SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
[x] Quarterly Report under Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the quarterly period ended October 19, 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 December 1,
1997.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [ X ]
Part I--Financial Information
ITEM I. FINANCIAL STATEMENTS
CUCOS INC.
BALANCE SHEETS
Oct. 19, 1997
UNAUDITED
Assets
Current Assets
Cash and Cash Equivalents $577,000
Receivables:
Trade 442,000
Due from Affiliates 174,000
Less Allowance for Doubtful Accounts 138,000
478,000
Inventories 255,000
Prepaid Expenses, Deferred Taxes and Other Current Assets 593,000
TOTAL CURRENT ASSETS 1,903,000
Deferred Taxes and Noncurrent Assets 305,000
Property, Equipment and Other
Land 327,000
Property and Equipment 3,671,000
Building and Leasehold Improvements 5,430,000
Reacquired Franchise Rights 529,000
9,957,000
Less Accumulated Depreciation and Amortization 4,178,000
5,779,000
Investment in LaMexiCo, LLC 245,000
Assets Held for Resale 77,000
Deferred Costs Less Accumulated Amortization 233,000
TOTAL ASSETS $8,542,000
Liabilities and Shareholders' Equity
Current Liabilities
Short-Term Debt Payable to Banks $ -
Trade Accounts Payable 1,823,000
Accrued Expenses and Other 483,000
Accrued Payroll 219,000
Current Portion of Long-Term Debt 413,000
TOTAL CURRENT LIABILITIES 2,938,000
Long-Term Debt, Less Current Portion 2,975,000
Convertible Debentures - Non-Interest Bearing 414,000
Deferred Revenue and Other 246,000
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) (3,005,000)
TOTAL SHAREHOLDERS' EQUITY 1,969,000
Total Liabilities and Equity $8,542,000
See Notes to Financial Statements
Part I--Financial Information
[CAPTION]
<TABLE>
CUCOS INC.
STATEMENTS OF OPERATIONS
UNAUDITED
16 Weeks 16 Weeks
Ended Ended
Oct. 19, 1997 Oct. 20, 1996
Restaurant Operations
<S> <C> <C>
Sales of Food and Beverages $6,506,000 $6,649,000
Restaurant Expenses:
Cost of Sales 1,740,000 1,797,000
Restaurant Labor and Benefits 2,142,000 2,123,000
Other Operating Expenses 1,208,000 1,226,000
Occupancy Costs 675,000 676,000
Preopening Costs - 39,000
Total Restaurant Expenses 5,765,000 5,861,000
Income from Restaurant Operations 741,000 788,000
Royalties and Franchise Revenues, Net of Expenses
of $6,997 and $8,872 34,000 28,000
Commissary and Other Income 70,000 69,000
845,000 885,000
Operations Expenses 296,000 333,000
Corporate Expenses 400,000 411,000
Operating Income 149,000 141,000
Interest Expense 128,000 144,000
Income (Loss) Before Income Taxes 21,000 (3,000)
Income Taxes - -
Net Income (Loss) $21,000 ($3,000)
Weighted Average Shares of Common Shares and Common
Share Equivalents Outstanding 2,654,000 2,114,000
Net Income (Loss) Per Share $0.01 $0.00
See Notes to Financial Statements
</TABLE>
Part I--Financial Information
[CAPTION]
<TABLE>
CUCOS INC.
STATEMENTS OF CASH FLOWS
UNAUDITED
16 Weeks 16 Weeks
Ended Ended
Oct. 19, 1997 Oct. 20, 1996
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $551,000 $220,000
INVESTING ACTIVITIES
Purchases of Property and Equipment (361,000) (248,000)
Change in Deferred Costs (123,000) (26,000)
NET CASH USED IN INVESTING ACTIVITIES (484,000) (274,000)
FINANCING ACTIVITIES
Proceeds from Borrowings 344,000 73,000
Principal Payments on Borrowings (310,000) (299,000)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 34,000 (226,000)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 101,000 (280,000)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 476,000 781,000
CASH AND CASH EQUIVALENTS AT END OF PERIOD $577,000 $501,000
</TABLE>
See Notes to Financial Statements
CUCOS INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. The Company: Cucos Inc. (the "Company") owns and franchises
Mexican restaurants under the name "Cucos". At October 19,
1997, sixteen Company-owned restaurants and seven franchised
restaurants were in operation, one of which closed October
31, 1997. At the end of the Comparable Quarter, there were
fifteen company-owned and six 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 1998 will end on June 28, 1998, and will consist of
one sixteen-week quarter ending October 19, 1997, and three
twelve-week quarters ending January 11, 1998, and April 5,
1998, and June 28, 1998. Fiscal 1997 and fiscal 1998 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 29, 1997. In the
opinion of management, these financial statements contain
all normal recurring adjustments necessary to fairly present
the financial results for the sixteen weeks ended October
19, 1997. Operating results for the period shown are not
necessarily indicative of the operating results expected for
the full fiscal year ending June 28, 1998.
4. 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
antidilutive for the 16 week period ended October 20, 1996.
