492 190,497 24,014 25,517 1,681 2,169 11,294 7,923 3,849 4,255 $ 275,435 $ 250,645 $ 26,269 $ 23,655 590 527 23,107 21,817 49,966 45,999 42,000 19,200 278 448 8,167 7,865 100,411 73,512 9,264 9,217 27,356 26,065 143,179 146,626 (4,775 (4,775 175,024 177,133 $ 275,435 $ 250,645 August 30,
2017August 31,
2016 (In thousands, except share data) ASSETS Current Assets: Cash and cash equivalents $ 1,096 $ 1,339 Trade accounts and other receivables, net 8,011 5,919 Food and supply inventories 4,453 4,596 Prepaid expenses 3,431 3,147 Assets related to discontinued operations — 1 Deferred income taxes — 540 Total current assets 16,991 15,542 Property held for sale 3,372 5,522 Assets related to discontinued operations 2,755 3,192 Property and equipment, net 172,814 193,218 Intangible assets, net 19,640 21,074 Goodwill 1,068 1,605 Deferred income taxes 7,254 8,738 Other assets 2,563 3,334 Total assets $ 226,457 $ 252,225 LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities: Accounts payable $ 15,937 $ 17,539 Liabilities related to discontinued operations 367 412 Current portion of credit facility debt — — Accrued expenses and other liabilities 28,076 23,752 Total current liabilities 44,380 41,703 Credit facility debt, less current portion 30,698 37,000 Liabilities related to discontinued operations 16 17 Other liabilities 7,311 7,752 Total liabilities 82,405 86,472 Commitments and Contingencies SHAREHOLDERS’ EQUITY Common stock, $0.32 par value; 100,000,000 shares authorized; Shares issued were 29,624,083 and 29,440,041, respectively; Shares outstanding were 29,124,083 and 28,940,041, respectively 9,480 9,421 Paid-in capital 31,850 30,348 Retained earnings 107,497 130,759 Less cost of treasury stock, 500,000 shares (4,775 ) (4,775 ) Total shareholders’ equity 144,052 165,753 Total liabilities and shareholders’ equity $ 226,457 $ 252,225 consolidated financial statements.
2014
2013
2012 $ 368,267 $ 360,001 $ 324,536 18,555 16,693 17,711 7,027 6,937 7,232 532 565 618 394,381 384,196 350,097 106,284 103,070 90,416 127,792 123,864 112,279 68,820 64,918 54,007 21,060 21,012 18,097 2,164 783 395 16,177 14,874 16,545 20,062 18,376 17,894 35,038 32,217 30,808 2,498 615 451 (2,357 (1,723 278 397,538 378,006 341,170 (3,157 6,190 8,927 (1,247 (920 (942 1,131 1,052 1,067 (3,273 6,322 9,052 (1,660 1,775 1,654 (1,613 4,547 7,398 (1,834 (1,386 (645 $ (3,447 $ 3,161 $ 6,753 $ (0.06 $ 0.16 $ 0.26 $ (0.06 $ 0.16 $ 0.26 $ (0.06 $ (0.05 $ (0.02 $ (0.06 $ (0.05 $ (0.02 $ (0.12 $ 0.11 $ 0.24 $ (0.12 $ 0.11 $ 0.24 28,812 28,618 28,351 28,812 28,866 28,429 Year Ended August 30, 2017 August 31, 2016 August 26, 2015 SALES: Restaurant sales $ 350,818 $ 378,111 $ 370,192 Culinary contract services 17,943 16,695 16,401 Franchise revenue 6,723 7,250 6,961 Vending revenue 547 583 531 TOTAL SALES 376,031 402,639 394,085 COSTS AND EXPENSES: Cost of food 98,714 106,980 107,052 Payroll and related costs 125,997 132,960 127,691 Other operating expenses 61,924 60,961 63,133 Occupancy costs 21,787 22,374 21,084 Opening costs 492 787 2,743 Cost of culinary contract services 15,774 14,955 14,786 Cost of franchise operations 1,733 1,877 1,668 Depreciation and amortization 20,438 21,889 21,407 Selling, general and administrative expenses 37,878 42,422 38,759 Provision for asset impairments and restaurant closings 10,567 1,442 636 Net gain on disposition of property and equipment (1,804 ) (684 ) (3,994 ) Total costs and expenses 393,500 405,963 394,965 LOSS FROM OPERATIONS (17,469 ) (3,324 ) (880 ) Interest income 8 4 4 Interest expense (2,443 ) (2,247 ) (2,337 ) Other income (expense), net (454 ) 186 521 Loss before income taxes and discontinued operations (20,358 ) (5,381 ) (2,692 ) Provision (benefit) for income taxes 2,438 4,875 (1,076 ) Loss from continuing operations (22,796 ) (10,256 ) (1,616 ) Loss from discontinued operations, net of income taxes (466 ) (90 ) (458 ) NET LOSS $ (23,262 ) $ (10,346 ) $ (2,074 ) Loss per share from continuing operations: Basic $ (0.77 ) $ (0.35 ) $ (0.06 ) Assuming dilution $ (0.77 ) $ (0.35 ) $ (0.06 ) Loss per share from discontinued operations: Basic $ (0.02 ) $ (0.00 ) $ (0.01 ) Assuming dilution $ (0.02 ) $ (0.00 ) $ (0.01 ) Net loss per share: Basic $ (0.79 ) $ (0.35 ) $ (0.07 ) Assuming dilution $ (0.79 ) $ (0.35 ) $ (0.07 ) Weighted-average shares outstanding: Basic 29,476 29,226 28,974 Assuming dilution 29,476 29,226 28,974 consolidated financial statements.Consolidated Financial Statements.
Capital
Earnings
Shareholders’
Equity 28,651 $ 9,168 (500 $ (4,775 $ 23,772 $ 136,872 $ 165,037 — — — — — (160 (160 ) 28,651 $ 9,168 (500 $ (4,775 $ 23,772 $ 136,712 $ 164,877 — — — — — 6,753 6,753 — — — — (27 — (27 26 8 — — 787 — 795 28,677 $ 9,176 (500 $ (4,775 $ 24,532 $ 143,465 $ 172,398 — — — — — 3,161 3,161 28 9 — — 19 — 28 80 26 — — 350 — 376 — — — — 64 — 64 19 6 — — 1,100 — 1,106 28,804 $ 9,217 (500 $ (4,775 $ 26,065 $ 146,626 $ 177,133 — — — — — (3,447 (3,447 31 10 — — 17 — 27 63 20 — — 78 — 98 — — — — 50 — 50 52 17 — — 1,146 — 1,163 28,950 $ 9,264 (500 $ (4,775 $ 27,356 $ 143,179 $ 175,024 Common Stock Issued Treasury Shares Amount Shares Amount Balance at August 27, 2014 28,950 $ 9,264 (500 ) $ (4,775 ) $ 27,356 $ 143,179 $ 175,024 Net income for the year — — — — — (2,074 ) (2,074 ) Common stock issued under nonemployee director benefit plans 40 13 — — (13 ) — — Common stock issued under employee benefit plans 82 26 — — 164 — 190 Increase in excess tax benefits from share-based compensation — — — — 5 — 5 Share-based compensation expense 63 20 — — 1,494 — 1,514 Balance at August 26, 2015 29,135 $ 9,323 (500 ) $ (4,775 ) $ 29,006 $ 141,105 $ 174,659 Net loss for the year — — — — — (10,346 ) (10,346 ) Common stock issued under nonemployee director benefit plans 60 19 — — (19 ) — — Common stock issued under employee benefit plans 177 57 — — 25 — 82 Increase in excess tax benefits from share-based compensation — — — — (119 ) — (119 ) Share-based compensation expense 68 22 — — 1,455 — 1,477 Balance at August 31, 2016 29,440 $ 9,421 (500 ) $ (4,775 ) $ 30,348 $ 130,759 $ 165,753 Net loss for the year — — — — — (23,262 ) (23,262 ) Common stock issued under nonemployee director benefit plans 83 26 — — (26 ) — — Common stock issued under employee benefit plans 7 2 — — (2 ) — — Share-based compensation expense 94 31 — — 1,530 — 1,561 Balance at August 30, 2017 29,624 $ 9,480 (500 ) $ (4,775 ) $ 31,850 $ 107,497 $ 144,052 consolidated financial statements.Consolidated Financial Statements.
2014
2013
2012 $ (3,447 $ 3,161 $ 6,753 1,347 (451 1,084 20,221 18,571 17,974 — — 382 123 112 112 125 404 — 1,163 1,106 795 (50 (64 27 (3,348 522 (394 16,134 23,361 26,733 (29 10 55 (530 (903 629 917 356 (1,186 3,947 6,618 3,031 20,439 29,442 29,262 23 80 (177 — (10,169 — 4,130 5,961 5,232 (46,184 (31,339 (25,845 (42,031 (35,467 (20,790 105,900 69,700 43,300 (83,100 (63,500 (51,800 (123 (338 (1 50 64 — 125 404 — 22,852 6,330 (8,501 1,260 305 (29 1,528 1,223 1,252 $ 2,788 $ 1,528 $ 1,223 Year Ended August 30, 2017 August 31, 2016 August 26, 2015 (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (23,262 ) $ (10,346 ) $ (2,074 ) Adjustments to reconcile net income to net cash provided by operating activities: Provision for asset impairments and net loss (gain) on property sales 8,762 734 (3,385 ) Depreciation and amortization 20,438 21,906 21,431 Amortization of debt issuance cost 348 313 204 Share-based compensation expense 1,561 1,477 1,514 Excess tax deficit (benefit) from share-based compensation — 119 (5 ) Deferred tax provision (benefit) 2,792 4,707 (1,996 ) Cash provided by operating activities before changes in operating asset and liabilities 10,639 18,910 15,689 Changes in operating assets and liabilities: Increase in trade accounts and other receivables (2,092 ) (744 ) (1,063 ) Decrease (Increase) in food and supply inventories 143 (616 ) 1,073 Decrease (Increase) in prepaid expenses and other assets 504 215 (268 ) Increase (decrease) in accounts payable, accrued expenses and other liabilities 446 (3,906 ) (5,115 ) Net cash provided by operating activities 9,640 13,859 10,316 CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from disposal of assets and property held for sale 9,286 4,794 13,278 Repayment of note receivable — 17 57 Purchases of property and equipment (12,502 ) (18,253 ) (20,378 ) Net cash used in investing activities (3,216 ) (13,442 ) (7,043 ) CASH FLOWS FROM FINANCING ACTIVITIES: Revolver borrowings 107,800 106,000 108,000 Revolver repayments (140,400 ) (106,500 ) (112,500 ) Debt issuance costs (652 ) (42 ) (255 ) Proceeds on term loan 35,000 — — Term loan repayments (8,415 ) — — Excess tax (deficit) benefit from share-based compensation — (119 ) 5 Proceeds received on the exercise of employee stock options — 82 190 Net cash used in financing activities (6,667 ) (579 ) (4,560 ) Decrease in cash and cash equivalents (243 ) (162 ) (1,287 ) Cash and cash equivalents at beginning of period 1,339 1,501 2,788 Cash and cash equivalents at end of period $ 1,096 $ 1,339 $ 1,501 Cash paid for: Income taxes $ 411 $ 357 $ 730 Interest 1,787 1,873 2,133 consolidated financial statements. Consolidated Financial Statements. 2014, 20132017, 2016, and 2012201527, 2014,30, 2017, the Company owned and operated 174167 restaurants, with 127122 in Texas and the remainder in other states. In addition, the Company received royalties from 110113 franchises as of August 27, 201430, 2017 located primarily throughout the United States. The Company’s owned and franchised restaurant locations are convenient to shopping and business developments, as well as, to residential areas. Accordingly, the restaurants appeal to a variety of customers at breakfast, lunch, and dinner. Culinary Contract Services consists of contract arrangements to manage food services for clients operating in primarily three lines of business: health care,healthcare, higher education, and corporate dining.Correction of Immaterial Errors in Previously Issued Financial StatementsIn the second quarter of fiscal 2014, we identified accounting errors in prepaid assets and payroll related liabilities. The Company did not expense amounts related to these accounts properly in the appropriate prior periods. The errors impacted all prior reporting periods beginning in 2007. While these errors were not material to any previously issued annual or quarterly consolidated financial statements, management concluded that correcting the cumulative errors and related tax effects would have been material to consolidated financial statements for the three months and six months ended February 12, 2014 and to the expected results of operations for the fiscal year ending August 27, 2014. Management evaluated the cumulative impact of the errors on prior periods under the guidance in ASC 250-10 relating to SEC Staff Accounting Bulletin (“SAB”) Topic1.M,Assessing Materiality. The Company also evaluated the impact of correcting the errors through an adjustment to its financial statements and concluded, based on the guidance within ASC 250-10 relating to SAB Topic 1.N,Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current YearFinancial Statements,to revise its previously issued financial statements to reflect the impact of the correction of these errors when it files subsequent reports on Form 10-Q and Form 10-K. Accordingly, the Company revised its consolidated financial statements for the quarters ended February 12, 2014 and May 7, 2014 and for the years ended August 29, 2012 and August 28, 2013, to correct these errors. The prior period error corrections did not change the net cash flows provided by or used in operating, investing or financing activities previously reported. The cumulative effect on retained earnings as of August 31, 2011, was a reduction of $160,000, as reflected in the Statement of Shareholders Equity as of August 27, 2014. Consolidated Balance Sheet.The following tables presents the impact of the accounting errors on the Company’s previously-reported consolidated balance sheet for the year ended August 28, 2013 and August 29, 2012. $ 1,528 $ - $ - $ 1,528 4,083 - - 4,083 5,026 (118 - 4,908 3,183 (57 141 3,267 21 175 - 196 1,436 - 199 1,635 15,277 - 340 15,617 449 - - 449 4,189 29 - 4,218 190,519 (22 - 190,497 25,517 - - 25,517 2,169 - - 2,169 7,923 - - 7,923 4,262 (7 - 4,255 $ 250,305 $ - $ 340 $ 250,645 $ 23,655 $ - $ - $ 23,655 440 87 - 527 21,178 (87 726 21,817 45,273 - 726 45,999 19,200 - - 19,200 304 144 - 448 8,010 (145 - 7,865 72,787 (1 726 73,512 9,217 - - 9,217 26,065 - - 26,065 147,011 1 (386 146,626 (4,775 - - (4,775 177,518 1 (386 177,133 $ 250,305 $ - $ 340 $ 250,645 (1)The results of operations, assets and liabilities for all units included in the Company's disposal plans discussed in Note 11 have been reclassified to discontinued operations in the statements of operations and balance sheets for all periods presented. Some table rows may not sum due to rounding. $ 1,223 $ - $ - $ 1,223 4,000 - - 4,000 3,561 - - 3,561 3,010 11 (262 2,759 40 (11 - 29 1,932 - 135 2,067 13,766 - (127 13,639 602 - - 602 4,824 20 - 4,844 173,653 (20 - 173,633 26,679 - - 26,679 195 - - 195 9,354 - - 9,354 1,944 - - 1,944 $ 231,017 $ - $ (127 $ 230,890 $ 14,849 $ 1 $ - $ 14,850 411 2 - 413 20,677 (2 135 20,810 35,937 1 135 36,073 13,000 - - 13,000 1,133 (78 - 1,055 8,288 77 - 8,364 58,358 $ - 135 58,492 9,176 - - 9,176 24,532 - - 24,532 143,726 - (262 143,465 (4,775 - - (4,775 172,659 - (262 172,398 $ 231,017 $ - $ (127 $ 230,890 (1)The results of operations, assets and liabilities for all units included in the Company's disposal plans discussed in Note 11 have been reclassified to discontinued operations in the statements of operations and balance sheets for all periods presented. Some table rows may not sum due to rounding.Consolidated Statements of OperationsThe following table presents the impact of the accounting errors on the Company’s previously-reported consolidated Statement of operations for the fiscal year ended August 28, 2013: $ 366,155 $ (6,154 $ — $ 360,001 104,993 (1,923 — 103,070 126,306 (2,500 58 123,864 66,382 (1,497 33 64,918 21,537 (525 — 21,012 32,121 3 93 32,217 1,839 — (64 1,775 4,222 445 (120 4,547 (1) Certain reclassification of amounts have been made to conform with the current year presentation for comparative purposes. The results of operations, assets and liabilities for all units included in the Company’s disposal plans discussed in Note 11 have been reclassified to discontinued operations in the statements of operations and balance sheets for all periods presented. Occupancy costs have been reclassified from Other operating expenses to a separate line item on the Consolidated Statements of Operations and group insurance, employer 401(k) matching and employee meal costs have been reclassified from Other operating expenses to Payroll and related costs to provide comparability to financial results reported by our peers in the industry. The following table presents the impact of the accounting errors on the Company’s previously-reported consolidated Statement of operations for the fiscal year ended August 29, 2012: $ 324,536 $ - $ - $ 324,536 90,416 - - 90,416 110,161 2,095 23 112,279 74,084 (20,078 1 54,007 - 18,097 - 18,097 30,678 - 130 30,808 1,706 - (52 1,654 7,558 (58 (102 7,398 (1) Certain reclassification of amounts have been made to conform with the current year presentation for comparative purposes. The results of operations, assets and liabilities for all units included in the Company’s disposal plans discussed in Note 11 have been reclassified to discontinued operations in the statements of operations and balance sheets for all periods presented. Occupancy costs have been reclassified from Other operating expenses to a separate line item on the Consolidated Statement of Operations and group insurance, employer 401k matching and employee meal costs have been reclassified from Other operating expenses to Payroll and related costs to provide comparability to financial results reported by our peers in the industry.corporation.corporations. The Company determines the allowance for CCS receivables and franchise royalty and marketing and advertising receivables based on the franchisees’ and CCS clients’ unsecured default status. The Company periodically reviews its allowance for doubtful accounts. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.
