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 January 12, 1997
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 ____________
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 [ ]
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 January 31,
1997.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [ X ]
Part I--Financial Information
ITEM I. FINANCIAL STATEMENTS
<TABLE>
CUCOS INC.
BALANCE SHEETS
<CAPTION>
Jan. 12, 1997 June 30, 1996
UNAUDITED
Assets
Current Assets
<S> <C> <C>
Cash and Cash Equivalents $549,508 $781,090
Receivables:
Trade 351,064 326,147
Due from affiliates 303,791 306,793
Notes receivable from franchisees 15,536 15,536
Less allowance for doubtful accounts 121,368 99,118
549,023 549,358
Inventories 257,843 244,589
Prepaids, deferred taxes and other current assets 440,347 348,834
TOTAL CURRENT ASSETS 1,796,721 1,923,871
Deferred Taxes and Noncurrent Receivables 346,629 322,508
Property, Equipment and Other
Land 327,000 327,000
Property and equipment 5,017,098 4,896,737
Building and leasehold improvements 5,380,326 5,183,624
Reacquired franchise rights 528,896 528,896
11,253,320 10,936,257
Less accumulated depreciation and amortization 5,078,482 4,561,795
6,174,838 6,374,462
Preopening cost less accumulated amortization 28,955 96,519
Investment in LaMexiCo, L.L.C. 242,207 245,178
Deferred Cost, less accumulated amortization 143,023 82,100
$8,732,373 $9,044,638
Liabilities and Shareholders' Equity
Current Liabilities
Short-term debt payable to banks $150,000 $93,000
Trade accounts payable 1,587,741 1,477,670
Accrued expenses and other 595,660 544,119
Accrued payroll 190,842 200,606
Current portion of long-term debt 937,914 968,396
TOTAL CURRENT LIABILITIES 3,462,157 3,283,791
Long-Term Debt, less current portion 2,534,150 2,934,051
Convertible Debenture - Non-Interest Bearing 500,000 500,000
Deferred Revenue 64,333 62,500
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 at January 12, 1997, and June 30, 1996 4,745,584 4,745,584
Additional paid-in capital 67,849 67,849
Retained earnings (deficit) (2,641,700) (2,549,137)
TOTAL SHAREHOLDERS' EQUITY 2,171,733 2,264,296
$8,732,373 $9,044,638
See Notes to Financial Statements.
</TABLE>
Part I--Financial Information
<TABLE>
CUCOS INC.
STATEMENT OF OPERATIONS
UNAUDITED
<CAPTION>
12 Weeks 12 Weeks 28 Weeks 28 Weeks
Ended Ended Ended Ended
Jan. 12, 1997 Jan. 14, 1996 Jan. 12, 1997 Jan. 14, 1996
Revenues:
<S> <C> <C> <C> <C>
Sales of Food and Beverages $4,617,337 $4,623,581 $11,099,759 $10,834,073
Franchise Fees and Royalties 23,835 43,845 60,196 100,867
Commissary, Rent & Other Income 131,529 72,586 278,331 174,088
Total Revenues 4,772,701 4,740,012 11,438,286 11,109,028
Costs and Expenses:
Cost of Sales 1,264,016 1,256,818 3,061,383 2,901,763
Restaurant Labor and Benefits 1,542,052 1,547,752 3,664,690 3,581,018
Other Operating Expenses 691,940 727,474 1,751,681 1,793,768
Occupancy Costs 502,539 476,520 1,178,605 1,119,521
Preopening Cost Amortization 28,956 0 67,564 0
Total Restaurant Operating Expenses 4,029,503 4,008,564 9,723,923 9,396,070
Operations and Franchise Expenses 374,111 325,795 793,870 718,328
Corporate Expenses 368,887 305,835 779,714 766,075
Interest Expense 98,873 94,145 233,342 219,491
Income Before Income Taxes (98,673) 5,673 (92,563) 9,064
Income Tax
- - - -
NET INCOME (LOSS) $(98,673) $5,673 $(92,563) $9,064
Weighted Average Shares and Common
Share Equivalents Outstanding 2,641,730 2,641,730 2,641,730 2,641,730
INCOME PER SHARE:
Net Income (Loss) Per Share ($0.04) $.00 ($0.04) $.00
See Notes to Financial Statements.
