October 19, 1998
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 1998 Annual Meeting of Shareholders. This
material will be mailed to the Company's shareholders on or about
October 20, 1998.
The Company's 1998 Annual Report to Shareholders, which is being
sent to shareholders with the definitive proxy materials, was
transmitted to the Commission on October 19, 1998, as Exhibit 13
to the Proxy Statement for its fiscal year ended June 28, 1998.
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 of the Board and President
(logo)
Cucos Inc.
110 Veterans Boulevard
Suite 222
Metairie, LA 70005
(504) 835-0306
October 5, 1998
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 November 19, 1998. The purposes of the Annual
Meeting are set forth in the accompanying Notice and Proxy
Statement.
The 1998 Annual Report to Shareholders, which is enclosed,
contains financial and other information concerning the Company
and its business for the fiscal year ended June 28, 1998. 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
President
(CUCOS LOGO)
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held November 19, 1998
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
November 19, 1998, for the purposes:
(1) To elect seven persons to the 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 27, 1999; 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 13, 1998, 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 5, 1998
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 November 19, 1998, 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 27, 1999.
These materials are being mailed to shareholders on or about
October 20, 1998. The cost of soliciting Proxies is being paid
by the Company. The Company's 1998 Annual Report to Shareholders
for the fiscal year ended June 28, 1998 ("Fiscal 1998")
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 2,651,730 shares were issued and
outstanding as of October 13, 1998, 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 September
25, 1998, 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) 474,950 shares 15.3%
Mr. & Mrs. Gerald E. Siefken (4) 224,000 shares 7.2%
Raymond D. Schoenbaum (5) 210,500 shares 6.8%
Robert J. Monroe (6) 191,730 shares 6.2%
Frank J. Ferrara (7) 401,188 shares 12.9%
All directors and officers as
a group (7 persons) (8) 1,161,962 shares 37.5%
(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 September 25, 1998.
(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 6.8%. 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) Address: P. O. Box 159, Walker, Louisiana 70785. Includes
25,000 shares subject to options exercisable by Mr. Ferrara.
(8) Includes 267,500 shares subject to options.
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 September 14, 1998, 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. 45 Dec. 1995 401,188 (4) 12.9%
Thomas J. Grace 57 Oct. 1983 56,003 (4) 1.8%
David M. Liuzza 51 Jan. 1995 70,071 (4) 2.3%
Vincent J. Liuzza, Jr. 57 Mar. 1981 477,100 (2) 15.3%
Sidney C. Pulitzer 64 Oct. 1983 31,000 (4) 1.0%
Miguel Uria 60 Dec. 1983 81,250 (3) 2.6%
V. M. Wheeler III 40 Oct. 19980 0 .0%
(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
(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) Includes shares subject to options exercisable as follows:
Frank J. Ferrara, Jr. - 15,000; Thomas J. Grace - 35,000;
David M. Liuzza - 15,000; Sidney C. Pulitzer - 23,400
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.
V. M. Wheeler III has been a Director since October 1, 1998.
Since 1995, Mr. Wheeler has been a partner of Kendrick & Wheeler,
L.L.P., a law firm located in New Orleans, Louisiana. From 1994
to 1997, he was Vice President of Cain Brothers & Company, Inc.,
an investment banking firm.
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
was General Counsel of the Company from 1992 to 1998. 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
Mediation Arbitration Professional Systems, Inc., formerly United
States Arbitration & Mediation, Gulf South, Inc., in Metairie,
Louisiana.
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., President of the Company, has
also been Chairman of the Board of Directors of the Company since
its inception in 1981. 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 had 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 until it was sold in December, 1997. 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 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 1998, the Board of Directors met nine times;
the Executive Committee met one time; the Compensation Committee
did not meet; 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, Jr., the Chairman of the Board of Directors of the
Company, serves as the President of the Company, and Thomas J.
Grace, a director of the Company, serves as Secretary.
Information concerning Messrs. Liuzza, Jr. 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 56 Vice President- June 1985
Concept Development
Daniel L. Earles 51 Executive Vice President-Operations June 1998
Elias Daher 39 Regional Vice President-Operations Sept. 1998
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.
Mr. Earles joined the Company as Executive Vice President-
Operations on June 15, 1998.
Mr. Daher was promoted to Regional Vice President of
Operations on September 7, 1998, from Senior Operations
Supervisor, and has been with the Company since January, 1984.
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 1998. 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 27, 1999. 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 28, 1998, L.B.G. owed the Company $93,000 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 1998 was $258,000 on July 27,
1997. The remaining balance of $81,000 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 31% 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 25.3% of
LaMexiCo. Mr. Thomas J. Grace (a director and the Secretary of
the Company), Mrs. Vincent J. Liuzza, Sr. (a part owner of
L.B.G.), Mr. Miguel Uria (a director of the Company), and certain
unaffiliated investors own the balance of LaMexiCo. The Company
received $58,000 in royalties and $77,000 in management fee
revenue from LaMexiCo during Fiscal 1998. At June 28, 1998,
LaMexiCo owed the Company $32,000, 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
$129,000 in rent to Mr. Pulitzer during Fiscal 1998.
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, President and
a director of the Company, is the sole stockholder of Brothers
Video. At June 28, 1998, the Company had a receivable from
Brothers Video of $34,000, which is paid current, for video poker
revenues earned. The Company's share of video poker revenues
earned was 3.1% of sales of food and beverages in fiscal year
1998.
