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 8, 2002
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.
_______________________________________________________________________________
(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 x 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: 22,433,043 shares outstanding as of June 13, 2002,
(exclusive of 4,970,024 treasury shares)
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
LUBY'S, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(In thousands except per share data)
Quarter Ended Three Quarters Ended
May 8, May 31, May 8, May 31,
2002 2001 2002 2001
____________ ____________ ____________ ____________
(84 days) (92 days) (250 days) (273 days)
<s> <c> <c> <c> <c>
Sales $ 93,069 $121,677 $279,521 $347,796
Costs and expenses:
Cost of food 23,902 30,305 71,092 88,649
Payroll and related costs 28,397 41,254 93,319 117,840
Occupancy and other operating expenses 34,044 42,512 104,637 123,903
Provision for asset impairments
and restaurant closings (See Note 7) 128 - 259 10,199
General and administrative expenses 4,707 6,415 15,415 19,437
_________ ________ ________ ________
91,178 120,486 284,722 360,028
_________ ________ ________ ________
Income (loss) from operations 1,891 1,191 (5,201) (12,232)
Interest expense (2,317) (3,534) (7,300) (8,475)
Other income, net 169 703 926 1,479
_________ ________ ________ ________
Income (loss) before income taxes (257) (1,640) (11,575) (19,228)
Income tax expense (benefit) (83) (574) (3,894) (6,730)
_________ ________ ________ ________
Net income (loss) $ (174) $ (1,066) $ (7,681) $(12,498)
_________ ________ ________ ________
Net income (loss) per share - basic
and assuming dilution $ (0.01) $ (0.05) $ (0.34) $ (0.56)
_________ ________ ________ ________
EBITDA (See Note 6) $ 7,277 $ 7,239 $ 10,851 $ 15,597
_________ ________ ________ ________
EBITDA per share - basic $ 0.32 $ 0.32 $ 0.48 $ 0.70
_________ ________ ________ ________
See accompanying notes.
LUBY'S, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
May 8, August 31,
2002 2001
_________ _________
ASSETS (unaudited)
Current assets:
Cash and cash equivalents $ 5,485 $ 4,099
Short-term investments (See Note 3) 20,567 19,984
Trade accounts and other receivables 239 358
Food and supply inventories 2,411 2,701
Prepaid expenses 2,306 2,765
Income tax receivable 5,343 4,468
________ ________
Total current assets 36,351 34,375
Property held for sale 5,496 3,047
Investments and other assets 8,621 5,929
Deferred income taxes 1,779 4,931
Property, plant, and equipment - at cost,
net (See Note 4) 292,246 305,180
________ ________
Total assets $344,493 $353,462
________ ________
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 19,167 $ 13,696
Accrued expenses and other liabilities
(See Note 5) 27,553 34,585
________ ________
Total current liabilities 46,720 48,281
Long-term debt (See Note 6) 120,944 122,000
Convertible subordinated notes - related
party (See Note 6) 5,735 5,401
Deferred income taxes and other credits 2,990 2,271
Reserve for restaurant closings (See Note 7) 3,151 4,506
Commitments and contingencies (See Note 8) - -
________ ________
Total liabilities 179,540 182,459
________ ________
Shareholders' equity:
Common stock 8,769 8,769
Paid-in capital 37,209 37,181
Deferred compensation (See Note 9) (2,394) (3,299)
Retained earnings 227,034 234,715
Accumulated other comprehensive income (loss)
(See Note 10) (108) (592)
Less cost of treasury stock (105,557) (105,771)
________ ________
Total shareholders' equity 164,953 171,003
________ ________
Total liabilities and shareholders' equity $344,493 $353,462
________ ________
See accompanying notes.
LUBY'S, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(In thousands)
Three Quarters Ended
May 8, May 31,
2002 2001
__________ __________
(250 days) (273 days)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(7,681) $(12,498)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 14,887 17,320
Amortization of deferred loss on interest
rate swaps 745 -
Amortization of discount on convertible
subordinated notes 334 -
Provision for asset impairments and
restaurant closings 259 10,200
Gain on disposal of property held for sale (110) (1,201)
Loss on disposal of property, plant, and equipment 146 45
Noncash directors' fees 188 84
Noncash compensation expense 905 560
_______ ________
Cash provided by operating activities before
changes in operating assets and liabilities 9,673 14,510
Changes in operating assets and liabilities:
(Increase) decrease in trade accounts and
other receivables 119 (55)
(Increase) decrease in food and supply inventories 290 32
(Increase) decrease in prepaid expenses 459 2,726
(Increase) decrease in income tax receivable (875) (3,200)
(Increase) decrease in other assets 253 (1,418)
Increase (decrease) in accounts payable 5,471 (3,035)
Increase (decrease) in accrued expenses and
other liabilities (7,032) 2,936
Increase (decrease) in deferred income taxes
and other credits 3,611 (76)
Increase (decrease) in reserve for
restaurant closings (1,614) (1,211)
_______ ________
Net cash provided by (used in)
operating activities $10,355 $ 11,209
_______ ________
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) decrease in short-term investments $ (583) $ (5,935)
Proceeds from disposal of property held for sale 1,093 6,935
Purchases of property, plant, and equipment, net (8,477) (13,678)
_______ ________
Net cash provided by (used in) investing activities (7,967) (12,678)
_______ ________
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (payments on) long-term borrowings (1,056) 7,000
Proceeds from (payments on) borrowings against
cash surrender value of officers' life insurance - 3,623
Proceeds received on the exercise of employee
stock options 54 -
Dividends paid - (2,242)
_______ ________
Net cash provided by (used in)
financing activities (1,002) 8,381
_______ ________
Net increase (decrease) in cash and cash equivalents 1,386 6,912
Cash and cash equivalents at beginning of period 4,099 679
_______ ________
Cash and cash equivalents at end of period $ 5,485 $ 7,591
_______ ________
See accompanying notes.
LUBY'S, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (unaudited)
(In thousands)
Accumu-
lated
De- Other
Paid- ferred Compre- Total
Common Stock In Comp- hensive Share-
Issued Treasury Capi- ensa- Retained Income holders'
Shares Amount Shares Amount tal tion Earnings (loss) Equity
_____________________________________________________________________________________________
<s> <c> <c> <c> <c> <c> <c> <c> <c> <c>
Balance at
August 31,
2001(audited) 27,403 $8,769 (4,980) $(105,771) $37,181 $(3,299) $234,715 $(592) $171,003
Other compre-
hensive in-
come (loss),
net of taxes:
Reclassifi-
cation ad-
justment
for loss
recognized
on termina-
tion of in-
terest rate
swaps, net of
taxes of $261 - - - - - - - 484 484
Net income (loss)
year to date - - - - - - (7,681) - (7,681)
Common stock
issued
under benefit
plans, net of
shares tendered
in partial
payment and
including tax
benefits - - 10 214 28 - - - 242
Noncash stock
compensation
expense - - - - - 905 - - 905
______________________________________________________________________________
Balance at
May 8, 2002 27,403 $8,769 (4,970) $(105,557) $37,209 $(2,394) $227,034 $(108) $164,953
______________________________________________________________________________
See accompanying notes.
LUBY'S, INC.
NOTES TO FINANCIAL STATEMENTS (unaudited)
May 8, 2002
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 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, 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.
Certain fiscal 2001 balances have been reclassified to conform with the fiscal
2002 presentation.
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 is therefore 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: SHORT-TERM INVESTMENTS
The Company maintained a balance of $20.6 million and $20.0 million in short-
term investments as of May 8, 2002, and August 31, 2001, respectively. This
cash is invested in money-market funds.
Note 4: PROPERTY, PLANT, AND EQUIPMENT
The cost and accumulated depreciation of property, plant, and equipment at
May 8, 2002, and August 31, 2001, together with the related estimated useful
lives used in computing depreciation and amortization, are reflected below:
May 8, August 31, Estimated
2002 2001 Useful Lives
_________ _________ ____________
(In thousands)
Land $ 73,664 $ 79,977 -
Restaurant equipment and
furnishings 136,427 135,670 3 to 15 years
Buildings 236,556 236,091 20 to 40 years
Leasehold and leasehold
improvements 33,009 35,582 Term of leases
Office furniture and equipment 11,978 11,486 5 to 10 years
Transportation equipment 897 937 5 years
Construction in progress - 289 -
________ ________
492,531 500,032
Less accumulated depreciation
and amortization 200,285 194,852
________ ________
$292,246 $305,180
________ ________
Note 5: INSURANCE
In the summer of 2001, the Company initiated an accident-prevention program
designed to increase employee and guest safety. Shortly thereafter, to enhance
the program and to better control costs, the Company began managing new claims
in-house.
The Company obtains reserve estimates from key members of its risk management
department. These employees manage and review detailed information associated
with each claim. In addition, actuarial analysts review reserve estimates on
the claims. The analysts use actuarial techniques, including those focused on
historical claims, to arrive at their estimates. Consistent with prior
practice, the Company regularly reviews its recorded liability balance to
ensure that it falls within the range of estimates of the Company's risk
management staff and that of the actuarial analysts.
The expenses for workers' compensation and general liability are estimated
based on all known claims information. For the first three quarters of fiscal
2002, both the actuarial analysts and the Company's risk management staff
concluded that employee and guest injury claims under the new program are
occurring at a much lower level than those experienced in the first three
quarters of fiscal 2001.
