-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HBEcGNfAqYPTBTuZ0JHYlUgDO9JCSg0fD6fm07qDhEWMR/w4sr2EUtyVR9wsb775 rb537nHQdtAwrXUqh8x4RA== 0000016099-02-000015.txt : 20020620 0000016099-02-000015.hdr.sgml : 20020620 20020619161439 ACCESSION NUMBER: 0000016099-02-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20020508 FILED AS OF DATE: 20020619 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LUBYS INC CENTRAL INDEX KEY: 0000016099 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 741335253 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08308 FILM NUMBER: 02682370 BUSINESS ADDRESS: STREET 1: 2211 NE LOOP 410 STREET 2: P O BOX 33069 CITY: SAN ANTONIO STATE: TX ZIP: 78265-3069 BUSINESS PHONE: 2106549000 MAIL ADDRESS: STREET 1: P O BOX 33069 CITY: SAN ANTONIO STATE: TX ZIP: 78265-3069 FORMER COMPANY: FORMER CONFORMED NAME: CAFETERIAS INC DATE OF NAME CHANGE: 19810126 FORMER COMPANY: FORMER CONFORMED NAME: LUBYS CAFETERIAS INC DATE OF NAME CHANGE: 19920703 10-Q 1 q3fy02-10q.txt BODY OF 10-Q FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 (Mark One) [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended May 8, 2002 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________________ to _______________________ Commission file number: 1-8308 LUBY'S, INC. _______________________________________________________________________________ (Exact name of registrant as specified in its charter) Delaware 74-1335253 _________________________________ _________________ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2211 Northeast Loop 410, P. O. Box 33069 San Antonio, Texas 78265-3069 _______________________________________________________________________________ (Address of principal executive offices) (Zip Code) 210/654-9000 _______________________________________________________________________________ (Registrant's telephone number, including area code) _______________________________________________________________________________ (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes x No ___ ___ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock: 22,433,043 shares outstanding as of June 13, 2002, (exclusive of 4,970,024 treasury shares) Part I - FINANCIAL INFORMATION Item 1. Financial Statements LUBY'S, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (In thousands except per share data)
Quarter Ended Three Quarters Ended May 8, May 31, May 8, May 31, 2002 2001 2002 2001 ____________ ____________ ____________ ____________ (84 days) (92 days) (250 days) (273 days) Sales $ 93,069 $121,677 $279,521 $347,796 Costs and expenses: Cost of food 23,902 30,305 71,092 88,649 Payroll and related costs 28,397 41,254 93,319 117,840 Occupancy and other operating expenses 34,044 42,512 104,637 123,903 Provision for asset impairments and restaurant closings (See Note 7) 128 - 259 10,199 General and administrative expenses 4,707 6,415 15,415 19,437 _________ ________ ________ ________ 91,178 120,486 284,722 360,028 _________ ________ ________ ________ Income (loss) from operations 1,891 1,191 (5,201) (12,232) Interest expense (2,317) (3,534) (7,300) (8,475) Other income, net 169 703 926 1,479 _________ ________ ________ ________ Income (loss) before income taxes (257) (1,640) (11,575) (19,228) Income tax expense (benefit) (83) (574) (3,894) (6,730) _________ ________ ________ ________ Net income (loss) $ (174) $ (1,066) $ (7,681) $(12,498) _________ ________ ________ ________ Net income (loss) per share - basic and assuming dilution $ (0.01) $ (0.05) $ (0.34) $ (0.56) _________ ________ ________ ________ EBITDA (See Note 6) $ 7,277 $ 7,239 $ 10,851 $ 15,597 _________ ________ ________ ________ EBITDA per share - basic $ 0.32 $ 0.32 $ 0.48 $ 0.70 _________ ________ ________ ________ See accompanying notes.
LUBY'S, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) May 8, August 31, 2002 2001 _________ _________ ASSETS (unaudited) Current assets: Cash and cash equivalents $ 5,485 $ 4,099 Short-term investments (See Note 3) 20,567 19,984 Trade accounts and other receivables 239 358 Food and supply inventories 2,411 2,701 Prepaid expenses 2,306 2,765 Income tax receivable 5,343 4,468 ________ ________ Total current assets 36,351 34,375 Property held for sale 5,496 3,047 Investments and other assets 8,621 5,929 Deferred income taxes 1,779 4,931 Property, plant, and equipment - at cost, net (See Note 4) 292,246 305,180 ________ ________ Total assets $344,493 $353,462 ________ ________ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 19,167 $ 13,696 Accrued expenses and other liabilities (See Note 5) 27,553 34,585 ________ ________ Total current liabilities 46,720 48,281 Long-term debt (See Note 6) 120,944 122,000 Convertible subordinated notes - related party (See Note 6) 5,735 5,401 Deferred income taxes and other credits 2,990 2,271 Reserve for restaurant closings (See Note 7) 3,151 4,506 Commitments and contingencies (See Note 8) - - ________ ________ Total liabilities 179,540 182,459 ________ ________ Shareholders' equity: Common stock 8,769 8,769 Paid-in capital 37,209 37,181 Deferred compensation (See Note 9) (2,394) (3,299) Retained earnings 227,034 234,715 Accumulated other comprehensive income (loss) (See Note 10) (108) (592) Less cost of treasury stock (105,557) (105,771) ________ ________ Total shareholders' equity 164,953 171,003 ________ ________ Total liabilities and shareholders' equity $344,493 $353,462 ________ ________ See accompanying notes. LUBY'S, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (In thousands) Three Quarters Ended May 8, May 31, 2002 2001 __________ __________ (250 days) (273 days) CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $(7,681) $(12,498) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 14,887 17,320 Amortization of deferred loss on interest rate swaps 745 - Amortization of discount on convertible subordinated notes 334 - Provision for asset impairments and restaurant closings 259 10,200 Gain on disposal of property held for sale (110) (1,201) Loss on disposal of property, plant, and equipment 146 45 Noncash directors' fees 188 84 Noncash compensation expense 905 560 _______ ________ Cash provided by operating activities before changes in operating assets and liabilities 9,673 14,510 Changes in operating assets and liabilities: (Increase) decrease in trade accounts and other receivables 119 (55) (Increase) decrease in food and supply inventories 290 32 (Increase) decrease in prepaid expenses 459 2,726 (Increase) decrease in income tax receivable (875) (3,200) (Increase) decrease in other assets 253 (1,418) Increase (decrease) in accounts payable 5,471 (3,035) Increase (decrease) in accrued expenses and other liabilities (7,032) 2,936 Increase (decrease) in deferred income taxes and other credits 3,611 (76) Increase (decrease) in reserve for restaurant closings (1,614) (1,211) _______ ________ Net cash provided by (used in) operating activities $10,355 $ 11,209 _______ ________ CASH FLOWS FROM INVESTING ACTIVITIES: (Increase) decrease in short-term investments $ (583) $ (5,935) Proceeds from disposal of property held for sale 1,093 6,935 Purchases of property, plant, and equipment, net (8,477) (13,678) _______ ________ Net cash provided by (used in) investing activities (7,967) (12,678) _______ ________ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from (payments on) long-term borrowings (1,056) 7,000 Proceeds from (payments on) borrowings against cash surrender value of officers' life insurance - 3,623 Proceeds received on the exercise of employee stock options 54 - Dividends paid - (2,242) _______ ________ Net cash provided by (used in) financing activities (1,002) 8,381 _______ ________ Net increase (decrease) in cash and cash equivalents 1,386 6,912 Cash and cash equivalents at beginning of period 4,099 679 _______ ________ Cash and cash equivalents at end of period $ 5,485 $ 7,591 _______ ________ See accompanying notes. LUBY'S, INC. CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (unaudited) (In thousands)
Accumu- lated De- Other Paid- ferred Compre- Total Common Stock In Comp- hensive Share- Issued Treasury Capi- ensa- Retained Income holders' Shares Amount Shares Amount tal tion Earnings (loss) Equity _____________________________________________________________________________________________ Balance at August 31, 2001(audited) 27,403 $8,769 (4,980) $(105,771) $37,181 $(3,299) $234,715 $(592) $171,003 Other compre- hensive in- come (loss), net of taxes: Reclassifi- cation ad- justment for loss recognized on termina- tion of in- terest rate swaps, net of taxes of $261 - - - - - - - 484 484 Net income (loss) year to date - - - - - - (7,681) - (7,681) Common stock issued under benefit plans, net of shares tendered in partial payment and including tax benefits - - 10 214 28 - - - 242 Noncash stock compensation expense - - - - - 905 - - 905 ______________________________________________________________________________ Balance at May 8, 2002 27,403 $8,769 (4,970) $(105,557) $37,209 $(2,394) $227,034 $(108) $164,953 ______________________________________________________________________________ See accompanying notes.
LUBY'S, INC. NOTES TO FINANCIAL STATEMENTS (unaudited) May 8, 2002 Note 1: BASIS OF PRESENTATION The accompanying unaudited financial statements are presented in accordance with the requirements of Form 10-Q and, consequently, do not include all of the disclosures normally required by accounting principles generally accepted in the United States. All adjustments which are, in the opinion of management, necessary to a fair statement of the results for the interim periods have been made. All such adjustments are of a normal recurring nature. The results for the interim periods are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with the consolidated financial statements and footnotes included in Luby's annual report on Form 10-K for the year ended August 31, 2001. The accounting policies used in preparing these consolidated financial statements are the same as those described in Luby's annual report on Form 10-K. Certain fiscal 2001 balances have been reclassified to conform with the fiscal 2002 presentation. Note 2: ACCOUNTING-PERIOD CHANGE Beginning with the 2002 fiscal year, the Company changed its accounting intervals from 12 calendar months to 13 four-week periods. To properly accommodate this change, the first period began September 1, 2001, and covered 26 days; subsequent periods cover 28 days. The first, second, third, and fourth quarters of fiscal year 2002 include 82, 84, 84, and 112 days, respectively. Fiscal year 2002 is therefore 362 days in length compared to 365 days in fiscal year 2001. Fiscal year 2003 and most years going forward will be 364 days in length. Note 3: SHORT-TERM INVESTMENTS The Company maintained a balance of $20.6 