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 4, 1999
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
past 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:
2,651,730 shares of common stock, no par value, as of May 13,
1999.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [ X ]
Part I--Financial Information
ITEM I. FINANCIAL STATEMENTS
CUCOS INC.
BALANCE SHEETS
April 4, 1999
Unaudited
Assets
Current Assets
Cash and Cash Equivalents $575,000
Receivables:
Trade Net of Allowance 205,000
Due from Affiliates Net of Allowance 146,000
351,000
Inventories 214,000
Prepaid Expenses 319,000
Deferred Taxes and Other Current Assets 4,000
TOTAL CURRENT ASSETS 1,463,000
Deferred Taxes and Noncurrent Assets 244,000
Property, Equipment and Other
Property and Equipment 2,693,000
Building and Leasehold Improvements 4,078,000
Reacquired Franchise Rights -
6,771,000
Less Accumulated Depreciation and Amortization 4,002,000
2,769,000
Investment in LaMexiCo, LLC 234,000
Deferred Costs Less Accumulated Amortization 263,000
TOTAL ASSETS $4,973,000
Liabilities and Shareholders' Equity
Current Liabilities
Short-Term Debt Payable to Banks $ -
Trade Accounts Payable 2,279,000
Accrued Expenses and Other 547,000
Accrued Payroll 188,000
Current Portion of Long-Term Debt 461,000
TOTAL CURRENT LIABILITIES 3,475,000
Long-Term Debt, Less Current Portion 3,137,000
Deferred Revenue and Other 461,000
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) (7,464,000)
TOTAL SHAREHOLDERS' EQUITY (2,100,000)
TOTAL LIABILITIES AND EQUITY $4,973,000
See Notes to Financial Statements
Part I--Financial Information
<TABLE>
<CAPTION>
CUCOS INC.
STATEMENTS OF OPERATIONS
UNAUDITED
12 Weeks 12 Weeks 40 Weeks 40 Weeks
Ended Ended Ended Ended
Apr. 4, 1999 Apr. 5, 1998 Apr. 4, 1999 Apr. 5, 1998
Restaurant Operations
<S> <C> <C> <C> <C>
Sales of Food and Beverages $4,594,000 $4,908,000 $15,539,000 $16,254,000
Restaurant Expenses:
Cost of Sales 1,256,000 1,280,000 4,367,000 4,304,000
Restaurant Labor and Benefits 1,653,000 1,656,000 5,554,000 5,441,000
Other Operating Expenses 745,000 866,000 3,017,000 2,921,000
Occupancy Costs 544,000 561,000 1,789,000 1,773,000
Preopening Costs - 33,000 55,000 55,000
Total Restaurant Expenses 4,198,000 4,396,000 14,782,000 14,494,000
Income from Restaurant Operations 396,000 512,000 757,000 1,760,000
Royalties and Franchise Revenues, Net of Expenses
of $817 and $8,637; $2,658 and $21,527 28,000 23,000 102,000 82,000
Commissary and Other Income 23,000 27,000 89,000 109,000
447,000 562,000 948,000 1,951,000
Operations Expenses 229,000 234,000 649,000 678,000
Corporate Expenses 598,000 361,000 1,433,000 1,092,000
Charges Related to Closed Units and Asset Impairment 1,860,000 - 1,860,000 -
Operating Income (2,240,000) (33,000) (2,994,000) 181,000
Interest Expense 114,000 130,000 376,000 385,000
Loss Before Income Taxes and Extraordinary Expenses (2,354,000) (163,000) (3,370,000) (204,000)
Income Taxes 2,000 - 3,000 -
Loss Before Extraordinary Expense (2,356,000) (163,000) (3,373,000) (204,000)
Extraordinary Item -- Debt Restructuring Penalties - - - (166,000)
Net Loss $(2,356,000) $(163,000) $(3,373,000) $(370,000)
Weighted Average Number of Common Shares and
Common Share Equivalents Outstanding 2,652,000 2,400,000 2,652,000 2,400,000
Net Loss Per Share Before Extraordinary Expenses $(0.89) $(0.07) $(1.27) $(0.09)
Net Loss Per Share $(0.89) $(0.07) $(1.27) $(0.15)
</TABLE>
See Notes to Financial Statements
Part I--Financial Information
<TABLE>
<CAPTION>
CUCOS INC.
