Document/Exhibit Description Pages Size
1: 10KSB Annual Report -- Small Business 19 101K
2: EX-4.D Mortgage and Security Agreement for $450,000 11± 46K
3: EX-4.E Promissory Note for $200,000 6± 30K
4: EX-4.F Promissory Note for $250,000 7± 30K
5: EX-4.G Promissory Note for $500,000 6± 30K
6: EX-13 Registrant's 1995 Annual Report 23 127K
7: EX-23 Consent of Independent Auditors 1 7K
8: EX-27 Financial Data Schedule 1 8K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
/X/ Annual Report under Section 13 or 15(d) of the
Securities Exchange Act of 1934 (Fee Required)
for the fiscal year ended July 2, 1995
/ / Transition report under Section 13 or 15(d) of the
Securities Exchange Act of 1934 (No Fee Required) for the
transition period from ____________ to ___________
Commission file number 0-12701
CUCOS INC.
(Exact name of Small Business Issuer in its charter)
Louisiana 72-0915435
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
110 Veterans Blvd., Suite 222 70005
Metairie, Louisiana (Zip Code)
(Address of principal executive offices)
Issuer's telephone number: (504) 835-0306
Securities registered under Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Act:
Common Stock, no par value
(Title of Class)
Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 12 months
(or for such shorter period that the Issuer was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of issuer's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB.
---
Issuer's revenues for its most recent fiscal year: $19,541,109
Aggregate market value (based on the average bid and asked prices in
the over the-counter market) of the voting stock held by non-affiliates of the
Registrant as of September 5, 1995: approximately $1,421,561.
Number of shares outstanding of each of the Issuer's Classes of common
stock as of September 5, 1995: 2,113,747 shares of Common Stock, no par value.
Documents Incorporated By Reference.
Portions of the Registrant's 1995 Annual Report to Shareholders (the
"1995 Annual Report") are incorporated by reference into Part II, and portions
of the definitive Proxy Statement for the 1995 Annual Meeting of Shareholders
(the "1995 Proxy Statement") are incorporated by reference into Part III.
1
INTRODUCTORY
Definition. Except where the context indicated otherwise, the
following terms have the following respective meanings when used in this Annual
Report: the "Registrant" means Cucos Inc. and the "Fiscal Year" means the 52
weeks ended July 2, 1995, which is the year for which this Annual Report is
filed.
Presentation and Dates of Information. The Item numbers appearing in
this Annual Report correspond with those used in Securities and Exchange
Commission Form 10-KSB (and, to the extent that it is incorporated into Form
10-KSB, the letters used in the Commission's Regulation S-B) as effective on
the date hereof, which specifies the information required to be included in
Annual Reports to the Commission. The information contained in this Annual
Report is, unless indicated to be given as of a specified date or for a
specified period, given as of September 30, 1995. In computing the aggregate
market value of the Registrant's voting stock held by non-affiliates disclosed
on the cover page to this Annual Report, the following stockholders were
treated as affiliates: all officers and directors of the Registrant; any
person owning more than 10% of the Registrant's Common Stock; and Mrs. Vincent
J. Liuzza, Sr.
PART I
Item 1. Business
The Registrant, which was organized in March 1981 by Vincent
J. Liuzza, Jr., Chairman of the Board and President of the Registrant, and
other members of the Liuzza family, operates and franchises full-service
restaurants serving moderately priced Sonoran and Tex-Mex Mexican appetizers
and entrees and complementary alcoholic beverages. The first Cucos restaurant
opened in a suburb of New Orleans (Metairie) in June 1981. At fiscal year end
on July 2, 1995, 22 restaurants were operating under the Cucos name, 15 of
which are owned by the Registrant and 7 by franchisees. There were
twenty-seven and thirty-one total restaurants in operation at the end of
fiscals 1994 and 1993.
During the fiscal year ended July 4, 1993, the Registrant
continued with its development of its "Cucos Border Cafe" concept, opening one
Cucos Border Cafe in Houma, Louisiana, and remodeling two additional
Registrant-owned restaurants to Border Cafes. Two existing franchisee-owned
restaurants were also remodeled to Border Cafes. During that fiscal year, one
franchised restaurant, which was not operating as a Border Cafe, closed due to
a combination of operating problems and local market conditions.
During the fiscal year ended July 3, 1994, Registrant
experienced a decline in comparable sales per restaurant after nine (9)
consecutive years of increases. Casino gambling on the Gulf Coast adversely
affected results, as did a myriad of openings by indirect competitors in
multiple markets. In addition, the Registrant opened one new Border Cafe
restaurant in the New Orleans market, which temporarily affected the sales of
two other restaurants in New Orleans. To offset these negative trends for the
future, the Registrant began work on its first television commercial and
instituted a major consumer research effort.
During the fiscal year ended July 2, 1995, the Company
experienced a 1.7% decline in comparable sales per restaurant. The
proliferation of casino gaming in Louisiana and Mississippi continue to
adversely affect the Company's sales and profitability. Additional gaming
facilities are planned for both Louisiana and Mississippi. The second
competitive factor hurting sales and profits was the negative study on Mexican
food by the Center for Science in the Public Interest (CSPI), which affected
the complete Mexican Segment. Well known large Mexican chains
2
such as Chi-Chis and Pancho's have also reported significant declines in
comparable sales per restaurant during the last twelve months. The third
competitive factor is the continued expansion of Mexican items at other casual
dining restaurants. In addition, the casual segment of the restaurant industry
has moved from using primarily word-of-mouth and radio advertising to
television.
To counteract these trends, management instituted a program to
competitively reposition the Cucos concept by:
o Accelerating the remodeling of all Company and franchised
restaurants.
o Modestly reducing prices to ensure there were sufficient
number of choices at lower price points for our guests.
o Intensifying advertising, including the development of the
Company's first television campaign.