InventoriesInventoriesThe Company analyzes market conditions each reporting periodDepreciation on assets moved to property held for sale is discontinued and record additional impairments due to declines in market values of like assets. The fair value of the property is determined by observable inputs such as appraisals and prices of comparable properties in active markets for assets like the Company’s. Gainsgains are not recognized until the properties are sold.workemployee injury and general liability programs. Accrued liabilities have been recorded based on estimates of the ultimate costs to settle incurred claims, both reported and not yet reported. These recorded estimated liabilities are based on judgments and independent actuarial estimates, which include the use of claim development factors based on loss history; economic conditions; the frequency or severity of claims and claim development patterns; and claim reserve management settlement practices.dininggift cards that have been sold but not yet redeemed and are recorded at their expected redemption value. When dininggift cards are redeemed, revenue is recognized, and unearned revenue is reduced.Start upRoyalties are accrued as earned and are calculated each period based on the franchisee’s reported sales. Area development fees paid by franchisees prior to the restaurant’s openingand franchise fees are deferred until the obligations to the franchisee have been satisfied, generallyrecognized as revenue when the Company has performed all material obligations and initial services. Area development fees are recognized proportionately with the opening of each new restaurant, opens.costs,expenses, other operating expenses, and other operatingselling, general and administrative expenses related to culinary contract service sales. All general and administrative expenses, depreciation and amortization, property disposal, and asset impairment costsexpenses associated with CCS are reported within those respective lines as applicable.AdvertisingOtherother operating expenses and selling, general and administrative expense was $4.6$5.7 million, $3.9$6.3 million, and $2.4$4.4 million in fiscal 2014, 20132017, 2016, and 2012,2015, respectively. GAAP provides that a company may adopt a policy of presenting taxes either gross within revenue or on a net basis. thesesales taxes on a net basis (excluded from revenue).guessguest traffic and sales transfer, the significance of the number of locations closed and expectancy of cash flow replacement by sales from new and existing locations, as well as the level of continuing involvement in the disposed operation. Operating and non-operating results of these locations are then classified and reported as discontinued operations of all periods presented. As of fiscal 2016, management evaluates unit closures for presentation in discontinued operations following guidance from ASU 2014-08. Beginning in fiscal 2016, in accordance with ASU No. 2014-08, the Company will only report the disposal of a component or a group of components of the Company in discontinued operations if the disposal of the components or group of components represents a strategic shift that has or will have a major effect on the Company’s operations and financial results. Adoption of this standard did not have a material impact on our consolidated financial statements.Share-Based CompensationBlack-SholesBlack-Scholes option pricing model. The Black-SholesBlack-Scholes option pricing model requires various judgmental assumptions including the expected dividend yield, stock price volatility, and the expected life of the award. If any of the assumptions used in the model change significantly, share-based compensation expense may differ materially in the future, from that recorded in the current period. The fair value of performance share based award liabilities are estimated based on a Monte Carlo simulation model. For further discussion, see Note 14, “Share-Based Compensation,” below.year 20112016 was such a year. Each of the first three quarters of each fiscal year, consistsprior to fiscal 2016, consisted of three four-week periods, while the fourth quarter normally consists of four four-week periods. However,ofincluded 13 weeks, resulting in a 53 week fiscal year 2011, as a result of the additional week, consisted of three four-week periods and one five-week period, accounting for 17 weeks, or 119 days, in the aggregate. Fiscal 2013 and 2012 both contained 52 weeks.year. Comparability between quarters may be affected by the varying lengths of the quarters, as well as the seasonality associated with the restaurant business.27, 201430, 2017 through the date of issuance of the financial statements are evaluated to determine if the nature and significance of the event warrants inclusion in the Company’s annual report.Note 2. AcquisitionsCheeseburger in ParadiseThe Company through a subsidiary, Paradise Cheeseburgers, LLC, purchased 100% of the membership units of Paradise Restaurant Group, LLC and affiliated companies which operate Cheeseburger in Paradise brand restaurants (collectively, “Cheeseburger in Paradise”) on December 6, 2012 for $10.2 million in cash. The Company assumed $2.4 million of Cheeseburger in Paradise obligations, real estate leases and contracts. The Company funded the purchase with existing cash reserves and borrowings from its credit facility.The Company believes the acquisition of Cheeseburger in Paradise will produce significant benefits. Whether we maintain and improve operations under the Cheeseburger in Paradise brand name or convert Cheeseburger in Paradise locations to Fuddruckers restaurants or other concepts or brands, the acquisition is expected to increase the Company’s market presence and opportunities for growth in sales, earnings and shareholder returns. The acquisition provides a complementary growth vehicle in the casual segment of the restaurant industry. The Company believes these factors support the amount of goodwill recorded as a result of the purchase price paid for the Cheeseburger in Paradise intangible and tangible assets, net of liabilities assumed.The Company has accounted for the acquisition of Cheeseburger in Paradise using the acquisition method and, accordingly, the results of operations related to this acquisition have been included in the consolidated results of the Company since the acquisition date. The Company incurred $0.4 million in acquisition costs which were expensed as incurred and classified as general and administrative expenses on the consolidated statements of operations.The allocation of the purchase price for the acquisition requires extensive use of accounting estimates and judgments to allocate the purchase price to tangible and intangible assets acquired and liabilities assumed based on respective fair values. The purchase price for the Company’s acquisition of Cheeseburger in Paradise and the assumption of liabilities is based on estimates of fair values at the acquisition date. The Company’s fair value estimates for the purchase price allocation may change during the allowable period, which is up to one year from the acquisition date to provide sufficient time to develop fair value estimates. The fair values that take longer to estimate and are more likely to change include property and equipment, intangible assets and leases.Such valuations require significant estimates and assumptions. The Company believes the fair values assigned to the assets acquired and liabilities assumed are based on reasonable assumptions.The following table summarizes the estimated fair values of net assets acquired and liabilities assumed, in thousands: $ 58 93 561 376 6,374 188 2,646 254 1,975 (2,356 $ 10,169 The license agreement and trade name relates to a perpetual license to use intangible assets including trademarks, service marks and publicity rights related to Cheeseburger in Paradise owned by Jimmy Buffett and affiliated entities. In return, the Company will pay a royalty fee of 2.5% of gross sales, less discounts, at acquired Cheeseburger in Paradise locations to an entity owned or controlled by Jimmy Buffett. The trade name represents a respected brand with positive customer loyalty, and the Company intends to cultivate and protect the use of the trade name.The Company will amortize the fair value allocated to the license agreement and trade name over an expected accounting life of 15 years based on the expected use of its assets and the restaurant environment in which it is being used. The Company recorded approximately $10 thousand of amortization expense for the fiscal year ended August 27, 2014, which is classified as depreciation and amortization expense in the accompanying consolidated statement of operations. Because the value of these assets will be amortized using the straight-line method over 15 years, the annual amortization will be $17 thousand in future years.A portion of the acquired lease portfolio contained favorable leases. Acquired lease terms were compared to current market lease terms to determine if the acquired leases were below or above the current rates tenants would pay for similar leases. The favorable lease assets totaled $2.6 million and are recorded in other assets and, after considering renewal periods, have an estimated weighted average life of approximately 19.1 years at August 27, 2014. There were determined to be no unfavorable leases. The favorable leases are amortized to rent expense on a straight line basis over the lives of the related leases. The Company recorded $126 thousand of amortization expense for the year ended August 27, 2014, which is classified as additional rent expense in the accompanying consolidated statement of operations.The following table shows the prospective amortization of the favorable lease asset:
2015
2016
2017
2018
2019 $ 121 $ 121 $ 121 $ 121 $ 121 Annual depreciation expense will be approximately $0.5 million of the $6.4 million of property and equipment.The Company also recorded an intangible asset for goodwill in the amount of $2.0 million. In fiscal, 2014, the Company impaired goodwill $0.5 million. Goodwill is considered to have an indefinite useful life and is not amortized but is tested for impairment at least annually. The total amount of goodwill is expected to be deductible for income tax purposes.The following unaudited pro forma information assumes the Cheeseburger in Paradise acquisition occurred as of the beginning of the fiscal year ended August 29, 2012. The unaudited pro forma data is presented for informational purposes only and does not purport to be indicative of the results of future operations of the Company or of the results that would have actually been attained had the acquisition taken place at the beginning of the fiscal year ended August 29, 2012. $ 401,960 $ 403,572 3,397 8,494 2,274 7,734 0.12 0.30 0.12 0.30 0.08 0.27 0.08 0.27 Included in the Consolidated Statement of Operations for fiscal 2013 were actual restaurant sales for Cheeseburger in Paradise of $35.7 million and loss from operations for Cheeseburger in Paradise of $1.8 million. Excluding first year integration costs of $0.7 million after-tax, the loss from operations related to Cheeseburger in Paradise included in the Consolidated Statement of Operations for the year ended August 28, 2013 was $1.1 million.3.2. Reportable Segmentsare alike, and store level profit margin isare similar. The chief operating decision maker analyzes Company-owned restaurants atrestaurant store level profit which is defined as restaurant sales and vending revenue, less cost of food, payroll and related costs, and other operating expenses, and occupancy costs. The primary brands are Luby’s Cafeteria, Fuddruckers - World’s Greatest Hamburgers®, and Cheeseburger in Paradise with a couple of non-core restaurant locations under other brand names (i.e., Koo Koo Roo California Bistro). Both Luby’s Cafeteria and FuddruckersParadise. All Company-owned restaurants are casual dining counter service restaurants. Each restaurant is an operating segment because operating results and cash flow can be determined for each restaurant.years 2014, 20132017, 2016, and 2012 was 174, 180,2015 were 167, 175, and 154,177, respectively. operation, branded as Luby’s Culinary Contract Services, consists of a business line servicing healthcare, higher education andsport stadiums, corporate dining clients.clients, and sales through retail grocery stores. The healthcare accounts are full service and typically include in-room delivery, catering, vending, coffee service, and retail dining. CCS had contracts with long-term acute care hospitals, acute care medical centers, ambulatory surgical centers, behavioral hospitals, a sports stadium, and business and industry clients, and higher education institutions. Culinary Contract Servicesclients. CCS has the unique ability to deliver quality services that include facility design and procurement as well as nutrition and branded food services to our clients. The costs of Culinary Contract Services on the Consolidated Statements of Operations includes all food, payroll and related costs, other operating expenses, and Other operatingother direct general and administrative expenses related to Culinary Contract ServicesCCS sales.Culinary Contract ServicesCCS contracts at the end of fiscal 2014, 20132017, 2016, and 2012 was2015 were 25, 2124, and 18,23, respectively.Franchising only the Fuddruckers brand. Franchises are sold in markets where expansion is deemed advantageous to the development of the Fuddruckers concept and system of restaurants. Initial franchise agreements have a term of 20 years. Franchise agreements typically grant franchisees an exclusive territorial license to operate a single restaurant within a specified area, usually a four-mile radius surrounding the franchised restaurant.was 110 at the end of fiscal end 2014, 116 at fiscal end 2013, 125 at fiscal end 2012.belowon the following page shows financial information as required by ASC 280 for segment reporting. ASC 280 requires depreciation and amortization be disclosed for each reportable segment, even if not used by the chief operating decision maker. The table also lists total assets for each reportable segment. Corporate assets include cash and cash equivalents, tax refunds receivable, property and equipment, assets related to discontinued operations, property held for sale, deferred tax assets, and prepaid expenses, intangible assets and goodwill.