million and $20.0 million in short- term investments as of May 8, 2002, and August 31, 2001, respectively. This cash is invested in money-market funds. Note 4: PROPERTY, PLANT, AND EQUIPMENT The cost and accumulated depreciation of property, plant, and equipment at May 8, 2002, and August 31, 2001, together with the related estimated useful lives used in computing depreciation and amortization, are reflected below: May 8, August 31, Estimated 2002 2001 Useful Lives _________ _________ ____________ (In thousands) Land $ 73,664 $ 79,977 - Restaurant equipment and furnishings 136,427 135,670 3 to 15 years Buildings 236,556 236,091 20 to 40 years Leasehold and leasehold improvements 33,009 35,582 Term of leases Office furniture and equipment 11,978 11,486 5 to 10 years Transportation equipment 897 937 5 years Construction in progress - 289 - ________ ________ 492,531 500,032 Less accumulated depreciation and amortization 200,285 194,852 ________ ________ $292,246 $305,180 ________ ________ Note 5: INSURANCE In the summer of 2001, the Company initiated an accident-prevention program designed to increase employee and guest safety. Shortly thereafter, to enhance the program and to better control costs, the Company began managing new claims in-house. The Company obtains reserve estimates from key members of its risk management department. These employees manage and review detailed information associated with each claim. In addition, actuarial analysts review reserve estimates on the claims. The analysts use actuarial techniques, including those focused on historical claims, to arrive at their estimates. Consistent with prior practice, the Company regularly reviews its recorded liability balance to ensure that it falls within the range of estimates of the Company's risk management staff and that of the actuarial analysts. The expenses for workers' compensation and general liability are estimated based on all known claims information. For the first three quarters of fiscal 2002, both the actuarial analysts and the Company's risk management staff concluded that employee and guest injury claims under the new program are occurring at a much lower level than those experienced in the first three quarters of fiscal 2001. Workers' Compensation Expense ___________________________________________________________________________ Period Ended May 8, May 31, Decrease 2002 2001 (Increase) ______ _______ __________ (In thousands) 3rd quarter $ 545 $2,887 $2,342 ______ ______ ______ Year to date $4,123 $7,379 $3,256 ______ ______ ______ Actual claims settlements and expenses may differ from interim loss provisions. The Company cannot make any assurances as to the ultimate level of claims under the new in-house safety program or whether declines in incidence of claims as well as claims costs experienced year to date in fiscal 2002 will continue in future periods. Note 6: DEBT SENIOR DEBT At August 31, 2001, the Company had a credit facility balance of $122 million with a syndicate of four banks. Weakened demand and increased recessionary trends following September 11, 2001, resulted in the Company's inability to meet its first quarterly EBITDA covenant for fiscal year 2002. Accordingly, the Company obtained a waiver and amendment to its credit agreement dated December 5, 2001, which waived its noncompliance with first-quarter EBITDA requirements, reset the EBITDA requirement to $16.6 million for fiscal 2002, and limited capital expenditures for the year to $15 million. Per the amended credit agreement, EBITDA is defined as operating income before interest, taxes, depreciation, amortization, and the noncash portion of Harris J. Pappas's and Christopher J. Pappas's stock option compensation. (See Note 9.) The Company expects to be in compliance with its revised covenants for the remainder of fiscal year 2002. Three payments were made to date in fiscal 2002 which reduced the balance of the credit facility to $120.9 million. These payments were made in compliance with the amended credit agreement, which requires that the Company pay the facility down in amounts equal to all proceeds received from the sale of real and personal property. The payments were a result of three land sales totaling $1.1 million. SUBORDINATED DEBT On March 9, 2001, the Company's newly appointed CEO and COO, Christopher J. Pappas and Harris J. Pappas, respectively, made commitments to loan the Company a total of $10 million in exchange for convertible subordinated notes that were funded in the fourth quarter of fiscal 2001. The notes bear interest at LIBOR (London InterBank Offered Rate) plus 2%, payable quarterly, and have a stated redemption date of March 1, 2011. Interest through September 1, 2003, may be paid in a combination of cash, common stock, or both at the Company's election, subject to certain restrictions on the amount of stock issued. All interest to date has been paid in cash. Notwithstanding any accrued interest that may also be converted to stock, the notes are convertible into the Company's common stock at $5.00 per share for 2,000,000 shares at the option of the holders at any time after January 2, 2003, and prior to the stated redemption date. The market price of the Company's stock on the commitment date (as determined by the closing price on the New York Stock Exchange on the date of issue) was $7.34. The difference between the market price and strike price of $5.00, or $2.34 per share, multiplied by the 2,000,000 convertible shares equals approximately $4.7 million. Applicable accounting principles require that this amount, which represents the intrinsic value of the beneficial conversion feature, be recorded as both a component of paid-in capital and a discount from the $10 million. The carrying value of the notes at August 31, 2001, net of the unamortized discount, was approximately $5.4 million. The carrying value of the notes at May 8, 2002, was approximately $5.7 million. The discount of $4.7 million is being amortized to interest expense over a period of ten years. The Company has amortized $334,000 of this discount during the fiscal year to date ended May 8, 2002. The amortization of the note discount to date is as follows: Balance of Convertible Subordinated Notes _________________________________________ Original Discount Period-End Balance Balance Net Balance _______________________________________________________________________________ (In thousands) As of June 29, 2001 $10,000 $(4,680) $5,320 As of August 31, 2001 10,000 (4,599) 5,401 As of May 8, 2002 10,000 (4,265) 5,735 EFFECT OF CONVERTIBLE NOTES AND OTHER SECURITIES ON EARNINGS PER SHARE Potentially dilutive securities, which include the convertible subordinated notes and stock options, are antidilutive in loss periods. As the Company had a net loss for the quarter and year to date, earnings per share assuming dilution equals basic earnings per share. Note 7: IMPAIRMENT OF LONG-LIVED ASSETS AND RESTAURANT CLOSINGS In accordance with Company guidelines, management periodically reviews the financial performance of each restaurant for indicators of impairment or indicators that closure would be appropriate. Where indicators are present, such as three full fiscal years of negative cash flows or other unfavorable market conditions, the carrying values of assets are written down to the estimated future discounted cash flows or fully written off in the case of negative cash flows anticipated in the future. Estimated future cash flows are based upon regression analyses generated from similar Company restaurants, discounted at the Company's weighted-average cost of capital. No restaurants have been impaired during fiscal 2002. The Company did close one restaurant not previously designated for closure. The net quarterly provision for asset impairment and restaurant closings includes the loss associated with closing the restaurant offset by the charge reversals for two lease settlements that were slightly more favorable than originally anticipated. During fiscal 2001, the Company recorded a pretax charge of $30.4 million as a result of its reviews for impairments in accordance with SFAS 121 and assessments of closure costs. The principal components of the fiscal 2001 charge were as follows: RESTAURANTS DESIGNATED FOR CLOSURE Charges of $11.6 million were incurred for the closing of 15 underperforming restaurants; subsequently, a total of 12 were closed during the first three quarters of fiscal year 2002. (As explained below, two other restaurants were closed for remodel and conversion to new concepts.) This charge included the cost to write down the properties and equipment to net realizable value and estimated costs for the settlement of lease obligations, legal and professional fees, and other exit costs. Employee severance costs were not accrued as of August 31, 2001, but were paid out and primarily expensed in the period of closure. As of May 8, 2002, approximately 531 employees have been terminated due to restaurant closings since September 1, 2001. IMPAIRED RESTAURANTS Charges of $17.0 million were incurred for asset impairment of 13 restaurants that the Company continues to operate. In accordance with SFAS 121, the properties were written down to the estimated future discounted cash flows or fully written off in the case of negative future cash flows. PROPERTY UNDER DISSOLVED JOINT VENTURE Charges of $0.8 million were incurred primarily for the impairment of one property operated under a joint venture with Waterstreet, Inc. The joint venture, L&W Seafood, Inc., was terminated in 1999. However, the property used by the joint venture was retained for a time to evaluate its potential use. This location remained vacant for over a year, after which time the Company decided against retaining it. This property was written down to its estimated net realizable value and was sold in fiscal year 2001. NEW CONCEPTS Charges of $1.0 million were associated with the write-off of assets for two locations that were slated for remodel and conversion to new concepts before the end of fiscal year 2002. The Company closed both units by October 31, 2001. Property that could not be salvaged, transferred, or effectively reused was written off. One of the two locations was reopened as a seafood restaurant in the second quarter of fiscal 2002. OPERATING RESULTS FOR RESTAURANTS DESIGNATED FOR CLOSURE The comparative quarterly and year-to-date results of operations for the 15 restaurants designated for closure at August 31, 2001, were as follows: Quarter Ended Three Quarters Ended May 8, May 31, May 8, May 31, 2002 2001 2002 2001 ________ ________ ________ ________ (84 days) (92 days) (250 days) (273 days) (In thousands) Sales $1,114 $5,069 $5,508 $14,840 Operating loss (674) (1,103) (2,667) (2,860) RESERVE FOR RESTAURANT CLOSINGS All material cash outlays