Workers' Compensation Expense
___________________________________________________________________________
Period Ended
May 8, May 31, Decrease
2002 2001 (Increase)
______ _______ __________
(In thousands)
3rd quarter $ 545 $2,887 $2,342
______ ______ ______
Year to date $4,123 $7,379 $3,256
______ ______ ______
Actual claims settlements and expenses may differ from interim loss provisions.
The Company cannot make any assurances as to the ultimate level of claims under
the new in-house safety program or whether declines in incidence of claims as
well as claims costs experienced year to date in fiscal 2002 will continue in
future periods.
Note 6: DEBT
SENIOR DEBT
At August 31, 2001, the Company had a credit facility balance of $122 million
with a syndicate of four banks. Weakened demand and increased recessionary
trends following September 11, 2001, 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 waived its noncompliance with first-quarter EBITDA
requirements, reset the EBITDA requirement to $16.6 million for fiscal 2002,
and limited capital expenditures for the year to $15 million. Per the amended
credit agreement, EBITDA is defined as operating income before interest, taxes,
depreciation, amortization, and the noncash portion of Harris J. Pappas's and
Christopher J. Pappas's stock option compensation. (See Note 9.) The Company
expects to be in compliance with its revised covenants for the remainder of
fiscal year 2002.
Three payments were made to date in fiscal 2002 which reduced the balance of
the credit facility to $120.9 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 three land sales totaling
$1.1 million.
SUBORDINATED DEBT
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
(London InterBank Offered Rate) plus 2%, payable quarterly, and have a stated
redemption date of March 1, 2011. Interest through September 1, 2003, may be
paid in a combination of cash, common stock, or both at the Company's election,
subject to certain restrictions on the amount of stock issued. All interest to
date has been paid in cash.
Notwithstanding any accrued interest that may also be converted to stock, the
notes are convertible into the Company's common stock at $5.00 per share for
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 market price of the
Company's stock on the commitment date (as determined by the closing price on
the New York Stock Exchange on the date of issue) was $7.34. The difference
between the market price and strike price of $5.00, or $2.34 per share,
multiplied by the 2,000,000 convertible shares equals approximately $4.7
million. Applicable accounting principles require that this amount, which
represents the intrinsic value of the beneficial conversion feature, be
recorded as both a component of paid-in capital and a discount from the $10
million.
The carrying value of the notes at August 31, 2001, net of the unamortized
discount, was approximately $5.4 million. The carrying value of the notes at
May 8, 2002, was approximately $5.7 million.
The discount of $4.7 million is being amortized to interest expense over a
period of ten years. The Company has amortized $334,000 of this discount
during the fiscal year to date ended May 8, 2002. The amortization of the note
discount to date is as follows:
Balance of Convertible Subordinated Notes
_________________________________________
Original Discount
Period-End Balance Balance Net Balance
_______________________________________________________________________________
(In thousands)
As of June 29, 2001 $10,000 $(4,680) $5,320
As of August 31, 2001 10,000 (4,599) 5,401
As of May 8, 2002 10,000 (4,265) 5,735
EFFECT OF CONVERTIBLE NOTES AND OTHER SECURITIES ON EARNINGS PER SHARE
Potentially dilutive securities, which include the convertible subordinated
notes and stock options, are antidilutive in loss periods. As the Company had
a net loss for the quarter and year to date, earnings per share assuming
dilution equals basic earnings per share.
Note 7: IMPAIRMENT OF LONG-LIVED ASSETS AND RESTAURANT CLOSINGS
In accordance with Company guidelines, management periodically reviews the
financial performance of each restaurant for indicators of impairment or
indicators that closure would be appropriate. Where indicators are present,
such as three full fiscal years of negative cash flows or other unfavorable
market conditions, the carrying values of assets are written down to the
estimated future discounted cash flows or fully written off in the case of
negative cash flows anticipated in the future. Estimated future cash flows are
based upon regression analyses generated from similar Company restaurants,
discounted at the Company's weighted-average cost of capital.
No restaurants have been impaired during fiscal 2002. The Company did close
one restaurant not previously designated for closure. The net quarterly
provision for asset impairment and restaurant closings includes the loss
associated with closing the restaurant offset by the charge reversals for two
lease settlements that were slightly more favorable than originally
anticipated.
During fiscal 2001, the Company recorded a pretax charge of $30.4 million as a
result of its reviews for impairments in accordance with SFAS 121 and
assessments of closure costs. The principal components of the fiscal 2001
charge were as follows:
RESTAURANTS DESIGNATED FOR CLOSURE
Charges of $11.6 million were incurred for the closing of 15 underperforming
restaurants; subsequently, a total of 12 were closed during the first three
quarters of fiscal year 2002. (As explained below, two other restaurants were
closed for remodel and conversion to new 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, and other exit costs. Employee severance costs were not accrued as of
August 31, 2001, but were paid out and primarily expensed in the period of
closure. As of May 8, 2002, approximately 531 employees have been terminated
due to restaurant closings since September 1, 2001.
IMPAIRED RESTAURANTS
Charges of $17.0 million were incurred for asset impairment of 13 restaurants
that the Company continues to operate. In accordance with SFAS 121, the
properties were written down to the estimated future discounted cash flows or
fully written off in the case of negative future cash flows.
PROPERTY UNDER DISSOLVED JOINT VENTURE
Charges of $0.8 million were incurred primarily for the impairment of one
property operated under a joint venture with Waterstreet, Inc. The joint
venture, L&W Seafood, Inc., was terminated in 1999. However, the property used
by the joint venture was retained for a time to evaluate its potential use.
This location remained vacant for over a year, after which time the Company
decided against retaining it. This property was written down to its estimated
net realizable value and was sold in fiscal year 2001.
NEW CONCEPTS
Charges of $1.0 million were associated with the write-off of assets for two
locations that were slated for remodel and conversion to new concepts before
the end of fiscal year 2002. The Company closed both units by October 31,
2001. Property that could not be salvaged, transferred, or effectively reused
was written off. One of the two locations was reopened as a seafood restaurant
in the second quarter of fiscal 2002.
OPERATING RESULTS FOR RESTAURANTS DESIGNATED FOR CLOSURE
The comparative quarterly and year-to-date results of operations for the 15
restaurants designated for closure at August 31, 2001, were as follows:
Quarter Ended Three Quarters Ended
May 8, May 31, May 8, May 31,
2002 2001 2002 2001
________ ________ ________ ________
(84 days) (92 days) (250 days) (273 days)
(In thousands)
Sales $1,114 $5,069 $5,508 $14,840
Operating loss (674) (1,103) (2,667) (2,860)
RESERVE FOR RESTAURANT CLOSINGS
All material cash outlays associated with prior closure plans were completed by
August 31, 2001. Under the current plan, the Company had a reserve for
restaurant closings of $3.2 million at May 8, 2002. Excluding lease
termination settlements, it is anticipated that all material cash outlays
required for the restaurant closings planned as of August 31, 2001, will be
made prior to August 31, 2002. The following is a summary of the types and
amounts recognized as restaurant-closure costs together with cash payments
under the fiscal year 2001 plan through the period ended May 8, 2002:
Reserve Balance
______________________________________________________
Lease Legal and Other
Settlement Professional Workforce Exit Total
Costs Fees Severance Costs Reserve
_______________________________________________________
(In thousands)
As of August 31, 2001 $4,206 $ - $ - $ 300 $ 4,506
Cash receipts (payments) (856) - (130) (126) (1,112)
Other additions
(reductions) (373) - 130 - (243)
______ ____ ____ ____ ______
As of May 8, 2002 $2,977 $ - $ - $174 $3,151
______ ____ ____ ____ ______
Note 8: COMMITMENTS AND CONTINGENCIES
OFFICER LOANS
In fiscal 1999, the Company guaranteed loans of approximately $1.9 million
relating to purchases of Company stock by officers of the Company. Under the
officer loan program, shares were purchased and funding was obtained from
JPMorgan Chase Bank. As of May 8, 2002, the notes, which mature in fiscal 2004,
have an outstanding balance of approximately $1.6 million. In the event of
possible default, the Company would purchase the loans from JPMorgan Chase
Bank, become holder of the notes, record the receivables, and pursue collection
in the event that note requirements are not met. The purchased Company stock
has been and can be used by borrowers to satisfy a portion of their loan
obligation. As of May 8, 2002, based on the market price on that day,
approximately $712,000, or 44% of the note balances, could have been covered by
stock, while approximately $902,000, or 56%, would have remained outstanding.
PENDING CLAIMS AND LAWSUITS
The Company is presently, and from time to time, subject to pending claims and
lawsuits arising in the ordinary course of business. In the opinion of
management, resolution of these pending legal proceedings will not have a
material adverse effect on the Company's operations or consolidated financial
position.
Note 9: DEFERRED COMPENSATION - EXECUTIVE STOCK OPTIONS
In connection with their employment agreements effective March 9, 2001, the CEO
and COO were granted a total of approximately 2.2 million stock options. From
that date through fiscal 2004, the Company will recognize a total of $5.2
million in noncash compensation expense associated with these options. A total
of $905,000 was recognized for the first three quarters of fiscal 2002, while
cumulatively for fiscal 2001 and 2002, $2.8 million has been recognized to
date.
