22
October 27, 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 definitive Proxy Statement and Form of
Proxy relating to the 1997 Annual Meeting of Shareholders. This
material will be mailed to the Company's shareholders on or about
November 10, 1997
The Company's 1997 Annual Report to Shareholders, which is being
sent to shareholders with the definitive proxy materials, was
transmitted to the Commission on October 27, 1997, as Exhibit 13
to the Proxy Statement for its fiscal year ended June 29, 1997.
The Annual Report is not to be treated as "soliciting material."
The financial statements enclosed in the Annual Report do not
reflect a change from the preceding year in accounting principles
or practices.
Very truly yours,
Vincent J. Liuzza, Jr.
Chairman and Chief Financial Officer
(logo)
Cucos Inc.
110 Veterans Blvd.
Suite 222
Metairie, LA 70005
(504) 835-0306
October 27, 1997
Dear Shareholder:
The Annual Meeting of Shareholders will be held in the Cucos
Border Cafe, 3000 Veterans Boulevard, Metairie, Louisiana, at
3:00 p.m. on December 11, 1997. The purposes of the Annual
Meeting are set forth in the accompanying Notice and Proxy
Statement.
The 1997 Annual Report to Shareholders, which is enclosed,
contains financial and other information concerning the Company
and its business for the fiscal year ended June 29, 1997. The
Annual Report is not to be considered part of the proxy
solicitation materials.
We cordially invite you to attend the Annual Meeting. If
you cannot attend, please complete and return the enclosed Proxy
so that your vote can be recorded.
Cordially,
Vincent J. Liuzza, Jr.
Chairman of the Board and
Chief Executive Officer
(CUCOS LOGO)
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held December 11, 1997
To the Shareholders:
The Annual Meeting of the Shareholders of Cucos Inc. (the
"Company") will be held in Cucos Border Cafe, 3000 Veterans
Boulevard, Metairie, Louisiana, at 3:00 p.m. (local time) on
December 11, 1997, for the purposes:
(1) To elect a Board of Directors for the ensuing year;
(2) To consider and act upon a proposal to approve and
ratify the selection of Ernst & Young LLP as the
Company's independent auditors for the fiscal year
ending June 28, 1998; and
(3) To transact such other business as may properly
come before the meeting or any adjournments thereof.
The business to be transacted at the Annual Meeting is more
fully described in the accompanying Proxy Statement, to which
reference is hereby made.
The Board of Directors has fixed the close of business on
October 9, 1997, as the record date for determining shareholders
entitled to notice of and to vote at the Annual Meeting.
BY ORDER OF THE
BOARD OF DIRECTORS:
Thomas J. Grace, Secretary
Dated: October 27, 1997
PROXY STATEMENT
General
The accompanying Proxy is solicited by and on behalf of the
Board of Directors of Cucos Inc. (the "Company"), 110 Veterans
Boulevard, Suite 222, Metairie, Louisiana 70005, in connection
with the Annual Meeting of Shareholders (the "Annual Meeting") to
be held December 11, 1997, and any adjournments of that meeting.
Execution of the Proxy will not in any way affect a shareholder's
right to attend the Annual Meeting and, upon revocation of the
Proxy, to vote in person. Proxies may be revoked at any time
before they are voted by filing with the Secretary a written
notice of revocation or a duly executed Proxy bearing a later
date. Unless they are revoked, Proxies in the form enclosed,
properly executed and received by the Secretary of the Company
prior to the Annual Meeting, will be voted at the Annual Meeting
as specified by the shareholder in the Proxy or, if no
specifications are made in the Proxy, then FOR the election as
directors of the nominees listed in the enclosed Proxy, and FOR
the proposal to approve and ratify the selection of Ernst & Young
LLP as the Company's independent auditors for the fiscal year
ending June 28, 1998.
These materials are being mailed to shareholders on or about
Novemer 10, 1997. The cost of soliciting Proxies is being paid
by the Company. The Company's 1997 Annual Report to Shareholders
for the fiscal year ended June 29, 1997 ("Fiscal 1997")
accompanies this Proxy Statement, but is not considered a part of
the proxy solicitation materials.
Capital Stock
The authorized capital stock of the Company consists of
1,000,000 shares of preferred stock, no par value, of which no
shares have been issued, and 20,000,000 shares of Common Stock,
no par value, of which 2,113,747 shares were issued and
outstanding as of October 22, 1997, the record date for the
Annual Meeting. Only shareholders of record at the close of
business on such date are entitled to notice of and to vote at
the Annual Meeting. Each such shareholder is entitled to one
vote for each share of Common Stock held at that date. Proxies
marked as abstaining and proxies containing broker non-votes on
any matter to be acted upon by shareholders will be treated as
present at the meeting for purposes of determining a quorum but
will not be counted as votes cast on such matters.
Beneficial Ownership
The following table sets forth information, as of August 5,
1997, concerning (a) the only shareholders known by the Company
to own beneficially more than 5% of the Common Stock of the
Company, which is the only class of voting securities
outstanding, (b) each of the executive officers named in the
Summary Compensation table and (c) the beneficial ownership of
Common Stock by all directors and officers of the Company as a
group.
Beneficial Owner(s) Amount Beneficially Percent of
and Address Owned (1) Class (1)
Vincent J. Liuzza, Jr. (2)(3) 477,100 shares 19.8%
Mr. & Mrs. Gerald E. Siefken (4) 224,000 shares 9.3%
Raymond D. Schoenbaum (5) 210,500 shares 8.7%
Robert J. Monroe (6) 191,730 shares 8.0%
Elie V. Khoury (2)(7) 25,700 shares 1.0%
All directors and officers as
a group (8 persons) (9) 737,224 shares 30.6%
(1) Unless otherwise noted, the shares are owned of record by
the beneficial owners shown with sole voting and investment
power, except for the community property interest, if any,
of the shareholder's spouse. The table includes shares
which are subject to stock options exercisable within 60
days of August 5, 1997.