Mr. Frank Ferrara and Mr. Elie Khoury, the former president,
and an independent third party own Mexican Restaurant Management,
Inc., which owns Restaurant Investments of Hattiesburg, Inc.,
which operates a franchised Cucos restaurant in Hattiesburg,
Mississippi. The franchise agreement requires the franchisee to
pay a minimum royalty of $3,000 per year and additional royalties
varying from 4 - 7% if net restaurant sales exceed $910,000 per
year. At June 28, 1998, Restaurant Investments of Hattiesburg,
Inc. owed the Company $2,100 in royalties and miscellaneous
receivables and paid royalties of $3,000 in fiscal 1998.
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. In February, 1998, the Notes were converted into
527,983 shares of the Company's Common Stock.
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 1998, Mr. Vincent J. Liuzza, Jr., President, made a
series of unsecured advances, due on demand, to the Company which
had a high balance of $57,000 and a balance outstanding of $0 at
June 28, 1998.
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 29, 1997, and June 28, 1998, for the President 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
28, 1998.
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards Payouts
Restricted
Name and Fiscal Other Stock Options/ LTIP All Other
Principal Position Year Salary (1) Bonus Compensation(2) Awards SARS Payouts Compensation(3)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Vincent J. Liuzza, 1998 $190,000 - - - - - $6,717
Jr., President 1997 $180,354 - - - - - $5,898
1996 $140,000 $645 - - - - $3,156
Elie V. Khoury, 1998 $153,686 - - - - - $2,128
President (4) 1997 $151,218 $7,781 - - - - $1,296
1996 $85,000 $50,881 - - - - $1,194
</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 - $617 - 1998, - $544 - 1997, $319 -
1996;; Mr. Khoury $863 - 1998, - $836 - 1997, $561 - 1996;
and (B) the dollar value of term life and disability
insurance premiums paid by the Company as follows: Mr.
Liuzza - $6,100 - 1998, - $5,354 - 1997, $2,838 - 1996,
$4,181 - 1995; ; Mr. Khoury -$1,265 - 1988, $460 - 1997,
$634 - 1996.
(4) Mr. Khoury's position as President terminated effective June
11, 1998.
Stock Option Grants During Fiscal 1998
The Company did not grant any stock options or stock
appreciation rights to Mr. Vincent J. Liuzza, Jr. during Fiscal
1998. The Company granted an option for 47,500 shares at $1.00
per share to Mr. Daniel L. Earles during Fiscal 1998, resulting
from his becoming Executive Vice President-Operations.
Aggregated Stock Option Exercises and Fiscal Year-Ended Option
Values
The following table sets forth information concerning stock
options which were exercisable during Fiscal 1998 by Messrs.
Vincent J. Liuzza, Jr., Elie V. Khoury, former president, and
Daniel L. Earles and the total number and value of unexercised
options held by each such person at June 28, 1998, separately
identifying unexercisable and exercisable options at June 28,
1998. No stock appreciation rights have ever been granted to any
of the named executive officers.
<TABLE>
<CAPTION>
Number of Shares
Underlying Value of
Unexercised Unexercised In-
Options at The-Money Options
Shares June 28, 1998 at June 29, 1997
Acquired on Value Exervisable/ Exercisable/
Name Exercise Realized Unexercisable Unexcercisable
<S> <C> <C> <C> <C>
Vincent J. Liuzza, Jr. 0 $0 60,000/0 $0/$0
Elie v. Khoury 0 $0 25,000/0 $0/$0
Daniel L. Earles 0 $0 47,500/0 $0/$0
</TABLE>
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 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. Bassed 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 June 30, 1997, to June 28, 1998, 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 1999 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, 1999.
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 Prox 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 5, 1998
REVOCABLE PROXY
CUCOS INC.
The undersigned hereby appoints Thomas MANAGEMENT RECOMMENDS A VOTE
J. Grace and Vincent J. Liuzza, Jr., "FOR" THE FOLLOWING
and each of them, as proxies for the PROPOSALS.
undersigned, with full power of
substition to vote all of the 1. Election of Directors:
undersigned's shares of common stock, For Withhold For All Except
no par value, of Cucos Inc. at the
Annual Meeting of Shareholders on Frank J. Ferrara, Thomas J.
November 19, 1998 (and any Grace, David M. Liuzza,
adjournments thereof), as instructed Vincent J. Liuzza, Jr., Sidney
herein with respect to the matters C. Pulitzer, Miguel Uria and
herein set forth. The undersigned V. M. Wheeler III
acknowledges receipt of the Company's
Notice of Meeting and Proxy statement INSTRUCTIONS: To withhold
dated October 5, 1998. authority for any individual
nominee, write the nominee's
name here.
2. Approving and ratifying the
selection of Ernst & Young,
LLP as the Company's
independent public
accountants for the fiscal
year ending June 27, 1999.
For Withhold Abstain
THIS PROXY WILL BE VOTED AS
DIRECTED, BUT IF NO
INSTRUCTIONS ARE SPECIFIED,
THIS PROXY WILL BE VOTED
Please be sure to sign and date FOR THE NOMINEES AND THE
this Proxy in the box below. PROPOSAL STATED. IF ANY
PROXY WILL BE VOTED BY
Date THOSE NAMED IN THIS PROXY
IN THEIR BEST JUDGMENT,
PRESENTLY, THE MANAGEMENT
Stockholder sign above----Co-holder KNOWS OF NO OTHER BUSINESS
(if any) sign above TO BE PRESENTED AT THE
MEETING.
Detach above card, sign, date and mail in postage paid envelope provided.