Note 10: DERIVATIVE FINANCIAL INSTRUMENTS
The Company adopted Statement of Financial Accounting Standards No. 133 (SFAS
133), "Accounting for Derivative Instruments and Hedging Activities," and its
amendments, Statements No. 137 and 138, on September 1, 2000. SFAS 133
requires that all derivative instruments be recorded on the balance sheet at
fair value. Pursuant to this standard, the Company designated its Interest
Rate Protection Agreements (Swaps) as cash flow hedge instruments. Swaps
have been used to manage exposure to interest rate movement by effectively
changing the variable rate to a fixed rate. The critical terms of the Swaps
and the interest-bearing debt associated with the Swaps were the same;
therefore, the Company assumed that there was no ineffectiveness in the hedge
relationship. Changes in fair value of the Swaps are recognized in other
comprehensive income (loss), net of tax effects, until the hedged items are
recognized in earnings. Due to declining interest rates and in anticipation of
additional future unfavorable interest rate changes, the Company terminated the
Swaps on July 2, 2001, for a cash payment of $1.3 million, including accrued
interest of $163,000.
In accordance with SFAS 133, the loss of $1.1 million is being recognized as
interest expense over the original term of the Swaps (through June 30, 2002).
At May 8, 2002, $108,000, net of taxes of $58,000, remains in accumulated other
comprehensive loss.
Note 11: 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:
Quarter Ended
May 8, May 31,
2002 2001
____________ ____________
(84 days) (92 days)
(In thousands)
Net income (loss) $ (174) $ (1,066)
Other comprehensive income, net of taxes:
Net derivative income (loss), net of taxes
of $123 - (228)
Reclassification adjustment for gains included
in net income (loss), net of taxes of $51 - 95
Reclassification adjustment for loss recognized on
termination of interest rate swaps, net of taxes
of $87 161 -
________ ________
Comprehensive income (loss) $ (13) $ (1,199)
_______ _______
Three Quarters Ended
May 8, May 31,
2002 2001
__________ __________
(250 days) (273 days)
(In thousands)
Net income (loss) $(7,681) $(12,498)
Other comprehensive income, net of taxes:
Cumulative effect of a change in accounting
for derivative financial instruments upon
adoption of SFAS 133, net of taxes of $61 - 114
Net derivative income (loss), net of taxes of $528 - (981)
Reclassification adjustment for gains included in
net income (loss), net of taxes of $50 - 93
Reclassification adjustment for loss recognized
on termination of interest rate swaps, net of
taxes of $261 484 -
_______ ________
Comprehensive income (loss) $(7,197) $(13,272)
_______ ________
Note 12: RELATED PARTIES
PROFIT SHARING AND RETIREMENT TRUST PLAN INVESTMENT ADVISORS
A director of the Company, Ronald K. Calgaard, is also a director of Austin,
Calvert & Flavin, Inc., a firm that provides investment services for the
Company's profit sharing and retirement trust plan (the Plan). The Plan
currently uses the services of four investment advisors. During the three
quarters ended May 8, 2002, the Plan paid Austin, Calvert & Flavin, Inc. a
total of approximately $46,000.
AFFILIATE SERVICES AGREEMENT
The CEO and COO of the Company, Christopher J. Pappas and Harris J. Pappas,
respectively, own a restaurant company that provides services to Luby's, Inc.
as detailed in an Affiliate Services Agreement. Under the terms of that
agreement, the restaurant company has provided accounting, architectural, and
general business services; basic equipment maintenance; specialized equipment
fabrication; and warehouse leasing. The scope and pricing of services rendered
under the Affiliate Services Agreement are reviewed periodically by the Finance
and Audit Committee of the Company's Board. The Committee uses the services of
the Company's external auditors and independent valuation consultants to
monitor the transactions associated with the agreement for fairness.
As part of this Affiliate Services Agreement, the Company entered into a three-
year lease which commenced on June 1, 2001, and ends May 31, 2004. The amount
paid by the Company pursuant to the terms of this lease was approximately
$60,000 for the three quarters ended May 8, 2002. The agreement also includes
the costs incurred for modifications to existing equipment, as well as custom-
fabrication, including stainless steel stoves, shelving, rolling carts, and
chef tables. The total cost of these services for fiscal 2002 year to date was
$461,000. The Company is currently reviewing the Affiliate Services Agreement
to address revisions that may be appropriate given the declining level and
scope of services being provided. All amounts charged under the Affiliate
Services Agreement have been paid except for the most recent professional and
consulting fees of approximately $3,000.
OPERATING LEASE
In a separate contract from the Affiliate Services Agreement, pursuant to the
terms of a ground lease dated March 25, 1994, the Company paid rent to PHCG
Investments for a Luby's restaurant operating in Dallas, Texas. Christopher J.
Pappas and Harris J. Pappas are general partners of PHCG Investments. The
amount paid by the Company to PHCG Investments pursuant to the terms of the
lease agreement during the fiscal year to date was approximately $63,000. Rents
paid for both the ground lease and the Affiliate Services Agreement lease
combined represent 2.2% of total rents paid by the Company for the three
quarters ended May 8, 2002.
SUBORDINATED DEBT
As described in Note 6 in the section entitled "Subordinated Debt," the CEO and
COO loaned the Company a total of $10 million in the form of convertible
subordinated notes to support the Company's future operating cash needs. The
entire balance was outstanding as of May 8, 2002.
BOARD OF DIRECTORS
Pursuant to the terms of a separate Purchase Agreement dated March 9, 2001,
entered into by and among the Company, Christopher J. Pappas and Harris J.
Pappas, the Company agreed to submit three persons designated by Christopher J.
Pappas and Harris J. Pappas as nominees for election for directors. Messrs.
Pappas designated themselves and Frank Markantonis as their nominees for
directors, all of whom were subsequently elected. Christopher J. Pappas and
Harris J. Pappas are brothers. As disclosed in the proxy statement for the
January 11, 2002, annual meeting of shareholders, Frank Markantonis is an
attorney whose principal client is Pappas Restaurants, Inc., an entity owned by
Harris J. Pappas and Christopher J. Pappas.
KEY MANAGEMENT PERSONNEL
Ernest Pekmezaris, the Chief Financial Officer of the Company, is also the
Treasurer of Pappas Restaurants, Inc. Compensation for the services provided
by Mr. Pekmezaris to Pappas Restaurants, Inc. is paid entirely by that entity.
Peter Tropoli, the Senior Vice President-Administration of the Company, is an
attorney who, from time to time, has provided litigation services to entities
controlled by Christopher J. Pappas and Harris J. Pappas. Mr. Tropoli is the
stepson of Frank Markantonis, who, as previously mentioned, is a director of
the Company.
Paulette Gerukos, Administration Assistant of the Human Resources Department of
the Company, is the sister-in-law of Harris J. Pappas, the Chief Operating
Officer.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of 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 May 8, 2002, and the audited
financial statements filed on Form 10-K for the fiscal year ended August 31,
2001.
OVERVIEW
As of May 8, 2002, Luby's, Inc. owned and operated 198 restaurants located
primarily in the southern and southwestern United States. The Company provides
its customers with a wide variety of freshly cooked foods at reasonable prices
in an attractive and informal environment. The Company's primary competitors
include family-style and casual-dining restaurants, buffets, cafeterias, and
quick-service restaurants in the home-meal-replacement category.
13-PERIOD YEAR
The Company modified its accounting fiscal year from one separated into 12
calendar months to one separated into 13, 28-day intervals. Although this
change generates notable timing differences when comparing the current to the
prior fiscal year, financial results on an annual basis should be substantially
unaffected. The primary purpose for this change was to provide more consistent
timing and comparability in the future.
RESULTS OF OPERATIONS
The operating performance of the Company is evaluated using several measures,
one of which is EBITDA. Per the Company's amended credit agreement, EBITDA is
defined as operating income before interest, taxes, depreciation, amortization,
and the noncash portion of Harris J. Pappas's and Christopher J. Pappas's stock
option compensation. While the Company and many in the financial community
consider EBITDA to be an important measure of operating performance, it should
be considered in addition to, but not as a substitute for or superior to, other
measures of financial performance prepared in accordance with accounting
principles generally accepted in the United States, such as operating income
and net income. In addition, the Company's definition of EBITDA is not
necessarily comparable to similarly titled measures reported by other
companies.
QUARTER ENDED MAY 8, 2002, COMPARED TO THE QUARTER ENDED MAY 31, 2001
Sales decreased $28.6 million, or 23.5%, in the third quarter of fiscal 2002
compared to the third quarter of fiscal 2001. Eight fewer days in the current
quarter accounted for approximately $9.1 million of the total sales decline.
Revenues were also $5.5 million lower due to the closure of 18 restaurants
since May 31, 2001. Excluding the effect of fewer days and restaurants in this
quarter, same-store sales declined $14.0 million, or 13.2%, for the quarter.
Cost of food decreased $6.4 million, or 21.1%, due primarily to a decline in
sales significantly impacted by fewer restaurants and days. Food cost as a
percentage of sales increased slightly from 24.9% to 25.7% in the third quarter
in comparison with the same period last year. In the prior year, price
increases in that quarter affected food margins.
Payroll and related costs decreased $12.9 million, or 31.2%, due primarily to
restaurant closures, eight fewer days in the quarter, and lower workers'
compensation expense. The ratio of payroll costs to sales improved
significantly from 33.9% to 30.5% in the third quarter in comparison with the
same period last year. Of the total reduction, $2.3 million, or 18.2% of the
total decline, is due to lower workers' compensation costs under the new in-
house claims management program initiated in October 2001.
Occupancy and other operating expenses decreased $8.5 million, or 19.9%.