(2) Address: 110 Veterans Blvd., Suite 222, Metairie, Louisiana
70005.
(3) Includes 60,000 shares subject to options exercisable by Mr.
Vincent Liuzza, Jr. and 25,000 shares subject to options
exercisable by Mr. Liuzza's wife, Glenda T. Liuzza, as to
which she possesses sole voting and investment power. Mr.
Liuzza, Jr. disclaims any beneficial ownership of shares
issuable pursuant to Mrs. Liuzza's options.
(4) Address: 40 Killdeer Street, New Orleans, Louisiana 70124.
Includes 1,000 shares owned of record by Mr. Siefken as to
which he exercises sole voting and investment power, 67,600
shares owned of record by Mrs. Siefken, as to which she
exercises sole voting and investment power, 15,000 shares
owned of record by a trust for the benefit of Mr. Siefken's
daughter, as to which he exercises sole voting and
investment power in his capacity as trustee of the trust,
and 74,000 shares owned of record by Mr. & Mrs. Siefken
jointly with shared voting and investment power. Mr.
Siefken is also the beneficial owner of 66,400 shares which
he holds as custodian for four of his children as to which
he exercises sole voting and investment power. Mr. Siefken
disclaims any beneficial interest in the shares owned of
record by his wife. The above information is based upon
filings made by Mr. & Mrs. Siefken with the Securities and
Exchange Commission.
(5) Address: 1480 Terrell Mill Road, Suite 1100, Marietta,
Georgia 30067-6050. Mr. Schoenbaum's actual percentage
ownership is 9.96%. His ownership includes 180,500 shares
as to which he exercises sole voting and investment power,
10,000 shares beneficially owned as custodian for the
accounts of Brian D. Schoenbaum and Marc S. Schoenbaum (his
children) and 20,000 shares indirectly beneficially owned by
Mr. Schoenbaum as controlling shareholder, Director,
Chairman and Secretary of Innovative Restaurant Concepts.
Mr. Schoenbaum disclaims beneficial ownership of all 20,000
shares of Cucos Common Stock held of record by Innovative
Restaurant Concepts. The above information is based upon
filings made by Mr. Schoenbaum with the Securities and
Exchange Commission.
(6) Address: 228 St. Charles Avenue, Suite 1402, New Orleans,
Louisiana 70130. Includes 191,730 shares that are
beneficially owned by Mr. Robert J. Monroe as Executor of
the Estate of J. Edgar Monroe as to which he has sole voting
and investment power. The information about the Estate's
ownership is based on a written confirmation made by Mr.
Monroe on behalf of the Estate of J. Edgar Monroe.
(7) Includes 25,000 shares subject to options exercisable by Mr.
Khoury.
(8) Includes 218,300 shares subject to options.
(9) The table excludes shares issuable on the conversion of
certain convertible debentures. These debentures are not
convertible until the earlier of five years from the date of
purchase or certain other events. See "Certain
Relationships and Related Transactions".
Vincent J. Liuzza, Jr., the Succession of Vincent J. Liuzza,
Sr., and David M. Liuzza have pledged an aggregate of 193,384
additional shares of Common Stock of the Company owned by them
individually to secure loans extended to L.B.G., Inc. (formerly
known as Sizzler Family Steak Houses of Southern Louisiana, Inc.)
("L.B.G"), an affiliate of the Company, for general business
purposes. Under the terms of each of the notes evidencing the
loans, the lenders may foreclose on its pledge if L.B.G. fails to
make timely payments on the loans.
I.
ELECTION OF DIRECTORS
Nominees for Director
A total of seven directors are to be elected at the Annual
Meeting. Management proposes the election as directors of the
seven nominees listed below, each to serve as a director until
the next Annual Meeting or until his successor is elected and has
qualified. In the absence of direction from the shareholder,
proxies in the enclosed form will be voted FOR the election as
directors of the seven nominees listed below or substituted
nominees who may be named by the Board of Directors to replace
any of the seven nominees who become unavailable to serve for any
reason. (No such unavailability is presently known to
management.) In no event, however, will the proxies be voted for
more than seven persons. There are no arrangements or
understandings relating to any person's election or prospective
election as a director of the Company.
Under the Company's By-Laws, no nominee listed below will be
elected as a director unless each such nominee receives the
affirmative vote of a majority of the shares represented (in
person or by proxy) at the Annual Meeting. If more nominees than
the number of directors to be elected receive a majority vote,
then those nominees, up to seven persons, receiving the highest
number of votes shall be elected.
The following table lists the nominees for director and
shows, as of August 5, 1997, the beneficial ownership of Common
Stock of the Company be each of them. Information concerning the
principal occupations of the nominees for director, and other
directorships which they hold in certain public companies, is set
forth in the text following the notes to the table.
