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 5, 1998
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:
2,641,730 shares of common stock, no par value, as of May 14,
1998.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [ X ]
Part I--Financial Information
ITEM I. FINANCIAL STATEMENTS
CUCOS INC.
BALANCE SHEETS
April 5, 1998
Unaudited
Assets
Current Assets
Cash and Cash Equivalents $690,000
Receivables:
Trade 531,000
Due from Affiliates 186,000
Less Allowance for Doubtful Accounts 207,000
510,000
Inventories 250,000
Prepaid Expenses, Deferred Taxes and Other Current Assets 504,000
TOTAL CURRENT ASSETS 1,954,000
Deferred Taxes and Noncurrent Assets 250,000
Property, Equipment and Other
Land 327,000
Property and Equipment 4,100,000
Building and Leasehold Improvements 5,517,000
Reacquired Franchise Rights 529,000
10,473,000
Less Accumulated Depreciation and Amortization 4,593,000
5,880,000
Investment in LaMexiCo, LLC 251,000
Assets Held for Resale 102,000
Deferred Costs Less Accumulated Amortization 481,000
TOTAL ASSETS $8,918,000
Liabilities and Shareholders' Equity
Current Liabilities
Short-Term Debt Payable to Banks $40,000
Trade Accounts Payable 1,598,000
Accrued Expenses and Other 554,000
Accrued Payroll 199,000
Current Portion of Long-Term Debt 394,000
TOTAL CURRENT LIABILITIES 2,785,000
Long-Term Debt, Less Current Portion 3,972,000
Deferred Revenue and Other 160,000
Shareholders' Equity
Preferred Stock, No Par Value - 1,000,000 Share
Authorized, None Issued or Outstanding -
Common Stock, No Par Value - 20,000,000 Shares
Authorized, 2,641,730 Shares Issued and Outstanding 5,246,000
Additional Paid-in Capital 152,000
Retained Earnings (Deficit) (3,397,000)
TOTAL SHAREHOLDERS' EQUITY 2,001,000
TOTAL LIABILITIES AND EQUITY $8,918,000
See Notes to Financial Statements
<TABLE>
Part I--Financial Information
CUCOS INC.
STATEMENTS OF OPERATIONS
UNAUDITED
<CAPTION>
12 Weeks 12 Weeks 40 Weeks 40 Weeks
Ended Ended Ended Ended
Apr. 5, 1998 Apr. 6, 1997 Apr. 5, 1998 Apr. 6, 1997
Restaurant Operations
<S> <C> <C> <C> <C>
Sales of Food and Beverages $4,908,000 $4,993,000 $16,254,000 $16,379,000
Restaurant Expenses:
Cost of Sales 1,280,000 1,303,000 4,304,000 4,365,000
Restaurant Labor and Benefits 1,656,000 1,590,000 5,441,000 5,254,000
Other Operating Expenses 866,000 823,000 2,921,000 2,861,000
Occupancy Costs 561,000 506,000 1,773,000 1,684,000
Preopening Costs 33,000 29,000 55,000 97,000
Total Restaurant Expenses 4,396,000 4,251,000 14,494,000 14,261,000
Income from Restaurant Operations 512,000 742,000 1,760,000 2,118,000
Royalties and Franchise Revenues, Net of Expenses
of $8,637 and $68,125; $21,532 and $83,928 23,000 3,000 82,000 48,000
Commissary and Other Income 40,000 43,000 149,000 151,000
575,000 788,000 1,991,000 2,317,000
Operations Expenses 247,000 282,000 718,000 890,000
Corporate Expenses 361,000 363,000 1,092,000 1,143,000
Operating Income (33,000) 143,000 181,000 284,000
Interest Expense 129,000 104,000 385,000 355,000
Income (Loss) Before Income Taxes (162,000) 39,000 (204,000) (71,000)
Income Taxes - - - -
Income (Loss) Before Extraordinary Expense (162,000) 39,000 (204,000) (71,000)
Loan Prepayment Penalties - - 166,000 -
Net Income (Loss) $(162,000) $39,000 $(370,000) $(71,000)
Average Shares Outstanding
Basic 2,400,000 2,114,000 2,199,000 2,114,000
Diluted 2,400,000 2,642,000 2,199,000 2,114,000
Net Income (Loss) Per Share Before Extraordinary Expense
Basic ($0.07) $0.02 ($0.09) ($0.03)
Diluted ($0.07) $0.01 ($0.09) ($0.03)
Net Income (Loss) Per Share
Basic ($0.07) $0.02 ($0.17) ($0.03)
Diluted ($0.07) $0.01 ($0.17) ($0.03)
</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
Apr. 5, 1998 Apr. 6, 1997
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $824,000 $539,000
INVESTING ACTIVITIES
Purchases of Property and Equipment (878,000) (393,000)
Change in Deferred Costs (371,000) 75,000
NET CASH USED IN INVESTING ACTIVITIES (1,249,000) (318,000)
FINANCING ACTIVITIES
Proceeds from Borrowings 4,781,000 324,000
Principal Payments on Borrowings (4,142,000) (780,000)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 639,000 (456,000)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 214,000 (235,000)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 476,000 781,000
CASH AND CASH EQUIVALENTS AT END OF PERIOD $690,000 $546,000
</TABLE>
See Notes to Financial Statements
CUCOS INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. The Company: Cucos Inc. (the "Company") owns and franchises
Mexican restaurants under the name "Cucos". At April 5,
1998, sixteen Company-owned restaurants and five franchised
restaurants were in operation. At the end of the Comparable
Quarter, there were fifteen company-owned and seven
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 and fiscal 1998 are both 52 week years.
