FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 31,November 21, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________________________________ to _____________________________________________
Commission file number: 1-8308
Luby's, Inc.LUBY'S, INC.
_______________________________________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 74-1335253
_________________________________________________________________________________________________________________ _________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2211 Northeast Loop 410, P. O. Box 33069
San Antonio, Texas 78265-3069
_______________________________________________________________________________________________________________________________________________________________
(Address of principal executive offices) (Zip Code)
210/654-9000
_______________________________________________________________________________________________________________________________________________________________
(Registrant's telephone number, including area code)
_______________________________________________________________________________________________________________________________________________________________
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.
Yes Xx No
___ ___
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock: 22,422,943 shares outstanding as of July 13,December 27,
2001, (exclusive of 4,980,124 treasury shares)
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
LUBY'S, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended Nine Months Ended
May 31, May 31,
2001 2000 2001 2000
_____ ____ ____ ____
(Amounts inOPERATIONS (unaudited)
(In thousands except per share data)
Quarters Ended
November 21, November 30,
2001 2000
___________ ___________
(82 days) (91 days)
Sales $121,677 $126,281 $347,796 $371,349$ 95,195 $113,900
Costs and expenses:
Cost of food 30,305 32,954 88,649 93,17724,650 29,360
Payroll and related costs 41,254 39,255 117,840 115,46534,593 39,210
Occupancy and other operating expenses 42,512 39,381 123,903 118,06636,384 39,712
General and administrative expenses 5,348 6,194
Provision for asset impairments and store closings --- --- 10,199 ---
General and administrative
expenses 6,415 5,244 19,437 16,105
_______ _______ _______ _______
120,486 116,834 360,028 342,813
_______ _______ _______ _______130 755
________ ________
101,105 115,231
________ ________
Income (loss) from operations 1,191 9,447 (12,232) 28,536(5,910) (1,331)
Interest expense (3,534) (1,645) (8,475) (3,954)(2,570) (2,257)
Other income, net 703 573 1,479 1,872
_______ _______ _______ _______448 499
________ ________
Income (loss) before income taxes (1,640) 8,375 (19,228) 26,454
Income tax expense(8,032) (3,089)
Provision (benefit) (574) 2,540 (6,730) 8,831
_______ _______ _______ _______for income taxes (2,687) (1,081)
________ ________
Net income (loss) $ (1,066)(5,345) $ 5,835 $(12,498) $ 17,623
_______ _______ _______ _______(2,008)
________ ________
Net income (loss) per share - basic and
assuming dilution $(0.05) $0.26 $(0.56) $0.79
_______ _______ _______ _______
Cash dividends per share $0.00 $0.20 $0.00 $0.60
_______ _______ _______ _______
Weighted average$ (0.24) $ (0.09)
_________ _________
Average number of shares outstanding - basic 22,423 22,420
22,422 22,420
Weighted average number of shares
outstanding - assuming dilution 22,632 22,420 22,475 22,422_________ _________
See accompanying notes.
Part I - FINANCIAL INFORMATION (continued)
Item 1. Financial Statements (continued).
LUBY'S, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
May 31,(In thousands)
November 21, August 31,
2001 2000
_______2001
ASSETS (unaudited)
___________ __________
(Thousands of dollars)
ASSETS
Current assets:
Cash and cash equivalents $ 7,5913,046 $ 6794,099
Short-term investments 5,935 ---22,968 19,984
Trade accounts and other receivables 458 403287 358
Food and supply inventories 3,821 3,8533,134 2,701
Prepaid expenses 1,755 4,4812,542 2,765
Income tax receivable 6,949 3,7497,072 4,468
Deferred income taxes 2,207 1,5404,834 4,931
________ _________________
Total current assets 28,716 14,70543,883 39,306
Property held for sale 8,230 13,1561,759 3,047
Investments and other assets 1,896 4,85812,766 5,929
Property, plant, and equipment - at cost, net 324,186 338,124296,381 305,180
________ ________
$363,028 $370,843Total assets $354,789 $353,462
________ ________
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 16,80821,805 $ 19,843
Dividends payable --- 2,24213,696
Accrued expenses and other liabilities 26,976 24,04033,483 34,585
________ ________
Total current liabilities 43,784 46,12555,288 48,281
Long-term debt (Note 5) 123,000 116,000126,746 127,401
Deferred income taxes and other credits 10,336 10,1622,130 2,271
Reserve for store closings 604 1,815
Derivative financial instruments (Note 2) 1,191 ---4,441 4,506
________ ________
Total liabilities 188,605 182,459
________ ________
Shareholders' equity:
Common stock 8,769 8,769
Paid-in capital 27,847 27,20234,247 33,882
Retained earnings 254,097 266,596229,370 234,715
Accumulated other comprehensive income (loss) (Note 3) (774) ---(431) (592)
Less cost of treasury stock (105,826) (105,826)(105,771) (105,771)
________ ________
Total shareholders' equity 184,113 196,741166,184 171,003
________ ________
$363,028 $370,843Total liabilities and shareholders' equity $354,789 $353,462
________ ________
See accompanying notes.
Part I - FINANCIAL INFORMATION (continued)
Item 1. Financial Statements (continued).
LUBY'S, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months(unaudited)
(In thousands)
Quarters Ended
May 31,November 21, November 30,
2001 2000
____ ____
(Thousands of dollars)___________ ___________
(82 days) (91 days)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(12,498) $ 17,623$(5,345) $(2,008)
Adjustments to reconcile net income (loss )(loss) to net
cash provided by operating activities:
Depreciation and amortization 17,320 16,8474,942 5,722
Amortization of deferred loss on interest
rate swaps 248 -
Amortization of discount on convertible
subordinated notes 111 -
Provision for asset impairments 10,199 ---and
store closings 130 755
Gain on disposal of property held for sale (70) (329)
Loss on disposal of property, plant,
and equipment 46 39
Noncash directors' fees 68 26
Noncash compensation expense 297 -
_______ _______
Cash provided by operating activities
before changes in operating assets
(1,156) ---
Non-cash stock compensation 558 ---and liabilities 427 4,205
Changes in operating assets and liabilities:
(Increase) decrease in trade accounts and
other receivables 71 (18)
(Increase) decrease in food and supply
inventories (433) (282)
(Increase) decrease in income tax receivable (2,604) (635)
(Increase) decrease in prepaid expenses 223 2,465
(Increase) decrease in inventory and
other assets 604 14
Increase (decrease) in accounts payable 8,109 (2,170)
Increase (decrease) in accrued expenses
and other liabilities (3,214) (7,975)
________ ________(1,102) 3,272
Increase (decrease) in deferred income
taxes and other credits (131) (549)
Increase (decrease) in reserve for
store closings (195) (1,012)
_______ _______
Net cash provided by (used in)
operating activities 11,209 26,495$ 4,969 $ 5,290
_______ _______
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) decrease in short-term investments $(2,984) $ -
Proceeds from disposal of property held for sale 6,935 1,010
Purchases of land held for future use --- (2,905)790 1,832
Purchases of property, plant, and equipment, (13,678) (40,827)
Purchases of short-term investments (5,935) ---
________ ________net (3,062) (7,508)
_______ _______
Net cash used inprovided by (used in) investing
activities (12,678) (42,722)(5,256) (5,676)
_______ _______
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under revolving credit agreement 7,000 31,000
Dividends paid (2,242) (13,452)
Proceeds from borrowing(payments on) long-term borrowings (766) -
Proceeds from (payments on) borrowings against
cash surrender value of officers' life insurance policies- 3,623
---
________ ________Dividends paid - (2,242)
_______ _______
Net cash provided by (used in) financing
activities 8,381 17,548(766) 1,381
_______ _______
Net increase (decrease) in cash and cash equivalents 6,912 1,321(1,053) 995
Cash and cash equivalents at beginning of period 4,099 679
286
________ _______________ _______
Cash and cash equivalents at end of period $ 7,5913,046 $ 1,6071,674
_______ _______
See accompanying notes.
Part I - FINANCIAL INFORMATION (continued)
Item 1. Financial Statements (continued).
LUBY'S, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (unaudited)
(In thousands)
Accumu-
lated
Other
Compre- Total
Common Stock hensive Share-
Issued Treasury Paid-In Retained Income holders'
Shares Amount Shares Amount Capital Earnings (loss) Equity
_____________________________________________________________________________________________
Balance at
August 31, 2001 27,403 $8,769 (4,980) $(105,771) $33,882 $234,715 $(592) $171,003
Other comprehensive
income (loss),
net of taxes:
Reclassification
adjustment for
loss recognized
on termination
of interest rate
swaps, net of
taxes of $87 - - - - - - 161 161
Net income (loss)
for the quarter - - - - - (5,345) - (5,345)
Common stock issued
under benefit plans,
net of shares tendered
in partial payment
and including tax
benefits - - - - 68 - - 68
Noncash stock compen-
sation expense - - - - 297 - - 297
________________________________________________________________________
Balance at
November 21, 2001 27,403 $8,769 (4,980) $(105,771) $34,247 $229,370 $(431) $166,184
________________________________________________________________________
See accompanying notes.
LUBY'S, INC.