2014
2013
2012 $ 368,799 $ 360,566 $ 325,154 18,555 16,693 17,711 7,027 6,937 7,232 $ 394,381 $ 384,196 $ 350,097 $ 44,843 $ 47,702 $ 50,355 2,378 1,819 1,166 7,027 6,937 7,232 $ 54,248 $ 56,458 $ 58,753 $ 17,357 $ 16,417 $ 15,990 409 440 471 767 767 767 1,529 752 666 $ 20,062 $ 18,376 $ 17,894 $ 220,793 $ 203,850 $ 182,162 2,724 3,547 3,774 13,906 14,674 15,352 38,012 28,574 29,601 $ 275,435 $ 250,645 $ 230,889 $ 43,075 $ 30,741 $ 19,077 64 95 292 — — — 3,045 503 6,476 $ 46,184 $ 31,339 $ 25,845 $ 54,248 $ 56,458 $ 58,753 (2,164 (783 (395 (20,062 (18,376 (17,894 (35,038 (32,217 (30,808 (2,498 (615 (451 2,357 1,723 (278 6 9 9 (1,247 (920 (942 1,125 1,043 1,058 $ (3,273 $ 6,322 $ 9,052 August 30, 2017 August 31, 2016 August 26, 2015 (In thousands) Sales: $ 351,365 $ 378,694 $ 370,723 Culinary contract services 17,943 16,695 16,401 Franchise operations 6,723 7,250 6,961 Total $ 376,031 $ 402,639 $ 394,085 Segment level profit: Company-owned restaurants $ 42,943 $ 55,419 $ 51,763 Culinary contract services 2,169 1,740 1,615 Franchise operations 4,990 5,373 5,293 Total $ 50,102 $ 62,532 $ 58,671 Depreciation and amortization: Company-owned restaurants $ 16,948 $ 18,181 $ 18,120 Culinary contract services 64 103 177 Franchise operations 770 784 767 Corporate 2,656 2,821 2,343 Total $ 20,438 $ 21,889 $ 21,407 Total assets: $ 189,990 $ 211,182 $ 218,492 Culinary contract services 3,342 3,390 1,644 11,325 12,266 13,034 Corporate 21,800 25,387 31,088 Total $ 226,457 $ 252,225 $ 264,258 Capital expenditures: Company-owned restaurants $ 11,374 $ 17,258 $ 19,726 Culinary contract services 3 28 18 Corporate 1,125 967 634 Total $ 12,502 $ 18,253 $ 20,378 Loss before income taxes and discontinued operations: Segment level profit $ 50,102 $ 62,532 $ 58,671 Opening costs (492 ) (787 ) (2,743 ) Depreciation and amortization (20,438 ) (21,889 ) (21,407 ) Selling, general and administrative expenses (37,878 ) (42,422 ) (38,759 ) Provision for asset impairments and restaurant closings, net (10,567 ) (1,442 ) (636 ) Net gain on disposition of property and equipment 1,804 684 3,994 Interest income 8 4 4 Interest expense (2,443 ) (2,247 ) (2,337 ) Other income, net (454 ) 186 521 Total $ (20,358 ) $ (5,381 ) $ (2,692 ) assetassets or liabilities to be measured at fair value.tiers include:●Level 1: Defined as observable inputs such as quoted prices in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.●Level 2: Defined as pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures.●Level 3: Defined as pricing inputs that are unobservable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value. Fair Value
Measurement Using Fiscal Year Ended August 30, 2017 Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3) Valuation Method Recurring Fair Value - Liabilities (In thousands) Continuing Operations: $ 831 $ — $ 831 $ — Monte Carlo Approach $ 266 $ — $ 266 $ — Discounted Cash Flow Total liabilities at Fair Value $ 1,097 $ — $ 1,097 $ — Fair Value
Measurement Using Fiscal Year Ended August 31, 2016 Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3) Valuation Method Recurring Fair Value - Liabilities (In thousands) Continuing Operations: $ 793 $ — $ 793 $ — Monte Carlo Approach Fair Value
Measurement Using Fiscal Year Ended August 26, 2015 Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3) Valuation Method Recurring Fair Value - Liabilities (In thousands) Continuing Operations: $ 108 — $ 108 — Monte Carlo Approach consistedconsist of the following: Fair Value
Measurement Using
Prices in
Active
Markets for
Identical
Assets
(Level 1)
Other
Observable
Inputs
(Level 2)
Unobservable
Inputs
(Level 3)
Impairments $ 6,446 — — $ 6,446 $ (2,498 — — — — — $ (2,498 $ 1,144 — — $ 1,144 $ (1,200
Measurement Using
Prices in
Active
Markets for
Identical
Assets
(Level 1)
Other
Observable
Inputs
(Level 2)
Unobservable
Inputs
(Level 3)
Impairments $ 722 $ — $ — $ 722 $ (462 $ 447 $ — $ — $ 447 $ (153 $ (615 $ 3,159 $ — $ — $ 3,159 $ (663
Measurement Using
Prices in
Active
Markets for
Identical
Assets
(Level 1)
Other
Observable
Inputs
(Level 2)
Unobservable
Inputs
(Level 3)
Impairments $ 57 $ — $ — $ 57 $ (175 — — — — (276 (451 $ 2,683 $ — $ — $ 2,683 $ (868 Fiscal Year Ended August 30, 2017 Nonrecurring Fair Value Measurements (In thousands) Continuing Operations: $ 5,519 $ — $ — $ 5,519 $ (8,571 ) — — — — (537 ) 3,372 — — 3,372 (977 ) Total Nonrecurring Fair Value Measurements $ 8,891 $ — $ — $ 8,891 $ (10,085 ) Fair Value
Measurement Using Fiscal Year Ended August 31, 2016 Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3)
Impairments(4)Nonrecurring Fair Value Measurements (In thousands) Continuing Operations: $ 959 $ — $ — $ 959 $ (738 ) — — — — (38 ) 1,290 — — 1,290 (463 ) Total Nonrecurring Fair Value Measurements $ 2,249 $ — $ — $ 2,249 $ (1,239 ) Fair Value
Measurement Using Fiscal Year Ended August 26, 2015 Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3)
Impairments(3)Nonrecurring Fair Value Measurements (In thousands) Continuing Operations: $ 1,350 $ — $ — $ 1,350 $ (598 ) — — — — (38 ) Total Nonrecurring Fair Value Measurements $ 1,350 $ — $ — $ 1,350 $ (636 ) Discontinued Operations: Property and equipment related to corporate assets $ 865 $ — $ — $ 865 $ (90 )
2014
2013 $ 2,940 $ 3,011 705 793 979 865 (512 (586 $ 4,112 $ 4,083 The Company does not have a concentration of credit risk in total trade and other receivables, net. August 30,
2017 August 31,
2016 (In thousands) Trade and other receivables $ 5,966 $ 5,161 Franchise royalties and marketing and advertising receivables 687 839 Trade receivables, unbilled 1,633 — Allowance for doubtful accounts (275 ) (81 ) Total Trade accounts and other receivables, net $ 8,011 $ 5,919 27, 201430, 2017 was $2.9$5.0 million, primarily the result of 1114 contracts with balances of approximately $0.1 million to $0.7approximately $2.3 million per contract entity. These 14 collectively represented approximately 58% of the Company’s total accounts receivables. Contract payment terms for its CCS customers’ receivables are due within 30 to 45 days.27, 201430, 2017 was approximately $0.7 million. At August 27, 2014,30, 2017, the Company had 110113 operating franchise restaurants with no concentration of accounts receivable.
2014
2013
2012 $ 586 $ 678 $ 302 61 (1 382 (135 (91 (6 $ 512 $ 586 $ 678 August 30,
2017 August 31,
2016 August 26,
2015 (In thousands) Beginning balance $ 81 $ 555 $ 512 Provisions (reversal) for doubtful accounts 200 (18 ) 51 (6 ) (456 ) (8 ) Ending balance $ 275 $ 81 $ 555
2014
2013 $ 158 $ 261 354 196 5 650 8,911 7,630 1,379 — 3,719 3,786 14,526 12,523 — 1,323 1,576 1,591 1,576 2,914 $ 12,950 $ 9,609 August 30,
2017 August 31,
2016 (In thousands) Deferred income tax assets: Workers’ compensation, employee injury, and general liability claims $ 486 $ 466 Deferred compensation 437 552 Net operating losses 2,140 1,258 General business and foreign tax credits 11,599 11,010 Depreciation, amortization and impairments 7,515 1,879 Straight-line rent, dining cards, accruals, and other 4,392 3,812 Subtotal 26,569 18,977 Valuation allowance (16,871 ) (6,905 ) Total deferred income tax assets 9,698 12,072 Deferred income tax liabilities: Property taxes and other 1,916 1,828 Total deferred income tax liabilities 1,916 1,828 Net deferred income tax asset $ 7,782 $ 10,244 27, 201430, 2017 of approximately $13.0$9.7 million, the most significant of which include the Company’s general business tax credits carryovers to future years of approximately $8.6 million of deferred tax assets, combined.$11.1 million. This item may be carried forward up to twenty (20) years for possible utilization in the future. The carryover of general business tax credits, beginning in fiscal 2002, will begin to expire at the end of fiscal 2022 through 2034,2037, if not utilized by then.Management has evaluated bothits forecastsscheduled reversals of taxable temporary differences, identified tax-planning strategy, the Company’sresults of recent operations, and where appropriate, projected future operational performancetaxable income. We have negative evidence in the form of cumulative losses in recent years, a significant source of which was due to a number of underperforming restaurant locations, principally all of which have, as of this time, been disposed of under the Company's disposal plan. The presence of a cumulative loss in recent years, generally limits our ability to consider projections of future earnings in assessing realization of our deferred tax assets.taxable income, adjusted by varying probability factors,(ii) an excess of appreciated asset value over the tax basis of properties within the Company's portfolio of real estate in makingan amount sufficient to realize certain of our deferred tax assets. Tax planning strategy includes the acceleration of unrealized gains from our owned property locations through sale or exchange, if and when necessary on a determination asselective basis, to whether it is more likely than notrealize deferred tax assets including federal tax credit carryovers. We regularly evaluate our portfolio of owned properties, long-lived assets and their relative values, for many different business purposes, and have estimated the resulting unrealized net gains thereon to be of sufficient amount to realize certain of our deferred tax assets.all or some portion of theour deferred tax assets will be realized. Based on its analysis, management concluded that no valuation allowance was necessary asrealized, but with the exception of the end of fiscal 2014, 2013, and 2012. The reversals of prior year’s valuation allowance amounts in fiscal 2011 and 2012 were based upon continued improvement in current and projected operational performance and the ability to utilize NOL amounts through carryforwards. This positive and negative evidence was weighed, and in each year, an increasinga certain portion of the Company’s NOL andCompany's general business and foreign tax credits was determinedcredit carryovers that are not likely at this time to be realizable,realized, and on which the Company has established a more likely than not basis, with corresponding adjustments to the valuation allowance. The reductionsgeneral business credits and foreign tax credit carryovers generally expire if unused within twenty (20) years and ten (10) years, respectively. We have, as a result of the foregoing assessment, increased the valuation allowance by an additional $10.0 million during fiscal 2017 to a $16.9 million valuation allowance for deferred tax assets that are not likely to be realized prior to their expiration. The resulting valuation allowance increase is principally attributable to changes for this fiscal year in fiscal 2011 and 2012 are reported as partappreciated asset values of real estate properties considered in the incomeCompany's identified tax expense (or benefit) included in income/(loss) from continuing operations for the year.
