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 April 6, 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 May 11,
1997.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [ X ]
Part I--Financial Information
ITEM I. FINANCIAL STATEMENTS
<TABLE>
CUCOS INC.
BALANCE SHEETS
<CAPTION>
April 6, 1997 June 30, 1996
UNAUDITED
<S>
Asets <C> <C>
Current Assets
Cash and Cash Equivalents $ 546,018 $ 781,090
Receivables:
Trade, Net 230,510 227,029
Due from affiliates 313,928 306,793
Notes receivable from franchisees 15,536 15,536
559,974 549,358
Inventories 248,757 244,589
Prepaids, deferred taxes and other current assets 481,119 348,834
TOTAL CURRENT ASSETS 1,835,868 1,923,871
Deferred Taxes and Noncurrent Receivables 341,395 322,508
Property, Equipment and Other
Land 327,000 327,000
Property and equipment 5,044,083 4,896,737
Building and leasehold improvements 5,429,296 5,183,624
Reacquired franchise rights 528,896 528,896
11,329,275 10,936,257
Less accumulated depreciation and amortization 5,305,720 4,561,795
6,023,555 6,374,462
Preopening cost less accumulated amortization - 96,519
Investment in LaMexiCo, L.L.C. 245,954 245,178
Deferred Cost, less accumulated amortization
103,610 82,102
$8,550,382 $9,044,640
Liabilities and Shareholders' Equity
Current Liabilities
Short-term debt payable to banks $150,000 $ 93,000
Trade accounts payable 1,555,002 1,477,670
Accrued expenses and other 521,102 544,119
Accrued payroll 198,838 200,606
Current portion of long-term debt 1,009,917 968,396
TOTAL CURRENT LIABILITIES 3,434,859 3,283,791
Long-Term Debt, less current portion 2,354,882 2,934,051
Convertible Debentures - Non-Interest Bearing 500,000 500,000
Deferred Revenue 42,560 62,500
Shareholders' Equity
Preferred Stock, no par value - 1,000,000 shares
authorized, none issued or outstanding
Common Stock, no par value - 20,000,000 shares
authorized, 2,113,747 shares issued and
outstanding at April 6, 1997, and June 30, 1996 4,745,585 4,745,585
Additional paid-in capital 67,849 67,849
Retained earnings (deficit) (2,595,353) (2,549,136)
TOTAL SHAREHOLDERS' EQUITY 2,218,081 2,264,298
$8,550,382 $9,044,640
</TABLE>
See Notes to Financial Statements
Part I--Financial Information
<TABLE>
CUCOS INC.
STATEMENTS OF OPERATIONS
UNAUDITED
<CAPTION>
12 Weeks 12 Weeks 40 Weeks 40 Weeks
Ended Ended Ended Ended
Apr. 6, 1997 Apr. 7, 1996 Apr. 6, 1997 Apr. 7, 1996
<S> <C> <C> <C> <C>
REVENUES:
Sales of Food and Beverages $4,854,949 $4,914,027 $15,954,708 $15,748,100
Franchise Fees and Royalties 71,368 25,263 131,564 126,130
Commissary, Rent and Other Income 131,355 65,681 409,686 239,769
TOTAL REVENUES 5,057,672 5,004,971 16,495,958 16,113,999
COST AND EXPENSES:
Cost of Sales 1,303,526 1,314,562 4,364,909 4,216,325
Restaurant Labor and Benefits 1,589,641 1,653,454 5,254,331 5,234,472
Other Operating Expenses 684,707 686,391 2,436,388 2,480,159
Occupancy Costs 505,963 495,263 1,684,568 1,614,784
Preopening Costs 28,955 - 96,519 -
TOTAL RESTAURANT EXPENSES 4,112,792 4,149,670 13,836,715 13,545,740
Operations and Franchise Expenses 438,849 417,866 1,232,719 1,136,194
Corporate Expenses 363,223 341,070 1,142,937 1,107,145
Interest Expense 96,460 92,527 329,802 312,018
Income (Loss) Before Income Taxes 46,348 3,838 (46,215) 12,902
Income Taxes
- - - -
NET INCOME (LOSS) $ 46,348 $ 3,838 $ (46,215) $ 12,902
Weighted Average Shares and Common Share
Equivalents Outstanding 2,641,730 2,641,730 2,641,730 2,641,730
INCOME (LOSS) PER SHARE $0.02 $.-- ($0.02) $.--
</TABLE>
See Notes to Financial Statements
Part I--Financial Information
<TABLE>
CUCOS INC.
