Exhibit 1
Report of Independent Auditors
Plan Administrator
Luby's Savings and Investment Plan
San Antonio, Texas
We have audited the accompanying statements of net assets available for benefits
of the Luby's Savings and Investment Plan as of December 31, 2001 and 2000, and
the related statement of changes in net assets available for benefits for the
year ended December 31, 2001. These financial statements are the responsibility
of the Plan's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan at
December 31, 2001 and 2000, and the changes in its net assets available for
benefits for the year ended December 31, 2001 in conformity with accounting
principles generally accepted in the United States.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedule of assets
(held at end of year) as of December 31, 2001, is presented for purposes of
additional analysis and is not a required part of the financial statements but
is supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. This supplemental schedule is the responsibility of the
Plan's management. The supplemental schedule has been subjected to the auditing
procedures applied in our audits of the financial statements and, in our
opinion, is fairly stated in all material respects in relation to the financial
statements taken as a whole.
ERNST & YOUNG LLP
San Antonio, Texas
May 16, 2002
Luby's Savings and Investment Plan
Statements of Net Assets Available for Benefits
December 31,
2001 2000
____ ____
Assets
Cash $ - $ 43
Investments, at fair value 9,435,039 8,272,702
Receivables:
Participant contributions 93,465 12,357
Employer contributions 16,400 -
__________ __________
109,865 12,357
__________ __________
Net assets available for benefits $9,544,904 $8,285,102
__________ __________
See accompanying notes.
Luby's Savings and Investment Plan
Statement of Changes in Net Assets Available for Benefits
Year Ended December 31, 2001
Additions to net assets attributed to:
Net depreciation in fair value of investments $ (795,619)
Interest and dividends 153,027
__________
(642,592)
Contributions:
Participants 2,296,442
Employer 384,465
__________
2,680,907
__________
Total additions 2,038,315
Deductions from net assets attributed to:
Benefits to participants 775,473
Administrative expenses 3,040
__________
Total deductions 778,513
__________
Net increase 1,259,802
Net assets available for benefits at beginning of year 8,285,102
__________
Net assets available for benefits at end of year $9,544,904
__________
See accompanying notes.
Luby's Savings and Investment Plan
Notes to Financial Statements
December 31, 2001 and 2000
1. Significant Accounting Policies
The financial statements of the Luby's Savings and Investment Plan (the Plan)
have been prepared using the accrual basis of accounting in accordance with
accounting principles generally accepted in the United States.
The Plan's investments are stated at fair value. The fair value of mutual funds
and common stock is based on quoted market prices on the valuation date.
Collective funds are stated at fair value as determined by the issuer based on
the fair value of the underlying investments. Participant loans and money
market funds are stated at cost, which approximates fair value. Changes in fair
market value and gains and losses on the sale of investment securities are
reflected in the statement of changes in net assets available for benefits as
net appreciation (depreciation) in fair value of investments.
Purchases and sales of securities are recorded on a settlement-date basis.
Interest income is recorded on an accrual basis. Dividends are recorded on the
ex-dividend date.
Certain administrative expenses of the Plan are paid by Luby's, Inc. (the
Company).
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
that affect amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
2. Description of the Plan
The following is a general description of the Plan. Participants should refer to
the Plan agreement for a more complete description of the Plan's provisions.
General
The Plan, which was effective on March 1, 1997, is a defined contribution plan
qualified under Section 401(a) of the Internal Revenue Code (IRC). Employees of
the Company and Luby's Restaurants Limited Partnership who complete one year of
service, which is defined as 1,000 hours, and have attained age 21 are eligible
to participate in the Plan on the next January 1, April 1, July 1, or October 1.
The Plan is subject to the provisions of the Employee Retirement Income Security
Act of 1974 (ERISA).
Contributions and Investment Options
Participants may contribute an amount not less than 1% and not more than 15% of
their compensation, limited by 401(k) regulations. Effective January 1, 2001,
the Plan was amended to allow for matching Company contributions. The Company
matches 25% of up to 4% of the participant's compensation. Compensation is
subject to certain limitations imposed by the IRC. Participants direct the
investment of all contributions into various investment options offered by the
Plan. The Plan currently offers five collective funds, four mutual funds, and
one common stock fund.
Participant Accounts
Each participant's account is credited with the participant's contributions, the
Company's matching contributions, and allocations of Plan earnings. Each
account is in turn charged with an allocation of any applicable participant
expenses. According to the Plan, forfeited balances of nonvested terminated
participants are first used to restore previously forfeited accounts, then used
to reduce Company contributions. The benefit to which a participant is entitled
is the benefit that can be provided from the participant's account.
Vesting
Participants are immediately vested in their voluntary contributions plus actual
earnings thereon. Company matching contributions and actual earnings thereon
vest according to the following schedule:
Vested
Completed Years of Active Service Percentage
_________________________________ __________
Less than two 0%
Two years but less than three years 25
Three years but less than four years 50
Four years but less than five years 75
Five or more 100
Participant Loans
Participants may borrow up to 50% of their account balance within a range
minimum of $1,000 and a defined maximum of $50,000, reduced by the highest
amount of any loan outstanding within the previous twelve months. Loan terms
range up to 5 years for general purpose loans or up to 15 years for the
purchase of a primary residence. The loans are secured by the balance in the
participant's account and bear interest at a rate commensurate with prevailing
rates as determined quarterly by the Plan administrator. At loan origination,
interest rates are set at prime plus 1%. Principal and interest are
paid ratably through payroll deductions.
