LUBYS INC (Form: 10-Q, Received: 03/29/2002 08:08:07)

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 February 13, 2002

[ ] 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 March 27, 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             Two Quarters Ended
                                        February 13,  February 28,  February 13,  February 28,
                                            2002          2001           2002         2001
                                        ____________  ____________  ____________  ____________
                                         (84 days)     (90 days)     (166 days)    (181 days)

Sales                                    $91,257       $112,219       $186,452      $226,119

Costs and expenses:
  Cost of food                            22,540         28,984         47,190        58,344
  Payroll and related costs               30,330         37,376         64,923        76,586
  Occupancy and other operating expenses  34,208         41,678         70,593        81,390
  Provision for asset impairments and
    restaurant closings (See Note 6)           -          9,445            130        10,199
  General and administrative expenses      5,360          6,827         10,708        13,022
                                         _______       ________       ________      ________
                                          92,438        124,310        193,544       239,541
                                         _______       ________       ________      ________
      Income (loss) from operations       (1,181)       (12,091)        (7,092)      (13,422)

Interest expense                          (2,413)        (2,685)        (4,983)       (4,942)
Other income, net                            309            278            757           777
                                         _______       ________       ________      ________
      Income (loss) before income taxes   (3,285)       (14,498)       (11,318)      (17,587)

Income tax expense (benefit)              (1,123)        (5,074)        (3,811)       (6,155)
                                         _______       ________       ________      ________
      Net income (loss)                  $(2,162)      $ (9,424)      $ (7,507)     $(11,432)
                                         _______       ________       ________      ________
Net income (loss) per share - basic and
  assuming dilution                      $ (0.09)      $  (0.42)      $  (0.33)     $  (0.51)
                                         _______       ________       ________      ________
EBITDA (see Note 5)                      $ 4,114       $  3,213       $  3,573      $  8,358
                                         _______       ________       ________      ________
EBITDA per share                         $  0.18       $   0.14       $   0.16      $   0.37
                                         _______       ________       ________      ________
Weighted-average number of shares
  outstanding - basic                     22,423         22,422         22,423        22,421
                                         _______       ________       ________      ________
Weighted-average number of shares
  outstanding - assuming dilution         22,516         22,435         22,592        22,421
                                         _______       ________       ________      ________
See accompanying notes.

LUBY'S, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

                                                       February 13,  August 31,
                                                           2002         2001
                                                       ____________  __________
ASSETS                                                  (unaudited)
Current assets:
  Cash and cash equivalents                                $  1,572  $  4,099
  Short-term investments                                     17,653    19,984
  Trade accounts and other receivables                          213       358
  Food and supply inventories                                 2,667     2,701
  Prepaid expenses                                            2,794     2,765
  Income tax receivable                                      11,297     4,468
                                                           ________  ________
    Total current assets                                     36,196    34,375

Property held for sale                                        5,502     3,047
Investments and other assets                                  8,740     5,929
Deferred income taxes                                         1,721     4,931
Property, plant, and equipment - at cost, net               294,867   305,180
                                                           ________  ________
Total assets                                               $347,026  $353,462
                                                           ________  ________
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                         $ 20,455  $ 13,696
  Accrued expenses and other liabilities                     28,906    34,585
                                                           ________  ________
    Total current liabilities                                49,361    48,281

Long-term debt (See Note 5)                                 120,944   122,000
Convertible subordinated notes - related party (See Note 5)   5,623     5,401
Deferred income taxes and other credits                       2,186     2,271
Reserve for restaurant closings                               4,378     4,506
                                                           ________  ________
   Total liabilities                                        182,492   182,459
                                                           ________  ________
Shareholders' equity:
  Common stock                                                8,769     8,769
  Paid-in capital                                            37,296    37,181
  Deferred compensation (See Note 9)                         (2,698)   (3,299)
  Retained earnings                                         227,208   234,715
  Accumulated other comprehensive income (loss)                (270)       (592)
  Less cost of treasury stock                              (105,771) (105,771)
                                                           ________  ________
    Total shareholders' equity                              164,534   171,003
                                                           ________  ________
Total liabilities and shareholders' equity                 $347,026  $353,462
                                                           ________  ________

See accompanying notes.

LUBY'S, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(In thousands)

                                                       Two Quarters Ended
                                                     February 13,  February 28,
                                                         2002          2001
                                                     ____________  ____________
                                                      (166 days)    (181 days)

CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)                                      $(7,507)     $(11,432)
  Adjustments to reconcile net income (loss) to net
    cash provided by operating activities:
      Depreciation and amortization                        9,934        11,581
      Amortization of deferred loss on
        interest rate swaps                                  496             -
      Amortization of discount on convertible
        subordinated notes                                   222             -
      Provision for asset impairments and
        restaurant closings                                  130        10,199
      Gain on disposal of property held for sale            (110)         (850)
      Loss on disposal of property, plant, and equipment      94            43
      Noncash directors' fees                                115            51
      Noncash compensation expense                           601             -
                                                         _______      ________
        Cash provided by operating activities before
          changes in operating assets and liabilities      3,975         9,592
     Changes in operating assets and liabilities:
        (Increase) decrease in trade accounts and
          other receivables                                  145           (45)
        (Increase) decrease in food and supply
          inventories                                         34          (134)
        (Increase) decrease in income tax receivable      (6,829)       (1,312)
        (Increase) decrease in prepaid expenses              (29)        2,399
        (Increase) decrease in inventory and other assets    133           122
        Increase (decrease) in accounts payable            6,759            17
        Increase (decrease) in accrued expenses and
          other liabilities                               (5,679)       (2,767)
        Increase (decrease) in deferred income taxes
          and other credits                                2,951        (2,988)
        Increase (decrease) in reserve for restaurant
          closings                                          (258)       (1,164)
                                                         _______      ________
          Net cash provided by (used in) operating
            activities                                     1,202         3,720
                                                         _______      ________
CASH FLOWS FROM INVESTING ACTIVITIES:
  (Increase) decrease in short-term investments            2,331             -
  Proceeds from disposal of property held for sale         1,093         3,495
  Purchases of property, plant, and equipment, net        (6,097)      (12,939)
                                                         _______      ________
          Net cash provided by (used in) investing
            activities                                    (2,673)       (9,444)
                                                         _______      ________

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
  Dividends paid                                               -        (2,242)
                                                         _______      ________
          Net cash provided by (used in) financing
            activities                                    (1,056)        8,381
                                                         _______      ________
Net increase (decrease) in cash and cash equivalents      (2,527)        2,657
Cash and cash equivalents at beginning of period           4,099           679
                                                         _______      ________
Cash and cash equivalents at end of period               $ 1,572      $  3,336
                                                         _______      ________

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 $174    -      -      -          -        -       -           -    322        322

Net income (loss)
 for the year
 to date            -      -      -          -        -       -      (7,507)     -     (7,507)

Common stock
 issued
 under benefit
 plans, net of
 shares tendered
 in partial
 payment and
 including tax
 benefits           -      -      -          -      115       -           -      -        115

Noncash stock
 compensation
 expense            -      -      -          -        -     601           -      -        601
               ______________________________________________________________________________

Balance at
 February 13,
 2002          27,403 $8,769 (4,980) $(105,771) $37,296 $(2,698)   $227,208  $(270)  $164,534
               ______________________________________________________________________________

See accompanying notes.

LUBY'S, INC.

NOTES TO FINANCIAL STATEMENTS (unaudited)
February 13, 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 balances in fiscal 2001 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 will therefore be 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: 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 $1,255,000, including accrued interest of $163,000.

In accordance with SFAS 133, the loss of $1,092,000 is being recognized as interest expense over the original term of the Swaps (through June 30, 2002). At February 13, 2002, $270,000, net of taxes of $145,000, remains in accumulated other comprehensive loss.

