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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended August 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _________________ to ______________________
Commission file number: 1-8308
LUBY'S CAFETERIAS, INC.
______________________________________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 74-1335253
_________________________ ___________________________________
(State of Incorporation) (I.R.S. Employer Identification No.)
2211 Northeast Loop 410
Post Office Box 33069
San Antonio, Texas 78265-3069 Area Code 210 654-9000
_______________________________________ _______________________________
(Address of principal executive office) (Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Name of exchange on
Title of Class which registered
______________ ______________________
Common Stock ($.32 par value) New York Stock Exchange
Common Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
____
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the shares of Common Stock of the registrant
held by non-affiliates of the registrant as of November 15, 1996, was
approximately $476,448,000 (based upon the assumption that directors and
officers are the only affiliates).
As of November 15, 1996, there were 23,271,600 shares of the registrant's
Common Stock outstanding, exclusive of 4,131,467 treasury shares.
Portions of the following documents are incorporated by reference into the
designated parts of this Form 10-K: annual report to shareholders for the
fiscal year ended August 31, 1996 (in Part II) and proxy statement relating to
1997 annual meeting of shareholders (in Part III).
Item 1. Business.
Luby's Cafeterias, Inc. (the "Company") operates 221 cafeterias under the
name "Luby's" located in suburban shopping areas in Arizona, Arkansas,
Florida, Kansas, Louisiana, Mississippi, Missouri, New Mexico, Oklahoma,
Tennessee, and Texas. Of the 221 cafeterias operated by the Company, 128 are
at locations owned by the Company and 93 are on leased premises.
Luby's Cafeterias, Inc. was originally incorporated in Texas in 1959 and
was reincorporated in Delaware on December 31, 1991. The Company's executive
offices are at 2211 Northeast Loop 410, P. O. Box 33069, San Antonio, Texas
78265-3069.
Marketing
The Company's product strategy is to provide a wide variety of freshly-
prepared foods in an attractive and informal environment. The Company's
research has shown that its products appeal to a broad range of value-oriented
consumers with particular success among senior citizens, families with
children, shoppers, and business people looking for a quick, healthy meal at a
reasonable price.
Prior to 1991 the Company relied primarily on customers' word-of-mouth
recommendations and community relations activities to promote its business,
spending approximately .5% of sales annually on these efforts. In 1991 the
Company began developing a new marketing program. Based on favorable
results of radio and television advertising tests, the marketing budget
increased to approximately two percent of sales for fiscal 1996. The Company
intends to continue expending the majority of the marketing budget on
television and radio advertising, as well as supporting the increased
local marketing activities of the individual cafeterias.
Operations
The Company's operations combine the food quality and atmosphere of a
good restaurant with the simplicity and visual food selection of cafeteria
service. Food is prepared in small quantities throughout serving hours, and
frequent quality checks are made. Each cafeteria offers a broad and varied
menu and normally serves 12 to 14 entrees, 12 to 14 vegetable dishes, 22 to 25
salads, and 18 to 20 desserts.
The Company's cafeterias cater primarily to shoppers and office or store
personnel for lunch and to families for dinner. The Company's cafeterias are
open for lunch and dinner seven days a week. All of the cafeterias sell
take-out orders, and most of them have separate food to go entrances. Take-
out orders accounted for approximately ten percent of sales in fiscal 1996.
Each cafeteria is operated as a separate unit under the control of a
manager who has responsibility for day-to-day operations, including food
purchasing, menu planning, and personnel employment and supervision. Each
cafeteria manager is compensated on the basis of his or her cafeteria's
profits. Management believes that granting broad authority to its cafeteria
managers and compensating them on the basis of their performance are
significant factors in the profitability of its cafeterias. Of the 221
cafeteria managers employed by the Company, 166 have been with the Company for
more than ten years. Generally, an individual is employed for a period of
seven to ten years before he or she is considered qualified to become a
cafeteria manager.
Each cafeteria cooks or prepares substantially all of the food served,
including breads and pastries. The cafeterias prepare food from the same
recipes, with minor variations to suit local tastes, although menus are not
uniform in all of the Company's cafeterias on any particular day. Menus are
prepared to reflect local and seasonal food preferences and to take advantage
of any special food purchasing opportunities. Substantially all of the food
served by each cafeteria is purchased from local suppliers. None of the
cafeterias are dependent upon any one supplier, and the Company believes that
alternative sources of supply are readily available.
Quality control teams, each consisting of experienced cooks and a
supervisor, help to maintain uniform standards of food preparation. The teams
primarily assist in the training of new personnel during the opening of new
cafeterias. The teams also visit the cafeterias periodically and work with
the regular staffs to check adherence to the Company's recipes, train
personnel in new techniques, and evaluate procedures for possible use
throughout the Company.
The Company conducts a training program comprised of both on-the-job
training and classroom instruction in its training facilities in
San Antonio. The training program is approximately three months in duration.
Management personnel receive one week of classroom instruction and spend
the remaining time on practical training in operating cafeterias. In order to
draw management trainees from regional talent pools, the Company has set
up satellite training schools in several key cafeterias to make on-the-job
training more accessible on a local level.
As of August 31, 1996, the Company had approximately 11,680 employees,
consisting of 10,890 nonmanagement cafeteria personnel; 659 cafeteria
managers, associate managers, and assistant managers; and 131 executive,
administrative, and clerical personnel. Employee relations are considered to
be good, and the Company has never had a strike or work stoppage.
Expansion
During the fiscal year ended August 31, 1996, the Company relocated one
cafeteria in Port Arthur, Texas, closed one cafeteria in El Paso, Texas, and
opened 18 new cafeterias in Surprise, Arizona; Wichita, Kansas; Nashville,
Tennessee; and Arlington, Corpus Christi, Dallas, Fort Worth, Houston,
Kerrville, McKinney, San Antonio, and Tomball, Texas; for a net increase of
17 units for the fiscal year.
On September 16, 1996, the Company acquired from Triangle FoodService
Corporation (formerly Wyatt Cafeterias, Inc.) 20 cafeteria locations,
consisting of 12 owned sites and 8 leased locations. On October 2, 1996,
the Company opened 15 of those units as "Luby's" cafeterias, located in
Hot Springs, Arkansas; Joplin, Missouri; and Abilene, Dallas, Del Rio,
Houston, Irving, Jacinto City, Laredo, McAllen, Mesquite, and Rosenberg,
Texas. In addition, since August 31, 1996, the Company has relocated a
cafeteria in Longview, Texas, and opened two new cafeterias in College Station
and San Antonio, Texas.
Ten new cafeterias are under construction in Peoria and Phoenix,
Arizona; Little Rock, Arkansas; St. Petersburg, Florida; Albuquerque, New
Mexico; Memphis, Tennessee; and Mesquite and San Antonio, Texas. During
fiscal 1997, the Company expects to open in excess of 30 new cafeterias,
including the reopened units acquired from Triangle FoodService Corporation.
The Company continually evaluates prospective new cafeteria sites and
typically has several sites for new cafeterias under active consideration at
any given time. The rate at which new cafeterias are opened is governed by
the Company's policy of controlled growth, which takes into account the
resources and capabilities of all departments involved, including real estate,
construction, equipment, and operations. It has been the Company's experience
that new cafeterias generally become profitable within three months after
opening.
