Lub Liquidating Trust (LUB) 8-K Luby’s Announces Second Quarter Fiscal 2008 Results

Luby’s Announces Second Quarter Fiscal 2008 Results

Total Revenue Grew Year Over Year

Same-Store Sales Declined 1.6%

New Restaurant Expected to Open in Port Arthur on March 27, 2008

Company Plans to Open 5 Additional New Restaurants in Calendar Year 2008

HOUSTON, TX – March 20, 2008 – Luby’s, Inc. (NYSE: LUB) today announced unaudited financial results for the second quarter of fiscal 2008, which ended on February 13, 2008.

Second Quarter Fiscal 2008 Highlights:

·Total revenue increased to $72.6 million compared to $72.2 million in the second quarter fiscal 2007

·Culinary contract services revenue increased to $1.7 million compared to $0.1 million in the secondquarter fiscal 2007

·Added one new culinary service contract in Dallas, Texas

·New prototype restaurant that opened in August, 2007 has continued to perform well and remains on paceto generate annual revenue inexcess of $3.25 million for its first year, an increase of 30%, compared tothe restaurant system per unit average revenue 

       of  $2.5 million

·Repurchased 500,000 shares of common stock on February 15, 2008, in a privately negotiated blocktrade at $9.50 per share

Total sales in the second quarter were $72.6 million, an increase of 0.6% compared to $72.2 million in the second quarter last year. Restaurant sales declined approximately $1.1 million, due primarily to declines in guest traffic partially offset by higher menu prices and more favorable menu mix. On a same-store basis, sales declined 1.6%. The decline in restaurant sales was more than offset by a $1.7 million increase in culinary contracts services sales.

“During the quarter we initiated construction development on new sites and hired additional staff to support these efforts. We invested approximately $6.9 million in capital expenditures, which included $1.5 million to upgrade our restaurant facilities including dining room updates, restroom remodels and the addition of new furniture in many of our restaurants. Our team remains committed to programs that are focused on customer service, menu innovation, food quality assurance and staff training and development. The long-term consistent execution of these programs is designed to enhance overall customer satisfaction and increase profitability,” said Chris Pappas, President and CEO.

“Our financial results in the second quarter were negatively impacted by the challenging restaurant operating environment, which included softer consumer demand and higher gasoline prices as well as increased commodity and labor costs that impacted margins during the quarter,” said Mr. Pappas. “However, despite the current macro-economic challenges, we remain confident that our long-term strategic plan to enhance and grow the Luby’s brand will optimize our competitive value proposition to the market and enhance shareholder value.”

Income from continuing operations in the second quarter was $354,000, or $0.01 per diluted share, compared to $2.1 million, or $0.08 per diluted share in the second quarter last year. Second quarter 2008 income from operations was reduced by approximately $0.03 per diluted share by the after tax impact of expenses related to the Company’s contested proxy election in January and a reduction in interest related to income taxes partially offset by a net gain on disposition of property and equipment.

Food costs in the second quarter as a percentage of restaurant sales were 28.1%, an increase of 1.0% compared to the second quarter last year. Food commodity costs increased in most categories with higher poultry, seafood, oils and grain costs having the greatest impact on food costs compared to the prior year.

Payroll and related costs in the second quarter as a percentage of restaurant sales were 34.5%, an increase of  0.8% compared to the second quarter last year. The increase was primarily due to higher store management and training costs partially offset by lower workers’ compensation expense, including the effects of reduced actuarial estimates of potential losses resulting from favorable claims expense.

Other operating expenses in the second quarter as a percentage of restaurant sales were 21.9%, a decrease of 0.7% compared to the second quarter last year. Other operating expenses decreased primarily due to 1) an approximate $1.0 million reduction in marketing and advertising expense due to the Company’s use of a mix of lower cost marketing mediums in geographically consolidated markets; and 2) an approximate $0.3 million reduction in insurance expense which included the effect of reduced estimates of potential losses from general liability claims. These favorable expense items were offset by approximately $0.6 million increase compared to last year for higher repairs and maintenance expense associated with efforts to further improve the appearance of restaurants.