These actions were mostly completed during the Third And
Fourth Quarters. Comparable sales per restaurant for company-owned locations
INCREASED 4.7% for the Fourth Quarter of fiscal 1995. This is the first
quarterly increase in comparable sales per restaurant in almost two years.
NARRATIVE DESCRIPTION OF BUSINESS
REGISTRANT-OWNED RESTAURANTS
General. Cucos restaurants are full-service restaurants which
serve a limited menu of Sonoran and Tex-Mex Mexican appetizers and entrees at
moderate prices. The Registrant's specialties are the "Chimichanga", the "Wild
Tostada", the "Super Taco", the "Alotta Enchilada", the "Burrito Supreme" and
"Fresh-itas", Cucos' version of fajitas. The restaurants also offer the more
traditional tacos, tamales, tostadas, enchiladas, fajitas and burritos. Most
of the dishes are served with Cucos Special Sauce, a spicy beef stock-based
sauce which is prepared by the Registrant from its own secret recipe. The menu
also offers various combination platters; various appetizers, including the
"Macho Nacho", avocado, guacamole and taco salads; half-pound "El Hamburgers"
served with french fries; a deep fried ice cream and banana chimichanga
desserts. In addition, during fiscal 1992 the Registrant introduced its new
"Heart Healthy" menu which was developed in conjunction with Ochsner Hospital
of New Orleans. The "Heart Healthy" menu selections have reduced calories, fat
content and cholesterol without sacrificing flavor. The restaurants also serve
a variety of alcoholic beverages, including American and Mexican beer and the
Registrant's own special-recipe Margaritas, Strawberry Margaritas, Pina
Coladas, Strawberry Coladas and Sangria. The restaurants are open seven days a
week from 11 a.m. until midnight.
The Registrant emphasizes the freshness and quality of its
food and beverages, the size of its portions and its plate presentations. The
Registrant's menu items are designed to appeal to the American palate. Fresh
ingredients are used in preparing the menu items. The Registrant uses a higher
quality beef than the traditional hamburger meat or shredded beef used in many
Mexican restaurants.
Food sales account for approximately 78% of revenues at the
fifteen Registrant-owned restaurants operated in fiscal 1995, with alcoholic
and other beverages representing approximately 22%. Special Luncheon menu
items range in price from $3.99 to $6.95. The prices of the specialty and
combination dinner items range from $5.95 to $8.95. The per person average
check, including beverage for fiscal 1995, is $9.87 and the average dining time
per table is approximately 45 minutes.
3
The restaurants are decorated with an abundance of cactus
plants and distinctive neon decorations intended to create a Southwestern
motif. Employees are encouraged to provide friendly service to each restaurant
guest. Management believes that the restaurants have a casual, festive
atmosphere which appeals particularly to adults between the age of 20 and 50.
Restaurant Management and Supervision. Each restaurant is
operated in accordance with uniform standards set by management relating to the
preparation and service of food and drink, appearance and conduct of employees,
and cleanliness of facilities. Food and beverage products are periodically
tested for quality and uniformity of portions. In accordance with the
Registrant's standards, each restaurant is run by a general manager, assisted
by two managers, a kitchen supervisor, a service supervisor and a bar
supervisor. At least one manager is on duty during all serving periods. Each
of Registrant's restaurant general managers receives, in addition to a salary,
incentive compensation calculated as a percentage of sales in excess of a
predetermined base level.
The Registrant's long-term expansion plans require it to
develop additional trained general managers. The Registrant requires
candidates for general manager to undergo a thorough training program designed
to familiarize them with all aspects of the Registrant's operations. A
candidate serves as an assistant manager before becoming a general manager.
Persons selected for training as general managers normally have several years
of food service experience.
Expansion Program. During fiscal year 1996, the Registrant
will consider acquisition of other sites or franchisee-owned restaurants as
they come available. The primary growth in sales for fiscal 1996 will be
accomplished by increasing comparable sales per restaurant through remodeling
of existing restaurants.
The Registrant is planning for expansion of the Cucos system
over the long-term. In this connection, the Registrant is currently studying
the population densities, traffic patterns, income levels, competition and
comparative cost structures for other suitable sites. The Registrant also
intends to expand by further franchising. See "Franchised Restaurants" below.
The ability of the Registrant or a franchisee to open a new
restaurant will depend on locating satisfactory sites, the availability of bank
and lease financing at acceptable terms, having sufficient working capital,
obtaining adequate property, casualty and liquor liability insurance coverages
at a reasonable cost, securing appropriate local government permits, licenses
and approvals, and on the capacity of the Registrant or a franchisee to
supervise construction and to recruit and train management personnel. Such
factors may cause a delay in the Registrant's planned development schedule.
The Registrant believes that its development plan of
controlled growth will occur in the Southeastern United States. The Registrant
expects in most cases to locate Registrant-owned and franchised restaurants in
high traffic, high growth areas of commercial or residential concentration, at
or near shopping centers. Registrant-owned and franchised restaurant sites
will be judged by the Registrant's executive management against certain
criteria as to population density, income levels, amount of competition,
ingress/egress and traffic patterns.