The costs of opening new cafeterias vary widely, depending on whether the
facilities are to be leased or owned, and if owned, on site acquisition and
construction costs. The Company estimates that in recent years it has cost
$2,300,000 to $2,600,000 to construct, equip, and furnish a new cafeteria in a
freestanding building under normal conditions, including land acquisition
costs. The approximate cost to finish out, equip, and furnish a new cafeteria
in a leased facility has ranged from $1,200,000 to $1,400,000. A new building
prototype is now being utilized to reduce the initial investment in a typical
new location.
Waterstreet Joint Venture
In January 1996 the Company announced a joint venture agreement with
Waterstreet, Inc., a seafood restaurant company operating in Corpus Christi,
Fort Worth, and San Antonio, Texas. The Company plans to build three "Water
Street Seafood Company" restaurants during fiscal 1997. They will be leased
to the joint venture and operated by Waterstreet, Inc. One joint venture
restaurant was opened in San Antonio in August 1996.
Service Marks
The Company uses several service marks, including "Luby's" and believes
that such marks are of material importance to its business. The Company has
federal service mark registrations for several of such marks.
The Company is not the sole user of the name "Luby's" in the cafeteria
business. One cafeteria using the name "Luby's" and one cafeteria using the
name "Pat Luby's" are being operated in two different cities in Texas by two
different owners not affiliated with the Company. The Company's legal counsel
is of the opinion that the Company has the paramount right to use the name
"Luby's" as a service mark in the cafeteria business in the United States and
that such other users can be precluded from expanding their use of the name as
a service mark.
Competition and Other Factors
The food service business is highly competitive, and there are numerous
restaurants and other food service operations in each of the markets where the
Company operates. The quality of the food served, in relation to its price,
and public reputation are important factors in food service competition.
Neither the Company nor any of its competitors has a significant share of the
total market in any area in which the Company competes. The Company believes
that its principal competitors are conventional restaurants and other
cafeterias.
The Company's facilities and food products are subject to state and local
health and sanitation laws. In addition, the Company's operations are subject
to federal, state, and local regulations with respect to environmental and
safety matters, including regulations concerning air and water pollution and
regulations under the Americans with Disabilities Act and the Federal
Occupational Safety and Health Act. Such laws and regulations, in the
Company's opinion, have not materially affected its operations, although
compliance has resulted in some increased costs.
Item 2. Properties.
The Company owns the underlying land and buildings in which 128 of its
cafeterias are located. In addition, the Company owns several cafeteria sites
being held for future development.
Of the 221 cafeterias operated by the Company, 93 are at locations held
under leases, including 51 in regional shopping malls. Most of the leases
provide for a combination of fixed-dollar and percentage rentals. Most of the
leases require the lessee to pay additional amounts related to property taxes,
hazard insurance, and maintenance of common areas.
See Notes 4 and 7 of Notes to Financial Statements for information
concerning the Company's lease rental expenses, lease commitments, and
construction commitments. Of the 93 cafeteria leases, the current terms of 26
expire from 1997 to 2001, 25 from 2002 to 2006, and 42 thereafter.
Seventy-six of the leases can be extended beyond their current terms at the
Company's option.
A typical cafeteria seats 250 to 300 guests and contains 9,000 to 10,500
square feet of floor space. A new building prototype is now being utilized
for new store openings in the latter part of fiscal 1997 which contains
approximately 8,000 square feet and seats 220 guests. Most of the cafeterias
are located in modern buildings and all are in good condition. It is the
Company's policy to refurbish and modernize cafeterias as necessary to
maintain their appearance and utility. The equipment in all cafeterias is
well maintained. Several of the Company's cafeteria properties contain excess
building space which is rented to tenants unaffiliated with the Company.
The 221 cafeterias operated by the Company are located as follows
(locations are in Texas except as otherwise indicated):
Number Number
Location of Units Location of Units
Abilene 2 Lubbock 1
Albuquerque, New Mexico 2 Lufkin 1
Amarillo 2 McAllen 3
Arlington 3 McKinney 1
Austin 6 Memphis, Tennessee 3
Bartlesville, Oklahoma 1 Mesa, Arizona 2
Baytown 1 Mesquite 2
Beaumont 1 Midland 1
Bedford 1 Mission, Kansas 1
Bellmead 1 Mission, Texas 1
Bossier City, Louisiana 1 Morristown, Tennessee 1
Broken Arrow, Oklahoma 1 Murfreesboro, Tennessee 1
Brownsville 2 Muskogee, Oklahoma 1
Bryan/College Station 2 Nashville, Tennessee 3
Carrollton 1 New Braunfels 1
Chandler, Arizona 1 North Little Rock, Arkansas 1
Clearwater, Florida 1 Oak Ridge, Tennessee 1
Conroe 1 Odessa 1
Corpus Christi 4 Okalahoma City, Oklahoma 3
Dallas 13 Pasadena 1
Deer Park 1 Pharr 1
Del Rio 1 Phoenix, Arizona 4
Denton 1 Pinellas Park, Florida 1
DeSoto 1 Plano 2
Duncanville 1 Port Arthur 2
El Paso 5 Richardson 1
Fayetteville, Arkansas 1 Rosenberg 1
Fort Smith, Arkansas 1 Round Rock 1
Fort Worth 9 San Angelo 1
Franklin, Tennessee 1 San Antonio 21
Galveston 1 San Marcos 1
Garland 1 Santa Fe, New Mexico 1
Glendale, Arizona 1 Scottsdale, Arizona 1
Grand Prairie 1 Sebring, Florida 1
Grapevine 1 Shawnee, Oklahoma 1
Harlingen 2 Sherman 1
Hattiesburg, Mississippi 1 Shreveport, Louisiana 1
Hot Springs, Arkansas 1 Stafford 1
Houston 31 Sugar Land 1
Humble 1 Surprise, Arizona 1
Independence, Missouri 1 Tampa, Florida 2
Irving/Las Colinas 2 Temple 1
Jacinto City 1 Texarkana 1
Joplin, Missouri 1 The Woodlands 1
Kansas City, Missouri 2 Tomball 1
Kerrville 1 Topeka, Kansas 1
Killeen 1 Tucson, Arizona 2
Kingwood 1 Tulsa, Oklahoma 2
Lake Jackson 1 Tyler 2
Laredo 2 Victoria 1
Las Cruces, New Mexico 1 Waco 1
Leavenworth, Kansas 1 Weslaco 1
Lewisville 1 Wichita, Kansas 2
Little Rock, Arkansas 1
Longview 1
The Company's corporate offices are located in a building owned by the
Company containing approximately 40,000 square feet of office space. The
Company utilizes the space for its executive offices and related facilities.
The Company maintains public liability insurance and property damage
insurance on its properties in amounts which management believes to be
adequate.
Item 3. Legal Proceedings.
There are no material pending legal proceedings, other than ordinary
routine litigation incidental to the business, to which the Company is a
party, or of which any of its property is the subject. There are no material
legal proceedings to which any director, officer, or affiliate of the Company,
or any associate of any such director or officer, is a party, or has a
material interest, adverse to the Company.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted during the fourth quarter of the fiscal year
ended August 31, 1996, to a vote of security holders of the Company.
Item 4A. Executive Officers of the Registrant.
Certain information is set forth below concerning the executive officers
of the Company, each of whom has been elected to serve until the 1997 annual
meeting of shareholders and until his successor is duly elected and qualified.
Served as
Officer Positions with Company and
Name Since Principal Occupation Last Five Years Age
________________________ ________ ____________________________________ ___
Ralph Erben 1978 Chairman of the Board (since Jan. 65
1996), Chief Executive Officer,
Chairman of the Executive
Committee, and Director; President
prior to Jan. 1996.