</TABLE>
Part I--Financial Information
<TABLE>
CUCOS INC.
STATEMENTS OF CASH FLOWS
UNAUDITED
<CAPTION>
28 Weeks 28 Weeks
Ended Ended
Jan. 12, 1997 Jan. 14, 1996
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $518,874 $496,594
INVESTING ACTIVITIES
Purchases of Property and Equipment (317,063) (501,199)
Investment in LaMexiCo, L.L.C. 2,971 ( 2,664)
Net (Additions) Reductions to Deferred Costs and Other (62,982) (64,357)
NET CASH USED IN INVESTING ACTIVITIES (377,074) (568,220)
FINANCING ACTIVITIES
Proceeds from Borrowings 850,673 904,887
Principal Payments on Borrowings (1,224,055) (624,002)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (373,382) 280,885
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (231,582) 209,259
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 781,090 566,740
CASH AND CASH EQUIVALENTS AT END OF PERIOD $549,508 $775,999
See Notes to Financial Statements.
</TABLE>
CUCOS INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. The Company: Cucos Inc. (the "Company") owns and franchises
Mexican restaurants under the name "Cucos". At January 12,
1997, fifteen company-owned restaurants and six franchised
restaurants were in operation. At the end of the Comparable
Quarter, there were fifteen company-owned and four
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 1997 will end on June 29, 1997, and will consist of
one sixteen-week quarter ending October 20, 1996, and three
twelve-week quarters ending January 12, 1997, and April 6,
1997, and June 29, 1997. Fiscal 1996 and fiscal 1997 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 June 30, 1996. In
the opinion of management, these financial statements
contain all normal recurring adjustments necessary to fairly
present the financial results for the twenty-eight weeks
ended January 12, 1997. Operating results for the period
shown are not necessarily indicative of the operating
results expected for the full fiscal year ending June 29,
1997.
4. Certain reclassifications of previously reported amounts
have been made to conform to current classifications.
ITEM 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Revenues increased for both the 12 weeks ended January 12, 1997
(the "Current Quarter"), and the 28 weeks ended January 12, 1997
(the "Current First Half"). Revenues increased .69% to
$4,772,701, from $4,740,012 for the twelve weeks ended January
14, 1996 (the "Comparable Quarter"). Revenues for the Current
First Half increased 3.0% to $11,438,286 from $11,109,028 for the
28 weeks ended January 14, 1996 (the "Comparable First Half").
Food and Beverage Revenues on a comparable sales per restaurant
basis decreased 1.3% in the Current Quarter and increased .73% in
the Current First Half.
The Company had a net loss of $98,673, ($.04 per share) in the
Current Quarter compared to net income of $5,763 ($.00 per
share), in the Comparable Quarter. The net loss for the Current
First Half was $92,563, ($.04 per share), compared to net income
of $9,064 ($.00 per share) in the Comparable First Half.
Sales of Food and Beverages for the Current Quarter decreased
.14% to $4,617,337 from $4,623,581 during the Comparable Quarter.
The decline in sales for the Current Quarter was due to a
temporary reduced level of advertising and increased competition
in certain locations. Restaurant level profits declined $27,183
in the Current Quarter, down 4.42% from the Comparable Quarter,
primarily due to higher depreciation and amortization expenses
and the inclusion of Preopening Cost Amortization in the Current
Quarter.
Sales of Food and Beverages for the Current First Half increased
$265,686 (2.45%) over the Comparable First Half. The sales
increase reflects a slight increase in comparable sales per
restaurant. Restaurant level profits for the Current First Half
decreased 4.32% to $1,375,836 compared to $1,438,003 in the
Comparable First Half due to increased depreciation and
amortization expenses and the inclusion of Preopening cost
amortization in the Current First Half.
Franchise Fees and Royalties declined to $23,835 in the Current
Quarter from $43,845 in the Comparable Quarter. The decrease was
primarily due to poorer performance at several franchise
restaurants and the Comparable Quarter included Development Fee
income which did not recur in the Current Quarter. There were
six franchised restaurants in operation at the end of the Current
Quarter compared to four franchised restaurants in operation at
the end of the Comparable Quarter.