CUCOS INC
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
(OUTSIDE COVER)
CUCOS' LOGO (centered)
CUCOS INC. 1998 ANNUAL REPORT
Restaurant Locations
Company Restaurants Franchised Restaurants
Alabama Arkansas
Birmingham (2) Fort Smith
Montgomery
Florida
Louisiana Boynton Beach
Alexandria
Gretna Louisiana
Hammond Metairie
Houma
Metairie Mississippi
Monroe Hattiesburg
New Orleans
Ruston Iowa
Slidell Clive
Mississippi
Biloxi
Pascagoula
Meridian
(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 five
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 7
Statements of Operations 8
Statements of Cash Flows 9
Statements of Shareholders' Equity 10
Notes to Financial Statements 10
Report of Independent Auditors 16
Stock Data (unaudited) 16
Directors & Officers, Corporate Information Inside Back Cover
Letter to Shareholders
Dear Fellow Shareholder:
This was a most disappointing year. It started with high
expectations, but as the year progressed, we saw continuing declines
in average guest counts throughout our system. Some of the declines
could be blamed on increased competition in our smaller markets,
however, it became apparent that there was more of a problem than
increased competition.
Income from restaurant operations was down $659,000 (23.8%), and
we experienced an operating loss for the first time in a number of
years. Additionally, we had to increase our reserves related to
closed units by $178,000 and write-off a deferred income tax asset of
$107,000. However, on a positive note, last November we were able to
commence a new financing package to restructure the Company's debt so
as to improve our cash flow, although this involved penalties of
$162,000 to pay off the previously existing debt.
After the refinancing was completed in November, 1997, and the
year continued to unfold, the continuing decline in restaurant
operations brought into sharp focus that something was broken and
needed to be fixed. We undertook a critical assessment of restaurant
operations. I decided that we had lost our focus on customer
satisfaction by an over-emphasis on reducing costs. It was time for a
change -- a time to renew the spirit that made our restaurants a fun,
festive place to get a quality meal. We had to increase the level of
customer satisfaction, and to do that, we had to have a change in
restaurant management philosophy and practice. I decided that we
needed to restructure restaurant management and supervision, and this
required the recruitment of a new head of restaurant operations. We
are very fortunate to have been able to bring in Dan Earles to be
Executive Vice President of Operations. Dan has many years of
restaurant experience and was deeply involved in the growth and
success of Ruth's Chris Steak Houses, the nation's pre-eminent upscale
steak house chain. He brings an attitude and history of commitment to
customer satisfaction.
We subsequently decided upon several new programs to improve our
guests' experience. To enable our managers to have more time to
personally devote to the customer, we have added additional staff in
the restaurants. We also increased the managers' responsibility by
giving them more authority to deal with the customer and to support
our employees in these efforts. We initiated several programs to
freshen the look of our restaurants: we changed the menu design and
tablecloths, accelerated maintenance programs, and instituted new
uniforms for the staff. A new advertising agency has been hired and
new advertising material produced.
While we believe that these programs are vital to our long term
success, they will cost approximately $500,000 and will result in
continued losses over the near term. Therefore, to help offset these
costs we implemented a 3% price increase -- our first in 4 years.
Even with this increase, we believe that our prices are very
competitive. We also increased our emphasis on a seasonal menu, which
will change periodically. These items will carry a slight premium
price, and the continued change should provide a fresh look to the
menu and additional options for our guests.
These programs are very ambitious and there are no guarantees of
success. But we strongly believe that this renewed emphasis on being
the "Best Mex" restaurants with a festive atmosphere is essential to
our long term success. This return to our roots should significantly
improve restaurant operating results.
Last year saw the greatest consolidation in the history of the
casual segment of our industry. The large equity offerings of recent
years with the ensuing accelerated growth of new units has created
over-capacity in our segment. This has also driven many national
chains into our smaller-market niche, over-saturating those areas.
The flip side of this peril may present opportunities for Cucos.
Many believe that last year's consolidation of smaller regional
companies will accelerate. In fiscal year 1998, we were approached by
a number of parties seeking to combine with a small public company
and/or to utilize it as a "platform" for stock acquisitions and/or
mergers with other smaller regional restaurant companies.
We need more critical mass to improve the probability of success
in the current and future environment. Smallness and marginal
profitability have made us more vulnerable to adversities - either
external or of our own making. We have so far been unable to grow our
way out of this size vulnerability.
Management's focus must remain primarily on achieving
profitability this fiscal year. As the year progresses, however, we
will dedicate appropriate attention and resources to
acquisition/merger efforts to improve our Company's competitiveness
and value in the marketplace.
I am pleased to announce that V. M. Wheeler III has agreed to
serve as a member of our Board of Directors. In addition to his
current law practice, he brings ten years experience in the investment
banking field including positions of Vice President of Corporate
Finance with firms such as Shearson Lehman Hutton and Kidder Peabody.
He fills the board seat vacated by Mr. Elie Khoury, our former
President and Chief Operating Officer.
I would like to thank you for your continuing support. While I
was very disappointed with this year, I am excited about the programs
we now have in place and their possible impact on our future. I
believe strongly that we will see significant improvements in our
guest counts, customer satisfaction, and restaurant operations in the
upcoming year.
Sincerely,
Vincent J. Liuzza, Jr.
Chairman of the Board and President
Management's Discussion and Analysis
of Results of Operations and Financial Condition
1998 Compared to 1997
Sales of Food and Beverages declined $302,000 (1.4%) to
$21,162,000 from $21,464,000. This decrease was due to a 4.7% decline
in existing restaurant sales resulting from a 6.0% decline in weekly
guest counts at comparable restaurants. This decrease in sales
occurred primarily in the Registrant's smaller markets and was
partially offset by the opening of the Registrant's restaurant in
Meridian, Mississippi.
