UNITED STATES
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Luby’s, Inc.
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 1 Luby’s, Inc. NYSE: LUB Investor Presentation 2008 Annual Meeting of Stockholders * * * |
 2 Forward-Looking Statements Statements in this discussion regarding future financial results and other statements of Luby’s, Inc. (“Luby’s” or the “Company”) that are not statements of historical fact are considered forward-looking statements. Forward- looking statements include statements about the Company's expected capital expenditures in fiscal year 2008, expected sales at the Company's new prototype restaurant, plans regarding the construction of new units and expansion into new markets, expectations regarding the opening of new units, and expected financial results for new units. Actual results might differ materially from those projected in the forward-looking statements. Additional information relating to the factors that could cause actual results to differ materially from those projected in the forward-looking statements is contained in publicly available documents that the company has previously filed with the Securities and Exchange Commission (“SEC”) including prior Annual Reports on Form 10-K and Quarterly Reports on 10-Q. Additional Information In connection with the solicitation of proxies, Luby's has filed with the SEC a definitive proxy statement on November 29, 2007 (the "Proxy Statement"). The Proxy Statement contains important information about Luby's and the 2008 Annual Meeting of Shareholders. Luby's shareholders are urged to read the Proxy Statement carefully. On November 29, 2007, Luby's began the process of mailing the Proxy Statement, together with a WHITE proxy card. Shareholders may obtain additional free copies of the Proxy Statement and other documents filed with the SEC by Luby's through the website maintained by the SEC at www.sec.gov. The Proxy Statement and other relevant documents also may be obtained free of charge from Luby's by contacting Investor Relations in writing at Luby's, Inc., 13111 Northwest Freeway, Suite 600, Houston, Texas 77040; or by phone at 713-329-6808; or by email at investors@lubys.com. The Proxy Statement is also available on Luby's website at www.lubys.com/06aboutusFilings.asp. The contents of the websites referenced above are not deemed to be incorporated by reference into the Proxy Statement. In addition, copies of the Proxy Statement may be requested by contacting the Company's proxy solicitor, MacKenzie Partners, Inc., by phone toll-free at 1-800-322-2885. Luby's and its directors and executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies in connection with the 2008 Annual Meeting of Shareholders. Information about Luby's directors and executive officers is located in the Proxy Statement. |
 3 About Luby’s Operates 128 cafeteria dining restaurants (fast casual) Strong brand recognition and virtually no direct competition in its markets Unique customer offering Quality food made from scratch Value pricing: 35% to 50% below price per person cost of competitors Menu variety, family dining, unique offerings Outstanding customer service Serves a broad customer demographic – families, children, boomers High-frequency customer visits Business- and family-oriented Traded on the New York Stock Exchange (NYSE: LUB) “Our mission is to be the most innovative and successful cafeteria company in America and to serve our customers convenient, great tasting, home-style meals at an excellent value, in a clean and friendly environment.” |
 4 128 Restaurants Clustered in Major Texas Markets Texas: Top U.S. Cities Population Rank Houston Metro 40 4th Dallas/Fort Worth Metro 23 9th/20th San Antonio Metro 16 7th Rio Grande Valley 11 Austin 7 16th Other Texas Markets 24 Other States 7
Total 128 Source: U.S. Census Bureau Top 50 Cities in the U.S. by Population Rank
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 5 In 2001, New Management Team Found Challenges and Opportunities Needed new CEO, COO, CFO & GC Faced operational challenges Lacked lending sources More than $120 million of debt Not profitable Many stores were underperforming Opportunities Enhance food quality and variety Modernize operations Expand customer base |
 6 Luby’s Board and Management Have Successfully Enhanced Shareholder Value Chris and Harris Pappas joined Luby’s in 2001 Brought over 30 years of restaurant industry experience Completely disinterested and independent Board named Chris and Harris Pappas and Frank Markantonis to the Board in 2001 Total Pappas investment to-date: $27 million Initially invested $6 million prior to joining the Board Loaned Luby’s $10 million (subsequently converted to equity) Exercised options and spent $11 million on additional equity Under the leadership of this Board and management team, the Company Returned to profitability in 2005 Eliminated $120 million of debt by 2006; today the Company is debt-free Increased same-store sales through improvements in product offerings and better store-level execution Outperformed its competitors despite a challenging restaurant environment Opened first new prototype restaurant & first large culinary services account in 2007 |