John E. Curtis, Jr. 1982 President, Chief Operating Officer 49
(since Jan. 1996), Chief Financial
Officer, member of the Executive
Committee, and Director; Senior
Vice President 1988-1995; Treasurer
1990-1995.
William E. Robson 1982 Executive Vice President-Operations 55
and Director (since 1993); Senior
Vice President-Operations 1992-1995;
Senior Vice President-Operations
Development prior to 1992.
Clyde C. Hays III 1985 Senior Vice President-Operations 45
(since Jan. 1996); Vice President-
Operations 1993-1995; Area Vice
President prior to 1993.
Jimmy W. Woliver 1984 Senior Vice President-Operations 59
(since Jan. 1996); Vice President-
Operations prior to 1996.
Ronald E. Riemenschneider 1990 Vice President and Treasurer (since 38
1995); Controller 1990-1995.
James R. Hale 1980 Secretary; Member of law firm of 67
Cauthorn Hale Hornberger Fuller
Sheehan & Becker Incorporated
since 1992; member of law firm of
Cox & Smith Incorporated prior
to 1992.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.
Stock Prices and Dividends
The Company's common stock is traded on the New York Stock Exchange under
the symbol LUB. The following table sets forth, for the last two fiscal
years, the high and low sales prices on the New York Stock Exchange from the
consolidated transaction reporting system and the per share cash dividends
declared on the common stock.
Fiscal Quarters Quarterly
Ended High Low Cash Dividend
_________________ ______ ______ ______________
November 30, 1994 $24.63 $22.00 $.165
February 28, 1995 23.25 22.00 .165
May 31, 1995 22.88 18.50 .165
August 31, 1995 21.25 19.25 .18
November 30, 1995 22.88 19.88 .18
February 29, 1996 23.00 20.13 .18
May 31, 1996 25.25 20.38 .18
August 31, 1996 25.25 22.50 .20
As of September 13, 1996, there were approximately 4,142 record holders of
the Company's common stock.
Item 6. Selected Financial Data.
Five Year Summary of Operations
(Thousands of dollars except per share data)
Years ended August 31,
1996 1995 1994 1993 1992
________ ________ ________ ________ ________
Sales $450,128 $419,024 $390,692 $367,757 $346,359
Costs and expenses:
Cost of food 110,008 103,611 98,223 92,957 86,507
Payroll and related costs 124,333 113,952 104,543 99,233 95,963
Occupancy and other operating
expenses 132,595 123,907 113,546 104,958 99,590
General and administrative
expenses 20,217 18,672 15,330 15,967 15,101
________ ________ ________ ________ ________
387,153 360,142 331,642 313,115 297,161
Income from operations 62,975 58,882 59,050 54,642 49,198
Other income (expenses):
Interest expense (2,130) (1,749) - - -
Interest and other 1,697 1,805 1,385 1,574 1,319
________ ________ ________ ________ ________
(433) 56 1,385 1,574 1,319
________ ________ ________ ________ ________
Income before income taxes
and accounting change 62,542 58,938 60,435 56,216 50,517
Provision for income taxes 23,334 21,923 22,663 20,687 17,924
________ ________ ________ ________ ________
Income before accounting
change 39,208 37,015 37,772 35,529 32,593
Cumulative effect of change in
accounting for income taxes - - 1,563 - -
________ ________ ________ ________ ________
Net income (a) $ 39,208 $ 37,015 $ 39,335 $ 35,529 $ 32,593
Income per share before accounting
change $ 1.66 $ 1.55 $ 1.45 $ 1.31 $ 1.19
Net income per common share $ 1.66 $ 1.55 $ 1.51 $ 1.31 $ 1.19
Cash dividend declared per common
share $ .74 $ .68 $ .62 $ .56 $ .51
At year-end:
Total assets $335,290 $312,380 $289,668 $302,099 $276,319
Long-term debt $ 41,000 $ - $ - $ - $ 1,384
Number of cafeterias 204 187 176 168 162
(a) Net income in 1994 includes the cumulative effect of change in accounting
for income taxes of $1,563, or $.06 per share.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Liquidity and Capital Resources
During the last three years the Company has funded all capital
expenditures from internally-generated funds, cash equivalents, short-term
borrowings, and long-term debt. Capital expenditures for fiscal 1996 were
$48,529,000, a 30% increase from fiscal 1995. This increase in capital
expenditures resulted from the opening of 19 new cafeterias in fiscal 1996,
including one relocation, as compared to 12 in fiscal 1995, which also
included one relocation. In addition, the Company also purchased eight
sites as land held for future use compared to ten land sites purchased
during fiscal 1995.
Capital commitments budgeted for fiscal 1997 include the purchase of 20
cafeteria locations from Triangle FoodService Corporation, formerly Wyatt
Cafeterias, Inc., for approximately $14 million in cash. On October 2, 1996,
15 of these locations opened as "Luby's." Capital expenditures during
fiscal 1997 to repair and refurbish these units will range from $2 million
to $3 million. In addition to these locations, plans for fiscal 1997 include
the opening of approximately 15 new cafeterias: seven on sites owned by the
Company, two on land held under long-term ground leases, and six in regional
shopping malls. In addition, two existing units will be relocated: one from
a neighborhood shopping center to a regional mall, and one from a leased
premise to a freestanding cafeteria on land held under a long-term ground
lease. Therefore, a net increase of approximately 30 cafeterias is
anticipated in fiscal 1997.
As part of a joint venture agreement with Waterstreet, Inc. signed in
January 1996, the Company also plans to build three seafood restaurants during
fiscal 1997: two on sites owned by the Company and one on land held under
a long-term ground lease. These "Water Street Seafood Company" restaurants
will be leased by the joint venture from the Company and operated by
Waterstreet, Inc. In addition, as of August 31, 1996, the Company owned 11
undeveloped cafeteria sites, and several land site acquisitions were in
varying stages of negotiation. As a result of all the capital commitments
discussed above, the Company expects a substantial increase in the total
capital expenditures for fiscal 1997. Construction costs for the new
cafeterias and seafood restaurants are expected to be funded by cash flow from
operations, cash currently held in cash equivalent investments, and long-term
debt.
The Company generated cash from operations of $60,354,000 in fiscal 1996.
The Company had a balance of $41,000,000 outstanding at August 31, 1996, under
a $100,000,000 credit facility with a syndication of four banks. At
August 31, 1996, the Company had a working capital deficit of $35,096,000
which compares to the prior year's working capital deficit of $79,316,000.
The working capital position improved during fiscal 1996 due primarily to the
renegotiation of the short-term facility to long-term debt.
The Board of Directors authorized the purchase in the open market of up
to 1,000,000 shares of the Company's outstanding common stock through
December 31, 1997. During fiscal 1996 the Company purchased 252,200 shares
of its common stock at a cost of $5,997,000, which are being held as treasury
stock.
The Company believes that funds generated from operations and short-term
or long-term financing from external sources, which can be obtained on terms
acceptable to the Company, are adequate for its foreseeable needs.