Commissary and Other Income increased $33,000 to $173,000 from
$140,000, primarily resulting from the sale of a restaurant.
Cost of Sales decreased $146,000 (2.9%) to $5,591,000 from
$5,737,000. This decrease is primarily due to the decline in sales of
food and beverages discussed above.
Restaurant Labor and Benefits increased $186,000 (2.7%) to
$7,091,000 from $6,905,000. This increase resulted from the increase
in minimum wage in September, 1997, and the opening of the restaurant
in Meridian, offset in part by a 2.0% decline in restaurant sales and
benefit costs at existing restaurants.
Other Operating Expenses increased $203,000 (5.0%) to $3,954,000
from $3,751,000. This increase primarily resulted from the opening of
the restaurant in Meridian.
Occupancy Costs increased $124,000 (5.6%) to $2,324,000 from
$2,200,000. This increase was primarily due to the opening of the
restaurant in Meridian.
Royalties and Franchise Revenues increased $43,000 due to the
opening of a franchised restaurant in Des Moines, Iowa, and a decline
in expenses as no new franchise restaurants were opened in 1998.
Operations Expenses decreased $88,000 (8.3%) to $968,000 from
$1,056,000, which primarily related to a decrease in costs related to
subleased restaurant facilities which was partially offset by an
increase in costs related to hiring new employees.
Corporate Expenses increased $72,000 (4.9%) to $1,533,000 from
$1,461,000. This was primarily the result of an increase in workmen's
compensation costs and the write-off of deferred site costs related to
locations no longer being considered as possible restaurant locations.
Due to revisions in its estimates, the Company provided an additional
$178,000 for charges related to closed restaurants.
Interest Expense increased $64,000 to $517,000 from $453,000.
This increase was due to higher average borrowings and amortization of
debt issuance costs offset in part by a small decline in the average
overall borrowing interest rate.
Because of lower than expected revenues and earnings, management
increased the valuation allowance for deferred income tax assets
resulting in income tax expense of $107,000.
On October 26, 1997, the Company entered into a new credit
facility with a commercial lending institution. In connection with
this refinancing, the Company incurred prepayment penalties of
$162,000 which have been reported as an extraordinary loss. (See
Liquidity and Capital Resources.)
Liquidity and Capital Resources
In 1998 and 1997, despite net losses of $1,064,000 and $446,000,
the Company's operating activities provided cash flow of $158,000 and
$881,000, respectively. Management has implemented certain actions,
which are described on page 11, in an effort to improve operating
results and cash flows. Management believes it will continue to
generate cash flow from operating activities sufficient to allow it to
operate and to meet its obligations. Management also believes there
are alternate sources of financing available to allow the Company to
meet short-term financing needs which may arise. However, there can
be no assurance that management's plans will be successful or that
alternate sources will be available.
Working capital needs have been and will continue to be financed
from operations and short-term borrowings. Although none is planned,
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 decreased $723,000 from 1997
which primarily resulted from a decline in income from restaurant
operations. Net cash provided by investing activities was $195,000 in
1998 compared to cash used of $525,000 in 1997, or an improvement of
$445,000 and primarily included the purchase of property and
equipment, offset by the sale of the Pensacola property. Net cash
used in financing activities was $150,000 in 1998 and included
principal payments on borrowings, debt issuance costs and debt
restructuring penalties which were substantially offset by additional
long-term borrowings.
On October 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 has been used
to repay substantially all of the existing long-term debt and short-
term debt payable to banks. In connection with this refinancing, the
Company incurred a charge to earnings in the Second Quarter of
$162,000 and is related to repayment penalties associated with the
existing debt. This loan is part of a pool of loans financed by the
lender. A provision of this loan requires the Company to pay
additional interest if certain conditions of the loan pool are not
met. This provision would require the Company to pay additional
interest each month if the loan pool conditions are not met. These
monthly payments, if required, may increase the interest costs by a
maximum of $400,000 over the life of the loan. At year end, the
Company had paid no additional interest.
The Company's line of credit provides $100,000 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 $100,000 outstanding at June 28, 1998.
In January 1998, the Board of Directors amended the terms of the
Company's debentures permitting immediate conversion. On February 19,
1998, the debenture holders exercised their conversion rights and
converted the debentures into 527,983 shares of common stock.
Impact of Inflation and Changing Prices
Inflation in food, labor, construction costs and interest rates
can affect the Company's operations. Many of the Company's employees
are paid hourly rates related to the minimum wage.
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.
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.
Impact of Year 2000
Some of the Company's older computer programs were written using
two digits rather than four to define the applicable year. As a
result, those computer programs have time-sensitive software that
recognize a date using "00" as the year 1900 rather than the year
2000. This could cause a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary
inability to process transactions, send invoices, or engage in similar
normal business activities.
The Company has completed an assessment and will have to modify
or replace hardware and software so that its computer systems will
function properly with respect to dates in the year 2000 and
thereafter. In 1998, the Company replaced substantially all of its
restaurant point of sales systems. The new systems do not have any
year 2000 issues. The total Year 2000 project cost is estimated at
approximately $50,000 for the purchase of new software and hardware
that will be capitalized.
The project is estimated to be completed not later than December
31, 1999, which is prior to any anticipated impact on its operating
systems. The Company believes that with modifications to existing
software and conversions to new software, the Year 2000 Issue will not
pose significant operational problems for its computer systems.
However, if such modifications and conversions are not made, or are
not completed timely, the Year 2000 Issue could have a material impact
on the operations of the Company.
