EX-1 2 0002.txt FINANCIAL STATEMENTS Exhibit 1 Report of Independent Auditors Plan Administrator Luby's Savings and Investment Plan San Antonio, Texas We have audited the accompanying statements of net assets available for benefits of the Luby's Savings and Investment Plan as of December 31, 1999 and 1998, and the related statement of changes in net assets available for benefits for the year ended December 31, 1999. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. 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 net assets available for benefits of the Plan at December 31, 1999 and 1998, and the changes in its net assets available for benefits for the year ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. Our audits were performed for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplemental schedule of assets held for investment purposes at end of year as of December 31, 1999 is presented for purposes of additional analysis and is not a required part of the financial statements but is supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan's management. The supplemental schedule has been subjected to the auditing procedures applied in our audits of the financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. ERNST & YOUNG LLP San Antonio, Texas May 19, 2000 Luby's Savings and Investment Plan Statements of Net Assets Available for Benefits December 31 1999 1998 ____ ____ Assets Investments, at fair value $7,363,539 $4,752,840 Receivables: Participant contributions 142,741 195 __________ __________ Net assets available for benefits $7,506,280 $4,753,035 __________ __________ See accompanying notes. Luby's Savings and Investment Plan Statement of Changes in Net Assets Available for Benefits Year Ended December 31, 1999 Additions to net assets attributed to: Investment income: Net appreciation in fair value of investments $ 760,329 Interest and dividends 64,178 __________ 824,507 Contributions: Participants 2,584,933 __________ Total additions 3,409,440 Deductions from net assets attributed to: Benefits to participants 645,663 Administrative expenses 10,532 __________ Total deductions 656,195 __________ Net increase 2,753,245 Net assets available for benefits at beginning of year 4,753,035 __________ Net assets available for benefits at end of year $7,506,280 __________ See accompanying notes. Luby's Savings and Investment Plan Notes to Financial Statements December 31, 1999 and 1998 1. Significant Accounting Policies The accounting records of the Luby's Savings and Investment Plan (the Plan) are maintained on the accrual basis of accounting. The Plan's investments are stated at fair value based on quoted market prices on the valuation date. Changes in fair market value and gains and losses on the sale of investment securities are reflected in the statement of changes in net assets available for benefits as net appreciation in fair value of investments. Purchases and sales of securities are recorded on a settlement-date basis. Interest income is recorded on an accrual basis. Dividends are recorded on the ex-dividend date. Certain administrative expenses of the Plan are paid by Luby's, Inc. (the Company). Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Reclassification Certain prior year balances have been reclassified to conform to current year presentation. 2. Description of the Plan The following is a general description of the Plan. Participants should refer to the Plan agreement for a more complete description of the Plan's provisions. General The Plan, which was effective on March 1, 1997, is a defined contribution plan qualified under Section 401(a) of the Internal Revenue Code (IRC). Employees of the Company and Luby's Restaurants Limited Partnership who complete one year of service, which is defined as 1,000 hours, and have attained age 21 are eligible to participate in the Plan on the next January 1, April 1, July 1, or October 1. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). Contributions and Investment Options Participants may contribute an amount not less than 1% and not exceeding 15% of their compensation, limited by 401(k) regulations. Participants direct the investment of their contributions into various investment options offered by the Plan. The Plan currently offers five collective funds, four mutual funds, and one common stock fund. Prior to May 1, 1999, the Plan offered eight pooled separate accounts, one common stock fund, and an insurance investment contract as investment options for participants. Participant Accounts Each participant's account is credited with the participant's contributions and allocations of Plan earnings, and charged with an allocation of any applicable participant expenses. The benefit to which a participant is entitled is the benefit that can be provided from the participant's account. Vesting Participants are immediately vested in their voluntary contributions plus actual earnings thereon. Participant Loans Participants may borrow from their fund accounts a minimum of $1,000 up to a maximum of $50,000 or 50% of their account balance, reduced by the highest amount of any loan outstanding within the previous twelve months. Loan transactions are treated as a transfer from (to) the investment fund to (from) the loan fund. Loan terms range up to 5 years for general purpose loans or up to 30 years for the purchase of a primary residence. The loans are secured by the balance in the participant's account and bear interest at a rate commensurate with prevailing rates as determined quarterly by the Plan administrator. Interest rates on outstanding loans range from 8.75 to 9.5 percent. Principal and interest are paid ratably through payroll deductions. Payment of Benefits Upon retirement, or in the event of death or disability, a participant will receive a lump-sum payment of his (her) account in the Plan and all amounts which have been allocated to his (her) Plan account. In the event of termination of employment with the employer for any other reason, the participant is entitled to the vested portion of his (her) account in the Plan and all vested amounts which have been allocated to his (her) Plan account. Plan Termination Although it has not expressed any intent to do so, the Company has the right to terminate the Plan subject to the provisions of ERISA. 