Note 4: 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
                                                    February 13,   February 28,
                                                       2002            2001
                                                    ____________   ____________
                                                      (84 days)      (90 days)
                                                           (In thousands)

Net income (loss)                                     $(2,162)       $(9,424)
Other comprehensive income, net of taxes:
    Net derivative income (loss), net of taxes
      of $297                                               -           (552)
    Reclassification adjustment for gains included
      in net income (loss), net of taxes of $10             -             18
    Reclassification adjustment for loss recognized on
      termination of interest rate swaps, net of taxes
      of $87                                              161              -
                                                      _______        _______
Comprehensive income (loss)                           $(2,001)       $(9,958)
                                                      _______       ________

                                                        Two Quarter Ended
                                                    February 13,   February 28,
                                                        2002            2001
                                                    ____________   ____________
                                                     (166 days)     (181 days)
                                                          (In thousands)

Net income (loss)                                     $(7,507)      $(11,432)
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 $405      -           (753)
    Reclassification adjustment for gains included in
      net income (loss), net of taxes of $1                 -             (2)
    Reclassification adjustment for loss recognized on
      termination of interest rate swaps, net of taxes of
      $174                                                322              -
                                                      _______       ________

Comprehensive income (loss) $(7,185) $(12,073)

Note 5: Debt

Senior Debt
At August 31, 2001, the Company had a credit facility balance of $122 million with a syndicate of four banks. Subsequent to fiscal year-end 2001, the terrorist attacks of September 11 and increased recessionary trends 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 and amortization, excluding the noncash portion of Harris J. Pappas's and Christopher J. Pappas's stock option compensation. 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 $1,056,000.

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. 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 $4,680,000. 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, even though the principal balance remains at $10 million.

The carrying value of the notes at August 31, 2001, was approximately $5,401,000. The carrying value of the notes at February 13, 2002, net of the unamortized discount, was approximately $5,623,000.

The discount of $4,680,000 is being amortized to interest expense over a period of ten years. The Company has amortized $222,000 of this discount during the fiscal year to date ended February 13, 2002. The amortization of the note discount to date is as follows:

                Convertible Subordinated Note Balance
____________________________________________________________________

                                               Discount
                                             Amortization
                                              Through the    Net Note
   Period-End            Balance    Discount  Period-End     Balance
_____________________________________________________________________
                                   (In thousands)

As of August 31, 2001    $10,000    $(4,680)    $  81        $5,401
As of February 13, 2002   10,000     (4,680)      303         5,623

Note 6: 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 restaurants, discounted at the Company's weighted-average cost of capital.

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:

- $11.6 million for the closing of 15 underperforming restaurants; a total of ten were closed during the first and second 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 first quarter of fiscal 2002. Approximately 435 employees have been terminated due to restaurant closings since September 1, 2001.

- $17.0 million 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.

- $0.8 million 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 land and buildings used by the joint venture were retained for a time to evaluate their potential use. The location remained vacant for over a year, after which time the Company decided against retaining the property. This property was written down to its estimated net realizable value and was sold in fiscal year 2001.

- $1.0 million 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.

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                Two Quarters Ended
                       February 13,  February 28,  February 13,  February 28,
                          2002          2001          2002          2001
                       ____________  ____________  ____________  ____________
                         (84 days)    (90 days)     (166 days)    (181 days)
                                           (In thousands)

Sales                     $1,546       $4,920        $ 4,394       $ 9,771
Operating loss              (676)        (807)        (1,993)       (1,757)

All material cash outlays associated with prior closure plans were completed by August 31, 2001. At February 13, 2002, the Company had a reserve for restaurant closings of $4.4 million. 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 February 13, 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
Additions (reductions)        -             -          130          -      130
Cash payments               (56)            -         (130)       (72)    (258)
                         ______          ____         ____       ____   ______

As of February 13, 2002  $4,150          $  -         $  -       $228   $4,378
                         ______          ____         ____       ____   ______

Note 7: Related Parties

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 two quarters ended February 13, 2002, the Plan paid the investment firm approximately $30,000.

The CEO and COO of the Company, Christopher J. Pappas and Harris J. Pappas, respectively, own a restaurant company that provides services to the Company as detailed in an Affiliate Services Agreement. The restaurant company provides accounting, architecture, general business services, basic equipment maintenance, specialized equipment fabrication, and warehouse leasing and support. The scope and pricing of services rendered under the Affiliate Services Agreement is reviewed periodically by the Finance and Audit Committee of the Board of the Company. The Finance and Audit 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 ground 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 $40,000 for the two quarters ended February 13, 2002. The total cost of the other services provided under the agreement for the same period was $325,000. 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 described above have been paid except for the most recent professional and consulting fees of approximately $3,000. 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 $42,000. 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 two quarters ended February 13, 2002.

As described previously in Note 5 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 February 13, 2002.

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.

Ernest Pekmezaris, the Chief Financial Officer of the Company, is the Treasurer of Pappas Restaurants, Inc., a company owned by Christopher J. Pappas and Harris J. Pappas, the Chief Executive Officer and Chief Operating Officer of the Company, respectively. Compensation for the services provided by Mr. Pekmezaris to Pappas Restaurants, Inc. is paid entirely by that entity.

Peter A. 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, 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.

Note 8: Short-Term Investments

At February 13, 2002, the Company maintained a balance of $17,653,000 in short- term investments. This cash is invested in money-market funds.

Note 9: Executive Stock Options

In connection with their employment agreements effective March 9, 2001, the CEO and COO were granted stock options. From that date through fiscal 2004, the Company will recognize a total of $5,242,000 in noncash compensation expense associated with these options. A total of $601,000 was recognized for the first two quarters of fiscal 2002, while cumulatively for fiscal 2001 and 2002, $2,282,000 has been recognized to date.

Note 10: Contingency

In fiscal 1999, the Company guaranteed loans of approximately $1,857,000 relating to purchases of Company stock by officers of the Company. Under the officer loan program, shares were purchased and funding was obtained from J.P. Morgan Chase & Co. As of February 13, 2002, the notes, which mature in fiscal 2004, have an outstanding balance of approximately $1,614,000. In the event of possible default, the Company would purchase the loans from J.P. Morgan Chase & Co., become holder of the notes, record the receivable and, if necessary, 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 February 13, 2002, based on market prices on that day, approximately $629,000, or 39% of the note balances, could have been covered by stock, while approximately $985,000, or 61%, would have remained outstanding.

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 February 13, 2002, and the audited financial statements filed on Form 10-K for the fiscal year ended August 31, 2001.

Results of Operations

We evaluate the operating performance of the Company 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 and amortization, excluding the noncash portion of Harris J. Pappas's and Christopher J. Pappas's stock option compensation. While we 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, our definition of EBITDA is not necessarily comparable to similarly titled measures reported by other companies.

Quarter ended February 13, 2002, compared to the quarter ended February 28, 2001

Sales decreased $20,962,000, or 18.7%, in the second quarter of fiscal 2002 compared to the second quarter of fiscal 2001. Six fewer days in the current quarter accounted for approximately $7.2 million of the total sales decline. Revenues were also lower due to the closure of 32 restaurants since September 2000. Excluding the effect of fewer days and restaurants in this quarter, same-store sales declined $8.5 million, or 8.6%, for the quarter.

Cost of food decreased $6,444,000, or 22.2%, due primarily to fewer restaurants, fewer days, and the decline in sales. Food cost as a percentage of sales improved from 25.8% to 24.7% in the second quarter in comparison with the same period last year.

Payroll and related costs decreased $7,046,000, or 18.9%, due primarily to restaurant closures and six fewer days in the quarter. The ratio of payroll costs to sales for both this quarter and the same quarter last year was slightly over 33%.

Occupancy and other operating expenses decreased $7,470,000, or 17.9%, but increased slightly as a percentage of sales. The dollar decrease is due primarily to lower utility costs, lower advertising costs due to a change in management's strategic focus, lower depreciation due to write-offs and impairments at August 31, 2001, and lower food-to-go packaging costs due to the intentional redirection at many locations to inside dining.

General and administrative expenses decreased $1,467,000, or 21.5%, due primarily to decreased professional and consulting fees.