Director Shares Beneficially Percent of
Nominees for Director Age Since Owned(1) Class (1)
Frank J. Ferrara, Jr. 44 Dec. 1995 15,000 (4) .7%
Thomas J. Grace 56 Oct. 1983 56,003 2.5%
Elie V. Khoury 37 Sept. 1996 25,700 (4) 1.0%
David M. Liuzza 50 Jan. 1995 60,071 2.7%
Vincent J. Liuzza, Jr. 56 Mar. 1981 477,100 (2) 19.8%
Sidney C. Pulitzer 63 Oct. 1983 27,200 1.2%
Miguel Uria 59 Dec. 1983 82,650 (3) 3.7%
______________
(1) The shares are owned of record by the beneficial owners
shown with sole voting and investment authority, except as
set forth in the notes below and except for the community
property interest, if any, of the shareholder's spouse. The
table includes currently exercisable options to purchase
31,500 shares which are held by Mr. Grace and exercisable
options to purchase 25,000 shares which are held by Mr.
Khoury.
(2) Includes 60,000 shares subject to options exercisable by Mr.
Liuzza, Jr., and 25,000 shares subject to options which are
exercisable by Mr. Liuzza's wife, Glenda T. Liuzza, as to
which she exercises sole voting and investment power. Mr.
Liuzza, Jr., disclaims any beneficial ownership of shares
issuable pursuant to Mrs. Liuzza's options.
(3) Of these shares, 56,250 shares are owned of record by the
Miguel Uria Self Directed IRA. Mr. Uria exercises sole
voting and investment power over these shares.
(4) The table excludes shares issuable on the conversion of
certain convertible debentures. These debentures are not
convertible until the earlier of five years from the date of
purchase or certain other events. See "Certain
Relationships and Related Transactions".
Principal Occupations and Certain Directorships
The following paragraphs identify the principal occupations
of the nominees for director. Except as otherwise indicated,
each nominee has served for at least five years in the position
shown. Information is also given as to directorships held by
such persons in other companies which are publicly held and are
subject to certain requirements for filing reports with the
Securities and Exchange Commission.
Since 1982, Mr. Ferrara has served as managing partner of
Ferrara & Ferrara, a law firm located in Baton Rouge, Louisiana.
Mr. Grace has been Secretary of the Company since 1983 and
has been General Counsel of the Company since 1992. Mr. Grace
also served as City Attorney for the City of Harahan, from 1988
to January, 1992, and was an instructor of Law at Loyola
University Law School in New Orleans, Louisiana, from August,
1990, to May, 1991. Mr. Grace was a partner in the law firm of
Courtenay, Forstall, Grace & Hebert, New Orleans, Louisiana, from
1972 to May, 1989. Mr. Grace is a mediator with the firm of
United States Arbitration & Mediation, Gulf South, Inc. in
Metairie, Louisiana.
Mr. Khoury is President of the Company and has served in
that capacity since July 1996. Prior to that from December,
1995, to June, 1996, he served as Executive Vice President and
from June, 1990, through December, 1995, as Vice President of
Operations. Mr. Khoury is also President of Restaurant
Investments of Jackson, Inc. and Mexican Restaurant Management,
Inc., franchisees of the Company. See description of the
Hattiesburg and Jackson transactions under "Certain Relationships
and Related Transactions".
Mr. David M. Liuzza is a founder of the Company and has been
a Director since January, 1995. For the last five years, Mr.
Liuzza has served as President or in other positions for L.B.G.,
Inc., an affiliate of the Company formerly known as Sizzler
Family Steak Houses of Southern Louisiana, Inc. and as President
of LaMexiCo, L.L.C., a franchisee of the Company, since 1994.
Mr. Liuzza is the brother of Vincent J. Liuzza, Jr. See "Certain
Relationships and Related Transactions."
Mr. Vincent J. Liuzza, Jr., Chief Executive Officer of the
Company, has also been Chairman of the Board of Directors of the
Company since its inception in 1981 and was President from
inception until July, 1996. Mr. Liuzza is also a founder of
L.B.G., Inc., an affiliate of the Company, and has served as its
Chairman or in other positions since 1969. See "Certain
Relationships and Related Transactions."
Since 1984, Mr. Pulitzer has been Chairman of the Board of
Wemco Inc., New Orleans, Louisiana, a manufacturer of men's
neckwear and sportswear, after serving for more than five years
as its President. During the past two years, he has also served
as President and then as Chairman of the World Trade Center in
New Orleans, Louisiana, and as a Director of North Star
Insurance.
Mr. Uria has been President of ORO Financial, a registered
broker/dealer in New Orleans, Louisiana, since January, 1988.
Committees of the Board of Directors
The Company's Board of Directors has three standing
committees: the Executive Committee, the Compensation Committee
and the Audit Committee. The Board of Directors does not have a
nominating committee.
The Executive Committee (presently consisting of Messrs.
Grace, David M. Liuzza, Elie V. Khoury and Vincent J. Liuzza,
Jr.,) meets during the intervals between meetings of the Board of
Directors on call of the Chairman of the Board and has all the
authority of the Board, subject to limitations imposed by law,
the By-Laws or the Board of Directors. Its minutes are reviewed
by the Board of Directors.
The Audit Committee (presently consisting of Messrs.
Pulitzer, Ferrara and Vincent J. Liuzza, Jr.) recommends the
appointment of the independent public accountants for the
Company, reviews the scope of audits proposed by the auditors,
reviews the financial statements and periodically consults with
the independent public auditors on matters relating to internal
accounting controls and procedures.
The Compensation Committee (presently consisting of Messrs.
Pulitzer, Uria, Ferrara and Vincent J. Liuzza, Jr.) reviews and
approves the compensation of employees above a certain salary
level, reviews management proposals relating to incentive
compensation plans, and reviews and recommends directors'
compensation.
During Fiscal 1997, the Board of Directors met six times;
the Executive Committee met two times; the Compensation Committee
met one time; and the Audit Committee met one time. All
incumbent directors attended 75% or more of the aggregate of (1)
the total meetings of the Board during the period he was a
director and (2) the total meetings of committees of the Board of
which each was a member.