NOTES TO FINANCIAL STATEMENTS May 31,(unaudited)
November 21, 2001
(UNAUDITED)
Note 1: Basis of Presentation
The accompanying unaudited financial statements are presented in accordance
with the requirements of Form 10-Q and, consequently, do not include all of the
disclosures normally required by accounting principles generally accepted accounting principles.in
the United States. All adjustments which are, in the opinion of management,
necessary to a fair statement of the results for the interim periods have been
made. All such adjustments are of a normal recurring nature. The results for
the interim periods are not necessarily indicative of the results to be
expected for the full year.
These financial statements should be read in conjunction with the consolidated
financial statements and footnotes included in Luby's annual report on
Form 10-K for the year ended August 31, 2000.2001. The accounting policies used in
preparing these consolidated financial statements are the same as those
described in Luby's annual report on Form 10-K.
Note 2: Accounting-Period Change
Beginning with the 2002 fiscal year, the Company changed its accounting
intervals from 12 calendar months to 13 four-week periods. To properly
accommodate this change, the first period began September 1, 2001, and covered
26 days; subsequent periods cover 28 days. The first, second, third, and
fourth quarters of fiscal year 2002 include 82, 84, 84, and 112 days,
respectively. Fiscal year 2002 will therefore be 362 days in length compared
to 365 days in fiscal year 2001. Fiscal year 2003 and most years going forward
will be 364 days in length.
Note 3: Derivative Financial Instruments
The Company adopted Statement of Financial Accounting Standards No. 133 (FAS(SFAS
133), "Accounting for Derivative Instruments and Hedging Activities," and its
amendments, Statements No. 137 and 138, on September 1, 2000. FASSFAS 133
requires that all derivative instruments be recorded on the balance sheet at
fair value. ThePursuant to this standard, the Company has designated its interest rate swap agreementsInterest
Rate Protection Agreements (Swaps) as cash flow hedge instruments. The swap agreements areSwaps have
been used to manage exposure to interest rate movement by effectively changing
the variable rate to a fixed rate. The critical terms of the interest rate swap agreementsSwaps and the
interest-bearing debt associated with the swap agreements areSwaps were the same; therefore, the
Company has assumed that there iswas no ineffectiveness in the hedge relationship.
Changes in fair value of the interest rate swap agreements will beSwaps are recognized in other comprehensive income
(loss), net of tax effects, until the hedged items are recognized in earnings.
The Company has hedged its exposureDue to declining interest rate
movement through June 30, 2002.
At September 1, 2000, the swap agreements wererates and in a favorable position
by approximately $175,000. In accordance with the transition
provisions of FAS 133, the net-of-tax cumulative effect of an
accounting change adjustment on September 1, 2000, was $114,000 in
accumulated other comprehensive income with a deferred income tax
liability of $61,000. At May 31, 2001, the fair value of the swap
agreements decreased to an unfavorable position; therefore, the
derivative financial instruments were adjusted to a liability of
$1,191,000. Accumulated other comprehensive income (loss) was adjusted
to an accumulated loss of $774,000 and the deferred income tax was
adjusted to a $417,000 tax asset. As the swap agreements were deemed
to be effective cash flow hedges, there was no income statement impact
related to hedge ineffectiveness. In anticipation of additional future
unfavorable interest rate changes, the Company unraveledterminated its swap agreementsSwaps on July 2,
2001, for a cash payment of $1,255,000.$1,255,000, including accrued interest of $163,000.
In accordance with SFAS 133, the loss of $1,092,000 is being recognized as
interest expense over the original term of the Swaps (through June 30, 2002).
At November 21, 2001, $431,000, net of taxes of $232,000, remains in
accumulated other comprehensive loss.
Note 3:4: Comprehensive Income (Loss)
The Company's comprehensive income (loss) is comprised of net income (loss) and
adjustments to derivative financial instruments. The components of
comprehensive income (loss) are as follows:
Three MonthsQuarters Ended
May 31,November 21, November 30,
2001 2000
____ _____
(Thousands of dollars)___________ ___________
(82 days) (91 days)
(In thousands)
Net income (loss) $(1,066) $5,835$(5,345) $(2,008)
Other comprehensive income, (loss),
net of taxes:
Net derivative income (loss),
net of taxes of $123 (228) ---
Reclassification adjustment for
(gains) losses included in net
income (loss), net of taxes of $51 95 ---
_______ ______
Comprehensive income (loss) $(1,199) $5,835
_______ ______
Nine Months Ended
May 31,
2001 2000
____ _____
(Thousands of dollars)
Net income (loss) $(12,498) $17,623
Other comprehensive income (loss), net of taxes:
Cumulative effect of a change in accounting
for derivative financial instruments upon
adoption of FASSFAS 133, net of taxes of $61 - 114 ---
Net derivative income (loss), net of taxes of $528 (981) ---$108 - (201)
Reclassification adjustment for (gains) lossesgains
included in net income (loss), net of taxes of $50 93 ---
_________$10 - (20)
Reclassification adjustment for loss recognized on
termination of interest rate swaps,
net of taxes of $87 161 -
_______ _______
Comprehensive income (loss) $(13,272) $17,623$(5,184) $(2,115)
_______ _______
Note 4:5: Debt
At August 31, 2001, the Company had a credit facility balance of $122 million
with a syndicate of four banks. Subsequent to fiscal year-end 2001, the
terrorist attacks of September 11 and increased recessionary trends resulted in
the Company's inability to meet its first quarterly EBITDA covenant for fiscal
year 2002. Accordingly, the Company obtained a waiver and amendment to its
credit agreement dated December 5, 2001, which waives its noncompliance with
first-quarter EBITDA levels, resets remaining fiscal 2002 quarterly EBITDA
targets, and limits capital expenditures for the year to $15 million. The
Company expects to be in compliance with its revised covenants for the
remainder of fiscal year 2002.
During the first quarter of fiscal 2002, two payments were made which reduced
the balance of the credit facility to $121.2 million. These payments were made
in compliance with the amended credit agreement, which requires that the
Company pay the facility down in amounts equal to all proceeds received from
the sale of real and personal property. The payments were a result of two land
sales that occurred during the quarter totaling $766,000.
On March 9, 2001, the Company's newly appointed CEO and COO, Christopher J.
Pappas and Harris J. Pappas, respectively, made commitments to loan the Company
a total of $10 million in exchange for convertible subordinated notes that were
funded in the fourth quarter of fiscal 2001. The notes bear interest at LIBOR
plus 2%, payable quarterly, and have a stated redemption date of March 1, 2011.
Interest through September 1, 2003, may be paid in a combination of cash,
common stock, or both at the Company's election, subject to certain
restrictions on the amount of stock issued. Notwithstanding any accrued
interest that may also be converted to options, the notes are convertible into
the Company's common stock at $5.00 per share, or 2,000,000 shares, at the
option of the holders at any time after January 2, 2003, and prior to the
stated redemption date.
The conversion price on the notes was less than the market value of the
Company's common stock (as determined by the closing price on the New York
Stock Exchange on the date of issue). The intrinsic value of this beneficial
conversion feature of $4,680,000 was recorded as a component of paid-in capital
and a discount on the notes. The discount is being amortized to interest
expense through the redemption date. The Company has amortized $111,000 of
this discount during the quarter ended November 21, 2001. The carrying value
of the notes at November 21, 2001, net of the unamortized discount, was
approximately $5,512,000.
Note 6: Impairment of Long-Lived Assets and Store Closings
During fiscal year 2001,the current quarter, the Company recorded a pretax charge to operating
costs of $10.2 million$130,000 related to employee termination costs for 11 of asset impairment charges in17
restaurants that met the Company's criteria for closure last fiscal year.
During the first fiscal quarter of 2002, the employees of those 11 units
received notification and each unit was subsequently closed.
In accordance with StatementCompany guidelines, management periodically reviews the
financial performance of Financial Accounting Standards No. 121
(FAS 121), "Accountingeach store for the Impairmentindicators of Long-Lived Assets toimpairment or indicators
that closure would be Disposed of." $9.4 millionappropriate. Where indicators are present, such as three
full fiscal years of the charge related to the impairment of
13 restaurant properties. These properties have experienced specificnegative cash flows or other unfavorable market
conditions, that have contributed to their
impairment. Thethe carrying values of the assets wereare written down to the estimated
future discounted cash flows or fully written off in the case of negative future cash
flows.flows anticipated in the future. Estimated future cash flows wereare based on aupon
regression analysis of averages foranalyses generated from similar restaurants, discounted at the
Company's weighted average cost of capital.
Three of
the 13 properties were designated for closure and were closed April 30,
2001. The remaining $755,000 of impairment charge was recorded in
accordance with FAS 121 for assets related to surplus properties held
for sale, which were written down to the lower of their historical
costs or estimated net realizable values.
In lateDuring fiscal 2000 the Company reviewed its restaurants from a capital
strategy standpoint to determine whether the closing of certain units
could positively impact sales and profitability at nearby locations
while also providing capital funds from the sale of these properties to
invest in other more profitable capital projects, such as food-to-go
drive-thru expansions. As a result of this review and continual
evaluation of possible impairments,2001, the Company recorded a pretax charge of $14.5$30.4 million during the fourth quarteras a
result of fiscal 2000its reviews for store closings, associated closing costs, asset impairment chargesimpairments in accordance with FASSFAS 121 and
other unusual charges.assessments of closure costs. The principal components of the 2000fiscal 2001
charge were as follows:
- $7.7$11.6 million for the closing of 15 restaurants that had not met the
Company's return on invested capital and sales growth requirements.