The Registrant believes that there are a number of existing
restaurant facilities which have either closed or are currently operating at a
loss or at marginal levels of profitability. The Registrant believes that a
number of these units may be suitable for conversion to a Cucos restaurant and
can be leased or purchased at attractive prices. The Registrant's strategy for
expansion (with respect to both Registrant-owned and franchised restaurants),
therefore, is primarily to locate units of this type rather than to follow the
strategy of most specialty restaurant chains, which has been to construct new
restaurant facilities on land owned or leased by the chain or to enter
build-to-suit arrangements under which new facilities are built to the
specifications of
4
the chain. In addition to the economic benefits of the Registrant's strategy,
such strategy may substantially reduce the delay between the site selection and
the opening of a new restaurant and may allow the Registrant to gain entry into
densely-populated suburban and urban markets in which land is either not
available for the construction of new restaurants or, if available, is
prohibitively expensive. The Registrant's expansion strategy may, however,
subject it to the same adverse factors that caused the existing facility to
operate marginally or unprofitably prior to being converted to a Cucos
restaurant. The Registrant intends to combat these adverse factors by
providing food and service, in renovated facilities, that will appeal to the
available customer base.
The Registrant estimates that the initial investment that will
be required in leasing an existing restaurant facility and converting it for
operation as a Registrant-owned restaurant will be between $550,000 and
$740,000. A new (rather than existing) leased facility could involve
substantially higher costs for leasehold improvements.
When a new Registrant-owned restaurant is opened, the
Registrant temporarily transfers experienced personnel from one or more of its
existing restaurants to the new restaurant. Prior to opening, personnel at the
new location undergo intensive training, which includes several pre-opening
events at which test meals are served.
The success of the Registrant's expansion program will depend
on, among other factors, capital availability, whether the Registrant is able
to attract and retain sufficient qualified, experienced managers and assistant
managers, and whether management will be able to ensure that Registrant-owned
and franchise restaurants operate in accordance with the Registrant's
standards.
Purchasing. Management believes that centralized purchasing
is advantageous to the Registrant in that it has allowed it to take advantage
of certain volume discounts. Fresh produce, beverages and certain other items
are purchased by each Registrant-owned restaurant from local wholesalers. The
Registrant believes that satisfactory local sources of supply are generally
available for all of the other items it regularly uses in its restaurants.
Insurance. Insurance costs have risen considerably in the
restaurant business, especially for those restaurants with liquor licenses.
The Registrant carries fire and casualty insurance on its Registrant-owned
restaurants and liability insurance in amounts which management feels is
adequate for its operations.
Marketing. The Registrant advertises primarily by television
advertising. Its advertising promotes the name "Cucos" and emphasizes quality
dining in a festive atmosphere at moderate prices. Periodically, print and
radio advertising are also used to advertise special events and promotions.
In the summer of 1994, the Center for Science in the Public
Interest (CSPI) published a report to the effect that Mexican food contained
unhealthy amounts of fat, salt and cholesterol. To counter the negative
publicity generated by the publication of this report, the Registrant
emphasizes the health benefits of its "Heart Healthy" selections, which it
believes gives Registrant a competitive edge over those Mexican restaurants
which do not offer comparable menu selections.
FRANCHISED RESTAURANTS
Subsequent to year-end, the Company granted development rights
to construct five franchised restaurants in the State of Louisiana during the
next seven years. At the present time, the Registrant is offering franchises
on a selective basis. No assurances can be given as to the number of franchise
development areas that will be sold during the fiscal year 1996 or the impact
5
of development fee revenues upon the Registrant's profitability and cash
position during fiscal year 1996.
The development agreements generally obligate the developer to
construct a specified number of Cucos restaurants within the licensed
territory. The restaurants may be either new restaurants or conversions of
existing restaurants, although the Registrant encourages franchisees to convert
existing restaurants whenever possible (see "Expansion Program"). A developer
must open new Cucos restaurants within the development territory in accordance
with the schedule set forth in the development agreement. If a developer fails
to open restaurants in accordance with the schedule, generally the Registrant
may notify the developer that it is in default under the development agreement
and may terminate the agreement 30 days thereafter if the default has not been
cured.
Generally, a development agreement expires three years after
the latest date set forth in the development schedule. During the first year
after completion of the schedule, the Registrant is prohibited from either
opening a Cucos restaurant or granting a franchise to someone other than the
developer to establish a Cucos restaurant within the licensed territory. If
during the second and third year after the completion of the schedule, the
Registrant desires to establish additional restaurants within the licensed
territory, the developer for that area has a right of first refusal to enter
into additional development agreements with respect to such additional
restaurants so long as the developer is in compliance with the then existing
development agreement. If the developer exercises its right of first refusal,
the developer is required to pay the fees for each restaurant then being
charged to new developers. Upon expiration of the development agreement, the
Registrant may open Registrant-owned restaurants in the previously licensed
territory or grant franchises to other persons to open additional franchised
restaurants in the previously licensed territory.
Development agreements provide for the payment of an initial
nonrefundable development fee by the developer upon execution of the agreement.
The development fee with respect to development agreements is generally $15,000
per restaurant up to five restaurants and $10,000 per restaurant thereafter.
The Registrant anticipates that the amount of the development fee with respect
to future development agreements will be based upon the size and nature of the
area covered by the development agreement.
Prior to the acquisition of a site for a restaurant in the
licensed territory, the developer must submit to the Registrant certain
information concerning the site and certain market information. Upon the
Registrant's approval of the site, the developer is required to enter into a
license agreement with the Registrant with respect to the restaurant to be
developed under the development agreement.
The license agreements generally have terms of 20 years from
the date of their execution. However, if the license agreement pertains to a
franchised restaurant that is leased, the license agreement terminates upon the
earlier of 20 years from the commencement date of the lease or upon the
termination or expiration of the primary term of the lease, plus any options to
renew the lease.
Generally franchisees are required to pay to the Registrant
under the license agreement a continuing royalty fee equal to 4% of gross
revenues at the restaurant. In addition, franchisees are required to pay a
continuing monthly contribution to an advertising materials fund equal to .5%
of gross revenues at the restaurant and if a national advertising fund or a
regional advertising fund applicable to the franchisee's region is established
by the Registrant (the Registrant has not done so to date), the franchisees
must also pay to the Registrant continuing monthly contributions, for use by
such funds, equal to amounts not to exceed 1% and 2% of gross revenues of the
restaurant, respectively, for the national media fund or the regional
advertising
6
fund in the franchisee's region. The Registrant has not established a national
or regional advertising fund and accordingly has not required contributions for
such funds.