Payment of Benefits
Upon retirement, or in the event of death or disability, a participant will
receive a lump-sum payment of his (her) account in the Plan and all amounts
which have been allocated to his (her) Plan account. In the event of termination
of employment with the employer for any other reason, the participant is
entitled to the vested portion of his (her) account in the Plan and all vested
amounts which have been allocated to his (her) Plan account.
Plan Termination
Although it has not expressed any intent to do so, the Company has the right
under the Plan to discontinue its contributions and to terminate the Plan
subject to the provisions of ERISA. In the event of Plan termination,
participants will become 100 percent vested in their accounts.
3. Investments
All investments are held by the Plan's trustee, American Express Trust Company.
The following individual investments represent five percent or more of the
Plan's net assets:
December 31,
2001 2000
____ ____
AET Income Fund II $1,725,207 $1,294,116
AET Medium-Term Horizon Fund 1,272,953 1,129,384
AET Long-Term Horizon Fund 1,504,905 1,409,628
AET Equity Index Fund II 1,246,482 1,312,837
Baron Asset Fund 1,352,290 1,209,224
Janus Overseas Fund 663,191 730,498
Luby's, Inc. Pooled Stock Fund 690,545 488,538
During 2001, the Plan's investments (including gains and losses on investments
purchased, sold, and held during the year) depreciated in value by $795,619 as
follows:
Collective funds $(272,626)
Mutual funds (420,217)
Common stock fund (102,776)
_________
$(795,619)
_________
4. Risks and Uncertainties
The Plan provides for various investments in common stock, mutual funds, common
collective trusts, and short-term investments. Investment securities, in
general, are exposed to various risks, such as interest rate, credit, and
overall market volatility risk. Due to the level of risk associated with
certain investment securities, it is reasonably possible that changes in the
values of investment securities will occur in the near term and that such
changes could materially affect the amounts reported in the statements of net
assets available for benefits and participant account balances.
5. Benefits Payable to Terminated Participants
At December 31, 2001, there were five withdrawing participants in the Plan
entitled to aggregate vested benefits totaling $10,852 in cash distributions
for benefit claims that have been processed and approved for payment prior
to December 31 but not yet paid as of that date.
6. Reconciliation of Financial Statements to Form 5500
The Form 5500 is prepared on the modified cash basis of accounting. The
following is a reconciliation of net assets available for benefits per the
financial statements to the Form 5500:
December 31,
2001 2000
____ ____
Net assets available for benefits
per the financial statements $9,544,904 $8,285,102
Contributions receivable
at December 31 (109,865) (12,357)
__________ __________
Net assets available for benefits
per the Form 5500 $9,435,039 $8,272,745
__________ __________
The following is a reconciliation of contributions received from participants
per the financial statements to the Form 5500 for the year ended December 31,
2001:
Net increase per the financial statements $1,259,802
Plus:
Amounts receivable from participants at
December 31, 2000 12,357
Less:
Amounts receivable from participants at
December 31, 2001 (109,865)
__________
Net increase per the Form 5500 $1,162,294
__________
7. Tax Status
The Plan has received a determination letter from the Internal Revenue Service
dated February 13, 1998, stating that it is qualified under Section 401(a)
of the IRC and, therefore, the related trust is exempt from taxation. Subsequent
to the issuance of the determination letter, the Plan was amended. Once
qualified, the Plan is required to operate in conformity with the IRC to
maintain its qualification. The Plan administrator has indicated that it will
take the necessary steps, if any, to maintain the Plan's qualified status.
SUPPLEMENTAL SCHEDULE
Luby's Savings and Investment Plan
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
EIN: 74-1335253 Plan No.: 003
December 31, 2001
Description of Investment,
Identity of Issue, Including Maturity Date,
Borrower, Lessor, Rate of Interest, Collateral, Current
or Similar Party Par or Maturity Date Value
____________________________________________________________________________
*AET Income Fund II Collective fund $1,725,207
*AET Short-Term Horizon Fund Collective fund 143,859
*AET Medium-Term Horizon Fund Collective fund 1,272,953
*AET Long-Term Horizon Fund Collective fund 1,504,905
*AET Equity Index Fund II Collective fund 1,246,482
*AXP Selective Fund Mutual fund 137,777
*AXP New Dimensions Fund Mutual fund 192,314
Baron Asset Fund Mutual fund 1,352,290
Janus Overseas Fund Mutual fund 663,191
*Luby's, Inc. Pooled Stock Fund Common stock 120,936 shares 690,545
*AET Money Market III Cash and Cash Equivalents 11,125
*Participant loans Interest accrued at
prime rate plus 1%,
varying maturity dates,
7.0% - 10.5% charged
during 2001 494,391
__________
$9,435,039
__________
*Denotes party-in-interest