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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
[x] Quarterly Report under Section 13 or 15 (d) of the Securities Exchange
Act of 1934
For the quarterly period ended October 22, 1995
OR
[ ] Transition Report Pursuant to Section 13 Or 15 (D) of the Securities
Exchange Act Of 1934
Commission file number 0-12701
For the transition period from to
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CUCOS INC.
(Exact name of small business issuer as specified in its charter)
LOUISIANA 72-0915435
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
110 Veterans Blvd., Suite 222, Metairie, Louisiana 70005
(Address of principal executive offices) (Zip code)
Issuer's telephone number, including area code--504-835-0306
Check whether the issuer: (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the post 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
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State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 2,113,747 shares of common
stock, no par value, as of November 30, 1995
Transitional Small Business Disclosure Format (check one):
Yes No X
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CUCOS INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. The Company: Cucos Inc. (the "Company") owns and franchises
Mexican restaurants under the name "Cucos". At October 22, 1995,
fifteen Company-owned restaurants and five franchised restaurants were
in operation. At the end of the Comparable Quarter, there were fifteen
company-owned and twelve franchised restaurants in operation.
2. Fiscal Year: The Company uses a 52/53 week year for financial
reporting purposes with the Company's fiscal year ending on the Sunday
closest to June 30 of each year. Fiscal 1996 will end on June 30,
1996, and will consist of one sixteen-week quarter ending October 22,
1995, and three twelve-week quarters ending January 14, 1996, and April
7, 1996, and June 30, 1996. Fiscal 1995 and fiscal 1996 are both 52
week years.
3. The accompanying unaudited financial statements have been prepared in
accordance with the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures
normally included in the financial statements have been omitted
pursuant to such rules and regulations. It is suggested that these
financial statements be read in conjunction with the Company's Annual
Report for the fiscal year ended July 2, 1995. In the opinion of
management, these financial statements contain all normal recurring
adjustments necessary to fairly present the financial results for the
sixteen weeks ended October 22, 1995. Operating results for the period
shown are not necessarily indicative of the operating results expected
for the full fiscal year ending June 30, 1996.
4. On July 28, 1995, the Company issued $500,000 of zero-coupon
convertible unregistered Notes due June 30, 2015 (the "Notes"). The
Notes do not bear interest and are convertible into 527,983 shares of
the Company's common stock. The Notes are not convertible for five
years except under certain conditions primarily relating to the sale or
change in control of the Company. The Notes are secured by an
assignment of one of the Company's restaurant leases and a lien on the
Company's tangible personal property located at that restaurant. The
proceeds were used for working capital purposes.
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ITEM 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Revenues and earnings increased for the 16 weeks ended October 22, 1995 (the
"Current Quarter"). Revenues increased 6.5% to $6,369,016, from $5,978,765 for
the sixteen weeks ended October 23, 1994 (the "Comparable Quarter"). There was
a profit of $3,391 ($.0 per share) in the Current Quarter compared to a loss of
$231,869 ($.11 per share) in the Comparable Quarter.
Sales of Food and Beverages were $6,210,492 during the Current Quarter, up 9.1%
from $5,693,418 during the Comparable Quarter. Sales increased between
quarters primarily because of a 9.6% increase in comparable sales per
restaurant. This increase was due to repositioning the Cucos concept in the
marketplace through remodeling, repricing and remarketing. During the Current
Quarter two additional remodels were completed and television advertising was
expanded to two additional markets.
Franchise Fees and Royalties declined to $57,022 from $119,652 in the
Comparable Quarter, primarily due to there being seven fewer franchised
restaurants in operation in the Current Quarter versus the Comparable Quarter.
Commissary Rent and Other Income declined primarily due to a $66,000 decline in
rent income from the four closed franchised restaurants. Since year end the
Company has resubleased two of these four properties.
Total Restaurant Expenses increased 8.6% to $5,387,506 in the Current Quarter
from $4,959,274 in the Comparable Quarter primarily due to a 9.1% increase in
sales. Cost of Sales as a percent of Sales of Food and Beverages increased
about 1.0% due to higher produce costs and lower prices on some items.
Restaurant labor and benefits declined as a percent of Sales of Food and
Beverages primarily due to the semifixed nature of these expenses compared to
the increase in sales. Other Operating Expenses as a percent of Sales of Food
and Beverages also increased primarily due to higher media expenses for the
Company's new television campaign. Media expenses increased by $208,722 in the
Current Quarter compared to the Comparable Quarter. A brief summary of the
various components of Total Restaurant Expenses as they relate to Restaurant
Sales for the Current Quarter versus the Comparable Quarter follows:
<TABLE>
<CAPTION>
Current Comparable
Description Quarter Quarter
----------- ------- -------
<S> <C> <C>
Cost of Sales 26.49% 25.50%
Restaurant Labor and Benefits 32.74% 33.80%
Other Operating Expenses 17.17% 16.28%
Occupancy Costs 10.35% 11.52%
------ ------
Total Restaurant Expenses 86.70% 87.10%
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</TABLE>
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Operations and Franchise Expenses for the Current Quarter decreased to $385,253
from $530,899 in the Comparable Quarter. The decline was primarily due to lower
expenses associated with the four restaurants slated for sale or sublease at the
end of fiscal 1995. Two of these four restaurants were subleased during the
Current Quarter.