Although the dollar decrease is primarily due to fewer stores, other factors
contributed to the fluctuation. Utility costs also decreased due to lower
energy costs coupled with moderate temperatures and conservation. Advertising
costs declined due to reduced emphasis on print and television advertising.
Depreciation was lower due to write-offs and impairments at August 31, 2001,
while food-to-go packaging costs further declined due to the intentional
redirection at many locations to inside dining.
The provision for asset impairments and restaurant closings increased by
$128,000 due to an additional store closing, net of lease settlements that were
more favorable than anticipated. There were no charges in this category in the
same period of fiscal 2001.
General and administrative expenses decreased $1.7 million, or 26.6%, due
primarily to lower officers' compensation, officers' life insurance, customer
research charges, and professional and consulting fees. Officers' compensation
decreased principally due to a reduction in relative headcount. Officers' life
insurance decreased principally due to a one-time $216,000 benefit realized on
the surrender of officer life insurance policies during the current fiscal
year. No customer research expenditures were incurred during the current
quarter. Charges related to the proxy and restructuring advice contributed to
the higher professional costs in the prior year. Consulting fees decreased
principally due to termination of the search for new senior management and a
reduction in other consulting services.
Interest expense decreased $1.2 million, or 34.4%, due primarily to a lower
effective interest rate on outstanding debt, the payoff of the loans on
surrendered officers' life insurance policies, and eight fewer days of interest
expense in the quarter, offset by interest on the $10 million in new
subordinated debt, amortization of the loss on interest rate Swaps, and the
amortization of amendment fees for the credit facility.
Other income decreased $534,000 principally due to lower gains on sales of
properties.
The income tax benefit decreased by $491,000, or 85.5%, due primarily to a
significantly lower incurred loss in fiscal 2002 versus fiscal 2001.
EBITDA, excluding noncash stock compensation, increased by $38,000 in the third
quarter in comparison with the same period last year.
THREE QUARTERS ENDED MAY 8, 2002, COMPARED TO THE THREE QUARTERS ENDED MAY 31,
2001
Sales decreased $68.3 million, or 19.6%, for the first three quarters of fiscal
2002 compared to the first three quarters of fiscal 2001. Twenty-three fewer
days in the first three quarters of fiscal 2002 accounted for approximately
$28.6 million of the total sales decline. Revenues were also $15.6 million
lower due to the closure of 35 restaurants since August 2000. Excluding the
effect of fewer days and restaurants, same-store sales would have declined
$24.1 million, or 8.1%, for the three quarters.
Cost of food decreased $17.6 million, or 19.8%, due primarily to a decline in
sales significantly impacted by fewer restaurants and days. Food cost as a
percentage of sales improved slightly for the first three quarters of fiscal
2002 in comparison with the same period last year due to less price
discounting.
Payroll and related costs decreased $24.5 million, or 20.8%, due primarily to
restaurant closures, twenty-three fewer days in the first three quarters of
fiscal 2002, and lower workers' compensation expense. Wages as a percentage of
sales increased slightly primarily due to the first quarter of fiscal 2002,
which included September 11, 2001. Management initiatives to improve labor
scheduling are currently in place and have led to improvements in labor expense
in the second and third quarters of fiscal 2002 versus the first quarter of
fiscal 2002. This category has also declined due to lower workers'
compensation costs under the new in-house claims management program.
Occupancy and other operating expenses decreased $19.3 million, or 15.6%.
Although the dollar decrease is primarily due to fewer stores, in most cases,
other factors also contributed to the change. Utility costs also decreased due
to lower energy prices coupled with moderate temperatures and conservation.
Advertising costs declined due to a planned reduction in print and television
advertising. Depreciation was lower due to write-offs and impairments at
August 31, 2001, while food-to-go packaging costs further declined due to the
intentional redirection at many locations to inside dining.
The provision for asset impairments and restaurant closings decreased by $9.9
million, or 97.5%, primarily due to charges of $259,000 recorded to date in
fiscal 2002 associated mainly with employee termination costs in comparison
with various asset impairments totaling $10.2 million recorded in fiscal 2001.
General and administrative expenses decreased $4.0 million, or 20.7%, due
primarily to lower officers' compensation, professional and consulting fees,
and customer research charges. Officers' compensation decreased principally due
to a reduction in relative headcount. Significant expenditures related to the
proxy and restructuring advice were a contributing factor to higher
professional costs in the prior year. Consulting services decreased
principally due to termination of the search for new senior management and a
reduction in other consulting fees. No customer research expenditures were
incurred during the current quarter.
Total interest expense decreased $1.2 million, or 13.9%, due primarily to a
lower effective interest rate on outstanding debt, the payoff of the loans on
surrendered officers' life insurance policies, and twenty-three fewer days of
interest expense for the first three quarters of fiscal 2002 in comparison to
the first three quarters of fiscal 2001. These savings were partially offset
by interest on the $10 million in new subordinated debt, amortization of the
loss on interest rate Swaps, and amortization of amendment fees for the credit
facility.
Other income decreased $553,000 due primarily to lower gains on sales of
properties partially offset by a decrease in property tax late-payment
penalties and other miscellaneous costs.
The reduction in the income tax benefit of $2.8 million, or 42.1%, was due
primarily to a significantly lower incurred loss in fiscal 2002 versus fiscal
2001.
EBITDA, excluding noncash stock compensation, decreased by $4.7 million in the
first three quarters of fiscal 2002 versus the corresponding quarters of fiscal
2001. This decrease was due primarily to the loss incurred in the first
quarter of fiscal 2002, which included September 11, 2001.
LIQUIDITY AND CAPITAL RESOURCES
CASH AND WORKING CAPITAL
Cash and cash equivalents increased by $1.4 million from the end of the
preceding fiscal year to May 8, 2002. A net improvement in operating cash flow
and an income tax refund of $6.8 million were offset by property tax payments.
Approximately $0.4 million of the $5.3 million total income tax receivable
balance as of May 8, 2002, relates to the prior fiscal year and is expected to
be refunded before the end of fiscal 2002. The remainder relates to current
year tax benefits that are also recoverable in the form of refunds in the next
fiscal year due to recently enacted changes in tax legislation that will allow
for extended carrybacks of net operating losses.
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 May 8, 2002, the Company had a working
capital deficit of $10.4 million, in comparison to a working capital deficit of
$13.9 million at August 31, 2001. The lower deficit was primarily attributable
to an increase in income tax receivable and a decrease in accrued expenses and
other liabilities; this was offset by an increase in payables.
Capital expenditures for the fiscal year to date were $8.5 million. All
capital expenditures for fiscal 2002 are being funded from cash flows from
operations and cash equivalents. As of the quarter-end, the Company owned 11
properties held for sale, including six undeveloped land sites. The Company
also has 11 properties held for future use.
Capital expenditures for fiscal 2002 are expected to approximate no more than
$15 million. The Company continues to focus on improving the appearance,
functionality, and sales at existing restaurants. These efforts also include,
where feasible, remodeling certain locations to other dining concepts. One
existing property was remodeled in the second quarter to create the Company's
first new concept, Luby's Seafood, in Huntsville, Texas. Potential dining
themes for other closed restaurants are still under consideration.
LONG-TERM DEBT
As of September 1, 2001, the Company had a balance of $122 million outstanding
under the credit facility. Year to date for fiscal year 2002, three payments
totaling $1.1 million were made to the credit facility, which brought the
balance to $120.9 million as of May 8, 2002. There is no ability to borrow
additional funds under the credit facility.
Due to reduced demand after the events of September 11, 2001, and the resulting
impact on the economy, the Company was unable to meet its first-quarter fiscal
2002 EBITDA covenant requirement. Accordingly, the Company obtained a waiver
and amendment to its credit facility dated December 5, 2001, which waived its
EBITDA noncompliance, reset remaining fiscal 2002 quarterly EBITDA targets to a
total of $16.6 million for the year, and limited capital expenditures to $15
million.
The current maturity date of the Company's credit facility is April 30, 2003,
with a provision for further extension to April 30, 2004, given satisfaction of
"Further Extension Conditions" detailed in the Waiver and Fifth Amendment to
the Credit Facility. The conditions stipulate a higher minimum annual EBITDA
of $20 million for fiscal 2002, that no default has occurred, that all required
payments have been made, and that the Company pay an administrative fee at the
time of extension. The Company is engaged in ongoing discussions with members
of its bank group regarding refinancing. Although the Company expects that no
default will occur and all payments will be made timely, it intends to explore
refinancing or alternative financing at the proper time, if necessary.
Based on current projections for fiscal 2002, management believes that the
Company's operating results will generate sufficient working capital, along
with available cash, to sustain operations and meet required loan covenants and
interest payment obligations throughout the year. In the event that the
Company is unable to refinance the existing debt at maturity, it would be
classified as current and the Company's credit facility lenders would have the
right to exercise any and all remedies, including the right to demand immediate
repayment of the entire amount outstanding ($120.9 million at May 8, 2002) or
the right to pursue foreclosure on assets pledged as collateral. As of May 8,
2002, $250 million of the Company's total book value, or 72.6% of its total
assets, in owned real estate, improvements, equipment, and fixtures was pledged
as collateral under the credit facility.
If the Company is required to arrange alternate financing, it may not be able
to obtain such financing from traditional commercial lenders. The Company may
have to arrange financing through high-yield debt or conduct additional sales
of its equity securities through public or private financing. The Company
would be subject to higher than prevailing interest rates than would be
obtainable through commercial lenders if financing were arranged through high-
yield debt. Substantial and immediate dilution to existing shareholders would
likely result from sales of equity securities.