The license agreement provides that the franchisees will
comply strictly with the Registrant's standards, specifications, processes,
procedures, requirements and instructions regarding the operation of the
franchisee's restaurant. The Registrant is obligated to provide initial
training programs for franchisees and to provide personnel for on-site
assistance in opening each franchised restaurant. The Registrant has the right
to approve the person designated by the franchisee to have overall supervisory
authority over franchised restaurant operations or, if no such overall
operations manager is designed, to approve each restaurant general manager.
Franchisees purchase food products and restaurant supplies
conforming to Registrant's specifications from independent suppliers.
Alternate sources of these items are generally readily available. The
Registrant may sell equipment, food or supplies to franchisees upon request,
but otherwise does not intend to do so. The Registrant continues to sell a
small amount of proprietary advertising materials and confidential recipe spice
packs to franchisees. The Registrant anticipates continuing these sales.
ADMINISTRATION AND RELATED MATTERS
L.B.G., Inc. (formerly Sizzler Family Steak Houses of Southern
Louisiana, Inc.) ("L.B.G.") is a company owned by Vincent J. Liuzza, Jr., the
President and Chairman of the Board of the Registrant, David M. Liuzza, a
former officer of the Registrant, and Mrs. Vincent J. Liuzza, Sr., (as
executrix of the Succession of Vincent J. Liuzza, Sr.) a principal shareholder
of the Registrant. Until February, 1994, L.B.G. operated a franchised Cucos
restaurant.
Under an agreement with L.B.G. dated as of October 1, 1983,
the Registrant provides bookkeeping, accounting and similar administrative
services to L.B.G., which pays the Registrant for a portion of the expenses of
providing these services based on L.B.G.'s proportionate share of the aggregate
gross sales of L.B.G. and the Registrant. As of July 2, 1995, these costs
total about $25,015 per four-week period. Under the above formula, L.B.G.
currently pays the Registrant for about 2.2% of these costs, and the Registrant
bears the remaining 97.8%. For fiscal 1995, approximately $7,000 of these
costs were allocated to L.B.G. The Registrant believes that the terms of this
arrangement with L.B.G. are at least as favorable to it as could be negotiated
with a third party.
The Registrant and L.B.G. also share rental expenses based
upon the square footage of the building occupied by each of them. Under that
formula, the Registrant paid approximately 95% of the building rental and
L.B.G. bore the remaining 5%. In the Fiscal Year ended July 2, 1995, the
Registrant paid rent of $102,405 and L.B.G. paid $4,899.
EMPLOYEES
At July 2, 1995, the Registrant-owned restaurants employed
approximately 829 part-time and full-time persons, of which 50 were managers
and assistant managers, all of whom are full-time. In addition, 23 persons
were employed at the Registrant's executive office. The Registrant endeavors
to control its employee turnover rate by offering to all full-time restaurant
employees certain paid benefits, including life insurance, health insurance and
vacation. None of the Registrant's employees are represented by a labor union.
The Registrant has experienced no work stoppages attributable to labor disputes
and considers its employee relations to be satisfactory.
7
COMPETITION
The restaurant business is highly competitive and is often
affected by changes in taste and eating habits, by local and national economic
conditions affecting spending habits, and by population and traffic patterns.
The Registrant believes that the quality and price of food products are the
principal means of competition in the restaurant industry. Also of importance
are site locations, quality and speed of service, cleanliness, advertising and
attractiveness of facilities.
The Registrant presently competes directly with Casa Garcia,
El Patio, Jalapeno's and Chili's at its Metairie locations; with Dos Gringo's
at its Westbank location; with El Chico at its Alexandria and Monroe locations;
with Vera Cruz and Vaquero's at its New Orleans location; and with Chili's and
several independent Mexican restaurants at its other locations. Each location
also competes with numerous restaurants offering other types of
moderately-priced foods and beverages, as well as Mexican appetizers and
entrees. Many of these restaurants are nationally or regionally-known chain
operations which operate more restaurants and have greater financial resources
and greater name recognition than the Registrant.
In addition, gaming operations often offer food at discounted
or below cost prices which provide a new level of indirect competition in the
Registrant's Louisiana and Mississippi markets.
GOVERNMENT REGULATION
Each of the Registrant's restaurants is subject to licensing
and regulation by state liquor control boards and the state police in
Louisiana, and by municipal health, sanitation, safety and fire department
agencies. The Registrant expects that liquor sales and video poker revenues
will account for a significant portion of the Registrant's revenues. During
1995 liquor sales and video poker commissions accounted for about 16.4% and
2.8% of revenues, respectively. The loss of an existing liquor license or
video poker license or the inability to obtain a liquor or video poker license
at a new restaurant would adversely affect the Registrant's operations at that
restaurant. There has been discussion in the media about the possibility of
the authority to issue video poker licenses moving from the State to local
communities. To the Registrant's knowledge, no legislation has been proposed
to affect this change. However, if such legislation were proposed and passed,
each local community where the Registrant's restaurants are located would have
the option to ban video poker, which would have an adverse affect on any
restaurants in that community.
The Registrant is also subject to the Fair Labor Standards
Act, which governs such matters as minimum wages, overtime, and other working
conditions. Many of the Registrant's food service personnel are paid at rates
related to the minimum wage and, accordingly, increases in the minimum wage
increase the Registrant's labor costs.