The provision for asset impairments and restaurant closings decreased by $9,445,000, or 100%. No charges were recorded in the second quarter of fiscal 2002 in comparison with various asset impairments recorded in the same period of fiscal 2001.

Interest expense decreased $272,000, or 10.1%, due primarily to a lower effective interest rate on outstanding debt, the payoff of the loans on officers' surrendered life insurance policies, and six fewer days of interest expense in the quarter, offset by interest on the $10 million in subordinated debt, amortization of the loss on the interest rate Swaps, and amortization of amendment fees for the credit facility.

The income tax benefit decreased by $3,951,000, or 77.9%, due primarily to a significantly lower loss being incurred in fiscal 2002 versus fiscal 2001.

EBITDA, excluding noncash stock compensation, increased by $901,000, due primarily to cost control in the second quarter of fiscal 2002 versus the corresponding quarter of fiscal 2001.

Two quarters ended February 13, 2002, compared to the two quarters ended February 28, 2001.

Sales decreased $39,667,000, or 17.5%, for the first two quarters of fiscal 2002 compared to the first two quarters of fiscal 2001. Fifteen fewer days in the first two quarters of fiscal 2002 accounted for approximately $19.6 million of the total sales decline. Revenues were also lower due to the closure of 32 restaurants since September 2000. Excluding the effect of fewer days and restaurants, same-store sales would have declined $10.9 million, or 5.6%, for the two quarters.

Cost of food decreased $11,154,000, or 19.1%, due primarily to fewer restaurants, fewer days, and the decline in sales. Food cost as a percentage of sales improved for the first two quarters of fiscal 2002 in comparison with the same period last year due to less price discounting.

Payroll and related costs decreased $11,663,000, or 15.2%, due primarily to restaurant closures and fifteen fewer days in the first two quarters of fiscal 2002. Wages as a percentage of sales increased slightly primarily due to the first quarter of fiscal 2002, which included September 11. Management initiatives to better and more promptly optimize labor are currently in place and have led to improvements in the second quarter of fiscal 2002 versus the first quarter of fiscal 2002.

Occupancy and other operating expenses decreased $10,797,000, or 13.3%, but increased as a percentage of sales. The dollar decrease is due primarily to lower utility costs, lower advertising costs due to a change in management's strategic focus, lower depreciation due to write-offs and impairments at August 31, 2001, and lower food-to-go packaging costs due to the intentional redirection at many locations to inside dining. The decrease was offset by increased expenditures related to improving the general condition of the restaurants.

General and administrative expenses decreased $2,314,000, or 17.8%, due primarily to lower officers' salaries and decreased professional and consulting fees.

The provision for asset impairments and restaurant closings decreased by $10,069,000, or 98.7%, primarily due to $130,000 in costs associated primarily with labor recorded in fiscal 2002 in comparison with various asset impairments totaling $10,199,000 recorded in fiscal 2001.

Interest expense increased $41,000, or 0.8%, due primarily to the $10 million subordinated debt, amortization of the loss on the interest rate Swaps, and amortization of amendment fees for the credit facility, offset by a lower effective interest rate on the debt.

The income tax benefit decreased by $2,344,000, or 38.1%, due primarily to a significantly lower loss being incurred in fiscal 2002 versus fiscal 2001.

EBITDA, excluding noncash stock compensation, decreased by $4,785,000 in the first two 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.

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 comprise the 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, 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 alterations and 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 pre-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 capital expenditures, general and administrative expenses, and operating and other costs:

______________________________________________________
      Costs Incurred (in thousands)
______________________________________________
                              Total
   Fiscal    1st       2nd     Year to  Total
    Year   Quarter   Quarter    Date   for All    % of
    2001     2002      2002     2002   Periods   Total
______________________________________________________

COSTS INCURRED UNDER THE
AFFILIATE SERVICES AGREE-
MENT

  Accounting and
    Architectural
    Services              $     47  $     5  $     3  $     8  $     55      9%
  Travel                         4        0        0        0         4      1%
  Custom-Fabricated
    Restaurant Equipment
    and Repairs                200      301       16      317       517     81%
  Lease Cost for
    Houston Service Center      20       20       20       40        60      9%
                          _____________________________________________________
  Total                        271      326       39      365       636    100%
                          ______________________________________________________
CAPITAL EXPENDITURES AND
GENERAL OPERATING COSTS
  Capital Expenditures      17,630    3,062    3,035    6,097    23,727
  Occupancy &
    Other Costs            166,533   36,384   34,208   70,592   237,125
  General &
    Administrative          25,355    5,348    5,360   10,708    36,063
                          ______________________________________________________
  Total                   $209,518  $44,794  $42,603  $87,397  $296,915
                          ______________________________________________________

COSTS INCURRED UNDER THE
AFFILATE SERVICES AGREE-
MENT AS A PERCENTAGE OF
CAPITAL EXPENDITURES AND
GENERAL OPERATING COSTS 0.13% 0.73% 0.09% 0.42% 0.21%

Liquidity and Capital Resources

Cash and cash equivalents decreased by $2,527,000 from the end of the preceding fiscal year to February 13, 2002. Timely property tax payments of approximately $7,204,000 made in the first two quarters ended February 13, 2002, contributed to this decrease. Capital expenditures for the fiscal year to date were $6,097,000. 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 five undeveloped land sites. The Company also has 11 properties held for future use.

Capital expenditures for fiscal 2002 are expected to approximate $15 million. The Company will focus on improving the appearance, functionality, and sales of existing restaurants. These efforts also include remodeling certain locations to other dining concepts, where feasible. 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.

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 February 13, 2002, the Company had a working capital deficit of $13,165,000, in comparison to a working capital deficit of $13,906,000 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 a decrease in payables.

Approximately $7 million of the $11.3 million total income tax receivable balance as of February 13, 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.

As of September 1, 2001, the Company had a balance of $122 million outstanding under the credit facility. Due to the events of September 11 and the resulting impact on the economy, the Company was unable to meet the 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 noncompliance with previous EBITDA requirements, reset remaining fiscal 2002 quarterly EBITDA targets to a total of $16.6 million for the year, and limited capital expenditures to $15 million. Year to date during fiscal year 2002, three payments totaling $1,056,000 were made to the credit facility, which brought the balance to $120.9 million as of February 13, 2002. There is no ability to borrow additional funds under the credit facility.

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 minimum annual EBIDTA 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, the Company 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 February 13, 2002) or the right to pursue foreclosure on assets pledged as collateral. As of February 13, 2002, $252 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.

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%.

Through four separate subordinated convertible debt agreements, Christopher J. Pappas and Harris J. Pappas, the CEO and COO of Luby's, respectively, loaned the Company a total of $10 million in exchange for the right to convert them to stock at $5.00 per share. The loans were conditioned upon receipt of certain agreements from the Company's existing credit syndicate under its $125 million credit facility. These agreements were part of the Fourth Amendment to the Credit Facility. Messrs. Pappas have no legal obligation to make additional loans to Luby's, Inc. in the future.

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 $1,857,000 to enable officers to purchase stock in the Company. As of February 13, 2002, the notes, which each officer obtained from J.P. Morgan Chase & Co. and mature in fiscal 2004, have a total outstanding balance of approximately $1,614,000. 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 such default, the Company is obligated to purchase the specific borrower's loan from J.P. Morgan Chase & Co. and would therefore become the holder of the notes. If the Company becomes the holder of any defaulted notes, it intends to pursue collection of such notes using all available remedies. See Note 10.

Trends and Uncertainties

The events of September 11 increased concerns over national security, fueled the development of recessionary trends, and cast uncertainty on the general economic outlook of the country. The long-term impact of these trends and uncertainties on the Company is difficult to predict and will ultimately depend on their severity, duration, and resulting effect on consumer spending.

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.