In the interim, the Company has taken steps to improve its fiscal 2002
operating results and anticipated cash flows, including cost-saving initiatives
in the areas of risk management, labor optimization, and purchasing.
VARIABLE-RATE DEBT
In prior fiscal years, the Company had Interest Rate Protection Agreements
(Swaps) that effectively fixed the interest rate on a portion of its floating-
rate debt under its line of credit. The Company terminated its Swaps effective
July 2, 2001, due to declining interest rates. The Company currently has a
total of $130.9 million in variable-rate debt: $120.9 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 Note 6.)
COMMITMENTS AND CONTINGENCIES
In connection with the Luby's Incentive Stock Plan as approved by the
shareholders of the Company at the January 8, 1999, annual meeting of
shareholders, the Company guaranteed loans in fiscal 1999 of approximately $1.9
million to enable officers to purchase stock in the Company. As of May 8, 2002,
the notes, which each officer obtained from JPMorgan Chase Bank and mature in
fiscal 2004, have a total outstanding balance of approximately $1.6 million.
The purchased Company stock can be used by the borrowers to satisfy a portion
of their obligation. The Company does not anticipate default on the loans by
any of the borrowers; however, in the event of default, the Company is
obligated to purchase the specific borrower's loan from JPMorgan Chase Bank and
would therefore become the holder of the note. If the Company becomes the
holder of any defaulted notes, it intends to pursue collection using all
available remedies. (See Note 8.)
AFFILIATE SERVICES AGREEMENT
The Company entered into an Affiliate Services Agreement effective August 31,
2001, with two companies, Pappas Partners, LP and Pappas Restaurants, Inc.,
which are restaurant businesses owned by Christopher J. Pappas and Harris J.
Pappas. Initially, one of the purposes of the agreement was to enhance certain
areas of the Company by utilizing management and operational support from the
Pappas entities. The Company has since hired its own employees in these areas,
and consequently, the scope of support services provided by the Pappas entities
has greatly declined.
As part of the Affiliate Services Agreement, the Company leases a facility
(Houston Service Center), which represents 21,000 square feet of shop
space and 5,664 square feet of office space, at a rental rate of $0.24 per
square foot per month. The office space is primarily used for dispatching
repair and maintenance service calls to the Company's restaurants. The
remainder of the facility is used primarily for repair and storage of new and
used equipment.
The agreement also includes the costs incurred for modifications to existing
equipment, as well as custom-fabrication, including stainless steel stoves,
shelving, rolling carts, and chef tables. These items are custom-designed to
fit the kitchens and are also engineered to give a longer service life than
comparable manufactured equipment.
The pricing of equipment, repair, and maintenance is set periodically and
evaluated on an ongoing basis. Based on a periodic review of third-party
pricing, it is management's opinion that pricing is set at or below market for
comparable goods and services.
The Finance and Audit Committee of the Company's Board of Directors uses
independent valuation consultants and the Company's external auditors to assist
in periodically monitoring the scope, pricing, and fairness of the transactions
associated with the Affiliate Services Agreement.
The following compares inception-to-date charges incurred under the Affiliate
Services Agreement to total general and administrative expenses, capital
expenditures, and occupancy and other costs:
Costs Incurred
___________________________________________________________________
(In thousands)
___________________________________________________________________
Total
Fiscal 1st 2nd 3rd Year to Total
Year Quarter Quarter Quarter Date for All % of
2001 2002 2002 2002 2002 Periods Total
___________________________________________________________________
<s> <c> <c> <c> <c> <c> <c> <c>
COSTS INCURRED UNDER
THE AFFILIATE SERVICES
AGREEMENT
General & adminis-
trative - profes-
sional services $ 51 $ 5 $ 3 $ - $ 8 $ 59 7.5%
Capital Expenditures
- custom-fabricated
and refurbished
equipment 200 301 16 136 453 653 82.5%
Occupancy and other
costs - Houston
Service Center
lease 20 20 20 20 60 80 10.0%
___________________________________________________________________
Total 271 326 39 156 521 792 100.0%
Less pass-through
amounts payable
to third parties (102) (81) (14) (130) (225) (327) (41.3)%
___________________________________________________________________
Net payable to
related party $ 169 $ 245 $ 25 $ 26 $ 296 $ 465 58.7%
___________________________________________________________________
APPLICABLE TOTAL
COMPANY COSTS
General & Adminis-
trative 25,355 5,348 5,360 4,707 15,415 40,770
Capital Expen
ditures 17,630 3,062 3,035 2,315 8,412 26,042
Occupancy &
Other Costs 166,533 36,384 34,208 34,044 104,636 271,169
__________________________________________________________
Total $209,518 $44,794 $42,603 $41,066 $128,463 $337,981
__________________________________________________________
COSTS INCURRED
UNDER THE AFFILATE
SERVICES AGREEMENT
AS A PERCENTAGE OF
APPLICABLE TOTAL
COMPANY COSTS 0.08% 0.55% 0.06% 0.06% 0.23% 0.14%
__________________________________________________________
TRENDS AND UNCERTAINTIES
SAME-STORE SALES
The restaurant business is highly competitive with respect to food quality,
concept, location, price, and service. The Company has experienced declining
same-store sales since 1996 as a result of uneven execution of food and
service, as well as increased industry-wide competition.
The following shows the comparative change in same-store sales:
Fiscal 2001 Fiscal 2002
_____________________________ ______________________
Q1 Q2 Q3 Q4 Q1 Q2 Q3
-6.8% -5.3% -0.4% -0.7% -2.7% -8.6% -13.2%
_____________________________ ______________________
The Company enacted price increases in the third and fourth quarters of fiscal
2001. The first quarter of fiscal 2002 includes September 11, 2001. In the
third quarter of fiscal 2002, the Company was able to maintain its comparative
cash flow level with declining sales by lowering related operating costs.
The Company may have additional opportunities to lower costs; however,
continued declines in net same-store sales could reduce operating cash flow.
If severe declines in cash flow were to develop, the Company's ability to
maintain compliance with the financial covenants of the credit facility could
be impaired. In such an event, the lender has the right to terminate the
credit facility, accelerate the maturity of any outstanding obligation under
that facility, and pursue foreclosure on assets pledged as collateral.
NEW PROGRAMS
Although there can be no assurance that the current strategies will prove to be
successful, the Company has initiated a number of programs since March 2001 to
address the decline in same-store sales, while increasing profitability by
building sales and prudently managing costs. The programs include:
- - Food excellence;
- - Service excellence;
- - Increased emphasis on employee training and development;
- - Targeted marketing;
- - Closure of certain underperforming restaurants;
- - New concept offerings; and
- - A new in-house safety and claims program.
IMPAIRMENT
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.
INSURANCE
Year-to-date workers' compensation expense has decreased substantially in
comparison with the prior fiscal year to date. Future related costs could
increase due to unforeseen circumstances.
MINIMUM WAGE
From time to time, the U.S. Congress considers an increase in the federal
minimum wage. The restaurant industry is intensely competitive, and in such
case, the Company may not be able to transfer all of the resulting increases in
operating costs to its customers in the form of price increases.
RESERVE FOR RESTAURANT CLOSINGS
The reserve declined from $4.5 million at August 31, 2001, to $3.2 million at
May 8, 2002, primarily due to the payment of lease settlement costs of
approximately $856,000 and further reductions associated with more favorable
lease settlements than originally anticipated.
CRITICAL ACCOUNTING POLICIES
The Company has identified the policies below as critical to its business and
the understanding of its results of operations. The Company believes it is
improbable that materially different amounts would be reported relating to the
accounting policies described below if other acceptable approaches were
adopted. However, application of these accounting policies involves the
exercise of judgment and use of assumptions as to future uncertainties;
therefore, actual results could differ from these estimates.
INCOME TAXES
The Company records the estimated future tax effects of temporary differences
between the tax bases of assets and liabilities and amounts reported in the
accompanying consolidated balance sheets, as well as operating loss and tax
credit carryforwards. The Company periodically reviews the recoverability of
any tax assets recorded on the balance sheet and provides allowances as
management deems necessary. Management makes judgments as to the
interpretation of the tax laws that might be challenged upon an audit and cause
changes to previous estimates of tax liability. In addition, the Company
operates within multiple taxing jurisdictions and is subject to audit in these
jurisdictions. In management's opinion, adequate provisions for income taxes
have been made for all years.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company periodically evaluates long-lived assets whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. In performing impairment reviews of individual restaurants, the
Company estimates future cash flows expected to result from the use of the
asset and its eventual disposition. The estimates of future cash flows, based
on reasonable and supportable assumptions and projections, require management's
subjective judgments. The time periods for estimating future cash flows is
often lengthy, which increases the sensitivity to assumptions made. Depending
on the assumptions and estimates used, the estimated future cash flows
projected in the evaluation of long-lived assets can vary within a wide range
of outcomes. The Company considers the likelihood of possible outcomes in
determining the best estimate of future cash flows.
INSURANCE RESERVES
The Company periodically reviews its workers' compensation and general
liability reserves to ensure reasonableness. The Company initiated an in-house
safety and claims program focused on safety training and rigorous scrutiny of
new claims, which has reduced costs significantly. Liability estimates are
obtained both from an actuarial firm and internal risk management staff. The
Company's recorded liability falls within the range of these two estimates.
Assumptions and judgments are used in evaluating this liability. The
possibility exists that future insurance-related liabilities could increase due
to unforeseen circumstances. (See Note 5.)