Corporate Expenses for the Current Quarter decreased by $85,827 (15.5%) to
$467,520 from $553,347 in the Comparable Quarter. This decrease was primarily
due to cost savings actions initiated at the beginning of the Current Quarter,
including a 10% compensation decrease for corporate management and an 8%
reduction in corporate staff.
LIQUIDITY AND CAPITAL RESOURCES
Long-Term Debt declined to $2,745,252 at the end of the Current Quarter
compared to $2,838,359 at the end of fiscal 1995 and $2,142,204 at the end of
the Comparable Quarter. During the Current Quarter the Company issued $500,000
of zero- coupon convertible unregistered Notes due June 30, 2015.
At October 22, 1995, the Company had cash and cash equivalents of $829,281
compared to $566,740 at the end of fiscal 1995 and $484,559 at the end of the
Comparable Quarter.
The current ratio was .71 at the end of the Current Quarter compared to .61 at
the end of fiscal 1995 and .71 at the end of the Comparable Quarter.
Management is continuing to renegotiate the terms of its existing long-term
debt and has reduced current maturities of long-term debt from $787,530 at year
end to $670,123 as of the end of the Current Quarter. The working capital
deficit improved by $371,285, primarily due to the issuance of a $500,000
convertible debenture due in 2015 and the renegotiation of the terms of some of
the Company's long-term debt.
The Company normally relies on cash flow operating activities to finance
recurring capital expenditures. A combination of long-term debt and lease
financing is used to fund expansion and remodeling. The Company's capital
budget for normal recurring equipment replacement and refurbishing is
approximately $325,000, annually.
The Company intends to extend its remodeling program by completing the
remodeling of three additional Company-owned restaurants during the next three
quarters. The average cost of each remodel will be approximately $150,000.
Financing has not been arranged as of the end of the Current Quarter.
PROSPECTIVE INFORMATION
There are several franchised restaurants which continue to experience
operational and local economic problems, which could result in additional
closings during the remainder of fiscal 1996. In addition, two of the four
properties slated for disposal during 1995 have not been subleased. Management
reviews the carrying values and estimated time for disposal quarterly to
determine if additional reserves are required.
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Part I--Financial Information
ITEM I. FINANCIAL STATEMENTS
CUCOS INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
Oct. 22, 1995 July 2, 1995
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UNAUDITED
<S> <C> <C>
ASSETS
Current Assets
Cash and Cash Equivalents $ 829,281 $ 566,740
Certificates of Deposit 33,000 33,000
Receivables:
Trade 593,141 616,470
Due from affiliates 240,289 233,942
Notes receivable from franchisees 14,787 28,864
Less allowance for doubtful accounts 202,744 194,034
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645,473 685,242
Inventories 228,231 219,653
Prepaids, deferred taxes and other current assets 391,932 302,511
Property held for resale 178,965 217,210
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TOTAL CURRENT ASSETS 2,306,882 2,024,356
Deferred Taxes and Noncurrent Receivables 264,574 276,737
Property, Equipment and Other
Land 327,000 327,000
Property and equipment 4,585,190 4,300,009
Building and leasehold improvements 4,419,954 4,275,063
Reacquired franchise rights 528,896 528,896
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9,861,040 9,430,968
Less accumulated depreciation and amortization 4,015,192 3,586,795
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5,845,848 5,844,173
Investment in LaMexiCo, L.L.C. 246,699 249,053
Deferred Cost, less accumulated amortization 76,423 25,113
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$ 8,740,726 $ 8,419,432
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Notes payable to bank $ 377,288 $ 313,725
Trade accounts payable 1,547,771 1,469,585
Accrued expenses and other 463,177 564,752
Accrued payroll 173,877 185,133
Current portion of long-term debt 670,123 787,530
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TOTAL CURRENT LIABILITIES 3,232,236 3,320,725
Long-Term Debt, less current portion 2,745,252 2,838,359
Convertible Debenture 500,000 -
Deferred Revenue 10,500 11,000
Shareholder's Equity
Preferred Stock, no par value - 1,000,000 shares
authorized, non issued or outstanding
Common Stock, no par value - 20,000,000 shares
authorized, 2,113,747 shares issued and
outstanding at October 22, 1995 and July 2, 1995 4,745,585 4,745,585
Additional paid-in capital 67,849 67,849
Retained earnings (deficit) (2,560,696) (2,564,086)
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TOTAL SHAREHOLDERS' EQUITY 2,252,738 2,249,348
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$ 8,740,726 $ 8,419,432
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</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
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Part I--Financial Information
CUCOS INC.