associated with prior closure plans were completed by August 31, 2001. Under the current plan, the Company had a reserve for restaurant closings of $3.2 million at May 8, 2002. Excluding lease termination settlements, it is anticipated that all material cash outlays required for the restaurant closings planned as of August 31, 2001, will be made prior to August 31, 2002. The following is a summary of the types and amounts recognized as restaurant-closure costs together with cash payments under the fiscal year 2001 plan through the period ended May 8, 2002: Reserve Balance ______________________________________________________ Lease Legal and Other Settlement Professional Workforce Exit Total Costs Fees Severance Costs Reserve _______________________________________________________ (In thousands) As of August 31, 2001 $4,206 $ - $ - $ 300 $ 4,506 Cash receipts (payments) (856) - (130) (126) (1,112) Other additions (reductions) (373) - 130 - (243) ______ ____ ____ ____ ______ As of May 8, 2002 $2,977 $ - $ - $174 $3,151 ______ ____ ____ ____ ______ Note 8: COMMITMENTS AND CONTINGENCIES OFFICER LOANS In fiscal 1999, the Company guaranteed loans of approximately $1.9 million relating to purchases of Company stock by officers of the Company. Under the officer loan program, shares were purchased and funding was obtained from JPMorgan Chase Bank. As of May 8, 2002, the notes, which mature in fiscal 2004, have an outstanding balance of approximately $1.6 million. In the event of possible default, the Company would purchase the loans from JPMorgan Chase Bank, become holder of the notes, record the receivables, and pursue collection in the event that note requirements are not met. The purchased Company stock has been and can be used by borrowers to satisfy a portion of their loan obligation. As of May 8, 2002, based on the market price on that day, approximately $712,000, or 44% of the note balances, could have been covered by stock, while approximately $902,000, or 56%, would have remained outstanding. PENDING CLAIMS AND LAWSUITS The Company is presently, and from time to time, subject to pending claims and lawsuits arising in the ordinary course of business. In the opinion of management, resolution of these pending legal proceedings will not have a material adverse effect on the Company's operations or consolidated financial position. Note 9: DEFERRED COMPENSATION - EXECUTIVE STOCK OPTIONS In connection with their employment agreements effective March 9, 2001, the CEO and COO were granted a total of approximately 2.2 million stock options. From that date through fiscal 2004, the Company will recognize a total of $5.2 million in noncash compensation expense associated with these options. A total of $905,000 was recognized for the first three quarters of fiscal 2002, while cumulatively for fiscal 2001 and 2002, $2.8 million has been recognized to date. Note 10: DERIVATIVE FINANCIAL INSTRUMENTS The Company adopted Statement of Financial Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative Instruments and Hedging Activities," and its amendments, Statements No. 137 and 138, on September 1, 2000. SFAS 133 requires that all derivative instruments be recorded on the balance sheet at fair value. Pursuant to this standard, the Company designated its Interest Rate Protection Agreements (Swaps) as cash flow hedge instruments. Swaps have been used to manage exposure to interest rate movement by effectively changing the variable rate to a fixed rate. The critical terms of the Swaps and the interest-bearing debt associated with the Swaps were the same; therefore, the Company assumed that there was no ineffectiveness in the hedge relationship. Changes in fair value of the Swaps are recognized in other comprehensive income (loss), net of tax effects, until the hedged items are recognized in earnings. Due to declining interest rates and in anticipation of additional future unfavorable interest rate changes, the Company terminated the Swaps on July 2, 2001, for a cash payment of $1.3 million, including accrued interest of $163,000. In accordance with SFAS 133, the loss of $1.1 million is being recognized as interest expense over the original term of the Swaps (through June 30, 2002). At May 8, 2002, $108,000, net of taxes of $58,000, remains in accumulated other comprehensive loss. Note 11: COMPREHENSIVE INCOME (LOSS) The Company's comprehensive income (loss) is comprised of net income (loss) and adjustments to derivative financial instruments. The components of comprehensive income (loss) are as follows: Quarter Ended May 8, May 31, 2002 2001 ____________ ____________ (84 days) (92 days) (In thousands) Net income (loss) $ (174) $ (1,066) Other comprehensive income, net of taxes: Net derivative income (loss), net of taxes of $123 - (228) Reclassification adjustment for gains included in net income (loss), net of taxes of $51 - 95 Reclassification adjustment for loss recognized on termination of interest rate swaps, net of taxes of $87 161 - ________ ________ Comprehensive income (loss) $ (13) $ (1,199) _______ _______ Three Quarters Ended May 8, May 31, 2002 2001 __________ __________ (250 days) (273 days) (In thousands) Net income (loss) $(7,681) $(12,498) Other comprehensive income, net of taxes: Cumulative effect of a change in accounting for derivative financial instruments upon adoption of SFAS 133, net of taxes of $61 - 114 Net derivative income (loss), net of taxes of $528 - (981) Reclassification adjustment for gains included in net income (loss), net of taxes of $50 - 93 Reclassification adjustment for loss recognized on termination of interest rate swaps, net of taxes of $261 484 - _______ ________ Comprehensive income (loss) $(7,197) $(13,272) _______ ________ Note 12: RELATED PARTIES PROFIT SHARING AND RETIREMENT TRUST PLAN INVESTMENT ADVISORS A director of the Company, Ronald K. Calgaard, is also a director of Austin, Calvert & Flavin, Inc., a firm that provides investment services for the Company's profit sharing and retirement trust plan (the Plan). The Plan currently uses the services of four investment advisors. During the three quarters ended May 8, 2002, the Plan paid Austin, Calvert & Flavin, Inc. a total of approximately $46,000. AFFILIATE SERVICES AGREEMENT The CEO and COO of the Company, Christopher J. Pappas and Harris J. Pappas, respectively, own a restaurant company that provides services to Luby's, Inc. as detailed in an Affiliate Services Agreement. Under the terms of that agreement, the restaurant company has provided accounting, architectural, and general business services; basic equipment maintenance; specialized equipment fabrication; and warehouse leasing. The scope and pricing of services rendered under the Affiliate Services Agreement are reviewed periodically by the Finance and Audit Committee of the Company's Board. The Committee uses the services of the Company's external auditors and independent valuation consultants to monitor the transactions associated with the agreement for fairness. As part of this Affiliate Services Agreement, the Company entered into a three- year lease which commenced on June 1, 2001, and ends May 31, 2004. The amount paid by the Company pursuant to the terms of this lease was approximately $60,000 for the three quarters ended May 8, 2002. The agreement also includes the costs incurred for modifications to existing equipment, as well as custom- fabrication, including stainless steel stoves, shelving, rolling carts, and chef tables. The total cost of these services for fiscal 2002 year to date was $461,000. The Company is currently reviewing the Affiliate Services Agreement to address revisions that may be appropriate given the declining level and scope of services being provided. All amounts charged under the Affiliate Services Agreement have been paid except for the most recent professional and consulting fees of approximately $3,000. OPERATING LEASE In a separate contract from the Affiliate Services Agreement, pursuant to the terms of a ground lease dated March 25, 1994, the Company paid rent to PHCG Investments for a Luby's restaurant operating in Dallas, Texas. Christopher J. Pappas and Harris J. Pappas are general partners of PHCG Investments. The amount paid by the Company to PHCG Investments pursuant to the terms of the lease agreement during the fiscal year to date was approximately $63,000. Rents paid for both the ground lease and the Affiliate Services Agreement lease combined represent 2.2% of total rents paid by the Company for the three quarters ended May 8, 2002. SUBORDINATED DEBT As described in Note 6 in the section entitled "Subordinated Debt," the CEO and COO loaned the Company a total of $10 million in the form of convertible subordinated notes to support the Company's future operating cash needs. The entire balance was outstanding as of May 8, 2002. BOARD OF DIRECTORS Pursuant to the terms of a separate Purchase Agreement dated March 9, 2001, entered into by and among the Company, Christopher J. Pappas and Harris J. Pappas, the Company agreed to submit three persons designated by Christopher J. Pappas and Harris J. Pappas as nominees for election for directors. Messrs. Pappas designated themselves and Frank Markantonis as their nominees for directors, all of whom were subsequently elected. Christopher J. Pappas and Harris J. Pappas are brothers. As disclosed in the proxy statement for the January 11, 2002, annual meeting of shareholders, Frank Markantonis is an attorney whose principal client is Pappas Restaurants, Inc., an entity owned by Harris J. Pappas and Christopher J. Pappas. KEY MANAGEMENT PERSONNEL Ernest Pekmezaris, the Chief Financial Officer of the Company, is also the Treasurer of Pappas Restaurants, Inc. Compensation for the services provided by Mr. Pekmezaris to Pappas Restaurants, Inc. is paid entirely by that entity. Peter Tropoli, the Senior Vice President-Administration of the Company, is an attorney who, from time to time, has provided litigation services to entities controlled by Christopher J. Pappas and Harris J. Pappas. Mr. Tropoli is the stepson of Frank Markantonis, who, as previously mentioned, is a director of the Company. Paulette Gerukos, Administration Assistant of the Human Resources Department of the Company, is the sister-in-law of Harris J. Pappas, the Chief Operating Officer. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion and analysis of financial condition and results of operations should be read in conjunction with the consolidated financial statements and footnotes for the quarter ended May 8, 2002, and the audited financial statements filed on Form 10-K for the fiscal year ended August 31, 2001. OVERVIEW As of May 8, 2002, Luby's, Inc. owned and operated 198 restaurants located primarily in the southern and southwestern United States. The Company provides its customers with a wide variety of freshly cooked foods at reasonable prices in an attractive and informal environment. The Company's primary competitors include family-style and casual-dining restaurants, buffets, cafeterias, and quick-service restaurants in the home-meal-replacement category. 