September 26, 1997
VIA EDGAR
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, DC 20549
RE: Cucos Inc. - Commission File No. 0-12701
Gentlemen:
On behalf of Cucos Inc. (the "Company"), there follows herewith
for filing the Company's Annual Report on Form 10-KSB for the
fiscal year ended June 29, 1997, with exhibits.
Very truly yours,
CUCOS INC.
Vincent J. Liuzza, Jr.
Chairman
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(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 June 29, 1997
/ / Transition report under Section 13 or 15(d) of the
Securities Exchange Act of 1934 (No Fee Required)
for the transition period from ____________ to
___________
Commission file number 0-12701
CUCOS INC.
(Exact name of Small Business Issuer in its charter)
Louisiana 72-0915435
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
110 Veterans Blvd., Suite 222 70005
Metairie, Louisiana (Zip Code)
(Address of principal executive offices)
Issuer's telephone number: (504) 835-0306
Securities registered under Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Act:
Common Stock, no par value
(Title of Class)
Check whether the Issuer (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act
during the past 12 months (or for such shorter period that the
Issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes
X No
Check if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B contained in this form,
and no disclosure will be contained, to the best of issuer's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. /X/
Issuer's revenues for its most recent fiscal year: $21,464,000
Aggregate market value (based on the average bid and asked
prices in the over the-counter market) of the voting stock held
by non-affiliates of the Registrant as of September 9, 1997:
approximately $3,567,000.
Number of shares outstanding of each of the Issuer's Classes
of common stock as of September 9, 1997: 2,113,747 shares of
Common Stock, no par value.
Documents Incorporated By Reference.
Portions of the definitive Proxy Statement for the 1997
Annual Meeting of Shareholders (the "1997 Proxy Statement") are
incorporated by reference into Part III.
INTRODUCTORY
Definitions. Except where the context indicated otherwise,
the following terms have the following respective meanings when
used in this Annual Report: the "Registrant" means Cucos Inc.
and the "Fiscal Year" means the 52 weeks ended June 29, 1997,
which is the year for which this Annual Report is filed.
Presentation and Dates of Information. The Item numbers
appearing in this Annual Report correspond with those used in
Securities and Exchange Commission Form 10-KSB (and, to the
extent that it is incorporated into Form 10-KSB, the letters used
in the Commission's Regulation S-B) as effective on the date
hereof, which specifies the information required to be included
in Annual Reports to the Commission. The information contained
in this Annual Report is, unless indicated to be given as of a
specified date or for a specified period, given as of September
25, 1997. In computing the aggregate market value of the
Registrant's voting stock held by non-affiliates disclosed on the
cover page to this Annual Report, the following stockholders were
treated as affiliates: all executive officers and directors of
the Registrant; any person owning more than 10% of the
Registrant's Common Stock.
PART I
Item 1. Business
The Registrant, which was organized in March 1981 by
Vincent J. Liuzza, Jr., Chairman of the Board and Chief Executive
Officer of the Registrant, and other members of the Liuzza
family, operates and franchises full-service restaurants serving
moderately priced Sonoran and Tex-Mex Mexican appetizers and
entrees and complementary alcoholic beverages. The first Cucos
restaurant opened in a suburb of New Orleans (Metairie) in June
1981. At fiscal year end on June 29, 1997, 22 restaurants were
operating under the Cucos name, 15 of which are owned by the
Registrant and 7 by franchisees. There were twenty-one total
restaurants in operation at the end of fiscal 1996. In October,
1997, the Company anticipates opening a new restaurant in
Meridian, Mississippi.
The Registrant has continued its program of remodeling
of all company-owned restaurants and increased advertising.
During fiscal year ended June 29, 1997, this program resulted in
an increase in comparable sales per comparable company-owned
restaurant of 0.8%. Comparable guest counts decreased by 0.4%
while average check increased by $.09. Average company-owned
restaurant profit was 13.7%. Management expects to continue the
strategies of remodeling and television advertising in fiscal
1998. Further, the Registrant anticipates adding at least one
Registrant owned restaurant in 1998.
REGISTRANT-OWNED RESTAURANTS
General. Cucos Mexican Restaurants are full service
restaurants serving fresh great tasting Mexican cuisine that
offer only the best quality and taste. It Tastes Better Our Way!
It really does, and there are lots of reasons why. Like our
vegetables. We use only the finest and freshest available, such
as Haas avocados for our made from scratch guacamole that we
prepare fresh every day. We only use fresh, lean hand trimmed
choice sirloin and absolutely fresh chicken. Then there are the
other shortcuts that we simply won't take. For example, we only
use real Monterey Jack and Cheddar cheeses and real dairy sour
cream. No imitations. No substitutions. Just like it should
be. In fact, everything that comes out of our kitchen is
meticulously prepared according to our own very secret, very
special recipes. Some of our dishes take hours. All of them
take effort. But we don't mind. Because it tastes better our
way!
We serve a variety of traditional Mexican dishes and
appetizers such as our sizzling steak, chicken, or shrimp
Fajitas, Burritos, Enchiladas, Tamales, and Chimichangas. We
also serve several huge combination dinners. We have CucosLite
items offering items with reduced fat, calories, and cholesterol
without sacrificing taste. We have delicious Vegetarian items as
well as the biggest and best Burger in town. Let's not forget
our famous award winning margaritas. Cucos' margarita was voted
best Margarita in New Orleans three years in a row. We were also
voted Best Mexican Restaurant in New Orleans by the readers of New
Orleans Magazine.
We offer a seasonal menu which changes quarterly. Our
seasonal menus feature such items as steak, crawfish enchiladas,
Creole Mex dishes, and our delicious Vegetarian Fajitas.
Our restaurants are decorated with Mexican antiques and
furniture, terra-cotta tile and hand painted large colorful
murals which are unique to each Cucos restaurant. Our Mexican
pottery, southwestern plants, colorful hand made Mexican flowers
and festive lighting add more Mexican touches to our casual
restaurants. During the past fiscal year, we have added colorful
new Fiesta plateware and serving dishes as well as a new Cucos'
cactus margarita glass.
Food sales account for approximately 79% of revenues at
the fifteen Registrant-owned restaurants operated in fiscal 1997,
with alcoholic and other beverages representing approximately
21%. Special Luncheon menu items range in price from $3.99 to
$6.95. The prices of the specialty and combination dinner items
range from $5.95 to $8.95. The per person average check,
including beverage, for fiscal 1997 was $9.84 and the average
dining time per table was approximately 45 minutes.
Restaurant Management and Supervision. Each restaurant
is operated in accordance with uniform standards set by
management relating to the preparation and service of food and
drink, appearance and conduct of employees, and cleanliness of
facilities. Food and beverage products are periodically tested
for quality and uniformity of portions. In accordance with the
Registrant's standards, each restaurant is run by a general
manager, assisted by two managers, a kitchen supervisor, a
service supervisor and a bar supervisor. At least one manager is
on duty during all serving periods. Each of Registrant's
restaurant general managers receives, in addition to a salary,
incentive compensation calculated as a percentage of sales and
profits in excess of a predetermined base level.
The Registrant's long-term expansion plans require it
to develop additional trained general managers. The Registrant
requires candidates for general manager to undergo a thorough
training program designed to familiarize them with all aspects of
the Registrant's operations. A candidate serves as an assistant
manager before becoming a general manager. Persons selected for
training as general managers normally have several years of food
service experience.
Expansion Program. During fiscal year 1998, the
Registrant will consider acquisition of sites as they come
available. Management intends that the primary growth in sales
for fiscal 1998 be accomplished by increasing comparable sales
per restaurant through a continuation of existing advertising and
remodeling strategies augmented by the opening of one to two new
Registrant-owned restaurants.
The Registrant is planning for expansion of the Cucos
system over the long-term. In this connection, the Registrant is
currently studying the population densities, traffic patterns,
income levels, competition and comparative cost structures for
other suitable sites. While the Registrant will focus expansion
efforts on Registrant-owned stores, it also intends to expand by
further franchising. See "Franchised Restaurants" below.
The ability of the Registrant or a franchisee to open a
new restaurant will depend on locating satisfactory sites, the
availability of bank and lease financing at acceptable terms,
having sufficient working capital, obtaining adequate property,
casualty and liquor liability insurance coverages at a reasonable
cost, securing appropriate local government permits, licenses and
approvals, and on the capacity of the Registrant or a franchisee
to supervise construction and to recruit and train management
personnel. Such factors may cause a delay in the Registrant's
planned development schedule.
The Registrant believes that its development plan of
controlled growth will occur in the Southeastern United States.
The Registrant expects in most cases to locate Registrant-owned
and franchised restaurants in high traffic, high growth areas of
commercial or residential concentration, at or near shopping
centers. Registrant-owned and franchised restaurant sites will
be judged by the Registrant's executive management against
certain criteria as to population density, income levels, amount
of competition, ingress/egress and traffic patterns.