2014
2013
2012 $ 371 $ 614 $ 1,631 87 89 74 (2,118 1,072 (51 $ (1,660 $ 1,775 $ 1,654 August 30,
2017 August 31,
2016 August 26,
2015 (In thousands) Current federal and state income tax expense $ 329 $ 128 $ 523 Current foreign income tax expense 84 82 63 Deferred income tax expense (benefit) 2,025 4,665 (1,662 ) Total income tax expense (benefit) $ 2,438 $ 4,875 $ (1,076 )
2014
2013
2012 $ (1,120 34.0 $ 2,149 34.0 $ 3,078 34.0 404 (12.3 355 5.6 217 2.4 54 (1.7 50 0.8 141 1.6 185 (5.6 68 1.1 128 1.4 52 (1.6 338 5.3 1,407 15.6 (1,187 36.1 (1,043 (16.5 (639 (7.1 (48 1.5 (142 (2.2 (39 (0.4 — — — — (2,639 (29.2 $ (1,660 50.4 $ 1,775 28.1 $ 1,654 18.3 August 30,
2017 August 31,
2016 August 26,
2015 Amount % Amount % Amount % (In thousands and as a percent of pretax loss from continuing operations) Income tax benefit from continuing operations at the federal rate $ (6,922 ) 34.0 % $ (1,830 ) 34.0 % $ (832 ) 34.0 % Permanent and other differences: Federal jobs tax credits (wage deductions) 200 (1.0 ) 226 (4.2 ) 302 (12.3 ) Stock options and restricted stock 129 (0.6 ) 165 (3.1 ) 74 (3.0 ) Other permanent differences 62 (0.3 ) 74 (1.4 ) 60 (2.5 ) State income tax, net of federal benefit (45 ) 0.2 94 (1.7 ) 200 (8.2 ) General Business Tax Credits (589 ) 2.9 (665 ) 12.4 (888 ) 36.3 Other 84 (0.4 ) (94 ) 1.7 8 (0.3 ) Change in valuation allowance 9,519 (46.8 ) 6,905 (128.3 ) — — Income tax expense (benefit) from continuing operations $ 2,438 (12.0 )% $ 4,875 (90.6 )% $ (1,076 ) 44.0 % 27, 2014,30, 2017, including both continuing and discontinued operations, the Company is estimated to report a federal taxable incomeloss of approximately $0.6$3.0 million. The Company utilized substantially all the remaining federal NOL’s in fiscal year 2014.28, 2013,31, 2016, including both continuing and discontinued operations, the Company generated federal taxable income of approximately $4.1$3.1 million. The Company utilized NOL carryovers from prior years to reduce the current year federal tax liability to zero.29, 2012,26, 2015, including both continuing and discontinued operations, the Company generated federal taxable income of approximately $10.3$0.4 million. The Company utilized NOL carryovers from prior years to reduce the current year federal tax liability to zero.The IRS has periodically reviewed the Company’s federalreturns. The IRS concluded a review of thefilings are periodically examined by various federal income tax return for fiscal year 2008 on March 12, 2011. The IRS made no changes to the return. The State of Texas examined the franchise tax filings for report years 2008 through 2011 based on accounting years 2007 through 2010 resulting in additional taxes of $33,000.and state jurisdictions. The State of Louisiana is alsocurrently examining the Company’s tax return filings resulting in additional taxes, interestreturns for fiscal 2014 and penalties2015.$0.3 million. There are no other examinations of income or franchise tax filings currently scheduled or underway.Prior to fiscal 2010, the Company operated in five states and was subject to state and localfederal income taxes in addition to federal income taxes. With the acquisition of Fuddruckers restaurants at the end of fiscal 2010 and Cheeseburger in Paradise in fiscal 2013, the2015, 2016 or 2017. The Company has income tax filing requirements in over 30 states.There were no payments of federal income taxes in fiscal 2011, 2012, 2013 or 2014. State income tax payments were approximately $0.5$0.4 million, each year during$0.4 million, and $0.7 million in fiscal 2011, 2012, 20132017, 2016, and 2014.years 2012, 20132015, 2016 and 20142017 (in thousands): $ 83 480 407 970 (273 72 $ 769 (707 - $ 62 Balance as of August 27, 2014 $ 62 Decrease based on prior year tax positions — Interest Expense 1 Balance as of August 26, 2015 $ 63 Decrease based on prior year tax positions (18 ) Interest Expense — Balance as of August 31, 2016 $ 45 Decrease based on prior year tax positions (20 ) Interest Expense — Balance as of August 30, 2017 $ 25 wereis no interest and penalties associated with unrecognized benefits as of August 27, 2014.30, 2017. The Company has included interest or penalties related to income tax matters as part of income tax expense (or benefit).27, 2014.Tangible Property RegulationsIn September 2013, the U.S. Treasury issued final regulations addressing the tax consequences associated with the acquisition, production and improvement of tangible property and which are generally effective for taxable years beginning on or after January 1, 2014, which for the Company is was year beginning August 28, 2014. The Company plans to timely adopt these regulations and, at this time, has not evaluated the impact of these regulations on its consolidated financial statements.27, 201430, 2017 and August 28, 2013,31, 2016, together with the related estimated useful lives used in computing depreciation and amortization, were as follows:
2014
2013
Useful Lives (years) $ 69,767 $ 62,191 131,932 116,664 181,535 172,342 40,835 39,108 7,537 7,444 10,313 7,814 441,919 405,563 (228,427 (215,066 $ 213,492 $ 190,497 $ 24,014 $ 25,517 $ 1,681 $ 2,169 August 30, 2017 August 31, 2016 (In thousands) Land $ 60,414 $ 61,940 — Restaurant equipment and furnishings 73,411 75,764 3 to 15 Buildings 153,041 157,006 20 to 33 Leasehold and leasehold improvements 26,953 25,973 Lesser of lease term or
estimated useful life Office furniture and equipment 3,684 3,277 3 to 10 Construction in progress 35 145 — 317,538 324,105 Less accumulated depreciation and amortization (144,724 ) (130,887 ) Property and equipment, net $ 172,814 $ 193,218 Intangible assets, net $ 19,640 $ 21,074 15 to 21 Goodwill $ 1,068 $ 1,605 salesales of beverages with alcohol. These assets have an expected accounting life of 15 years from the date of acquisition December 6, 2012.Company recorded $6.0 million of accumulatedaggregate amortization expense related to intangible assets subject to amortization for fiscal 2017, 2016, and 2015 was approximately $1.4 million, $1.4 million, and $1.4 million, respectively. The aggregate amortization expense related to intangible assets subject to amortization is expected to be approximately $1.4 million in each of the next five successive years.27, 201430, 2017 and $4.5 million of accumulated amortization expense as of August 28, 2013.The31, 2016: August 30, 2017 August 31, 2016 (In thousands) (In thousands) Accumulated Amortization Accumulated Amortization Intangible Assets Subject to Amortization: Fuddruckers trade name and franchise agreements $ 29,486 $ (9,943 ) $ 19,543 $ 29,486 $ (8,535 ) $ 20,951 Cheeseburger in Paradise trade name and license agreements $ 421 $ (324 ) $ 97 $ 421 $ (298 ) $ 123 Intangible assets, net $ 29,907 $ (10,267 ) $ 19,640 $ 29,907 $ (8,833 ) $ 21,074 the membership units of Paradise Restaurant Group, LLC.Cheeseburger in Paradise. Goodwill is considered to have an indefinite useful life and is not amortized. Goodwill was $1.7 million as of August 27, 2014 and $2.2 million as of August 28, 2013.Generally accepted accounting principles in the United States require theto performperforms a goodwill impairment test annually and more frequently when negative conditions or a triggering event arise. In September 2011, the FASB issued amended guidance that simplified how entities test goodwill for impairment. After an assessment of certain qualitative factors, if it is determined to be more likely than not that the fair value of a reporting unit is less than its carrying amount, entities must perform the quantitative analysis of the goodwill impairment test. Otherwise, the quantitative test(s) become optional. For the annual analysis in fiscal 2017, 2016 and 2015, the Company elected to bypass the qualitative assessment and proceeded directly to performing the first step of the goodwill impairment test. In future periods, the Company may determine that facts and circumstances indicate use of the qualitative assessment may be the most reasonable approach. Management performed its formal annual assessment as of the second quarter of each fiscal year. The acquiredindividual restaurant level is the level at which goodwill starting testingis assessed for impairment one year fromunder ASC 350. In accordance with our understanding of ASC 350, we have allocated the goodwill value to each reporting unit in proportion to each location’s fair value at the date of acquisition whichacquisition. The result of these assessments were impairment of goodwill of approximately $537 thousand, $38 thousand, and $38 thousand in fiscal 2017, 2016, and 2015, respectively. The Company will formally perform additional assessments on an interim basis if an event occurs or circumstances exist that indicate that it is more likely than not that a goodwill impairment exists. As of November 7, 2017, of the 23 Cheeseburger in Paradise locations that were acquired, seven locations remain operating as Cheeseburger in Paradise restaurants and of the restaurants closed for conversion to Fuddruckers five locations remain operating as a Fuddruckers restaurant. Three locations were removed due to their lease term expiring, three locations were subleased to franchisees, and the remaining five locations were closed and held for future use. As we are not moving any of the former Cheeseburger in Paradise restaurants out of their respective market, the goodwill associated with the acquired location and market area is expected to be realized through operating these former Cheeseburger in Paradise branded restaurants as Fuddruckers branded restaurants. The Company has experience converting and opening new restaurant locations and the Fuddruckers brand units have positive cash flow history. This historical data was considered when completing our fair value estimates for recovery of the remaining net book value including goodwill. In addition, we included the incremental conversion costs in our second quarter ended February 12, 2014. We do not believecash flow projections when completing our routine impairment of long-lived assets testing. Management has therefore performed valuations using a triggering event occurred during fiscal 2013 which would require usdiscounted cash flow analysis for each of its restaurants to impairdetermine the goodwill acquired on December 6, 2012.