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

No additional restaurants were impaired during the second quarter of fiscal 2002. Of the 17 restaurants designated for closure as of August 31, 2001, 11 were closed in the first quarter of fiscal 2002 (one of which was later reopened as a new concept) and one was closed in the second quarter. As of August 31, 2001, the balance in the reserve for restaurant closings was $4.5 million. During the first two quarters of fiscal 2002, the Company paid $56,000 in lease settlement costs and $72,000 in other exit costs. The Company also charged $130,000 to the reserve, and subsequently paid $130,000 in employee termination costs. After the changes in the reserve noted here, the balance decreased to $4.4 million as of February 13, 2002. See Note 6 for further discussion.

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 the actual results of the Company 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 4. Submission of Matters to a Vote of Security Holders

(a) The 2002 annual meeting of shareholders of Luby's, Inc. was held on January 11, 2002.

(b) The directors elected at the meeting were Judith B. Craven, Arthur R. Emerson, Frank Markantonis, Christopher J. Pappas, Harris J. Pappas, and Gasper Mir, III. The other directors whose terms continued after the meeting are Ronald K. Calgaard, Roger R. Hemminghaus, Robert T. Herres, Walter J. Salmon, Joanne Winik, and Jim W. Woliver.

(c) The matters voted upon at the meeting were (i) the election of one director to serve until the 2003 Annual Meeting of Shareholders, the election of one director to serve until the 2004 Annual Meeting of Shareholders, and the election of four directors to serve until the 2005 Annual Meeting of Shareholders; (ii) the approval of the appointment of Ernst & Young LLP as auditors for the 2002 fiscal year; and (iii) the unscheduled Mathis Proposal regarding the elimination of the greater than majority voting.

(d) With respect to the election of directors, the results of the voting were:

                        Shares Voted    Shares    Broker
    Nominee                  For       Abstained  Nonvotes
Judith B. Craven         18,753,716    1,142,392    -0-
Arthur R. Emerson        18,821,746    1,074,362    -0-
Frank Markantonis        19,598,932      297,176    -0-
Christopher J. Pappas    19,224,471      671,637    -0-
Harris J. Pappas         19,197,542      698,568    -0-
Gasper Mir, III          19,581,773      314,335    -0-

(e) With respect to the approval of the appointment of auditors, the results of the voting were:

Shares voted "for"       19,775,402
Shares voted "against"       73,293
Shares abstaining            47,411
Broker nonvotes                 -0-

(f) With respect to the approval of the unscheduled Mathis Proposal, the results of the voting were:

Shares voted "for" 750 Shares voted "against" 16,213,200

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(h) - ISDA Master Agreement dated June 17, 1997, between Luby's Cafeterias, Inc. and NationsBank, N.A., with Schedule and Confirmation dated July 7, 1997 (filed as Exhibit 4(g) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1997, and incorporated herein by reference).

4(i) - ISDA Master Agreement dated July 2, 1997, between Luby's Cafeterias, Inc. and Texas Commerce Bank National Association, with Schedule and Confirmation dated July 2, 1997 (filed as Exhibit 4(h) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 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(a) - Form of Deferred Compensation Agreement entered into between Luby's Cafeterias, Inc. and various officers (filed as Exhibit 10(b) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1981, and incorporated herein by reference).*

10(b) - Form of Amendment to Deferred Compensation Agreement between Luby's Cafeterias, Inc. and various officers and former officers adopted January 14, 1997 (filed as Exhibit 10(b) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1997, 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(n) - Luby's Cafeterias, Inc. Nonemployee Director Phantom Stock Plan adopted March 19, 1998 (filed as Exhibit 10(aa) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1998, 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 Annual Report on Form 10-K for the fiscal year ended August 31, 2001, and refiled herewith to correct the date of amendment).

*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:  March 27, 2002

EXHIBIT INDEX

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).

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.

*Denotes management contract or compensatory plan or arrangement.

Exhibit 10(y)

AFFILIATE SERVICES AGREEMENT

This Affiliate Services Agreement ("Agreement"), entered into to be effective as of August 31, 2001, between Harris J. Pappas, Christopher J. Pappas, and each of the entities described on Exhibit "A" hereto (the "Pappas Entities")(collectively, "Pappas"), and Luby's, Inc., a Delaware corporation (the "Company").

WHEREAS, Pappas has provided, and will provide, corporate services to the Company;

WHEREAS, the Company and Pappas wish to provide for the terms of payment for such services; and

WHEREAS, to provide for the ongoing provision of Corporate Services (as defined in paragraph 1 below) by Pappas to the Company and to express the term of provisions of those Services, Pappas and the Company desire to enter into this Agreement.

NOW, THEREFORE, in consideration of the premises and of the mutual agreements contained in this Agreement, Pappas and the Company hereby agree as follows:

1. Corporate Services To Be Made Available.

(a) For the period provided for under paragraph 6 hereof, Pappas agrees to make available to the Company such services (collectively, the "Corporate Services") as to which the respective Chief Executive Officers of Pappas and the Company may from time to time agree, on the terms provided herein. If the same person serves as Chief Executive Officer of both parties, such Chief Executive Officer may act singly hereunder on behalf of both such parties.

(b) Without limiting the generality or flexibility of paragraph 1(a), the Corporate Services shall initially consist of the following services (the "Initial Services"):

(i) financial advice and services, including, without limitation, assistance with respect to the raising of capital, investment analysis, cash and treasury management, and risk management services, to be provided by Pappas's treasury staff;

(ii) accounting, audit, payroll, and bookkeeping advice and services, to be provided by Pappas's accounting staff;

(iii) office and warehouse space for maintenance and storage facilities, to be leased from the Pappas Entities;

(iv) furniture and equipment, to be purchased from the Pappas Entities;

(v) equipment and facilities maintenance services, to be provided by the Pappas Entities; and

(vi) architectural and construction services, to be provided by the Pappas Entities.

(c) For purposes of the avoidance of doubt, the Initial Services shall constitute the Corporate Services unless and until modified in accordance with the provisions of paragraph 1(a) or 6(a) of this Agreement.

2. Standard of Conduct.

(a) In providing Corporate Services to the Company, Pappas's officers and employees shall conduct themselves in accordance with the Company's written policies and procedures and, shall provide the Corporate Services with the same degree of care, skill and prudence customarily exercised by such officers and employees for the benefit of Pappas in connection with Pappas's operations. Notwithstanding the foregoing, in providing the Corporate Services, Pappas and its directors, officers and employees will not be responsible for, and shall have no liability for, any Losses (as defined below) arising out of the performance by Pappas of the Corporate Services, except to the extent arising out of the gross negligence or willful misconduct of Pappas or its directors, officers or employees. Pappas shall indemnify, defend and hold harmless the Company, its affiliates, and their respective directors, officers and employees from and against any and all Losses incurred by the Company arising as a result of the gross negligence or willful misconduct of Pappas or its directors, officers or employees in connection with the performance of the Corporate Services hereunder, except in circumstances where the party that would otherwise be indemnified hereunder is found by a court of competent jurisdiction to have acted with gross negligence or to have engaged in willful misconduct.

(b) The Company shall indemnify, defend and hold harmless Pappas, its affiliates, and their respective directors, officers and employees from and against any and all Losses incurred by Pappas arising as a result of Pappas having provided Corporate Services, except in circumstances where the party that would otherwise be indemnified hereunder is found by a court of competent jurisdiction to have acted with gross negligence or to have engaged in willful misconduct.

(c) In no event shall Pappas, the Company, their respective affiliates, or their respective directors, officers or employees be liable for any indirect, special or consequential damages in connection with or arising out of this Agreement.

(d) For purposes of this paragraph, the term "Losses" shall mean any and all losses, liabilities, demands, claims, actions or causes of action, assessments, losses, fines, penalties, costs, damages and/or expenses (including, without limitation, the reasonable fees and expenses of attorneys and other professionals).

3. Cost of Services.

(a) The parties hereby ratify the previously made determination of the level of corporate services and the payments therefor provided by Pappas prior to the effective date of this Agreement as detailed on Exhibit "B" hereto for the Company's current fiscal year, and the estimated fee and payment schedule therefor.