4. Certain reclassifications of previously reported amounts
have been made to conform to current classifications which
relate primarily to the allocation of convertible debenture
proceeds and the related imputed interest expense.
ITEM 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Net income for the sixteen weeks ended October 19, 1997 (the
"Current Quarter") increased to $21,000 compared to a net loss of
$3,000 in the sixteen weeks ended October 20, 1996 (the
"Comparable Quarter"). This was the result of a $48,000 decline
in operations and corporate expenses and a $16,000 decline in
interest expense which were partially offset by a decline in
income from restaurant operations of $47,000.
Sales of food and beverages declined for the Current Quarter to
$6,506,000 from $6,649,000 for the Comparable Quarter (a decrease
of 2.2%). This was the result of a decline in average weekly
guest counts in certain markets. Comparable restaurant sales
declined 2.8%.
Restaurant expenses declined to $5,765,000 in the Current Quarter
compared to $5,861,000 in the Comparable Quarter. This was the
result of an overall decline in restaurant expenses primarily due
to lower sales volumes and a reduction in advertising costs which
were partially offset by an increase in restaurant labor costs
resulting from the increase in the minimum wage. A brief summary
of the component restaurant expenses are:
Current Comparable
Description Quarter Quarter
Cost of Sales 26.74% 27.04%
Restaurant Labor and Benefits 32.93 31.92
Other Operating Expenses 18.56 18.44
Occupancy Costs 10.38 10.17
Preopening Costs - .58
Total Restaurant Expenses 88.61% 88.15%
Royalties and franchise revenues increased to $34,000 in the
Current Quarter compared to $28,000 in the Comparable Quarter.
This was due primarily to having an additional franchised
restaurant opened in the Current Quarter compared to the
Comparable Quarter.
Operations and corporate expenses declined slightly in the
Current Quarter compared to the Comparable Quarter. This is the
result of tight cost controls maintained in the Company.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased to $577,000 in the Current
Quarter compared to $501,000 in the Comparable Quarter. The
current ratio is .65 at the end of the Current Quarter compared
to .53 at the end of the Comparable Quarter. During the Current
Quarter the Company has funded the capital and preopening costs
of $400,000 to open a new restaurant in Meridian, Mississippi,
through operations and additional borrowings. This restaurant
opened October 15, 1997.
Long term debt decreased by $381,000 in the Current Quarter
compared to the Comparable Quarter. This was primarily due to
the payments on the debt being partially offset by increased
borrowings to fund purchases of restaurant equipment and
leasehold improvements.
On November 26, 1997, the Company entered into a new credit
facility of $3,590,000 with a commercial lending institution.
This new credit facility consists of a term loan to be repaid,
primarily, in monthly payments over 10 years and is secured by
the restaurant operating properties. The proceeds from this term
loan will be used to repay substantially all of the existing long-
term debt and short-term debt payable to banks. The amounts
included in the balance sheet of October 19, 1997, for short-term
debt payable to banks and long-term debt reflect the repayment
terms of the new term loan. In connection with this refinancing,
the Company will incur a charge to earnings in the Second Quarter
which is not expected to exceed $200,000 and is primarily related
to prepayment penalties associated with the existing debt.
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.
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.
None
ITEM 5. OTHER INFORMATION.
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a. Exhibits.
4-K - Pledge and Security Agreement,
dated October 7, 1997, between
Cucos Inc. and AMRESCO Commercial Lending
Corporation (with subordination agreement and
guaranty)
27 - Financial Data Schedule
b. Reports on Form 8-K.
None.
INDEX TO EXHIBITS
The following exhibits are filed with this Quarterly
Report or is incorporated herein by reference:
Exhibit Number Title
4-K* Pledge and Security Agreement, dated
October 7, 1997, between Cucos
Inc. and AMRESCO Commercial
Lending Corporation (with
subordination agreement and
guaranty)
27 Financial Data Schedule
* To be filed by amendment.
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)
Vincent J. Liuzza, Jr.
Date: December 3, 1997 By:/s/ Vincent J. Liuzza, Jr.
Chairman, Chief Executive Officer,
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-28-1998
<PERIOD-END> OCT-19-1997
<CASH> 577,000
<SECURITIES> 5,000
<RECEIVABLES> 616,000
<ALLOWANCES> 138,000
<INVENTORY> 255,000
<CURRENT-ASSETS> 1,903,000
<PP&E> 9,957,000
<DEPRECIATION> 4,178,000
<TOTAL-ASSETS> 8,542,000
<CURRENT-LIABILITIES> 2,938,000
<BONDS> 3,389,000
0
0
<COMMON> 4,746,000
<OTHER-SE> (2,777,000)
<TOTAL-LIABILITY-AND-EQUITY> 8,542,000
<SALES> 6,506,000
<TOTAL-REVENUES> 6,610,000
<CGS> 1,740,000
<TOTAL-COSTS> 5,765,000
<OTHER-EXPENSES> 654,000
<LOSS-PROVISION> 42,000
<INTEREST-EXPENSE> 128,000
<INCOME-PRETAX> 21,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 21,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,000
<EPS-PRIMARY> .01
<EPS-DILUTED> 0
</TABLE>