13-PERIOD YEAR The Company modified its accounting fiscal year from one separated into 12 calendar months to one separated into 13, 28-day intervals. Although this change generates notable timing differences when comparing the current to the prior fiscal year, financial results on an annual basis should be substantially unaffected. The primary purpose for this change was to provide more consistent timing and comparability in the future. RESULTS OF OPERATIONS The operating performance of the Company is evaluated using several measures, one of which is EBITDA. Per the Company's amended credit agreement, EBITDA is defined as operating income before interest, taxes, depreciation, amortization, and the noncash portion of Harris J. Pappas's and Christopher J. Pappas's stock option compensation. While the Company and many in the financial community consider EBITDA to be an important measure of operating performance, it should be considered in addition to, but not as a substitute for or superior to, other measures of financial performance prepared in accordance with accounting principles generally accepted in the United States, such as operating income and net income. In addition, the Company's definition of EBITDA is not necessarily comparable to similarly titled measures reported by other companies. QUARTER ENDED MAY 8, 2002, COMPARED TO THE QUARTER ENDED MAY 31, 2001 Sales decreased $28.6 million, or 23.5%, in the third quarter of fiscal 2002 compared to the third quarter of fiscal 2001. Eight fewer days in the current quarter accounted for approximately $9.1 million of the total sales decline. Revenues were also $5.5 million lower due to the closure of 18 restaurants since May 31, 2001. Excluding the effect of fewer days and restaurants in this quarter, same-store sales declined $14.0 million, or 13.2%, for the quarter. Cost of food decreased $6.4 million, or 21.1%, due primarily to a decline in sales significantly impacted by fewer restaurants and days. Food cost as a percentage of sales increased slightly from 24.9% to 25.7% in the third quarter in comparison with the same period last year. In the prior year, price increases in that quarter affected food margins. Payroll and related costs decreased $12.9 million, or 31.2%, due primarily to restaurant closures, eight fewer days in the quarter, and lower workers' compensation expense. The ratio of payroll costs to sales improved significantly from 33.9% to 30.5% in the third quarter in comparison with the same period last year. Of the total reduction, $2.3 million, or 18.2% of the total decline, is due to lower workers' compensation costs under the new in- house claims management program initiated in October 2001. Occupancy and other operating expenses decreased $8.5 million, or 19.9%. Although the dollar decrease is primarily due to fewer stores, other factors contributed to the fluctuation. Utility costs also decreased due to lower energy costs coupled with moderate temperatures and conservation. Advertising costs declined due to reduced emphasis on print and television advertising. Depreciation was lower due to write-offs and impairments at August 31, 2001, while food-to-go packaging costs further declined due to the intentional redirection at many locations to inside dining. The provision for asset impairments and restaurant closings increased by $128,000 due to an additional store closing, net of lease settlements that were more favorable than anticipated. There were no charges in this category in the same period of fiscal 2001. General and administrative expenses decreased $1.7 million, or 26.6%, due primarily to lower officers' compensation, officers' life insurance, customer research charges, and professional and consulting fees. Officers' compensation decreased principally due to a reduction in relative headcount. Officers' life insurance decreased principally due to a one-time $216,000 benefit realized on the surrender of officer life insurance policies during the current fiscal year. No customer research expenditures were incurred during the current quarter. Charges related to the proxy and restructuring advice contributed to the higher professional costs in the prior year. Consulting fees decreased principally due to termination of the search for new senior management and a reduction in other consulting services. Interest expense decreased $1.2 million, or 34.4%, due primarily to a lower effective interest rate on outstanding debt, the payoff of the loans on surrendered officers' life insurance policies, and eight fewer days of interest expense in the quarter, offset by interest on the $10 million in new subordinated debt, amortization of the loss on interest rate Swaps, and the amortization of amendment fees for the credit facility. Other income decreased $534,000 principally due to lower gains on sales of properties. The income tax benefit decreased by $491,000, or 85.5%, due primarily to a significantly lower incurred loss in fiscal 2002 versus fiscal 2001. EBITDA, excluding noncash stock compensation, increased by $38,000 in the third quarter in comparison with the same period last year. THREE QUARTERS ENDED MAY 8, 2002, COMPARED TO THE THREE QUARTERS ENDED MAY 31, 2001 Sales decreased $68.3 million, or 19.6%, for the first three quarters of fiscal 2002 compared to the first three quarters of fiscal 2001. Twenty-three fewer days in the first three quarters of fiscal 2002 accounted for approximately $28.6 million of the total sales decline. Revenues were also $15.6 million lower due to the closure of 35 restaurants since August 2000. Excluding the effect of fewer days and restaurants, same-store sales would have declined $24.1 million, or 8.1%, for the three quarters. Cost of food decreased $17.6 million, or 19.8%, due primarily to a decline in sales significantly impacted by fewer restaurants and days. Food cost as a percentage of sales improved slightly for the first three quarters of fiscal 2002 in comparison with the same period last year due to less price discounting. Payroll and related costs decreased $24.5 million, or 20.8%, due primarily to restaurant closures, twenty-three fewer days in the first three quarters of fiscal 2002, and lower workers' compensation expense. Wages as a percentage of sales increased slightly primarily due to the first quarter of fiscal 2002, which included September 11, 2001. Management initiatives to improve labor scheduling are currently in place and have led to improvements in labor expense in the second and third quarters of fiscal 2002 versus the first quarter of fiscal 2002. This category has also declined due to lower workers' compensation costs under the new in-house claims management program. Occupancy and other operating expenses decreased $19.3 million, or 15.6%. Although the dollar decrease is primarily due to fewer stores, in most cases, other factors also contributed to the change. Utility costs also decreased due to lower energy prices coupled with moderate temperatures and conservation. Advertising costs declined due to a planned reduction in print and television advertising. Depreciation was lower due to write-offs and impairments at August 31, 2001, while food-to-go packaging costs further declined due to the intentional redirection at many locations to inside dining. The provision for asset impairments and restaurant closings decreased by $9.9 million, or 97.5%, primarily due to charges of $259,000 recorded to date in fiscal 2002 associated mainly with employee termination costs in comparison with various asset impairments totaling $10.2 million recorded in fiscal 2001. General and administrative expenses decreased $4.0 million, or 20.7%, due primarily to lower officers' compensation, professional and consulting fees, and customer research charges. Officers' compensation decreased principally due to a reduction in relative headcount. Significant expenditures related to the proxy and restructuring advice were a contributing factor to higher professional costs in the prior year. Consulting services decreased principally due to termination of the search for new senior management and a reduction in other consulting fees. No customer research expenditures were incurred during the current quarter. Total interest expense decreased $1.2 million, or 13.9%, due primarily to a lower effective interest rate on outstanding debt, the payoff of the loans on surrendered officers' life insurance policies, and twenty-three fewer days of interest expense for the first three quarters of fiscal 2002 in comparison to the first three quarters of fiscal 2001. These savings were partially offset by interest on the $10 million in new subordinated debt, amortization of the loss on interest rate Swaps, and amortization of amendment fees for the credit facility. Other income decreased $553,000 due primarily to lower gains on sales of properties partially offset by a decrease in property tax late-payment penalties and other miscellaneous costs. The reduction in the income tax benefit of $2.8 million, or 42.1%, was due primarily to a significantly lower incurred loss in fiscal 2002 versus fiscal 2001. EBITDA, excluding noncash stock compensation, decreased by $4.7 million in the first three quarters of fiscal 2002 versus the corresponding quarters of fiscal 2001. This decrease was due primarily to the loss incurred in the first quarter of fiscal 2002, which included September 11, 2001. LIQUIDITY AND CAPITAL RESOURCES CASH AND WORKING CAPITAL Cash and cash equivalents increased by $1.4 million from the end of the preceding fiscal year to May 8, 2002. A net improvement in operating cash flow and an income tax refund of $6.8 million were offset by property tax payments. Approximately $0.4 million of the $5.3 million total income tax receivable balance as of May 8, 2002, relates to the prior fiscal year and is expected to be refunded before the end of fiscal 2002. The remainder relates to current year tax benefits that are also recoverable in the form of refunds in the next fiscal year due to recently enacted changes in tax legislation that will allow for extended carrybacks of net operating losses. The Company typically carries current liabilities in excess of current assets because a substantial portion of cash generated from operating activities is reinvested in capital expenditures. At May 8, 2002, the Company had a working capital deficit of $10.4 million, in comparison to a working capital deficit of $13.9 million at August 31, 2001. The lower deficit was primarily attributable to