(b) Not less than thirty (30) days prior to each successive fiscal year of the Company, Pappas and the Company shall estimate the probable level of Corporate Services to be provided under this Agreement for the fiscal year in question, and shall budget the estimated amount of the fee to be paid by the Company to Pappas therefor on the assumption that such estimated level of Corporate Services will actually be provided. In determining each such estimate and subsequent adjustment, Pappas and the Company shall value Corporate Services based on Pappas's direct and indirect costs allocable thereto, calculated in accordance with Pappas's usual accounting practices. As soon as practicable after the end of each of the Company's fiscal quarters (including the Company's current fiscal quarter), Pappas and the Company shall, based on a detailed review, determine the actual level of Corporate Services rendered by Pappas during such fiscal quarter, and the Company shall pay Pappas the applicable adjusted fee within 15 business days of presentation of a statement therefor. Pappas shall cause its employees to record or otherwise apportion the time they devote in providing Corporate Services to the Company, in order to facilitate such review and determination and to permit a proper adjustment to be made.

(c) The Company also agrees to reimburse Pappas, within 15 business days of presentation of invoices therefor, for all reasonable out- of-pocket expenses incurred by Pappas in providing Corporate Services, including reasonable expenses for outside professional services incurred by Pappas for the benefit of the Company.

(d) The failure of the Company to make any payment to Pappas hereunder within 30 days of the date such payment is due shall result in the Company owing Pappas interest at the rate of 10% per annum on the amount due from the date payable to the actual payment date.

4. Requirement of Approval By Finance and Audit Committee of the Board of Directors of the Company. All determinations on behalf of the Company made pursuant to paragraphs 3 and 6 hereof must be approved by the Finance and Audit Committee of the Board of Directors of the Company (the "Committee"). In carrying out its duties pursuant to this Agreement, the Committee may retain such independent accountants, lawyers and other experts as it deems necessary or prudent to retain, and the expenses of all such professionals shall be reimbursed by the Company.

5. Information and Witnesses. Pappas shall provide to the Company and the Company shall provide to Pappas, upon the other's written request, at reasonable times, full and complete access to, and duplication rights with respect to, any and all Information, as defined below, as the other may reasonably request and require, and Pappas shall use its best efforts to make available to the Company, and the Company shall use its best efforts to make available to Pappas, upon the other's written request, the officers, directors, employees and agents of Pappas and of the Company, respectively, as witnesses to the extent that such persons may reasonably be required in connection with any legal, administrative or other proceedings in which the Company or Pappas, as the case may be, may from time to time be a party; provided, however, that neither Pappas nor the Company need provide any Information or make available witnesses to the other to the extent that doing so would (i) unreasonably interfere with the performance by any person of such person's duties to the party to which a request under this paragraph 5 is made or otherwise cause unreasonable burden to such party, (ii) result in a waiver of any attorney-client or work product privilege of such party or its legal counsel, (iii) require either Pappas or the Company to provide any Information which relates to the subject matter of any legal, administrative or other proceeding in which Pappas and the Company are adverse parties, or (iv) result in any breach of any agreement with a third party; and provided, further, that the party providing Information or making available witnesses pursuant to this paragraph 5 shall be entitled to receive from the other party, upon presentation of reasonably detailed invoices therefor, payment of its reasonable out-of-pocket costs (including, without limitation, the reasonable fees and expenses of attorneys and other professionals) incurred in connection with providing Information or making witnesses available. The term Information as used in this paragraph 5 means any books, records, contracts, instruments, data, facts and other information in the possession or under the control of either Pappas or the Company and necessary or desirable for use in legal, administrative or other proceedings or for auditing, accounting or tax purposes.

6. Term of Agreement.

(a) This Agreement shall become effective as of the date hereof, and shall continue in effect thereafter unless terminated with respect to the performance of Corporate Services in whole or in part by either party upon not less than 30 days written notice. Termination of Corporate Services in part shall not result in the termination of this Agreement. Termination of Corporate Services in whole shall result in the termination of this Agreement except that the obligations of the parties under paragraphs 2, 3, 4, 5, 6, 8 and 9 shall continue after such termination.

(b) Notwithstanding the foregoing, Pappas shall have the right (but not the obligation) to terminate this Agreement immediately and without the requirement of notice at any time upon the first to occur of the date on which (i) the Company sells, or enters into a definitive agreement to sell, all or substantially all of its assets to any one or more persons (other than Pappas), (ii) the Company merges, or enters into a definitive agreement to merge, with any person other than Pappas, or (iii) any person or group of persons (other than Pappas) acquires the right (as a consequence of share ownership, contractual right or otherwise) to elect or designate a majority of the board of directors of the Company.

(d) Upon termination of this Agreement in whole, a final fee adjustment on the basis described in paragraph 3(b) shall be made within 60 days.

7. Independence. All employees and representatives of Pappas providing the Corporate Services to the Company will be deemed for purposes of all compensation and employee benefits to be employees or representatives of Pappas and not employees or representatives of the Company. Except to the extent such employees and representatives are elected officers of the Company, in performing such services such employees and representatives will be under the direction, control and supervision of Pappas (and not of the Company) and Pappas will have the sole right to exercise all authority with respect to the employment (including termination of employment), assignment and compensation of such employees and representatives.

8. Independent Contractor. The relationship of Pappas to the Company which is created hereunder is that of an independent contractor. This Agreement is not intended to create and shall not be construed as creating between the Company and Pappas the relationship of affiliate, principal and agent, joint venture, partnership, or any other similar relationship, the existence of which is hereby expressly denied.

9. Confidentiality. Any and all information which is not generally known to the public which is exchanged between the parties in connection with the performance of this Agreement, whether of a technical or business nature, shall be considered to be confidential. The parties agree that confidential information shall not be disclosed to any third party or parties without the written consent of the other party, except as permitted below. Each party shall take reasonable measures to protect against disclosure of confidential information by its officers, employees and agents. Confidential information shall not include any information (i) which is or becomes part of the public domain other than as a result of the breach of a party's obligation hereunder, (ii) which is obtained from third parties who are not bound by confidentiality obligations or (iii) which is required to be disclosed by law, under compulsion of legal process, or by the rules of any state or Federal regulatory agency or any securities exchange (including NASDAQ) on which the Company's or Pappas's securities might be listed for trading. The provisions of this paragraph shall survive the termination of this Agreement.

10. Miscellaneous.

(a) Nonassignability of Agreement. This Agreement shall not be assignable, in whole or in part, directly or indirectly, whether by operation of law or otherwise, by either party hereto without the prior written consent of the other (which consent may be withheld in the sole discretion of the party whose consent is required), and any attempt to assign any rights or obligations arising under this Agreement without such consent shall be void; provided, however, that the provisions of this Agreement shall be binding upon, inure to the benefit of and be enforceable by Pappas and the Company and their respective successors and permitted assigns.

(b) Further Assurances. Subject to the provisions hereof, each of the parties hereto shall make, execute, acknowledge and deliver such other actions and documents as may be reasonably required in order to effectuate the purposes of this Agreement, and to comply with all applicable laws, regulations, orders and decrees, and obtain all required consents and approvals and make all required filings with any governmental agency, other regulatory or administrative agency, commission or similar authority, as may be reasonably necessary or desirable in this connection.

(c) Waivers. No failure or delay on the part of Pappas or the Company in exercising any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, or any abandonment or discontinuance of steps to enforce such a right, preclude any other or further exercise thereof or the exercise of any other right. No modification or waiver of any provision of this Agreement nor consent to any departure by Pappas or the Company therefrom shall in any event be effective unless the same shall be in writing, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Any consent or waiver by the Company under this paragraph 10(c) must be approved by the Independent Committee.

(d) Entire Agreement. This Agreement contains the entire understanding of the parties with respect to the transactions contemplated hereby.

(e) Amendments. Except as provided in paragraph 1 with respect to changes in the level of Corporate Services which may be agreed by the respective Chief Executive Officers of Pappas and the Company without approval of or authorization by their respective Boards of Directors and Section 6(a) with respect to the termination of the provision of Corporate Services in whole or in part by the Company, this Agreement may be amended or supplemented only in writing executed by the parties hereto under authorization by their respective Boards of Directors (including, in the case of the Company, the approval of the Independent Committee).