Franchise Fees and Royalties for the Current First Half decreased
to $60,196 from $100,867 in the Comparable First Half for the
same reasons as the Current Quarter decline.
Total Restaurant Expenses increased $20,939 (.52%) in the Current
Quarter over the Comparable Quarter primarily due to the Current
Quarter including Preopening Cost Amortization of approximately
$29,000 which was not included in the Comparable Quarter. A
brief summary of the various components of Restaurant Expenses as
they relate to Restaurant Sales for the Current Quarter versus
the Comparable Quarter follows:
Current Comparable
Description Quarter Quarter
Cost of Sales 27.38% 27.18%
Restaurant Labor and 33.40 33.48
Benefits
Other Operating Expenses 14.99 15.73
Occupancy Costs 10.88 10.31
Preopening .63 .00
Total Restaurant Expenses 87.27% 86.70%
Cost of Sales as a percent of Sales of Food and Beverage
increased slightly in the Current Quarter due to food cost
inflation. Restaurant Labor and Benefits expense was virtually
the same percent of sales as the prior year. Other Operating
Expenses, which includes advertising, utilities, supplies, etc.,
were lower than the prior year primarily due to lower advertising
and supplies cost offset partially by decreased video poker
revenues. Occupancy Costs increased in both absolute terms and
as a percent of sales primarily due to higher depreciation and
amortization expense for equipment and leasehold improvements
related to recent remodelings, and higher rent expense.
Total Restaurant Expenses increased $327,853 (3.49%) to
$9,723,923 in the Current First Half over the Comparable First
Half primarily due to increased cost of sales and labor
associated with increased sales, and higher occupancy expenses.
A brief summary of the various components of Restaurant Expenses
as they relate to Restaurant Sales for the Current First Half
versus the Comparable First Half follows:
Current Comparable
Description First Half First Half
Cost of Sales 27.58% 26.78%
Restaurant Labor and 33.02 33.05
Benefits
Other Operating Expenses 15.78 16.56
Occupancy Costs 10.62 10.33
Preopening .61 .00
Total Restaurant Expenses 87.60% 86.73%
Cost of Sales as a percent of Sales of Food and Beverage
increased slightly due to food cost inflation. Restaurant Labor
and Benefits was virtually the same as the prior year. Other
Operating Expenses were lower than the prior year primarily due
to lower advertising and supplies cost offset partially by
decreased video poker revenues. Occupancy Costs increased in
both absolute terms and as a percent of sales primarily due to
higher depreciation and amortization expense for equipment and
leasehold improvements related to recent remodelings, and higher
rent expense.
Operations and Franchise Expenses for the Current Quarter
increased by $48,316 (14.8%) over the Comparable Quarter. The
increase was primarily due to increased training expenses,
provision for uncollectable accounts and costs associated with
subleases.
Operations and Franchise Expenses increased by $75,542 (10.5%) in
the Current First Half over the Comparable First Half primarily
due to increased training expense and costs associated with
subleases. The revenue from these subleases is reported in
Commissary, Rent and Other Income.
Corporate Expenses for the Current Quarter increased $63,052
(20.6%) over the Comparable Quarter primarily due to increased
marketing and salary expenses and a smaller insurance premium
credit than in the Comparable Quarter. Corporate Expenses for
the Current First Half increased $13,639 (1.8%) from the
Comparable First Half.
Interest Expense for the Current Quarter increased $4,728 (5.0%)
from the Comparable Quarter and $13,851 (6.3%) for the Current
First Half. The increased expense was due to a higher effective
interest rate on debt.
LIQUIDITY AND CAPITAL RESOURCES
At January 12, 1997, the Company had cash and cash equivalents of
$549,508 compared to $781,090 at the end of fiscal 1996.
The current ratio was .52 at the end of the Current Quarter
compared to .59 at the end of fiscal 1996.
The anticipated financing of $160,000 of expenditures associated
with the Alexandria remodeling was not consummated in the Second
Quarter. The Company expects to obtain long-term financing for
these expenditures by year-end.