The costs of the project and the date on which the Company
believes it will complete the Year 2000 modifications are based on
management's best estimates, which were derived utilizing numerous
assumptions of future events, including the continued availability of
certain resources and other factors. However, there can be no
guarantee that these estimates will be achieved and actual results
could differ materially from those anticipated. Specific factors that
might cause such material differences include, but are not limited to,
the availability and cost of personnel trained in this area and the
availability of software and hardware.
The Company has initiated communications with all of its
significant suppliers to determine the extent to which the Company's
interface systems are vulnerable to those third parties' failure to
remediate their own Year 2000 Issues. There is no guarantee that the
systems of other companies on which the Company's systems rely will be
timely converted and would not have an adverse effect on the Company's
systems.
Balance Sheet - Cucos Inc.
June 28, 1998
Assets
Current Assets
Cash and Cash Equivalents $679,000
Receivables:
Trade 590,000
Due from Affiliates 166,000
Less Allowance for Doubtful Accounts 257,000
499,000
Inventories 233,000
Prepaid Expenses 260,000
Deferred Taxes and Other Current Assets 5,000
TOTAL CURRENT ASSETS 1,676,000
Deferred Taxes and Noncurrent Assets 264,000
Property, Equipment and Other
Equipment 3,774,000
Leasehold Improvements 5,203,000
Reacquired Franchise Rights 529,000
9,506,000
Less Accumulated Depreciation and Amortization 4,412,000
5,094,000
Investment in LaMexiCo, L.L.C. 242,000
Deferred Costs, Less Accumulated Amortization of $130,000 397,000
$7,673,000
Liabilities and Shareholders' Equity
Current Liabilities
Short-Term Debt Payable to Banks $100,000
Trade Accounts Payable 1,412,000
Accrued Expenses and Other 572,000
Accrued Payroll 215,000
Current Portion of Long-Term Debt 387,000
TOTAL CURRENT LIABILITIES 2,686,000
Long-Term Debt, Less Current Portion 3,452,000
Deferred Revenue and Other 262,000
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, 2,651,730 Shares Issued and Outstanding 5,253,000
Additional Paid-in Capital 111,000
Retained Earnings (Deficit) (4,090,000)
TOTAL SHAREHOLDERS' EQUITY 1,273,000
$7,673,000
See notes to financial statements.
<TABLE>
<CAPTION>
Statements of Operations - Cucos Inc.
Fiscal Year Ended
June 28, 1998 June 29, 1997
Restaurant Operations
<S> <C> <C>
Sales of Food and Beverages $21,162,000 $21,464,000
Restaurant Expenses:
Cost of Sales 5,591,000 5,737,000
Restaurant Labor and Benefits 7,091,000 6,905,000
Other Operating Expenses 3,954,000 3,751,000
Occupancy Costs 2,324,000 2,200,000
Preopening Costs 87,000 97,000
Total Restaurant Expenses 19,047,000 18,690,000
Income From Restaurant Operations 2,115,000 2,774,000
Royalties and Franchise Revenues, net of
expenses of $23,000 and $96,000 113,000 70,000
Commissary and Other Income 173,000 140,000
2,401,000 2,984,000
Operations Supervision Expenses 968,000 1,056,000
Corporate Expenses 1,533,000 1,461,000
Charges Related to Closed Units and Asset Impairment 178,000 460,000
Operating Income (Loss) (278,000) 7,000
Interest Expense 517,000 453,000
Loss Before Income Taxes and Extraordinary Item (795,000) (446,000)
Income Taxes 107,000 -
Loss Before Extraordinary Item (902,000) (446,000)
Extraordinary Item - Debt Restructuring Penalties (162,000) -
Net Loss $(1,064,000) $(446,000)
Weighted Average Number of Common Shares and Common
Share Equivalents Outstanding - Basic and Diluted 2,306,000 2,114,000
Net Loss Per Share Before Extraordinary Items - Basic ($0.39) ($0.21)
and Diluted
Extraordinary Item - Basic and Diluted $0.07 $ -
Net Loss Per Share - Basic and Diluted ($0.46) ($0.21)
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
Statements of Cash Flows - Cucos Inc.
Fiscal Year Ended
June 28, 1998 June 29, 1997
Operating Activities
<S> <C> <C>
Net Loss ($1,064,000) ($446,000)
Adjustments to Reconcile Net Loss to Net
Cash Provided by Operating Activities:
Deferred income Taxes 107,000 -
Debt Restructuring Penalties 162,000 -
Depreciation and Amortization 920,000 1,053,000
Decrease in Deferred Revenue and Other (209,000) (30,000)
Gain on Sale of Assets and Other (187,000) -
Asset Impairment and Rent Reserve 178,000 460,000
Accretion of Discount on Convertible Debenture 21,000 32,000
Equity in Earnings of Equity Investee,
Net of Distributions of $44,000 and $17,000 11,000 (8,000)
Change in Operating Assets and Liabilities:
Receivables 105,000 (54,000)
Inventories 21,000 (10,000)
Prepaids and Other 141,000 (119,000)
Deferred Costs (5,000) (16,000)
Accounts Payable (143,000) 78,000
Accrued Expenses 88,000 (61,000)
Accrued Payroll 12,000 2,000
NET CASH PROVIDED BY OPERATING ACTIVITIES 158,000 881,000
Investing Activities
Purchases of Property and Equipment (639,000) (525,000)
Proceeds From Sale of Assets 834,000 -
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 195,000 (525,000)
Financing Activities
Change in Short-Term Debt Payable to Banks (50,000) 57,000
Proceeds From Long-Term Borrowings 4,506,000 452,000
Debt Restructuring Penalties (162,000) -
Principal Payments on Borrowings (4,155,000) (1,170,000)
Debt Issuance Costs (289,000) -
NET CASH USED IN FINANCING ACTIVITIES (150,000) (661,000)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 203,000 (305,000)
Cash and Cash Equivalents at Beginning of Year 476,000 781,000
CASH AND CASH EQUIVALENTS AT END OF YEAR $679,000 $476,000
Non Cash Financing and Investing Activities
Equipment and Leasehold Improvements Financed by Capital Leases $400,000 $29,000
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
Statements of Shareholders' Equity - Cucos Inc.