STATEMENTS OF CASH FLOWS
UNAUDITED
40 Weeks 40 Weeks
Ended Ended
April 4, 1999 April 5, 1998
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $259,000 $824,000
INVESTING ACTIVITIES
Purchases of Property and Equipment (155,000) (878,000)
Change in Deferred Costs 134,000 (371,000)
NET CASH USED IN INVESTING ACTIVITIES (21,000) (1,249,000)
FINANCING ACTIVITIES
Proceeds from Borrowings 74,000 4,781,000
Principal Payments on Borrowings (416,000) (4,142,000)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (342,000) 639,000
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (104,000) 214,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 679,000 476,000
CASH AND CASH EQUIVALENTS AT END OF PERIOD $575,000 $690,000
</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 4,
1999, fourteen Company-owned restaurants and four franchised
restaurants were in operation. At the end of the Comparable
Quarter, there were sixteen company-owned and five
franchised restaurants in operation.
2. Fiscal Year: The Company uses a 52/53 week year for
financial reporting purposes with the Company's fiscal year
ending on the Sunday closest to June 30 of each year.
Fiscal 1998 and fiscal 1999 are both 52 week years.
3. The accompanying unaudited financial statements have been
prepared in accordance with the rules and regulations of the
Securities and Exchange Commission. Certain information and
footnote disclosures normally included in the financial
statements have been omitted pursuant to such rules and
regulations. It is suggested that these financial
statements be read in conjunction with the Company's Annual
Report for the fiscal year ended June 28, 1998. In the
opinion of management, these financial statements contain
all normal recurring adjustments necessary to fairly present
the financial results for the twelve weeks ended April 4,
1999. Operating results for the period shown are not
necessarily indicative of the operating results expected for
the full fiscal year ending June 27, 1999.
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.
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 4, 1999
(the "Current Quarter") decreased 6.4% to $4,594,000 from
$4,908,000 for the 12 weeks ended April 5, 1998 (the `Comparable
Quarter"). Sales of Food and Beverages for the 40 weeks ended
April 4, 1999 (the "Current Three Quarters") declined 4.4% to
$15,539,000 from $16,254,000 for the 40 weeks ended April 5, 1998
(the "Comparable Three Quarters"). The decrease in the Current
Quarter was primarily due to having one additional restaurant
(Pensacola) in 1998. Near the end of the Current Quarter, the
restaurant in Meridian, Mississippi, was closed. Restaurants
open throughout the Current and Comparable Quarters declined .7%.
The sales decline in the Current Three Quarters was the result of
one fewer restaurant (Pensacola) partially offset by the
Meridian, Mississippi, restaurant which opened in the preceding
Comparable Quarter. Restaurants open throughout the Current and
Comparable Three Quarters declined .5%.
Restaurant expenses in the Current Quarter decreased by 4.5%
compared to the Comparable Quarter. The decrease was primarily
due to the additional restaurant (Pensacola) in the Comparable
Quarter, and a decrease in preopening expenses associated with
the opening of Meridian also in the Comparable Quarter. These
decreases, however, were offset by increases in cost of sales and
labor in restaurants open throughout the Current and Comparable
Quarters.
Restaurant expenses in the Current Three Quarters increased 2%.
The decrease associated with Pensacola was more than offset by
increases in labor, cost of sales, and advertising. A summary of
the components of restaurant expenses as a percentage of sales of
food and beverages are:
Current Quarter Comparable Quarter
Cost of Sales 27.34% 26.08%
Restaurant Labor and Benefits 35.98 33.74
Other Operating Expenses 16.22 17.64
Occupancy Expenses 11.84 11.43
Preopening Expenses 0.00 0.67
Total Restaurant Expenses 91.38% 89.57%
As a result of the above factors, Income from Restaurant
Operations declined to $396,000 in the Current Quarter from
$512,000 in the Comparable Quarter. Restaurant Operations Income
decreased to $757,000 from $1,760,000 for the Current Three
Quarters and the Comparable Three Quarters, respectively.
Net Royalties and Franchise Revenues increased $5,000 in the
Current Quarter compared to the Comparable Quarter, and increased
$20,000 in the Current Three Quarters compared to the Comparable
Three Quarters. These increases are a result of fewer expenses
associated with supervision of franchised restaurants.
Commissary and Other Income declined to $23,000 in the Current
Quarter from $27,000 in the Comparable Quarter, and to $89,000 in
the Current Three Quarters from $109,000 in the Comparable Three
Quarters.