3. Investments All investments are held by the Plan's trustee. CIGNA was the trustee of the Plan through April 30, 1999. American Express Trust Company assumed the trustee duties on May 1, 1999, and all Plan assets were transferred to American Express Trust Company. The following presents investments that represent five percent or more of the Plan's net assets: December 31, 1999 1998 ____ ____ AET Income Fund II $1,115,455 $ - AET Medium-Term Horizon Fund 869,991 - AET Long-Term Horizon Fund 1,213,301 - AET Equity Index Fund II 1,484,014 - Baron Asset Fund 1,187,735 - Janus Overseas Fund 685,524 - Luby's, Inc. Pooled Stock Fund 410,413 342,136 CIGNA Guaranteed Income Fund - 745,094 CIGNA Lifetime 20 Fund - 275,665 CIGNA Lifetime 30 Fund - 504,676 CIGNA Lifetime 40 Fund - 362,578 CIGNA Large Company Stock Index Fund - 911,844 PBHG Growth Fund - 1,022,618 Templeton Foreign Fund - 258,208 During 1999, the Plan's investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated in value by $760,329 as follows: Collective funds $455,215 Mutual funds 291,246 Common stock fund (131,153) Pooled separate accounts 145,021 ________ $760,329 ________ 4. Investment Contract With Insurance Company From March 1, 1997, through April 30, 1999, the Plan had a group annuity contract with Connecticut General Life Insurance Company (CGLIC). The contract included a Guaranteed Income Fund which was invested in CGLIC's general portfolio, was fully benefit-responsive, and was recorded at contract value. Contract value equaled all contributions and transfers into the account, plus accrued interest, less payments. The average yield on the Guaranteed Income Fund was 5.40% through April 1999 and 5.75% for 1998. The credited interest rate was 5.40% at April 30, 1999, and 5.75% at December 31, 1998. Because the credited interest rate was reset periodically at the discretion of CGLIC, the contract value approximated fair value. The value of the group annuity contract was subject to the stability of CGLIC. 5. Benefits Payable to Terminated Participants At December 31, 1999, there were five withdrawing participants in the Plan entitled to aggregate vested benefits totaling $9,533 in cash distributions for benefit claims that have been processed and approved for payment prior to December 31 but not yet paid as of that date. 6. Reconciliation of Financial Statements to Form 5500 The Form 5500 is prepared on the modified cash basis of accounting. The following is a reconciliation of net assets available for benefits per the financial statements to the Form 5500: December 31 1999 1998 ____ ____ Net assets available for benefits per the financial statements $7,506,280 $4,753,035 Participant contributions receivable at December 31, 1999 (142,741) (195) __________ __________ Net assets available for benefits per the Form 5500 $7,363,539 $4,752,840 __________ __________ The following is a reconciliation of contributions received from participants per the financial statements to the Form 5500 for the year ended December 31, 1999: Contributions received from partici- pants per the financial statements $2,584,933 Plus: Amounts receivable from participants at December 31, 1998 195 Less: Amounts receivable from participants at December 31, 1999 (142,741) ___________ Contributions received from participants per the Form 5500 $2,442,387 ___________ 7. Tax Status The Plan has received a determination letter from the Internal Revenue Service dated February 13, 1998, stating that the Plan is qualified under Section 401(a) of the IRC and, therefore, the related trust is exempt from taxation. Once qualified, the Plan is required to operate in conformity with the IRC to maintain its qualification. The Plan has been amended since receiving the determination letter. The Plan administrator believes the Plan is being operated in compliance with the applicable requirements of the IRC and, therefore, believes the Plan is qualified and the related trust is tax-exempt. SUPPLEMENTAL SCHEDULE Luby's Savings and Investment Plan Schedule H, Line 4i - Schedule of Assets Held for Investment Purposes at End of Year EIN: 74-1335253 Plan No.: 003 December 31, 1999 Description of Investment, Identity of Issue, Including Maturity Date, Borrower, Lessor, Rate of Interest, Collateral, Current or Similar Party Par or Maturity Date Value ____________________________________________________________________________ *AET Income Fund II Collective fund $1,115,455 *AET Short-Term Horizon Fund Collective fund 90,741 *AET Medium-Term Horizon Fund Collective fund 869,991 *AET Long-Term Horizon Fund Collective fund 1,213,301 *AET Equity Index Fund II Collective fund 1,484,014 *AXP Selective Fund Mutual fund 3,812 *AXP New Dimensions Fund Mutual fund 82,173 Baron Asset Fund Mutual fund 1,187,735 Janus Overseas Fund Mutual fund 685,524 *Luby's, Inc. Pooled Stock Fund Common stock 35,091 shares 410,413 *Participant loans Interest accrued at prime rate plus 1%, varying maturity dates, 8.75% - 9.50% charged during 1999 220,380 __________ $7,363,539 __________ *Denotes party-in-interest