Results of Operations
Fiscal 1996 Compared to Fiscal 1995
Sales increased $31,104,000, or 7%, due in part to the addition of 18 new
cafeterias in fiscal 1996 and 11 cafeterias in fiscal 1995. The average sales
volume of cafeterias opened over one year increased slightly to $2,332,000 in
fiscal 1996 from $2,321,000 in fiscal 1995 due primarily to higher average
tray prices over the prior year. The same-store customer count trend was
negative for the first time since 1992. This decline was not wholly
unexpected because all but four of the current year openings occurred in
existing markets. Accordingly, our market share improved in these areas;
however, customer traffic and sales at established cafeterias were negatively
impacted. This, combined with increased competition and the lack of full
recovery from the peso devaluation in fiscal 1995, resulted in the negative
same-store customer count trend.
Cost of food increased $6,397,000, or 6%, due primarily to the increase
in sales. Food cost margins improved from the price increase on the Lu Ann
Platter, which took effect on December 1, 1995. Payroll and related costs
increased $10,381,000, or 9%, due primarily to the increase in sales, higher
wages for hourly employees in existing cafeterias, and higher wage costs
associated with increased expansion over the prior year. As the expansion
rate increases for fiscal 1997 and the new Federal minimum wage increases
effective October 1, 1996, the Company anticipates that payroll and related
costs will increase as a percentage of sales over fiscal 1996. The Company
implemented a 3% to 4% price increase on September 15, 1996, to help offset
the pressure on profit margins. Occupancy and other operating expenses
increased $8,688,000, or 7%, due primarily to the increase in sales and the
opening of 18 new cafeterias. Since all preopening costs are expensed as
incurred, the preopening expense amount included in occupancy and other
operating expenses for fiscal 1997 will significantly increase due to the
higher expansion rate, especially in the first quarter. During fiscal 1997
the Company plans to maintain the budget for advertising expense at 25 of
sales. General and administrative expenses increased $1,545,000, or 8%, due
primarily to two additional area vice president positions, higher management
trainee salaries, and higher moving expenses, all associated with the
increased expansion.
Interest expense of $2,130,000 for fiscal 1996 was incurred in
conjunction with borrowings under the credit facility and is net of $1,100,000
capitalized on qualifying properties. The increase over fiscal 1995 of
$381,000, or 22%, was due to higher average outstanding borrowings.
The provision for income taxes increased $1,411,000, or 6%, due to higher
income before income taxes. The Company's effective income tax rate increased
slightly from 37.2% in fiscal 1995 to 37.3% in fiscal 1996.
Fiscal 1995 Compared to Fiscal 1994
Sales increased $28,332,000, or 7%, due in part to the addition of 11 new
cafeterias in fiscal 1995 and eight cafeterias in fiscal 1994. The average
sales volume of cafeterias opened over one year increased to $2,321,000 in
fiscal 1995 from $2,287,000 in fiscal 1994. The increase resulted from the
implementation of new marketing programs and from higher average tray prices
over the prior year.
Cost of food increased $5,388,000, or 5%, due primarily to the increase
in sales. Food cost margins improved from the price increase on the Lu Ann
Platter, which took effect on December 1, 1994, and an additional price
increase on selected individual items effective June 10, 1995. Payroll and
related costs increased $9,409,000, or 9%, due primarily to the increase in
sales, higher wages for hourly employees in existing cafeterias, and higher
wage costs associated with increased expansion over the prior year.
Occupancy and other operating expenses increased $10,361,000, or 9%, due
primarily to the increase in sales, the opening of 11 new cafeterias, higher
advertising expenditures, higher costs for a new uniform program, and higher
costs for paper supplies. General and administrative expenses increased
$3,342,000, or 22%, due primarily to the higher Company contribution to the
profit sharing and retirement plan as determined by the plan's provisions,
which increased approximately $3,000,000 over fiscal 1994.
Interest expense for fiscal 1995 was incurred in conjunction with
borrowings under the line-of-credit agreement and is net of $895,000
capitalized on qualifying properties.
The provision for income taxes decreased $740,000, or 3%, due in part to
lower income before income taxes. The Company's effective income tax rate
decreased slightly from 37.5% in fiscal 1994 to 37.2% in fiscal 1995.
Inflation
The Company's policy is to maintain stable menu prices without regard to
seasonal variations in food costs. General increases in costs of food, wages,
supplies, and services make it necessary for the Company to increase its menu
prices from time to time. To the extent prevailing market conditions allow,
the Company intends to adjust menu prices to maintain profit margins.
Item 8. Financial Statements and Supplementary Data.
LUBY'S CAFETERIAS, INC.
FINANCIAL STATEMENTS
Years Ended August 31, 1996, 1995, and 1994
with Report of Independent Auditors
Report of Independent Auditors
The Board of Directors and Shareholders
Luby's Cafeterias, Inc.
We have audited the accompanying balance sheets of Luby's Cafeterias,
Inc. at August 31, 1996 and 1995, and the related statements of income,
shareholders' equity, and cash flows for each of the three years in the period
ended August 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 financial position of Luby's Cafeterias,
Inc. at August 31, 1996 and 1995, and the results of its operations and its
cash flows for each of the three years in the period ended August 31, 1996, in
conformity with generally accepted accounting principles.
As discussed in Note 6 to the financial statements, in 1994 the Company
changed its method of accounting for income taxes.
ERNST & YOUNG LLP
San Antonio, Texas
October 1, 1996
Luby's Cafeterias, Inc.
Balance Sheets
August 31
1996 1995
________ _______
(Thousands of Dollars)
Assets
Current assets:
Cash and cash equivalents $ 2,687 $ 12,392
Trade accounts and other receivables 541 311
Food and supply inventories 4,517 4,034
Prepaid expenses 3,195 2,849
Deferred income taxes 418 629
________ ________
Total current assets 11,358 20,215
Investments and other assets - at cost:
Land held for future use 8,040 9,820
Other assets 4,303 3,188
________ ________
Total investments and other assets 12,343 13,008
Property, plant, and equipment - at cost, less
accumulated depreciation and amortization 311,589 279,157
________ ________
Total assets $335,290 $312,380
________ ________
Liabilities and Shareholders' Equity
Current liabilities:
Short-term borrowings $ - $ 57,000
Accounts payable - trade 14,568 10,969
Dividends payable 4,796 4,196
Accrued expenses and other liabilities 24,336 24,895
Income taxes payable 2,754 2,471
________ ________
Total current liabilities 46,454 99,531
Deferred income taxes and other credits 22,163 20,145
Commitments - -
Shareholders' equity:
Common stock, $.32 par value; authorized
100,000,000 shares, issued 27,403,067 shares 8,769 8,769
Paid-in capital 26,945 26,945
Retained earnings 267,374 248,973
Less cost of treasury stock, 3,425,525
shares in 1996 and 4,089,935 shares in
1995 (77,415) (91,983)
________ ________
Total shareholders' equity 225,673 192,704
________ ________
Total liabilities and shareholders' equity $335,290 $312,380
________ ________
See accompanying notes.
Luby's Cafeterias, Inc.