(f) Notices. All notices, approvals and other communications provided for herein shall be validly given, made or served, if in writing and delivered personally, by telegram or be telephonic facsimile transmission, or sent by registered mail, postage prepaid, to:

The Company:

Luby's, Inc.
2211 Northeast Loop 410
San Antonio, Texas 78217-4673 Attention: Chairman of the Finance and Audit Committee

and to:

Cauthorn Hale Hornberger Fuller Sheehan Becker & Beiter Incorporated 700 N. St. Mary's Street, Suite 600 San Antonio, Texas 78205
Attention: Drew R. Fuller, Jr. Telephone: (210) 271-1700
Facsimile: (210) 271-1730

Pappas:

Harris J. Pappas
642 Yale
Houston, Texas 77007

with a copy to:

Frank Markantonis
645 Heights Blvd.
Houston, Texas 77007

and shall become effective upon receipt.

(g) Governing Law. Despite any different result required by any conflicts of law provisions, this Agreement shall be governed by the laws of the Commonwealth of Massachusetts.

(h) Force Majeure. Anything else in this Agreement notwithstanding, Pappas shall be excused from performance hereunder while, and to the extent that, its performance is prevented by fire, drought, explosion, flood, invasion, rebellion, earthquake, civil commotion, strike or labor disturbance, governmental or military authority, act of God, mechanical failure or any other event or casualty beyond the reasonable control of Pappas, whether similar or dissimilar to those enumerated in this paragraph. In the event of any of the foregoing occurrences, the Company shall be responsible for making its own alternative arrangements with respect to the interrupted services.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be effective as of the date first above written.

/s/Harris J. Pappas
______________________________________
Harris J. Pappas


/s/Christopher J. Pappas
______________________________________
Christopher J. Pappas

LUBY'S, INC.

By:    /s/ Peter Tropoli
      ________________________________
Name:  Peter Tropoli
Its:   Senior Vice President
       Administration

Exhibit "A"

List of Pappas Entities providing services

(See attached)

Exhibit A

Pappas Partners LP, a Texas Limited Partnership

and

Pappas Restaurants, Inc., a Texas S Corporation

Exhibit "B"

List of Services provided to date and the amounts owed to date

(See attached)

Exhibit B

Corporate Services - Affiliate Services Agreement See Section 1.(b) in agreement

                          Fiscal Year Ended August 31, 2001
________________________________________________________________________________

March - August                               Incurred       Paid     Outstanding

Professional Services and Consulting Fees   $ 47,463           -     $ 47,463

              Out-of-Pocket                    3,932           -        3,932

Equipment and other Restaurant-
  Related Services                           200,460     (84,257)     116,203

Lease Cost (Houston Service Center) -
  Crockett St. Property                       19,500           -         19,500
                                            ________     _______      _______

              Total                         $271,355     (84,257)     187,098
                                            ________     _______      _______

Budget Estimate - 1st Quarter Ended November 21, 2001

September - November                        Estimate

Professional Services and Consulting Fees   $ 22,500

              Out-of-Pocket                    1,000

Equipment and other Restaurant-
  Related Services                           175,000

Houston Service Center Rent Expense           19,500
                                            ________

              Total                         $218,000
                                            ________

Exhibit 10(dd)

LUBY'S, INC.
AMENDED AND RESTATED
NONEMPLOYEE DIRECTOR PHANTOM STOCK PLAN

1. Purpose and Effectiveness. The Luby's, Inc. Nonemployee Director Phantom Stock Plan (the "Plan") was approved to be effective April 1, 1998, to provide for the payment to Nonemployee Directors of Luby's, Inc. (the "Company") of all or a portion of their director retainer fees in the form of shares of phantom stock ("Phantom Shares") in order to align further the interests of the directors with those of the shareholders of the Company and thereby to promote the long-term growth and performance of the Company. The Plan was amended by action of the Board of Directors on July 26, 2001. The text of this Amended and Restated Nonemployee Director Phantom Stock Plan contains all amendments through the date hereof.

2. Participants. Participants shall be directors of the Company who are not employed by the Company or a subsidiary of the Company or any other business entity in which the Company, directly or indirectly, owns 50% or more of the capital or profit interest (the "Nonemployee Directors"). A Nonemployee Director may become a participant by electing to defer all or a portion of his or her cash compensation paid to such participant for services as a Nonemployee Director (collectively, "Director Compensation") as provided in the Plan.

3. Deferral of Director Compensation. By written notice to the Secretary of the Company, a Nonemployee Director (a) shall elect to defer at least fifty percent (50%) of his or her director retainer fees until such time as he or she has accumulated total stock ownership in the Company (including both direct holdings and holdings in his or her Account, as that term is defined below) with a value of at least $100,000 and (b) may otherwise elect to defer all or a portion of any cash compensation paid to him or her for services as a Nonemployee Director. Such notice must be received by the Secretary, or postmarked, not later than the date immediately preceding the date on which such Nonemployee Director is deemed to have earned any Director Compensation deferred pursuant to the terms of this Plan. Deferral elections made under the Plan with respect to the subsequent calendar year will be final and, upon commencement of such year, cannot be amended or revoked in respect of Director Compensation for director services rendered during such year. For purposes of determining the value of the total stock ownership in the Company of a Participant, the average closing price of a share of Company common stock, as reported by the New York Stock Exchange, over the preceding 365 day period shall be used.

4. Participants' Accounts. Director Compensation deferred by a Participant pursuant to the Plan shall be credited to a Phantom Share account ("Account") maintained on the books of the Company for such Participant. A Participant's Account shall be credited with an additional amount equal to twenty-five percent (25%) of the difference between the Required Amount and the actual amount which such Participant elects to defer. The term "Required Amount" means (a) fifty percent (50%) of a Participant's director retainer fees until such time as he or she has accumulated total stock ownership in the Company (including both direct holdings and holdings in his or her Account) with a value of at least $100,000, or (b) zero, after a Participant has accumulated total stock ownership in the Company with a value of at least $100,000. Deferred Director Compensation shall be credited to a Participant's Account on the date such Director Compensation would otherwise have been paid.

5. Phantom Shares. Dollar amounts to be credited to an Account shall be credited in the form of Phantom Shares. The number of Phantom Shares credited shall be determined in each instance by dividing the dollar credit by an amount equal to the closing price of a share of the Company's common stock ("Common Stock") as reported by the composite tape of the New York Stock Exchange (or other reporting system selected by the Board of Directors of the Company) on the relevant date; or, if no sale of Common Stock is reported for such date, the next following day for which there is a reported sale. Phantom Shares shall be credited in whole shares and in fractional shares to the nearest thousandth of a share.

6. Dividend Equivalents. On each date when a cash dividend is paid by the Company on the Common Stock, the Account of each Participant shall be credited with a dollar amount equal to such dividend on one share of Common Stock multiplied by the number of Phantom Shares in the Account at the close of business on the dividend record date, which credit shall be converted into additional Phantom Shares in the manner described in Section 5 hereof.

7. Adjustments. In the event the outstanding shares of Common Stock are increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Company or another corporation, through reorganization, merger, consolidation, liquidation, recapitalization, stock split-up, combination of shares, or dividend payable in Common Stock, appropriate adjustment in the number and kind of Phantom Shares credited to the Account of each Participant shall be made so as to provide, as nearly as practicable, an equivalent interest in the Account. No such adjustment shall be made in any Account after the Termination Date applicable to that Account.

8. Termination of Directorship. When a Nonemployee Director ceases to be a director of the Company on account of resignation, retirement, death, disability, removal, or any other circumstance, his or her last day of service shall constitute the "Termination Date" for purposes of the Plan. No credits of Phantom Shares shall be made to the Account of a Participant after his or her Termination Date.