Goodwill, net of accumulated impairments of approximately $1.1 million and $0.6 million in fiscal 2017 and 2016, respectively, was approximately $1.1 million as of August 30, 2017 and $1.6 million as of August 31, 2016 and relates to our Company-owned restaurants reportable segment.27, 201430, 2017 and August 28, 2013:
2014
2013 $ 6,504 $ 5,574 1,280 1,180 4,144 3,941 6,943 6,501 1,076 936 3,160 3,685 $ 23,107 $ 21,817 August 30,
2017 August 31,
2016 (In thousands) $ 5,339 $ 4,184 Operating expenses 1,041 1,118 Unredeemed gift cards and certificates 7,298 6,269 Taxes, other than income 9,423 7,882 Accrued claims and insurance 1,505 1,577 Income taxes, legal and other 3,470 2,722 Total $ 28,076 $ 23,752 27, 201430, 2017 and August 28, 2013:
2014
2013 $ 729 $ 634 758 47 6,450 7,097 125 136 105 (48 $ 8,167 $ 7,866 August 30,
2017 August 31,
2016 (In thousands) Workers’ compensation and general liability insurance reserve $ 923 $ 986 Capital leases 109 44 Deferred rent and unfavorable leases 5,297 5,565 426 895 Fair value derivative - Interest Rate Swap 266 — Other 290 262 Total $ 7,311 $ 7,752 August 30,
2017 August 31, 2016 (In thousands) 2013 Credit Agreement - Revolver $ — $ 37,000 2016 Credit Agreement - Revolver 4,400 — 2016 Credit Agreement - Term Loan 26,585 — Total credit facility debt 30,985 37,000 Less unamortized debt issue costs (287 ) — Total credit facility debt, less unamortized debt issuance costs 30,698 37,000 Current portion of credit facility debt — — Total 30,698 37,000 Facility27, 2014,30, 2017, the Company had $42.0$31.0 million in total outstanding loans and $1.1approximately $1.3 million committed under letters of credit, which the Company reissuedis used as security for the payment of insurance obligations, and $1.1approximately $0.1 million in capital lease commitments.National Association,(formerly Amegy Bank, N.A.), as Syndication Agent. Pursuant to the October 2, 2015 amendment, the total aggregate amount of the lenders' commitments was lowered to $60 million from $70.0 million. The following description summarizes the material terms of the revolving credit facility, as subsequently amended on March 21, 2014, and November 7, 2014 and October 2, 2015, (the revolving credit facility is referred to as the “2013 Credit Facility”). The 2013 Credit Facility iswas governed by the credit agreement dated as of August 14, 2013 (the “2013 Credit Agreement”) among the Company, the lenders from time to time party thereto, Wells Fargo Bank, National Association, as Administrative Agent, and ZB, N.A. dba Amegy Bank National Association,(formerly Amegy Bank, N.A.), as Syndication Agent. The maturity date of the 2013 Credit Facility iswas September 1, 2017.The aggregate amount of the lenders’ commitments under the 2013 Credit Facility was $70.0 million as of August 28, 2013. providesprovided for the issuance of letters of credit in a maximum aggregate amount of $5.0 million outstanding as of August 14, 2013 and $15.0 million outstanding at any one time with prior written consent of the Administrative Agent and the Issuing Bank. At August 27, 2014, under the 2013 Credit Facility, the total available borrowing capacity was up to $49.3 million after applying the Lease Adjusted Leverage Ratio Limitation, the available borrowing capacity was $5.1 million.The 2013 Credit Facility is guaranteed by all of the Company’s present subsidiaries and will be guaranteed by our future subsidiaries. In addition to the bank’s increased commitment under the 2013 Credit Agreement, it may be increased to a maximum commitment of $90 million.hashad the option to elect one of two bases of interest rates. One interest rate option iswas the greater of (a) the Federal Funds Effective Rate plus 0.50%, or (b) prime, plus, in either case, an applicable spread that ranges from 0.75% to 2.25% per annum. The other interest rate option iswas the London InterBank Offered Rate plus a spread that ranges from 2.50% to 4.0% per annum. The applicable spread under each option iswas dependent upon the ratio of ourthe Company's debt to EBITDA at the most recent determination date.iswas obligated to pay to the Administrative Agent for the account of each lender a quarterly commitment fee based on the average daily unused amount of the commitment of such lender, ranging from 0.30% to 0.40% per annum depending on the Total Leverage Ratio at the most recent determination date.arewas available for the Company’s general corporate purposes and general working capital purposes and capital expenditures.Borrowingsare subjectmay have be immediately terminated and, or the Company could have been required to mandatory repayment withrepay all amounts outstanding under the proceeds of sales of certain of the Company’s real property, subject to certain exceptions.iswas secured by a perfected first priority lien on certain of the Company’sCompany's real property and all of the material personal property owned by the Company or any of its subsidiaries, other than certain excluded assets (as defined in the 2013 Credit Agreement). At August 27, 2014, the carrying value of the collateral securing the 2013 Credit Facility was $84.4 million.The 2013 Credit Agreement, as amended, contains the following covenants among others:●maintenance of a ratio of (a) EBITDA minus $7.5 million (for maintenance capital expenditures) for the four fiscal quarters ending on the last day of any fiscal quarter to (b) the sum of (x) interest expense (as defined in the 2013 Credit Agreement) for such four fiscal-quarter-period plus (y) the outstanding principal balance of the loans as of the last day of such fiscal quarter divided by ten (the “Debt Service Coverage Ratio), of not less than 1.10 to 1.00 during the first, second and third fiscal quarters of fiscal 2015; 1.25 to 1.00 during the fourth fiscal quarter of fiscal 2015 and the first and second fiscal quarters of fiscal 2016; and 1.50 to 1.00 at all times thereafter.●maintenance of minimum net profit of $1.00 (1) for at least one of any two consecutive fiscal quarters starting with the third fiscal quarter of 2016, and (2) for any period of four consecutive fiscal quarters starting with the fourth fiscal quarter of 2015 (for the fiscal year 2015).●maintenance of a ratio of (a) the sum of (x) indebtedness as of the last day of any fiscal quarter plus (y) eight times rental expense for the four fiscal quarters ending on the last day of any fiscal quarter to (b) the sum of (x) EBITDA for such four fiscal-quarter-period plus (y) rental expense for such four fiscal-quarter-period (the “Lease Adjusted Leverage Ratio”) of no more than (i) 5.75 to 1.00 during the first, second and third fiscal quarters of fiscal 2015, (ii) 5.50 to 1.00 during the fourth fiscal quarter of 2015, (iii) 5.25 to 1.00 during the first fiscal quarter of 2016, (iv) 5.00 to 1.00 during the second fiscal quarter of 2016 and, (v) 4.75 to 1.00 at all times thereafter.●capital expenditures limited to $25.0 million per year,●restrictions on incurring indebtedness, including certain guarantees and capital lease obligations,●restrictions on incurring liens on certain of our property and the property of our subsidiaries,●restrictions on transactions with affiliates and materially changing our business,●restrictions on making certain investments, loans, advances and guarantees,●restrictions on selling assets outside the ordinary course of business,●prohibitions on entering into sale and leaseback transactions,●restrictions on certain acquisitions of all or a substantial portion of the assets, property and/or equity interests of any person, including share repurchases and dividends.The Company was in compliance with the covenants contained in the Credit Agreement as of August 27, 2014.The 2013 Credit Agreement also includes customary events of default. If a default occurs and is continuing, the lenders’ commitments under the 2013 Credit Facility may be immediately terminated and/or the company may be required to repay all amounts outstanding under the 2013 Credit Facility.As of August 27, 2014, the Company had $42.0 million in outstanding loans and $1.1 million committed under letters of credit, which the company reissued as security for the payment of insurance obligations and $1.1 million in capital lease commitments.2014, 20132017, 2016, and 20122015 was $1.6approximately $2.2 million, $0.9$2.2 million, and $0.9$2.3 million, respectively. Interest paid was approximately $1.4$1.8 million, $0.8$1.9 million, and $0.8$2.1 million in fiscal 2014, 20132017, 2016, and 2012,2015, respectively. No interest expense was allocated to discontinued operations in fiscal 2014, 20132017, 2016, or 2012 . No interest2015. Interest was capitalized on properties in fiscal 2014, 2013 or 2012.2017, 2016, and 2015, in the amounts of zero, zero, and $80 thousand, respectively.
2014
2013
2012 $ 2,498 $ 615 $ 451 (2,357 (1,723 278 $ 141 $ (1,108 $ 729 $ — $ 0.04 $ (0.03 $ — $ 0.04 $ (0.03 August 30, 2017 August 31, 2016 August 26, 2015 (In thousands, except per share data) Provision for asset impairments and restaurant closings $ 10,567 $ 1,442 $ 636 Net gain on disposition of property and equipment (1,804 ) (684 ) (3,994 ) Total $ 8,763 $ 758 $ (3,358 ) Effect on EPS: Basic $ (0.29 ) $ (0.03 ) $ 0.12 Assuming dilution $ (0.29 ) $ (0.03 ) $ 0.12 $2.5approximate $10.6 million impairment charge in fiscal 20142017 is primarily related to one operating Luby’s Cafeteria, two operating Fuddruckers restaurants, two operating Cheeseburgerassets impaired at 17 property locations, goodwill at six property locations, five properties held for sale written down to their fair value, and a reserve for 10 restaurant closings of approximately $482 thousand.Paradise restaurants and nine closed Cheeseburger in Paradise restaurants.$0.6approximate $1.4 million impairment charge in fiscal 20132016 is primarily related to assets impaired at 4 property locations, goodwill at one property heldlocation, and a reserve for four restaurant closings of approximately $202 thousand.one operating Fuddruckers restaurant and one operating Koo Koo Roo Chicken Bistro ®restaurant as well as a reduction of the estimated fair valuetwo properties of used assets to be refurbished and reused.$0.5approximate $0.6 million impairment charge in fiscal 20122015 is primarily related to a CCS locationthree property locations.two underperforming restaurant locations. The $0.3 million lossequipment in fiscal 2015 is primarily related to the gain on the sale of five properties of approximately $4.5 million partially offset by routine asset retirements and the closures of two leased locations.On March 24, 2014, the Company announced that it has initiated a plan focused on improving cash flow from the recently acquired Cheeseburger in Paradise leasehold locations. This underperforming Cheeseburger in Paradise leasehold disposal plan called for five or more units to be closed by the end of Fiscal 2014 and disposed of within 12 months.or converted to Fuddruckers restaurants. As of August 27, 2014, four30, 2017, no locations have been closed for disposal and reclassified toremain classified as discontinued operations. year 2010 adoption of the Company’s Cash Flow Improvement and Capital Redeployment Plan, the Company reclassified 24 Luby’s Cafeterias to discontinued operations. As of August 27, 2014, four locations remain,30, 2017, one is under lease to a third party and three remainlocation remains held for sale.We believe the majority of cash flows lost will not be recovered by ongoing operations and the majority of sales lost by closing will not be recovered. In addition, there will not be any ongoing involvement or significant cash flows from the closed stores. Stores we close, but do not classify as discontinued operations, follow the implementation guidance in ASC 205-20-55 because cash flows are expected to be generated by the ongoing entity. There is some migration of customer traffic to existing or new locations, and ultimately the majority of sales lost by closing these stores are expected to be eventually replaced by sales from new locations.The results of operations, assets and liabilities for all units included in the Plan have been reclassified to discontinued operations in the statement of operations and balance sheets for all periods presented.Assets related to discontinued operations include accounts receivable, accrued liabilities, prepaid expenses, deferred taxes, unimproved land, closed restaurant properties and related equipment for locations classified as discontinued operations.
2014
2013 $ — $ — — 118 52 78 $ 52 $ 196 $ 2,817 $ 3,918 1,387 300 $ 4,204 $ 4,218 $ 308 $ 246 282 281 $ 590 $ 527 $ 278 $ 448 — — $ 278 $ 448 August 30,
2017 August 31,
2016 (In thousands) Prepaid expenses $ — $ 1 Assets related to discontinued operations—current $ — $ 1 Property and equipment $ 1,872 $ 1,872 Deferred tax assets 883 1,320 Assets related to discontinued operations—non-current $ 2,755 $ 3,192 Deferred income taxes $ 354 $ 361 Accrued expenses and other liabilities 13 51 Liabilities related to discontinued operations—current $ 367 $ 412 Other liabilities $ 16 $ 17 Liabilities related to discontinued operations—non-current $ 16 $ 17 27, 2014,30, 2017, under both closure plans, the Company had nine propertiesone property classified as discontinued operations assets and theoperations. The asset carrying value of the owned propertiesproperty was $5.3approximately $1.9 million and is included in assets related to discontinued operations. The asset carrying values of theCompany is actively marketing this property for sale and has one property with a ground leases werelease previously impaired to zero.The Company is actively marketing all but one of these properties for sale and the Company’s results of discontinued operations will be affected by the disposal of properties related to discontinued operations to the extent proceeds from the sales exceed or are less than net book value.