The Registrant is also subject to the provisions of Americans
with Disabilities Act. The Registrant has remodeled its restaurants to meet
these requirements where necessary.
The Registrant's franchise operations are subject to a variety
of laws regulating the marketing of franchises. Federal Trade Commission
regulations impose certain disclosure requirements on persons engaged in the
business of offering franchises. States in which the Registrant offers
franchises also may have franchising laws that require registration prior to
the offering of franchises for sale in those states or that afford franchisees
substantive rights, including limiting the circumstances under which franchises
may be terminated.
8
MISCELLANEOUS
Customers. No material part of the Registrant's business is
dependent upon a single customer, or a very few customers, the loss of any one
of which would have a material adverse effect on the Registrant. No single
customer accounts for as much as 10% of the Registrant's total revenues.
Seasonality. The Registrant's results are impacted by
seasonality. Usually the highest sales periods occur in late Spring and
Summer, with sales declining in the Fall and Winter. This is especially true
for the Gulf Coast restaurants where sales are more dependent on tourism.
Service Marks and Trademarks. The Registrant is the owner of
United States Service Mark Registrations Nos. 1,509,612, dated October 18,
1988, for the mark CUCOS; and 1,733,801 dated November 17, 1992, for the mark
CUCOS BORDER CAFE and DESIGN. The Registrant is also the owner of United
States Trademark Registrations Nos. 1,405,169, dated August 12, 1986, for the
mark FRESH-ITAS (Cucos' version of fajitas) and 1,465,729, dated November 17,
1987, for the mark FRESH-ITA NACHOS (Cucos' version of fajita nachos). Those
registrations which issued prior to November 16, 1989, have an effective term
of 20 years and those issued on or after November 16, 1989, have an effective
term of 10 years, unless sooner terminated by law, and all may be renewed for
successive terms so long as the marks continue to be used by Registrant in
interstate commerce for the specified services or goods. The Registrant has a
pending application for the mark CUCOS MEXICAN CAFE & DESIGN, the mark of which
has been approved by the Examiner for publication in the Official Trademark
Gazette; and the Registrant has filed an application for the mark THE TASTE TO
MAKE YOU SAY OLE. The Registrant also owns a service mark registration as
issued by the State of Louisiana, dated July 14, 1987, for the name CU-CO's.
This registration is effective for a term of 10 years and may be renewed for
successive terms. All of these registrations are valid and subsisting. In
addition, Registrant is the owner of Copyright Registrations for its Cucos
Power Manual and Video, dated November 4, 1988.
Item 2. Properties.
The following table summarizes certain information concerning
Registrant-owned restaurants located in facilities that are leased from others
as of September 1, 1995.
[Download Table]
Lease
Size Dining Lease Option(s)
Location Opened/Acquired (Sq. Ft.) Capacity Expires Through
-------- --------------- --------- -------- ------- -------
New Orleans -
Metairie June 1981 4250 136 1997 2017
Biloxi, MS April 1982 5600 159 1997 2032
New Orleans -
Westbank September 1983 4800 147 1998* 2010
Monroe, LA June 1984 4284 146 1999** 2019
Slidell, LA November 1984 4200 139 2008*** 2018
Alexandria, LA March 1985 5040 143 2000 2015
New Orleans -
Uptown November 1985 4539 120 2000 2015
Pascagoula, MS December 1989 5160 130 2011 2021
Hammond, LA July 1990 6062 130 1996 2002
Tallahassee, FL July 1991 5258 160 1998 2023
Birmingham, AL March 1992 4560 150 2006 2012
Houma, LA September 1992 6000 148 2007 2027
Birmingham, AL February 1993 5000 160 1996 2016
Montgomery, AL February 1993 5100 170 1997 2007
9
* Exercised Second Three-year option after expiration of first option
in 1995.
** Exercised Second Five-year option after expiration of first option
in 1994.
*** Lease Amendment executed 6/14/93; term 15 years.
The New Orleans-Westbank location, the Slidell location and
the second Birmingham and Montgomery, Alabama, locations are in strip shopping
centers. The Hammond, first Birmingham and Houma locations are in shopping
malls. Eleven locations are free-standing buildings. The restaurant leases
require the Registrant to pay real estate taxes, insurance and utilities, and
to bear repair, maintenance and other expenses normally borne by the lessee
under a triple net lease. The Company owns the land and building of its
Pensacola restaurant.
Item 3. Legal Proceedings.
As previously reported by the Registrant, on May 2, 1991, the
Court of Appeals of Tennessee affirmed the dismissal, without prejudice, by the
Chancery Court of Shelby County, Tennessee, of a complaint styled Tennsonita
(Memphis), Inc., et al. v. Cucos Inc. (Civil Action No. 98110-1), filed against
the Registrant by Tennsonita (Memphis), Inc., Tennsonita Realty, Inc., Joseph
Files, Donald M. Quinn, III, Jerome F. Moeller and James A. Moeller. The
plaintiffs had asserted claims against the Registrant for, among other things,
misrepresentation, breach of contract, fraud and unfair trade practices in the
marketing and sale to the plaintiffs of franchise development rights for the
state of Tennessee, and in the operating support that the Registrant provided
to the plaintiffs in connection with the development of their restaurant in
that territory. The complaint also alleged that the Registrant breached an
agreement with the plaintiffs to purchase plaintiffs' restaurant and
development rights. The relief sought by the plaintiffs included specific
performance of the alleged purchase agreement, compensatory damages in excess
of $1.6 million, punitive damages, treble damages pursuant to the Tennessee
Consumer Protection Act (the "Act"), and attorney's fees pursuant to the Act.
On April 12, 1990, the Chancery Court granted the Registrant's motion to
dismiss, without prejudice, the plaintiffs' claim on the grounds that it had to
be brought in a Louisiana forum pursuant to a contract between the parties.