9. Designation of Beneficiary. A Participant may designate a beneficiary ("Beneficiary") to whom the Participant's benefits under the Plan shall be distributed in the event of death of the Participant prior to settlement of his or her Account. If there is no designated Beneficiary, or no designated Beneficiary surviving at a Participant's death, his or her benefits under the Plan shall be distributed to his or her estate. A Participant's Beneficiary designation must be in writing on a form prescribed by the Company and must be delivered to the Company prior to the Termination Date.

10. Payment of Accounts. When a Participant ceases to be a director of the Company, the Phantom Shares in his or her Account shall be converted on his or her Termination Date into an equivalent number of shares of Common Stock (with any fractional share being rounded up to a whole share). As soon as practicable after the Termination Date, the Company shall issue and deliver to such Participant, or his or her Beneficiary, a certificate for the number of shares of Common Stock determined in accordance with this Section 10.

11. Total Shares. The number of shares of Common Stock which may be issued in satisfaction of Phantom Shares pursuant to the Plan shall not exceed 100,000 shares, unless increased by the Board of Directors in an amendment to the Plan.

12. Listing and Registration. The Company, in its discretion, may postpone the issuance and delivery of shares of Common Stock until completion of such stock exchange listing, or registration, or other qualification of such shares, under any federal or state law, rule, or regulation, as the Company may consider appropriate. The Company may require the recipient of such shares to make such representations and to furnish such information as the Company may consider appropriate in connection with the issuance of such shares in compliance with applicable law.

13. Payment of Taxes. It shall be a condition to the Company's obligation to issue shares of Common Stock pursuant to the Plan that each Participant or his or her Beneficiary shall pay, or make provision satisfactory to the Company for payment of, any federal or state taxes which the Company may be obligated to withhold or collect with respect to the issuance of such shares.

14. Shareholder Rights. No Participant shall have any rights as an owner or holder of Common Stock by virtue of his or her Account or by virtue of his or her ownership of Phantom Shares. No such rights shall exist or be deemed to be created until such time as the Phantom Shares in the Account are converted into shares of Common Stock pursuant to Section 10 hereof.

15. No Right to Continued Service. Nothing contained in the Plan shall be deemed to confer upon any Nonemployee Director the right to continue to serve as a director of the Company or the right to be renominated or reelected as such.

16. Assignment. No right or interest of any Participant or his or her Beneficiary (or any person claiming through or under either of them) in such Participant's Account or any distribution or benefit under the Plan shall be assignable or transferrable in any manner or be subject to alienation, anticipation, sale, pledge, encumbrance, or other legal process or in any manner liable for or subject to the debts or liabilities of such Participant.

17. Unfunded Plan. The Plan and the rights of Participants to receive benefits under the Plan shall be unfunded and shall not create or be construed to create a trust or other fiduciary obligation of the Company. All rights of Participants to receive benefits under the Plan shall constitute unsecured claims against the general assets of the Company.

18. Tax Consequences. The Plan is intended to be treated as an unfunded deferred compensation plan under the Internal Revenue Code so that amounts by which Participants elect to have their compensation reduced pursuant to the Plan shall not be included in their gross income until such time as the amounts credited to their Accounts are distributed to them or their Beneficiaries in the form of shares of Common Stock.

19. Successors and Heirs. The Plan and all properly executed elections and designations made by any Participant shall be binding upon the Company and each Participant, and upon any successor in interest or assignee of the Company, and upon the Beneficiary, heirs and legal representatives of each Participant.

20. Administration and Interpretation. The Plan shall be administered by the Board of Directors of the Company. The decision of the Board of Directors on any matter concerning the administration or interpretation of the Plan shall be final, conclusive and binding upon all Participants and their Beneficiaries, heirs and legal representatives. The Board of Directors shall have no liability for any action taken in good faith with respect to the Plan.

21. Expenses. All costs and expenses incurred in the operation and administration of the Plan shall be borne by the Company.

22. Amendment or Termination of the Plan. The Plan may be amended, from time to time, or terminated, at any time, by the Board of Directors; provided, however, that no amendment or termination shall adversely affect the Account of any Participant without his or her consent.

23. Term of the Plan. The Plan shall continue in effect from the Effective Date until terminated by the Board of Directors or until the maximum number of shares of Common Stock issuable under the Plan have been issued.

24. Governing Law. The Plan shall be governed by, construed under, and enforced in accordance with the laws of Delaware and, where applicable, the laws of the United States.

25. Transfers. At any time during the period from the Effective Date through December 31, 2001, a Nonemployee Director who has previously elected to defer director's fees pursuant to the Luby's, Inc. Nonemployee Director Deferred Compensation Plan (the "1995 Plan") may deliver to the Company a written notification that such Nonemployee Director elects to transfer to this Plan the entire balance of his or her deferred compensation account established under the 1995 Plan, to be credited to his or her Account under this Plan in the form of Phantom Shares. In the event of such notification to the Company, the Account of the notifying Nonemployee Director under this Plan shall be credited with the transferred amount as of the date of receipt by the Company of said notification, which credit shall be in the form of Phantom Shares determined in accordance with the provisions of Section 5 hereof.

Dated to be effective as of September 28, 2001 (the "Effective Date").

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 quarters ended February 13, 2002, and February 28, 2001.

Quarter ended February 13, 2002

     22,422,943 x shares outstanding for 84 days     1,883,527,212
                                                     divided by 84
                                                     _____________
                                                        22,422,943

Quarter ended February 28, 2001

     22,420,375 x shares outstanding for 42 days       941,655,750
     22,422,943 x shares outstanding for 48 days     1,076,301,264
                                                     _____________
     Subtotal                                        2,017,957,014
                                                     divided by 90
                                                     ______________
                                                         22,421,745

Exhibit 99(a)

LUBY'S, INC.
CORPORATE GOVERNANCE GUIDELINES

ROLE AND RESPONSIBILITIES OF BOARD

1. Ethical Business Environment The Board believes that the long-term success of Luby's is dependent on the maintenance of an ethical business environment that focuses on adherence to both the letter and spirit of the law and regulations and the highest standards of corporate citizenship.

2. Oversight The Board acknowledges that Luby's has many different stakeholders. However, the paramount duty of Luby's Board and management is to the shareholders; the interests of other stakeholders are relevant as a derivative of the duty to shareholders. The Board is the ultimate decision making body except for those matters reserved by law to the shareholders. The management team is charged by the Board with the management of Luby's affairs. The Board monitors corporate performance against business plans on a regular basis to evaluate whether the business is being properly managed.

3. Senior Management The Board selects and regularly evaluates the CEO. The appointment and regular evaluation of a Chief Operating Officer, if any, will be made by the Board in collaboration with the CEO. The Board determines the CEO's compensation and reviews and approves the salaries of senior management named in the Summary Compensation Table of the Proxy Statement. The Board also reviews and approves management's recommendations for threshold, target, and stretch points for the annual Incentive Bonus Plan. It periodically reviews succession planning and management development with the CEO.

4. Strategy The Board ensures that a strategic planning process is in place, is used, and produces sound choices. It reviews and approves major corporate strategies and monitors the implementation of current strategic initiatives to assess whether they are on schedule, on budget, and producing effective results.

5. Material Transactions The Board reviews and approves significant capital allocations and expenditures and material transactions not in the ordinary course of business.

6. Internal Controls, Reporting, and Compliance The Board satisfies itself as to the adequacy of internal controls, risk management, financial reporting, and compliance with laws and regulations.

7. Corporate Governance The Board nominates directors to serve on the Board and ensures that the structure and practices of the Board provide for sound corporate governance.

COMPOSITION OF THE BOARD

8. Independent Director An "Independent Director" is a person who is not a current and, generally, not a former member of management and has no relationship or activity that could affect or appear to affect his or her ability to exercise independent judgment as a director. The Governance Committee reviews the circumstances in each case and determines when a Board member or candidate is not independent. The Board will seek to maintain a substantial majority of independent directors. Various regulatory agencies have adopted differing concepts of independence (e.g. SEC, NYSE, IRS). These external definitions are not part of these Guidelines and should be consulted only for the specific purposes for which they were intended.

