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, 1999 and 1998, and
the related statement of changes in net assets available for benefits for the
year ended December 31, 1999. 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, 1999 and 1998, and the changes in its net assets available for
benefits for the year ended December 31, 1999, 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 for investment purposes at end of year as of December 31, 1999 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 19, 2000
Luby's Savings and Investment Plan
Statements of Net Assets Available for Benefits
December 31
1999 1998
____ ____
Assets
Investments, at fair value $7,363,539 $4,752,840
Receivables:
Participant contributions 142,741 195
__________ __________
Net assets available for benefits $7,506,280 $4,753,035
__________ __________
See accompanying notes.
Luby's Savings and Investment Plan
Statement of Changes in Net Assets Available for Benefits
Year Ended December 31, 1999
Additions to net assets attributed to:
Investment income:
Net appreciation in fair value of investments $ 760,329
Interest and dividends 64,178
__________
824,507
Contributions:
Participants 2,584,933
__________
Total additions 3,409,440
Deductions from net assets attributed to:
Benefits to participants 645,663
Administrative expenses 10,532
__________
Total deductions 656,195
__________
Net increase 2,753,245
Net assets available for benefits at beginning of year 4,753,035
__________
Net assets available for benefits at end of year $7,506,280
__________
See accompanying notes.
Luby's Savings and Investment Plan
Notes to Financial Statements
December 31, 1999 and 1998
1. Significant Accounting Policies
The accounting records of the Luby's Savings and Investment Plan (the Plan) are
maintained on the accrual basis of accounting.
The Plan's investments are stated at fair value based on quoted market prices on
the valuation date. 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 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 generally accepted
accounting principles requires management to make estimates and assumptions that
affect amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Reclassification
Certain prior year balances have been reclassified to conform to current year
presentation.
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 exceeding 15% of
their compensation, limited by 401(k) regulations. Participants direct the
investment of their contributions into various investment options offered by the
Plan. The Plan currently offers five collective funds, four mutual funds, and
one common stock fund. Prior to May 1, 1999, the Plan offered eight pooled
separate accounts, one common stock fund, and an insurance investment contract
as investment options for participants.
Participant Accounts
Each participant's account is credited with the participant's contributions and
allocations of Plan earnings, and charged with an allocation of any applicable
participant expenses. 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.
Participant Loans
Participants may borrow from their fund accounts a minimum of $1,000 up to a
maximum of $50,000 or 50% of their account balance, reduced by the highest
amount of any loan outstanding within the previous twelve months. Loan
transactions are treated as a transfer from (to) the investment fund to (from)
the loan fund. Loan terms range up to 5 years for general purpose loans or up to
30 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.
Interest rates on outstanding loans range from 8.75 to 9.5 percent. 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 to
terminate the Plan subject to the provisions of ERISA.
3. Investments
All investments are held by the Plan's trustee. CIGNA was the trustee of the
Plan through April 30, 1999. American Express Trust Company assumed the trustee
duties on May 1, 1999, and all Plan assets were transferred to American Express
Trust Company.
The following presents investments that represent five percent or more of the
Plan's net assets:
December 31,
1999 1998
____ ____
AET Income Fund II $1,115,455 $ -
AET Medium-Term Horizon Fund 869,991 -
AET Long-Term Horizon Fund 1,213,301 -
AET Equity Index Fund II 1,484,014 -
Baron Asset Fund 1,187,735 -
Janus Overseas Fund 685,524 -
Luby's, Inc. Pooled Stock Fund 410,413 342,136
CIGNA Guaranteed Income Fund - 745,094
CIGNA Lifetime 20 Fund - 275,665
CIGNA Lifetime 30 Fund - 504,676
CIGNA Lifetime 40 Fund - 362,578
CIGNA Large Company Stock Index Fund - 911,844
PBHG Growth Fund - 1,022,618
Templeton Foreign Fund - 258,208
During 1999, the Plan's investments (including gains and losses on investments
bought and sold, as well as held during the year) appreciated in value by
$760,329 as follows:
Collective funds $455,215
Mutual funds 291,246
Common stock fund (131,153)
Pooled separate accounts 145,021
________
$760,329
________
4. Investment Contract With Insurance Company
From March 1, 1997, through April 30, 1999, the Plan had a group annuity
contract with Connecticut General Life Insurance Company (CGLIC). The
contract included a Guaranteed Income Fund which was invested in CGLIC's
general portfolio, was fully benefit-responsive, and was recorded at
contract value. Contract value equaled all contributions and transfers
into the account, plus accrued interest, less payments.
The average yield on the Guaranteed Income Fund was 5.40% through April 1999 and
5.75% for 1998. The credited interest rate was 5.40% at April 30, 1999, and
5.75% at December 31, 1998. Because the credited interest rate was reset
periodically at the discretion of CGLIC, the contract value approximated fair
value. The value of the group annuity contract was subject to the stability
of CGLIC.
5. Benefits Payable to Terminated Participants
At December 31, 1999, there were five withdrawing participants in the Plan
entitled to aggregate vested benefits totaling $9,533 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
1999 1998
____ ____
Net assets available for benefits
per the financial statements $7,506,280 $4,753,035
Participant contributions receivable
at December 31, 1999 (142,741) (195)
__________ __________
Net assets available for benefits
per the Form 5500 $7,363,539 $4,752,840
__________ __________
The following is a reconciliation of contributions received from participants
per the financial statements to the Form 5500 for the year ended December 31,
1999:
Contributions received from partici-
pants per the financial statements $2,584,933
Plus:
Amounts receivable from participants at
December 31, 1998 195
Less:
Amounts receivable from participants at
December 31, 1999 (142,741)
___________
Contributions received from participants per
the Form 5500 $2,442,387
___________
7. Tax Status
The Plan has received a determination letter from the Internal Revenue Service
dated February 13, 1998, stating that the Plan is qualified under Section 401(a)
of the IRC and, therefore, the related trust is exempt from taxation. Once
qualified, the Plan is required to operate in conformity with the IRC to
maintain its qualification. The Plan has been amended since receiving the
determination letter. The Plan administrator believes the Plan is being operated
in compliance with the applicable requirements of the IRC and, therefore,
believes the Plan is qualified and the related trust is tax-exempt.
SUPPLEMENTAL SCHEDULE
Luby's Savings and Investment Plan
Schedule H, Line 4i - Schedule of Assets Held for Investment Purposes at
End of Year
EIN: 74-1335253 Plan No.: 003
December 31, 1999
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 $1,115,455
*AET Short-Term Horizon Fund Collective fund 90,741
*AET Medium-Term Horizon Fund Collective fund 869,991
*AET Long-Term Horizon Fund Collective fund 1,213,301
*AET Equity Index Fund II Collective fund 1,484,014
*AXP Selective Fund Mutual fund 3,812
*AXP New Dimensions Fund Mutual fund 82,173
Baron Asset Fund Mutual fund 1,187,735
Janus Overseas Fund Mutual fund 685,524
*Luby's, Inc. Pooled Stock Fund Common stock 35,091 shares 410,413
*Participant loans Interest accrued at
prime rate plus 1%,
varying maturity dates,
8.75% - 9.50% charged
during 1999 220,380
__________
$7,363,539
__________
*Denotes party-in-interest