Cost of culinary contract services in the second quarter increased approximately $1.4 million compared to the second quarter last year. This increase was related to the food, labor, and other operating expenses associated with the increase in revenue for this line of business.

General and administrative expenses in the second quarter fiscal 2008 as a percentage of total sales were 9.5% compared to 6.9% last year. The increase was primarily due to 1) an approximate $0.5 million increase in corporate salary expense related to staffing costs supporting our culinary services initiative to provide services at healthcare facilities and other departments to support our strategic growth plan; and 2) an approximate $1.1 million increase in professional service fees primarily related to costs incurred in connection with the proxy contest in the second quarter of 2008.

Company Outlook

The Company expects to open one new restaurant on March 27, 2008, one replacement restaurant in May and five additional new restaurants in calendar 2008.

Conference Call

The company will host a conference call today at 4:00 p.m. Central Time, March 20, 2008, to discuss second quarter fiscal 2008 results. To access the call live, dial 866-383-8108 and use the participant pin code, Lubys (58297), at least 10 minutes prior to the start time, or listen live over the Internet by logging on to www.lubys.com.

About Luby’s

Luby’s operates 122 restaurants in Austin, Dallas, Houston, San Antonio, the Rio Grande Valley and other locations throughout Texas and other states.  Luby’s provides its customers with quality home-style food, value pricing, and outstanding customer service.

Consolidated Statements of Operations (unaudited)

(In thousands except per share data)

	Quarter Ended						Two Quarters Ended
	February 13,			February 14,			February 13,			February 14,
	2008			2007			2008			2007
	(84 days)			(84 days)			(168 days)			(168 days)
SALES
Restaurant sales	$	70,972		$	72,101		$	142,606		$	145,759
Culinary contract services		1,668			97			3,396			126
TOTAL SALES		72,640			72,198			146,002			145,885
COSTS AND EXPENSES:
Cost of food		19,938			19,541			39,595			39,339
Payroll and related costs		24,495			24,300			48,934			49,604
Other operating expenses		15,575			16,262			31,282			33,076
Cost of culinary contract services		1,500			116			3,078			166
Depreciation and amortization		4,004			3,570			7,960			7,155
General and administrative expenses		6,888			4,981			12,856			10,023
Provision for (reversal of) asset impairments		—			190			717			190
Net loss (gain) on disposition of property and equipment		(222	)		312			94			494
Total costs and expenses		72,178			69,272			144,516			140,047
INCOME FROM OPERATIONS		462			2,926			1,486			5,838
Interest income		375			242			673			412
Interest expense		(49	)		(199	)		(100	)		(391	)
Interest related to income taxes		(578	)		—			1,319			—
Other income, net		229			198			412			409
Income before income taxes and discontinued operations		439			3,167			3,790			6,268
Provision (benefit) for income taxes		85			1,114			(1,409	)		2,209
Income from continuing operations		354			2,053			5,199			4,059
Discontinued operations, net of income taxes		(68	)		(171	)		(142	)		(262	)
NET INCOME	$	286		$	1,882		$	5,057		$	3,797
Income per share - from continuing operations
- basic	$	0.01		$	0.08		$	0.19		$	0.16
- assuming dilution		0.01			0.08			0.19			0.15
Loss per share - from discontinued operations
- basic	$	—		$	(0.01	)	$	(0.01	)	$	(0.01	)
- assuming dilution		—			(0.01	)		(0.01	)		(0.01	)
Net income per share
- basic	$	0.01		$	0.07		$	0.18		$	0.15
- assuming dilution		0.01			0.07			0.18			0.14
Weighted average shares outstanding:
- basic		28,408			26,101			27,645			26,090
- assuming dilution		28,518			27,238			28,057			27,170

The following table contains information derived from the Company’s Consolidated Statements of Operations expressed as a percentage of sales.  Percentages may not add due to rounding.