 7 Luby’s Financial Performance New Management Impact: 2001 to 2007 |
 8 Comparison of 5 Year Cumulative Total Return Assumes Initial Investment of $100 August 2007 0.00 50.00 100.00 150.00 200.00 250.00 300.00 2002 2003 2004 2005 2006 2007 LUBY'S INC S&P 600 Restaurant Index . Luby’s has generated a total shareholder return of nearly 150% -- significantly outperforming the S&P 600 Restaurant Index Shareholder Return Exceeds Peers Source: S&P Small Cap 600 Data Copyright ©2006, Standard & Poor’s, a division of
the McGraw-Hill Companies, Inc. |
 9 Increased Store Sales with Reduced Store Count 0 50 100 150 200 250 FY01 FY02 FY03 FY04 FY05* FY06 FY07 $0.0 $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 Year-End Store Count Avg. Unit Sales *Fiscal year 2005 was a 53 week year, compared to all other fiscal years presented here which are
52 weeks. Total Sales
$467.2 $399.1 $318.5 $308.8 $322.2
$324.6 $318.3 ($ in
millions) Avg. unit sales calculated as total sales divided by avg. store count during
the year. |
 10 Growing Margins -35 -25 -15 -5 5 15 Income From Operations Income from Ops. % of total sales ($in millions) FY01 FY02
FY03 FY04 FY05* FY06 FY07 1% 5.1% 4.9% 6.0% 2.9% *Fiscal year 2005 was a 53 week year, compared to all other fiscal years presented here which are
52 weeks. |
 11 Growing Profitability While Investing In Business $- $5 $10 $15 $20 $25 $30 $35 FY01 FY02 FY03 FY04 FY05* FY06 FY07 Cash Flow From Operations Capital Expenditures ($in millions) *Fiscal year 2005 was a 53 week year, compared to all other fiscal years presented here which are
52 weeks. |
 12 Restored Balance Sheet ($140) ($120) ($100) ($80) ($60) ($40) ($20) $0 $20 $40 Cash Debt ($in millions) FY01 FY02
FY03 FY04 FY05 FY06 FY07 |
 13 Improved Expense Efficiency 82.7% 82.7% 82.8% 84.9% 85.7% 86.8% 89.1% FY01 FY02 FY03 FY04 FY05 FY06 FY07 Prime Costs & Other Operating Expenses |
 14 New Strategic Growth Plan to Create Long-Term Shareholder Value Earlier this year, Luby’s announced a new strategic growth plan designed to position the Company for the future and create long-term shareholder value Open new restaurants based on an innovative, upscale design Invest in existing restaurants Expand our brand FY08 Capex: $33M to $40M New unit development costs related to real estate: approximately $4M to $5M Construction and equipment costs for new units: approximately $15M to $17M (approx. $2.8 million per unit) Recurring repairs at existing units: approximately $6M to $7M Upgrades and technology costs at our existing units: approximately $8M to $11M |
 15 Debuting New Innovative, Upscale Restaurants New next generation cafeterias offer customers An upscale dining experience Healthy choices The same quality food, variety and affordability The first new restaurant opened in Cypress, Texas on August 17 th Already outperforming the system average unit sales of $2.5M – on pace to exceed $3.25M Well-received by customers Anticipate building 45 to 50 new restaurants over the next five years in growing areas of existing markets and expanding to promising new growth markets Expect to open 4 to 6 new units in 2008 New restaurants will drive increased market share, higher unit sales and enhanced store-level profit Expect 15 – 20% cash flow return |
 16 Investing In and Enhancing Existing Restaurants Update existing locations to further enhance the dining experience of our guests Performed upgrade work at 30 stores in FY07 Rest rooms, interior, ceiling tile work, dining room lighting, carpet, high chairs, tables, chairs, exterior paint and benches. Additional new components: Pay at the end of the line, booths & booth walls, condiment stands, & salad & dessert display cases Restaurant management team continues to focus on maintaining Luby's high standards of food quality, service and profitability |
 17 Expand Our Brand: Grow Culinary Contract Services Build on Luby’s core strengths by bringing high- quality, made-from-scratch offerings to new facilities at hospitals and medical schools New dining facility at Baylor College of Medicine has been well-received by customers and is performing in line with expectations Continue to grow the culinary contract business, which increased from one account to eight in FY07 Focused on growing this area of business and expanding our brand into the healthcare sector |
 18 The New Luby’s Experience New Store 150 Person Line Capacity Furniture & Booths Granite Serving Line Open Kitchen Bar/Counter (single diners) TVs WiFi Electronic Menu Screen Salad & Dessert Display Cases Old Store 75 Person Line Capacity Tables & Chairs only Steel Serving Line Closed-Off Kitchen None None None None Ice Displays/Limited Visibility |