Fourteen of the 15 unitsunderperforming restaurants; nine were
closed by the first quarter of fiscal year 2002. (As explained below, two
other restaurants were closed that will be remodeled and reopened as of February 2001, and the
remaining store is planned for closure prior to August 31, 2001. Thenew
concepts.) This charge included the cost to write down the properties and
equipment to net realizable value and estimated costs for the settlement of
lease obligations, legal and professional fees, severance costs, and other exit costs.
Employee severance costs were not accrued as of August 31, 2001, but were
paid out and expensed in the first quarter of fiscal 2002.
- $3.2$17.0 million for asset impairmentsimpairment of six restaurant properties which13 restaurants that the Company
continues to operate. The carrying values ofIn accordance with SFAS 121, the assetsproperties were
written down to the estimated future discounted cash flows or fully written
off in the case of negative future cash flows.
Estimated
future cash flows were based on a regression analysis of averages for
similar restaurants, discounted at the Company's weighted average cost
of capital.
- $1.3$0.8 million primarily for the write-downimpairment of computer-related equipment and
software.one property operated under a
joint venture with Waterstreet, Inc. The write-down included the abandonment of a payroll-related
software package and several point-of-sale (POS) systems. The POS
systems were replaced with new touch-screen systems to provide better
information and customer service, especially in the food-to-go
expansions. As these items were abandoned, the remaining book value of
these assets was written off.
- $1.2 million additional write-down on surplus properties held for
sale. These properties were written down to the lower of their
historical carrying costs or estimated net realizable values.
- $1.1 million related to other unusual charges. The primary component
of this charge was the write-off of the remaining asset balance related
tojoint venture, L&W Seafood, Inc.,
a joint venture originally established betweenwas terminated in 1999. This property was written down to its estimated
net realizable value and was sold in fiscal year 2001.
- $1.0 million associated with the write-off of assets for two locations that
will be remodeled and reopened before the end of fiscal year 2002. The
Company closed these units by October 31, 2001. Property that cannot be
salvaged, transferred, or effectively reused has been written off.
The comparative quarterly results of operations for the 15 restaurants
designated for closure at August 31, 2001, were as follows:
Quarters Ended
November 21, November 30,
2001 2000
___________ ___________
(82 days) (91 days)
(In thousands)
Sales $2,848 $4,851
Operating loss (1,317) (950)
At November 21, 2001, the Company and Waterstreet, Inc.
Prior to August 31, 2000, all restaurant employees of the Company were notified
of the possibility of their termination due to future restaurant closures. As
of May 31, 2001, approximately 300 employees have been terminated, and
approximately 30 additional employees will be terminated when the remaining
restaurant is closed during the coming year. The severance cost for these
employees was accrued and included in the store closing charge noted above.
During 1998 the Company recordedhad a similar pretax charge of $36.9 million as a
result of the adoption of its strategic plan, which included the disposition,
relocation, and write-down of several restaurants that had not met management's
financial return expectations. The principal components of the 1998 charge were
(1) $14.7 million for the closing of 14 underperforming restaurants; (2) $10.7
million for the closing and relocation of 16 restaurants to optimize their
market potential; (3) $11.4 million for asset impairments of 13 restaurants
which the Company continues to operate; and (4) $0.1 million additional write-
down on surplus properties held for sale.
At May 31, 2001, the balance in the reserve for store closings was $604,000.
All material cash outlays related to the 1998 pretax charge have been made as of November 2000. It$4.4
million. Excluding lease termination settlements, it is anticipated that all
material cash outlays required for the 2000 pretax chargestore closings planned as of August 31,
2001, will be made prior to August 31, 2001.2002. The following table presentsis a summary for
the quarter of the types and amounts recognized as accrued expenses together
with cash payments made against such accruals throughunder the period ended
May 31, 2001:
_____________________________________________________fiscal year 2001 plan:
Reserve Balance
______________________________________________________
Lease Legal And
Lease Profes- Workand Other
Settlement sional forceProfessional Workforce Exit Total
Costs Fees Severance Costs Reserve
_____________________________________________________
(Thousands_______________________________________________________
(In thousands)
As of dollars)
Reserve balance at August 31, 19982001 $4,206 $ 4,537- $ 985 $ 260 $ 390 $ 6,172
Additions/transfer/- $300 $4,506
Additions (reductions) (224) 150 56 (257) (275)- - 130 - 130
Cash payments (406) (135) (244) (45) (830)
_______ _______ _______ _______ _______
Reserve balance at(56) - (130) (9) (195)
______ ____ ____ ____ ______
As of November 21, 2001 $4,150 $ - $ - $291 $4,441
______ ____ ____ ____ ______
All material cash outlays associated with prior closure plans were completed by
August 31, 1999 3,907 1,000 72 88 5,067
Additions/transfers/
(reductions) 675 350 375 300 1,700
Cash payments (3,817) (975) (72) (88) (4,952)
_______ _______ _______ _______ _______
Reserve balance at
August 31, 2000 765 375 375 300 1,815
Additions/transfers/
(reductions) 450 (200) (55) (195) ---
Cash payments (715) --- (306) (190) (1,211)
_______ _______ _______ _______ _______
Reserve balance at
May 31, 2001 $ 500 $ 175 $ 14 $ (85) $ 604
_______ _______ _______ _______ _______2001.
Note 5. Debt
The Company has a $125 million credit facility with a syndication of
four banks. As of May 31, 2001, the balance outstanding under the
line-of-credit agreement was $123 million. A portion of the remaining
balance on the line of credit, $1.1 million, has been committed to fund
obligations under letters of credit. The credit facility was amended
effective June 29, 2001, to include only one financial covenant
relative to EBITDA (Earnings Before Interest, Taxes, Depreciation, and
Amortization) and an extension of the agreement term to April 30, 2003.
Additional term extensions are also available if certain conditions are
met. There is no ability to borrow additional funds under the credit
facility. Per the new amendment, scheduled principal payments will be
required and annual limits have been set for capital expenditures. In
addition to the scheduled principal payments, the Company made a
$1 million principal payment on July 6, 2001, which reduced the
principal balance owed to $122 million. As part of the amended credit
facility, the Company will pay interest at prime, plus an applicable
margin as defined in the amendment, on all debt outstanding. Based
upon the new covenant, the Company is no longer in default.
Note 6:7: Related Parties
A Directordirector of the Company is also the Chief Operating Officera director of an investment firm that
provides investment services for the Company's profit sharing and retirement
trust plan (the Plan). During the nine monthsquarter ended May 31,November 21, 2001, the Plan
paid the investment firm approximately $50,000 for its
services.$15,000.
The recently hired Chief Executive OfficerCEO and Chief Operating OfficerCOO of the Company own a restaurant company whichthat
provides services to Luby's.the Company. The services include general business
consulting, basic equipment maintenance, specialized equipment fabrication,
warehousing support, and warehousing support.a ground lease. The total cost of these services for
the nine
monthsquarter ended May 31,November 21, 2001, has been estimated at $100,000. All costs
to date were incurred in the third quarter after the chief officers
were hired.was $367,700.
The Chief Executive OfficerCEO and the Chief Operating Officer have
personally committed to loaningCOO loaned the Company a total of $10 million beforein the endform of
the fiscal yearconvertible subordinated notes to support the Company's future dailyoperating cash
needs. The Company received an installment toward this commitmententire balance was outstanding as of $3 million on July 2, 2001, and the remainder on July 5,November 21, 2001.
The recently hired Chief Financial OfficerCFO and the Senior Vice President of
AdministrationPresident-Administration provide
financial and legal services to the restaurant company owned by the Chief Executive OfficerCEO and the Chief Operating
OfficerCOO
of the Company. CompensationCompany; compensation for the services provided by the Chief Financial OfficerCFO and the
Senior Vice President of AdministrationPresident-Administration to the separate restaurant company are
funded by that organization.
Part I - FINANCIAL INFORMATION (continued)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.Operations
Management's discussion and analysis of financial condition and results of
operations should be read in conjunction with the consolidated financial
statements and footnotes for the quarter ended November 21, 2001, and the
audited financial statements filed on Form 10-K for the fiscal year ended
August 31, 2001.
Results of Operations
Quarter ended November 21, 2001, compared to the quarter ended November 30,
2000
Sales decreased $18,705,000, or 16.4%, in the first quarter of fiscal 2002
compared to the first quarter of fiscal 2001. Nine fewer days in the current
quarter accounted for approximately $12 million of the total sales decline.
Revenues were also lower due to the closure of 30 stores since September 2000.
Excluding the effect of fewer days and stores this quarter, same-store sales
declined $2.6 million, or 2.7%, which was primarily pressured by recent
recessionary trends.