Additional Retained
Paid-In Earnings
Common Stock Capital (Deficit) Total
<S> <C> <C> <C> <C>
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 4,746,0000 228,000 (3,027,000) 1,947,000
Net Loss for the year - (1,064,000) (1,064,000)
Conversion of Debenture 500,000 (117,000) - 383,000
Common Stock for Services 7,000 - - 7,000
Balance as of June 28, 1998 $5,2536,000 $111,000 ($4,091,000) $1,273,000
</TABLE>
Cucos Inc.
June 28, 1998
Notes to Financial Statements
Note A - Significant Accounting Policies
Fiscal Year: The Company uses a 52/53 week year for financial
reporting purposes with its fiscal year ending on the Sunday closest
to June 30. 1998 and 1997 were fifty-two week years.
Industry: The Company is a full-service casual dining restaurant
chain offering Mexican appetizers, entrees and complementing
beverages. At year end, the Company operated fifteen restaurants and
franchised five 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 costs represent site costs, debt
issuance costs and other, primarily trademarks. 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. Deferred
debt issuance costs are amortized over the life of the related debt.
Other deferred costs, primarily trademarks, are amortized on a
straight-line basis over 20 years.
Advertising Costs: Advertising costs are expensed as incurred.
Advertising expense was $982,000 and $954,000 in 1998 and 1997,
respectively.
Franchise Fees and Royalties: The Company sells exclusive rights
to develop Cucos restaurants in designated territories (Area
Development Agreements), as well as individual franchises for each
restaurant. The Area Development Agreements call for a nonrefundable
fee paid to the Company in exchange for territorial exclusivity.
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
related to 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 is recognized as income
when earned. Royalties and other receivables are often collaterized by
personal guarantees and sometimes by 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 ($26,000) 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, including reacquired
franchise rights, 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. Assets are evaluated for impairment
at the operating unit level. The Company considers a history of
operating losses to be its primary indicator of potential impairment.
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, "Accounting for Stock Issued to Employees".
Reclassifications: Certain balances in the prior fiscal year have
been reclassified to conform with the presentation in the current
fiscal year.
Note B - Debt
Note payable to insurance company - fixed interest rate -
9.5% - monthly payments of $4,000 $127,000
Notes payable to commercial lender - fixed interest rate -
11.6% - monthly payments of $55,000 3,340,000
Capital lease obligations - fixed interest rates of 12.11%
to 14.2% - monthly payments of $9,000 372,000
3,839,000
Less current portion 387,000
$3,452,000
In November 1997, the Company used the proceeds from a loan by a
commercial lending company to refinance all of its outstanding notes
payable to banks and finance companies, capital lease obligations, and
other long-term debt that was outstanding at that time. This loan is
part of a pool of loans financed by the lender. A provision of this
loan required the Company to pay additional interest if certain
conditions of the loan pool are not met. This provision would require
the Company to pay additional interest each month if the loan pool
conditions are not met. These monthly payments, if required, may
increase the interest costs by a maximum of $400,000 over the life of
the loan. At year end, the Company had paid no additional interest.
The Company's debt is collateralized by substantially all of the
restaurant equipment and leasehold improvements and other assets and
is guaranteed by a company officer.
Maturities of long-term debt for each of the next five fiscal
years are $387,000 in 1999; $435,000 in 2000; $489,000 in 2001;
$425,000 in 2002; and $386,000 in 2003. Interest expense approximates
interest paid for each of the last two fiscal years.
The Company has a line-of-credit agreement which provides up to
$100,000 of short-term financing at prime plus 2%. There were no
amounts available to borrow under that agreement as of year end.
Borrowings under this agreement are unsecured and mature in December
1998. At year end the prime rate was approximately 8.5%.
The weighted average interest cost on the short-term borrowings
at year end 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 various ratios. At
year end the Company was in compliance with all such covenants.
In July 1996, the Company issued $500,000 of Zero-Coupon
Convertible unregistered debentures. The debentures were convertible
into 527,983 shares of the Company's common stock beginning on July
2000. In January 1998, the Board of Directors amended the terms of
the Company's debentures permitting immediate conversion. On February
19, 1998, the debenture holders exercised their conversion rights and
converted the debentures into 527,983 shares of common stock. At the
time of conversion, the debentures were owned by related parties.
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:
Deferred tax assets:
Net operating loss carryforwards $991,000
Tax credit carryforwards 642,000
Property 335,000
Other - net 161,000
Total deferred tax assets 2,129,000
Valuation allowance for deferred tax assets 2,016,000
113,000
Deferred tax liabilities:
Prepaid and deferred costs 113,000
Net deferred tax assets $ -
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:
June 28, June 29,
1998 1997
Income tax benefit at the Federal statutory rate $(364,000) $(152,000)
State taxes, net of Federal deductions (47,000) (24,000)
Tax credits - (117,000)
Miscellaneous items not deductible for Federal income - 41,000
taxes
Change in valuation allowance 828,000 252,000
Income Taxes $ - $ -
At year end for federal income tax purposes, the Company had net
operating loss carryforwards of approximately $2,608,000 and
investment and jobs tax credits carryforwards of approximately
$642,000. 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. Because of lower than
expected revenues and earnings, management increased the valuation
allowance resulting in income tax expense of $107,000.