The Registrant believes that there are a number of
existing restaurant facilities which have either closed or are
currently operating at a loss or at marginal levels of
profitability. The Registrant believes that a number of these
units may be suitable for conversion to a Cucos restaurant and
can be leased or purchased at attractive prices. The
Registrant's strategy for expansion (with respect to both
Registrant-owned and franchised restaurants), therefore, is
primarily to locate units of this type rather than to follow the
strategy of most specialty restaurant chains, which has been to
construct new restaurant facilities on land owned or leased by
the chain or to enter build-to-suit arrangements under which new
facilities are built to the specifications of the chain. In
addition to the economic benefits of the Registrant's strategy,
such strategy may substantially reduce the delay between the site
selection and the opening of a new restaurant and may allow the
Registrant to gain entry into densely-populated suburban and
urban markets in which land is either not available for the
construction of new restaurants or, if available, is
prohibitively expensive. The Registrant's expansion strategy
may, however, subject it to the same adverse factors that caused
the existing facility to operate marginally or unprofitably prior
to being converted to a Cucos restaurant. The Registrant intends
to combat these adverse factors by providing food and service, in
renovated facilities, that will appeal to the available customer
base.
The Registrant estimates that the initial investment
that will be required in leasing an existing restaurant facility
and converting it for operation as a Registrant-owned restaurant
will be between $550,000 and $740,000. A new (rather than
existing) leased facility could involve substantially higher
costs for leasehold improvements.
When a new Registrant-owned restaurant is opened, the
Registrant temporarily transfers experienced personnel from one
or more of its existing restaurants to the new restaurant. Prior
to opening, personnel at the new location undergo intensive
training, which includes several pre-opening events at which test
meals are served.
The success of the Registrant's expansion program will
depend on, among other factors, capital availability, whether the
Registrant is able to attract and retain sufficient qualified,
experienced managers and assistant managers, and whether
management will be able to ensure that Registrant-owned and
franchised restaurants operate in accordance with the Registrant's
standards.
Purchasing. Management believes that centralized
purchasing is advantageous to the Registrant in that it has
allowed it to take advantage of certain volume discounts. Fresh
produce, beverages and certain other items are purchased by each
Registrant-owned restaurant from local wholesalers. The
Registrant believes that satisfactory local sources of supply are
generally available for all of the other items it regularly uses
in its restaurants.
Insurance. Insurance costs have risen considerably in
the restaurant business, especially for those restaurants with
liquor licenses. The Registrant carries fire and casualty
insurance on its Registrant-owned restaurants and liability
insurance in amounts which management feels is adequate for its
operations.
Marketing. The Registrant advertises primarily by
television advertising. Its advertising promotes the name
"Cucos" and emphasizes quality dining in a festive atmosphere at
moderate prices. Periodically, print and radio advertising are
also used to advertise special events and promotions.
FRANCHISED RESTAURANTS
At the present time, the Registrant is offering
franchises on a selective basis. No assurances can be given as
to the number of franchise development areas that will be sold
during the fiscal year 1998 or the impact of development fee
revenues upon the Registrant's profitability and cash position
during fiscal year 1998.
The development agreements generally obligate the
developer to construct a specified number of Cucos restaurants
within the licensed territory. The restaurants may be either new
restaurants or conversions of existing restaurants, although the
Registrant encourages franchisees to convert existing restaurants
whenever possible (see "Expansion Program"). A developer must
open new Cucos restaurants within the development territory in
accordance with the schedule set forth in the development
agreement. If a developer fails to open restaurants in
accordance with the schedule, generally the Registrant may notify
the developer that it is in default under the development
agreement and may terminate the agreement 30 days thereafter if
the default has not been cured.
Generally, a development agreement expires three years
after the latest date set forth in the development schedule.
During the first year after completion of the schedule, the
Registrant is prohibited from either opening a Cucos restaurant
or granting a franchise to someone other than the developer to
establish a Cucos restaurant within the licensed territory. If
during the second and third year after the completion of the
schedule, the Registrant desires to establish additional
restaurants within the licensed territory, the developer for that
area has a right of first refusal to enter into additional
development agreements with respect to such additional
restaurants so long as the developer is in compliance with the
then existing development agreement. If the developer exercises
its right of first refusal, the developer is required to pay the
fees for each restaurant then being charged to new developers.
Upon expiration of the development agreement, the Registrant may
open Registrant-owned restaurants in the previously licensed
territory or grant franchises to other persons to open additional
franchised restaurants in the previously licensed territory.
Development agreements provide for the payment of an
initial nonrefundable development fee by the developer upon
execution of the agreement. The development fee with respect to
development agreements is generally $15,000 per restaurant up to
five restaurants and $10,000 per restaurant thereafter. The
Registrant anticipates that the amount of the development fee
with respect to future development agreements will be based upon
the size and nature of the area covered by the development
agreement.
Prior to the acquisition of a site for a restaurant in
the licensed territory, the developer must submit to the
Registrant certain information concerning the site and certain
market information. Upon the Registrant's approval of the site,
the developer is required to enter into a license agreement with
the Registrant with respect to the restaurant to be developed
under the development agreement.
The license agreements generally have terms of 20 years
from the date of their execution. However, if the license
agreement pertains to a franchised restaurant that is leased, the
license agreement terminates upon the earlier of 20 years from
the commencement date of the lease or upon the termination or
expiration of the primary term of the lease, plus any options to
renew the lease.
Generally franchisees are required to pay to the
Registrant under the license agreement a continuing royalty fee
equal to 4% of gross revenues at the restaurant. In addition,
franchisees are required to pay a continuing monthly contribution
to an advertising materials fund equal to .5% of gross revenues
at the restaurant and if a national advertising fund or a
regional advertising fund applicable to the franchisee's region
is established by the Registrant (the Registrant has not done so
to date), the franchisees must also pay to the Registrant
continuing monthly contributions, for use by such funds, equal to
amounts not to exceed 1% and 2% of gross revenues of the
restaurant, respectively, for the national media fund or the
regional advertising fund in the franchisee's region. The
Registrant has not established a national or regional advertising
fund and accordingly has not required contributions for such
funds.
The license agreement provides that the franchisees
will comply strictly with the Registrant's standards,
specifications, processes, procedures, requirements and
instructions regarding the operation of the franchisee's
restaurant. The Registrant is obligated to provide initial
training programs for franchisees and to provide personnel for on-
site assistance in opening each franchised restaurant. The
Registrant has the right to approve the person designated by the
franchisee to have overall supervisory authority over franchised
restaurant operations or, if no such overall operations manager
is designated, to approve each restaurant general manager.
Franchisees purchase food products and restaurant
supplies conforming to Registrant's specifications from
independent suppliers. Alternate sources of these items are
generally readily available. The Registrant may sell equipment,
food or supplies to franchisees upon request, but otherwise does
not intend to do so. The Registrant continues to sell a small
amount of proprietary advertising materials and confidential
recipe spice packs to franchisees. The Registrant anticipates
continuing these sales.
EMPLOYEES
At June 29, 1997, the Registrant-owned restaurants
employed approximately 837 part-time and full-time persons, of
which 53 were managers and assistant managers, all of whom are
full-time. In addition, 21 persons were employed at the
Registrant's executive office. The Registrant endeavors to
control its employee turnover rate by offering to all full-time
restaurant employees certain paid benefits, including life
insurance, health insurance and vacation. None of the
Registrant's employees are represented by a labor union. The
Registrant has experienced no work stoppages attributable to
labor disputes and considers its employee relations to be
satisfactory.
COMPETITION
The restaurant business is highly competitive and is
often affected by changes in taste and eating habits, by local
and national economic conditions affecting spending habits, and
by population and traffic patterns. The Registrant believes that
the quality and price of food products are the principal means of
competition in the restaurant industry. Also of importance are
site locations, quality and speed of service, cleanliness,
advertising and attractiveness of facilities.
The Registrant presently competes directly with Casa
Garcia, El Patio, Jalapeno's and Chili's at its Metairie
locations; with Dos Gringo's at its Westbank location; with El
Chico at its Alexandria and Monroe locations; with Vera Cruz and
Vaquero's at its New Orleans location; and with Chili's and
several independent Mexican restaurants at its other locations.
Each location also competes with numerous restaurants offering
other types of moderately-priced foods and beverages, as well as
Mexican appetizers and entrees. Many of these restaurants are
nationally or regionally-known chain operations which operate
more restaurants and have greater financial resources and greater
name recognition than the Registrant.
In addition, gaming operations often offer food at
discounted or below cost prices which provide a new level of
indirect competition in the Registrant's Louisiana and
Mississippi markets.
GOVERNMENT REGULATION
The Registrant's franchise operations are subject to a
variety of laws regulating the marketing of franchises. Federal
Trade Commission regulations impose certain disclosure
requirements on persons engaged in the business of offering
franchises. States in which the Registrant offers franchises
also may have franchising laws that require registration prior to
the offering of franchises for sale in those states or that
afford franchisees substantive rights, including limiting the
circumstances under which franchises may be terminated.
The Registrant is also subject to the Fair Labor
Standards Act, which governs such matters as minimum wages,
overtime, and other working conditions. Many of the Registrant's
food service personnel are paid at rates related to the minimum
wage and, accordingly, increases in the minimum wage increase the
Registrant's labor costs.
Each of the Registrant's restaurants is subject to
licensing and regulation by state liquor control boards and the
state police in Louisiana (with respect to video poker), and by
municipal health, sanitation, safety and fire department
agencies. The Registrant expects that liquor sales and video
poker revenues will account for a significant portion of the
Registrant's revenues. During 1997 liquor sales and video poker
revenues accounted for about 20.5% and 2.6% of food and beverage
revenues, respectively.
During fiscal 1996, the State of Louisiana passed a
local option ordinance on all forms of gambling including video
poker. In November, 1996, all parishes in the state voted
whether to retain video poker and other forms of gambling.