Statements of Income
Years Ended August 31
1996 1995 1994
________ ________ ________
(Thousands of dollars except per share data)
Sales $450,128 $419,024 $390,692
Costs and expenses:
Cost of food 110,008 103,611 98,223
Payroll and related costs 124,333 113,952 104,543
Occupancy and other operating
expenses 132,595 123,907 113,546
General and administrative expenses 20,217 18,672 15,330
________ ________ ________
387,153 360,142 331,642
________ ________ ________
Income from operations 62,975 58,882 59,050
Interest expense (2,130) (1,749) -
Other income, net 1,697 1,805 1,385
________ ________ ________
Income before income taxes and
cumulative effect of change in method
of accounting for income taxes 62,542 58,938 60,435
Provision for income taxes:
Current 20,940 21,750 18,909
Deferred 2,394 173 3,754
________ ________ ________
23,334 21,923 22,663
________ ________ ________
Income before cumulative effect of
change in method of accounting for
income taxes 39,208 37,015 37,772
Cumulative effect of change in
method of accounting for income
taxes - - 1,563
________ ________ ________
Net income $ 39,208 $ 37,015 $ 39,335
________ ________ ________
Earnings per share:
Income before cumulative effect of
change in method of accounting for
income taxes $ 1.66 $ 1.55 $ 1.45
Cumulative effect of change in
method of accounting for income
taxes - - .06
________ ________ ________
Net income per share $ 1.66 $ 1.55 $ 1.51
________ ________ ________
See accompanying notes.
Luby's Cafeterias, Inc.
Statements of Shareholders' Equity
Common Stock Total
Issued Treasury Paid-In Retained Shareholders'
Shares Amount Shares Amount Capital Earnings Equity
__________________________________________________________________________________________
(Amounts in thousands except per share data)
Balance at
August 31, 1993 27,403 $ 8,769 (176) $(3,072) $ 27,037 $206,214 $238,948
Net income for the
year - - - - - 39,335 39,335
Common stock issued
under stock option
plan, net of shares
tendered in partial
payment - - 159 3,360 (92) (744) 2,524
Cash dividends,
$.615 per share - - - - - (15,791) (15,791)
Purchases of treasury
stock - - (2,268) (51,490) - - (51,490)
______ ______ ______ _______ _______ _______ _______
Balance at
August 31, 1994 27,403 8,769 (2,285) (51,202) 26,945 229,014 213,526
Net income for the
year - - - - - 37,015 37,015
Common stock issued
under employee bene-
fit plans, net of
shares tendered in
partial payment - - 195 4,395 - (1,086) 3,309
Cash dividends,
$.675 per share - - - - - (15,970) (15,970)
Purchases of treasury
stock - - (2,000) (45,176) - - (45,176)
______ ______ ______ _______ _______ _______ _______
Balance at
August 31, 1995 27,403 8,769 (4,090) (91,983) 26,945 248,973 192,704
Net income for the
year - - - - - 39,208 39,208
Common stock issued
under employee bene-
fit plans, net of
shares tendered in
partial payment and
including tax benefits - - 916 20,565 - (3,218) 17,347
Cash dividends,
$.74 per share - - - - - (17,589) (17,589)
Purchases of treasury
stock - - (252) (5,997) - - (5,997)
______ ______ ______ _______ _______ _______ _______
Balance at
August 31, 1996 27,403 $ 8,769 (3,426) $(77,415) $ 26,945 $267,374 $225,673
______ ______ ______ _______ _______ _______ _______
See accompanying notes.
Luby's Cafeterias, Inc.
Statements of Cash Flows
Years Ended August 31
1996 1995 1994
________ ________ ________
(Thousands of dollars)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 39,208 $ 37,015 $ 39,335
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 17,693 16,417 15,700
Cumulative effect of change in
method of accounting - - (1,563)
(Gain) loss on disposal of land
held for future use - (106) 69
(Gain) loss on disposal of
property, plant, and equipment 31 (313) 23
________ ________ ________
Cash provided by operating
activities before changes in
operating assets and liabilities 56,932 53,013 53,564
Changes in operating assets and
liabilities:
(Increase) decrease in trade
accounts and other receivables (230) (36) 327
Increase in food and supply inventories (483) (183) (425)
Increase in prepaid expenses (346) (9) (373)
Increase in other assets (1,115) (353) (460)
Increase (decrease) in accounts
payable - trade 2,441 1,368 (87)
Increase (decrease) in accrued
expenses and other liabilities (337) 3,082 (4,832)
Increase (decrease) in income
taxes payable 1,263 (479) 157
Increase (decrease) in deferred
income taxes and other credits 2,229 (5) 4,275
_______ ________ ________
Net cash provided by operating
activities 60,354 56,398 52,146
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposal of land
held for future use - 495 955
Proceeds from disposal of property,
plant, and equipment 153 474 182
Purchases of land held for future use (5,776) (7,531) (3,470)
Purchases of property, plant, and
equipment (42,753) (29,715) (26,252)
_______ ________ ________
Net cash used in investing
activities (48,376) (36,277) (28,585)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common
under stock option plans 16,145 3,196 2,524
Net proceeds (payments) of
short-term borrowings (57,000) 40,000 17,000
Proceeds from long-term debt 268,000 - -
Reductions of long-term debt (227,000) - -
Purchases of treasury stock (4,839) (45,916) (50,750)
Dividends paid (16,989) (15,918) (15,731)
_______ _______ _______
Net cash used in financing activities (21,683) (18,638) (46,957)
_______ _______ _______
Net increase (decrease) in cash
and cash equivalents (9,705) 1,483 (23,396)
Cash and cash equivalents at
beginning of year 12,392 10,909 34,305
________ ________ ________
Cash and cash equivalents at end
of year $ 2,687 $ 12,392 $ 10,909
________ ________ ________
See accompanying notes.
Luby's Cafeterias, Inc.
Notes to Financial Statements
August 31, 1996, 1994, and 1994
1. Significant Accounting Policies
Nature of Operations
Luby's Cafeterias, Inc. (the Company), based in San Antonio, Texas, owns
and operates cafeterias in the southern United States. As of August 31, 1996,
the Company operated a total of 204 units. The Company locates its cafeterias
convenient to shopping and business developments as well as to residential
areas. Accordingly, the cafeterias cater primarily to shoppers, store and
office personnel at lunchtime, and to families at dinner.
Inventories
The food and supply inventories are stated at the lower of cost
(first-in, first-out) or market.
Depreciation and Amortization
The Company depreciates the cost of plant and equipment over their
estimated useful lives using both straight-line and accelerated methods.
Leasehold improvements are amortized over the related lease lives, which are
in some cases shorter than the estimated useful lives of the improvements.
Long-Lived Assets
In March 1995, the Financial Accounting Standards Board (FASB) issued
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of," which requires impairment losses to
be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be
generated by those assets are less than the assets' carrying amount.
Statement No. 121 also addresses the accounting for long-lived assets that are
expected to be disposed of. The Company will adopt Statement 121 in the first
quarter of 1997 and, based on current circumstances, does not believe the
effect of adoption will be material.
Statement of Cash Flows
For purposes of the statement of cash flows, the Company considers all
highly liquid financial instruments purchased with an original maturity of
three months or less to be cash equivalents.
Preopening Expenses
New store preopening costs are expensed as incurred.
Advertising Expenses
Advertising costs are expensed as incurred.
Income Taxes
Deferred income taxes are computed using the liability method. Under
this method, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and
liabilities (temporary differences) and are measured using the enacted tax
rates and laws that will be in effect when the differences are expected to
reverse.
Stock Options
Proceeds from the sale of common stock issued under the stock option
plans and related tax benefits which accrue to the Company are accounted for
as capital transactions, and no charges or credits are made to income in
connection with the plans.
Use of Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect the reported amount of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and revenues and expenses during the reporting period. Actual
results could differ from these estimates.