an increase in income tax receivable and a decrease in accrued expenses and other liabilities; this was offset by an increase in payables. Capital expenditures for the fiscal year to date were $8.5 million. All capital expenditures for fiscal 2002 are being funded from cash flows from operations and cash equivalents. As of the quarter-end, the Company owned 11 properties held for sale, including six undeveloped land sites. The Company also has 11 properties held for future use. Capital expenditures for fiscal 2002 are expected to approximate no more than $15 million. The Company continues to focus on improving the appearance, functionality, and sales at existing restaurants. These efforts also include, where feasible, remodeling certain locations to other dining concepts. One existing property was remodeled in the second quarter to create the Company's first new concept, Luby's Seafood, in Huntsville, Texas. Potential dining themes for other closed restaurants are still under consideration. LONG-TERM DEBT As of September 1, 2001, the Company had a balance of $122 million outstanding under the credit facility. Year to date for fiscal year 2002, three payments totaling $1.1 million were made to the credit facility, which brought the balance to $120.9 million as of May 8, 2002. There is no ability to borrow additional funds under the credit facility. Due to reduced demand after the events of September 11, 2001, and the resulting impact on the economy, the Company was unable to meet its first-quarter fiscal 2002 EBITDA covenant requirement. Accordingly, the Company obtained a waiver and amendment to its credit facility dated December 5, 2001, which waived its EBITDA noncompliance, reset remaining fiscal 2002 quarterly EBITDA targets to a total of $16.6 million for the year, and limited capital expenditures to $15 million. The current maturity date of the Company's credit facility is April 30, 2003, with a provision for further extension to April 30, 2004, given satisfaction of "Further Extension Conditions" detailed in the Waiver and Fifth Amendment to the Credit Facility. The conditions stipulate a higher minimum annual EBITDA of $20 million for fiscal 2002, that no default has occurred, that all required payments have been made, and that the Company pay an administrative fee at the time of extension. The Company is engaged in ongoing discussions with members of its bank group regarding refinancing. Although the Company expects that no default will occur and all payments will be made timely, it intends to explore refinancing or alternative financing at the proper time, if necessary. Based on current projections for fiscal 2002, management believes that the Company's operating results will generate sufficient working capital, along with available cash, to sustain operations and meet required loan covenants and interest payment obligations throughout the year. In the event that the Company is unable to refinance the existing debt at maturity, it would be classified as current and the Company's credit facility lenders would have the right to exercise any and all remedies, including the right to demand immediate repayment of the entire amount outstanding ($120.9 million at May 8, 2002) or the right to pursue foreclosure on assets pledged as collateral. As of May 8, 2002, $250 million of the Company's total book value, or 72.6% of its total assets, in owned real estate, improvements, equipment, and fixtures was pledged as collateral under the credit facility. If the Company is required to arrange alternate financing, it may not be able to obtain such financing from traditional commercial lenders. The Company may have to arrange financing through high-yield debt or conduct additional sales of its equity securities through public or private financing. The Company would be subject to higher than prevailing interest rates than would be obtainable through commercial lenders if financing were arranged through high- yield debt. Substantial and immediate dilution to existing shareholders would likely result from sales of equity securities. In the interim, the Company has taken steps to improve its fiscal 2002 operating results and anticipated cash flows, including cost-saving initiatives in the areas of risk management, labor optimization, and purchasing. VARIABLE-RATE DEBT In prior fiscal years, the Company had Interest Rate Protection Agreements (Swaps) that effectively fixed the interest rate on a portion of its floating- rate debt under its line of credit. The Company terminated its Swaps effective July 2, 2001, due to declining interest rates. The Company currently has a total of $130.9 million in variable-rate debt: $120.9 million under its credit facility at prime plus an applicable margin as required by the amended credit facility and $10 million in subordinated convertible notes loaned to the Company by its CEO and COO at LIBOR plus 2%. (See Note 6.) COMMITMENTS AND CONTINGENCIES In connection with the Luby's Incentive Stock Plan as approved by the shareholders of the Company at the January 8, 1999, annual meeting of shareholders, the Company guaranteed loans in fiscal 1999 of approximately $1.9 million to enable officers to purchase stock in the Company. As of May 8, 2002, the notes, which each officer obtained from JPMorgan Chase Bank and mature in fiscal 2004, have a total outstanding balance of approximately $1.6 million. The purchased Company stock can be used by the borrowers to satisfy a portion of their obligation. The Company does not anticipate default on the loans by any of the borrowers; however, in the event of default, the Company is obligated to purchase the specific borrower's loan from JPMorgan Chase Bank and would therefore become the holder of the note. If the Company becomes the holder of any defaulted notes, it intends to pursue collection using all available remedies. (See Note 8.) AFFILIATE SERVICES AGREEMENT The Company entered into an Affiliate Services Agreement effective August 31, 2001, with two companies, Pappas Partners, LP and Pappas Restaurants, Inc., which are restaurant businesses owned by Christopher J. Pappas and Harris J. Pappas. Initially, one of the purposes of the agreement was to enhance certain areas of the Company by utilizing management and operational support from the Pappas entities. The Company has since hired its own employees in these areas, and consequently, the scope of support services provided by the Pappas entities has greatly declined. As part of the Affiliate Services Agreement, the Company leases a facility (Houston Service Center), which represents 21,000 square feet of shop space and 5,664 square feet of office space, at a rental rate of $0.24 per square foot per month. The office space is primarily used for dispatching repair and maintenance service calls to the Company's restaurants. The remainder of the facility is used primarily for repair and storage of new and used equipment. The agreement also includes the costs incurred for modifications to existing equipment, as well as custom-fabrication, including stainless steel stoves, shelving, rolling carts, and chef tables. These items are custom-designed to fit the kitchens and are also engineered to give a longer service life than comparable manufactured equipment. The pricing of equipment, repair, and maintenance is set periodically and evaluated on an ongoing basis. Based on a periodic review of third-party pricing, it is management's opinion that pricing is set at or below market for comparable goods and services. The Finance and Audit Committee of the Company's Board of Directors uses independent valuation consultants and the Company's external auditors to assist in periodically monitoring the scope, pricing, and fairness of the transactions associated with the Affiliate Services Agreement. The following compares inception-to-date charges incurred under the Affiliate Services Agreement to total general and administrative expenses, capital expenditures, and occupancy and other costs:
Costs Incurred ___________________________________________________________________ (In thousands) ___________________________________________________________________ Total Fiscal 1st 2nd 3rd Year to Total Year Quarter Quarter Quarter Date for All % of 2001 2002 2002 2002 2002 Periods Total ___________________________________________________________________ COSTS INCURRED UNDER THE AFFILIATE SERVICES AGREEMENT General & adminis- trative - profes- sional services $ 51 $ 5 $ 3 $ - $ 8 $ 59 7.5% Capital Expenditures - custom-fabricated and refurbished equipment 200 301 16 136 453 653 82.5% Occupancy and other costs - Houston Service Center lease 20 20 20 20 60 80 10.0% ___________________________________________________________________ Total 271 326 39 156 521 792 100.0% Less pass-through amounts payable to third parties (102) (81) (14) (130) (225) (327) (41.3)% ___________________________________________________________________ Net payable to related party $ 169 $ 245 $ 25 $ 26 $ 296 $ 465 58.7% ___________________________________________________________________ APPLICABLE TOTAL COMPANY COSTS General & Adminis- trative 25,355 5,348 5,360 4,707 15,415 40,770 Capital Expen ditures 17,630 3,062 3,035 2,315 8,412 26,042 Occupancy & Other Costs 166,533 36,384 34,208 34,044 104,636 271,169 __________________________________________________________ Total $209,518 $44,794 $42,603 $41,066 $128,463 $337,981 __________________________________________________________ COSTS INCURRED UNDER THE AFFILATE SERVICES AGREEMENT AS A PERCENTAGE OF APPLICABLE TOTAL COMPANY COSTS 0.08% 0.55% 0.06% 0.06% 0.23% 0.14% __________________________________________________________