Long-term Debt decreased to $2,534,150 at the end of the Current
Quarter compared to $2,934,051 at the end of the fiscal year.
The long-term debt/equity ratio decreased to 1.17 to 1.00 in the
Current Quarter from 1.30 to 1.00 at the end of the fiscal year.
In order to provide funds to open new restaurants and to improve
short-term liquidity, the Company is considering opportunities to
refinance its long-term debt.
The Company normally relies on cash flow from operating
activities to finance recurring capital expenditures. The
Company's capital budget for normal recurring equipment
replacement and refurbishing is approximately $325,000, annually.
To fund expansion and major remodels of its restaurants, the
Company will rely primarily on landlord financing and the
issuance of long-term debt in the form of long-term notes or
capital leases.
PROSPECTIVE INFORMATION
There are several franchised restaurants which continue to
experience location and local economic problems. The Company has
signed a lease agreement to open a new Company-owned restaurant
late in calendar year 1997. In addition, the Company has several
additional sites under consideration for new company-owned
restaurants. A new franchised restaurant opened in Des Moines,
Iowa, on January 23, 1997.
On November 5, 1996, each parish in Louisiana voted on whether to
continue or appeal casino and video poker gaming. Video Poker
was continued in all areas in which the Company currently
operates video poker machines except for four locations which
represent approximately fifty percent of the Company's gaming
revenue. However, in those parishes voting to appeal video
poker, existing video poker operators will be allowed to continue
to operate until July, 1999.
Part II-Other Information
ITEM 1. LEGAL PROCEEDINGS.
None, except as previously reported.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Annual Meeting of Shareholders was held on October
31, 1996. The following matters were voted on and
received the specified number of votes for, against,
and abstaining:
1. Election of Directors:
Name of Nominees Votes For Votes Withheld
Frank Ferrara 1,900,213 21,301
Thomas J. Grace 1,899,913 21,601
Elie V. Khoury 1,899,913 21,601
David M. Liuzza 1,899,913 21,601
Vincent J. Liuzza, Jr. 1,899,913 21,601
Sidney C. Pulitzer 1,899,913 21,601
Miguel Uria 1,899,913 21,601
2. Adoption of the Amendments to the Company's 1993
Stock Option Plan: 1,079,991 votes for; 137,340 votes
against; 3,236 votes abstaining; and 700,947 broker non-
votes.
3. Appointment of independent public accountants,
Ernst & Young, LLP, for the year 1997: 1,920,013 votes
for; 400 votes against; and 1,101 votes abstaining.
ITEM 5. OTHER INFORMATION.
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a. Exhibits.
27 - Financial Data Schedule
b. Reports on Form 8-K.
None.
INDEX TO EXHIBITS
The following exhibit is filed with this Quarterly
Report or is incorporated herein by reference:
Exhibit Number Title
27 Financial Data Schedule
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)
Lee W. Randall
Date: February 24, 1997 By: /s/
Lee W. Randall
Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-29-1997
<PERIOD-END> JAN-12-1997
<CASH> 549,508
<SECURITIES> 4,769
<RECEIVABLES> 670,391
<ALLOWANCES> 121,368
<INVENTORY> 257,843
<CURRENT-ASSETS> 1,796,721
<PP&E> 11,253,320
<DEPRECIATION> 5,078,482
<TOTAL-ASSETS> 8,832,373
<CURRENT-LIABILITIES> 3,462,157
<BONDS> 3,034,150
0
0
<COMMON> 4,745,584
<OTHER-SE> (2,573,851)
<TOTAL-LIABILITY-AND-EQUITY> 8,732,373
<SALES> 4,617,337
<TOTAL-REVENUES> 4,772,701
<CGS> 1,264,016
<TOTAL-COSTS> 4,029,503
<OTHER-EXPENSES> 710,837
<LOSS-PROVISION> 32,161
<INTEREST-EXPENSE> 98,873
<INCOME-PRETAX> (98,673)
<INCOME-TAX> 0
<INCOME-CONTINUING> (98,673)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (98,673)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