Cost of food decreased $4,710,000, or 16.0%, due primarily to the decline in
sales. As a percentage of sales, food costs were slightly higher due to the
emphasis on increased food quality. Payroll and related costs decreased
$4,617,000, or 11.8%, due primarily to store closures and nine fewer days in
the quarter. Wages as a percentage of sales increased; the Company was unable
to quickly lower labor cost in response to the decrease in sales. Management
initiatives to better and more promptly optimize labor are currently in
development. Occupancy and other operating expenses decreased $3,328,000, or
8.4%, due primarily to store closures, but increased as a percentage of sales
due to higher utility rates and higher expenditures related to improving the
general condition of the restaurants.
General and administrative expenses decreased $846,000, or 13.7%, due primarily
to lower officer salaries and decreased legal and professional fees.
The provision for asset impairments and store closings decreased $625,000, or
82.8%, primarily due to a write-down in the first quarter of fiscal year 2001.
The property that was subsequently sold had been operated under L&W Seafood,
Inc., a joint venture with Waterstreet that was terminated in 1999. The lower
expense in the first quarter of fiscal year 2002 relates to employee
termination costs for 11 of 17 restaurants that met the Company's criteria for
closure in the previous fiscal year.
Interest expense increased $313,000, or 13.9%, due primarily to noncash
interest amortization and higher levels of debt, offset by lower interest rates
and nine fewer days of interest expense in the quarter.
Other income decreased $51,000, or 10.2%, due to lower gains on the sale of
properties compared to the same quarter of the prior fiscal year.
The income tax benefit increased $1,606,000, or 148.5%, due primarily to a
greater loss incurred in the current quarter in comparison with the same
quarter of the prior fiscal year. This benefit was partially offset by a lower
effective tax rate of 33.5% in the current year compared to 35% in the prior
year primarily due to permanent differences in non-deductible interest expense.
Liquidity and Capital Resources
_______________________________
Cash and cash equivalents increaseddecreased by $6,912,000$1,053,000 from the end of the preceding
fiscal year to May 31,November 21, 2001. Capital expenditures for the first quarter
ended November 21, 2001, were $3,062,000. All capital expenditures for fiscal
20012002 are being funded from cash flows from operations and cash equivalents, and long-term debt.
Capital expenditures for the nine months ended May 31, 2001, were $13,678,000.equivalents. As
of May 31, 2001,the quarter-end, the Company owned 18seven properties held for sale, including
eightfive undeveloped land sites. The Company also has two18 properties held for
future use.
To fundCapital expenditures for fiscal 2002 are expected to approximate $15 million.
The Company will focus on improving the appearance, functionality, and sales at
existing restaurants. These efforts will include changing several locations to
other dining concepts, where feasible. As a start, the Company plans to
remodel two currently closed units. One will reopen as a new seafood
restaurant. The new dining theme for the other restaurant is still under
development.
The Company typically carries current liabilities in excess of current assets
because a substantial portion of cash generated from operating activities is
reinvested in capital expenditures. At November 21, 2001, the Company had a
working capital deficit of $11,405,000, in comparison to a working capital
deficit of $8,975,000 at August 31, 2001. The higher deficit was primarily
attributable to an increase in accounts payable of $8,109,000, due to changes
in the timing of operational cutoffs and Thanksgiving holiday purchases under
the Company's new 13-period fiscal year. Partially offsetting the rise in
accounts payable was the improvement in cash and cash equivalents and short-term
investments provided by operating activities to a combined total of
$26,014,000 at the end of the first quarter of fiscal year 2002, from
$24,083,000 at the end of the previous fiscal year.
As of September 1, 2001, the Company had a balance of $122 million outstanding
under its credit facility. Due to the events of September 11 and the resulting
impact on the economy, the Company was unable to meet its first quarter fiscal
2002 EBITDA covenant requirement for its credit facility. Accordingly, the
Company obtained a waiver and amendment to its credit facility dated
December 5, 2001, which waives its noncompliance with EBITDA levels, resets
remaining fiscal 2002 quarterly EBITDA targets, and limits capital expenditures
to $15 million. During the Company required external financing and
borrowed funds under a $125quarter, two payments totaling $766,000 were made
to the credit facility, which brought the balance to $121.2 million line-of-credit agreement. Asas of
May 31,
2001, the amount outstanding under this line of credit is $123 million. A
portion of the remaining amount under the line of credit, $1.1 million, is
committed to fund obligations under letters of credit.November 21, 2001. There is no ability to borrow additional funds under the
credit facility.
In prior fiscal years, the Company had Interest Rate SwapProtection Agreements
_____________________________
The Company has two(Swaps) that effectively fixed the interest rate swap agreements (swaps) that fix the rate on a portion of the floating-rateits floating-
rate debt outstanding under its revolving line of credit. The swaps fix interest at a rate of 6.50% in the notional amounts of
$30 million and $15 million and both terminate as of June 30, 2002. The
differential to be paid or received as interest rates change is accrued and
recognized as an adjustment to interest expense related to the debt. The
related amount payable to or receivable from counterparties is included in other
liabilities or assets. The fair values of these agreements are estimated by
obtaining quoted market prices. The swap agreements were in an unfavorable
market value position of approximately $1,191,000 as of May 31, 2001. The
Company unraveledterminated its swap agreementsSwaps effective
July 2, 2001, due to declining interest rates. The Company currently has a
total of $131.2 million in variable-rate debt: $121.2 million under its credit
facility at prime plus an applicable margin as required by the amended credit
facility and $10 million in subordinated convertible notes loaned to the
Company by its CEO and COO at LIBOR plus 2%. See Financial Statement Notes 3
and 5 for a cash payment
of $1,255,000, in anticipation of additional future unfavorable interest rate
changes.further discussion.
Trends and Uncertainties
_________________________
FASThe events of September 11 increased concerns over national security, fueled
the development of recessionary trends, and cast uncertainty on the general
economic outlook of the country. The long-term impact of these trends and
uncertainties on the Company is difficult to predict and will ultimately depend
on their severity, duration, and resulting effect on consumer spending.
SFAS 121 requires the Company to review long-lived assets for impairment
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. The Company considers a history of
operating losses or negative cash flows and unfavorable changes in market
conditions to be its main indicators of potential impairment. Assets are
generally evaluated for impairment at the restaurant level. If a restaurant
does not meet its financial investment objectives or continues to incur negative
cash flows or operating losses, an impairment or restaurant closing
charge may be recognized in future periods.
The U.S. Congress is currently considering an increase in the federal minimum
wage as part of an economic stimulus package. The restaurant industry is
intensely competitive, and the Company may not be able to transfer all of the
resulting increases in operating costs to its customers in the form of price
increases.
Reserve for Store Closings
__________________________No additional restaurants were impaired during the first quarter of fiscal
2002. Of the 1317 restaurants impaireddesignated for closure as of August 31, 2001, 11
were closed in the first nine monthsquarter of 2001, three were
designated for closure and were closed April 30, 2001. The reserve for store
closings was not increased for the effect of these three restaurants as most
employees transferred to nearby locations and the properties are either owned or
the related leases have expired.
During the nine months ended May 31, 2001, the Company had cash outlays related
to the reserve, which originally resulted from write-downs taken in fiscal year
2000 and fiscal year 1998. The write-downs were the result of the Company's
continuing efforts to redeploy both capital and human resources to improve the
Company's financial performance and strengthen the organization. See further
discussion of the 2000 and 1998 pretax write-downs in Note 4 of the Notes to
Consolidated Financial Statements for the period ended May 31, 2001. All
material cash outlays related to the 1998 pretax charge were made as of
November 30, 2000. It is anticipated that all material cash outlays required
for the 2000 pretax charge will be made prior to2002. At August 31, 2001.
At May 31, 2001, the
balance in the reserve for store closings was $604,000,
which relates$4.5 million. During the quarter,
the Company paid $56,000 in lease settlement costs and $9,000 in other exit
costs. The Company also charged to the 2000 pretax charge. The following table presents a summaryreserve, and subsequently paid before
the end of the types and amounts recognized as accrued expenses together with cash
payments made against such accruals forquarter, $130,000 in employee termination costs. After the
nine months ended May 31, 2001:
_____________________________________________________
Legal
And
Lease Profes- Work Other
Settlement sional force Exit Total
Costs Fees Severance Costs Reserve
_____________________________________________________
(Thousands of dollars)
Reserve balance at
August 31, 2000 $ 765 $ 375 $ 375 $ 300 $ 1,815
Additions/transfers/
(reductions) 450 (200) (55) (195) ---
Cash payments (715) --- (306) (190) (1,211)
_______ _______ _______ _______ _______
Reserve balance at
February 28, 2001 $ 500 $ 175 $ 14 $ (85) $ 604
_______ _______ _______ _______ _______
Results of Operations
_____________________
Quarter ended May 31, 2001, compared to the quarter ended May 31, 2000
Sales decreased $4,604,000, or 3.6%, due to the closing of three restaurants in
fiscal year 2000 and 17 restaurants in fiscal year 2001; this decrease was
partially offset by the opening of 11 new restaurants during fiscal year 2000
and one restaurant in fiscal year 2001. Same-store sales declined 0.4% during
the quarter at restaurants opened over 18 months. Additionally, in April 2001,
the Company effected a 50 cent price increase on its signature Lu Ann Plate.
The bundled offerings of the Luby's Platter and the "Big2Do" were in turn
discontinued.