Executive Officers of the Company
The following table lists certain information about those
executive officers of the Company who are not directors of the
Company. In addition to the persons listed below, Mr. Vincent J.
Liuzza, the Chairman of the Board of Directors of the Company,
serves as the Chief Executive Officer of the Company, Thomas J.
Grace, a director of the Company, serves as Secretary and General
Counsel, and Mr. Elie Khoury serves as President of the Company.
Information concerning Messrs. Liuzza, Jr., Khoury, and Grace is
set forth under the captions "ELECTION OF DIRECTORS - Nominees
for Director," and 'ELECTION OF DIRECTORS - Principal Occupation
and Certain Directorships." Information concerning the business
experience of each executive officer named in the table below
follows the table.
Name Age Officer Officer Since
Glenda T. Liuzza 55 Vice President- June 1985
Concept Development
Mrs. Liuzza has been Vice President Concept Development of
the Company since June 1996, and was previously Vice President
Marketing/Concept Development since June 1985.
All executive officers serve at the pleasure of the Board of
Directors. Vincent J. Liuzza, Jr., and Glenda T. Liuzza are
husband and wife.
II.
INDEPENDENT AUDITORS
Ernst & Young LLP, Certified Public Accountants, New
Orleans, Louisiana, were the independent auditors for the Company
during Fiscal 1997. A representative of Ernst & Young is
expected to be present at the Annual Meeting. The representative
will have the opportunity to make a statement at the Annual
Meeting and will be available to respond to any appropriate
questions.
The Board of Directors of the Company has selected the firm
of Ernst & Young LLP as the Company's independent auditors for
the fiscal year ending June 28, 1998. Shareholder approval and
ratification of this selection is not required by law or by the
By-Laws of the Company. Nevertheless, the Board of Directors has
chosen to submit it to the shareholders for their approval and
ratification. The affirmative vote of a majority of the shares
represented (in person or by Proxy) at the Annual Meeting is
required to approve and ratify this selection. If this selection
is not approved and ratified, the Board of Directors intends to
reconsider its selection of Ernst & Young. The proxy holders
named in the accompany Proxy will vote FOR this proposal unless
otherwise directed in the Proxy.
OTHER MATTERS
As of the date of this Proxy Statement, the Company's
management knows of no matters likely to be brought before the
Annual Meeting other than those set forth in the Notice of the
Meeting. If other matters properly come before the Annual
Meeting, each Proxy will be voted in accordance with the
discretion of the proxy holders named therein.
ADDITIONAL INFORMATION
Certain Relationships and Related Transactions
L.B.G., Inc. ("L.B.G.") is a management company owned by (i)
Vincent J. Liuzza, Jr., the Chairman, a principal shareholder and
a director of the Company and a nominee for re-election as such,
and (ii) David M. Liuzza, a former officer of the Company, a
director of the Company and a nominee for election as such.
At June 29, 1997, L.B.G. owed the Company $258,000 for food,
restaurant supplies, rent and services provided in previous
years. The largest amount of indebtedness outstanding from
L.B.G. to the Company during Fiscal 1997 was $258,000 on June 29,
1997. Subsequent to year end, $179,000 was repaid. 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.
("LaMexiCo"), a Louisiana limited liability company that operates
a franchised Cucos restaurant at 3000 Veterans Boulevard in
Metairie, Louisiana. The Company also manages the restaurant for
LaMexiCo and receives 4.0% of net sales plus out-of-pocket
expenses as compensation. The restaurant opened under the
development rights previously owned by L.B.G. which owns 21% of
LaMexiCo. Mr. Thomas J. Grace (a director, the Secretary and the
General Counsel of the Company), Mrs. Vincent J. Liuzza, Sr. (a
part owner of L.B.G.), Mr. Miguel Uria (a director of the
Company), Mr. Elie V. Khoury (a director and President of the
Company), and certain unaffiliated investors own the balance of
LaMexiCo. The Company received $54,000 in royalties and $80,000
in management fee revenue from LaMexiCo during Fiscal 1997. At
June 29, 1997, LaMexiCo owed the Company $17,000, which is paid
current, for management fees, royalties and other expenses.
The Company leases land, building and improvements on which
a Company-owned restaurant in New Orleans, Louisiana, is located
from Sidney C. Pulitzer, a director of the Company and a nominee
for re-election as such. The lease has a primary term of fifteen
years which expires on October 31, 2000, and contains an option
to renew for an additional fifteen-year period. The Company paid
$122,000 in rent to Mr. Pulitzer during Fiscal 1997.
The Company has entered into several agreements with
Brothers Video, Inc. pursuant to which Brothers Video supplies
video poker machines in nine Cucos restaurants located in
Louisiana. The term of an 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 licensing fees and receives 65% of the net
receipts during the first two years of the term and 70%
thereafter. Vincent J. Liuzza, Jr., the Chairman, Chief
Executive Officer and a director of the Company, is the sole
stockholder of Brothers Video. At June 29, 1997, the Company had
a receivable from Brothers Video of $36,000, which is paid
current, for video poker revenues earned. The Company's share of
video poker revenues earned was 2.6% of sales of food and
beverages in fiscal year 1997.