2. Property, Plant, and Equipment
The cost and accumulated depreciation of property, plant, and equipment
at August 31, 1996 and 1995, together with the related estimated useful lives
used in computing depreciation and amortization, are reflected below:
Estimated
1996 1995 Useful Lives
________ ________ _______________
(Thousands of dollars)
Land $ 74,699 $ 66,405 -
Cafeteria equipment and
furnishings 117,227 106,540 3 to 10 years
Buildings 209,404 181,389 20 to 40 years
Leasehold and leasehold
improvements 46,403 43,752 Term of leases
Office furniture and equipment 2,536 2,271 5 to 10 years
Transportation equipment 688 674 5 years
Construction in progress 7,506 9,225 -
________ ________
458,463 410,256
Less accumulated depreciation
and amortization 146,874 131,099
________ ________
$311,589 $279,157
________ ________
Total interest expense incurred for 1996, 1995, and 1994 was $3,230,000,
$2,644,000, and $288,000, respectively, which approximated the amount paid
in each year. The amounts capitalized on qualifying properties in 1996,
1995, and 1994 were $1,100,000, $895,000, and $288,000, respectively.
3. Debt
As of August 31, 1995, $57,000,000 in short-term borrowings was
outstanding under a $100 million line-of-credit which expired in December
1995. The weighted average interest rate for short-term borrowings based on
the number of days outstanding was 6.4% for 1995.
During 1996 the Company entered into a new $100 million credit facility
with a syndication of four banks. As part of this credit facility, the
Company has a revolving credit agreement which allows borrowings for varying
periods through February 27, 2001, at the lower of the prime rate or other
rate options available at the time of borrowing. The credit facility includes
a maximum commitment for letters of credit of $20 million. The Company pays a
facility fee of .1% on the total commitment. The credit facility contains
business covenants which, among other things, impose certain financial
restrictions on the Company relating primarily to leverage and net worth. As
of August 31, 1996, the balance outstanding under the revolving credit
agreement was $41 million at an interest rate of 5.7%.
At August 31, 1996, letters of credit of approximately $4,244,000 have
been issued as security for the payment of insurance obligations classified as
accrued expenses on the balance sheet.
4. Leases
The Company conducts a major part of its operations from facilities which
are leased under noncancelable lease agreements. Most of the leases are for
periods of ten to 25 years and provide for contingent rentals based on sales
in excess of a base amount. Approximately 80% of the leases contain renewal
options ranging from five to 30 years.
Annual future minimum lease payments under noncancelable operating leases
as of August 31, 1996, are as follows:
(Thousands of dollars)
Years ending August 31:
1997 $ 6,386
1998 6,570
1999 6,623
2000 6,470
2001 6,231
Thereafter 52,516
_______
Total minimum lease payments $84,796
_______
Total rent expense for operating leases for the years ended August 31,
1996, 1995, and 1994 was as follows:
1996 1995 1994
________ ________ ________
(Thousands of dollars)
Minimum rentals $ 5,807 $ 5,477 $ 5,141
Contingent rentals 1,126 1,229 1,436
________ ________ ________
$ 6,933 $ 6,706 $ 6,577
________ ________ ________
5. Employee Benefit Plans and Agreements
Incentive Compensation
The Company has various incentive compensation plans covering officers
and other key employees that are based upon the achievement of specified
earnings goals and performance factors. Awards under the plans are payable in
cash and/or in shares of common stock. Charges to expense for current and
future distributions under the plans amounted to $400,000, $431,000, and
$1,481,000 in 1996, 1995, and 1994, respectively. During the years ended
August 31, 1996, 1995, and 1994, 10,590, 4,820, and -0- shares of common stock
were issued under the plans out of treasury stock, respectively.
Stock Option Plans
The Company had an Employee Stock Option Plan for executive and other key
salaried employees. Under the terms of the stock option plan, nonqualified
options and incentive stock options totaling 225,000 shares of the Company's
common stock could be granted at prices not less than 100% of fair market
value at date of grant. Options were exercisable for such periods as the
Compensation Committee determined, but not for more than ten years from
date of grant. All options outstanding under this plan either expired or were
exercised as of August 31, 1995.
In 1990 the Company adopted a new Management Incentive Stock Plan to
replace the Employee Stock Option Plan and to provide for market-based
incentive awards, including stock options, stock appreciation rights,
restricted stock, and performance share awards. Under the terms of the
Management Incentive Stock Plan, nonqualified options and incentive stock
options totaling 2,700,000 shares of the Company's common stock are reserved
for grants to the officer group, certain administrative personnel, and
cafeteria management personnel. Stock options may be granted at prices not
less than 100% of fair market value at date of grant. Options granted to the
participants of the plan are exercisable over staggered periods and expire,
depending upon the type of grant, in five to seven years. The plan provides
for various vesting methods, depending upon the category of personnel.
Following is a summary of activity in the stock option plans for the
three years ended August 31, 1996, 1995, and 1994:
Common
Option Price Shares Options Options
Per Share Reserved Outstanding Exercisable
________________ _________ ___________ ___________
Balances - August 31, 1993 $14.83 to $23.25 2,654,694 1,876,169 212,434
Granted 21.75 to 21.75 - 370,725 -
Became exercisable 15.00 to 23.25 - - 246,327
Cancelled or expired 15.00 to 23.25 - (139,294) (41,633)
Exercised 14.83 to 17.88 (191,366) (191,366) (191,366)
_________ _________ _______
Balances - August 31, 1994 15.00 to 23.25 2,463,328 1,916,234 225,762
Granted 22.75 to 23.75 - 136,100 -
Became exercisable 15.00 to 23.75 - - 582,379
Cancelled or expired 15.00 to 23.75 - (95,467) (43,552)
Exercised 15.00 to 21.75 (209,753) (209,753) (209,753)
_________ _________ _______
Balances - August 31, 1995 15.00 to 23.75 2,253,575 1,747,114 554,836
Granted 21.00 to 21.63 - 223,648 -
Became exercisable 15.00 to 23.75 - - 1,167,766
Cancelled or expired 16.42 to 23.75 - (53,415) (38,903)
Exercised 15.00 to 23.25 (980,600) (980,600) (980,600)
_________ _________ ________
Balances - August 31, 1996 $15.00 to $23.75 1,272,975 936,747 703,099
_________ _________ ________
Deferred Compensation
Deferred compensation agreements exist for several key management
employees, all of whom are current or former officers. Under the agreements,
the Company is obligated to provide for each such employee or his
beneficiaries, during a period of ten years after the employee's death,
disability, or retirement, annual benefits ranging from $15,500 to $43,400.
The estimated present value of future benefits to be paid is being
accrued over the period from the effective date of the agreements until the
expected retirement dates of the participants. The net expense incurred for
this plan for the years ended August 31, 1996, 1995, and 1994 amounted to
$239,000, $79,000, and $78,000, respectively.
The Company also has a Supplemental Executive Retirement Plan (SERP) for
key executives and officers. The SERP is a "target" benefit plan, with the
annual lifetime benefit based upon a percentage of average salary during the
final five years of service at age 65, offset by several sources of income
including benefits payable under deferred compensation agreements, if
applicable, the profit sharing plan, and Social Security. SERP benefits will
be paid from the Company's assets. The net expense incurred for this plan for
the year ended August 31, 1996, was $80,000, and the unfunded accumulated
benefit obligation as of August 31, 1996, was approximately $250,000.