Note D - Leases
The Company leases eighteen restaurant facilities and its
corporate headquarters under noncancelable operating lease agreements
with initial lease terms expiring between 1999 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 three restaurant facilities under
noncancelable sublease agreements with lease terms expiring from 2005-
2012. The Company revised and increased its reserve for the
difference between anticipated sublease income and the Company's
minimum commitment under these leases by $1,630,000. This reserve is
included in deferred revenue and other liabilities.
Future minimum lease and sublease payments were as follows at
year end:
Operating Leases
Lease Sublease Net Capital
Leases
1999 $1,439,000 $231000 $1,128,000 $111,000
2000 1,365,000 233,000 1,056,000 111,000
2001 1,199,000 265,000 854,000 111,000
2002 1,113,000 265,000 767,000 111,000
2003 865,000 265,000 540,000 55,000
Thereafter 3,402,000 1,048,000 2,354,000 -
499,000
Less unamortized discount (12.1-14.2%) (127,000)
$372,000
Rent expense for real estate on all the Company's operating
leases was $1,594,000 in 1998 and $1,560,000 in 1997.
Included in Property, Equipment and Other are assets subject to
capital leases of:
Equipment and Leasehold Improvements $649,000
Accumulated Amortization (245,000)
$404,000
Note E - Related Party Transactions
The Company is affiliated with L.B.G., Inc. ("LBG"), through
common ownership. The Company charges LBG for accounting and
administrative services based on the gross sales of each company. The
amounts reimbursed in 1998 and in 1997 were nominal. At June 28,
1998, LBG owed the Company $93,000 for food, rent supplies and
service.
The Company owns a 31.0% interest in LaMexiCo, L.L.C.
("LaMexiCo"), a limited liability company, that operates a franchised
Cucos in Metairie, Louisiana. The Company also manages the restaurant
for LaMexiCo, and receives 4% of net sales as compensation. There was
no undistributed income from LaMexiCo included in the Company's
retained earnings at June 28, 1998. The restaurant opened under the
development rights previously owned by LBG. LBG currently owns 25.3%
of LaMexiCo. At year end, LaMexiCo owed the Company $32,000, which is
paid current, for management fees, royalties and other expenses.
The following summarizes the Company's relationships with
LaMexiCo.
1998 1997
Royalties received $58,000 $54,000
Management fees received $77,000 $80,000
Receivable outstanding at year end $32,000 $17,000
Equity in earnings $33,000 $25,000
LaMexiCo summarized financial information (based on the
investee's fiscal year ending April of each year):
1998 1997
Balance Sheet
Total Liabilities $259,000 $253,000
Members Equity 696,000 777,000
TOTAL ASSETS $955,000 $1,030,000
Statement of Income
Revenues $2,202,000 $1,834,000
Net Income $133,000 $115,000
The Company leases the land, building and improvements for one
Company-owned restaurant from a director. The primary term of the
lease is 15 years and expires in 2000 with an option to renew for 15
years. The Company paid rent of $127,000 in 1998 and 1997.
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 10
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 70% of the net
receipts. The Chairman and Chief Executive Officer of the Company is
the sole stockholder of Brothers Video, Inc. At June 28, 1998, the
Company had a current accounts receivable from Brothers Video, Inc. of
$34,000 for video poker revenues earned. The Company's share of video
poker revenues, included in sales of food and beverages, was 3.1% and
2.6% of sales of food and beverages in 1998 and 1997 respectively.
Also see Note B for description of issuance of $500,000 of non
interest bearing convertible debt to related parties. At various
times during 1998 an officer made advances to the Company totaling
$37,000 of which all has been repaid. The high balance outstanding
during the year was $57,000.
Note F - Stock Options
The Company's 1993 Incentive Stock Option Plan (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.
Additionally, the Company may award nonqualified stock options under
the Option Plan at an exercise price of not 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 1998. The
weighted average contractual life is 8 years.
<TABLE>
<CAPTION>
1998 1997
Weighted Weighted
Shares Avg. Price Shares Avg. Price
<S> <C> <C> <C> <C>
Outstanding at beginning of year 370,000 $1.40 395,000 $1.67
Granted 81,700 $1.04 244,000 $1.32
Forfeited (7,500) $1.51 (269,000) $1.73
Exercised - - - -
Outstanding at end of year 444,200 $1.31 370,000 $1.40
Exercisable at end of year 249,000 251,000
Exercise Price $1.18-$1.94 $1.18-$1.94
</TABLE>
The weighted average remaining contractual life of the options
outstanding is 8.5 years. The weighted average fair value of options
granted during 1998 and 1997 was $1.00 per share.
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 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 1998 and 1997, 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).
1998 1997
Pro forma net loss ($1,089,000) ($662,000)
Pro forma loss per share-Basic and diluted ($.47) ($.31)
Note G - Per Share Amounts
Basic loss per share amounts are based on the weighted average
number of shares of Common Stock outstanding. Diluted per share
amounts give effect to securities (stock options) outstanding, if any.
Stock options were anti-dilutive in 1998 and 1997. The Financial
Accounting Standards Board issued FAS 128, Earnings Per Share, which
was effective in the period ending December 1997. The adoption of
this pronouncement had no impact on the Company's previously reported
1997 or 1998 reported per share amounts.