Operations Expenses declined to $229,000 in the Current Quarter
from $234,000 in the Comparable Quarter, and to $649,000 in the
Current Three Quarters from $678,000 in the Comparable three
Quarters. These declines are primarily attributable to having
fewer supervisory personnel.
Corporate Expenses increased to $598,000 in the Current Quarter
from $361,000 in the Comparable Quarter and to $1,433,000 in the
Current Three Quarters from $1,092,000 in the Comparable Three
Quarters. These increases are primarily the result of
approximately $80,000 in additional legal fees on non-recurring
items, a one time non-cash charge of approximately $70,000 for
abandoned sites, and a one time marketing charge of $100,000
primarily associated with television commercial production.
During the Current Quarter, the Company has adjusted the value of
assets on impaired properties located in Meridian, Birmingham,
and Montgomery as per FASB #121. These non-cash impairment
charges were $1,860,000. There were no adjustments per FASB #121
in the Comparable Quarter. As a result of these charges, future
depreciation expense will be reduced.
Interest expense decreased $16,000 in the Current Quarter
compared to the Comparable Quarter and decreased $9,000 in the
Current Three Quarters versus the Comparable Three Quarters.
This decrease is attributed to decreased debt.
During the Comparable Three Quarters, 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 were reported in the Comparable Three
Quarters as an Extraordinary Loss.
The Loss Before Extraordinary Loss was $2,356,000 in the Current
Quarter compared to $163,000 in the Comparable Quarter. The Loss
Before Extraordinary Loss was $3,373,000 in the Current Three
Quarters compared to $204,000 in the Comparable Three Quarters.
These losses were primarily attributable to the FASB #121 write-
down, additional legal fees, and other items discussed above.
LIQUIDITY AND CAPITAL RESOURCES
Cash and Cash Equivalents decreased to $575,000 in the Current
Quarter compared to $690,000 in the Comparable Quarter. The
Current ratio is .42 at the end of the Current Quarter compared
to .70 at the end of the Comparable Quarter and to .52 at the end
of the previous Quarter ending January 10, 1999.
As a means of improving liquidity, the Company has entered into
an agreement with its major lender to defer a major portion of
the next six months' debt service payments for a period of two
years. The elimination of the substantial operating losses at
the Meridian location will also improve liquidity going forward.
In the First Quarter of the Fiscal Year, management began
implementing its Guest Experience Enhancement Programs, which
significantly increased restaurant operating expenses, but which
should improve guest satisfaction and, therefore, future cash
flows. As these programs were rolled out, subsequent price
increases were implemented. Near the end of the Current Quarter,
the relationship between menu prices and cost of sales began to
approach a more normal relationship resulting in a reduction in
operating losses. Management believes that cash flow from future
operating activities will be sufficient to allow it to meet its
obligations, however, there is no assurance that these operations
changes will have the intended impact.
Long-term and short-term debt decreased to $3,598,000 at the end
of the Current Quarter compared to $3,940,000 at the end of the
Fiscal Year and decreased from $4,406,000 at the end of the
Comparable Quarter.
IMPACT OF YEAR 2000
The Company's position on the Year 2000 exposures are described
in the Company's annual report for fiscal year ended June 28,
1998. The Company continues to address this issue and does not
expect any significant problems or exposures arising from this
issue. There have been no significant changes in this area in
the Current Quarter.
FORWARD-LOOKING STATEMENTS
Forward-looking statements regarding management's present plans
or expectations for new unit openings, remodels, other capital
expenditures, the financing thereof, and disposition of impaired
units involve risks and uncertainties relative to return
expectations and related allocation of resources, and changing
economic or competitive conditions, as well as the negotiation of
agreements with third parties, which could cause actual results
to differ from present plans or expectations, and such
differences could be material. Similarly, forward-looking
statements regarding management's present expectations for
operating results involve risk and uncertainties relative to
these and other factors, such as advertising effectiveness and
the ability to achieve cost reductions, which also would cause
actual results to differ from present plans. Such differences
could be material. Management does not expect to update such
forward-looking statements continually as conditions change, and
readers should consider that such statements speak only as to the
date hereof.
Part II-Other Information
ITEM 1. LEGAL PROCEEDINGS.
None, except as previously reported.
ITEM 2. CHANGES IN SECURITIES.
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a. Exhibits.
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 17, 1999 By:
Vincent J. Liuzza, Jr.
Chairman, Chief Executive Officer,
Chief Financial Officer