Also as previously reported by the Registrant, on April 11,
1990, the plaintiffs filed a complaint in the 24th Judicial District Court for
the Parish of Jefferson, Louisiana, against the Company and, as an additional
defendant, its President and Chairman of the Board of Directors, Vincent J.
Liuzza, Jr., entitled Tennsonita (Memphis), Inc. v. Cucos Inc. (case no.
397857-5). The allegations contained therein are substantially similar to
those asserted in the dismissed Tennessee complaint. The relief sought by
plaintiffs includes actual damages, in an amount to be proven at trial,
together with attorney's fees, costs, legal interest, and such other relief as
the Court may deem appropriate. The Registrant and Mr. Liuzza initially filed
certain exceptions to plaintiffs' suit, seeking, among other things, dismissal
of the suit. The District Court overruled these exceptions. However, the
Registrant and Mr. Liuzza presently have pending two additional exceptions,
which have not yet been argued. If these exceptions are ruled favorably upon
by the District Court, the plaintiffs' case would be dismissed by the District
Court, subject to plaintiffs' right to appeal such a decision. There has been
no activity in this litigation for more than two years. On August 3, 1992,
however, plaintiffs advised Registrant that they had closed the restaurant in
Memphis, Tennessee, which closure was necessitated by the continuing damages
and losses suffered by Tennsonita as alleged in the lawsuit. The Registrant
believes the plaintiff's claims are groundless.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of the Registrant's
security holders, through the solicitation of proxies or otherwise, during the
fourth quarter of the Fiscal Year.
10
PART II
Item 5. Market for the Registrant's Common Stock and Related
Shareholder Matters.
Reference is made to the information concerning the market for
the Registrant's common stock, no par value, and related shareholder matters
appearing on page 14 of the 1995 Annual Report. Such information is
incorporated herein by reference to the 1995 Annual Report.
Item 6. Management's Discussion and Analysis or Plan of Operation.
Reference is made to "Management's Discussion and Analysis of
Results of Operation and Financial Condition" appearing on pages 5 through 9 of
the 1995 Annual Report. Such information is incorporated herein by reference
to the 1995 Annual Report.
Item 7. Financial Statements.
Reference is made to the following financial statements and
notes thereto appearing on pages 11 through 14 and 15 through 18 of the 1995
Annual Report. Such information is incorporated herein by reference to the
1995 Annual Report, which is attached as Exhibit 13 to this Annual Report.
[Enlarge/Download Table]
Statements of Operations Fiscal Years ended July 2, 1995, July 3, 1994, and July
4, 1993
Balance Sheets July 2, 1995, and July 3, 1994
Statements of Cash Flows Fiscal Years ended July 2, 1995, July 3, 1994, and July
4, 1993
Statements of Shareholders' Equity Fiscal Years ended July 2, 1995, July 3, 1994, and July
4, 1993
Report of Ernst and Young LLP, Independent Fiscal Years ended July 2, 1995, July 3, 1994, and July
Auditors 4, 1993
Report of Management Fiscal Years ended July 2, 1995, July 3, 1994, and July
4, 1993
Notes to Financial Statements
Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
None.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act of the
Registrant.
Reference is made to the information concerning the directors
of the Registrant and the nominees for re-election as directors appearing under
the caption "Election of Directors" in the
11
1995 Proxy Statement. Such information is incorporated herein by reference to
the 1995 Proxy Statement.
Reference is made to the information concerning the executive
officers of the Registrant who are not directors appearing under the caption
"Executive Officers of the Company" in the 1995 Proxy Statement. Such
information is incorporated herein by reference to the 1995 Proxy Statement.
Reference is made to the information concerning compliance
with Section 16(a) of the Exchange Act appearing under the caption "Compliance
with 16(a) of the Securities Exchange Act of 1934" in the 1995 Proxy Statement.
Such information is incorporated herein by reference to the 1995 Proxy
Statement.
Item 10. Executive Compensation.
Reference is made to the information concerning remuneration
of directors and executive officers of the Registrant appearing under the
captions "Additional Information-Executive Compensation," "Additional
Information-Stock Option Grants During Fiscal 1995," "Additional
Information-Aggregated Stock Option Exercises and Fiscal Year-Ended Option
Values," and "Additional Information-Compensation of Directors," in the 1995
Proxy Statement. Such information is incorporated herein by reference to the
1995 Proxy Statement.
Item 11. Security Ownership of Certain Beneficial Owners and
Management.
Reference is made to the information concerning beneficial
ownership of the Registrant's Common Stock, which is the only class of the
Registrant's voting securities, appearing under the captions "Beneficial
Ownership" and "Election of Directors" in the 1995 Proxy Statement. Such
information is incorporated herein by reference to the 1995 Proxy Statement.
Item 12. Certain Relationships and Related Transactions.
Reference is made to the information regarding certain
relationships and transactions between the Registrant and its directors,
nominees for re-election as directors of the Registrant, its executive
officers, beneficial owners of 5% or more of its Common Stock and any member of
the immediate family of any of the foregoing persons, appearing under the
caption "Additional Information-Certain Relationships and Related Transactions"
in the 1995 Proxy Statement. Such information is incorporated herein by
reference to the 1995 Proxy Statement.
Item 13. Exhibits and Reports on Form 8-K.
EXHIBITS
The following exhibits are filed with this Annual Report or
are incorporated herein by reference:
[Download Table]
Exhibit Number Title
--------------
(1) 2 - Joint Agreement of Merger, dated February 23, 1983, of Cu-Co's of
Biloxi, Inc.
(1) 3-A - Copy of Articles of Incorporation of the Registrant.
12
[Download Table]
(1) 3-A-1 - Copy of Amendment to Articles of Incorporation of the Registrant.