Profit Sharing
The Company has a profit sharing plan and retirement trust covering
substantially all employees who have attained the age of 21 years and have
completed one year of continuous service. The plan is administered by a
corporate trustee, is a "qualified plan" under Section 401(a) of the Internal
Revenue Code, and provides for the payment of the employee's vested portion of
the plan upon retirement, termination, disability, or death. The plan is
funded by contributions of a portion of the net earnings of the Company. The
plan provides that for each fiscal year in which the Company's net income
(before income taxes and before any contribution to the plan) meets certain
minimum standards, the Company is obligated to contribute to the plan, at a
minimum, an amount equal to a defined percentage of the participants'
compensation. In no event will the required contribution exceed 10% of the
Company's income before income taxes and before any contribution to the plan.
The Company's annual contribution to the plan amounted to $5,100,000,
$4,888,000, and $1,886,000, for 1996, 1995, and 1994, respectively.
6. Income Taxes
The Company adopted FASB Statement No. 109, "Accounting for Income
Taxes," in 1994. The effect of the change on pretax income from continuing
operations for the year ended August 31, 1994, was not material; however, the
cumulative effect of the change increased net income in fiscal 1994 by
$1,563,000, or $.06 per share.
The tax effect of temporary differences results in deferred income tax
assets and liabilities as of August 31 as follows:
1996 1995
________ ___________
(Thousands of dollars)
Deferred tax liabilities:
Amortization of capitalized interest $ 494 $ 522
Depreciation and amortization 19,085 17,566
Deferred compensation (779) (766)
Other 1,083 378
_______ _______
Total deferred tax liabilities 19,883 17,700
Deferred tax asset:
Workers' compensation insurance 418 629
_______ _______
Net deferred tax liabilities $19,465 $17,071
_______ _______
The reconciliation of the provision for income taxes to the expected
income tax expense (computed using the statutory tax rate) is as follows:
1996 1995 1994
Amount % Amount % Amount %
_______ ____ _______ ____ _______ ____
(Thousands of dollars and as a percent of pretax income)
Normally expected
income tax expense $21,890 35.0% $20,628 35.0% $21,152 35.0%
State income taxes 1,488 2.4 1,616 2.7 1,625 2.7
Jobs tax credits (1) - (151) (.2) (260) (.4)
Other differences (43) (.1) (170) (.3) 146 .2
_______ ____ _______ ____ ______ ____
$23,334 37.3% $21,923 37.2% $22,663 37.5%
_______ ____ _______ ____ ______ ____
Cash payments for income taxes for 1996, 1995, and 1994 were $19,677,000,
$22,229,000, and $18,752,000, respectively.
7. Commitments
At August 31, 1996, the Company had seven cafeterias under construction.
The aggregate unexpended costs under the construction contracts were
approximately $5,469,000.
The Company has unconditionally guaranteed a $2,000,000 loan under a line
of credit for an unrelated limited partnership in exchange for advertising
rights and a participation in future profits of the venture.
8. Common Stock
In 1991 the Board of Directors adopted a Shareholder Rights Plan and
declared a dividend of one common stock purchase right for each outstanding
share of common stock. The rights are not initially exercisable. The rights
may become exercisable under circumstances described in the Plan if any person
or group (an Acquiring Person) becomes the beneficial owner of 15% or more of
the common stock. Once the rights become exercisable, each right will be
exercisable to purchase, for $27.50 (the Purchase Price), one-half of one
share of common stock, par value $.32 per share, of the Company. If any
person becomes the beneficial owner of 15% or more of the common stock, each
right will entitle the holder, other than the Acquiring Person, to purchase
for the Purchase Price a number of shares of the Company's common stock having
a market value of four times the Purchase Price.
The Board of Directors authorized the purchase in the open market of up
to 1,000,000 shares of the Company's outstanding common stock through December
31, 1997. During 1996 the Company purchased 252,200 shares of its
common stock at a cost of $5,997,000, which are being held as treasury stock.
9. Per Share Information
The weighted average number of shares used in the net income per share
computation was 23,688,813 for 1996, 23,908,087 for 1995, and 25,981,840 for
1994.
10. Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities at August 31 consisted of:
1996 1995
_______ _______
(Thousands of dollars)
Salaries and bonuses $ 6,185 $ 7,542
Rent 777 841
Taxes, other than income 5,742 4,886
Profit sharing plan 5,057 4,888
Insurance 6,273 6,417
Other 302 321
_______ _______
$24,336 $24,895
_______ _______
11. Quarterly Financial Information (Unaudited)
The following is a summary of quarterly unaudited financial information
for 1996 and 1995:
Three Months Ended
November 30, February 29, May 31, August 31,
1995 1996 1996 1996
________ ________ ________ _________
(Thousands of dollars except per share data)
Sales $108,337 $108,835 $117,132 $115,824
Gross profit 51,027 52,634 57,140 54,986
Net income 8,565 9,322 10,964 10,357
Net income per share .37 .40 .46 .43
Three Months Ended
November 30, February 28, May 31, August 31,
1994 1995 1995 1995
________ ________ ________ _________
(Thousands of dollars except per share data)
Sales $101,446 $100,570 $106,899 $110,109
Gross profit 48,361 48,446 51,523 53,131
Net income 8,683 8,582 9,907 9,843
Net income per share .35 .36 .42 .42
12. Subsequent Event
On September 16, 1996, the Company purchased the assets of 20 cafeteria
locations from Triangle FoodService Corporation, formerly Wyatt Cafeterias,
Inc., for approximately $14 million in cash.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant.
There is incorporated in this Item 10 by reference that portion
of the Company's definitive proxy statement for the 1997 annual
meeting of shareholders appearing therein under the captions "Election
of Directors" and "Information Concerning Directors and Executive
Officers." See also the information in Item 4A of Part I of this
Report.
Item 11. Executive Compensation.
There is incorporated in this Item 11 by reference that portion
of the Company's definitive proxy statement for the 1997 annual
meeting of shareholders appearing therein under the caption "Executive
Compensation."
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
There is incorporated in this Item 12 by reference that portion
of the Company's definitive proxy statement for the 1997 annual
meeting of shareholders appearing therein under the captions
"Principal Shareholders" and "Management Shareholders."
Item 13. Certain Relationships and Related Transactions.
There is incorporated in this Item 13 by reference that portion
of the Company's definitive proxy statement for the 1997 annual
meeting of shareholders appearing therein under the caption "Certain
Relationships and Related Transactions."
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) Documents.
1. Financial Statements
The following financial statements are filed as part of this Report:
Balance sheets at August 31, 1996 and 1995
Statements of income for each of the three years in the period
ended August 31, 1996
Statements of shareholders' equity for each of the three years in
the period ended August 31, 1996
Statements of cash flows for each of the three years in the
period ended August 31, 1996
Notes to financial statements
Report of independent auditors
2. Financial Statement Schedules
All schedules are omitted since the required information is not present
or is not present in amounts sufficient to require submission of the schedule
or because the information required is included in the financial statements
and notes thereto.
3. Exhibits
The following exhibits are filed as a part of this Report:
2 - Agreement and Plan of Merger dated November 1, 1991,
between Luby's Cafeterias, Inc., a Texas corporation,
and Luby's Cafeterias, Inc., a Delaware corporation
(filed as Exhibit 2 to the Company's Quarterly Report
on Form 10-Q for the quarter ended November 30, 1991,
and incorporated herein by reference).
3(a) - Certificate of Incorporation of Luby's Cafeterias, Inc., a
Delaware corporation, as in effect February 28, 1994 (filed
as Exhibit 3(a) to the Company's Quarterly Report on Form
10-Q for the quarter ended February 28, 1994, and
incorporated herein by reference).