Voters in four parishes in which the Registrant operates voted to
end video poker and other forms of gambling. The ban on video
poker at these locations will be effective in fiscal 2000. In
1997 the Company recorded video poker revenues of 1.5% of sales
of food and beverages at these locations. Legislation was
considered in the current session of the Louisiana Legislature to
further restrict video poker activities. This legislation was
defeated in this session; however, future legislative sessions
may consider legislation that might adversely impact the
Company's remaining video poker activities.
The loss of an existing liquor license or video poker
license or the inability to obtain a liquor or video poker
license at a new restaurant would adversely affect the
Registrant's operations at that restaurant.
The Registrant is also subject to the provisions of
Americans with Disabilities Act. The Registrant has remodeled
its restaurants to meet these requirements where necessary.
MISCELLANEOUS
Customers. No material part of the Registrant's
business is dependent upon a single customer, or a very few
customers, the loss of any one of which would have a material
adverse effect on the Registrant. No single customer accounts
for as much as 10% of the Registrant's total revenues.
Seasonality. The Registrant's results are impacted by
seasonality. Usually the highest sales periods occur in late
Spring and Summer, with sales declining in the Fall and Winter.
This is especially true for the Gulf Coast restaurants where
sales are more dependent on tourism.
Service Marks and Trademarks. The Registrant is the
owner of United States Service Mark Registrations Nos. 1,509,612,
dated October 18, 1988, for the mark CUCOS; 1,733,801 dated
November 17, 1992, for the mark CUCOS BORDER CAFE and DESIGN; and
1,941,214, dated December 12, 1995, for the mark CUCOS MEXICAN
CAFE & DESIGN. The Registrant is also the owner of United States
Trademark Registrations Nos. 1,405,169, dated August 12, 1986,
for the mark FRESH-ITAS (Cucos' version of fajitas) and
1,465,729, dated November 17, 1987, for the mark FRESH-ITA NACHOS
(Cucos' version of fajita nachos). The Registrant is also the
owner of United States Service Mark Registration No. 1,996,748,
dated August 27, 1996, for the mark THE TASTE TO MAKE YOU SAY
OLE` and United States Service Mark Registration No. 2,019,308,
issued November 27, 1996, for the mark IT TASTES BETTER OUR WAY.
Those registrations which issued prior to November 16, 1989, have
an effective term of 20 years and those issued on or after
November 16, 1989, have an effective term of 10 years, unless
sooner terminated by law, and all may be renewed for successive
terms so long as the marks continue to be used by Registrant in
interstate commerce for the specified services or goods. The
Registrant also owns a service mark registration as issued by the
State of Louisiana, dated July 14, 1987; a Virginia State
Registration, issued March 8, 1988; a Texas State Registration
No. 48214, issued February 25, 1988; a Tennessee State
Registration, issued July 2, 1987; a Florida State Registration
No. 707,637, dated July 17, 1987; an Alabama State Registration
No. 103,383, issued July 14, 1987; a Mississippi State
Registration No. 1,509,612, issued on July 27, 1987; and an
Arkansas State Registration No. 181-87, issued on July 8, 1986.
for the name CU-CO's. This registration is effective for a term
of 10 years and may be renewed for successive terms. All of
these registrations are valid and subsisting. In addition,
Registrant is the owner of Copyright Registrations for its Cucos
Power Manual and Video, dated November 4, 1988.
Item 2. Properties.
The following table summarizes certain information
concerning Registrant-owned restaurants located in facilities
that are leased from others as of September 25, 1997.
<TABLE>
<CAPTION>
Lease
Size Dining Lease Option(s)
Location Opened/Acquired (Sq. Ft.) Capacity Expires Through
New Orleans -
<S> <S> <C> <C> <C> <C> <S>
Metairie June 1981 5138 136 2007 None
Biloxi, MS April 1982 5600 159 1997 2032
New Orleans -
Westbank September 1983 4800 147 1998* 2010
Monroe, LA June 1984 4476 146 1999 2019
Slidell, LA November 1984 5300 139 2008 2018
Alexandria, LA March 1985 5125 143 2000 2015
New Orleans -
Uptown November 1985 4539 120 2000 2015
Pascagoula, MS December 1989 5160 130 2011 2021
Hammond, LA July 1990 6062 130 2001 None
Birmingham, AL March 1992 4560 150 2006 2012
Houma, LA September 1992 6000 148 2007 2017
Birmingham, AL February 1993 5000 160 2006 2026
Montgomery, AL February 1993 5100 170 2002 2012
Ruston, LA February 1996 5476 162 2003 2026
Meridian, MS October 1997 5374 221 2007 2017
</TABLE>
* Registrant plans to exercise its renewal option for an
additional three years.
The New Orleans-Westbank location, the Slidell location
and the second Birmingham and Montgomery, Alabama, locations are
in strip shopping centers. The Hammond, first Birmingham, Houma,
and Meridian locations are in shopping malls. Seven leased
locations are free-standing buildings. The restaurant leases
require the Registrant to pay real estate taxes, insurance and
utilities, and to bear repair, maintenance and other expenses
normally borne by the lessee under a triple net lease. The
Company owns the land and building of its Pensacola restaurant.
In addition to the leases above, the company has leases
on four restaurant properties that are no longer used in its
operations. The properties have been subleased to other
companies.
Location Lease Expires Sublease Expires
Columbus, GA 2004 2004
Cutler Ridge, FL 2005 2005
Macon, GA 2011 2011
Tallahassee 1998 1998
Item 3. Legal Proceedings.
On April 11, 1990, a franchisee filed a complaint
against the Registrant and certain of its officers alleging
breach of contract and misrepresentation and seeks damages in
excess of $1.6 million. There has been no activity in this
litigation for more than six years except for a discovery request
filed in January, 1997, which avoided a dismissal of the
litigation for non-prosecution. The Registrant believes the
claims are without merit and the likelihood of a loss is remote.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of the Registrant's
security holders, through the solicitation of proxies or
otherwise, during the fourth quarter of the Fiscal Year.
PART II
Item 5. Market for the Registrant's Common Stock and Related
Shareholder Matters.
Cucos Inc. - Stock Data
The Company's common stock is traded on The NASDAQ Small-Cap
Market under the symbol CUCO. The following table sets forth the
range of the high and low bid and ask prices for each of the
quarters indicated for fiscal 1997 and fiscal 1996.
Fiscal 1996 High Bid-Ask Low Bid-Ask
1st Quarter ended 10/22/95 1 1/2-1 5/8 1-1 3/8
2nd Quarter ended 1/14/96 1 3/4-1 3/4 1 1/8-1 3/8
3rd Quarter ended 4/7/96 1 1/2-1 1/2 1 1/8-1 1/8
4th Quarter ended 6/30/96 1 5/8-1 5/8 1 1/8-1 1/8
Fiscal 1997 High Bid-Ask Low Bid-Ask
1st Quarter ended 10/19/96 1 3/8-1 5/8 1 1/4-1 1/4
2nd Quarter ended 1/11/97 1 1/2-1 5/8 1 1/8-1 1/4
3rd Quarter ended 4/5/97 1 3/8-1 5/8 1 1/4-1 5/16
4th Quarter ended 6/29/97 1 3/8-1 1/2 1 3/16-1 1/4
On September 17, 1997, the closing bid and ask prices for
Cucos common stock were 1 3/8 bid and 1 3/8 ask.
The foregoing quotations reflect inter-dealer prices,
without retail markup, mark-down or commission and may not
necessarily represent actual transactions.
Since becoming a public company, Cucos Inc. has paid no cash
dividends and has no present intention of paying dividends, but
rather will retain its earnings to provide funds for expansion of
its business and other corporate purposes.
Approximate number of shareholders (including beneficial
shareholders through nominee registration) as of September 9,
1997: 1,082
Market makers: Herzog, Heine, Geduld, Inc., Legg Mason Wood
Walker Inc., Paragon Capital Corp. and Morgan, Keegan & Company.
Item 6. Management's Discussion and Analysis or Plan of
Operation.
1997 Compared to 1996
Sales of Food and Beverages declined $179,000 (0.8%) to
$21,464,000 from $21,643,000. This decrease was primarily the
result of the loss of sales from closing one restaurant offset by
an increase in sales from opening a restaurant (a net decrease of
$260,000). This decrease was, also, partially offset by an
overall increase of $80,000 in the sales in the other restaurants
caused by a small decrease in average guest counts offset by a
small increase in average check.
Cost of sales increased $79,000 (1.4%) to $5,737,000 from
$5,658,000. This increase is primarily the result of the general
impact of inflation.
Restaurant Labor and Benefits decreased $87,000 (1.2%) to
$6,905,000 from $6,991,000. This decrease is primarily the
result of closing one restaurant offset by having a full year of
operations of a new restaurant (a net decrease of $113,000) and
better management of restaurant staffing requirements which was
partly offset by the minimum wage increase ($70,000).
Other Operating Expenses declined from $3,960,000 to
$3,751,000 or a decrease of $209,000 (5.3%). The decrease in
these costs resulted from closing one restaurant during the year
and having a full year of operations of a new restaurant (a
decrease of $126,000) and a decline in advertising and promotions
of $80,000.
Occupancy Expense increased $51,000 (2.4%) from $2,149,000
to $2,200,000. This increase resulted from an increase in
depreciation and amortization ($76,000) arising from the opening
of a new restaurant and equipment upgrades in several other
restaurants, and a decrease in rent expense ($21,000).
Preopening Costs increased to $97,000 from $29,000, an
increase of $68,000 resulting from a new restaurant being open
for four quarters in 1997 compared to one quarter in 1996.