Note H - Franchise Operations
In addition to its company-owned restaurants, the Company had
five franchised restaurants in operation at the end of 1998. During
1998 no franchised restaurants opened and no franchised restaurants
closed. During 1997, one franchised restaurant opened and none
closed.
Note I - Shareholders' 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 Company's Common Stock. The rights were issued in
February 1990. The rights are not exercisable until ten days following
the occurrence of one of the following events: 1) acquisition by a
group or person of 15% or more of the Company's Common Stock, or 2) an
announcement by a potential acquirer of a tender or exchange offer
that would result in the ownership of 15% or more of the CompanyOs
Common Stock. Once exercisable, unless redeemed earlier by the
Company, each right entitles the holder to buy $12 worth of shares of
the Company's 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 Company's 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 in 1998
and 1997.
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.
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 28, 1998, and the related statements of operations,
shareholders' equity, and cash flows for each of the two years in the
period ended June 28, 1998. These financial statements are the
responsibility of the Company's 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 28, 1998, and the results of its operations and its
cash flows for each of the two years in the period ended June 28,
1998, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
New Orleans, Louisiana
September 25, 1998
Cucos Inc. - Stock Data
The Registrant's common stock is traded on The NASDAQ Small-Cap
Market under the symbol CUCO. The following table sets forth the range
of the high and low bid and ask prices for each of the quarters
indicated for fiscal 1998 and fiscal 1997.
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
Fiscal 1998 High Bid-Ask Low Bid-Ask
1st Quarter ended 10/19/97 1 1/2 - 1 7/8 1 1/8 - 1 1/4
2nd Quarter ended 1/11/98 1 1/4 - 1 1/2 1 1/8 - 1/3/8
3rd Quarter ended 4/5/98 1 1/4 23/32 - 1/1/8
4th Quarter ended 6/28/98 1 3/4 - 1
On September 17, 1998, the closing bid and ask prices for the
Registrant's 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, the Registrant 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 15, 1998:
825. Market makers: Herzog, Heine, Geduld, 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 Founder, Chairman of the Board
since 1981. Committees: of Cucos Inc. since 1981.
Executive, Audit, Compensation. Chairman and other Offices-
Chairman-Executive L.B.G. Inc., (formerly Sizzler
Family Steakhouses of Southern
Frank J. Ferrara Louisiana, Inc.) since 1969.
Director since 1996. Managing
Partner - Ferrara & Ferrara since Thomas J. Grace
1982. Committees: Audit, Secretary since 1983 and
Compensation. Chairman- General Counsel since 1992.
Compensation.
Glenda T. Liuzza
Thomas J. Grace Founder, Vice President Concept
Founder and Secretary since 1983. Development since 1985.
General Counsel since 1992. Director of Marketing (1983-
Committee: Executive. 1985).
David M. Liuzza Daniel L. Earles
Founder and Director since 1995. Executive Vice President in
President and other offices of charge of Operations since June
L.B.G., Inc., formerly Sizzler 1998.
Family Steakhouses of Southern
Louisiana, Inc. since 1969. Elias Daher
President-LaMexiCo, L.L.C., a Regional Vice President since
franchisee of the Company since September 1998.
1994. Committee: Executive Senior Operations Supervisor
(1997-1998)
Sidney C. Pulitzer District Supervisor (1990 -
Director since 1983. Formerly 1997)
Chairman-Wemco Inc., a General Manager (1986 - 1990)
manufacturer of menOs neckwear.
Committees: Compensation and
Audit. Chairman-Audit. Consultants to the Board
Miguel Uria Richard E. Butler
Director since 1983. President- Consultant since 1994
Oro Financial, a registered Formerly Executive Vice-
broker/dealer since 1988. Prior President - El Torito Mexican
to 1988, Mr. Uria served as First Restaurants
Vice President of Howard, Weil,
Labouisse, Friederichs Kenneth F. Reimer
Incorporated, an investment Consultant since 1994
banking firm. Committees: Formerly President and CEO -
Compensation Roma Corporation, operator of
Tony Roma's, A Place for Ribs.
V. M. Wheeler III
Accepted appointment on Board of
Directors October 1, 1998.
Partner - Kendrick & Wheeler,
L.L.P., a law firm located in New
Orleans, LA since 1995. From
1994-1997, he was a Vice
President of Cain Brothers &
Company, Inc., an investment
banking firm. Committees: Audit
and Compensation
Corporate Information
Transfer Agent Form 10-KSB
Registrar and Transfer Company A copy of Form 10-KSB, the
Cranford, New Jersey Corporation's annual report to
Securities Counsel the Securities and Exchange
Drinker Biddle & Reath, LLP Commission, can be obtained
Philadelphia, Pennsylvania without charge by writing or
Independent Auditors faxing your request to:
Ernst & Young LLP Cucos Inc.
New Orleans, Louisiana Attn: Investor Relations
Corporate Office 110 Veterans Blvd., Suite
110 Veterans Blvd., Suite 222 222
Metairie, Louisiana 70005 Metairie, Louisiana 70005
504-835-0306 Fax No. 1-504-836-3194
NASDAQ Symbol: CUCO Form 10-QSB
Annual Meeting A copy of Form 10-QSB, the
The annual meeting of shareholders CompanyOs quarterly report to
will be held at Cucos Border Cafe, the Securities and Exchange
3000 Veterans Boulevard, Metairie, Commission, can be obtained
Louisiana, at 3:00 p.m. on without charge by faxing your
Thursday, November 19, 1998. request to:
Cucos Inc.
Attn. Investor Relations
Fax No. (504) 836-3194