	Quarter Ended						Two Quarters Ended
	February 13,			February 14,			February 13,			February 14,
	2008			2007			2008			2007
	(84 days)			(84 days)			(168 days)			(168 days)
Restaurant sales		97.7	%		99.9	%		97.7	%		99.9	%
Culinary contract services		2.3	%		0.1	%		2.3	%		0.1	%
TOTAL SALES		100	%		100	%		100	%		100	%
COSTS AND EXPENSES:
(As a percentage of restaurant sales)
Cost of food		28.1	%		27.1	%		27.8	%		27.0	%
Payroll and related costs		34.5	%		33.7	%		34.3	%		34.0	%
Other operating expenses		21.9	%		22.6	%		21.9	%		22.7	%
Store level profit		15.5	%		16.6	%		16.0	%		16.3	%
(As a percentage of total sales)
General and administrative expenses		9.5	%		6.9	%		8.8	%		6.9	%
INCOME FROM OPERATIONS		0.6	%		4.1	%		1.0	%		4.0	%

Consolidated Balance Sheets

(In thousands except share data)

	February 13,		August 29,
	2008		2007
	(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	17,996	$	17,514
Short-term investments		17,650		8,600
Trade accounts and other receivables, net		2,827		1,657
Food and supply inventories		2,876		2,574
Prepaid expenses		1,341		1,398
Deferred income taxes		548		624
Total current assets		43,238		32,367
Property and equipment, net		185,049		185,983
Property held for sale		5,411		736
Other assets		457		548
Total assets	$	234,155	$	219,634
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	14,173	$	12,882
Accrued expenses and other liabilities		17,353		21,400
Total current liabilities		31,526		34,282
Other liabilities		7,925		7,088
Total liabilities		39,451		41,370
Commitments and Contingencies
SHAREHOLDERS' EQUITY
Common stock, $0.32 par value; 100,000,000 shares authorized; Shares issued were 28,410,996 and 27,835,901, respectively; Shares outstanding were 28,410,996 and 26,159,498, respectively		9,091		8,907
Paid-in capital		19,603		43,514
Retained earnings		166,010		161,447
Less cost of treasury stock, zero and 1,676,403 shares, respectively		—		(35,604	)
Total shareholders' equity		194,704		178,264
Total liabilities and shareholders' equity	$	234,155	$	219,634

Consolidated Statements of Cash Flows (unaudited)

(In thousands)

	Two Quarters Ended
	February 13,			February 14,
	2008			2007
	(168 days)			(168 days)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	5,057		$	3,797
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for (reversal of) asset impairments, net of gains and losses on property sales		811			908
Depreciation and amortization		7,960			7,155
Amortization of debt issuance cost		21			215
Non-cash compensation expense		113			109
Share-based compensation expense		559			429
Interest related to income taxes		(1,319	)		—
Deferred tax provision (benefit)		(931	)		1,964
Cash provided by operating activities before changes in operating assets and liabilities		12,271			14,577
Changes in operating assets and liabilities:
(Increase) decrease in trade accounts and other receivables		(978	)		1,045
Increase in food and supply inventories		(302	)		(53	)
(Increase) decrease in prepaid expenses and other assets		127			(105	)
Decrease in accounts payable, accrued expenses and other liabilities		(292	)		(653	)
Net cash provided by operating activities		10,826			14,811
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from redemption or maturity of short-term investments		16,600			6,399
Purchases of short-term investments		(25,650	)		(20,395	)
Proceeds from disposal of assets		2,300			70
Purchases of property and equipment		(14,799	)		(6,643	)
Net cash used in investing activities		(21,549	)		(20,569	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds received on exercise of stock options		11,205			313
Net cash provided by financing activities		11,205			313
Net increase (decrease) in cash and cash equivalents		482			(5,445	)
Cash and cash equivalents at beginning of period		17,514			9,715
Cash and cash equivalents at end of period	$	17,996		$	4,270
Cash paid for:
Income taxes	$	302		$	167
Interest		56			76

The Company wishes to caution readers that various factors could cause its actual financial and operational results to differ materially from those indicated by forward-looking statements made from time to time in news releases, reports, proxy statements, registration statements, and other written communications, as well as oral statements made from time to time by representatives of the Company. Any statements made in this news release and in such oral and written communications other than historical statements, including statements regarding the expected financial performance of the Company’s prototype restaurant, the execution of the Company’s strategic plan, and future openings of new or replacement restaurants are forward-looking statements. Forward-looking statements 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 the Company’s periodic reports on Form 10-K and Form 10-Q.

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