9. Number of Directors The Board believes that the number of directors should not be less than nine or more than twelve. The Board may adjust the number upward to accommodate an outstanding potential candidate or during periods of transition when new directors may overlap with retiring directors.

10. Membership Criteria The Board Governance Committee is responsible for recommending to the Board the appropriate skills and characteristics for prospective Board candidates in the context of the current Board makeup and the perceived needs of Luby's at that point in time. This assessment should include issues of general business experience, specialized knowledge, functional skills, other Board and time commitments, personal characteristics, age, independence, and diversity.

11. Screening, Selection, and Invitation to Serve Luby's Bylaws provide that director candidates standing for election by the shareholders shall be nominated by the Board or by a shareholder as provided in the Bylaws. Vacancies in the Board shall be filled by selection of the current directors. The Governance Committee is responsible for screening potential candidates with input from all Board members. The Chairman will coordinate the extension of an invitation to Board membership.

12. Directors Who Change Principal Job Responsibility Directors who have a significant change in their professional roles and responsibilities, such as retirement or a change in employer, should submit a letter to the Chairman of the Board explaining the circumstances. The Board, through its Governance Committee, should review the circumstances and decide whether it is in the best interest of Luby's that the director continue to serve.

13. Retirement Age and Term Limits A director shall not be eligible to stand for election or reelection to the Board after reaching the age of 70 years. Except for incumbent directors as of March 19, 1998, who were then 70 years of age or older, a director will offer his or her resignation from the Board upon reaching the age of 70 years effective at the next annual meeting of shareholders. The Board has not established term limits for directors; however, the Board Governance Committee should consider each Director's contribution to the Board every three years, prior to his of her nomination for reelection by the shareholders.

14. Chairman/CEO Corporate policy allows for separation of the office of Chairman and CEO. This policy is intended to preserve flexibility for the board of directors regarding the selection of Chairman and CEO and the independence of those positions.

15. Lead Director If the offices of the CEO and Chairman are not separate or if the Chairman is not considered by the Board to be an independent director, the independent directors will elect one of their number to serve as Lead Director. The Lead Director will chair meetings of independent directors, will facilitate communications between other members of the Board and the CEO and Chairman, and will assume other duties which the independent directors as a whole may designate from time to time. Directors are always free to communicate directly with the CEO and Chairman.

16. Limitations on Tenure as Independent Chair or Lead Director An Independent Chair or Lead Director serves at the pleasure of the Board. It is the sense of the Board that a director's service as Independent Chair or Lead Director should generally not extend beyond the annual meeting of shareholders after three consecutive years of service.

FUNCTIONING OF THE BOARD

17. Board Meetings Article III of Luby's Bylaws spells out required procedures for calling and conducting meetings of the Board in order to conduct corporate business. The Board sets the number and schedule of Regular Board meetings for the entire year at the annual meeting of the Board in January. Currently the Board has five Regular Meetings each year. The Chairman, the CEO, or a majority of directors may call Special Meetings of the Board as necessary.

18. Board Agendas The CEO in conjunction with the Chairman and committee chairs will establish and publish an agenda for each meeting of the Board. Board members may suggest items for inclusion on the agenda and may raise for discussion at any Board meeting subjects not on the agenda.

19. Board Materials Distributed in Advance Information and data that are important to the Board's understanding of the business of the meeting and presentations on special subjects should, when practical, be distributed at least one week in advance of the meeting to permit directors to prepare for the meeting. This will conserve Board meeting time and allow discussion to focus on questions and analysis of these materials. Management will try to keep materials as brief as possible while still providing the desired information. Lengthy reports or documents, when practical, should be accompanied by executive summaries. Directors are encouraged to comment on the adequacy and effectiveness of materials provided.

20. Attendance of Nondirectors at Board Meetings The CEO may invite members of senior management who are not Board members to regularly participate in portions of the Board meeting. Further, the Board encourages the participation at Board meetings of managers who can provide additional insight into items being discussed or who have substantial future potential in the Company and who should be given exposure to the Board. Portions of all Board meetings will be reserved for private deliberation among Board members.

21. Meetings of Independent Directors Independent directors will meet in executive session at the conclusion of the regularly scheduled board meetings as a matter of practice whenever requested by an individual board member, either in advance of or during board deliberations. They may also meet at other times when the need to do so is established by the Chairman or lead outside director, as appropriate, or upon the Board's own motion. The Chairman/Lead outside director is responsible for keeping the CEO fully informed of any substantive deliberations in such executive sessions. These meetings may include a discussion with the CEO.

FUNCTIONING OF COMMITTEES OF THE BOARD

22. Board Committees The current standing committees of the Board are: Executive, Finance and Audit, Personnel and Administrative Policy, and Board Governance. From time to time the Board may create a new or disband an existing Committee depending on particular interests of the Board, issues facing the Company, or legal requirements.

23. Committee Charters Each Committee should, with leadership from its Chair, maintain a charter describing its duties and responsibilities. Charters developed or amended will be reviewed by the Executive Committee and approved by the full Board.

24. Assignment and Rotation of Committee Membership The Executive Committee in consultation with the Chairman and, the CEO, and individual Board members, will assign Board members and chairs to various Committees, subject to Board approval. Assignments should comply with various applicable regulations (e.g. SEC, NYSE, IRS) and with the desires of individual members insofar as possible. Consideration should be given to rotating committee membership and chairs from time to time generally on a three to five year schedule.

25. Scheduling of Committee Meetings and Committee Agendas The Chair of each Committee, in collaboration with management and the Chairman of the Board, determine the frequency, length, and agenda of each meeting of the Committee.

26. Committee Reports to the Board The Chair of each Committee, with the support of management, will report to the full Board as soon as practical following a Committee meeting all significant matters discussed and will present recommendations of the committee to the Board for action, review, or approval, as appropriate, at each Board meeting. Minutes of all Committee meetings will be distributed to all Board members.

MISCELLANEOUS

27. Board Access to Management Board members have access to Luby's management, as necessary to fulfill their obligations as members of the board, and will keep the CEO, COO, and the chairman informed of any contacts of substance and concerns that may arise therefrom. Board members should use judgment to insure that this contact is not distracting to business operations or that it could be perceived as infringing on the responsibilities of the CEO. Correspondence from a Board member to a member of management should be copied to the CEO and Chairman.

28. Communications with the Public and Various Constituencies The CEO is responsible for establishing effective communications with Luby's various constituencies, i.e. press, shareholders, potential investors, customers, communities, suppliers, creditors, and corporate partners. Management speaks for Luby's, and Board members should communicate with these constituencies only with the consent and generally at the request of management.

29. Assessing Board Performance Approximately annually, the Governance committee will survey Board members on their perceptions of the performance and effectiveness of the Board and solicit suggestions for improving its performance. The objective is to increase the effectiveness of the Board and not to evaluate individual Board members. The results of this survey will be reported to the Executive committee which will report, in turn to the full board with the results and recommended action the committee deems appropriate.

30. Board Compensation Luby's policy is to compensate nonmanagement directors competitively relative to companies of comparable size. The Governance Committee will annually recommend to the full Board for its consideration director compensation for the next year.

31. Stock Ownership Guidelines for Directors The Board believes that each Luby's director should accumulate a meaningful investment in Luby's stock and has established guidelines for share ownership. Currently, directors are expected to accumulate, over time, common shares with a market value of at least $100,000. Luby's has established a tax deferred Nonemployee Director Phantom Stock Plan. Beginning in 1999 and until the ownership guidelines are met, the nonemployee director will receive at least $10,000 of the annual retainer in phantom stock units to be redeemed for a like number of common shares when he or she ceases for any reason to be a director.

32. Review of Guidelines The Executive Committee is responsible for periodic review of these Guidelines, as well as consideration of other corporate governance issues that may, from time to time, merit consideration of the entire Board.

33. Intent These Guidelines are intended to be a statement of general principles to guide the Board in formulating corporate policy. The Guidelines are not rules or bylaws. They may be amended from time to time by the Board. In addition, the Board may on occasion depart from the Guidelines when circumstances indicate that a departure is in the best interest of the Company and its shareholders.