TRENDS AND UNCERTAINTIES SAME-STORE SALES The restaurant business is highly competitive with respect to food quality, concept, location, price, and service. The Company has experienced declining same-store sales since 1996 as a result of uneven execution of food and service, as well as increased industry-wide competition. The following shows the comparative change in same-store sales: Fiscal 2001 Fiscal 2002 _____________________________ ______________________ Q1 Q2 Q3 Q4 Q1 Q2 Q3 -6.8% -5.3% -0.4% -0.7% -2.7% -8.6% -13.2% _____________________________ ______________________ The Company enacted price increases in the third and fourth quarters of fiscal 2001. The first quarter of fiscal 2002 includes September 11, 2001. In the third quarter of fiscal 2002, the Company was able to maintain its comparative cash flow level with declining sales by lowering related operating costs. The Company may have additional opportunities to lower costs; however, continued declines in net same-store sales could reduce operating cash flow. If severe declines in cash flow were to develop, the Company's ability to maintain compliance with the financial covenants of the credit facility could be impaired. In such an event, the lender has the right to terminate the credit facility, accelerate the maturity of any outstanding obligation under that facility, and pursue foreclosure on assets pledged as collateral. NEW PROGRAMS Although there can be no assurance that the current strategies will prove to be successful, the Company has initiated a number of programs since March 2001 to address the decline in same-store sales, while increasing profitability by building sales and prudently managing costs. The programs include: - - Food excellence; - - Service excellence; - - Increased emphasis on employee training and development; - - Targeted marketing; - - Closure of certain underperforming restaurants; - - New concept offerings; and - - A new in-house safety and claims program. IMPAIRMENT SFAS 121 requires the Company to review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company considers a history of operating losses or negative cash flows and unfavorable changes in market conditions to be its main indicators of potential impairment. Assets are generally evaluated for impairment at the restaurant level. If a restaurant does not meet its financial investment objectives or continues to incur negative cash flows or operating losses, an impairment or restaurant closing charge may be recognized in future periods. INSURANCE Year-to-date workers' compensation expense has decreased substantially in comparison with the prior fiscal year to date. Future related costs could increase due to unforeseen circumstances. MINIMUM WAGE From time to time, the U.S. Congress considers an increase in the federal minimum wage. The restaurant industry is intensely competitive, and in such case, the Company may not be able to transfer all of the resulting increases in operating costs to its customers in the form of price increases. RESERVE FOR RESTAURANT CLOSINGS The reserve declined from $4.5 million at August 31, 2001, to $3.2 million at May 8, 2002, primarily due to the payment of lease settlement costs of approximately $856,000 and further reductions associated with more favorable lease settlements than originally anticipated. CRITICAL ACCOUNTING POLICIES The Company has identified the policies below as critical to its business and the understanding of its results of operations. The Company believes it is improbable that materially different amounts would be reported relating to the accounting policies described below if other acceptable approaches were adopted. However, application of these accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties; therefore, actual results could differ from these estimates. INCOME TAXES The Company records the estimated future tax effects of temporary differences between the tax bases of assets and liabilities and amounts reported in the accompanying consolidated balance sheets, as well as operating loss and tax credit carryforwards. The Company periodically reviews the recoverability of any tax assets recorded on the balance sheet and provides allowances as management deems necessary. Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management's opinion, adequate provisions for income taxes have been made for all years. IMPAIRMENT OF LONG-LIVED ASSETS The Company periodically evaluates long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In performing impairment reviews of individual restaurants, the Company estimates future cash flows expected to result from the use of the asset and its eventual disposition. The estimates of future cash flows, based on reasonable and supportable assumptions and projections, require management's subjective judgments. The time periods for estimating future cash flows is often lengthy, which increases the sensitivity to assumptions made. Depending on the assumptions and estimates used, the estimated future cash flows projected in the evaluation of long-lived assets can vary within a wide range of outcomes. The Company considers the likelihood of possible outcomes in determining the best estimate of future cash flows. INSURANCE RESERVES The Company periodically reviews its workers' compensation and general liability reserves to ensure reasonableness. The Company initiated an in-house safety and claims program focused on safety training and rigorous scrutiny of new claims, which has reduced costs significantly. Liability estimates are obtained both from an actuarial firm and internal risk management staff. The Company's recorded liability falls within the range of these two estimates. Assumptions and judgments are used in evaluating this liability. The possibility exists that future insurance-related liabilities could increase due to unforeseen circumstances. (See Note 5.) NEW ACCOUNTING PRONOUNCEMENTS The Company reviewed recent accounting pronouncements, including SFAS 144, entitled "Accounting for the Impairment or Disposal of Long-Lived Assets." The provisions of SFAS 144 supersede SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of," and will take effect in fiscal 2003 for the Company. At that time, the Company will ensure existing policies are consistent with the provisions of SFAS 144. The Company does not currently expect the adoption of SFAS 144 to have a material effect on earnings or the financial position of the Company. FORWARD-LOOKING STATEMENTS The Company wishes to caution readers that various factors could cause its actual financial and operational results to differ materially from those indicated by forward-looking statements made from time to time in news releases, reports, proxy statements, registration statements, and other written communications (including the preceding sections of this Management's Discussion and Analysis), as well as oral statements made from time to time by representatives of the Company. Except for historical information, matters discussed in such oral and written communications are forward-looking statements that involve risks and uncertainties, including but not limited to general business conditions, the impact of competition, the success of operating initiatives, changes in the cost and supply of food and labor, the seasonality of the Company's business, taxes, inflation, governmental regulations, and the availability of credit, as well as other risks and uncertainties disclosed in periodic reports on Form 10-K and Form 10-Q. Part II - OTHER INFORMATION Item 1. Legal Proceedings Two former assistant managers of the Company have filed suit against the Company in federal district court alleging violations of the Fair Labor Standards Act and the commission of certain fraudulent acts by the Company. The plaintiffs also seek authorization to represent a class of all assistant managers employed by the Company throughout the United States who they claim, on information and belief, are similarly without the requisite job duties and responsibilities to be considered exempt from the overtime requirements of the Fair Labor Standards Act. The Company has asserted that no class is appropriate, that plaintiffs are exempt from the right to overtime under the Fair Labor Standards Act under the white collar exemptions, and has denied any misrepresentations. The complaint does not specify the total amount of damages being sought. The Company believes that the allegations are unfounded and intends to continue to diligently contest the claims of the plaintiffs. Item 6. Exhibits and Reports on Form 8-K A. Exhibits 3(a) - Certificate of Incorporation of Luby's, Inc., as currently in effect (filed as Exhibit 3(b) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 1999, and incorporated herein by reference). 3(b) - Bylaws of Luby's, Inc. as currently in effect (filed as Exhibit 3(c) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1998, and incorporated herein by reference). 4(a) - Description of Common Stock Purchase Rights of Luby's Cafeterias, Inc., in Form 8-A (filed April 17, 1991, effective April 26, 1991, File No. 1-8308, and incorporated herein by reference). 4(b) - Amendment No. 1 dated December 19, 1991, to Rights Agreement dated April 16, 1991 (filed as Exhibit 4(b) to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 1991, and incorporated herein by reference). 4(c) - Amendment No. 2 dated February 7, 1995, to Rights Agreement dated April 16, 1991 (filed as Exhibit 4(d) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1995, and incorporated herein by reference). 4(d) - Amendment No. 3 dated May 29, 1995, to Rights Agreement dated April 16, 1991 (filed as Exhibit 4(d) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 1995, and incorporated herein by reference). 4(e) - Amendment No. 4 dated March 8, 2001, to Rights Agreement dated April 16, 1991 (filed as Exhibit 99.1 to the Company's Report on Form 8-A12B/A on March 22, 2001, and incorporated herein by reference). 4(f) - Credit Agreement dated February 27, 1996, among Luby's Cafeterias, Inc., Certain Lenders, and NationsBank of Texas, N.A. (filed as Exhibit 4(e) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 29, 1996, and incorporated herein by reference). 4(g) - First Amendment to Credit Agreement dated January 24, 1997, among Luby's Cafeterias, Inc., Certain Lenders, and NationsBank of Texas, N.A. (filed as Exhibit 4(f) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1997, and incorporated herein by reference). 4(j) - Second Amendment to Credit Agreement dated July 3, 1997, among Luby's Cafeterias, Inc., Certain Lenders, and NationsBank of Texas, N.A. (filed as Exhibit 4(i) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1997, and incorporated herein by reference). 4(k) - Third Amendment to Credit Agreement dated October 27, 2000, among Luby's, Inc., Certain Lenders, and Bank of America, N.A. (filed as Exhibit 4(j) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2000, and incorporated herein by reference). 4(l) - Fourth Amendment to Credit Agreement dated July 9, 2001, among Luby's, Inc., Bank of America, N.A., and other creditors of its bank group (filed as Exhibit 4(l) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 2001, and incorporated herein by reference). 4(m) - Deed of Trust, Assignment, Security Agreement, and Financing Statement dated July 2001, executed as part of the Fourth Amendment to Credit Agreement (filed as Exhibit 4(m) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 2001, and incorporated herein by reference). 4(n) - Subordination and Intercreditor Agreement dated June 29, 2001, between Harris J. Pappas and Christopher J. Pappas, Bank of America, N.A. Agreement [as the bank group agent], and Luby's, Inc. (filed as Exhibit 4(n) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 2001, and incorporated herein by reference). 