Royalties and Franchise Revenues increased $3,000 to
$165,000 in 1997 from $162,000 in 1996. This was the result of
an increase in licensing fees in 1997 of $25,000 offset by a
decline in royalties of $22,000. Franchise expenses increased
$43,000 to $95,000 in 1997 from $52,000 in 1996. This was
primarily due to $49,000 of expenses incurred related to the
opening of one franchise restaurant in 1997.
Commissary and Other Income decreased $46,000 to $190,000
from $236,000 which was the result of an overall general decline
in various small income items.
Operations Expense decreased $161,000 (12.5%) from
$1,288,000 to $1,127,000. This decrease was a result of a
decrease in bad debt expense ($66,000), a reduction in the loss
related to restaurant subleases ($114,000) offset by an increase
in training expenses ($28,000) resulting from one additional
employee in that area.
Corporate Expenses decreased $23,000 (1.5%) to $1,461,000
from $1,484,000. This was primarily the result of a reduction in
insurance costs ($22,000).
Operating income before losses related to closed units and
asset impairment was $467,000 in 1997 compared to $430,000 in
1996. This increase was the result of the reductions in
operations and corporate expenses explained above which more than
offset the decline in revenue discussed previously.
Losses related to closed units and asset impairment reflect
management's decision to dispose of equipment used in restaurants
that were closed and is currently not in use and a reduction in
amounts to be recovered from subleases. (See Notes D and L to
the audited financial statements.)
Interest Expense increased slightly as a result of an
increase in overall interest rates offset by a reduction in long-
term debt.
Net income for 1996 was restated to increase interest
expense and to decrease net income by $32,000 related to imputed
interest on the convertible debenture.
Liquidity and Capital Resources
Working capital needs have been and will continue to be
financed from operations and short term bank borrowings.
Restaurant expansion and remodeling has been and will continue to
be funded from long term debt, lessor allowances and leases.
Because of the timing of securing long term debt and leases,
restaurant expansion and remodeling may be temporarily funded
from operations.
Net cash provided by operations was $881,000 in 1997, a
decrease of $15,000 from 1996. Net cash used in investing
activities was $525,000 in 1997 compared to $595,000 in 1996, or
a decline of $70,000 and primarily included the purchase of
property and equipment. Net cash used in financing activities
was $661,000 in 1997 and included principal payments on
borrowings which were partially offset by additional long term
and short term borrowings.
The Company's line of credit provides $150,000 which may be
used for working capital needs as well as restaurant expansion
and remodeling. The line of credit bears interest at 2.0% per
annum above the New York Prime Rate and had $150,000 outstanding
at June 29, 1997.
The Company is currently constructing a restaurant in
Meridian, Mississippi, which is expected to open in October 1997,
and will cost approximately $725,000. It is anticipated that
this restaurant will be financed with a combination of lessor
allowances, leases and long-term debt. The Company anticipates
opening an additional restaurant in early 1998 and remodeling at
least one existing restaurant and expects to finance these costs
in a similar manner.
The Company has provided a valuation allowance for deferred
tax assets of $1,372,000 related primarily to net operating loss
carry-forwards which may not be realized through future taxable
income and the future reversals of existing taxable temporary
differences. Uncertainties that affect the ultimate realization
of deferred tax assets include the risk of incurring additional
operating losses in the future. The risk has been considered in
determining the need for a valuation allowance. Management will
continue to assess the adequacy of the valuation allowance on a
quarterly basis in fiscal 1998.
Impact of Inflation and Changing Prices
Inflation in food, labor, construction costs and interest
rates can affect the CompanyOs operations. Many of the CompanyOs
employees are paid hourly rates related to the minimum wage.
Legislation was signed increasing the minimum wage $.50 on
October 1, 1996, and an additional $.40 on September 1, 1997 for
non-tipped employees. Management expects to institute sales
building and cost savings actions to partially offset the effect
of this increase. Management estimates that the first increase
resulted in $70,000 of additional expense in 1997.
Management reviews its pricing regularly to ensure it is
priced competitively, that it offers outstanding value to its
customers, and that margins are maintained. Inflation can also
affect food costs, rent, taxes, maintenance, and insurance costs.
The Company has offset many of these increases through increased
purchasing efficiencies.
Seasonality
The Company's results are affected by seasonality. Usually
the highest sales periods occur in late Spring and Summer, with
sales declining in the Fall and Winter. This is especially true
for the Gulf Coast restaurants where sales are more dependent on
tourism.
Forward-Looking Statements
Forward-looking statements regarding management's present
plans or expectations for new unit openings, remodels, other
capital expenditures, the financing thereof, and disposition of
impaired units involve risks and uncertainties relative to return
expectations and related allocation of resources, and changing
economic or competitive conditions, as well as the negotiation of
agreements with third parties, which could cause actual results
to differ from present plans or expectations, and such
differences could be material. Similarly, forward-looking
statements regarding management's present expectations for
operating results involve risk and uncertainties relative to
these and other factors, such as advertising effectiveness and
the ability to achieve cost reductions, which also would cause
actual results to differ from present plans. Such differences
could be material. Management does not expect to update such
forward-looking statements continually as conditions change, and
readers should consider that such statements speak only as to the
date hereof.
Item 7. Financial Statements.
Balance Sheet - Cucos Inc.
June 29, 1997
Assets
Current Assets
Cash and Cash Equivalents $ 476,000
Receivables:
Trade 378,000
Due from Affiliates 323,000
Less Allowance for Doubtful Accounts 97,000
604,000
Inventories 254,000
Prepaid Expenses, Deferred Taxes and Other Current Assets 468,000
TOTAL CURRENT ASSETS 1,802,000
Deferred Taxes and Noncurrent Assets 309,000
Property, Equipment and Other
Land 327,000
Property and Equipment 3,483,000
Building and Leasehold Improvements 5,256,000
Reacquired Franchise Rights 529,000
9,595,000
Less Accumulated Depreciation and Amortization 3,922,000
5,673,000
Investment in LaMexiCo, L.L.C. 253,000
Assets Held for Sale 102,000
Deferred Costs, Less Accumulated Amortization of $23,000 110,000
$8,249,000
Liabilities and Shareholders' Equity
Current Liabilities
Short-Term Debt Payable to Banks $150,000
Trade Accounts Payable 1,555,000
Accrued Expenses and Other 484,000
Accrued Payroll 203,000
Current Portion of Long-Term Debt 983,000
TOTAL CURRENT LIABILITIES 3,375,000
Long-Term Debt, Less Current Portion 2,230,000
Convertible Debenture - Non-Interest Bearing 404,000
Deferred Revenue and Other 293,000
Shareholders' Equity
Preferred Stock, No Par Value-1,000,000
Shares Authorized, None Issued or Outstanding -
Common Stock, No Par Value - 20,000,000 Shares
Authorized, 2,113,747 Shares Issued and Outstanding 4,746,000
Additional Paid-in Capital 228,000
Retained Earnings (Deficit) (3,027,000)
TOTAL SHAREHOLDERS' EQUITY 1,947,000
$8,249,000
See notes to financial statements.
<TABLE>
<CAPTION>
Statements of Operations - Cucos Inc.
Fiscal Year Ended
June 29, 1997 June 30, 1996
Restaurant Operations
<S> <C> <C>
Sales of Food and Beverages $21,464,000 $21,643,000
Restaurant Expenses:
Cost of Sales 5,737,000 5,658,000
Restaurant Labor and Benefits 6,905,000 6,991,000
Other Operating Expenses 3,751,000 3,960,000
Occupancy Costs 2,200,000 2,149,000
Preopening Costs 97,000 29,000
Total Restaurant Expenses 18,690,000 18,787,000
Income From Restaurant Operations 2,774,000 2,856,000
Royalties and Franchise Revenues, net of
expenses of $95,000 and $52,000 70,000 110,000
Commissary and Other Income 190,000 236,000
3,034,000 3,202,000
Operations Expenses 1,106,000 1,288,000
Corporate Expenses 1,461,000 1,484,000
Losses Related to Closed Units and Asset Impairment 460,000 -
Operating Income 7,000 430,000
Interest Expense 453,000 447,000
Loss Before Income Taxes (446,000) (17,000)
Income Taxes - -
Net Loss $(446,000) $ (17,000)
Weighted Average Number of Common Shares and Common Share
Equivalents Outstanding 2,114,000 2,114,000
Net Loss Per Share ($.21) ($.01)
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
Statements of Cash Flows - Cucos Inc.