STATEMENTS OF CASH FLOWS
UNAUDITED
<CAPTION>
40 Weeks 40 Weeks
Ended Ended
April 6, 1997 April 7, 1996
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES 663,046 826,809
INVESTING ACTIVITIES
Purchases of Property and Equipment (393,018) (810,071)
Proceeds From Sale of Assets - 3,600
Net Additions to Deferred Costs (24,452) (181,838)
NET CASH USED IN INVESTING ACTIVITIES (417,470) (988,309)
FINANCING ACTIVITIES
Proceeds from Borrowings 1,387,371 1,096,437
Principal Payments on Borrowings (1,868,019) (919,300)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (480,648) 177,137
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (235,072) 15,637
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 781,090 566,740
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 546,018 $ 582,377
</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 April 6,
1997, fifteen Company-owned restaurants and seven franchised
restaurants were in operation. At the end of the Comparable
Quarter, there were sixteen company-owned and four
franchised restaurants in operation.
2. Fiscal Year: The Company uses a 52/53 week year for
financial reporting purposes with the Company's fiscal year
ending on the Sunday closest to June 30 of each year.
Fiscal 1997 will end on June 29, 1997, and will consist of
one sixteen-week quarter ending October 20, 1996, and three
twelve-week quarters ending January 12, 1997, and April 6,
1997, and June 29, 1997. Fiscal 1996 and fiscal 1997 are
both 52 week years.
3. The accompanying unaudited financial statements have been
prepared in accordance with the rules and regulations of the
Securities and Exchange Commission. Certain information and
footnote disclosures normally included in the financial
statements have been omitted pursuant to such rules and
regulations. It is suggested that these financial
statements be read in conjunction with the Company's Annual
Report for the fiscal year ended June 30, 1996. In the
opinion of management, these financial statements contain
all normal recurring adjustments necessary to fairly present
the financial results for the forty weeks ended April 6,
1997. Operating results for the period shown are not
necessarily indicative of the operating results expected for
the full fiscal year ending June 29, 1997.
4. Certain reclassifications of previously reported amounts
have been made to conform to current classifications.
ITEM 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Revenues increased for the 12 weeks ended April 6, 1997 (the
"Current Quarter"), and for the 40 weeks ended April 6, 1997 (the
"Current Three Quarters"). Revenues increased 1.05% to
$5,057,672, from $5,004,971 for the twelve weeks ended April 7,
1996 (the "Comparable Quarter"). Revenues for the Current Three
Quarters increased 2.37% to $16,495,958 from $16,113,999 for the
40 weeks ended April 7, 1996 (the "Comparable Three Quarters").
Net Income was $46,348 ($.02 per share) in the Current Quarter
compared to Net Income of $3,838 ($.00 per share) in the
Comparable Quarter. Net Loss for the Current Three Quarters was
$46,215 ($.02 per share) compared to Net Income of $12,902 ($.00
per share) in the Comparable Three Quarters.
Sales of Food and Beverages for the Current Quarter decreased to
$4,854,949, down 1.20%, from $4,914,027 during the Comparable
Quarter. There were 15 company-owned restaurants open during the
Current Quarter compared to sixteen in the Comparable Quarter.
Restaurant level profits declined to $742,157 in the Current
Quarter from $764,357 in the Comparable Quarter, primarily due to
amortization of preopening expenses associated with a new company-
owned restaurant in Northern Louisiana.
Sales of Food and Beverages for the Current Three Quarters
increased 1.31% to $15,954,708 from $15,748,100 in the Comparable
Three Quarters. This increase is primarily due to increased
sales at a recently remodeled restaurant and sales from the new
company-owned restaurant, both in Northern Louisiana which were
partially offset by the reduction in the number of company-owned
restaurants. Future sales of food and beverage will be adversely
affected as a result of negative publicity concerning the
Company's Pensacola, Florida, restaurant. Subsequent to the end
of the Third Quarter, this restaurant was temporarily closed by
the Department of Business and Professional Regulation of the
State of Florida as a result of several code violations which the
Department claimed to have found during an inspection of the
restaurant. The Company took prompt action to correct the
claimed violations and the restaurant was reopened for business
within 24 hours. As a result of negative publicity in the local
area generated by this event, sales at this restaurant declined
and this will adversely affect the Company's sales and profits.