2014
2013
2012 $ 4,691 $ 6,153 $ — $ (2,813 $ (1,926 $ (1,064 $ 979 $ 540 $ 419 $ (1,834 $ (1,386 $ (645 5 0 0 During fiscal 2011 and 2010, the Company expensed $0.2 million and $0.7 million, respectively, for lease exit costs and future rental costs related to closed locations. The Company incurred $0.7 million in employee settlement costs in fiscal 2010 but incurred no settlement costs in fiscal 2011 or 2012. August 30,
2017 August 31,
2016 August 26,
2015 (In thousands, except locations) Sales $ — $ — $ — Pretax loss $ (28 ) $ (136 ) $ (864 ) Income tax benefit on discontinued operations $ (438 ) $ 46 $ 406 Loss on discontinued operations $ (466 ) $ (90 ) $ (458 ) Discontinued locations closed during the period 0 0 0 2014, 20132017, 2016, and 2012:
2014
2013
2012 $ (1,199 $ (663 $ (868 (7 5 513 (1,206 (658 (355 (628 $ (728 (290 $ (1,834 $ (1,386 $ (645 $ (0.06 $ (0.05 $ (0.02 August 30,
2017 August 31,
2016 August 26,
2015 (In thousands, except per share data) Discontinued operating losses $ (28 ) $ (161 ) $ (890 ) Impairments — — (90 ) Gains — 25 116 Net loss $ (28 ) $ (136 ) $ (864 ) Income tax benefit (expense) from discontinued operations (438 ) 46 406 Loss from discontinued operations, net of income taxes $ (466 ) $ (90 ) $ (458 ) Effect on EPS from discontinued operations—decrease—basic $ (0.02 ) $ (0.00 ) $ (0.01 ) 27, 2014,30, 2017, the Company had onefour owned properties recorded at approximately $1.0$3.4 million in property held for sale. The Company is actively marketing the locations currently classified as property held for sale.28, 2013,31, 2016, the Company had onefive owned propertyproperties recorded at approximately $0.4$5.5 million in property held for sale. The Company is actively marketing the location currently classified as property held for sale.At August 29, 2012, the Company had one owned property recorded at approximately $0.6 million in property held for sale.2014, 20132017, 2016, and 20122015 is provided below(in thousands): $ 1,046 (444 — $ 602 — (153 $ 449 (449 991 $ 991 Balance as of August 27, 2014 $ 991 Disposals (3,203 ) Net transfers to property held for sale 6,748 Balance as of August 26, 2015 $ 4,536 Disposals (1,488 ) Net transfers to property held for sale 2,937 Adjustment to fair value (463 ) Balance as of August 31, 2016 $ 5,522 Disposals (1,173 ) Adjustment to fair value (977 ) Balance as of August 30, 2017 $ 3,372 restaurants.restaurants or restaurant remodels. This construction activity exposes the Company to the risks inherent in new constructionthis industry including but not limited to rising material prices, labor shortages, delays in getting required permits and inspections, adverse weather conditions, and injuries sustained by workers. The Company hashad no non-cancelable contracts as of August 28, 2013.30, 2017.27, 2014,30, 2017, the Company has lease agreements for 9991 properties which include the Company’s corporate office, facility service warehouseswarehouse, two remote office spaces, and restaurant properties. The leasing terms of the 9991 properties consist of11 13 properties expiring in less than one year, 7256 properties expiring between one and five years and the remaining 1622 properties having current terms that are greater than five years. Of the 9991 leased properties, 7566 properties have options remaining to renew or extend the lease.27, 2014,30, 2017, the Company has entered into noncancelable operating lease agreements for certain office equipment with terms ranging from 36 to 7260 months.27, 201430, 2017 are as follows: 12,219 10,712 8,091 6,759 5,938 26,154 $ 69,873 Fiscal Year Ending: (In thousands) August 29, 2018 $ 11,747 August 28, 2019 10,088 August 26, 2020 7,777 August 25, 2021 6,287 August 31, 2022 5,122 Thereafter 25,078 Total minimum lease payments $ 66,099 fifteen5 to thirty years and some leases provide for contingent rentals based on sales in excess of a base amount.the last three fiscal years2017, 2016, and 2015 was as follows:
2014
2013
2012 $ 12,999 $ 13,488 $ 11,132 251 182 235 829 818 751 $ 14,079 $ 14,488 $ 12,118 3.6 3.7 3.5 Year Ended August 30,
2017 August 31,
2016 August 26,
2015 (In thousands, except percentages) Minimum rent-facilities $ 11,849 $ 12,341 $ 12,547 Contingent rentals 86 164 129 Minimum rent-equipment 758 712 805 Total rent expense (including amounts in discontinued operations) $ 12,693 $ 13,217 $ 13,481 Percent of sales 3.4 % 3.3 % 3.4 % EmployeeLuby's Incentive Stock Plan, as amended and restated effective December 5, 2015 (the "Employee Stock Plan ") and the Nonemployee Director Stock Plan. Both plans authorize the granting of stock options, restricted stock, and other types of awards consistent with the purpose of the plans.0.71.1 million options, restricted stock units and restricted stock awards were granted, 0.1 million options were cancelled or expired and added back into the plan.plan, since the plans inception. Approximately 0.50.1 million shares remain available for future issuance as of August 27, 2014.30, 2017. Compensation cost for share-based payment arrangements under the Nonemployee Director Stock Plan, recognized in selling, general and administrative expenses for fiscal years 2014, 20132017, 2016, and 20122015 was approximately $0.6$0.7 million, $0.3$0.7 million, and $0.2$0.7 million, respectively.2.64.1 million shares approved for issuance under the Employee Stock Plan 4.6(which amount includes shares authorized under the original plan and shares authorized pursuant to the amended and restated plan effective as of December 5, 2015), 6.1 million options and restricted stock units were granted, 3.03.7 million options and restricted stock units were cancelled or expired and added back into the plan.plan, since the plans inception in 2005. Approximately 1.01.7 million shares remain available for future issuance as of August 27, 2014.30, 2017. Compensation cost for share-based payment arrangements under the Employee Stock Plan, recognized in selling, general and administrative expenses for fiscal years 2014, 20132017, 2016, and 20122015 was approximately $0.7$0.9 million, $0.8$1.0 million, and $0.8$0.9 million, respectively.years 2014, 20132017, 2016, or 2012. However,2015. No options to purchase 14,000 shares at option prices of $6.45 per share remain outstanding under this plan, as of August 27, 2014.25% on the anniversary date of each grant and expire six years from the date of the grant. However, options granted to executive officers under the Employee Stock Plan vest 50% on the first anniversary date of the grant date, 25% on the second anniversary of the grant date and the remaining 25% vest on the third anniversary of the grant date, and expirewith all options expiring ten years from the grant date. All options granted in fiscal years 2014, 20132017 , 2016, and 20122015 were granted under the Employee Stock Plan. Options to purchase 787,0001,345,916 shares at options prices from $3.44 to $11.10 per share remain outstanding as of August 27, 2014.threetwo groups which represent, respectively, the Employee Stock PlansPlan and the Nonemployee Director Stock Option Plan. The assumptions are as follows:●The Company estimated volatility using its historical share price performance over the expected life of the option. Management believes the historical estimated volatility is materially indicative of expectations about expected future volatility.●The Company uses an estimate of expected lives for options granted during the period based on historical data.●The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for the expected term of the option.●The expected dividend yield is based on the Company’s current dividend yield and the best estimate of projected dividend yield for future periods within the expected life of the option.
2013
2012 — — 44.49 56.79 0.72 0.93 5.50 4.25 No options were granted during fiscal year ended August 27, 2014. August 30,
2017 August 31,
2016 August 26,
2015 (In thousands, except percentages) Dividend yield 0 % 0 % 0 % Volatility 37.65 % 39.64 % 42.30 % Risk-free interest rate 1.99 % 1.82 % 1.41 % Expected life (in years) 5.87 5.58 5.61 the three fiscal years ended August 27, 2014, August 28, 20132017, 2016, and August 29, 20122015 is presented in the following table:
Fixed Options
Exercise Price
Remaining
Contractual Term
Value 1,356,551 $ 7.36 3.9 $ 367 59,426 4.42 0 0 (238,208 11.87 0 0 1,177,769 $ 6.30 3.1 $ 1,500 109,335 5.95 0 0 (93,973 4.29 0 0 (310,363 9.85 0 0 882,768 $ 5.23 4.7 $ 2,042 (29,253 4.27 0 0 (52,761 10.30 0 0 800,754 $ 4.95 4.1 $ 583 665,729 $ 4.83 3.8 $ 553 Shares
Under
Fixed
Options Weighted-
Average
Exercise
Price Weighted-
Average
Remaining
Contractual
Term Aggregate
Intrinsic
Value (Years) (In thousands) Outstanding at August 27, 2014 800,754 $ 4.95 4.1 $ 583 Granted 628,060 4.49 — — Exercised (57,007 ) 3.45 — — Forfeited (1,523 ) 5.59 — — Expired (82,185 ) 5.47 — — Outstanding at August 26, 2015 1,288,099 $ 4.76 6.5 $ 350 Granted 279,944 4.89 — — Exercised (21,249 ) 3.51 — — Cancelled (312,663 ) 4.98 — — Forfeited (55,893 ) 4.80 — — Expired (9,000 ) 3.44 — — Outstanding at August 31, 2016 1,169,238 $ 4.76 6.6 $ 178 Granted 295,869 4.26 — — Exercised 0 0.00 — — Cancelled (9,290 ) 4.49 — — Forfeited (72,212 ) 4.57 — Expired (37,689 ) 5.39 — — Outstanding at August 30, 2017 1,345,916 $ 4.64 6.4 $ 0 Exercisable at August 30, 2017 872,216 $ 4.74 5.2 $ 0 27, 2014,30, 2017, there was approximately $0.2$0.4 million of total unrecognized compensation cost related to unvested options that are expected to be recognized over a weighted-average period of 1.91.4 years.years 20132017, 2016, and 20122015 was $2.44$1.66, $1.92, and $2.00$1.83 per share, respectively.years 2014, 20132017, no options were exercised. During fiscal 2016 and 2012,2015 cash received from options exercised was approximately $125,000, $403,000$82 thousand and zero,$190 thousand, respectively.
Units
Average
Fair Value
Average
Remaining
Contractual Term 96,822 5.11 2.1 69,713 4.46 (2,589 5.39 163,946 4.83 1.8 274,290 6.17 (14,000 3.46 424,236 $ 5.74 2.1 63,238 7.09 (80,233 5.39 (9,404 5.79 397,837 $ 6.03 1.6 (Per share) (In years) Unvested at August 27, 2014 397,837 $ 6.03 1.6 Granted 84,495 4.54 — Vested (72,915 ) 4.55 — Forfeited — — — Unvested at August 26, 2015 409,417 $ 5.98 1.6 Granted 172,212 4.87 — Vested (257,482 ) 6.19 — Forfeited (9,314 ) 5.37 — Unvested at August 31, 2016 314,833 $ 5.23 1.9 Granted 200,549 4.26 — Vested (92,058 ) 6.30 — Forfeited (18,960 ) 4.55 — Unvested at August 30, 2017 404,364 $ 4.54 1.8 27, 2014,30, 2017, there was approximately $3.0$0.9 million of total unrecognized compensation cost related to unvested restricted stock units that is expected to be recognized over a weighted-average period of 1.61.8 years.optreceive a 20% premium of additional restricted stock by opting to receive 20% more shares of restricted stock awards by accepting more than theover a minimum required amount of stock, insteadin lieu of cash. The number of shares granted is valued at the average of the high and low price of the Company’s stock at the date of the grant. Restricted stock awards vest when granted because they are granted in lieu of a cash payment. However, directors are restricted from selling their shares until after the third anniversary of the date of the grant.27, 2014,30, 2017, August 28, 201331, 2016, and August 29, 2012,26, 2015, was zero, and the unfunded accrued liability included in “Other Liabilities” on the Company’s consolidated Balance Sheets as of August 27, 201430, 2017 and August 28, 201331, 2016 was approximately $83,000$45 thousand and $95,000,$58 thousand, respectively.year 2003; since that time, no deferrals, incentives or dividends have been credited to phantom stock accounts. As participants cease to be directors, their phantom shares are converted into an equal number of shares of common stock and issued from the Company’s treasury stock. As of August 27, 2014,30, 2017, 29,627 phantom shares remained unissued under the Phantom Stock Plan.401(k) Plansalary up until September 2009 when the Company stopped the match. The Company resumed the employee match feature in the first quarter of fiscal year 2012.salary. The net expense recognized in connection with the employer match feature of the voluntary 401(k) employee savings plan for the years ended August 27, 2014,30, 2017, August 28, 201331, 2016, and August 29, 2012,26, 2015, was $501,000, $421,000approximately $359 thousand, $350 thousand, and $164,000,$255 thousand, respectively.December 9, 2005May 28, 2015 among the Company and the Pappas entities.2014, 20132017, 2016, and 20122015 were approximately $4,000,$4 thousand, $2 thousand, and zero, and $139,000, respectively. The decrease in fiscal 2013 was primarily due to fewer restaurant openings in fiscal year 2013 than fiscal 2012. Services provided under this agreement are subject to review and approval by the Finance and Audit Committee of the Company’s Board of Directors. The Company made payments of approximately $388,000, $426,000 and $332,000 in fiscal years 2014, 2013 and 2012, respectively, under the lease agreement which currently includes an annual base rate of $14.64 per square foot.is currently obligated to paypaid rent of $20.00$22.00 per square foot ($22.00 per square foot beginning January 2014) plus maintenance, taxes, and insurance during the remaining primary term of the lease. Thereafter, the lease provides for reasonable increases in rent at set intervals. The Company made payments of approximately $419 thousand, $417 thousand, and $416 thousand in fiscal 2017, 2016, and 2015, respectively, under the lease agreement. The new lease agreement was approved by the Finance and Audit Committee.2.3%2.7%, 2.7%2.6%, and 2.6%2.7% of total rents for continuing operations for fiscal years 2014, 20132017, 2016, and 2012,2015, respectively.National Association,a Division of ZB, N.A. (formerly, Amegy Bank, N.A.), which iswas a lender and syndication agent under the Company’s 2013 Revolving Credit Facility.In January 2015, Christopher PappasDecember 2014.August 29, 2018. Mr. Pappas continues to devote his primary time and business efforts to the Company while maintaining his role at Pappas Restaurants, Inc.On December 20, 2011, the Board of Directors of the Company approved the renewal of a consultant agreement with Ernest Pekmezaris, the Company’s former Chief Financial Officer. The agreement expiring on January 31, 2013 was renewed for six months at a lower monthly rate. Under the agreement, Mr. Pekmezaris furnished to the Company advisory and consulting services related to finance and accounting matters and other related consulting services. Mr. Pekmezaris is also the Treasurer of Pappas Restaurants, Inc. Compensation for the services provided by Mr. Pekmezaris to Pappas Restaurants, Inc. is paid entirely by that entity.27, 2014,30, 2017, the Company had 500,000 shares of common stock reserved for issuance upon the exercise of outstanding stock options.