 19 Traditional Luby’s New Prototype New Generation Luby’s Cafeteria |
 20 Customer Friendly Bar & Waiting Area Increased Queuing Capacity: 150 person capacity vs. 75 at other Luby’s Spacious Serving Line and Open- View Kitchen Concourse |
 21 Positive Wall Street Review “We were quite impressed by the layout, ambience, and location. In our opinion, the new restaurant represents a substantial improvement over existing locations. This opening, therefore, gives us greater confidence in Luby’s growth plan and the use of this restaurant design as the vehicle.” “We believe this attractive design creates more energy in the restaurant and gives Luby’s a greater casual dining ambiance that should be more appealing to today’s consumers, who are less inclined to dine at cafeterias. Therefore, these new Luby’s should attract a broader customer base and thus generate higher sales volumes, in our opinion.” 8/16/07 SMH Research Report Permission to use quotation neither sought nor obtained. |
 22 Luby’s Has the Right Board to Implement Strategic Growth Plan Luby’s Board has the necessary depth and breadth of expertise in areas that are critical to
Luby’s continued success Luby’s directors are veterans in restaurant management, public company leadership, real
estate, finance, accounting, marketing, law and customer relations The ethnic diversity and region representation of the Board reflects Luby’s customer
demographic and major markets served The Board is highly-qualified, independent-minded and committed to good corporate
governance 7 of 10 directors are independent Designated independent lead director Separate Chairman and CEO positions 4 new independent directors since 2002 Independent directors meet in executive sessions without management Finance & Audit, Nominating & Corporate Governance and Executive Compensation Committees all consist entirely of independent directors Committees are authorized to engage independent advisors and counsel Board has complete access to all Luby’s officers and employees Board publishes and follows clear, defined corporate governance guidelines Luby's Corporate Governance Quotient (CGQ®) as of 6-Nov-07 is better than 90.6% of CGQ
Universe companies and 68.9% of Consumer Services companies.
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 23 Luby’s Director Nominees: Experienced, Independent and Committed to Enhancing Shareholder Value – Licensed to practice medicine; distinguished career in public health – Retired President of the United Way of the Texas Gulf Coast – Served as director of Public Health for the City of Houston from 1980 until 1983, which included responsibility for the regulation of all food service establishments in the city – Director of Belo Corp., SYSCO Corp., Sun America Fund, Valic Corp., and the Houston Convention Center Hotel – Former member of the Board of Regents of the University of Texas at Austin Dr. Judith B. Craven Vice Chair of Board Personnel and Administrative Policy Committee (C) Executive Compensation Committee (VC) Executive Committee (VC) Nominating and Corporate Governance Committee – Attorney with over thirty years of legal experience representing clients in the restaurant industry, with a concentration in real estate development, litigation defense, insurance procurement and
coverage, immigration and employment law – General Counsel of Pappas Restaurants – Member of the State Bar of Texas, District of Columbia Bar, and a Fellow in the Houston Bar
Association Frank Markantonis Personnel and Administrative Policy Committee – Certified Public Accountant – 18 years KPMG, 10 years KPMG Audit Partner – Principal owner of the public accounting and professional services firm Mir•Fox & Rodriguez, P.C., which he founded in 1988 – Director of the Memorial Hermann Hospital System, the Greater Houston Community Foundation, the Sam Houston Council of Boy Scouts, the Advisory Board of the University of Houston-Downtown School of Business, and the Houston Region Advisory Board of JPMorgan Chase Bank of Texas Gasper Mir Chairman of Board Executive Committee (C) Nominating and Corporate Governance Committee (C) Finance and Audit Committee Directors Standing for Re-Election – Chairman and Chief Executive Officer of San Antonio based GRE Creative Communications, a
bilingual marketing and public relations firm – Extensive experience in conducting food service television marketing campaigns – Chairman of the Texas Aerospace Committee – Director of USAA Federal Savings Bank Arthur Rojas Emerson Finance and Audit Committee |
 24 The Dissidents’ Plan Is DETRIMENTAL to Luby’s Ramius has no interest in long-term value creation Ramius is presenting a short-term plan to manipulate the Company’s balance sheet by engaging in a sale/leaseback of its real estate Ramius’ plan would deplete capital assets and potentially saddle the Company with debt and make it difficult, if not impossible, to pursue the Company’s strategic growth plan By owning rather than leasing properties, Luby’s generates better operating margins and greater cash flow returns, which better positions the Company for growth |