The Company is in the process of implementing a program to
generate customer traffic at the Pensacola restaurant in order to
rebuild sales to their prior levels. The Company does not
believe that this event will adversely effect the sales at its
other restaurants outside of the Pensacola market. Restaurant
level profits for the Current Three Quarters decreased 3.83% to
$2,117,993 compared to $2,202,360 in the Comparable Three
Quarters due to the preopening expenses noted above and higher
cost of sales.
Franchise Fees and Royalties increased to $71,368 from $25,263 in
the Comparable Quarter. There were seven franchised restaurants
in operation at the end of the Current Quarter compared to four
franchised restaurants in operation at the end of the Comparable
Quarter. This increase results from license and development fees
related to one franchised restaurant opening during the Current
Quarter compared to no new franchised restaurants opening during
the Comparable Quarter.
Franchise Fees and Royalties for the Current Three Quarters
increased to $131,564 from $126,130 in the Comparable Three
Quarters primarily due to the new franchised restaurant in Des
Moines, Iowa. License and Development fees were $25,000 and
$10,000 respectively in the Current Three Quarters compared to
$10,000 of Development Fees in the Comparable Three Quarters.
This increase was partially offset by the closing of two
franchised restaurants which were operating during the Comparable
Three Quarters.
Commissary, Rent and Other Income increased to $131,355 in the
Current Quarter from $65,681 in the Comparable Quarter primarily
due to increased rental income. Rental Income is derived from
five subleased properties in the Current Quarter compared to two
properties in the Comparable Quarter. Commissary, Rent, and
Other Income increased to $409,686 in the Current Three Quarters
compared to $239,769 in the Comparable Three Quarters for the
reasons noted above.
Total Restaurant Expenses decreased .89% to $4,112,792 in the
Current Quarter from $4,149,670 in the Comparable Quarter
primarily due to lower labor costs. A brief summary of the
various components of Restaurant Expenses as they relate to
Restaurant Sales for the Current Quarter versus the Comparable
Quarter follows:
Current Comparable
Description Quarter Quarter
Cost of Sales 26.85% 26.75%
Restaurant Labor and 32.74 33.65
Benefits
Other Operating Expenses 14.10 13.97
Occupancy Costs 10.42 10.08
Preopening Costs .60 .--
Total Restaurant Expenses 84.71% 84.45%
Cost of sales, as a percent of sales of food and beverages, was
virtually the same as the prior year. Restaurant Labor
decreased in the Current Quarter primarily due to higher costs
incurred in the Comparable Quarter related to opening a new
company-owned restaurant. Other operating expenses which include
utilities, advertising, etc. were higher than the prior year due
to higher television advertising. Occupancy costs increased in
both absolute terms and as a percent of sales primarily due to
additional depreciation and amortization expense for equipment
and leasehold improvements related to a recent remodeling. In
addition, preopening amortization expense was incurred for the
newest company-owned restaurant.
Total Restaurant Expenses increased 2.15% to $13,836,715 in the
Current Three Quarters from $13,545,740 in the Comparable Three
Quarters primarily due to preopening amortization expenses. A
brief summary of the various components of Restaurant Expenses as
they relate to Restaurant Sales for the Current Three Quarters
versus the Comparable Three Quarters follows:
Current Comparable
Description Three Three
Quarters Quarters
Cost of Sales 27.36% 26.77%
Restaurant Labor and 32.93 33.24
Benefits
Other Operating Expenses 15.27 15.75
Occupancy Costs 10.56 10.25
Preopening Costs .60 .--
Total Restaurant Expenses 86.72% 86.01%
Cost of sales increased primarily due to higher cost of sales in
the Current Three Quarters. Labor declined for the reason noted
above. Other Operating Expenses declined due to lower level of
advertising costs. Occupancy and Preopening Expenses increased
in the Current Three Quarters for the same reasons discussed
above.