Cost of food decreased $2,649,000, or 8.0%, due primarily to the decline in
sales. As a percentage of sales, food costs were lower due to the move from
deeply discounted bundled offerings. Payroll and related costs increased
$1,999,000, or 5.1%, due to higher hourly labor costs and higher workers'
compensation costs. Occupancy and other operating expenses increased $3,131,000,
or 8.0%, due primarily to increased utility costs due to higher rates, higher
property taxes related to new stores and remodels, higher expenditures related
to improving the general condition of the restaurants, and increased management
compensation. In addition, advertising expense was higher due to the timing of
expenditures. General and administrative expenses increased $1,171,000, or
22.3%, due primarily to higher officer salaries due to non-cash compensation
related to new management stock options and increased legal and professional
fees related to the debt restructuring. These increases were partially offset
by lower manager trainee salaries due to fewer trainees and lower travel-related
costs.
Interest expense increased $1,889,000, or 114.8%, due to higher borrowings under
the line-of-credit agreement and higher interest rates.
Other income increased $130,000 due to higher gains on the sale of properties.
The income tax benefit increased $3,114,000, or 122.6%, due primarily to lower
income before income taxes. This was also raised by an increasechanges in the effective income tax rate from 30.3%reserve noted here, the balance decreased to 35.0%. In the prior year, the Company
settled several tax items favorably which contributed to a lower effective tax
rate.
Nine months ended May 31, 2001, compared to the nine months ended May 31, 2000
______________________________________________________________________________
Sales decreased $23,553,000, or 6.3%, due to the closing$4.4 million as of
three restaurants in
fiscal 2000 and 17 restaurants in fiscal year 2001; this decrease was partially
offset by the opening of 11 new restaurants during fiscal 2000 and one
restaurant in fiscal yearNovember 21, 2001. Excluding a leap day in fiscal year 2000, same
store sales declined 4.5% during the nine-month period at restaurants opened
over 18 months. Additionally, in April 2001, the Company effected a 50 cent
price increase on its signature Lu Ann Plate. The bundled offerings of the
Luby's Plate and the "Big2Do" were in turn discontinued.
Cost of food decreased $4,528,000, or 4.9%, due primarily to the decline in
sales. As a percentage of sales, food costs were lower due to the move from
deeply discounted bundled offerings. Payroll and related costs increased
$2,375,000, or 2.1%, primarily due to higher hourly labor costs and higher
workers' compensations costs. Occupancy and other operating expenses increased
$5,837,000, or 4.9%, due primarily to increased utility costs due to higher
rates and higher expenditures related to improving the general condition of the
restaurants. The provision for asset impairments of $10,199,000 during the
current year relates the pretax charge to operating costs which resulted from
asset impairment charges in accordance with the Statement of Financial
Accounting Standards No. 121 (FAS121), "Accounting for the Impairment of Long
Lived Assets to be Disposed of." See Note 4. General and administrative
expenses increased $3,332,000, or 20.7%, due primarily to higher officers'
salaries related to incentive options6 for new executive management, as well as a
separation agreement negotiated with Luby's former President and CEO, increased
consulting services, and higher legal and professional fees related to the proxy
and debt restructuring. These increases were offset by lower profit sharing
expense.
Interest expense increased $4,521,000, or 114.3%, from the first nine months of
fiscal 2000 due to higher borrowings under the line-of-credit agreement and
higher interest rates.
Other income decreased $393,000 due primarily to property tax late payment
penalties and other miscellaneous costs. These decreases were offset by higher
gains on property sales.
The income tax benefit increased $15,561,000, or 176.2%, due primarily to lower
income before income taxes. This was also raised by a slight increase in the
effective income tax rate from 33.4% to 35.0%. In the prior year, the Company
settled several items favorably which contributed to a lower effective tax ratefurther discussion.
Forward-Looking Statements
The Company wishes to caution readers that various factors could cause the
actual results of the Company to differ materially from those indicated by
forward-looking statements made from time to time in news releases, reports,
proxy statements, registration statements, and other written communications
(including the preceding sections of this Management's Discussion and
Analysis), as well as oral statements made from time to time by representatives
of the Company. Except for historical information, matters discussed in such
oral and written communications are forward-looking statements that involve
risks and uncertainties, including but not limited to general business
conditions, the impact of competition, the success of operating initiatives,
changes in the cost and supply of food and labor, the seasonality of the
Company's business, taxes, inflation, governmental regulations, and the
availability of credit, as well as other risks and uncertainties disclosed in
periodic reports on Form 10-K.
Item 3. Quantitative10-K and Qualitative Disclosure about Market Risk
Excluding the interest rate swap agreements (swaps) in the combined notional
amount of $45 million, the Company borrowed under its revolving credit agreement
at prime or other rate options available at the time of borrowing. The other
rate options were increased or decreased according to the Company's performance
in comparison to existing bank covenants.
As of May 31, 2001, the total amount of debt subject to interest rate
fluctuations was $78 million under its revolving credit agreement. A 1% change
in interest rates would result in an increase or decrease in interest expense of
$780,000 per year.Form 10-Q.
Part II - OTHER INFORMATION
(continued)
Item 6.4. Exhibits and Reports on Form 8-K.
(a)8-K
A. Exhibits
3(a) - Certificate of Incorporation of Luby's, Inc., as currently in effect
(filed as Exhibit 3(b) to the Company's Quarterly Report on Form 10-Q
for the quarter ended May 31, 1999, and incorporated herein by
reference).
3(b) - Bylaws of Luby's, Inc. as currently in effect (filed as Exhibit 3(c)
to the Company's Quarterly Report on Form 10-Q for the quarter ended
February 28, 1998, and incorporated herein by reference).
4(a) - Description of Common Stock Purchase Rights of Luby's Cafeterias,
Inc., in Form 8-A (filed April 17, 1991, effective April 26, 1991,
File No. 1 8308,1-8308, and incorporated herein by reference).
4(b) - Amendment No. 1 dated December 19, 1991, to Rights Agreement dated
April 16, 1991 (filed as Exhibit 4(b) to the Company's QuarterlQuarterly
Report on Form 10-Q for the quarter ended November 30, 1991, and
incorporated herein by reference).
4(c) - Amendment No. 2 dated February 7, 1995, to Rights Agreement dated
April 16, 1991 (filed as Exhibit 4(d) to the Company's Quarterly
Report on Form 10-Q for the quarter ended February 28, 1995, and
incorporated herein by reference).
4(d) - Amendment No. 3 dated May 29, 1995, to Rights Agreement dated
April 16, 1991 (filed as Exhibit 4(d) to the Company's Quarterly
Report on Form 10-Q for the quarter ended May 31, 1995, and
incorporated herein by reference).
4(e) - Amendment No. 4 dated March 8, 2001, to Rights Agreement dated
April 16, 1991 (filed as Exhibit 99.1 to the Company's Report on Form
8
A12B/8-A12B/A on March 22, 2001, and incorporated herein by reference).
4(f) - Credit Agreement dated February 27, 1996, among Luby's Cafeterias,
Inc., Certain Lenders, and NationsBank of Texas, N.A. (filed as
Exhibit 4(e) to the Company's Quarterly Report on Form 10-Q for the
quarter ended February 29, 1996, and incorporated herein by
reference).
4(g) - First Amendment to Credit Agreement dated January 24, 1997, among
Luby's Cafeterias, Inc., Certain Lenders, and NationsBank of Texas,
N.A. (filed as Exhibit 4(f) to the Company's Quarterly Report on Form
10-Q for the quarter ended February 28, 1997, and incorporated herein
by reference).
4(h) - ISDA Master Agreement dated June 17, 1997, between Luby's Cafeterias,
Inc. and NationsBank, N.A., with Schedule and Confirmation dated
July 7, 1997 (filed as Exhibit 4(g) to the Company's Annual Report on
Form 10-K for the fiscal year ended August 31, 1997, and incorporated
herein by reference).
4(i) - ISDA Master Agreement dated July 2, 1997, between Luby's Cafeterias,
Inc. and Texas Commerce Bank National Association, with Schedule and
Confirmation dated July 2, 1997 (filed as Exhibit 4(h) to the
Company's Annual Report on Form 10-K for the fiscal year ended
August 31, 1997, and incorporated herein by reference).
4(j) - Second Amendment to Credit Agreement dated July 3, 1997, among Luby's
Cafeterias, Inc., Certain Lenders, and NationsBank of Texas, N.A.
(filed as Exhibit 4(i) to the Company's Annual Report on Form 10-K for
the fiscal year ended August 31, 1997, and incorporated herein by
reference).
4(k) - Third Amendment to Credit Agreement dated October 27, 2000, among
Luby's, Inc., Certain Lenders, and Bank of America, N.A. (filed as
Exhibit 4(j) to the Company's Annual Report on Form 10-K for the
fiscal year ended August 31, 2000, and incorporated herein by
reference).
4(l) - Fourth Amendment to Credit Agreement dated October 27, 2000,July 9, 2001, among Luby's,
Inc., Bank of America, N.A., and other creditors of its bank group.group
(filed as Exhibit 4(l) to the Company's Quarterly Report on Form 10-Q
for the quarter ended May 31, 2001, and incorporated herein by
reference).