Mr. Khoury serves as President of Mexican Restaurant
Management, Inc., a corporation which purchased all of the
outstanding stock of Restaurant Investments of Hattiesburg, Inc.,
a corporation operating a franchised Cucos restaurant in
Hattiesburg, Mississippi. Mr. Khoury is voting trustee under a
Voting Trust, for all of the stock of Restaurant Investments of
Hattiesburg, Inc. Mexican Restaurant Management, Inc. is owned
by Mr. Khoury, Mr. Frank Ferrara, and an independent third party,
who has also guaranteed the obligation of Restaurant Investments
of Hattiesburg, Inc., to the Company. Subsequent to the purchase
of Restaurants Investments of Hattiesburg, Inc. by Mexican
Restaurant Management, Inc. Mr. Ferrara became a member of the
board of directors of the Company. As an incentive, the Company
and Restaurant Investments of Hattiesburg, Inc. entered into a
Royalty Incentive Program. The Royalty Incentive Program is
based on quantitative measures, that, once achieved, is intended
to result in an operationally sound and stable restaurant as well
as provide the franchisee with a further incentive to spend
advertising dollars. The franchisee has paid or will pay
royalties in an amount of $1,200 per month from July, 1996,
through December, 1996, and $1,500 per ending December, 1997, if
these incentives are achieved. The Royalty Incentive Program
expires December 31, 1997. At June 29, 1997, Restaurant
Investments of Hattiesburg, Inc. owed the Company $200 in
royalties and miscellaneous receivables and paid royalties of
$11,000 in 1997.
Mr. Khoury also serves as President of Restaurant
Investments of Jackson, Inc. which operates a franchised
restaurant in Jackson, Mississippi. The Company has awarded
Development Rights to obtain up to (2) Licenses to Restaurant
Investment of Jackson, Inc. for Dothin, Hinds, Rankin and Madison
Counties, Mississippi. In consideration for the development
rights, Licensee shall pay no development fee for the first
restaurant and $15,000 for the second restaurant which will be
paid upon the opening of that restaurant. Also, the Company has
granted a license to Restaurants Investments of Jackson, Inc. to
operate a restaurant at 1270 E. County Line Road in Ridgeland,
Mississippi, which opened May 9, 1996. The license fee was for
all out-of-pocket expenses. The royalty agreement under the
License calls for no royalties for the first six months of
operation. Royalties for months 7 - 18 will be 1.0% of net
sales; for months 19 - 30, royalties will be 2.0%; for months 31
- - 42, royalties will be 3.0%; and for months 43 and thereafter,
royalties will be 4.0%. Mr. Khoury, Mr. Ferrara and an
independent third party each own one-third of the outstanding
stock of Restaurant Investments of Jackson, Inc. At June 29,
1997, Restaurant Investments of Jackson, Inc. owed the Company
$2,000 for royalties and miscellaneous receivables and paid
royalties of $1,000 in 1997.
The Company sold its Zero-Coupon Convertible Secured Notes
due June 30, 2015, in the aggregate principal amount of $500,000
(the "Notes") to three individuals including Mr. Elie Khoury,
President of the Company, who purchased $87,500 principal amount
of the Notes for $87,500, and Mr. Frank Ferrara, Director of the
Company who purchased $206,250 principal amount for $206,250. On
February 24, 1997, Mr. Elie Khoury purchased $56,250 of Notes and
Mr. Frank Ferrara purchased $150,000 of Notes from the other
individual. The Notes are convertible into shares of the
Company's Common Stock at a conversion price of $0.947 per share
of Common Stock (527,983 shares), subject to adjustments under
antidilution provisions; provided that the conversion privileges
cannot be exercised unless (1) shares to be received upon
conversion are to be immediately resold in the open marketplace,
(2) five years have passed from the date of issuance of the Notes
or (3) certain conditions relating to the sale or control of the
Company have occurred. The notes are secured by the assignment
of one of the Company's restaurant leases and a lien on the
Company's tangible personal property located at that restaurant.
Also, the Company granted Mr. Khoury and Mr. Ferrara and the
other individual who purchased the Notes, development rights to
obtain five licenses to use the Company's unique restaurant
system at specific locations within the States of Louisiana and
Mississippi to be designated in separate license agreements at a
development fee of $15,000 per restaurant. $500 ($100 per
license) of this development fee was paid on July 28, 1995, and
$14,900 will be payable upon the execution of each license
agreement. No restaurant has been opened under the agreement.
During 1997, Mr. Elie V. Khoury, President, and Mr. Vincent
J. Liuzza, Jr., Chief Executive Officer, made a series of
unsecured advances, due on demand, to the Company which had a
high balance of $90,000 and a balance outstanding of $30,500 at
June 29, 1997. Mr. Khoury's advances totaled $138,500 of which
$128,000 has been repaid. Mr. Liuzza's advances totaled $40,000
of which $20,000 has been repaid.
As described above, the Company believes that the terms of
the transactions described above are all on terms that are not
less favorable to the Company than those that could be negotiated
with an independent third party.
Executive Compensation
The following table shows cash compensation for services
rendered in all capacities to the Company during the fiscal years
June 30, 1996, and June 29, 1997, for the Chief Executive Officer
and for the only other executive officer of the Company whose
total annual salary and bonus exceeded $100,000 for the fiscal
year ended June 29, 1997.
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards Payouts
Other
Com- Restricted All Other
Name and Principal Fiscal pensa- Stock Options/ LTIP Compensa-
Position Year Salary (1) Bonus tion(2) Awards SARS Payouts tion(3)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Vincent J. Liuzza, 1997 $180,354 - - - - - $5,898
Jr., Chief 1996 $140,000 $645 - - - - $3,156
Executive Officer 1995 $156,000 - - - - - $5,289
Elie V. Khoury, 1997 $151,218 $7,781 - - - - $1,296
President 1996 $85,000 $50,881 - - - - $1,194
1995 $85,000 $42,005 - - - - $1,344
</TABLE>
_____________
(1) Includes amounts deferred under a retirement plan maintained
under the provisions of Section 401(k) of the Internal
Revenue Code in which employees of the Company are eligible
to participate. Does not include matching contributions
made by the Company, all of which are set forth in the
column "All Other Compensation".