NEW ACCOUNTING PRONOUNCEMENTS
The Company reviewed recent accounting pronouncements, including SFAS 144,
entitled "Accounting for the Impairment or Disposal of Long-Lived Assets." The
provisions of SFAS 144 supersede SFAS 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of," and will take
effect in fiscal 2003 for the Company. At that time, the Company will ensure
existing policies are consistent with the provisions of SFAS 144. The Company
does not currently expect the adoption of SFAS 144 to have a material effect on
earnings or the financial position of the Company.
FORWARD-LOOKING STATEMENTS
The Company wishes to caution readers that various factors could cause its
actual financial and operational results to differ materially from those
indicated by forward-looking statements made from time to time in news
releases, reports, proxy statements, registration statements, and other written
communications (including the preceding sections of this Management's
Discussion and Analysis), as well as oral statements made from time to time by
representatives of the Company. Except for 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 and Form 10-Q.
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
Two former assistant managers of the Company have filed suit against the
Company in federal district court alleging violations of the Fair Labor
Standards Act and the commission of certain fraudulent acts by the Company.
The plaintiffs also seek authorization to represent a class of all assistant
managers employed by the Company throughout the United States who they claim,
on information and belief, are similarly without the requisite job duties and
responsibilities to be considered exempt from the overtime requirements of the
Fair Labor Standards Act. The Company has asserted that no class is
appropriate, that plaintiffs are exempt from the right to overtime under the
Fair Labor Standards Act under the white collar exemptions, and has denied any
misrepresentations. The complaint does not specify the total amount of damages
being sought. The Company believes that the allegations are unfounded and
intends to continue to diligently contest the claims of the plaintiffs.
Item 6. Exhibits and Reports on Form 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, and incorporated herein by reference).
4(b) - Amendment No. 1 dated December 19, 1991, to Rights Agreement dated
April 16, 1991 (filed as Exhibit 4(b) to the Company's Quarterly
Report on Form 10-Q for the quarter ended November 30, 1991, and
incorporated herein by reference).
4(c) - Amendment No. 2 dated February 7, 1995, to Rights Agreement dated
April 16, 1991 (filed as Exhibit 4(d) to the Company's Quarterly
Report on Form 10-Q for the quarter ended February 28, 1995, and
incorporated herein by reference).
4(d) - Amendment No. 3 dated May 29, 1995, to Rights Agreement dated
April 16, 1991 (filed as Exhibit 4(d) to the Company's Quarterly
Report on Form 10-Q for the quarter ended May 31, 1995, and
incorporated herein by reference).
4(e) - Amendment No. 4 dated March 8, 2001, to Rights Agreement dated
April 16, 1991 (filed as Exhibit 99.1 to the Company's Report on Form
8-A12B/A on March 22, 2001, and incorporated herein by reference).
4(f) - Credit Agreement dated February 27, 1996, among Luby's Cafeterias,
Inc., Certain Lenders, and NationsBank of Texas, N.A. (filed as
Exhibit 4(e) to the Company's Quarterly Report on Form 10-Q for the
quarter ended February 29, 1996, and incorporated herein by
reference).
4(g) - First Amendment to Credit Agreement dated January 24, 1997, among
Luby's Cafeterias, Inc., Certain Lenders, and NationsBank of Texas,
N.A. (filed as Exhibit 4(f) to the Company's Quarterly Report on Form
10-Q for the quarter ended February 28, 1997, and incorporated herein
by reference).
4(j) - Second Amendment to Credit Agreement dated July 3, 1997, among Luby's
Cafeterias, Inc., Certain Lenders, and NationsBank of Texas, N.A.
(filed as Exhibit 4(i) to the Company's Annual Report on Form 10-K for
the fiscal year ended August 31, 1997, and incorporated herein by
reference).
4(k) - Third Amendment to Credit Agreement dated October 27, 2000, among
Luby's, Inc., Certain Lenders, and Bank of America, N.A. (filed as
Exhibit 4(j) to the Company's Annual Report on Form 10-K for the
fiscal year ended August 31, 2000, and incorporated herein by
reference).
4(l) - Fourth Amendment to Credit Agreement dated July 9, 2001, among Luby's,
Inc., Bank of America, N.A., and other creditors of its bank group
(filed as Exhibit 4(l) to the Company's Quarterly Report on Form 10-Q
for the quarter ended May 31, 2001, and incorporated herein by
reference).
4(m) - Deed of Trust, Assignment, Security Agreement, and Financing Statement
dated July 2001, executed as part of the Fourth Amendment to Credit
Agreement (filed as Exhibit 4(m) to the Company's Quarterly Report on
Form 10-Q for the quarter ended May 31, 2001, and incorporated herein
by reference).
4(n) - Subordination and Intercreditor Agreement dated June 29, 2001, between
Harris J. Pappas and Christopher J. Pappas, Bank of America, N.A.
Agreement [as the bank group agent], and Luby's, Inc. (filed as
Exhibit 4(n) to the Company's Quarterly Report on Form 10-Q for the
quarter ended May 31, 2001, and incorporated herein by reference).
4(o) - Convertible Subordinated Promissory Note dated June 29, 2001, between
Christopher J. Pappas and Luby's, Inc. in the amount of $1,500,000
(filed as Exhibit 4(o) to the Company's Quarterly Report on Form 10-Q
for the quarter ended May 31, 2001, and incorporated herein by
reference).
4(p) - Convertible Subordinated Promissory Note dated June 29, 2001, between
Harris J. Pappas and Luby's, Inc. in the amount of $1,500,000 (filed
as Exhibit 4(p) to the Company's Quarterly Report on Form 10-Q for the
quarter ended May 31, 2001, and incorporated herein by reference).
4(q) - Convertible Subordinated Promissory Note dated June 29, 2001, between
Christopher J. Pappas and Luby's, Inc. in the amount of $3,500,000
(filed as Exhibit 4(q) to the Company's Quarterly Report on Form 10-Q
for the quarter ended May 31, 2001, and incorporated herein by
reference).
4(r) - Convertible Subordinated Promissory Note dated June 29, 2001, between
Harris J. Pappas and Luby's, Inc. in the amount of $3,500,000 (filed
as Exhibit 4(r) to the Company's Quarterly Report on Form 10-Q for the
quarter ended May 31, 2001, and incorporated herein by reference).
4(s) - Fifth Amendment to Credit Agreement dated December 5, 2001, among
Luby's, Inc., Bank of America, 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(c) - Management Incentive Stock Plan of Luby's Cafeterias, Inc. (filed as
Exhibit 10(i) to the Company's Annual Report on Form 10-K for the
fiscal year ended August 31, 1989, and incorporated herein by
reference).*
10(d) - Amendment to Management Incentive Stock Plan of Luby's Cafeterias,
Inc. adopted January 14, 1997 (filed as Exhibit 10(k) to the Company's
Quarterly Report on Form 10-Q for the quarter ended February 28, 1997,
and incorporated herein by reference).*
10(e) - Nonemployee Director Deferred Compensation Plan of Luby's Cafeterias,
Inc. adopted October 27, 1994 (filed as Exhibit 10(g) to the Company's
Quarterly Report on Form 10-Q for the quarter ended November 30, 1994,
and incorporated herein by reference).*
10(f) - Amendment to Nonemployee Director Deferred Compensation Plan of Luby's
Cafeterias, Inc. adopted January 14, 1997 (filed as Exhibit 10(m) to
the Company's Quarterly Report on Form 10-Q for the quarter ended
February 28, 1997, and incorporated herein by reference).*
10(g) - Amendment to Nonemployee Director Deferred Compensation Plan of Luby's
Cafeterias, Inc. adopted March 19, 1998 (filed as Exhibit 10(o) to the
Company's Quarterly Report on Form 10-Q for the quarter ended
February 28, 1998, and incorporated herein by reference).*
10(h) - Amended and Restated Nonemployee Director Stock Option Plan of Luby's,
Inc. approved by the shareholders of Luby's, Inc. on January 14, 2000
(filed as Exhibit 10(j) to the Company's Quarterly Report on Form 10-Q
for the quarter ended February 29, 2000, and incorporated herein by
reference).*
10(i) - Luby's Cafeterias, Inc. Supplemental Executive Retirement Plan dated
May 30, 1996 (filed as Exhibit 10(j) to the Company's Annual Report on
Form 10-K for the fiscal year ended August 31, 1996, and incorporated
herein by reference).*
10(j) - Amendment to Luby's Cafeterias, Inc. Supplemental Executive Retirement
Plan adopted January 14, 1997 (filed as Exhibit 10(r) to the Company's
Quarterly Report on Form 10-Q for the quarter ended February 28, 1997,
and incorporated herein by reference).*
10(k) - Amendment to Luby's Cafeterias, Inc. Supplemental Executive Retirement
Plan adopted January 9, 1998 (filed as Exhibit 10(u) to the Company's
Quarterly Report on Form 10-Q for the quarter ended February 28, 1998,
and incorporated herein by reference).*
10(l) - Amendment to Luby's Cafeterias, Inc. Supplemental Executive Retirement
Plan adopted May 21, 1999 (filed as Exhibit 10(q) to the Company's
Quarterly Report on Form 10-Q for the quarter ended May 31, 1999, and
incorporated herein by reference.)*
10(m) - Severance Agreement between Luby's, Inc. and Barry J.C. Parker dated
December 19, 2000 (filed as Exhibit 10(r) to the Company's Quarterly
Report on Form 10-Q for the quarter ended November 30, 2000, and
incorporated herein by reference.)*
10(o) - Luby's Incentive Stock Plan adopted October 16, 1998 (filed as Exhibit
10(cc) to the Company's Annual Report on Form 10-K for the fiscal year
ended August 31, 1998, and incorporated herein by reference).*
10(p) - Form of Change in Control Agreement entered into between Luby's, Inc.,
and each of its Senior Vice Presidents as of January 8, 1999 (filed as
Exhibit 10(aa) to the Company's Quarterly Report on Form 10-Q for the
quarter ended February 28, 1999, and incorporated herein by
reference).*
10(q) - Luby's, Inc. Deferred Compensation Plan effective June 1, 1999 (filed
as Exhibit 10(cc) to the Company's Quarterly Report on Form 10-Q for
the quarter ended May 31, 1999, and incorporated herein by
reference).*
10(r) - Registration Rights Agreement dated March 9, 2001, by and among
Luby's, Inc., Christopher J. Pappas, and Harris J. Pappas (filed as
Exhibit 10.4 to the Company's Current Report on Form 8-K dated
March 9, 2001, and incorporated herein by reference).