4(o) - Convertible Subordinated Promissory Note dated June 29, 2001, between Christopher J. Pappas and Luby's, Inc. in the amount of $1,500,000 (filed as Exhibit 4(o) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 2001, and incorporated herein by reference). 4(p) - Convertible Subordinated Promissory Note dated June 29, 2001, between Harris J. Pappas and Luby's, Inc. in the amount of $1,500,000 (filed as Exhibit 4(p) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 2001, and incorporated herein by reference). 4(q) - Convertible Subordinated Promissory Note dated June 29, 2001, between Christopher J. Pappas and Luby's, Inc. in the amount of $3,500,000 (filed as Exhibit 4(q) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 2001, and incorporated herein by reference). 4(r) - Convertible Subordinated Promissory Note dated June 29, 2001, between Harris J. Pappas and Luby's, Inc. in the amount of $3,500,000 (filed as Exhibit 4(r) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 2001, and incorporated herein by reference). 4(s) - Fifth Amendment to Credit Agreement dated December 5, 2001, among Luby's, Inc., Bank of America, and other creditors of its bank group (filed as Exhibit 4(s) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2001, and incorporated herein by reference). 10(c) - Management Incentive Stock Plan of Luby's Cafeterias, Inc. (filed as Exhibit 10(i) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1989, and incorporated herein by reference).* 10(d) - Amendment to Management Incentive Stock Plan of Luby's Cafeterias, Inc. adopted January 14, 1997 (filed as Exhibit 10(k) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1997, and incorporated herein by reference).* 10(e) - Nonemployee Director Deferred Compensation Plan of Luby's Cafeterias, Inc. adopted October 27, 1994 (filed as Exhibit 10(g) to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 1994, and incorporated herein by reference).* 10(f) - Amendment to Nonemployee Director Deferred Compensation Plan of Luby's Cafeterias, Inc. adopted January 14, 1997 (filed as Exhibit 10(m) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1997, and incorporated herein by reference).* 10(g) - Amendment to Nonemployee Director Deferred Compensation Plan of Luby's Cafeterias, Inc. adopted March 19, 1998 (filed as Exhibit 10(o) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1998, and incorporated herein by reference).* 10(h) - Amended and Restated Nonemployee Director Stock Option Plan of Luby's, Inc. approved by the shareholders of Luby's, Inc. on January 14, 2000 (filed as Exhibit 10(j) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 29, 2000, and incorporated herein by reference).* 10(i) - Luby's Cafeterias, Inc. Supplemental Executive Retirement Plan dated May 30, 1996 (filed as Exhibit 10(j) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1996, and incorporated herein by reference).* 10(j) - Amendment to Luby's Cafeterias, Inc. Supplemental Executive Retirement Plan adopted January 14, 1997 (filed as Exhibit 10(r) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1997, and incorporated herein by reference).* 10(k) - Amendment to Luby's Cafeterias, Inc. Supplemental Executive Retirement Plan adopted January 9, 1998 (filed as Exhibit 10(u) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1998, and incorporated herein by reference).* 10(l) - Amendment to Luby's Cafeterias, Inc. Supplemental Executive Retirement Plan adopted May 21, 1999 (filed as Exhibit 10(q) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 1999, and incorporated herein by reference.)* 10(m) - Severance Agreement between Luby's, Inc. and Barry J.C. Parker dated December 19, 2000 (filed as Exhibit 10(r) to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 2000, and incorporated herein by reference.)* 10(o) - Luby's Incentive Stock Plan adopted October 16, 1998 (filed as Exhibit 10(cc) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1998, and incorporated herein by reference).* 10(p) - Form of Change in Control Agreement entered into between Luby's, Inc., and each of its Senior Vice Presidents as of January 8, 1999 (filed as Exhibit 10(aa) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1999, and incorporated herein by reference).* 10(q) - Luby's, Inc. Deferred Compensation Plan effective June 1, 1999 (filed as Exhibit 10(cc) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 1999, and incorporated herein by reference).* 10(r) - Registration Rights Agreement dated March 9, 2001, by and among Luby's, Inc., Christopher J. Pappas, and Harris J. Pappas (filed as Exhibit 10.4 to the Company's Current Report on Form 8-K dated March 9, 2001, and incorporated herein by reference). 10(s) - Purchase Agreement dated March 9, 2001, by and among Luby's, Inc. Harris J. Pappas, and Christopher J. Pappas (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K dated March 9, 2001, and incorporated herein by reference). 10(t) - Employment Agreement dated March 9, 2001, between Luby's, Inc. and Christopher J. Pappas (filed as Exhibit 10.2 to the Company's Current Report on Form 8-K dated March 9, 2001, and incorporated herein by reference).* 10(u) - Employment Agreement dated March 9, 2001, between Luby's, Inc. and Harris J. Pappas (filed as Exhibit 10.3 to the Company's Current Report on Form 8-K dated March 9, 2001, and incorporated herein by reference).* 10(v) - Luby's, Inc. Incentive Bonus Plan for Fiscal 2001 (filed as Exhibit 10(z) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2000, and incorporated herein by reference).* 10(w) - Luby's, Inc. Stock Option granted to Christopher J. Pappas on March 9, 2001 (filed as Exhibit 10(w) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 2001, and incorporated herein by reference).* 10(x) - Luby's, Inc. Stock Option granted to Harris J. Pappas on March 9, 2001 (filed as Exhibit 10(x) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 2001, and incorporated herein by reference).* 10(y) - Affiliate Services Agreement dated August 31, 2001, by and among Luby's, Inc., Christopher J. Pappas, Harris J. Pappas, Pappas Restaurants, L. P., and Pappas Restaurants, Inc. (filed as Exhibit 10(y) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2001, and refiled herewith to include signature references and an exhibit that were inadvertently omitted). 10(z) - Ground Lease for a cafeteria site dated March 25, 1994, by and between Luby's Cafeterias, Inc. and PHCG Investments, as amended by Lease Amendment dated July 6, 1994 (filed as Exhibit 10(z) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2001, and incorporated herein by reference). 10(aa)- Lease Agreement dated June 1, 2001, by and between Luby's, Inc. and Pappas Restaurants, Inc. (filed as Exhibit 10(aa) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2001, and incorporated herein by reference). 10(bb)- Final Severance Agreement and Release between Luby's, Inc. and Alan M. Davis dated July 20, 2001 (filed as Exhibit 10(bb) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2001, and incorporated herein by reference). While in search for new executive management, the Company entered into an employment agreement with Mr. Davis in January 2001. The value of that one-year contract was a year's salary upon termination. After new management was secured, the Company finalized the exhibited agreement that provides for the payment of monthly consulting fees to Mr. Davis until July 2002, but releases the Company from all prior employment commitments.* 10(cc)- Consultant Agreement between Luby's Restaurants Limited Partnership and Alan M. Davis dated July 20, 2001 (filed as Exhibit 10(cc) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2001, and incorporated herein by reference).* 10(dd)- Luby's, Inc. Amended and Restated Nonemployee Director Phantom Stock Plan effective September 28, 2001.* 11 - Statement re computation of per share earnings. 99(a) - Corporate Governance Guidelines of Luby's, Inc., as amended October 25, 2001 (filed as Exhibit 99(a) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 13, 2002, and incorporated herein by reference). *Denotes management contract or compensatory plan or arrangement. B. Reports on Form 8-K No reports on Form 8-K have been filed during the quarter for which this report is filed. SIGNATURES 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. LUBY'S, INC. (Registrant) By:/s/Christopher J. Pappas ________________________ Christopher J. Pappas President and Chief Executive Officer By:/s/Ernest Pekmezaris ________________________ Ernest Pekmezaris Senior Vice President and Chief Financial Officer Dated: June 19, 2002 EXHIBIT INDEX 3(a) - Certificate of Incorporation of Luby's, Inc., as currently in effect (filed as Exhibit 3(b) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 1999, and incorporated herein by reference). 3(b) - Bylaws of Luby's, Inc. as currently in effect (filed as Exhibit 3(c) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1998, and incorporated herein by reference). 4(a) - Description of Common Stock Purchase Rights of Luby's Cafeterias, Inc., in Form 8-A (filed April 17, 1991, effective April 26, 1991, File No. 1-8308, and incorporated herein by reference). 4(b) - Amendment No. 1 dated December 19, 1991, to Rights Agreement dated April 16, 1991 (filed as Exhibit 4(b) to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 1991, and incorporated herein by reference). 4(c) - Amendment No. 2 dated February 7, 1995, to Rights Agreement dated April 16, 1991 (filed as Exhibit 4(d) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1995, and incorporated herein by reference). 4(d) - Amendment No. 3 dated May 29, 1995, to Rights Agreement dated April 16, 1991 (filed as Exhibit 4(d) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 1995, and incorporated herein by reference). 4(e) - Amendment No. 4 dated March 8, 2001, to Rights Agreement dated April 16, 1991 (filed as Exhibit 99.1 to the Company's Report on Form 8-A12B/A on March 22, 2001, and incorporated herein by reference). 4(f) - Credit Agreement dated February 27, 1996, among Luby's Cafeterias, Inc., Certain Lenders, and NationsBank of Texas, N.A. (filed as Exhibit 4(e) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 29, 1996, and incorporated herein by reference). 4(g) - First Amendment to Credit Agreement dated January 24, 1997, among Luby's Cafeterias, Inc., Certain Lenders, and NationsBank of Texas, N.A. (filed as Exhibit 4(f) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1997, and incorporated herein by reference). 4(j) - Second Amendment to Credit Agreement dated July 3, 1997, among Luby's Cafeterias, Inc., Certain Lenders, and NationsBank of Texas, N.A. (filed as Exhibit 4(i) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1997, and incorporated herein by reference). 