(2) The Company provides certain employees, including executive
officers, with automobiles and provides complimentary meals
to executive officers and directors. The value of these
benefits is not included in the amounts reported in the
table. The Company has determined that perquisites and
other personal benefits with respect to any individual named
in the preceding table would in no event have exceeded 10%
of the compensation reported in such table for such person.
(3) Amounts set forth (A) matching contributions made under the
retirement plan referenced in footnote (1) to this table as
follows: Mr. Liuzza - $544 - 1997, $319 - 1996, $1,108 -
1995; Mr. Khoury - $836 - 1997, $561 - 1996, $977 - 1995;
and (B) the dollar value of term life and disability
insurance premiums paid by the Company as follows: Mr.
Liuzza - $5,354 - 1997, $2,838 - 1996, $4,181 - 1995; Mr.
Khoury - $460 - 1997, $634 - 1996, $367 - 1995.
Stock Option Grants During Fiscal 1997
During Fiscal 1997 the Board of Directors approved a plan to
permit all option holders who held options granted under the
1983 Stock Option Plan to convert those options to options
issued under the 1993 Stock Option Plan. All option
holders exercised their right to convert the 1983 options.
The following table list the options converted by executive
officers:
<TABLE>
<CAPTION>
Market Price Length of Original
of Stock at Exercise Option Terms
Number of time of Price at Time New Remaining at Date
Options Repricing or of Repricing Exercise of Repricing or
Name Date Repriced Amendment or Amendment Price Amendment
<S> <C> <C> <C> <C> <C> <C>
Vincent J. Liuzza, Jr. 6/12/97 10,000 $1.32 $2.00 $1.32 1 month
" 6/12/97 10,000 $1.32 $1.63 $1.32 1 year 2 months
" 6/12/97 40,000 $1.32 $2.00 $1.32 1 year 4 months
Elie V. Khoury 6/12/97 750 $1.32 $1.63 $1.32 2 months
" 6/12/97 20,000 $1.32 $1.63 $1.32 1 year 4 months
" 6/12/97 2,250 $1.32 $2.00 $1.32 1 year 4 months
" 6/12/97 10,000 $1.32 $1.44 $1.32 2 years 2 months
" 6/12/97 10,000 $1.32 $1.25 $1.32 3 years 2 months
</TABLE>
The Company did not grant any stock options or stock
appreciation rights to Mr. Vincent J. Liuzza, Jr. during Fiscal
1997. The Company granted an option for 22,500 shares at $1.38
per share to Mr. Elie V. Khoury during Fiscal 1997, resulting
from his becoming President and Chief Operating Officer.
Aggregated Stock Option Exercises and Fiscal Year-Ended Option
Values
The following table sets forth information concerning stock
options which were exercisable during Fiscal 1997 by Messrs.
Vincent J. Liuzza, Jr., and Elie V. Khoury and the total number
and value of unexercised options held by each such person at June
29, 1997, separately identifying unexercisable and exercisable
options at June 29, 1997. No stock appreciation rights have ever
been granted to any of the named executive officers.
Number of Shares
Underlying Value of
Unexercised Unexercised In-
Shares Options at The-Money Options
Acquired June 29, 1997 at June 29, 1997
on Value Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable
Vincent J. Liuzza, Jr. 0 $0 60,000/0 $0/$0
Elie V. Khoury 0 $0 25,000/0 $0/$0
__________________
Compensation of Directors
Directors of the Company are not paid fees for attendance at
meetings of the Board of Directors or any other cash compensation
for serving as directors. Under the 1993 Stock Option Plan, the
non-employee directors of the Company shall receive stock options
to purchase 800 shares of Common Stock at its fair market value
on the day immediately following the Annual Meeting (provided
such directors are re-elected). Furthermore, under the 1993
Stock Option Plan, a new non-employee director would receive an
option to purchase 15,000 (rather than 800) shares of Common
Stock on the day after his or her initial appointment as a
director of the Company.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934
requires the Company's directors and executive officers, and
persons who own more than ten percent of a registered class of
the Company's equity securities, i.e., the Company's Common Stock
("10% Shareholders"), to file reports of ownership and reports of
changes in ownership of such securities with the Securities and
Exchange Commission (the "SEC"). Executive officers, directors
and 10% Shareholders are required by SEC regulation to furnish
the Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received
by it and written representations from certain reporting persons
that no other reports were required for those persons, the
Company believes that during the period from July 1, 1996, to
June 29, 1997, all of its officers, directors and 10%
Shareholders complied with all applicable Section 16(a) filing
requirements.
SHAREHOLDER PROPOSALS
1998 ANNUAL MEETING
A shareholder who intends to present a proposal, which
relates to a proper subject for shareholder action, at the 1998
Annual Meeting of Shareholders and who wishes such proposal to be
considered for inclusion in the Company's proxy materials for
such meeting must cause such proposal to be received, in proper
form, at the Company's principal executive offices no later than
June 20, 1998. Any such proposals, as well as any questions
relating thereto, should be directed to the Company to the
attention of its President.