3. In 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128,
Earnings per Share. Statement 128 replaced the previously
reported primary and fully diluted earnings per share with
basic and diluted earnings per share. Unlike primary
earnings per share, basic earnings per share excludes any
dilutive effects of options, warrants, and convertible
securities. Diluted earnings per share is very similar to
the previously reported fully diluted earnings per share.
Common stock equivalents (stock options and convertible
debentures) were antidilutive for the 12 week periods ended
April 5, 1998 and April 6, 1997, and for the 40 week periods
ended April 5, 1998 and April 6, 1997. All earnings per
share amounts for all periods presented have been, and where
necessary, restated to conform to the Statement 128
requirements.
4. Per share amounts are based on the weighted average number
of shares of common stock and dilutive common stock
equivalents outstanding.
5. Certain reclassifications of previously reported amounts
have been made to conform to current classifications which
relate primarily to the allocation of convertible debenture
proceeds and the related imputed interest expense.
6. On February 17, 1998, the Board of Directors amended the
agreement related to the Zero-Coupon Convertible Secured
Notes to permit the holders to convert the Zero-Coupon
Convertible Secured Notes to Common Stock of Cucos Inc. two
years after the date of issue rather than five years. On
February 19, 1998, the holders converted the Zero-Coupon
Convertible Secured Notes into 527,983 shares of common
stock. As a result, stockholders equity increased by
$424,670.
ITEM 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Sales of Food and Beverages for the 12 weeks ended April 5, 1998
(the "Current Quarter") decreased 1.7% to $4,908,000 from
$4,993,000 for the 12 weeks ended April 6, 1997 (the `Comparable
Quarter"). Sales of Food and Beverages for the 40 weeks ended
April 5, 1998 (the "Current Three Quarters") declined 0.8% to
$16,254,000 from $16,379,000 for the 40 weeks ended April 6, 1997
(the "Comparable Three Quarters"). The decrease in the Current
Quarter was the result of a 5.6% decline in food and beverage
sales in the restaurants open throughout both periods ("existing
restaurants"), which was offset by food and beverage sales
related to opening a new restaurant in Meridian in October, 1997.
The decline in the Current Three Quarters was the result of an
overall decline in existing restaurant revenues. The existing
restaurant revenues decline is primarily the result of a 7.3% and
5.3% decline in average guest counts for the Current Quarter and
the Comparable Three Quarters, respectively, compared to the
Comparable periods.
Restaurant expenses in the Current Quarter increased by 3.4%
compared to the Comparable periods. Restaurant Expenses in
restaurants open throughout both periods declined 3.1% in the
Current Quarter. However, this decline was more than offset by
restaurant expenses associated with the opening of the Meridian
restaurant. Similar results were experienced in the Current
Three Quarters compared to the Comparable Three Quarters.
Generally, the components of restaurant expenses reflected the
same results.
As a result of the above factors, Income from Restaurant
Operations declined to $512,000 in the Current Quarter from
$742,000 in the Comparable Quarter and $1,760,000 for the Current
Three Quarters from $2,118,000 for the Comparable Three Quarters.
Net Royalties and Franchise Revenues increased $20,000 in the
Current Quarter compared to the Comparable Quarter and $34,000 in
the Current Three Quarters compared to the Comparable Three
Quarters. This increase is the result of no expenses associated
with opening of franchised restaurants in the Current Quarter and
the Current Three Quarters compared to the Comparable periods.
Operations Expenses declined to $247,000 in the Current Quarter
from $282,000 in the Comparable Quarter and to $718,000 in the
Current Three Quarters from $890,000 in the Comparable Three
Quarters. The decline was primarily attributable to a decline in
losses related to subleases of $34,000 in the Current Quarter
compared to the Comparable Quarter and $122,000 in the Current
Three Quarters compared to the Comparable Three Quarters.
Corporate Expenses decreased .6% in the Current Quarter to
$361,000 compared to the Comparable Quarter, and declined 4.6% in
the Current Three Quarters to $1,092,000 compared to the
Comparable Three Quarters. This decline was attributable to
additional cost controls that were implemented by the Company,
partially offset by higher insurance cost in the Current Quarter.
As a result of these factors Operating Income decreased $176,000
in the Current Quarter compared to the Comparable Quarter and
$103,000 in the Current Three Quarters compared to the Comparable
Three Quarters.