 25 Dissidents’ Nominees Will Add Nothing to Luby’s Board Little If Any Familiarity with Luby's: Only one of the four Ramius nominees lives in a state where Luby's operates No Stock Ownership: None of Ramius’ four nominees directly owns shares of Luby's stock No Expressed Interest in Luby's Operations/Finances: None of Ramius’ four nominees has contacted any member of Luby's senior management or Board of Directors to discuss the company, its finances or operations Disappointing Actual “Restaurant Experience”: Brion Grube: 2005-2006: President/CEO of Baja Fresh Mexican Grill, owned by Wendy’s
Due to poor performance during Grube’s tenure, Wendy’s sold Baja Fresh for $31 million — $244 million less than Wendy’s purchase price of $275 million 2004-2005: President/CEO of another unprofitable Wendy’s subsidiary, Cafe Express,
which was sold in 2007 due to poor performance Grube is currently retired Matthew Pannek: May 2006 to August 2007: President/CEO of Magic Brands and Fuddruckers, Inc. Led brand for only 15 months Limited operational experience Pannek is currently a consultant Stephen Farrar: 1992-2006: Senior Vice President, Western Region, Wendy’s During his tenure, Wendy’s bought two now- failed chains: Baja Fresh & Cafe Express Agreeing with an activist investor to sell Baja Fresh, Wendy’s also agreed to reduce its
corporate overhead by $100 million. Farrar “retired early” during the reorganization Farrar is currently a consultant |
 26 Dissidents’ Nominees Will Add Nothing to Luby’s Board cont. The fourth nominee, William J. Fox, has no restaurant experience and has faced accusations of corporate governance deficiencies in the past In merely 18 months, Ramius has nominated Fox to four different Boards of Directors. Fox is currently a nominee for three Boards According to a complaint filed by Payless Shoesource, Inc. that named Fox as a defendant During Fox’s tenure as a senior executive officer of Revlon, the company’s stock lost
more than 45% of its market value in a single day, costing investors more than $1.5
billion Fox was a named defendant in a lawsuit relating to his service at Revlon and
The Cosmetic Centers, allegations against him included fraud and violations of
securities laws. The suit was reportedly settled for $10 million in 2003
The Cosmetic Centers filed for bankruptcy in April 1999 Fox is a former Vice Chairman, member of Advisory Board of Barington Capital, another dissident hedge fund with a record of activism as a partner with Ramius Fox recently resigned as lead director of Nephros (Amex:NEP) on September 19 2007; NEP stock declined 85% from $5.80 to $0.77 during Fox’s three-year tenure
We do not believe Luby’s growth objectives can be achieved with Ramius’ nominees on the Board |
 27 Wall Street Recognizes Luby’s Has The Right Plan “Company transitioning from turnaround phase to growth phase. After turning around the business, LUB is now focused on growth through the expansion of its restaurant base using an attractive new prototype and its culinary service business. We believe this strategy should drive higher earnings and returns and, subsequently, the stock’s valuation.” “Superior management team and attractive asset base. LUB has one of the most talented management teams in the business, in our opinion, giving us confidence in the execution of the company’s growth plan. A rich asset base through LUB’s real estate ownership limits the downside risk, too.” “LUB’s accelerating long-term growth outlook and superior management team are the key drivers of why we think LUB shares will outperform the broader market and its peers over the next 12 months. Over the long term, the market eventually rewards restaurant companies that have improving growth outlooks with higher multiples. Therefore, we believe that as the market begins to recognize the upside of LUB’s strategy, the stock should appreciate ahead of its peers. Luby’s is also led by a very experienced management team that is implementing the right strategy to enhance shareholder value, in our opinion, and has the talent to execute.” 12/12/07 SMH Research Report: Permission to use quotation neither sought nor obtained.
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 28 Conclusion Luby’s Board and management are committed to maximizing shareholder value Luby’s strategic growth plan is the right plan Luby’s has the right Board to oversee the implementation of the Company’s strategic growth plan Ramius’ nominees would add nothing to Luby’s Board and, in fact, would undermine future growth of the Company Commit to the Company’s Strategic Growth Plan for Shareholder Value Vote FOR Luby’s Experienced Director Nominees on the WHITE Proxy Card |