4(m) - Deed of Trust, Assignment, Security Agreement, and Financing Statement
dated July 2001, executed as part of the Fourth Amendment to Credit
Agreement (filed as Exhibit 4(m) to the Credit Agreement.Company's Quarterly Report on
Form 10-Q for the quarter ended May 31, 2001, and incorporated herein
by reference).
4(n) - Subordination and Intercreditor Agreement dated June 29, 2001, between
Harris J. Pappas and Christopher J. Pappas, Bank of America, N.A.
(asAgreement [as the bank group agent)agent], and Luby's, Inc. (filed as
Exhibit 4(n) to the Company's Quarterly Report on Form 10-Q for the
quarter ended May 31, 2001, and incorporated herein by reference).
4(o) - Convertible Subordinated Promissory Note dated June 29, 2001, between
Christopher J. Pappas and Luby's, Inc. in the amount of $1,500,000.00$1,500,000
(filed as Exhibit 4(o) to the Company's Quarterly Report on Form 10-Q
for the quarter ended May 31, 2001, and incorporated herein by
reference).
4(p) - Convertible Subordinated Promissory Note dated June 29, 2001, between
Harris J. Pappas and Luby's, Inc. in the amount of $1,500,000.00.$1,500,000 (filed
as Exhibit 4(p) to the Company's Quarterly Report on Form 10-Q for the
quarter ended May 31, 2001, and incorporated herein by reference).
4(q) - Convertible Subordinated Promissory Note dated June 29, 2001, between
Christopher J. Pappas and Luby's, Inc. in the amount of $3,500,000.00.$3,500,000
(filed as Exhibit 4(q) to the Company's Quarterly Report on Form 10-Q
for the quarter ended May 31, 2001, and incorporated herein by
reference).
4(r) - Convertible Subordinated Promissory Note dated June 29, 2001, between
Harris J. Pappas and Luby's, Inc. in the amount of $3,500,000.00.$3,500,000 (filed
as Exhibit 4(r) to the Company's Quarterly Report on Form 10-Q for the
quarter ended May 31, 2001, and incorporated herein by reference).
4(s) - Fifth Amendment to Credit Agreement dated December 5, 2001, among
Luby's, Inc., Bank of America, and other creditors of its bank group
(filed as Exhibit 4(s) to the Company's Annual Report on Form 10-K for
the fiscal year ended August 31, 2001, and incorporated herein by
reference).
10(a) - Form of Deferred Compensation Agreement entered into between Luby's
Cafeterias, Inc. and various officers (filed as Exhibit 10(b) to the
Company's Annual Report on Form 10-K for the fiscal year ended
August 31, 1981, and incorporated herein by reference).*
10(b) - Form of Amendment to Deferred Compensation Agreement between Luby's
Cafeterias, Inc. and various officers and former officers adopted
January 14, 1997 (filed as Exhibit 10(b) to the Company's Quarterly
Report on Form 10-Q for the quarter ended February 28, 1997, and
incorporated herein by reference).*
10(c) - Management Incentive Stock Plan of Luby's Cafeterias, Inc. (filed as
Exhibit 10(i) to the Company's Annual Report on Form 10-K for the
fiscal year ended August 31, 1989, and incorporated herein by
reference).*
10(d) - Amendment to Management Incentive Stock Plan of Luby's Cafeterias,
Inc. adopted January 14, 1997 (filed as Exhibit 10(k) to the Company's
Quarterly Report on Form 10-Q for the quarter ended February 28, 1997,
and incorporated herein by reference).*
10(e) - Nonemployee Director Deferred Compensation Plan of Luby's Cafeterias,
Inc. adopted October 27, 1994 (filed as Exhibit 10(g) to the Company's
Quarterly Report on Form 10-Q for the quarter ended November 30, 1994,
and incorporated herein by reference).*
10(f) - Amendment to Nonemployee Director Deferred Compensation Plan of Luby's
Cafeterias, Inc. adopted January 14, 1997 (filed as Exhibit 10(m) to
the Company's Quarterly Report on Form 10-Q for the quarter ended
February 28, 1997, and incorporated herein by reference).*
10(g) - Amendment to Nonemployee Director Deferred Compensation Plan of Luby's
Cafeterias, Inc. adopted March 19, 1998 (filed as Exhibit 10(o) to the
Company's Quarterly Report on Form 10-Q for the quarter ended
February 28, 1998, and incorporated herein by reference).*
10(h) - Amended and Restated Nonemployee Director Stock Option Plan of Luby's,
Inc. approved by the shareholders of Luby's, Inc. on January 14, 2000
(filed as Exhibit 10(j) to the Company's Quarterly Report on Form 10-Q
for the quarter ended February 29, 2000, and incorporated herein by
reference).*
10(i) - Luby's Cafeterias, Inc. Supplemental Executive Retirement Plan dated
May 30, 1996 (filed as Exhibit 10(j) to the Company's Annual Report on
Form 10-K for the fiscal year ended August 31, 1996, and incorporated
herein by reference).*
10(j) - Amendment to Luby's Cafeterias, Inc. Supplemental Executive Retirement
Plan adopted January 14, 1997 (filed as Exhibit 10(r) to the Company's
Quarterly Report on Form 10-Q for the quarter ended February 28, 1997,
and incorporated herein by reference).*
10(k) - Amendment to Luby's Cafeterias, Inc. Supplemental Executive Retirement
Plan adopted January 9, 1998 (filed as Exhibit 10(u) to the Company's
Quarterly Report on Form 10-Q for the quarter ended February 28, 1998,
and incorporated herein by reference).*
10(l) - Amendment to Luby's Cafeterias, Inc. Supplemental Executive Retirement
Plan adopted May 21, 1999 (filed as Exhibit 10(q) to the Company's
Quarterly Report on Form 10-Q for the quarter ended May 31, 1999, and
incorporated herein by reference.)*
10(m) - Severance Agreement between Luby's, Inc. and Barry J.C. Parker dated
December 19, 2000 (filed as Exhibit 10(r) to the Company's Quarterly
Report on Form 10-Q for the quarter ended November 30, 2000, and
incorporated herein by reference).reference.)*
10(n) - Luby's Cafeterias, Inc. Nonemployee Director Phantom Stock Plan
adopted March 19, 1998 (filed as Exhibit 10(aa) to the Company's
Quarterly Report on Form 10-Q for the quarter ended February 28, 1998,
and incorporated herein by reference).*
10(o) - Luby's Incentive Stock Plan adopted October 16, 1998 (filed as Exhibit
10(cc) to the Company's Annual Report on Form 10-K for the fiscal year
ended August 31, 1998, and incorporated herein by reference).*
10(p) - Form of Change in Control Agreement entered into between Luby's, Inc.,
and each of its Senior Vice Presidents as of January 8, 1999 (filed as
Exhibit 10(aa) to the Company's Quarterly Report on Form 10-Q for the
quarter ended February 28, 1999, and incorporated herein by
reference).*
10(q) - Luby's, Inc. Deferred Compensation Plan effective June 1, 1999 (filed
as Exhibit 10(cc) to the Company's Quarterly Report on Form 10-Q for
the quarter ended May 31, 1999, and incorporated herein by
reference).*
10(r) - Registration Rights Agreement dated March 9, 2001, by and among
Luby's, Inc., Christopher J. Pappas, and Harris J. Pappas (filed as
Exhibit 10.4 to the Company's Current Report on Form 8-K dated
March 9, 2001, and incorporated herebyherein by reference).
10(s) - Purchase Agreement dated March 9, 2001, by and among Luby's, Inc.,
Harris J. Pappas, and Christopher J. Pappas (filed as Exhibit 10.1 to
the Company's Current Report on Form 8-K dated March 9, 2001, and
incorporated herein by reference).
10(t) - Employment Agreement dated March 9, 2001, between Luby's, Inc. and
Christopher J. Pappas (filed as Exhibit 10.2 to the Company's Current
Report on Form 8-K dated March 9, 2001, and incorporated herein by
reference).*
10(u) - Employment Agreement dated March 9, 2001, between Luby's, Inc. and
Harris J. Pappas (filed as Exhibit 10.3 to the Company's Current
Report on Form 8-K dated March 9, 2001, and incorporated herein by
reference).*
10(v) - Luby's, Inc. Incentive Bonus Plan for Fiscal 2001 (filed as Exhibit
10(z) to the Company's Annual Report on Form 10-K for the fiscal year
ended August 31, 2000, and incorporated herein by reference).*
10(w) - Luby's, Inc. Stock Option granted to Christopher J. Pappas on March 9,
2001.2001 (filed as Exhibit 10(w) to the Company's Quarterly Report on Form
10-Q for the quarter ended May 31, 2001, and incorporated herein by
reference).*
10(x) - Luby's, Inc. Stock Option granted to Harris J. Pappas on March 9, 2001
(filed as Exhibit 10(x) to the Company's Quarterly Report on Form 10-Q
for the quarter ended May 31, 2001, and incorporated herein by
reference).*
10(y) - Affiliate Services Agreement dated August 31, 2001, by and among
Luby's, Inc., Christopher J. Pappas, Harris J. Pappas, Pappas
Restaurants, L. P., and Pappas Restaurants, Inc. (filed as Exhibit
10(y) to the Company's Annual Report on Form 10-K for the fiscal year
ended August 31, 2001, and incorporated herein by reference).