(1) 3-A-2 - Copy of Amendment to Articles of Incorporation of the Registrant.
(1) 3-A-3 - Copy of Amendment to Articles of Incorporation of the Registrant.
(1) 3-B - Copy of By-Laws of the Registrant.
(2) 3-B-1 - Copy of Amendment to By-Laws of Registrant.
(9) 3-B-2 - Amended and Restated By-Laws of the Registrant.
(3) 4-A - Rights Agreement, dated as of February 5, 1990, between the
Registrant and Commercial National Bank in Shreveport.
(3) 4-B - Letter, dated February 26, 1991, from Whitney National Bank to
the Registrant confirming the change of Rights Agent from
Commercial National Bank in Shreveport to Whitney National Bank.
(3) 4-C - Assignment of Rights Agreement, dated August 30, 1993, among
Whitney National Bank, Boatmen's National Bank and the Registrant
with respect to the change of Rights Agent from Whitney National
Bank to Boatmen's National Bank.
4-D - Copy of Mortgage and Security Agreement dated April 25, 1994,
with First National Bank of Commerce for $450,000.
4-E - Copy of Promissory Note dated October 27, 1994, with First
National Bank of Commerce for $200,000.
4-F - Copy of Promissory Note dated October 27, 1994, with First
National Bank of Commerce for $250,000.
4-G - Copy of Promissory Note dated October 27, 1994, with First
National Bank of Commerce for $500,000.
(10) 4-H - Note Purchase Agreement (with Exhibits).
(10) 4-I - Amendment No. 1 to Rights Agreement.
(1) 10-A - Copy of Registrant's 1983 Stock Option Plan.
13
[Download Table]
(1) 10-B - Copy of letter agreement between the Registrant and certain
stockholders of the Registrant relating to piggyback registration
rights.
(4) 10-C - Amendment No. 1 to 1983 Stock Option Plan of Cucos Inc.
(5) 10-D - Amendment No. 2 to 1983 Stock Option Plan of Cucos Inc.
(5) 10-E - Amendment No. 3 to 1983 Stock Option Plan of Cucos Inc.
(6) 10-F - Amendment No. 4 to 1983 Stock Option Plan of Cucos Inc.
(7) 10-G - Amendment No. 5 to 1983 Stock Option Plan of Cucos Inc.
(5) 10-H - Form of Incentive Stock Option Agreement for 1983 Stock Option
Plan.
(5) 10-I - Form of Non-Qualified (Employee) Stock Option Agreement for 1983
Stock Option Plan.
(5) 10-J - Form of Non-Qualified (Director) Stock Option Agreement for 1983
Stock Option Plan.
(8) 10-K - Description of Registrant's Bonus Plan.
(9) 10-L - Copy of Registrant's 1993 Stock Option Plan as amended.
(9) 10-M Form of Non-Qualified Stock Option Agreement for 1993 Stock
Option Plan
(9) 10-N Form of Incentive Stock Option Agreement for 1993 Stock Option
Plan
13 - Copy of Registrant's 1995 Annual Report to Shareholders.
23 - Consent of Independent Auditors.
27 - Financial Data Schedule
________________________________
(1) Filed as an exhibit to the Registrant's Registration Statement on Form
S-18 (Commission File No. 2-87372A) and incorporated herein by
reference.
(2) Filed as an exhibit to Form 10-K for the fiscal year ended July 1,
1984 (Commission File No. 0-12701) and incorporated herein by
reference.
14
(3) Filed as an exhibit to Form 8-K dated February 23, 1990 (Commission
File No. 0-12701), as amended by Form 8 dated March 12, 1990, and
incorporated herein by reference.
(4) Filed as an exhibit to the Registrant's Registration Statement on Form
S-8 (Commission File No. 33-03953) and incorporated herein by
reference.
(5) Filed as an exhibit to the Registrant's Registration Statement on Form
S-8 (Commission File No. 33-15785) and incorporated herein by
reference.
(6) Filed as an exhibit to the Registrant's Registration Statement on Form
S-8 (Commission File No. 33-26941) and incorporated herein by
reference.
(7) Filed as an exhibit to Form 10-K for the fiscal year ended June 28,
1992 (Commission File No. 0-12701) and incorporated herein by
reference.
(8) Filed as an exhibit to Form 10-K for the fiscal year ended June 28,
1987 (Commission File No. 0-12701) and incorporated herein by
reference.
(9) Filed as an exhibit to Form 10-KSB for the fiscal year ended July 3,
1994 (Commission File No. 0-12701) and incorporated herein by
reference.
(10) Filed as an exhibit to Form 8-K filed August 11, 1995 (Commission File
No. 0-12701) and incorporated herein by reference.
The Registrant is a party to various agreements defining the
rights of holders of long-term debt of the Registrant, but no single agreement
authorizes securities in an amount which exceeds 10% of the total assets of the
Registrant. Accordingly, such agreements are omitted as exhibits as permitted
by Item 601(b) (4) (ii) of Regulation S-B.
REPORTS ON FORM 8-K:
No reports on Form 8-K were filed during the fourth quarter of
Fiscal Year ended July 2, 1995.
QUALIFICATION BY REFERENCE
Information contained in this Annual Report as to the contents
of any contract or other document referred to or evidencing a transaction
referred to is necessarily not complete, and in each instance reference is made
to the copy of such contract or other document filed as an exhibit to this
Annual Report or incorporated herein by reference, all such information being
qualified in its entirety by such reference.
15
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CUCOS INC.
Date: September 22, 1995 By: /s/ Vincent J. Liuzza, Jr.
Vincent J. Liuzza, Jr.