10(s) - Purchase Agreement dated March 9, 2001, by and among Luby's, Inc.
Harris J. Pappas, and Christopher J. Pappas (filed as Exhibit 10.1 to
the Company's Current Report on Form 8-K dated March 9, 2001, and
incorporated herein by reference).
10(t) - Employment Agreement dated March 9, 2001, between Luby's, Inc. and
Christopher J. Pappas (filed as Exhibit 10.2 to the Company's Current
Report on Form 8-K dated March 9, 2001, and incorporated herein by
reference).*
10(u) - Employment Agreement dated March 9, 2001, between Luby's, Inc. and
Harris J. Pappas (filed as Exhibit 10.3 to the Company's Current
Report on Form 8-K dated March 9, 2001, and incorporated herein by
reference).*
10(v) - Luby's, Inc. Incentive Bonus Plan for Fiscal 2001 (filed as Exhibit
10(z) to the Company's Annual Report on Form 10-K for the fiscal year
ended August 31, 2000, and incorporated herein by reference).*
10(w) - Luby's, Inc. Stock Option granted to Christopher J. Pappas on March 9,
2001 (filed as Exhibit 10(w) to the Company's Quarterly Report on Form
10-Q for the quarter ended May 31, 2001, and incorporated herein by
reference).*
10(x) - Luby's, Inc. Stock Option granted to Harris J. Pappas on March 9, 2001
(filed as Exhibit 10(x) to the Company's Quarterly Report on Form 10-Q
for the quarter ended May 31, 2001, and incorporated herein by
reference).*
10(y) - Affiliate Services Agreement dated August 31, 2001, by and among
Luby's, Inc., Christopher J. Pappas, Harris J. Pappas, Pappas
Restaurants, L. P., and Pappas Restaurants, Inc. (filed as Exhibit
10(y) to the Company's Annual Report on Form 10-K for the fiscal year
ended August 31, 2001, and refiled herewith to include signature
references and an exhibit that were inadvertently omitted).
10(z) - Ground Lease for a cafeteria site dated March 25, 1994, by and between
Luby's Cafeterias, Inc. and PHCG Investments, as amended by Lease
Amendment dated July 6, 1994 (filed as Exhibit 10(z) to the Company's
Annual Report on Form 10-K for the fiscal year ended August 31, 2001,
and incorporated herein by reference).
10(aa)- Lease Agreement dated June 1, 2001, by and between Luby's, Inc. and
Pappas Restaurants, Inc. (filed as Exhibit 10(aa) to the Company's
Annual Report on Form 10-K for the fiscal year ended August 31, 2001,
and incorporated herein by reference).
10(bb)- Final Severance Agreement and Release between Luby's, Inc. and Alan M.
Davis dated July 20, 2001 (filed as Exhibit 10(bb) to the Company's
Annual Report on Form 10-K for the fiscal year ended August 31, 2001,
and incorporated herein by reference). While in search for new
executive management, the Company entered into an employment agreement
with Mr. Davis in January 2001. The value of that one-year contract
was a year's salary upon termination. After new management was
secured, the Company finalized the exhibited agreement that provides
for the payment of monthly consulting fees to Mr. Davis until July
2002, but releases the Company from all prior employment commitments.*
10(cc)- Consultant Agreement between Luby's Restaurants Limited Partnership
and Alan M. Davis dated July 20, 2001 (filed as Exhibit 10(cc) to the
Company's Annual Report on Form 10-K for the fiscal year ended
August 31, 2001, and incorporated herein by reference).*
10(dd)- Luby's, Inc. Amended and Restated Nonemployee Director Phantom Stock
Plan effective September 28, 2001.*
11 - Statement re computation of per share earnings.
99(a) - Corporate Governance Guidelines of Luby's, Inc., as amended
October 25, 2001 (filed as Exhibit 99(a) to the Company's Quarterly
Report on Form 10-Q for the quarter ended February 13, 2002, and
incorporated herein by reference).
*Denotes management contract or compensatory plan or arrangement.
B. Reports on Form 8-K
No reports on Form 8-K have been filed during the 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 J. Pappas
________________________
Christopher J. Pappas
President and
Chief Executive Officer
By:/s/Ernest Pekmezaris
________________________
Ernest Pekmezaris
Senior Vice President and
Chief Financial Officer
Dated: June 19, 2002
EXHIBIT INDEX
3(a) - Certificate of Incorporation of Luby's, Inc., as currently in effect
(filed as Exhibit 3(b) to the Company's Quarterly Report on Form 10-Q
for the quarter ended May 31, 1999, and incorporated herein by
reference).
3(b) - Bylaws of Luby's, Inc. as currently in effect (filed as Exhibit 3(c)
to the Company's Quarterly Report on Form 10-Q for the quarter ended
February 28, 1998, and incorporated herein by reference).
4(a) - Description of Common Stock Purchase Rights of Luby's Cafeterias,
Inc., in Form 8-A (filed April 17, 1991, effective April 26, 1991,
File No. 1-8308, and incorporated herein by reference).
4(b) - Amendment No. 1 dated December 19, 1991, to Rights Agreement dated
April 16, 1991 (filed as Exhibit 4(b) to the Company's Quarterly
Report on Form 10-Q for the quarter ended November 30, 1991, and
incorporated herein by reference).
4(c) - Amendment No. 2 dated February 7, 1995, to Rights Agreement dated
April 16, 1991 (filed as Exhibit 4(d) to the Company's Quarterly
Report on Form 10-Q for the quarter ended February 28, 1995, and
incorporated herein by reference).
4(d) - Amendment No. 3 dated May 29, 1995, to Rights Agreement dated
April 16, 1991 (filed as Exhibit 4(d) to the Company's Quarterly
Report on Form 10-Q for the quarter ended May 31, 1995, and
incorporated herein by reference).
4(e) - Amendment No. 4 dated March 8, 2001, to Rights Agreement dated
April 16, 1991 (filed as Exhibit 99.1 to the Company's Report on Form
8-A12B/A on March 22, 2001, and incorporated herein by reference).
4(f) - Credit Agreement dated February 27, 1996, among Luby's Cafeterias,
Inc., Certain Lenders, and NationsBank of Texas, N.A. (filed as
Exhibit 4(e) to the Company's Quarterly Report on Form 10-Q for the
quarter ended February 29, 1996, and incorporated herein by
reference).
4(g) - First Amendment to Credit Agreement dated January 24, 1997, among
Luby's Cafeterias, Inc., Certain Lenders, and NationsBank of Texas,
N.A. (filed as Exhibit 4(f) to the Company's Quarterly Report on Form
10-Q for the quarter ended February 28, 1997, and incorporated herein
by reference).
4(j) - Second Amendment to Credit Agreement dated July 3, 1997, among Luby's
Cafeterias, Inc., Certain Lenders, and NationsBank of Texas, N.A.
(filed as Exhibit 4(i) to the Company's Annual Report on Form 10-K for
the fiscal year ended August 31, 1997, and incorporated herein by
reference).
4(k) - Third Amendment to Credit Agreement dated October 27, 2000, among
Luby's, Inc., Certain Lenders, and Bank of America, N.A. (filed as
Exhibit 4(j) to the Company's Annual Report on Form 10-K for the
fiscal year ended August 31, 2000, and incorporated herein by
reference).
4(l) - Fourth Amendment to Credit Agreement dated July 9, 2001, among Luby's,
Inc., Bank of America, N.A., and other creditors of its bank group
(filed as Exhibit 4(l) to the Company's Quarterly Report on Form 10-Q
for the quarter ended May 31, 2001, and incorporated herein by
reference).
4(m) - Deed of Trust, Assignment, Security Agreement, and Financing Statement
dated July 2001, executed as part of the Fourth Amendment to Credit
Agreement (filed as Exhibit 4(m) to the Company's Quarterly Report on
Form 10-Q for the quarter ended May 31, 2001, and incorporated herein
by reference).
4(n) - Subordination and Intercreditor Agreement dated June 29, 2001, between
Harris J. Pappas and Christopher J. Pappas, Bank of America, N.A.
Agreement [as the bank group agent], and Luby's, Inc. (filed as
Exhibit 4(n) to the Company's Quarterly Report on Form 10-Q for the
quarter ended May 31, 2001, and incorporated herein by reference).