Fiscal Year Ended
June 29, 1997 June 30, 1996
Operating Activities
<S> <C> <C>
Net Loss ($446,000) ($17,000)
Adjustments to Reconcile Net Loss to Net
Cash Provided by Operating Activities:
Depreciation and Amortization 1,053,000 885,000
Increase (Decrease) in Deferred Revenue (30,000) 51,000
Loss on Sale of Assets and Other - 24,000
Asset Impairment and Rent Reserve 460,000 89,000
Losses Related to Closed Units - (218,000)
Accretion of Discount on Convertible Debenture 32,000 32,000
Equity in Earnings of Equity Investee,
Net of Distributions of $17,000 and $20,000 (8,000) 4,000
Change in Operating Assets and Liabilities:
Receivables (54,000) 102,000
Inventories (10,000) (25,000)
Prepaids and Other (119,000) (37,000)
Deferred Costs (16,000) (125,000)
Accounts Payable 78,000 8,000
Accrued Expenses (61,000) 108,000
Accrued Payroll 2,000 15,000
NET CASH PROVIDED BY OPERATING ACTIVITIES 881,000 896,000
Investing Activities
Purchases of Property and Equipment (525,000) (595,000)
Proceeds From Sale of Assets - 4,000
NET CASH USED IN INVESTING ACTIVITIES (525,000) (591,000)
Financing Activities
Change in Short-Term Debt Payable to Banks 57,000 (221,000)
Proceeds From Long-Term Borrowings 452,000 553,000
Proceeds From Convertible Debt - 500,000
Principal Payments on Borrowings (1,170,000) (874,000)
Debt Issuance Costs - (49,000)
NET CASH USED IN FINANCING ACTIVITIES (661,000) (91,000)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (305,000) 214,000
Cash and Cash Equivalents at Beginning of Year 781,000 567,000
CASH AND CASH EQUIVALENTS AT END OF YEAR $476,000 $781,000
Non Cash Financing and Investing Activities
Equipment Financed by Capital Leases $29,000 $598,000
</TABLE>
See notes to financial statements.
Statements of Shareholders' Equity
<TABLE>
<CAPTION>
Statements of Shareholders' Equity - Cucos Inc.
Additional Paid-In Retained Earnings
Common Stock Capital (Deficit) Total
<S> <C> <C> <C> <C>
Balance as of July 2, 1995 $4,746,000 $68,000 $(2,564,000) $2,250,000
Net for the year - - (17,000) (17,000)
Issuance of convertible debenture -
non-interest bearing - 160,000 - 160,000
Balance as of June 30, 1996 4,746,000 228,000 (2,581,000) 2,393,000
Net for the year - - (446,000) (446,000)
Balance as of June 29, 1997 $4,746,000 $228,000 ($3,027,000) $1,947,000
</TABLE>
Cucos Inc.
June 29, 1997
Notes to Financial Statements
Note A - Significant Accounting Policies
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. 1997 and
1996 were fifty-two week years.
Industry: The Company is a full-service casual dining
restaurant chain offering Mexican appetizers, entrees and
complementing beverages. At June 29, 1997, the Company operated
fifteen restaurants and franchised seven restaurants.
Use of Estimates: The preparation of the financial
statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those
estimates.
Cash and Cash Equivalents: The Company considers all highly
liquid investments purchased with an original maturity of three
months or less to be cash equivalents.
Inventories: Inventories, consisting primarily of food and
beverages, are stated at the lower of cost (first-in, first-out
method) or market.
Property, Equipment, and Other: Property, Equipment and
Other is stated on the basis of cost. Depreciation and
amortization are computed by the straight-line method over the
assetsO useful lives or their lease terms, whichever is shorter.
Amortization of assets recorded under capital leases is included
in depreciation expense. The useful lives of equipment range
from 3-10 years; the useful lives of leasehold improvements are
generally 15 years, and the useful lives of reacquired franchise
rights, which represents the costs to reacquire franchised
restaurants in excess of the tangible assets acquired, are 15
years.
Deferred Costs: Deferred site costs incurred in the
selection of sites for new company-owned restaurants are
capitalized and amortized on a straight-line basis over a 10-year
period; costs incurred in the selection of sites for franchised
restaurants are accumulated and expensed when the related
franchise revenue is recognized. If a potential site is
abandoned, the deferred costs related to that site are charged to
current operations. Other deferred costs, primarily trademarks,
are amortized on a straight-line basis over 20 years. Deferred
issuance costs are amortized over the life of the convertible
debenture (20 years).
Advertising Costs: Advertising costs are expensed as
incurred. Advertising expense was $954,000 and $1,018,000 in
1997 and 1996, respectively.
Franchise Fees and Royalties: The Company sells exclusive
rights to develop Cucos restaurants for designated territories,
as well as individual franchises for each restaurant. The area
development agreements call for a nonrefundable fee for
territorial exclusivity and for other development opportunities
lost or deferred as a result of the rights granted under the
agreement. Franchise development fee revenue from these
agreements is deferred and recognized as income on a pro rata
basis as restaurants are developed in the designated territory or
when the developer forfeits the development rights under the
agreement. Franchise fee revenue from the individual restaurants
is recognized as income when all obligations of the Company are
substantially fulfilled, which occurs when the franchise
restaurant begins operations. Royalty income is based upon a
percentage of franchise sales and recognized as income when
earned. Royalties and other receivables are often collaterized by
personal guarantees and sometimes equipment owned by the
franchisee.
Investment in LaMexiCo, L.L.C.: The Company accounts for
its investment using the equity method of accounting. The
difference between the carrying amount of the investment and the
amount of the underlying equity in the net assets of the investee
is being amortized over the term of the franchise agreement.
Income Taxes: The Company accounts for income taxes 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, and are
measured using the enacted tax rates and laws that will be in
effect when the differences are expected to reverse.
Impairment of Long-Lived Assets: The Company reviews long-
lived assets to be held and used in the business for impairment
whenever events or changes in circumstances indicate that the
carrying amount of an asset or a group of assets may not be
recoverable. The Company considers a history of operating losses
to be its primary indicator of potential impairment. Assets are
evaluated for impairment at the operating unit level. An asset
is deemed to be impaired if a forecast of undiscounted future
operating cash flows directly related to the asset, including
disposal value if any, is less than its carrying amount. If an
asset is determined to be impaired, the loss is measured as the
amount by which the carrying amount of the asset exceeds its fair
value. The Company generally estimates fair value by discounting
estimated future cash flows. Considerable judgment is necessary
to estimate cash flows. Accordingly, it is reasonably possible
that actual results could vary significantly from such estimates.
Stock-Based Compensation: The Company accounts for its stock
compensation arrangements under the provision of Accounting
Principles Board (OAPBO) No. 25, OAccounting for Stock Issued to
EmployeesO.
Reclassifications: Certain balances in the prior fiscal year
have been reclassified to conform with the presentation in the
current fiscal year.
Note B - Debt
June 29, 1997
Notes payable to banks and finance companies:
Fixed interest rates from 6.5% to 17.6% $1,349,000
Variable interest rates from prime to prime
plus 1.5% 724,000
Capital lease obligations with fixed interest rates
of 10.0% to 16.5% 445,000
Other:
Fixed interest rates of 4.3% to 17.6% 570,000
Variable interest rates at prime plus 1.5% 125,000
3,213,000
Less current portion 983,000
$2,230,000
The Company's debt is collateralized by restaurant
equipment, land, building and leasehold improvements and other
assets with a carrying value of approximately $4,424,000.
Included in other notes payable is an unsecured demand advance by
two officers of $31,000 of which $10,000 bears interest at 10%.
Maturities of long-term debt for each of the next five
fiscal years are $983,000 in 1998; $1,209,000 in 1999; $589,000
in 2000; $274,000 in 2001; and $66,000 in 2002. Interest expense
approximates interest paid for each of the last two fiscal years.
At June 29, 1997, the prime rate was approximately 8.5%.
The Company has a line-of-credit agreement under which
$150,000 can be borrowed at June 29, 1997. There were no amounts
available under that agreement as of that date. Borrowings under
this agreement are unsecured and mature in October 1997.
The weighted average interest cost on the short-term
borrowings at June 29, 1997, was 10.25% and the overall average
interest rate on long term debt was 12.1%.
Certain credit and long-term debt agreements contain
covenants which include provisions for the maintenance of net
worth and various ratios. At June 29, 1997, the Company was in
compliance with all such covenants.
The Company has issued $500,000 of zero-coupon convertible
unregistered debentures. At the time of issue the majority of
these debentures were issued to non-related parties. All of
these debentures are now held by related parties. The debentures
which are due July 28, 2015, do not bear interest and are
convertible into 527,983 shares of the CompanyOs common stock.
The debentures are convertible beginning in July 2000, except
under certain conditions, primarily relating to the sale or
change of control of the Company. The conversion price of the
debentures, $0.947 per share, was below the market price of the
Company's common stock at the date of issue. In the fourth
quarter of 1997 the Company allocated $160,000 of the debenture
proceeds to the intrinsic value of the conversion feature, and
this amount was credited to paid-in capital. The 1996 financial
statements have been restated to increase interest expense and to
decrease net income by $32,000 related to imputed interest on the
debentures and to increase paid-in capital by $160,000. The
debentures are secured by the assignment of one of the CompanyOs
restaurant leases and a lien on the Company's tangible personal
property located at that restaurant.
The carrying amounts reported in the balance sheet for debt
approximate fair value, as estimated using discounted cash flow
analyses, based on the CompanyOs current incremental borrowing
rates for similar types of borrowing instruments.
Note C - Income Taxes
Significant components of the CompanyOs deferred tax assets and
liabilities are as follows:
June 29, 1997
Deferred tax assets:
Net operating loss carryforwards $ 459,000
Tax credit carryforwards 642,000
Reserves 167,000
Property 230,000
Other - net 62,000
Total deferred tax assets 1,560,000
Valuation allowance for deferred tax assets (1,372,000)
188,000
Deferred tax liabilities:
Prepaid and deferred costs (78,000)
Net deferred tax assets $110,000
The following is a reconciliation of income taxes at the
Federal statutory rate of 34% to income taxes reported in the
statements of operations based on loss before income taxes:
<TABLE>
<CAPTION>
June 29, 1997 June 30, 1996
<S> <C> <C>
Income tax benefit at the Federal statutory rate $(152,000) $(6,000)
State taxes, net of Federal deductions (24,000) (1,000)
Tax credits (117,000) (16,000)
Miscellaneous items not deductible for Federal income taxes 41,000 36,000
Change in valuation allowance 252,000 (13,000)
Income Taxes $______- $_____-
</TABLE>
At June 29, 1997, for federal income tax purposes, the
Company had net operating loss carryforwards of approximately
$1,164,000 and investment and jobs tax credits carryforwards of
approximately $633,000. These carryforwards expire beginning in
1999.