2014
2013
2012 $ (1,613 $ 4,547 $ 7,398 $ (3,447 $ 3,161 $ 6,753 28,812 28,618 28,351 — 248 78 28,812 28,866 28,429 $ (0.06 $ 0.16 $ 0.26 $ (0.06 $ 0.16 $ 0.26 $ (0.12 $ 0.11 $ 0.24 $ (0.12 $ 0.11 $ 0.24 (a)Potentially dilutive shares not included in the computation of net income per share because to do so would have been antidilutive amounted to 180,000 in fiscal year 2014 and zero shares in fiscal year 2013 and fiscal year 2012. Additionally, stock options with exercise prices exceeding market close prices that were excluded from the computation of net income per share amounted to 143,000 shares in fiscal year 2014, 67,000 shares in fiscal year 2013 and 373,020 shares in fiscal year 2012. August 30,
2017 August 31,
2016 August 26,
2015 (In thousands, except per share data) Numerator: Loss from continuing operations $ (22,796 ) $ (10,256 ) $ (1,616 ) NET LOSS $ (23,262 ) $ (10,346 ) $ (2,074 ) Denominator: Denominator for basic earnings per share—weighted-average shares 29,476 29,226 28,974 Effect of potentially dilutive securities: Employee and non-employee stock options — — — Denominator for earnings per share assuming dilution 29,476 29,226 28,974 Loss from continuing operations: Basic $ (0.77 ) $ (0.35 ) $ (0.06 ) $ (0.77 ) $ (0.35 ) $ (0.06 ) Net loss per share: Basic $ (0.79 ) $ (0.35 ) $ (0.07 ) $ (0.79 ) $ (0.35 ) $ (0.07 ) years 20142017 and 2013.
2014
2014
2014
2013 $ 115,549 $ 90,141 $ 83,045 $ 80,064 2,284 1,684 1,545 1,514 5,772 4,534 3,979 4,270 123,605 96,359 88,569 85,848 (1,081 1,742 (1,581 (693 (366 (12 (603 (853 (1,447 1,730 (2,184 (1,546 (0.06 0.06 (0.08 (0.05 (0.06 0.06 (0.08 (0.05 29.1 28.6 29.0 28.6 35.0 33.3 35.3 35.2 19.3 17.7 18.6 18.9 5.8 5.4 5.8 5.9
2013 (As Revised)
2013 (As Revised)
2013 (As Revised)
2012 (As Revised) $ 115,947 $ 89,671 $ 80,858 $ 74,091 2,235 1,640 1,539 1,522 5,086 4,099 3,667 3,841 123,268 95,410 86,064 79,454 1,086 2,624 663 174 (657 (163 (482 (84 429 2,461 181 90 0.01 0.09 0.01 0.01 0.01 0.09 0.01 0.01 28.8 28.6 28.9 28.2 33.8 33.5 35.6 35.2 19.2 17.3 17.1 18.0 6.3 5.5 6.0 5.5 (a)The quarters ended August 27, 20142016. August 30,
2017 June 7,
2017 March 15,
2017 December 21,
2016 (84 days) (84 days) (84 days) (112 days) (In thousands, except per share data) Restaurant sales $ 79,078 $ 82,594 $ 81,064 $ 108,082 Franchise revenue 1,556 1,477 1,819 1,871 Culinary contract services 5,825 4,515 3,306 4,297 Vending revenue 130 133 125 159 Total sales $ 86,589 $ 88,719 $ 86,314 $ 114,409 Loss from continuing operations (4,069 ) (377 ) (12,836 ) (5,514 ) Income (loss) from discontinued operations (32 ) (19 ) (343 ) (72 ) Net loss $ (4,101 ) $ (396 ) $ (13,179 ) $ (5,586 ) Net loss per share: Basic $ (0.14 ) $ (0.01 ) $ (0.45 ) $ (0.19 ) Assuming dilution $ (0.14 ) $ (0.01 ) $ (0.45 ) $ (0.19 ) Cost of food 28.3 % 27.8 % 27.9 % 28.5 % Payroll and related costs 36.1 % 35.7 % 36.1 % 35.8 % Other operating expenses 18.6 % 16.7 % 17.0 % 18.2 % Occupancy costs 6.4 % 6.0 % 6.6 % 6.0 % August 31, 2016 June 1,
2016 March 9,
2016 December 16,
2015 (91 days) (84 days) (84 days) (112 days) (In thousands, except per share data) Restaurant sales $ 91,775 $ 86,476 $ 86,314 $ 113,546 Franchise revenue 1,839 1,586 1,700 2,125 Culinary contract services 3,970 3,892 3,918 4,915 Vending revenue 145 143 137 158 Total sales $ 97,729 $ 92,097 92,069 $ 120,744 Loss from continuing operations (7,789 ) (147 ) (582 ) (1,738 ) Income (loss) from discontinued operations (13 ) 13 (17 ) (73 ) Net loss $ (7,802 ) $ (134 ) $ (599 ) $ (1,811 ) Net loss per share: Basic $ (0.27 ) $ — $ (0.02 ) $ (0.06 ) Assuming dilution $ (0.27 ) $ — $ (0.02 ) $ (0.06 ) Cost of food 28.0 % 28.0 % 28.5 % 28.6 % Payroll and related costs 35.9 % 35.6 % 34.6 % 34.7 % Other operating expenses 16.6 % 15.7 % 15.9 % 16.2 % Occupancy costs 5.6 % 5.9 % 6.4 % 5.8 % August 28, 2013 consists of four four-week periods. All other quarters presented represent three four-week periods.(b)The first quarter encompasses the typical start of school and second quarter includes Christmas and Thanksgiving holidays.(c) In the secondfiscal quarter ended August 31, 2016, consists of fiscal 2014, we identifiedtwo four-week periods and corrected immaterial accounting errors in prepaid assets and payroll related liabilities. The Company did not expense amounts related to these accounts properly in the appropriate prior periods. The errors impacted all prior reporting periods beginning in 2007. Based on management’s analysis of the error as required by guidance in ASC 250-10 relating to SEC Staff Accounting Bulletin (“SAB”) Topic1.M,Assessing Materialityand SAB Topic 1.N,Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current YearFinancial Statements, Income from continuing operations for quarter one of fiscal year 2014 and quarters one through four of fiscal year 2013 have been revised. See Note 1. Nature of Operations and Significant Accounting Policies. In addition, Restaurant sales, Income from continuing operations and Discontinued operations were revised to reflect the Company’s disposal plans discussed in Note 8.five week period.27, 2014.30, 2017. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of August 27, 2014,30, 2017, our disclosure controls and procedures were effective in providing reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.management conducted an evaluation ofwe have evaluated the effectiveness of our internal control over financial reporting as of August 27, 2014 based on the framework in Internal Control—Control – Integrated FrameworkFramework-2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).Commission. Based on thatour evaluation, our managementwe concluded that our internal control over financial reporting was effective as of August 27, 2014.27, 2014,30, 2017, as stated in their attestation report which is included under Item 8 of this report.27, 201430, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.None 20152018 annual meeting of shareholders appearing therein under the captions “Election of Directors,” “Corporate Governance,” “Section 16(a) Beneficial Ownership Reporting Compliance,” “Executive Officers,” and “Certain Relationships and Related Transactions.”boardBoard of directors,Directors, and Supplemental Standards of Conduct and Ethics for the Chief Executive Officer, Chief Financial Officer, Controller, and all senior financial officers. This Policy Guide and the Supplemental Standards were filed as exhibits to the Annual Report on Form 10-K for the fiscal year ended August 26, 2003 and can be found on our website at www.lubys.com. We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding amendments to or waivers from the code of ethics or supplementary code of ethics by posting such information on our website at www.lubys.com.20152018 annual meeting of shareholders appearing therein under the captions “Compensation Discussion and Analysis—Executive Compensation,” “—Executive Compensation Committee Report,” “—Compensation Tables and Information,” “—Director Compensation,” and “Corporate Governance—Executive Compensation Committee—Compensation Committee Interlocks.”20152018 annual meeting of shareholders appearing therein under the captions “Ownership of Equity Securities in the Company” and “Principal Shareholders.”20152018 annual meeting of shareholders appearing therein under the captions, “Corporate Governance Guidelines—Director Independence” and “Certain Relationships and Related Transactions.”20152018 annual meeting of shareholders appearing therein under the caption “Fees Paid To The Independent Registered Public Accounting Firm.” PART IVThe following financial statements are filed as part of this Report: Consolidated balance sheets at August 27, 201430, 2017 and August 28, 2013.31, 2016.Consolidated statements of operations for each of the three years in the period ended August 27, 2014.30, 2017.Consolidated statements of shareholders’ equity for each of the three years in the period ended August 27, 2014. 30, 2017. Consolidated statements of cash flows for each of the three years in the period ended August 27, 2014.30, 2017.Notes to consolidated financial statements Reports of Independent Registered Public Accounting Firm Grant Thornton LLP 3(a)3(a) 4(a)Credit Agreement dated as of November 9, 2009, among the Company, the lenders party thereto, Wells Fargo Bank, National Association, as Administrative Agent, and Amegy Bank, National Association, as Syndication Agent (filed as Exhibit 4(l) to the Company’s Annual Report on Form 10-K for the fiscal year ended August 26, 2009 File No. 001-08308, and incorporated herein by reference).4(b)First 4(c)Second Amendment to Credit Agreement, dated as of July 26, 2010, among the Company, the lenders from time to time party thereto, Wells Fargo Bank, National Association, as administrative agent, and Amegy Bank National Association, as syndication agent (filed as Exhibit 10.33.1 to the Company’s Current Report on Form 8-K dated July 27, 2010, and incorporated herein by reference)filed on October 22, 2015 (File No. 001-08308)).4(d)Third Amendment to Credit Agreement, dated as of September 30, 2010, among the Company, the lenders from time to time party thereto, Wells Fargo Bank, National Association, as administrative agent, and Amegy Bank National Association, as syndication agent (filed as Exhibit 4(f) to the Company’s Annual Report on Form 10-K for the fiscal year ended August 25, 2010, and incorporated herein by reference).4(e)Fourth Amendment to Credit Agreement, dated as of October 30, 2010, among the Company, the lenders from time to time party thereto, Wells Fargo Bank, National Association, as administrative agent, and Amegy Bank National Association, as syndication agent (filed as Exhibit 4(g) to the Company’s Annual Report on Form 10-K for the fiscal year ended August 25, 2010, and incorporated herein by reference).4(f)Fifth Amendment to Credit Agreement, dated as of August 25, 2011, among the Company, the lenders from time to time party thereto, Wells Fargo Bank, National Association, as administrative agent, and Amegy Bank National Association, as syndication agent (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated August 25, 2011, and incorporated herein by reference).4(g)Sixth Amendment to Credit Agreement, dated as of October 20, 2011, among the Company, the lenders from time to time party thereto, Wells Fargo Bank, National Association, as administrative agent, and Amegy Bank National Association, as syndication agent (filed as Exhibit 4(i) to the Company’s Annual Report on Form 10-K for the fiscal year ended August 29, 2012, and incorporated herein by reference).4(h)Seventh Amendment to Credit Agreement, dated as of February 14, 2013, among the Company, the lenders from time to time party thereto, Wells Fargo Bank, National Association, as administrative agent, and Amegy Bank National Association, as syndication agent (filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended February 13, 2013, and incorporated herein by reference.4(i)4(j)10(b) 4(k)Rights Agreement dated January 27, 2011 between Luby’s, Inc. and American Stock Transfer & Trust Company, LLC, as Rights Agent (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated February 2, 2011, and incorporated herein by reference)filed on March 27, 2014 (File No. 001-08308)).4(l)First10(a)Nonemployee Director Deferred Compensation Plan of Luby’s Cafeterias, Inc. adopted October 27, 1994 (filed as Exhibit 10(g) to the Company’s QuarterlyCompany's Current Report on Form 10-Q for the quarter ended8-K filed on November 30, 199412, 2014 (File No. 001-08308), and incorporated herein by reference)).*10(b)10(c)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(d)Amended and Restated Nonemployee Director Stock Plan of Luby’s, Inc. adopted January 20, 2005, as amended January 24, 2007, as amended April 14, 2008 (filed as Exhibit 10(f) to the Company’s Annual Report on Form 10-K for the fiscal year ended August 27, 2008 (File No. 001-08308), and incorporated herein by reference).*10(e)10(f)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, 1996filed March 25, 2013 (File No. 001-08308), and incorporated herein by reference)).*10(g)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 (File No. 001-08308), and incorporated herein by reference).*10(h)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 (File No. 001-08308), and incorporated herein by reference).*10(i)Amendment to Luby’s Cafeterias, Inc. Supplemental Executive Retirement Plan adopted May 21, 1999 (filed as Exhibit 10(q) to the Company’s Quarterly Report on Form 10-Q for the quarter ended May 31, 1999 (File No. 001-08308), and incorporated herein by reference.)*10(j)Luby’s Incentive Stock Plan adopted October 16, 1998 (filed as Exhibit 10(cc) to the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 1998 (File No. 001-08308), and incorporated herein by reference).