METHODS AND COST OF SOLICITING PROXIES
The Proxy enclosed with this Proxy Statement is solicited by
and on behalf of the Board of Directors of the Company. In
addition to use of the mail, Proxies may be solicited by personal
interview and telephone. Directors, executive officers or
employees of the Company who may solicit Proxies by such methods
are not paid additional remuneration therefor. The cost of
solicitation, including the cost of preparation, printing and
mailing, is being paid by the Company.
BY ORDER OF THE BOARD OF DIRECTORS:
Thomas J. Grace, Secretary
Dated: October 27, 1997
CUCOS INC.
PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Thomas J. Grace and Vincent J.
Liuzza, Jr., and each of them, as proxies for the undersigned,
with full power of substitution to vote all of the undersigned's
shares of common stock, no par value, of Cucos Inc. at the Annual
Meeting of Shareholders on December 11, 1997 (and any
adjournments thereof), as instructed herein with respect to the
matters herein set forth. The undersigned acknowledges receipt
of the Company's Notice of Meeting and Proxy Statement October
27, 1997.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
- -----------------------------------------------------------------
-------------
MANAGEMENT RECOMMENDS A VOTE "FOR" THE FOLLOWING PROPOSALS
1. Directors Election of Frank J. Ferrara, Thomas J. Grace,
Elie V. Khoury, David M. Liuzza,
Vincent J. Liuzza, Jr., Sidney C.
Pulitzer and Miguel Uria
FOR all WITHHOLD INSTRUCTIONS: To withhold authority
nominees AUTHORITY to vote for any individual nominee,
listed (to vote write the nominee's name here:
(except as for all
indicated nominees _____________________________________
to the listed) _______
contrary)
2. Approving and ratifying the selection of
Ernst & Young LLP as the Company's
independent public accountants for the
fiscal year ending June 28, 1998.
FOR AGAINST ABSTAIN
/ / / / / /
This Proxy when properly
executed will be voted as
directed upon the matters
set forth on the reverse.
If no direction is
indicated, this Proxy will
be voted "FOR" the nominees
for election to the Board
of director's named on the
reverse and "FOR" proposal
2. This Proxy confers
discretionary voting
authority as to al other
matters which may properly
come before the Annual
Meeting.
DATE:
________________________,1997
___________________________
___________________________
SIGNATURE(S)
PLEASE MARK, SIGN, DATE AND RETURN OUR Executors, Administrators,
PROXY IN THE ACCOMPANYING ENVELOPE Trustees, etc. should give
WHICH REQUIRES NO POSTAGE IF MAILED IN full title.
THE UNITED STATES.
- -----------------------------------------------------------------
-------------
-FOLD AND DETACH HERE-
OUTSIDE COVER
CUCOS INC. 1997 ANNUAL REPORT
PHOTO
Restaurant Locations
Company Restaurants Franchised Restaurants
Alabama Arkansas
Birmingham (2) Fort Smith
Montgomery
Florida
Florida Boynton Beach
Pensacola Tallahassee
Louisiana Louisiana
Alexandria Metairie
Gretna
Hammond Mississippi
Houma Hattiesburg
Metairie Jackson
Monroe
New Orleans Iowa
Ruston Clive
Slidell
Mississippi
Biloxi
Pascagoula
Meridian *
* Opened on October 15, 1997
(LOGO)
Cucos Inc. is a full-service,
casual dining restaurant chain
offering moderately priced
Mexican appetizers, entrees
and complementing beverages.
Cucos was founded in 1981 and
currently operates fifteen
company-owned and seven
franchised restaurants located
in the Southeastern United
States.
Table of Contents
Restaurants Locations Inside Front Cover
Letter to Shareholders 2
Management's Discussion and Analysis 4
Balance Sheet 6
Statements of Operations 7
Statements of Cash Flows 8
Statements of Shareholders' Equity 9
Notes to Financial Statements 9
Report of Independent Auditors 15
Stock Data (unaudited) 15
Directors & Officers 16
Corporate Information Inside Back Cover
Letter to Shareholders
Dear Fellow Shareholder:
This year the Company continued its implementation of
strategies we introduced two years ago. This included
completing our remodel program, as well as implementing more
competitive pricing. Also, we continued our program to
reduce operations and administrative costs. These programs
continue to work, as our operating income before charges
related to closed units and asset impairment was $467,000 in
1997 compared to $430,000 in 1996.
Our sales per comparable restaurant increased 1% with
guest counts remaining flat. These results are particularly
notable since last year's guest counts were up 10%. The
Fiscal 1997 results compare to an industry background of a
decline of 3% in guest counts for the casual restaurant
industry and a 6% drop in the Mexican segment. This is the
third consecutive year that our guest count change has
exceeded industry averages.
Unit economics remained solid. Average restaurant
sales increased to an all-time high of $1,394,000 with
restaurant-level profit margins remaining stable at 13.7%.
This was achieved without a price increase! The sales-
related programs which contributed to this result included
the roll-out of an aggressive in-restaurant suggestive
selling program and the addition of selected seasonal menu
entrees which were healthy, provided more variety, thus
giving the guests more value for their money.
The restaurant-level cost containment programs included
improved employee and unit management retention. Employee
turnover was reduced by 15% and management turnover dropped
14%. At the end of Fiscal 1997 and in the First Quarter of
Fiscal 1998, we rolled out an interactive state-of-the-art
training program. This program uses CD type technology
enabling us to improve both employee knowledge and training
consistency thus lowering future costs.
On the corporate level, operations and corporate
expenses decreased by $200,000, which represents a decrease
of $500,000 in the last two years, a 16% reduction. We
continue to closely monitor these expenses to insure that
the economics achieved in the past two years are not lost.