The Company has provided a valuation allowance for deferred
tax assets, which may not be realized through future taxable
income and the reversals of taxable temporary differences.
Note D - Leases
The Company leases nineteen restaurant facilities and its
corporate headquarters under noncancelable operating lease
agreements with initial lease terms expiring between 1998 and
2011. Eighteen of the restaurant leases have remaining renewal
options, and fifteen provide for contingent rentals based on
sales performance in excess of specified minimums. Contingent
rentals were not material in any year. Some of the leases also
have varying escalation clauses based either on fixed dollar
increases, a percentage of the previous minimum annual rental, or
the consumer price index. Amortization of assets recorded under
capital leases is included in depreciation expense.
The Company subleases four restaurant facilities it
previously operated under noncancelable sublease agreements with
lease terms expiring from 1998-2011. During the fourth quarter
of 1997, the Company recorded a reserve of $260,000 for the
difference between anticipated sublease income and the Company's
minimum commitment under these leases. This reserve is included
in deferred revenue and other liabilities.
Future minimum lease and sublease payments were as follows
at June 29, 1997:
<TABLE>
<CAPTION>
Operating Lease Sublease Net Capital Leases
<C> <C> <C> <C> <C>
1998 $1,407,000 $338,000 $1,069,000 $162,000
1999 1,224,000 231,000 993,000 146,000
2000 1,171,000 233,000 938,000 73,000
2001 1,069,000 265,000 804,000 61,000
2002 965,000 265,000 700,000 3,000
Thereafter 4,355,000 1,313,000 3,042,000 -
$10,191,000 $2,645,000 $7,546,000 $445,000
</TABLE>
Rent expense for real estate on all the Company's operating
leases was $1,441,000 in 1997 and $1,410,000 in 1996.
Included in Property, Equipment and Other are assets subject
to capital leases of:
June 29, 1997
Equipment $1,102,000
Accumulated Amortization (600,000)
$502,000
Note E - Related Party Transactions
The Company is affiliated with L.B.G., Inc., through common
ownership. L.B.G., Inc. reimburses the Company for accounting and
administrative services based on the gross sales of each company.
The amounts reimbursed in 1997 and 1996 were immaterial. At June
29, 1997, L.B.G. owed the Company $258,000 for food, rent
supplies and services of which $180,000 was repaid subsequent to
year end. The remaining balance of $78,000 was converted to an
unsecured note which bears interest at prime plus 2% and is due
in monthly installments of $1,314.
The Company owns a 26.6% interest in LaMexiCo, L.L.C., a
limited liability company, that operates a franchised Cucos in
Metairie, Louisiana. The Company also manages the restaurant for
LaMexiCo, L.L.C., and receives 4% of net sales as compensation.
The undistributed income from LaMexiCo, L.L.C. included in the
Company's retained earnings was $9,000 at June 29, 1997. The
restaurant opened under the development rights previously owned
by L.B.G. Inc. L.B.G. Inc. currently owns 21.6% of LaMexiCo,
L.L.C. LaMexiCo, L.L.C. owed the Company $17,000, which is paid
current, for management fees, royalties and other expenses.
The following summarizes the Company's relationships with
LaMexiCo, L.L.C.
1997 1996
Royalties received $54,000 $51,000
Management fees received $80,000 85,000
Receivable Outstanding at year end $17,000 $15,000
Equity in earnings $25,000 $26,000
LaMexiCo, L.L.C. summarized financial information (based on
the investee's fiscal year ending April of each year):
1997 1996
Balance Sheet
Total Liabilities $253,000 $220,000
Members Equity 777,000 765,000
TOTAL ASSETS $1,030,000 $985,000
Statement of Income
Revenues $1,834,000 $1,840,000
Net Income $115,000 $99,000
The Company leases the land, building and improvements for
one Company-owned restaurant from a director. The primary term
of the lease was 15 years and expires in 2000 with an option to
renew for 15 years. The Company paid rent of $122,000 in 1997
and 1996.
The Company has agreements with Brothers Video, Inc., an
affiliated company, to supply video poker machines in nine Cucos
restaurants located in Louisiana. The term of each agreement is 5
years. The Company has the option to renew each contract for two
additional years.
Under the agreements the Company shares in the gross device
revenues less state franchise fees and receives 65% of the net
receipts during the first two years of the term and 70%
thereafter. The Chairman and Chief Executive Officer of the
Company is the sole stockholder of Brothers Video, Inc. At June
29, 1997, the Company had a current accounts receivable from
Brothers Video, Inc. of $36,000 for video poker revenues earned.
The Company's share of video poker revenues, included in sales of
food and beverages, was 2.6% and 2.7% of sales of food and
beverages in 1997 and 1996 respectively.
The President of the Company owns an interest in two
franchise companies which operate two of the Company's franchised
restaurants. The Company received royalties of $12,000 in 1997
and $2,400 in 1996 from these two companies. These franchise
companies owe the Company $12,000 at June 29, 1997, which is paid
current.
The convertible debenture holders have been granted
development rights to open restaurants in certain areas of
Louisiana and Mississippi, which are subject to separate
development agreements. No restaurants were opened in 1997 under
these agreements.
Also see Note B for a description of issuance of $500,000 of
non interest bearing convertible debt to related parties. At
various times during 1997 two officers made advances to the
Company totaling $179,000 of which $148,000 has been repaid. The
high balance outstanding during the year was $90,000. See Note
B.
Note F - Stock Options
The Company's 1993 Incentive Stock Option Plan has
authorized the grant of options to directors and management
personnel for up to 509,000 shares of the Company's common stock.
The option price of each incentive stock option granted may not
be less than 100% of the fair market value of the Common Stock at
date of grant. No minimum option price is required for
nonqualified stock options, but the Company's policy is that
these options will not be granted with an exercise price of less
than the fair market value of the Common Stock at the date of
grant. All options granted have 10 year terms and vest and
become exercisable in four equal annual installments beginning
one year after the grant date.
The following table summarizes options outstanding for 1997.
The weighted average contractual life is 10 years.
Weighted
Shares Avg. Price
Outstanding at beginning of year 395,000 $1.67
Granted/Converted 244,000 $1.32
Forfeited/Converted (269,000) $1.73
Exercised - -
Outstanding at end of year 370,000 $1.40
Exercisable at end of year 251,000
Exercise Price $1.18-$1.94
The weighted average remaining contractual life of the
options outstanding is 8.5 years. The weighted average fair
value of options granted during the year was $1.00 per share.
The Company's 1983 Plan expired in 1993 and has been
replaced by the 1993 Plan. In June 1997, all option holders
under the 1983 Plan were permitted to convert all of the
outstanding options (212,000) to options issued under the 1993
Plan. All options outstanding were converted and were
immediately vested and exercisable.
Pro forma information regarding net income and earnings per
share is required by FASB Statement 123, Accounting for Stock
Based Compensation, which also requires that the information be
determined as if the Company has accounted for its employee stock
options granted subsequent to June 1995, under the fair value
method of that Statement. The fair value for these options was
estimated at the date of grant using a Black-Scholes option
pricing model with the following weighted-average assumptions for
1997 and 1996, respectively: risk-free interest rates of 6.3% and
5.9%; no dividends; volatility factors of the expected market
price of the Company's common stock of .54 and .48; and a
weighted-average expected life of the options of 5 years.
The Black-Scholes option valuation model was developed for
use in estimating the fair value of traded options which have no
vesting restrictions and are fully transferable. In addition,
option valuation models require the input of highly subjective
assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because
changes in the subjective input assumptions can materially affect
the fair value estimate, in management's opinion, the existing
models do not necessarily provide a reliable single measure of
the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair
value of the options is amortized to expense over the options'
vesting period. The Company's pro forma information follows (in
thousands except for earnings per share information). Pro forma
1997 income was significantly impacted by the modification of the
options granted under the 1983 Plan.
1997 1996
Pro forma net loss ($662,000) ($20,000)
Pro forma loss per share ($.31) ($.01)
Note G - Per Share Amounts
Per share amounts are based on the weighted average number
of shares of Common Stock and dilutive common stock equivalents
outstanding. Common stock equivalents were anti-dilutive in 1997
and 1996. The Financial Accounting Standards Board has issued
FAS 128, Earnings Per Share, which will be effective in the
period ending December 1997. The adoption of this pronouncement
will have no impact on the Company's 1996 or 1997 reported per
share amounts.
Note H - Franchise Operations
In addition to its company-owned restaurants, the Company
had seven franchised restaurants in operation at the end of 1997.
During 1997 one franchised restaurant opened and no franchised
restaurants closed. During 1996, one franchised restaurant
opened and three closed.