Operations and Franchise Expenses for the Current Quarter
increased to $438,849 in the Current Quarter from $417,866
recorded in the Comparable Quarter. This increase is primarily
due to costs incurred to open the new franchised restaurant in
Iowa.
Operations and franchise expenses increased to $1,232,719 in the
Current Three Quarters from $1,136,194 for the Comparable Three
Quarters primarily due to costs incurred to open the new
franchised restaurant noted above. In addition, costs for a
company-owned restaurant subleased to a franchisee at the
beginning of the Current Three Quarters were incurred as
restaurant expenses in the Comparable Three Quarters.
Corporate Expenses for the Current Quarter increased by 6.5% to
$363,223 from $341,070 in the Comparable Quarter primarily due to
declining restaurant construction activity and increased
officers' salaries. Corporate Expenses for the Current Three
Quarters increased 3.23% to $1,142,937 from $1,107,145 in the
Comparable Three Quarters due to the same factors.
Interest Expense for the Current Quarter increased to $96,460
from $92,527 in the Comparable Quarter primarily due to a higher
effective interest rate on debt. Interest Expense for the
Current Three Quarters was $329,802 compared to $312,018 in the
Comparable Three Quarters for the same reason.
LIQUIDITY AND CAPITAL RESOURCES
At April 6, 1997, the Company had cash and cash equivalents of
$546,018 compared to $781,090 at the end of fiscal 1996 and
$582,377 at the end of the Comparable Quarter.
The current ratio was .53 at the end of the Current Quarter
compared to .59 at the end of fiscal 1996 and .61 at the end of
the Comparable Quarter.
The Company expects to complete the long term financing of
$160,000 of expenditures associated with the Alexandria
remodeling by year end.
Long-term Debt decreased to $2,354,882 at the end of the Current
Quarter compared to $2,934,051 at the end of the fiscal year and
decreased from $2,721,301 at the end of the Comparable Quarter.
The long-term debt/equity ratio decreased to 1.06 to 1.00 in the
Current Quarter from 1.30 to 1.00 at the end of the fiscal year.
This ratio was 1.20 to 1.00 at the end of the Comparable Quarter.
In order to provide funds to open new restaurants and to improve
short-term liquidity, the Company is considering opportunities to
refinance its long-term debt.
Since its inception in 1981, the Company's principal sources of
capital have been the funds provided by operations, funds from
offerings of common stock, and proceeds from long-term
borrowings. The Company's capital budget for normal recurring
equipment replacement and refurbishing is approximately $325,000,
annually.
To fund expansion and major remodels of its restaurants, the
Company will rely primarily on landlord financing and the
issuance of long-term debt in the form of long-term notes or
capital leases.
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.
27 - Financial Data Schedule
b. Reports on Form 8-K.
None.
INDEX TO EXHIBITS
The following exhibit is filed with this Quarterly
Report or is incorporated herein by reference:
Exhibit Number Title
27 Financial Data Schedule
CUCOS INC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
CUCOS INC.
(Registrant)
Vincent J. Liuzza, Jr.
Date: May 14, 1997 By:
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-29-1997
<PERIOD-END> APR-06-1997
<CASH> 546,018
<SECURITIES> 4,769
<RECEIVABLES> 706,914
<ALLOWANCES> 148,940
<INVENTORY> 248,757
<CURRENT-ASSETS> 1,835,868
<PP&E> 11,329,275
<DEPRECIATION> 5,305,720
<TOTAL-ASSETS> 8,550,382
<CURRENT-LIABILITIES> 3,434,859
<BONDS> 2,854,882
0
0
<COMMON> 4,745,584
<OTHER-SE> (2,595,352)
<TOTAL-LIABILITY-AND-EQUITY> 8,550,382
<SALES> 4,854,949
<TOTAL-REVENUES> 5,057,672
<CGS> 1,303,526
<TOTAL-COSTS> 4,112,792
<OTHER-EXPENSES> 776,500
<LOSS-PROVISION> 25,572
<INTEREST-EXPENSE> 96,940
<INCOME-PRETAX> 46,348
<INCOME-TAX> 0
<INCOME-CONTINUING> 46,348
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 46,348
<EPS-PRIMARY> $.02
<EPS-DILUTED> $.02
</TABLE>