*10(k)Amended and Restated Luby’s Incentive Stock Plan adopted January 19, 2006 (filed as Exhibit 10(ee) to the Company’s Quarterly Report on Form 10-Q for the quarter ended February 15, 2006 (File No. 001-08308), and incorporated herein by reference).*10(l)10(m)Asset Purchase Agreement, dated as of June 23, 2010, by and among Luby’s, Inc., Fuddruckers, Inc., Magic Brands, LLC, Atlantic Restaurant Ventures, Inc., R. Wes, Inc., Fuddruckers of Howard County, LLC and Fuddruckers of White Marsh, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 29, 2010).10(n)Amendment to Asset Purchase Agreement, dated as of July 26, 2010, by and among Luby’s Fuddruckers Restaurants, LLC, Fuddruckers, Inc., Magic Brands, LLC, Atlantic Restaurant Ventures, Inc., R. Wes, Inc., Fuddruckers of Howard County, LLC and Fuddruckers of White Marsh, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 27, 2010).10(o)10(p)10(q)10(r)10(s)10(t)10(m) 10(n) 10(o) 10(u)10(p) 10(q) 10(r) 10(s) 10(t) 1111 101.SCH101.SCH XBRL Schema Document ** Denotes management contract or compensatory plan or arrangement. ** SIGNATURESNovember 10, 2014DateLUBY’S, INC.(Registrant)November 13, 2017 By:Date (Registrant) By: /s/ CHRISTOPHER J. PAPPAS Signature and Title 10, 201410, 201410, 201410, 201410, 2014November 13, 2017 Gerald W. Bodzy, Director /S/ JUDITH B. CRAVEN 10, 201410, 201410, 2014/S/ J.S.B. JENKINSNovember 10 2014J.S.B. Jenkins, Director10, 201410, 2014EXHIBIT INDEX3(a)Amended and Restated Certificate of Incorporation of Luby’s, Inc. (filed as Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended February 11, 2009 File No. 001-08308, and incorporated herein by reference).3(b)Bylaws of Luby’s, Inc., as amended through July 9, 2008 (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K dated July 14, 2008 File No. 001-08308, and incorporated herein by reference).4(a)Credit Agreement dated as of November 9, 2009, among the Company, the lenders party thereto, Wells Fargo Bank, National Association, as Administrative Agent, and Amegy Bank, National Association, as Syndication Agent (filed as Exhibit 4(l) to the Company’s Annual Report on Form 10-K for the fiscal year ended August 26, 2009 File No. 001-08308, and incorporated herein by reference).4(b)First Amendment to Credit Agreement, dated as of January 31, 2010, among the Company, the lenders from time to time party thereto, Wells Fargo Bank, National Association, as Administrative Agent, and Amegy Bank National Association, as Syndication Agent (filed as Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended February 10, 2010, and incorporated herein by reference).4(c)Second Amendment to Credit Agreement, dated as of July 26, 2010, among the Company, the lenders from time to time party thereto, Wells Fargo Bank, National Association, as administrative agent, and Amegy Bank National Association, as syndication agent (filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K dated July 27, 2010, and incorporated herein by reference).4(d)Third Amendment to Credit Agreement, dated as of September 30, 2010, among the Company, the lenders from time to time party thereto, Wells Fargo Bank, National Association, as administrative agent, and Amegy Bank National Association, as syndication agent (filed as Exhibit 4(f) to the Company’s Annual Report on Form 10-K for the fiscal year ended August 25, 2010, and incorporated herein by reference).4(e)Fourth Amendment to Credit Agreement, dated as of October 30, 2010, among the Company, the lenders from time to time party thereto, Wells Fargo Bank, National Association, as administrative agent, and Amegy Bank National Association, as syndication agent (filed as Exhibit 4(g) to the Company’s Annual Report on Form 10-K for the fiscal year ended August 25, 2010, and incorporated herein by reference).4(f)Fifth Amendment to Credit Agreement, dated as of August 25, 2011, among the Company, the lenders from time to time party thereto, Wells Fargo Bank, National Association, as administrative agent, and Amegy Bank National Association, as syndication agent (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated August 25, 2011, and incorporated herein by reference).4(g)Sixth Amendment to Credit Agreement, dated as of October 20, 2011, among the Company, the lenders from time to time party thereto, Wells Fargo Bank, National Association, as administrative agent, and Amegy Bank National Association, as syndication agent (filed as Exhibit 4(i) to the Company’s Annual Report on Form 10-K for the fiscal year ended August 29, 2012, and incorporated herein by reference).4(h)Seventh Amendment to Credit Agreement, dated as of February 14, 2013, among the Company, the lenders from time to time party thereto, Wells Fargo Bank, National Association, as administrative agent, and Amegy Bank National Association, as syndication agent (filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended February 13, 2013, and incorporated herein by reference.4(i)Credit Agreement, dated as of August 14, 2013, among the Company, the lenders from time to time party thereto, Wells Fargo Bank, National Association, as administrative agent, and Amegy Bank National Association, as syndication agent. (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated August 19, 2013, and incorporated herein by reference).4(j)First Amendment to Credit Agreement, dated as March 21, 2014, among the Company, the lenders from time to time party thereto, Wells Fargo Bank, National Association, as administrative agent, and Amegy Bank National Association, as syndication agent (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed with the Securities and Exchange Commission on March 27, 2014).
964(k)Rights Agreement dated January 27, 2011 between Luby’s, Inc. and American Stock Transfer & Trust Company, LLC, as Rights Agent (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated February 2, 2011, and incorporated herein by reference).4(l)First Amendment to Rights Agreement, dated as of December 3, 2013, between Luby’s, Inc. and American Stock Transfer & Trust Company, LLC (incorporated by reference to Exhibit 4.2 to the Company’s form 8-K filed with the Securities and Exchange Commission on December 3, 2013).10(a)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 (File No. 001-08308), and incorporated herein by reference).*10(b)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 (File No. 001-08308), and incorporated herein by reference).*10(c)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(d)Amended and Restated Nonemployee Director Stock Plan of Luby’s, Inc. adopted January 20, 2005, as amended January 24, 2007, as amended April 14, 2008 (filed as Exhibit 10(f) to the Company’s Annual Report on Form 10-K for the fiscal year ended August 27, 2008 (File No. 001-08308), and incorporated herein by reference).*10(e)Second Amended and Restated Nonemployee Director Stock Plan of Luby’s, Inc. adopted January 25, 2013 (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended February 13, 2013, and incorporated herein by reference).*10(f)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 (File No. 001-08308), and incorporated herein by reference).*10(g)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 (File No. 001-08308), and incorporated herein by reference).*10(h)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 (File No. 001-08308), and incorporated herein by reference).*10(i)Amendment to Luby’s Cafeterias, Inc. Supplemental Executive Retirement Plan adopted May 21, 1999 (filed as Exhibit 10(q) to the Company’s Quarterly Report on Form 10-Q for the quarter ended May 31, 1999 (File No. 001-08308), and incorporated herein by reference.)*10(j)Luby’s Incentive Stock Plan adopted October 16, 1998 (filed as Exhibit 10(cc) to the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 1998 (File No. 001-08308), and incorporated herein by reference).*10(k)Amended and Restated Luby’s Incentive Stock Plan adopted January 19, 2006 (filed as Exhibit 10(ee) to the Company’s Quarterly Report on Form 10-Q for the quarter ended February 15, 2006 (File No. 001-08308), and incorporated herein by reference).*10(l)Registration Rights Agreement dated March 9, 2001, by and among Luby’s, Inc., Christopher J. Pappas, and Harris J. Pappas (filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K dated March 9, 2001, and incorporated herein by reference).10(m)Asset Purchase Agreement, dated as of June 23, 2010, by and among Luby’s, Inc., Fuddruckers, Inc., Magic Brands, LLC, Atlantic Restaurant Ventures, Inc., R. Wes, Inc., Fuddruckers of Howard County, LLC and Fuddruckers of White Marsh, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 29, 2010).10(n)Amendment to Asset Purchase Agreement, dated as of July 26, 2010, by and among Luby’s Fuddruckers Restaurants, LLC, Fuddruckers, Inc., Magic Brands, LLC, Atlantic Restaurant Ventures, Inc., R. Wes, Inc., Fuddruckers of Howard County, LLC and Fuddruckers of White Marsh, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 27, 2010).10(o)Luby’s, Inc. Amended and Restated Nonemployee Director Phantom Stock Plan effective September 28, 2001 (filed as Exhibit 10(dd) to the Company’s Quarterly Report on Form 10-Q for the quarter ended February 13, 2002, and incorporated herein by reference).*10(p)Form of Indemnification Agreement entered into between Luby’s, Inc. and each member of its Board of Directors initially dated July 23, 2002 (filed as Exhibit 10(gg) to the Company’s Annual Report on Form 10-K for the fiscal year ended August 28, 2002 (File No. 001-08308), and incorporated herein by reference).10(q)Amended and Restated Master Sales Agreement effective November 16, 2011, by and among Luby’s, Inc., Pappas Restaurants, L.P., and Pappas Restaurants, Inc. (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended May 9, 2012, and incorporated herein by reference).10(r)Amended and Restated Master Sales Agreement effective November 8, 2013, by and among Luby’s, Inc., Pappas Restaurants, L.P., and Pappas Restaurants, Inc. (filed as Exhibit 10 (u) to the Company’s Annual Report on Form 10-K for the fiscal year ended August 28, 2013, and incorporated herein by reference).10(s)Employment Agreement dated January 24, 2014, between Luby’s, Inc. and Christopher J. Pappas (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated January 27, 2014, and incorporated herein by reference).*10(t)Form of Restricted Stock Award Agreement pursuant to the Luby’s Incentive Stock Plan (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated November 16, 2007 (File No. 001-08308), and incorporated herein by reference).10(u)Form of Incentive Stock Option Award Agreement pursuant to the Luby’s Incentive Stock Plan (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K dated November 16, 2007 (File No. 001-08308), and incorporated herein by reference).11Statement regarding computation of Per Share Earnings.**14(a)Policy Guide on Standards of Conduct and Ethics applicable to all employees, as well as the board of directors (filed as Exhibit 14(a) to the Company’s Annual Report on Form 10-K for the fiscal year ended August 26, 2003, and incorporated herein by reference).14(b)Supplemental Standards of Conduct and Ethics for the Chief Executive Officer, Chief Financial Officer, Controller, and all senior financial officers (filed as Exhibit 14(b) to the Company’s Annual Report on Form 10-K for the fiscal year ended August 26, 2003, and incorporated herein by reference).21Subsidiaries of the Company.23.1Consent of Grant Thornton LLP.31.1Rule 13a-14(a)/15d-14(a) certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2Rule 13a-14(a)/15d-14(a) certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1Section 1350 certification of the Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2Section 1350 certification of the Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.99(a)Corporate Governance Guidelines of Luby’s, Inc., as amended October 28, 2004 (filed as Exhibit 99(a) to the Company’s Annual Report on Form 10-K for the fiscal year ended August 29, 2007, and incorporated herein by reference).101.INSXBRL Instance Document101.SCHXBRL Schema Document101.CALXBRL Calculation Linkbase Document101.DEFXBRL Definition Linkbase Document101.LABXBRL Label Linkbase Document101.PREXBRL Presentation Linkbase Document*Denotes management contract or compensatory plan or arrangement.**Information required to be presented in Exhibit 11 is provided in Note 17 “Earnings Per Share” of the Notes to Consolidated Financial Statements under Part II, Item 8 of this Form 10-K in accordance with the provisions of FASB Statement of Financial Accounting Standards (SFAS) No. 128, Earnings per Share. 90