Note I - ShareholdersO Rights Agreement
In 1989 the Company declared a distribution of rights to
purchase the Company's Common Stock at a rate of one right for
each outstanding share of the Company's Common Stock. The rights
were issued in February 1990. The rights are not exercisable
until ten days following the occurrence of one of the following
events: 1) acquisition by a group or person of 15% or more of the
Company's Common Stock, or 2) an announcement by a potential
acquirer of a tender or exchange offer that would result in the
ownership of 15% or more of the Company's Common Stock. Once
exercisable, unless redeemed earlier by the Company, each right
entitles the holder to buy $12 worth of shares of the CompanyOs
Common Stock for an exercise price of $6. The Company may redeem
the rights at $.01 per right at any time until 10 days after 15%
or more of the CompanyOs Common Stock is acquired by a person or
group. The rights will expire on December 31, 1999.
Note J - Defined Contribution Plan
The Company sponsors a defined contribution savings plan
which is available to substantially all employees. Eligible
employees may contribute up to 20% of their compensation. The
Company contributes an additional amount to the plan equal to 15%
of employee contributions up to 5% of compensation. Company
contributions were $15,000 and $10,000 in 1997 and 1996,
respectively.
Note K - Contingencies
The Company has various lawsuits arising from its normal
operations. It is the opinion of management that the outcome of
these matters will not have a material adverse effect on the
Company's financial position or results of operations.
Note L - Assets Held For Sale
During the fourth quarter of 1997, the Company decided to
dispose of certain equipment from closed restaurants because this
equipment, which had a carrying value of $302,000, no longer met
the Company's specifications. The Company plans to sell this
equipment in 1998. It has recorded the equipment at its
estimated salvage value net of costs to sell. Accordingly, the
Company recorded an impairment loss of approximately $200,000,
which is included in losses related to closed units and asset
impairment.
Report of Ernst & Young LLP, Independent Auditors
Board of Directors and Shareholders
Cucos Inc.
We have audited the accompanying balance sheet of Cucos Inc.
as of June 29, 1997, and the related statements of operations,
shareholdersO equity, and cash flows for each of the two years in
the period ended June 29, 1997. These financial statements are
the responsibility of the CompanyOs 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 Cucos Inc. at June 29, 1997, and the results of its operations
and its cash flows for each of the two years in the period ended
June 29, 1997, in conformity with generally accepted accounting
principles.
As discussed in Note B, the Company has restated its 1996
financial statements to recognize interest expense for the
discount feature of the debentures convertible into common stock
at a discount to market price.
New Orleans, Louisiana ERNST & YOUNG LLP
September 11, 1997
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
None.
PART III
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange
Act of the Registrant.
Reference is made to the information concerning the
directors of the Registrant and the nominees for re-election as
directors appearing under the caption "Election of Directors" in
the 1997 Proxy Statement. Such information is incorporated
herein by reference to the Registrant's 1997 Proxy Statement to
be filed with the Securities and Exchange Commission in October,
1997.
Reference is made to the information concerning the
executive officers of the Registrant who are not directors
appearing under the caption "Executive Officers of the Company"
in the 1997 Proxy Statement. Such information is incorporated
herein by reference to the Registrant's 1997 Proxy Statement to
be filed with the Securities and Exchange Commission in October,
1997.
Reference is made to the information concerning
compliance with Section 16(a) of the Exchange Act appearing under
the caption "Section 16A, Beneficial Ownership's Reporting
Compliance" in the 1997 Proxy Statement. Such information is
incorporated herein by reference to the Registrant's 1997 Proxy
Statement to be filed with the Securities and Exchange Commission
on October, 1997.
Item 10. Executive Compensation.
Reference is made to the information concerning
remuneration of directors and executive officers of the
Registrant appearing under the captions "Additional Information-
Executive Compensation," "Additional Information-Stock Option
Grants During Fiscal 1997," "Additional Information-Aggregated
Stock Option Exercises and Fiscal Year-Ended Option Values," and
"Additional Information-Compensation of Directors," in the 1997
Proxy Statement. Such information is incorporated herein by
reference to the Registrant's 1997 Proxy Statement to be filed
with the Securities and Exchange Commission in October, 1997.
Item 11. Security Ownership of Certain Beneficial Owners and
Management.
Reference is made to the information concerning
beneficial ownership of the Registrant's Common Stock, which is
the only class of the Registrant's voting securities, appearing
under the captions "Beneficial Ownership" and "Election of
Directors" in the 1997 Proxy Statement. Such information is
incorporated herein by reference to the Registrant's 1997 Proxy
Statement to be filed with the Securities and Exchange Commission
in October, 1997.
Item 12. Certain Relationships and Related Transactions.
Reference is made to the information regarding certain
relationships and transactions between the Registrant and its
directors, nominees for re-election as directors of the
Registrant, its executive officers, beneficial owners of 5% or
more of its Common Stock and any member of the immediate family
of any of the foregoing persons, appearing under the caption
"Additional Information-Certain Relationships and Related
Transactions" in the 1997 Proxy Statement. Such information is
incorporated herein by reference to the Registrant's 1997 Proxy
Statement to be filed with the Securities and Exchange Commission
in October, 1997.
Item 13. Exhibits and Reports on Form 8-K.
EXHIBITS
The following exhibits are filed with this Annual
Report or are incorporated herein by reference:
Exhibit Number Title
1 2 - Joint Agreement of Merger, dated February 23,
1983, of Cu-Co's of Biloxi, Inc.
1 3-A - Copy of Articles of Incorporation of the
Registrant.
1 3-A-1 - Copy of Amendment to Articles of Incorporation of
the Registrant.
1 3-A-2 - Copy of Amendment to Articles of Incorporation of
the Registrant.
1 3-A-3 - Copy of Amendment to Articles of Incorporation of
the Registrant.
1 3-B - Copy of By-Laws of the Registrant.
2 3-B-1 - Copy of Amendment to By-Laws of Registrant.
9 3-B-2 - Amended and Restated By-Laws of the Registrant.
3 4-A - Rights Agreement, dated as of February 5, 1990,
between the Registrant and Commercial National
Bank in Shreveport.
3 4-B - Letter, dated February 26, 1991, from Whitney
National Bank to the Registrant confirming the
change of Rights Agent from Commercial National
Bank in Shreveport to Whitney National Bank.
3 4-C - Assignment of Rights Agreement, dated August 30,
1993, among Whitney National Bank, Boatmen's
National Bank and the Registrant with respect to
the change of Rights Agent from Whitney National
Bank to Boatmen's National Bank.
11 4-D - Copy of Mortgage and Security Agreement dated
April 25, 1994, with First National Bank of
Commerce for $450,000.
11 4-E - Copy of Promissory Note dated October 27, 1994,
with First National Bank of Commerce for $200,000.
11 4-F - Copy of Promissory Note dated October 27, 1994,
with First National Bank of Commerce for $250,000.
11 4-G - Copy of Promissory Note dated October 27, 1994,
with First National Bank of Commerce for $500,000.
10 4-H - Note Purchase Agreement (with Exhibits).
10 4-I - Amendment No. 1 to Rights Agreement dated March
12, 1991.
12 4-J - Assignment of Rights Agreement dated June 2, 1997,
among Boatman's National Bank, ChaseMellon
Shareholder Services, L.L.C. and the Registrant
with respect to the change of Rights Agent to
ChaseMellon Shareholder Services, L.L.C.
1 10-A - Copy of Registrant's 1983 Stock Option Plan.
1 10-B - Copy of letter agreement between the Registrant
and certain stockholders of the Registrant
relating to piggyback registration rights.
4 10-C - Amendment No. 1 to 1983 Stock Option Plan of Cucos
Inc.
5 10-D - Amendment No. 2 to 1983 Stock Option Plan of Cucos
Inc.
5 10-E - Amendment No. 3 to 1983 Stock Option Plan of Cucos
Inc.
6 10-F - Amendment No. 4 to 1983 Stock Option Plan of Cucos
Inc.
7 10-G - Amendment No. 5 to 1983 Stock Option Plan of Cucos
Inc.
5 10-H - Form of Incentive Stock Option Agreement for 1983
Stock Option Plan.
5 10-I - Form of Non-Qualified (Employee) Stock Option
Agreement for 1983 Stock Option Plan.
5 10-J - Form of Non-Qualified (Director) Stock Option
Agreement for 1983 Stock Option Plan.
8 10-K - Description of Registrant's Bonus Plan.
9 10-L - Copy of Registrant's 1993 Stock Option Plan as
amended.
9 10-M Form of Non-Qualified Stock Option Agreement for
1993 Stock Option Plan
9 10-N Form of Incentive Stock Option Agreement for 1993
Stock Option Plan
23 - Consent of Independent Auditors
27 - Financial Data Schedule
________________________________
1 Filed as an exhibit to the Registrant's Registration
Statement on Form S-18 (Commission File No. 2-87372A) and
incorporated herein by reference.
2 Filed as an exhibit to Form 10-K for the fiscal year ended
July 1, 1984 (Commission File No. 0-12701) and incorporated
herein by reference.
3 Filed as an exhibit to Form 8-K dated February 23, 1991
(Commission File No. 0-12701), as amended by Form 8 dated
March 12, 1991, and incorporated herein by reference.
4 Filed as an exhibit to the Registrant's Registration
Statement on Form S-8 (Commission File No. 33-03953) and
incorporated herein by reference.
5 Filed as an exhibit to the Registrant's Registration
Statement on Form S-8 (Commission File No. 33-15785) and
incorporated herein by reference.
6 Filed as an exhibit to the Registrant's Registration
Statement on Form S-8 (Commission File No. 33-26941) and
incorporated herein by reference.