STATEMENTS OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
16 Weeks 16 Weeks
Ended Ended
Oct. 22, 1995 Oct. 23, 1994
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<S> <C> <C>
OPERATING ACTIVITIES
Net Income (Loss) $ 3,391 $ (231,869)
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation and Amortization 247,062 263,021
Deferred Revenue (500) (36,667)
Loss (Gain) on Sale of Assets 12,696 (782)
Changes in Operating Assets/Liabilities & Other (15,096) (77,651)
--------- ----------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES 247,553 (83,948)
INVESTING ACTIVITIES
Purchases of Property and Equipment (223,188) (310,386)
Proceeds From Sale of Assets - 340,000
Change in Deferred Costs (51,311) 26,452
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NET CASH PROVIDED BY (USED) IN
INVESTING ACTIVITIES (274,499) 56,066
FINANCING ACTIVITIES
Proceeds from Borrowings 552,345 150,635
Principal Payments on Borrowings (262,858) (253,029)
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NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 289,487 (102,394)
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INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 262,541 (130,276)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 566,740 614,835
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 829,281 $ 484,559
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</TABLE>
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Part I--Financial Information
CUCOS INC.
STATEMENT OF OPERATIONS
UNAUDITED
<TABLE>
<CAPTION>
16 Weeks Ended 16 Weeks Ended
October 22, 1995 October 23, 1994
---------------- ----------------
<S> <C> <C>
Revenues:
Sales of Food and Beverages 6,210,492 5,693,418
Franchise Fees and Royalties 57,022 119,652
Commissary, Rent, and Other Income 101,502 165,695
----------- -----------
Total Revenues 6,369,016 5,978,765
Costs and Expenses:
Cost of Sales 1,644,945 1,451,677
Restaurant Labor and Benefits 2,033,266 1,924,422
Other Operating Expenses 1,066,294 927,079
Occupancy Costs 643,001 656,096
Preopening Costs 0 0
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Total Restaurant Expenses 5,387,506 4,959,274
Operations and Franchise Expenses 385,253 530,899
Corporate Expenses 467,520 553,347
Interest Expense 125,346 121,557
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Income (Loss) Before Income Taxes 3,391 (186,312)
Income Tax Expense - 45,557
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NET INCOME (LOSS) $ 3,391 $ (231,869)
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Weighted Shares Outstanding 2,113,747 2,161,904
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NET INCOME (LOSS) PER SHARE $ .0 $ (.11)
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</TABLE>
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Part II-Other Information
ITEM 1. LEGAL PROCEEDINGS.
None, except as previously reported.
ITEM 2. CHANGES IN SECURITIES.
On July 26, 1995, the Company's by-laws were amended to provide
that shareholders shall not have dissenters' rights as provided in Section
12:140.2 of the Louisiana Business Corporation Law.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 5. OTHER INFORMATION.
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a. Exhibits.
The following exhibits are filed with this Quarterly Report or are
incorporated herein by reference:
Exhibit Number Title
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3* Amended and Restated By-Laws
4-A* Note Purchase Agreement (with Exhibits)
4-B* Amendment No. 1 to Rights Agreement
27 Financial Data Schedule
____________________
* Filed as an exhibit to the Company's Form 8-K filed August 11, 1995
(Commission File No. 1-12701), and incorporated herein by reference.
b. Reports on Form 8-K.
On August 11, 1995, the Company filed a report on Form 8-K dated
August 8, 1995, with the Commission. The Form 8-K reported the Company's
issuance of its zero-coupon convertible unregistered Notes due June 30, 2015,
in the aggregate principal amount of $500,000 (see Note 3 to Financial
Statements) and the amendment to the Company's by-laws described in Item 2
above.
<PAGE> 9
CUCOS INC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CUCOS INC.
(Registrant)
Date December 4, 1995 /s/ THOMAS J. SANDEMAN
-----------------------------
BY: Thomas J. Sandeman
Vice President-Finance and Treasurer
Chief Financial Officer
<PAGE> 10
INDEX TO EXHIBITS
The following exhibits are filed with this Quarterly Report or are
incorporated herein by reference:
Exhibit Number Title
-------------- -----
3* Amended and Restated By-Laws
4-A* Note Purchase Agreement (with Exhibits)
4-B* Amendment No. 1 to Rights Agreement
27 Financial Data Schedule
____________________
* Filed as an exhibit to the Company's Form 8-K filed August 11, 1995
(Commission File No. 1-12701), and incorporated herein by reference.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-03-1995
<PERIOD-END> OCT-22-1995
<CASH> 862,281
<SECURITIES> 0
<RECEIVABLES> 848,217
<ALLOWANCES> 202,744
<INVENTORY> 228,231
<CURRENT-ASSETS> 2,306,882
<PP&E> 9,861,040
<DEPRECIATION> 4,015,192
<TOTAL-ASSETS> 8,740,726
<CURRENT-LIABILITIES> 3,232,236
<BONDS> 2,745,252
<COMMON> 4,745,585
0
0
<OTHER-SE> (2,492,847)
<TOTAL-LIABILITY-AND-EQUITY> 8,740,726
<SALES> 6,210,492
<TOTAL-REVENUES> 6,369,016
<CGS> 1,644,945
<TOTAL-COSTS> 5,387,506
<OTHER-EXPENSES> 852,773
<LOSS-PROVISION> 34,418
<INTEREST-EXPENSE> 125,346
<INCOME-PRETAX> 3,391
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,391
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,391
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