4(o) - Convertible Subordinated Promissory Note dated June 29, 2001, between
Christopher J. Pappas and Luby's, Inc. in the amount of $1,500,000
(filed as Exhibit 4(o) to the Company's Quarterly Report on Form 10-Q
for the quarter ended May 31, 2001, and incorporated herein by
reference).
4(p) - Convertible Subordinated Promissory Note dated June 29, 2001, between
Harris J. Pappas and Luby's, Inc. in the amount of $1,500,000 (filed
as Exhibit 4(p) to the Company's Quarterly Report on Form 10-Q for the
quarter ended May 31, 2001, and incorporated herein by reference).
4(q) - Convertible Subordinated Promissory Note dated June 29, 2001, between
Christopher J. Pappas and Luby's, Inc. in the amount of $3,500,000
(filed as Exhibit 4(q) to the Company's Quarterly Report on Form 10-Q
for the quarter ended May 31, 2001, and incorporated herein by
reference).
4(r) - Convertible Subordinated Promissory Note dated June 29, 2001, between
Harris J. Pappas and Luby's, Inc. in the amount of $3,500,000 (filed
as Exhibit 4(r) to the Company's Quarterly Report on Form 10-Q for the
quarter ended May 31, 2001, and incorporated herein by reference).
4(s) - Fifth Amendment to Credit Agreement dated December 5, 2001, among
Luby's, Inc., Bank of America, 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(c) - Management Incentive Stock Plan of Luby's Cafeterias, Inc. (filed as
Exhibit 10(i) to the Company's Annual Report on Form 10-K for the
fiscal year ended August 31, 1989, and incorporated herein by
reference).*
10(d) - Amendment to Management Incentive Stock Plan of Luby's Cafeterias,
Inc. adopted January 14, 1997 (filed as Exhibit 10(k) to the Company's
Quarterly Report on Form 10-Q for the quarter ended February 28, 1997,
and incorporated herein by reference).*
10(e) - Nonemployee Director Deferred Compensation Plan of Luby's Cafeterias,
Inc. adopted October 27, 1994 (filed as Exhibit 10(g) to the Company's
Quarterly Report on Form 10-Q for the quarter ended November 30, 1994,
and incorporated herein by reference).*
10(f) - Amendment to Nonemployee Director Deferred Compensation Plan of Luby's
Cafeterias, Inc. adopted January 14, 1997 (filed as Exhibit 10(m) to
the Company's Quarterly Report on Form 10-Q for the quarter ended
February 28, 1997, and incorporated herein by reference).*
10(g) - Amendment to Nonemployee Director Deferred Compensation Plan of Luby's
Cafeterias, Inc. adopted March 19, 1998 (filed as Exhibit 10(o) to the
Company's Quarterly Report on Form 10-Q for the quarter ended
February 28, 1998, and incorporated herein by reference).*
10(h) - Amended and Restated Nonemployee Director Stock Option Plan of Luby's,
Inc. approved by the shareholders of Luby's, Inc. on January 14, 2000
(filed as Exhibit 10(j) to the Company's Quarterly Report on Form 10-Q
for the quarter ended February 29, 2000, and incorporated herein by
reference).*
10(i) - Luby's Cafeterias, Inc. Supplemental Executive Retirement Plan dated
May 30, 1996 (filed as Exhibit 10(j) to the Company's Annual Report on
Form 10-K for the fiscal year ended August 31, 1996, and incorporated
herein by reference).*
10(j) - Amendment to Luby's Cafeterias, Inc. Supplemental Executive Retirement
Plan adopted January 14, 1997 (filed as Exhibit 10(r) to the Company's
Quarterly Report on Form 10-Q for the quarter ended February 28, 1997,
and incorporated herein by reference).*
10(k) - Amendment to Luby's Cafeterias, Inc. Supplemental Executive Retirement
Plan adopted January 9, 1998 (filed as Exhibit 10(u) to the Company's
Quarterly Report on Form 10-Q for the quarter ended February 28, 1998,
and incorporated herein by reference).*
10(l) - Amendment to Luby's Cafeterias, Inc. Supplemental Executive Retirement
Plan adopted May 21, 1999 (filed as Exhibit 10(q) to the Company's
Quarterly Report on Form 10-Q for the quarter ended May 31, 1999, and
incorporated herein by reference.)*
10(m) - Severance Agreement between Luby's, Inc. and Barry J.C. Parker dated
December 19, 2000 (filed as Exhibit 10(r) to the Company's Quarterly
Report on Form 10-Q for the quarter ended November 30, 2000, and
incorporated herein by reference.)*
10(o) - Luby's Incentive Stock Plan adopted October 16, 1998 (filed as Exhibit
10(cc) to the Company's Annual Report on Form 10-K for the fiscal year
ended August 31, 1998, and incorporated herein by reference).*
10(p) - Form of Change in Control Agreement entered into between Luby's, Inc.,
and each of its Senior Vice Presidents as of January 8, 1999 (filed as
Exhibit 10(aa) to the Company's Quarterly Report on Form 10-Q for the
quarter ended February 28, 1999, and incorporated herein by
reference).*
10(q) - Luby's, Inc. Deferred Compensation Plan effective June 1, 1999 (filed
as Exhibit 10(cc) to the Company's Quarterly Report on Form 10-Q for
the quarter ended May 31, 1999, and incorporated herein by
reference).*
10(r) - Registration Rights Agreement dated March 9, 2001, by and among
Luby's, Inc., Christopher J. Pappas, and Harris J. Pappas (filed as
Exhibit 10.4 to the Company's Current Report on Form 8-K dated
March 9, 2001, and incorporated herein by reference).
10(s) - Purchase Agreement dated March 9, 2001, by and among Luby's, Inc.
Harris J. Pappas, and Christopher J. Pappas (filed as Exhibit 10.1 to
the Company's Current Report on Form 8-K dated March 9, 2001, and
incorporated herein by reference).
10(t) - Employment Agreement dated March 9, 2001, between Luby's, Inc. and
Christopher J. Pappas (filed as Exhibit 10.2 to the Company's Current
Report on Form 8-K dated March 9, 2001, and incorporated herein by
reference).*
10(u) - Employment Agreement dated March 9, 2001, between Luby's, Inc. and
Harris J. Pappas (filed as Exhibit 10.3 to the Company's Current
Report on Form 8-K dated March 9, 2001, and incorporated herein by
reference).*
10(v) - Luby's, Inc. Incentive Bonus Plan for Fiscal 2001 (filed as Exhibit
10(z) to the Company's Annual Report on Form 10-K for the fiscal year
ended August 31, 2000, and incorporated herein by reference).*
10(w) - Luby's, Inc. Stock Option granted to Christopher J. Pappas on March 9,
2001 (filed as Exhibit 10(w) to the Company's Quarterly Report on Form
10-Q for the quarter ended May 31, 2001, and incorporated herein by
reference).*
10(x) - Luby's, Inc. Stock Option granted to Harris J. Pappas on March 9, 2001
(filed as Exhibit 10(x) to the Company's Quarterly Report on Form 10-Q
for the quarter ended May 31, 2001, and incorporated herein by
reference).*
10(y) - Affiliate Services Agreement dated August 31, 2001, by and among
Luby's, Inc., Christopher J. Pappas, Harris J. Pappas, Pappas
Restaurants, L. P., and Pappas Restaurants, Inc. (filed as Exhibit
10(y) to the Company's Annual Report on Form 10-K for the fiscal year
ended August 31, 2001, and refiled herewith to include signature
references and an exhibit that were inadvertently omitted).
10(z) - Ground Lease for a cafeteria site dated March 25, 1994, by and between
Luby's Cafeterias, Inc. and PHCG Investments, as amended by Lease
Amendment dated July 6, 1994 (filed as Exhibit 10(z) to the Company's
Annual Report on Form 10-K for the fiscal year ended August 31, 2001,
and incorporated herein by reference).
10(aa)- Lease Agreement dated June 1, 2001, by and between Luby's, Inc. and
Pappas Restaurants, Inc. (filed as Exhibit 10(aa) to the Company's
Annual Report on Form 10-K for the fiscal year ended August 31, 2001,
and incorporated herein by reference).
10(bb)- Final Severance Agreement and Release between Luby's, Inc. and Alan M.
Davis dated July 20, 2001 (filed as Exhibit 10(bb) to the Company's
Annual Report on Form 10-K for the fiscal year ended August 31, 2001,
and incorporated herein by reference). While in search for new
executive management, the Company entered into an employment agreement
with Mr. Davis in January 2001. The value of that one-year contract
was a year's salary upon termination. After new management was
secured, the Company finalized the exhibited agreement that provides
for the payment of monthly consulting fees to Mr. Davis until July
2002, but releases the Company from all prior employment commitments.*
10(cc)- Consultant Agreement between Luby's Restaurants Limited Partnership
and Alan M. Davis dated July 20, 2001 (filed as Exhibit 10(cc) to the
Company's Annual Report on Form 10-K for the fiscal year ended
August 31, 2001, and incorporated herein by reference).*
10(dd)- Luby's, Inc. Amended and Restated Nonemployee Director Phantom Stock
Plan effective September 28, 2001.*
11 - Statement re computation of per share earnings.
99(a) - Corporate Governance Guidelines of Luby's, Inc., as amended
October 25, 2001 (filed as Exhibit 99(a) to the Company's Quarterly
Report on Form 10-Q for the quarter ended February 13, 2002, and
incorporated herein by reference).
*Denotes management contract or compensatory plan or arrangement.