7 Filed as an exhibit to Form 10-K for the fiscal year ended
June 28, 1992 (Commission File No. 0-12701) and incorporated
herein by reference.
8 Filed as an exhibit to Form 10-K for the fiscal year ended
June 28, 1987 (Commission File No. 0-12701) and incorporated
herein by reference.
9 Filed as an exhibit to Form 10-KSB for the fiscal year ended
July 3, 1994 (Commission File No. 0-12701) and incorporated
herein by reference.
10 Filed as an exhibit to Form 8-K filed August 11, 1995
(Commission File No. 0-12701) and incorporated herein by
reference.
11 Filed as an exhibit to Form 10-KSB for the fiscal year ended
July 2, 1995 (Commission File No. 0-12701) and incorporated
herein by reference.
12 Filed as an exhibit to Form 8-A dated September 11, 1997,
and incorporated herein by reference.
The Registrant is a party to various agreements
defining the rights of holders of long-term debt of the
Registrant, but no single agreement authorizes securities in an
amount which exceeds 10% of the total assets of the Registrant.
Accordingly, such agreements are omitted as exhibits as permitted
by Item 601(b) (4) (ii) of Regulation S-B.
REPORTS ON FORM 8-K:
No reports on Form 8-K were filed during the fourth
quarter of Fiscal Year ended June 29, 1997
QUALIFICATION BY REFERENCE
Information contained in this Annual Report as to the
contents of any contract or other document referred to or
evidencing a transaction referred to is necessarily not complete,
and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to this Annual
Report or incorporated herein by reference, all such information
being qualified in its entirety by such reference.
SIGNATURES
In accordance with Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant caused this
report to be signed on its behalf by the undersigned, thereunto
duly authorized.
CUCOS INC.
Date: September 25, 1997 By:/s/ Vincent J. Liuzza, Jr.
Vincent J. Liuzza, Jr.
Chairman of the Board and
Chief Executive Officer
In accordance with 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 indicated as of
September 25, 1997.
/s/ Sidney C. Pulitzer /s/ Thomas J. Grace
Sidney C. Pulitzer, Director Thomas J. Grace, Director and
Secretary
/s/ Miguel Uria /s/ Frank J. Ferrara, Jr.
Miguel Uria, Director Frank J. Ferrara, Director
/s/ David M. Liuzza /s/ Vincent J. Liuzza, Jr.
David M. Liuzza, Director Vincent J. Liuzza, Jr., Chairman
of the
Board of Directors and Chief
Executive
Officer
/s/ Elie V Khoury
Elie V. Khoury, Director and President
EXHIBIT INDEX
Exhibit Number Title
(1) 2 - Joint Agreement of Merger, dated February 23,
1983, of Cu-Co's of Biloxi, Inc.
(1) 3-A - Copy of Articles of Incorporation of the
Registrant.
(1) 3-A-1 - Copy of Amendment to Articles of Incorporation
of the Registrant.
(1) 3-A-2 - Copy of Amendment to Articles of Incorporation
of the Registrant.
(1) 3-A-3 - Copy of Amendment to Articles of Incorporation
of the Registrant.
(1) 3-B - Copy of By-Laws of the Registrant.
(2) 3-B-1 - Copy of Amendment to By-Laws of Registrant.
(9) 3-B-2 - Amended and Restated By-Laws of the Registrant.
(3) 4-A - Rights Agreement, dated as of February 5, 1990,
between the Registrant and Commercial National
Bank in Shreveport.
(3) 4-B - Letter, dated February 26, 1991, from Whitney
National Bank to the Registrant confirming the
change of Rights Agent from Commercial National
Bank in Shreveport to Whitney National Bank.
(3) 4-C - Assignment of Rights Agreement, dated August 30,
1993, among Whitney National Bank, Boatmen's
National Bank and the Registrant with respect to
the change of Rights Agent from Whitney National
Bank to Boatmen's National Bank.
(11) 4-D - Copy of Mortgage and Security Agreement dated
April 25, 1994, with First National Bank of
Commerce for $450,000.
(11) 4-E - Copy of Promissory Note dated October 27, 1994,
with First National Bank of Commerce for
$200,000.
(11) 4-F - Copy of Promissory Note dated October 27, 1994,
with First National Bank of Commerce for
$250,000.
(11) 4-G - Copy of Promissory Note dated October 27, 1994,
with First National Bank of Commerce for
$500,000.
(10) 4-H - Note Purchase Agreement (with Exhibits).
(10) 4-I - Amendment No. 1 to Rights Agreement dated March
12, 1991.
(12) 4-J - Assignment of Rights Agreement dated June 2,
1997, among Boatman's National Bank, ChaseMellon
Shareholder Services, L.L.C. and the Registrant
with respect to the change of Rights Agent to
ChaseMellon Shareholders Services, L.L.C.
(1) 10-A - Copy of Registrant's 1983 Stock Option Plan.
(1) 10-B - Copy of letter agreement between the Registrant
and certain stockholders of the Registrant
relating to piggyback registration rights.
(4) 10-C - Amendment No. 1 to 1983 Stock Option Plan of
Cucos Inc.
(5) 10-D - Amendment No. 2 to 1983 Stock Option Plan of
Cucos Inc.
(5) 10-E - Amendment No. 3 to 1983 Stock Option Plan of
Cucos Inc.
(6) 10-F - Amendment No. 4 to 1983 Stock Option Plan of
Cucos Inc.
(7) 10-G - Amendment No. 5 to 1983 Stock Option Plan of
Cucos Inc.
(5) 10-H - Form of Incentive Stock Option Agreement for
1983 Stock Option Plan.
(5) 10-I - Form of Non-Qualified (Employee) Stock Option
Agreement for 1983 Stock Option Plan.
(5) 10-J - Form of Non-Qualified (Director) Stock Option
Agreement for 1983 Stock Option Plan.
(8) 10-K - Description of Registrant's Bonus Plan.
(9) 10-L - Copy of Registrant's 1993 Stock Option Plan as
amended.
(9) 10-M Form of Non-Qualified Stock Option Agreement for
1993 Stock Option Plan
(9) 10-N Form of Incentive Stock Option Agreement for
1993 Stock Option Plan
23 - Consent of Independent Auditors
27 - Financial Data Schedule
________________________________
(1) Filed as an exhibit to the Registrant's Registration
Statement on Form S-18 (Commission File No. 2-87372A) and
incorporated herein by reference.
(2) Filed as an exhibit to Form 10-K for the fiscal year ended
July 1, 1984 (Commission File No. 0-12701) and incorporated
herein by reference.
(3) Filed as an exhibit to Form 8-K dated February 23, 1990
(Commission File No. 0-12701), as amended by Form 8 dated
March 12, 1991, and incorporated herein by reference.
(4) Filed as an exhibit to the Registrant's Registration
Statement on Form S-8 (Commission File No. 33-03953) and
incorporated herein by reference.
(5) Filed as an exhibit to the Registrant's Registration
Statement on Form S-8 (Commission File No. 33-15785) and
incorporated herein by reference.
(6) Filed as an exhibit to the Registrant's Registration
Statement on Form S-8 (Commission File No. 33-26941) and
incorporated herein by reference.
(7) Filed as an exhibit to Form 10-K for the fiscal year ended
June 28, 1992 (Commission File No. 0-12701) and incorporated
herein by reference.
(8) Filed as an exhibit to Form 10-K for the fiscal year ended
June 28, 1987 (Commission File No. 0-12701) and incorporated
herein by reference.
(9) Filed as an exhibit to Form 10-KSB for the fiscal year ended
July 3, 1994 (Commission File No. 0-12701) and incorporated
herein by reference.
(10) Filed as an exhibit to Form 8-K filed August 11, 1995
(Commission File No. 0-12701) and incorporated herein by
reference.
(11) Filed as an exhibit to Form 10-KSB for the fiscal year ended
July 2, 1995 (Commission File No. 0-12701) and incorporated
herein by reference.
(12) Filed as an exhibit to Form 8-A dated September 11, 1997,
and incorporated herein by reference.
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the
Registration Statement (Form S-8 No. 33-26941), pertaining to the
1993 Stock Option Plan of Cucos Inc. of our report dated September 11,
1997, with respect to the financial statements of Cucos Inc.
included in this Annual Report (Form 10-KSB) for the year ended
June 29, 1997.
Ernst & Young LLP
New Orleans, Louisiana
September 24, 1997
[ARTICLE] 5
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] JUN-29-1997
[PERIOD-END] JUN-29-1997
[CASH] 476,000
[SECURITIES] 0
[RECEIVABLES] 701,000
[ALLOWANCES] 97,000
[INVENTORY] 254,000
[CURRENT-ASSETS] 1,802,000
[PP&E] 9,595,000
[DEPRECIATION] 3,942,000
[TOTAL-ASSETS] 8,249,000
[CURRENT-LIABILITIES] 3,375,000
[BONDS] 2,230,000
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 4,746,000
[OTHER-SE] (2,799,000)
[TOTAL-LIABILITY-AND-EQUITY] 8,249,000
[SALES] 21,464,000
[TOTAL-REVENUES] 21,724,000
[CGS] 5,737,000
[TOTAL-COSTS] 18,690,000
[OTHER-EXPENSES] 3,027,000
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 453,000
[INCOME-PRETAX] (446,000)
[INCOME-TAX] 0
[INCOME-CONTINUING] (446,000)
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (446,000)
[EPS-PRIMARY] (0.21)
[EPS-DILUTED] 0
</TABLE>