Interest expense increased $25,000 in the Current Quarter
compared to the Comparable Quarter and $30,000 in the Current
Three Quarters compared to Comparable Three Quarters. This
increase was attributable to increased borrowings.
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 $166,000 which have been reported as an extraordinary loss.
(See Liquidity and Capital Resources.)
The Loss Before Extraordinary Loss was $162,000 in the Current
Quarter compared to income of $39,000 in the Comparable Quarter
and was a $204,000 loss in the Current Three Quarters compared to
a loss of $71,000 in the Comparable Three Quarters. The Net Loss
increased $201,000 to $162,000 in the Current Quarter and
increased $299,000 to $370,000 in the Current Three Quarters.
This increase was primarily attributable to the loss incurred
related to the recent refinancing and other items discussed
above.
LIQUIDITY AND CAPITAL RESOURCES
Cash and Cash Equivalents increased to $690,000 in the Current
Quarter compared to $546,000 in the Comparable Quarter. The
Current ratio is .70 at the end of the Current Quarter compared
to .53 at the end of the Comparable Quarter. Deferred costs
increased $376,000 in the Current Quarter to $481,000 which was
attributable to an increase in preopening costs of $142,000
related to the Meridian restaurant and costs of $274,000 incurred
related to the refinancing described below.
Long-term debt and short-term debt payable to banks increased
$494,900 in the Current Quarter compared to the Comparable
Quarter. This increase was primarily related to financing for
the Meridian restaurant, additional equipment at existing
restaurants, and for working capital purposes.
On November 26, 1997, the Company entered into a new credit
facility of $3,590,000 with a commercial lending institution.
This new credit facility consists of a term loan to be repaid,
primarily, in monthly payments over 10 years and is secured by
the restaurant operating properties. The proceeds from this term
loan has been used to repay substantially all of the existing
long-term debt and short-term debt payable to banks. The amounts
included in the balance sheet of October 19, 1997, for short-term
debt payable to banks and long-term debt reflect the repayment
terms of the new term loan. In connection with this refinancing,
the Company incurred a charge to earnings in the Second Quarter
of $166,000 and is related to prepayment penalties associated
with the existing debt.
On February 17, 1998, the Board of Directors amended the
agreement related to the Zero-Coupon Convertible Secured Notes to
permit the holders to convert the Zero-Coupon Convertible Secured
Notes to Common Stock of Cucos Inc. two years after the date of
issue rather than five years. On February 19, 1998, the holders
converted the Zero-Coupon Convertible Secured Notes into 527,983
shares of common stock. As a result, stockholders equity
increased by $424,670.
FORWARD-LOOKING STATEMENTS
Forward-looking statements regarding management's present plans
or expectations for new unit openings, remodels, other capital
expenditures, the financing thereof, and disposition of impaired
units involve risks and uncertainties relative to return
expectations and related allocation of resources, and changing
economic or competitive conditions, as well as the negotiation of
agreements with third parties, which could cause actual results
to differ from present plans or expectations, and such
differences could be material. Similarly, forward-looking
statements regarding management's present expectations for
operating results involve risk and uncertainties relative to
these and other factors, such as advertising effectiveness and
the ability to achieve cost reductions, which also would cause
actual results to differ from present plans. Such differences
could be material. Management does not expect to update such
forward-looking statements continually as conditions change, and
readers should consider that such statements speak only as to the
date hereof.
Part II-Other Information
ITEM 1. LEGAL PROCEEDINGS.
None, except as previously reported.
ITEM 2. CHANGES IN SECURITIES.
On March 26, 1998, the Board of Directors approved the
issuance of 10,000 shares of Common Stock of Cucos Inc.
to Thomas L. McCormick for services rendered to Cucos
in connection with the new credit facility.
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 exhibits are 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 19, 1998 By:
Vincent J. Liuzza, Jr.
Chairman, Chief Executive Officer,
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-28-1998
<PERIOD-END> APR-05-1998
<CASH> 690,000
<SECURITIES> 0
<RECEIVABLES> 531,000
<ALLOWANCES> 207,000
<INVENTORY> 250,000
<CURRENT-ASSETS> 1,954,000
<PP&E> 10,473,000
<DEPRECIATION> 4,593,000
<TOTAL-ASSETS> 8,918,000
<CURRENT-LIABILITIES> 2,785,000
<BONDS> 3,972,000
0
0
<COMMON> 5,246,000
<OTHER-SE> 152,000
<TOTAL-LIABILITY-AND-EQUITY> 8,918,000
<SALES> 16,254,000
<TOTAL-REVENUES> 16,485,000
<CGS> 4,304,000
<TOTAL-COSTS> 14,494,000
<OTHER-EXPENSES> 1,810,000
<LOSS-PROVISION> 6,000
<INTEREST-EXPENSE> 385,000
<INCOME-PRETAX> (204,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (204,000)
<DISCONTINUED> 0
<EXTRAORDINARY> (166,000)
<CHANGES> 0
<NET-INCOME> (370,000)
<EPS-PRIMARY> (.17)
<EPS-DILUTED> (.17)
</TABLE>