10(z) - Ground Lease dated March 25, 1994, by and between Luby's Cafeterias,
Inc. and PHCG Investments, as amended by Lease Amendment dated July 6,
1994 (filed as Exhibit 10(z) to the Company's Annual Report on Form
10-K for the fiscal year ended August 31, 2001, and incorporated
herein by reference).
10(aa)- Lease Agreement dated June 1, 2001, by and between Luby's, Inc. and
Pappas Restaurants, Inc. (filed as Exhibit 10(aa) to the Company's
Annual Report on Form 10-K for the fiscal year ended August 31, 2001,
and incorporated herein by reference).
10(bb)- Final Severance Agreement and Release between Luby's, Inc. and Alan M.
Davis dated July 20, 2001 (filed as Exhibit 10(bb) to the Company's
Annual Report on Form 10-K for the fiscal year ended August 31, 2001,
and incorporated herein by reference). While in search for new
executive management, the Company entered into an employment agreement
with Mr. Davis in January 2001. The value of that one-year contract
was a year's salary upon termination. After new management was
secured, the Company finalized the exhibited agreement that provides
for the payment of monthly consulting fees to Mr. Davis until July
2002, but releases the Company from all prior employment commitments.*
10(cc)- Consultant Agreement between Luby's Restaurants Limited Partnership
and Alan M. Davis dated July 20, 2001 (filed as Exhibit 10(cc) to the
Company's Annual Report on Form 10-K for the fiscal year ended
August 31, 2001, and incorporated herein by reference).*
11 - Statement re computation of per share earnings.
99(a) - Corporate Governance Guidelines of Luby's, Cafeterias, Inc., as amended July 20, 200026,
2001 (filed as Exhibit 99(a) to the Company's Annual Report on Form
10-K for the fiscal year ended August 31, 2000,2001, and incorporated
herein by reference).
*Denotes management contract or compensatory plan or arrangement.
(b)B. Reports on Form 8-K
The Company filed a reportNo reports on Form 8-K dated March 15, 2001, relating tohave been filed during the employment of Harris J. and Christopher J. Pappas, the agreement of Messrs.
Pappas to purchase $10 million in subordinated convertible notes, the election
of Messrs. Pappas to the Board of Directors of the Company, and an amendment to
the Company's shareholder right plan.quarter for which
this report is filed.
SIGNATURES
Pursuant to the requirements 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.
(Registrant)
By: /s/CHRISTOPHER/s/Christopher J. PAPPAS
________________________________Pappas
________________________
Christopher J. Pappas
President and
Chief Executive Officer
By: /s/ERNEST PEKMEZARIS
:________________________________/s/Ernest Pekmezaris
________________________
Ernest Pekmezaris
Senior Vice President and
Chief Financial Officer
Dated: July 16, 2001January 3, 2002
EXHIBIT INDEX
Number Document Page
3(a) - Certificate of Incorporation of Luby's, Inc., as currently in effect
(filed as Exhibit 3(b) to the Company's Quarterly Report on Form 10-Q
for the quarter ended May 31, 1999, and incorporated herein by
reference).
3(b) - Bylaws of Luby's, Inc. as currently in effect (filed as Exhibit 3(c)
to the Company's Quarterly Report on Form 10-Q for the quarter ended
February 28, 1998, and incorporated herein by reference).
4(a) - Description of Common Stock Purchase Rights of Luby's Cafeterias,
Inc., in Form 8-A (filed April 17, 1991, effective April 26, 1991,
File No. 1 8308,1-8308, and incorporated herein by reference).
4(b) - Amendment No. 1 dated December 19, 1991, to Rights Agreement dated
April 16, 1991 (filed as Exhibit 4(b) to the Company's Quarterly
Report on Form 10-Q for the quarter ended November 30, 1991, and
incorporated herein by reference).
4(c) - Amendment No. 2 dated February 7, 1995, to Rights Agreement dated
April 16, 1991 (filed as Exhibit 4(d) to the Company's Quarterly
Report on Form 10-Q for the quarter ended February 28, 1995, and
incorporated herein by reference).
4(d) - Amendment No. 3 dated May 29, 1995, to Rights Agreement dated
April 16, 1991 (filed as Exhibit 4(d) to the Company's Quarterly
Report on Form 10-Q for the quarter ended May 31, 1995, and
incorporated herein by reference).
4(e) - Amendment No. 4 dated March 8, 2001, to Rights Agreement dated
April 16, 1991 (filed as Exhibit 99.1 to the Company's Report on Form
8-
A12B/8-A12B/A on March 22, 2001, and incorporated herein by reference).
4(f) - Credit Agreement dated February 27, 1996, among Luby's Cafeterias,
Inc., Certain Lenders, and NationsBank of Texas, N.A. (filed as
Exhibit 4(e) to the Company's Quarterly Report on Form 10-Q for the
quarter ended February 29, 1996, and incorporated herein by
reference).
4(g) - First Amendment to Credit Agreement dated January 24, 1997, among
Luby's Cafeterias, Inc., Certain Lenders, and NationsBank of Texas,
N.A. (filed as Exhibit 4(f) to the Company's Quarterly Report on Form
10-Q for the quarter ended February 28, 1997, and incorporated herein
by reference).
4(h) - ISDA Master Agreement dated June 17, 1997, between Luby's Cafeterias,
Inc. and NationsBank, N.A., with Schedule and Confirmation dated
July 7, 1997 (filed as Exhibit 4(g) to the Company's Annual Report on
Form 10-K for the fiscal year ended August 31, 1997, and incorporated
herein by reference).
4(i) - ISDA Master Agreement dated July 2, 1997, between Luby's Cafeterias,
Inc. and Texas Commerce Bank National Association, with Schedule and
Confirmation dated July 2, 1997 (filed as Exhibit 4(h) to the
Company's Annual Report on Form 10-K for the fiscal year ended
August 31, 1997, and incorporated herein by reference).
4(j) - Second Amendment to Credit Agreement dated July 3, 1997, among Luby's
Cafeterias, Inc., Certain Lenders, and NationsBank of Texas, N.A.
(filed as Exhibit 4(i) to the Company's Annual Report on Form 10-K for
the fiscal year ended August 31, 1997, and incorporated herein by
reference).
4(k) - Third Amendment to Credit Agreement dated October 27, 2000, among
Luby's, Inc., Certain Lenders, and Bank of America, N.A. (filed as
Exhibit 4(j) to the Company's Annual Report on Form 10-K for the
fiscal year ended August 31, 2000, and incorporated herein by
reference).
4(l) - Fourth Amendment to Credit Agreement dated October 27, 2000,July 9, 2001, among Luby's,
Inc., Bank of America, N.A., and other creditors of its bank group.group
(filed as Exhibit 4(l) to the Company's Quarterly Report on Form 10-Q
for the quarter ended May 31, 2001, and incorporated herein by
reference).
4(m) - Deed of Trust, Assignment, Security Agreement, and Financing Statement
dated July 2001, executed as part of the Fourth Amendment to Credit
Agreement (filed as Exhibit 4(m) to the Credit Agreement.Company's Quarterly Report on
Form 10-Q for the quarter ended May 31, 2001, and incorporated herein
by reference).
4(n) - Subordination and Intercreditor Agreement dated June 29, 2001, between
Harris J. Pappas and Christopher J. Pappas, Bank of America, N.A.
(asAgreement [as the bank group agent)agent], and Luby's, Inc. (filed as
Exhibit 4(n) to the Company's Quarterly Report on Form 10-Q for the
quarter ended May 31, 2001, and incorporated herein by reference).
4(o) - Convertible Subordinated Promissory Note dated June 29, 2001, between
Christopher J. Pappas and Luby's, Inc. in the amount of $1,500,000.00.$1,500,000
(filed as Exhibit 4(o) to the Company's Quarterly Report on Form 10-Q
for the quarter ended May 31, 2001, and incorporated herein by
reference).
4(p) - Convertible Subordinated Promissory Note dated June 29, 2001, between
Harris J. Pappas and Luby's, Inc. in the amount of $1,500,000.00.$1,500,000 (filed
as Exhibit 4(p) to the Company's Quarterly Report on Form 10-Q for the
quarter ended May 31, 2001, and incorporated herein by reference).
4(q) - Convertible Subordinated Promissory Note dated June 29, 2001, between
Christopher J. Pappas and Luby's, Inc. in the amount of $3,500,000.00.$3,500,000
(filed as Exhibit 4(q) to the Company's Quarterly Report on Form 10-Q
for the quarter ended May 31, 2001, and incorporated herein by
reference).
4(r) - Convertible Subordinated Promissory Note dated June 29, 2001, between
Harris J. Pappas and Luby's, Inc. in the amount of $3,500,000.00.$3,500,000 (filed
as Exhibit 4(r) to the Company's Quarterly Report on Form 10-Q for the
quarter ended May 31, 2001, and incorporated herein by reference).
4(s) - Fifth Amendment to Credit Agreement dated December 5, 2001, among
Luby's, Inc., Bank of America, and other creditors of its bank group
(filed as Exhibit 4(s) to the Company's Annual Report on Form 10-K for
the fiscal year ended August 31, 2001, and incorporated herein by
reference).