Chairman of the Board and
President
Date: September 22, 1995 By: /s/ Thomas J. Sandeman
Thomas J. Sandeman
Vice President-Finance and
Treasurer (Principal Financial
Officer and Principal Accounting
Officer)
16
In accordance with the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated as of September 22, 1995.
/s/ Sidney C. Pulitzer /s/ Thomas J. Grace
Sidney C. Pulitzer, Director Thomas J. Grace, Director and Secretary
/s/ Miguel Uria /s/ William D. Humphries
Miguel Uria, Director William D. Humphries, Director
/s/ David M. Liuzza /s/ Vincent J. Liuzza, Jr.
David M. Liuzza, Director Vincent J. Liuzza, Jr., Chairman of the
Board of Directors and President
17
EXHIBIT INDEX
[Download Table]
Exhibit Number Title
-------------- -----
(1) 2 - Joint Agreement of Merger, dated February 23, 1983, of Cu-Co's of
Biloxi, Inc.
(1) 3-A - Copy of Articles of Incorporation of the Registrant.
(1) 3-A-1 - Copy of Amendment to Articles of Incorporation of the Registrant.
(1) 3-A-2 - Copy of Amendment to Articles of Incorporation of the Registrant.
(1) 3-A-3 - Copy of Amendment to Articles of Incorporation of the Registrant.
(1) 3-B - Copy of By-Laws of the Registrant.
(2) 3-B-1 - Copy of Amendment to By-Laws of Registrant.
(9) 3-B-2 - Amended and Restated By-Laws of the Registrant.
(3) 4-A - Rights Agreement, dated as of February 5, 1990, between the
Registrant and Commercial National Bank in Shreveport.
(3) 4-B - Letter, dated February 26, 1991, from Whitney National Bank to
the Registrant confirming the change of Rights Agent from
Commercial National Bank in Shreveport to Whitney National Bank.
(3) 4-C - Assignment of Rights Agreement, dated August 30, 1993, among
Whitney National Bank, Boatmen's National Bank and the Registrant
with respect to the change of Rights Agent from Whitney National
Bank to Boatmen's National Bank.
4-D - Copy of Mortgage and Security Agreement dated April 25, 1994,
with First National Bank of Commerce for $450,000.
4-E - Copy of Promissory Note dated October 27, 1994, with First
National Bank of Commerce for $200,000.
4-F - Copy of Promissory Note dated October 27, 1994, with First
National Bank of Commerce for $250,000.
4-G - Copy of Promissory Note dated October 27, 1994, with First
National Bank of Commerce for $500,000.
(10) 4-H - Note Purchase Agreement (with Exhibits).
(10) 4-I - Amendment No. 1 to Rights Agreement.
(1) 10-A - Copy of Registrant's 1983 Stock Option Plan.
[Download Table]
(1) 10-B - Copy of letter agreement between the Registrant and certain
stockholders of the Registrant relating to piggyback registration
rights.
(4) 10-C - Amendment No. 1 to 1983 Stock Option Plan of Cucos Inc.
(5) 10-D - Amendment No. 2 to 1983 Stock Option Plan of Cucos Inc.
(5) 10-E - Amendment No. 3 to 1983 Stock Option Plan of Cucos Inc.
(6) 10-F - Amendment No. 4 to 1983 Stock Option Plan of Cucos Inc.
(7) 10-G - Amendment No. 5 to 1983 Stock Option Plan of Cucos Inc.
(5) 10-H - Form of Incentive Stock Option Agreement for 1983 Stock Option
Plan.
(5) 10-I - Form of Non-Qualified (Employee) Stock Option Agreement for 1983
Stock Option Plan.
(5) 10-J - Form of Non-Qualified (Director) Stock Option Agreement for 1983
Stock Option Plan.
(8) 10-K - Description of Registrant's Bonus Plan.
(9) 10-L - Copy of Registrant's 1993 Stock Option Plan as amended.
(9) 10-M Form of Non-Qualified Stock Option Agreement for 1993 Stock
Option Plan
(9) 10-N Form of Incentive Stock Option Agreement for 1993 Stock Option
Plan
13 - Copy of Registrant's 1995 Annual Report to Shareholders.
23 - Consent of Independent Auditors.
27 - Financial Data Schedule
________________________________
(1) Filed as an exhibit to the Registrant's Registration Statement on Form
S-18 (Commission File No. 2-87372A) and incorporated herein by
reference.
(2) Filed as an exhibit to Form 10-K for the fiscal year ended July 1,
1984 (Commission File No. 0-12701) and incorporated herein by
reference.
(3) Filed as an exhibit to Form 8-K dated February 23, 1990 (Commission
File No. 0-12701), as amended by Form 8 dated March 12, 1990, and
incorporated herein by reference.
(4) Filed as an exhibit to the Registrant's Registration Statement on Form
S-8 (Commission File No. 33-03953) and incorporated herein by
reference.
(5) Filed as an exhibit to the Registrant's Registration Statement on Form
S-8 (Commission File No. 33-15785) and incorporated herein by
reference.
(6) Filed as an exhibit to the Registrant's Registration Statement on Form
S-8 (Commission File No. 33-26941) and incorporated herein by
reference.
(7) Filed as an exhibit to Form 10-K for the fiscal year ended June 28,
1992 (Commission File No. 0-12701) and incorporated herein by
reference.
(8) Filed as an exhibit to Form 10-K for the fiscal year ended June 28,
1987 (Commission File No. 0-12701) and incorporated herein by
reference.
(9) Filed as an exhibit to Form 10-KSB for the fiscal year ended July 3,
1994 (Commission File No. 0-12701) and incorporated herein by
reference.
(10) Filed as an exhibit to Form 8-K filed August 11, 1995 (Commission File
No. 0-12701) and incorporated herein by reference.
Dates Referenced Herein and Documents Incorporated by Reference
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