During the Fourth Quarter of 1997, the Company incurred
a loss of $460,000 related to closed units and asset
impairment. This loss reflects our decision to dispose of
equipment on hand that had been used in closed restaurants
and to reflect a reduction in amounts expected to be
recovered from subleases.
With our strong unit economics and effective corporate
cost controls, we believe that the Company is strategically
positioned to resume modest growth. In October we opened a
new restaurant in Meridian, Mississippi -- our first new
company-owned restaurant in nearly two years. We are
pleased with the initial sales results. Additionally, one
franchised restaurant opened in January 1997. In addition
to Meridian, we anticipate opening at least one more company-
owned restaurant in Fiscal 1998. We have secured financing
for the costs of these new restaurants.
Our Annual Meeting will again be held at Cucos Border
Cafe at 3000 Veterans Boulevard in Metairie, Louisiana, on
December 11, 1997, at 3:00 p.m. Thank you for your
continued support and we look forward to seeing you.
Affixed below is a complimentary card good for two entrees
at any of our restaurants.
Sincerely,
Vincent J. Liuzza, Jr. Elie V. Khoury
Chairman, Chief Executive Officer President, Chief Operating Officer
Management's Discussion and Analysis
of Results of Operations and Financial Condition
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 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 has just opened a restaurant in Meridian,
Mississippi, and expect the final cost to be approximately $725,000.
It is anticipated that this restaurant will be financed with a
combination of lessor allowances, leases, long-term debt and cash.
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.
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 - Cucos Inc.
<TABLE>
<CAPTION>
Additional Retained
Paid-In 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 Loss 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 Loss 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 CompanyOs 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 CompanyOs 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:
Operating Sublease Net Capital
Lease Leases
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
Rent expense for real estate on all the CompanyOs 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
CompanyOs 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 CompanyOs Common Stock at a rate of one right for each outstanding
share of the CompanyOs 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 CompanyOs 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 CompanyOs
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
Cucos Inc. - Stock Data
The CompanyOs 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.
Board of Directors Officers
Vincent J. Liuzza, Jr. Vincent J. Liuzza, Jr.
Founder, Chairman of the Board since Founder, Chairman of the
1981. Board of Cucos Inc. since
Committees: Executive, Audit, 1981. Chairman and other
Compensation, Stock Option Offices-L.B.G. Inc.,
Chairman-Executive (formerly Sizzler Family
Steakhouses of Southern
Frank J. Ferrara Louisiana, Inc.) since 1969.
Director since 1996. Managing Partner
- - Thomas J. Grace
Ferrara & Ferrara since 1982. Secretary since 1983 and
Committees: Stock Option, Audit, General Counsel since 1992.
Compensation
Chairman-Compensation. Elie V. Khoury
President since July 1996.
Elie V. Khoury Vice President-Operations
President since July 1996. (1990-1996)
Vice President-Operations (1990-1996) Executive Director of
Executive Director of Operations (1989- Operations (1989-1990).
1990). District Supervisor (1985- District Supervisor (1985-
1989). 1989).
Thomas J. Grace Glenda T. Liuzza
Founder and Secretary since 1983. Founder, Vice President
General Counsel since 1992. Committee: Concept Development since
Executive. 1985. Director of Marketing
(1983-1985).
David M. Liuzza
Founder and Director since 1995.
President and other offices of L.B.G., Consultants to the Board
Inc., formerly Sizzler Family
Steakhouses of Southern Louisiana, Richard E. Butler
Inc. since 1969. President-LaMexiCo, Consultant since 1994
L.L.C., a franchisee of the Company Formerly Executive Vice-
since 1994. Committee: Executive President - El Torito
Mexican Restaurants
Sidney C. Pulitzer
Director since 1983. Chairman-Wemco Kenneth F. Reimer
Inc., a manufacturer of menOs neckwear Consultant since 1994
and sportswear since 1985. Committees: Formerly President and CEO -
Compensation, Stock Option and Audit Roma Corporation, operator
Chairman-Audit. of Tony RomaOs, A Place for
Ribs.
Miguel Uria
Director since 1983. President-Oro
Financial, a registered broker/dealer
since 1988. Prior to 1988, Mr. Uria
served as First Vice President of
Howard, Weil, Labouisse, Friederichs
Incorporated, an investment banking
firm. Committees: Compensation and
Stock Option
Chairman-Stock Option
Corporate Information
Transfer Agent
ChaseMellon Shareholders Services, L.L.C.
Ridgefield Park, New Jersey
Securities Counsel
Drinker Biddle & Reath, LLP
Philadelphia, Pennsylvania
Independent Auditors
Ernst & Young LLP
New Orleans, Louisiana
Corporate Office
110 Veterans Blvd., Suite 222
Metairie, Louisiana 70005
504-835-0306
NASDAQ Symbol: CUCO
Annual Meeting
The annual meeting of shareholders will be held at Cucos Border
Cafe, 3000 Veterans Boulevard, Metairie, Louisiana, at 3:00 p.m.
on Thursday, December 11, 1997.
Form 10-KSB
A copy of Form 10-KSB, the CorporationOs annual report to the
Securities and Exchange Commission, can be obtained without
charge by writing or faxing your request to:
Cucos Inc.
Attn: Investor Relations
110 Veterans Blvd., Suite 222
Metairie, Louisiana 70005
Fax No. 1-504-836-3194
Form 10-QSB
A copy of Form 10-QSB, the CompanyOs quarterly report to the
Securities and Exchange Commission, can be obtained without
charge by faxing your request to:
Cucos Inc.
Attn. Investor Relations
Fax No. (504) 836-3194