10(a) - Form of Deferred Compensation Agreement entered into between Luby's
Cafeterias, Inc. and various officers (filed as Exhibit 10(b) to the
Company's Annual Report on Form 10-K for the fiscal year ended
August 31, 1981, and incorporated herein by reference).*
10(b) - Form of Amendment to Deferred Compensation Agreement between Luby's
Cafeterias, Inc. and various officers and former officers adopted
January 14, 1997 (filed as Exhibit 10(b) to the Company's Quarterly
Report on Form 10-Q for the quarter ended February 28, 1997, and
incorporated herein by reference).*
10(c) - Management Incentive Stock Plan of Luby's Cafeterias, Inc. (filed as
Exhibit 10(i) to the Company's Annual Report on Form 10-K for the
fiscal year ended August 31, 1989, and incorporated herein by
reference).*
10(d) - Amendment to Management Incentive Stock Plan of Luby's Cafeterias,
Inc. adopted January 14, 1997 (filed as Exhibit 10(k) to the Company's
Quarterly Report on Form 10-Q for the quarter ended February 28, 1997,
and incorporated herein by reference).*
10(e) - Nonemployee Director Deferred Compensation Plan of Luby's Cafeterias,
Inc. adopted October 27, 1994 (filed as Exhibit 10(g) to the Company's
Quarterly Report on Form 10-Q for the quarter ended November 30, 1994,
and incorporated herein by reference).*
10(f) - Amendment to Nonemployee Director Deferred Compensation Plan of Luby's
Cafeterias, Inc. adopted January 14, 1997 (filed as Exhibit 10(m) to
the Company's Quarterly Report on Form 10-Q for the quarter ended
February 28, 1997, and incorporated herein by reference).*
10(g) - Amendment to Nonemployee Director Deferred Compensation Plan of Luby's
Cafeterias, Inc. adopted March 19, 1998 (filed as Exhibit 10(o) to the
Company's Quarterly Report on Form 10-Q for the quarter ended
February 28, 1998, and incorporated herein by reference).*
10(h) - Amended and Restated Nonemployee Director Stock Option Plan of Luby's,
Inc. approved by the shareholders of Luby's, Inc. on January 14, 2000
(filed as Exhibit 10(j) to the Company's Quarterly Report on Form 10-Q
for the quarter ended February 29, 2000, and incorporated herein by
reference).*
10(i) - Luby's Cafeterias, Inc. Supplemental Executive Retirement Plan dated
May 30, 1996 (filed as Exhibit 10(j) to the Company's Annual Report on
Form 10-K for the fiscal year ended August 31, 1996, and incorporated
herein by reference).*
10(j) - Amendment to Luby's Cafeterias, Inc. Supplemental Executive Retirement
Plan adopted January 14, 1997 (filed as Exhibit 10(r) to the Company's
Quarterly Report on Form 10-Q for the quarter ended February 28, 1997,
and incorporated herein by reference).*
10(k) - Amendment to Luby's Cafeterias, Inc. Supplemental Executive Retirement
Plan adopted January 9, 1998 (filed as Exhibit 10(u) to the Company's
Quarterly Report on Form 10-Q for the quarter ended February 28, 1998,
and incorporated herein by reference).*
10(l) - Amendment to Luby's Cafeterias, Inc. Supplemental Executive Retirement
Plan adopted May 21, 1999 (filed as Exhibit 10(q) to the Company's
Quarterly Report on Form 10-Q for the quarter ended May 31, 1999, and
incorporated herein by reference.)*
10(m) - Severance Agreement between Luby's, Inc. and Barry J.C. Parker dated
December 19, 2000 (filed as Exhibit 10(r) to the Company's Quarterly
Report on Form 10-Q for the quarter ended November 30, 2000, and
incorporated herein by reference).reference.)*
10(n) - Luby's Cafeterias, Inc. Nonemployee Director Phantom Stock Plan
adopted March 19, 1998 (filed as Exhibit 10(aa) to the Company's
Quarterly Report on Form 10-Q for the quarter ended February 28, 1998,
and incorporated herein by reference).*
10(o) - Luby's Incentive Stock Plan adopted October 16, 1998 (filed as Exhibit
10(cc) to the Company's Annual Report on Form 10-K for the fiscal year
ended August 31, 1998, and incorporated herein by reference).*
10(p) - Form of Change in Control Agreement entered into between Luby's, Inc.,
and each of its Senior Vice Presidents as of January 8, 1999 (filed as
Exhibit 10(aa) to the Company's Quarterly Report on Form 10-Q for the
quarter ended February 28, 1999, and incorporated herein by
reference).*
10(q) - Luby's, Inc. Deferred Compensation Plan effective June 1, 1999 (filed
as Exhibit 10(cc) to the Company's Quarterly Report on Form 10-Q for
the quarter ended May 31, 1999, and incorporated herein by
reference).*
10(r) - Registration Rights Agreement dated March 9, 2001, by and among
Luby's, Inc., Christopher J. Pappas, and Harris J. Pappas (filed as
Exhibit 10.4 to the Company's Current Report on Form 8-K dated
March 9, 2001, and incorporated herebyherein by reference).
10(s) - Purchase Agreement dated March 9, 2001, by and among Luby's, Inc.,
Harris J. Pappas, and Christopher J. Pappas (filed as Exhibit 10.1 to
the Company's Current Report on Form 8-K dated March 9, 2001, and
incorporated herein by reference).
10(t) - Employment Agreement dated March 9, 2001, between Luby's, Inc. and
Christopher J. Pappas (filed as Exhibit 10.2 to the Company's Current
Report on Form 8-K dated March 9, 2001, and incorporated herein by
reference).*
10(u) - Employment Agreement dated March 9, 2001, between Luby's, Inc. and
Harris J. Pappas (filed as Exhibit 10.3 to the Company's Current
Report on Form 8-K dated March 9, 2001, and incorporated herein by
reference).*
10(v) - Luby's, Inc. Incentive Bonus Plan for Fiscal 2001 (filed as Exhibit
10(z) to the Company's Annual Report on Form 10-K for the fiscal year
ended August 31, 2000, and incorporated herein by reference).*
10(w) - Luby's, Inc. Stock Option granted to Christopher J. Pappas on March 9,
2001.2001 (filed as Exhibit 10(w) to the Company's Quarterly Report on Form
10-Q for the quarter ended May 31, 2001, and incorporated herein by
reference).*
10(x) - Luby's, Inc. Stock Option granted to Harris J. Pappas on March 9, 2001
(filed as Exhibit 10(x) to the Company's Quarterly Report on Form 10-Q
for the quarter ended May 31, 2001, and incorporated herein by
reference).*
10(y) - Affiliate Services Agreement dated August 31, 2001, by and among
Luby's, Inc., Christopher J. Pappas, Harris J. Pappas, Pappas
Restaurants, L. P., and Pappas Restaurants, Inc. (filed as Exhibit
10(y) to the Company's Annual Report on Form 10-K for the fiscal year
ended August 31, 2001, and incorporated herein by reference).
10(z) - Ground Lease dated March 25, 1994, by and between Luby's Cafeterias,
Inc. and PHCG Investments, as amended by Lease Amendment dated July 6,
1994 (filed as Exhibit 10(z) to the Company's Annual Report on Form
10-K for the fiscal year ended August 31, 2001, and incorporated
herein by reference).
10(aa)- Lease Agreement dated June 1, 2001, by and between Luby's, Inc. and
Pappas Restaurants, Inc. (filed as Exhibit 10(aa) to the Company's
Annual Report on Form 10-K for the fiscal year ended August 31, 2001,
and incorporated herein by reference).
10(bb)- Final Severance Agreement and Release between Luby's, Inc. and Alan M.
Davis dated July 20, 2001 (filed as Exhibit 10(bb) to the Company's
Annual Report on Form 10-K for the fiscal year ended August 31, 2001,
and incorporated herein by reference). While in search for new
executive management, the Company entered into an employment agreement
with Mr. Davis in January 2001. The value of that one-year contract
was a year's salary upon termination. After new management was
secured, the Company finalized the exhibited agreement that provides
for the payment of monthly consulting fees to Mr. Davis until July
2002, but releases the Company from all prior employment commitments.*
10(cc)- Consultant Agreement between Luby's Restaurants Limited Partnership
and Alan M. Davis dated July 20, 2001 (filed as Exhibit 10(cc) to the
Company's Annual Report on Form 10-K for the fiscal year ended
August 31, 2001, and incorporated herein by reference).*
11 - Statement re computation of per share earnings.
99(a) - Corporate Governance Guidelines of Luby's, Cafeterias, Inc., as amended July 20, 200026,
2001 (filed as Exhibit 99(a) to the Company's Annual Report on Form
10-K for the fiscal year ended August 31, 2000,2001, and incorporated
herein by reference).
*Denotes management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K
The Company filed a report on Form 8-K dated March 15, 2001, relating to
the employment of Harris J. and Christopher J. Pappas, the agreement of Messrs.
Pappas to purchase $10 million in subordinated convertible notes, the election
of Messrs. Pappas to the Board of Directors of the Company, and an amendment to
the Company's shareholder right plan.