4(k) - Third Amendment to Credit Agreement dated October 27, 2000, among Luby's, Inc., Certain Lenders, and Bank of America, N.A. (filed as Exhibit 4(j) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2000, and incorporated herein by reference). 4(l) - Fourth Amendment to Credit Agreement dated July 9, 2001, among Luby's, Inc., Bank of America, N.A., and other creditors of its bank group (filed as Exhibit 4(l) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 2001, and incorporated herein by reference). 4(m) - Deed of Trust, Assignment, Security Agreement, and Financing Statement dated July 2001, executed as part of the Fourth Amendment to Credit Agreement (filed as Exhibit 4(m) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 2001, and incorporated herein by reference). 4(n) - Subordination and Intercreditor Agreement dated June 29, 2001, between Harris J. Pappas and Christopher J. Pappas, Bank of America, N.A. Agreement [as the bank group agent], and Luby's, Inc. (filed as Exhibit 4(n) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 2001, and incorporated herein by reference). 4(o) - Convertible Subordinated Promissory Note dated June 29, 2001, between Christopher J. Pappas and Luby's, Inc. in the amount of $1,500,000 (filed as Exhibit 4(o) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 2001, and incorporated herein by reference). 4(p) - Convertible Subordinated Promissory Note dated June 29, 2001, between Harris J. Pappas and Luby's, Inc. in the amount of $1,500,000 (filed as Exhibit 4(p) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 2001, and incorporated herein by reference). 4(q) - Convertible Subordinated Promissory Note dated June 29, 2001, between Christopher J. Pappas and Luby's, Inc. in the amount of $3,500,000 (filed as Exhibit 4(q) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 2001, and incorporated herein by reference). 4(r) - Convertible Subordinated Promissory Note dated June 29, 2001, between Harris J. Pappas and Luby's, Inc. in the amount of $3,500,000 (filed as Exhibit 4(r) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 2001, and incorporated herein by reference). 4(s) - Fifth Amendment to Credit Agreement dated December 5, 2001, among Luby's, Inc., Bank of America, and other creditors of its bank group (filed as Exhibit 4(s) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2001, and incorporated herein by reference). 10(c) - Management Incentive Stock Plan of Luby's Cafeterias, Inc. (filed as Exhibit 10(i) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1989, and incorporated herein by reference).* 10(d) - Amendment to Management Incentive Stock Plan of Luby's Cafeterias, Inc. adopted January 14, 1997 (filed as Exhibit 10(k) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1997, and incorporated herein by reference).* 10(e) - Nonemployee Director Deferred Compensation Plan of Luby's Cafeterias, Inc. adopted October 27, 1994 (filed as Exhibit 10(g) to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 1994, and incorporated herein by reference).* 10(f) - Amendment to Nonemployee Director Deferred Compensation Plan of Luby's Cafeterias, Inc. adopted January 14, 1997 (filed as Exhibit 10(m) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1997, and incorporated herein by reference).* 10(g) - Amendment to Nonemployee Director Deferred Compensation Plan of Luby's Cafeterias, Inc. adopted March 19, 1998 (filed as Exhibit 10(o) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1998, and incorporated herein by reference).* 10(h) - Amended and Restated Nonemployee Director Stock Option Plan of Luby's, Inc. approved by the shareholders of Luby's, Inc. on January 14, 2000 (filed as Exhibit 10(j) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 29, 2000, and incorporated herein by reference).* 10(i) - Luby's Cafeterias, Inc. Supplemental Executive Retirement Plan dated May 30, 1996 (filed as Exhibit 10(j) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1996, and incorporated herein by reference).* 10(j) - Amendment to Luby's Cafeterias, Inc. Supplemental Executive Retirement Plan adopted January 14, 1997 (filed as Exhibit 10(r) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1997, and incorporated herein by reference).* 10(k) - Amendment to Luby's Cafeterias, Inc. Supplemental Executive Retirement Plan adopted January 9, 1998 (filed as Exhibit 10(u) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1998, and incorporated herein by reference).* 10(l) - Amendment to Luby's Cafeterias, Inc. Supplemental Executive Retirement Plan adopted May 21, 1999 (filed as Exhibit 10(q) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 1999, and incorporated herein by reference.)* 10(m) - Severance Agreement between Luby's, Inc. and Barry J.C. Parker dated December 19, 2000 (filed as Exhibit 10(r) to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 2000, and incorporated herein by reference.)* 10(o) - Luby's Incentive Stock Plan adopted October 16, 1998 (filed as Exhibit 10(cc) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1998, and incorporated herein by reference).* 10(p) - Form of Change in Control Agreement entered into between Luby's, Inc., and each of its Senior Vice Presidents as of January 8, 1999 (filed as Exhibit 10(aa) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1999, and incorporated herein by reference).* 10(q) - Luby's, Inc. Deferred Compensation Plan effective June 1, 1999 (filed as Exhibit 10(cc) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 1999, and incorporated herein by reference).* 10(r) - Registration Rights Agreement dated March 9, 2001, by and among Luby's, Inc., Christopher J. Pappas, and Harris J. Pappas (filed as Exhibit 10.4 to the Company's Current Report on Form 8-K dated March 9, 2001, and incorporated herein by reference). 10(s) - Purchase Agreement dated March 9, 2001, by and among Luby's, Inc. Harris J. Pappas, and Christopher J. Pappas (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K dated March 9, 2001, and incorporated herein by reference). 10(t) - Employment Agreement dated March 9, 2001, between Luby's, Inc. and Christopher J. Pappas (filed as Exhibit 10.2 to the Company's Current Report on Form 8-K dated March 9, 2001, and incorporated herein by reference).* 10(u) - Employment Agreement dated March 9, 2001, between Luby's, Inc. and Harris J. Pappas (filed as Exhibit 10.3 to the Company's Current Report on Form 8-K dated March 9, 2001, and incorporated herein by reference).* 10(v) - Luby's, Inc. Incentive Bonus Plan for Fiscal 2001 (filed as Exhibit 10(z) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2000, and incorporated herein by reference).* 10(w) - Luby's, Inc. Stock Option granted to Christopher J. Pappas on March 9, 2001 (filed as Exhibit 10(w) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 2001, and incorporated herein by reference).* 10(x) - Luby's, Inc. Stock Option granted to Harris J. Pappas on March 9, 2001 (filed as Exhibit 10(x) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 2001, and incorporated herein by reference).* 10(y) - Affiliate Services Agreement dated August 31, 2001, by and among Luby's, Inc., Christopher J. Pappas, Harris J. Pappas, Pappas Restaurants, L. P., and Pappas Restaurants, Inc. (filed as Exhibit 10(y) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2001, and refiled herewith to include signature references and an exhibit that were inadvertently omitted). 10(z) - Ground Lease for a cafeteria site dated March 25, 1994, by and between Luby's Cafeterias, Inc. and PHCG Investments, as amended by Lease Amendment dated July 6, 1994 (filed as Exhibit 10(z) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2001, and incorporated herein by reference). 10(aa)- Lease Agreement dated June 1, 2001, by and between Luby's, Inc. and Pappas Restaurants, Inc. (filed as Exhibit 10(aa) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2001, and incorporated herein by reference). 10(bb)- Final Severance Agreement and Release between Luby's, Inc. and Alan M. Davis dated July 20, 2001 (filed as Exhibit 10(bb) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2001, and incorporated herein by reference). While in search for new executive management, the Company entered into an employment agreement with Mr. Davis in January 2001. The value of that one-year contract was a year's salary upon termination. After new management was secured, the Company finalized the exhibited agreement that provides for the payment of monthly consulting fees to Mr. Davis until July 2002, but releases the Company from all prior employment commitments.* 10(cc)- Consultant Agreement between Luby's Restaurants Limited Partnership and Alan M. Davis dated July 20, 2001 (filed as Exhibit 10(cc) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2001, and incorporated herein by reference).* 10(dd)- Luby's, Inc. Amended and Restated Nonemployee Director Phantom Stock Plan effective September 28, 2001.* 11 - Statement re computation of per share earnings. 99(a) - Corporate Governance Guidelines of Luby's, Inc., as amended October 25, 2001 (filed as Exhibit 99(a) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 13, 2002, and incorporated herein by reference). *Denotes management contract or compensatory plan or arrangement. EX-11 3 exh11.txt COMPUTATION OF PER SHARE EARNINGS Exhibit 11 COMPUTATION OF PER SHARE EARNINGS The following is a computation of the weighted-average number of shares outstanding which is used in the computation of per share earnings for Luby's, Inc. for the quarter and three quarters ended May 8, 2002, and May 31, 2001. Quarter ended May 8, 2002: 22,423,043 x shares outstanding for 28 days 627,845,204 22,433,043 x shares outstanding for 56 days 1,256,250,408 _____________ 1,884,095,612 Divided by number of days in the period 84 _____________ Weighted average number of shares outstanding - basic 22,429,710 Three quarters ended May 8, 2002: 22,422,943 x shares outstanding for 110 days 2,466,523,730 22,423,014 x shares outstanding for 28 days 627,844,392 22,423,043 x shares outstanding for 56 days 1,255,690,408 22,433,043 x shares outstanding for 56 days 1,256,250,408 _____________ 5,606,308,938 Divided by number of days in the period 250 _____________ Weighted average number of shares outstanding - basic 22,425,236 Quarter ended May 31, 2001: 22,422,943 x shares outstanding for 92 days 2,062,910,756 Divided by number of days in the period 92 _____________ Weighted average number of shares outstanding - basic 22,422,943 Three quarters ended May 31, 2001: 22,420,375 x shares outstanding for 133 days 2,981,909,875 22,422,943 x shares outstanding for 140 days 3,139,212,020 _____________ 6,121,121,895 Divided by number of days in the period 273 _____________ Weighted average number of shares outstanding - basic 22,421,692 -----END PRIVACY-ENHANCED MESSAGE-----