3(b) - Amendment to Bylaws of Luby's Cafeterias, Inc. adopted July 12,
1996.
3(c) - Bylaws of Luby's Cafeterias, Inc. as currently in effect.
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) - 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).
10(a) - Form of Deferred Compensation Agreement entered into between
Luby's Cafeterias, Inc. and various officers (filed as Exhibit
10(b) to the Company's Annual Report on Form 10-K for the fiscal
year ended August 31, 1981, and incorporated herein by
reference).
10(b) - Annual Incentive Plan for Area Vice Presidents of Luby's
Cafeterias, Inc. adopted October 19, 1983 (filed as Exhibit
10(d) to the Company's Annual Report on Form 10-K for the fiscal
year ended August 31, 1983, and incorporated herein by
reference).
10(c) - Incentive Bonus Plan of Luby's Cafeterias, Inc. adopted
October 19, 1983 (filed as Exhibit 10(e) to the Company's
Annual Report on Form 10-K for the fiscal year ended
August 31, 1983, and incorporated herein by reference).
10(d) - Performance Unit Plan of Luby's Cafeterias, Inc. approved by
the shareholders on January 12, 1984 (filed as Exhibit 10(f) to
the Company's Annual Report on Form 10-K for the fiscal year
ended August 31, 1984, and incorporated herein by reference).
10(e) - Employment Contract dated January 8, 1988, between Luby's
Cafeterias, Inc. and George H. Wenglein (filed as Exhibit 10(h)
to the Company's Annual Report on Form 10-K for the fiscal year
ended August 31, 1988, and incorporated herein by reference).
10(f) - 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(g) - 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(h) - Nonemployee Director Stock Option Plan of Luby's Cafeterias,
Inc. approved by the shareholders on January 13, 1995 (filed
as Exhibit 10(h) to the Company's Quarterly Report on
Form 10-Q for the quarter ended February 28, 1995, and
incorporated herein by reference).
10(i) - Employment Contract dated January 12, 1996, between Luby's
Cafeterias, Inc. and John B. Lahourcade (filed as Exhibit 10(i)
to the Company's Quarterly Report on Form 10-Q for the quarter
ended February 29, 1996, and incorporated herein by reference).
10(j) - Luby's Cafeterias, Inc. Supplemental Executive Retirement Plan
dated May 30, 1996.
10(k) - Luby's Cafeterias, Inc. Welfare Benefit Plan Trust dated July
18, 1996.
11 - Statement re computation of per share earnings.
21 - Subsidiaries of Luby's Cafeterias, Inc.
99(a) - Consent of Ernst & Young LLP.
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed during the last quarter of
the period covered by this Report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned thereunto duly
authorized.
Date: November 26, 1996 LUBY'S CAFETERIAS, INC.
(Registrant)
By: JOHN E. CURTIS, JR.
___________________________
John E. Curtis, Jr., President
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
Signature and Date Name and Title
RALPH ERBEN Ralph Erben, Chairman
_______________________________ of the Board, Chief Executive
November 26, 1996 Officer, and Director
JOHN E. CURTIS, JR. John E. Curtis, Jr., President,
_______________________________ Chief Operating Officer, Chief
November 26, 1996 Financial Officer, and Director
WILLIAM E. ROBSON William E. Robson, Executive Vice
________________________________ President-Operations, and
Director
November 26, 1996
RONALD E. RIEMENSCHNEIDER Ronald E. Riemenschneider, Vice
________________________________ President, Treasurer, and
November 26, 1996 Principal Accounting Officer
LAURO F. CAVAZOS Lauro F. Cavazos, Director
________________________________
November 26, 1996
DAVID B. DAVISS David B. Daviss, Director
________________________________
November 26, 1996
ROGER R. HEMMINGHAUS Roger R. Hemminghaus, Director
________________________________
November 26, 1996
JOHN B. LAHOURCADE John B. Lahourcade, Director
________________________________
November 26, 1996
WALTER J. SALMON Walter J. Salmon, Director
________________________________
November 26, 1996
GEORGE H. WENGLEIN George H. Wenglein, Director
________________________________
November 26, 1996
JOANNE WINIK Joanne Winik, Director
________________________________
November 26, 1996
EXHIBIT INDEX
Exhibit
Page
2 - Agreement and Plan of Merger dated November 1, 1991,
between Luby's Cafeterias, Inc., a Texas corporation,
and Luby's Cafeterias, Inc., a Delaware corporation
(filed as Exhibit 2 to the Company's Quarterly Report
on Form 10-Q for the quarter ended November 30, 1991,
and incorporated herein by reference).
3(a) - Certificate of Incorporation of Luby's Cafeterias, Inc., a
Delaware corporation, as in effect February 28, 1994 (filed
as Exhibit 3(a) to the Company's Quarterly Report on Form
10-Q for the quarter ended February 28, 1994, and
incorporated herein by reference).
3(b) - Amendment to Bylaws of Luby's Cafeterias, Inc. adopted July 12,
1996.
3(c) - Bylaws of Luby's Cafeterias, Inc. as currently in effect.
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) - 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).
10(a) - Form of Deferred Compensation Agreement entered into between
Luby's Cafeterias, Inc. and various officers (filed as Exhibit
10(b) to the Company's Annual Report on Form 10-K for the fiscal
year ended August 31, 1981, and incorporated herein by
reference).
10(b) - Annual Incentive Plan for Area Vice Presidents of Luby's
Cafeterias, Inc. adopted October 19, 1983 (filed as Exhibit
10(d) to the Company's Annual Report on Form 10-K for the fiscal
year ended August 31, 1983, and incorporated herein by
reference).
10(c) - Incentive Bonus Plan of Luby's Cafeterias, Inc. adopted
October 19, 1983 (filed as Exhibit 10(e) to the Company's
Annual Report on Form 10-K for the fiscal year ended
August 31, 1983, and incorporated herein by reference).
10(d) - Performance Unit Plan of Luby's Cafeterias, Inc. approved by
the shareholders on January 12, 1984 (filed as Exhibit 10(f) to
the Company's Annual Report on Form 10-K for the fiscal year
ended August 31, 1984, and incorporated herein by reference).
10(e) - Employment Contract dated January 8, 1988, between Luby's
Cafeterias, Inc. and George H. Wenglein (filed as Exhibit 10(h)
to the Company's Annual Report on Form 10-K for the fiscal year
ended August 31, 1988, and incorporated herein by reference).
10(f) - 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(g) - 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(h) - Nonemployee Director Stock Option Plan of Luby's Cafeterias,
Inc. approved by the shareholders on January 13, 1995 (filed
as Exhibit 10(h) to the Company's Quarterly Report on
Form 10-Q for the quarter ended February 28, 1995, and
incorporated herein by reference).
10(i) - Employment Contract dated January 12, 1996, between Luby's
Cafeterias, Inc. and John B. Lahourcade (filed as Exhibit 10(i)
to the Company's Quarterly Report on Form 10-Q for the quarter
ended February 29, 1996, and incorporated herein by reference).
10(j) - Luby's Cafeterias, Inc. Supplemental Executive Retirement Plan
dated May 30, 1996.
10(k) - Luby's Cafeterias, Inc. Welfare Benefit Plan Trust dated July
18, 1996.
11 - Statement re computation of per share earnings.
21 - Subsidiaries of Luby's Cafeterias, Inc.
99(a) - Consent of Ernst & Young LLP.