1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended: Commission File Number:
March 31, 2001 1-15935
------------------ -------
OUTBACK STEAKHOUSE, INC.
---------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 59-3061413
------------------------------- -------------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
2202 N. Westshore Blvd., 5th Floor
Tampa, FL 33607
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(Address of principal executive offices) (Zip Code)
(813) 282-1225
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(Registrant's telephone number, including area code)
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 (or for such shorter period that the registrant was
required to file such reports), 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. As of April 26, 2001, there
were 76,116,137 shares of Common Stock, $.01 par value outstanding.
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PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
The accompanying unaudited consolidated financial statements have been
prepared by Outback Steakhouse, Inc. (the "Company") pursuant to the rules and
regulations of the Securities and Exchange Commission. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of the
Company, all adjustments (consisting only of normal recurring entries) necessary
for the fair presentation of the Company's results of operations, financial
position and cash flows for the periods presented have been included.
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OUTBACK STEAKHOUSE, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
March 31, December 31,
2001 2000
(unaudited)
----------- -----------
ASSETS
CURRENT ASSETS
Cash and cash equivalents ........................................ $ 78,934 $ 131,604
Inventories ...................................................... 33,555 27,871
Other current assets ............................................. 30,019 22,572
----------- -----------
Total current assets ........................................... 142,508 182,047
PROPERTY, FIXTURES AND EQUIPMENT, NET .............................. 707,157 693,975
INVESTMENTS IN AND ADVANCES TO
UNCONSOLIDATED AFFILIATES, NET ................................... 40,096 29,655
OTHER ASSETS ....................................................... 152,551 116,858
----------- -----------
$ 1,042,312 $ 1,022,535
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable ................................................. $ 29,637 $ 37,162
Sales taxes payable .............................................. 12,236 11,580
Accrued expenses ................................................. 49,738 46,266
Unearned revenue ................................................. 21,881 54,458
Income taxes payable ............................................. 21,313 13,621
Current portion of long-term debt ................................ 5,553 4,958
----------- -----------
Total current liabilities ...................................... 140,358 168,045
DEFERRED INCOME TAXES .............................................. 14,499 14,382
LONG-TERM DEBT ..................................................... 12,301 11,678
OTHER LONG-TERM LIABILITIES ........................................ 26,000 4,000
----------- -----------
Total liabilities .............................................. 193,158 198,105
INTEREST OF MINORITY PARTNERS IN ----------- -----------
CONSOLIDATED PARTNERSHIPS ........................................ 16,611 16,840
----------- -----------
STOCKHOLDERS' EQUITY
Common stock, $0.01 par value, 200,000
shares authorized; 78,514 and 78,514
shares issued; and 76,134 and 76,632
outstanding as of March 31, 2001 and
December 31, 2000, respectively .................................. 785 785
Additional paid-in capital ....................................... 214,604 214,541
Retained earnings ................................................ 675,720 638,383
----------- -----------
891,109 853,709
Less treasury stock, 2,380 shares and 1,882 shares at March 31,
2001 and December 31, 2000, respectively, at cost ............... (58,566) (46,119)
----------- -----------
Total stockholders' equity ...................................... 832,543 807,590
----------- -----------
$ 1,042,312 $ 1,022,535
=========== ===========
See notes to unaudited consolidated financial statements.
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OUTBACK STEAKHOUSE, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data, unaudited)
Three Months Ended
March 31,
---------------------------
2001 2000
--------- ---------
REVENUES
Restaurant sales ...................... $ 516,654 $ 460,974
Other revenues ........................ 4,599 3,823
--------- ---------
TOTAL REVENUES ......................... $ 521,253 $ 464,797
COSTS AND EXPENSES ..................... --------- ---------
Cost of sales ......................... 195,124 171,699
Labor and other related ............... 122,990 107,689
Other restaurant operating ............ 101,143 88,350
Depreciation and amortization ......... 15,968 13,727
General & administrative .............. 19,633 18,429
Income from operations of
unconsolidated affiliates ............ (1,001) (367)
--------- ---------
453,857 399,527
--------- ---------
INCOME FROM OPERATIONS ................. 67,396 65,270
OTHER INCOME (EXPENSE), NET ............ (864) (593)
INTEREST INCOME (EXPENSE) .............. 1,222 823
INCOME BEFORE ELIMINATION OF ........... --------- ---------
MINORITY PARTNERS' INTEREST
AND INCOME TAXES ...................... 67,754 65,500
ELIMINATION OF MINORITY
PARTNERS' INTEREST .................... 9,106 9,877
INCOME BEFORE PROVISION --------- ---------
FOR INCOME TAXES ...................... 58,648 55,623
PROVISION FOR INCOME TAXES ............. 20,761 19,857
--------- ---------
NET INCOME ............................. $ 37,887 $ 35,766
========= =========
BASIC EARNINGS PER COMMON SHARE ........ $ 0.50 $ 0.46
========= =========
BASIC WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING ............. 76,539 77,622
========= =========
DILUTED EARNINGS PER COMMON SHARE ...... $ 0.49 $ 0.45
========= =========
DILUTED WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING ............. 77,755 79,345
========= =========
See notes to unaudited consolidated financial statements.
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OUTBACK STEAKHOUSE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
Three Months Ended
March 31,
---------------------------
2001 2000
--------- ---------
Cash flows from operating activities:
Net income ............................................................... $ 37,887 $ 35,766
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation ........................................................... 14,439 12,456
Amortization ........................................................... 1,529 1,271
Minority partners' interest in consolidated partnerships' income ....... 9,106 9,877
Income from unconsolidated affiliates .................................. (1,001) (367)
Change in assets and liabilities:
(Increase) decrease in inventories ..................................... (5,684) 1,642
Increase in other current assets ....................................... (5,947) (148)
Increase in other assets ............................................... (2,154) (8,993)
(Decrease) increase in accounts payable,
sales taxes payable, and accrued expenses ............................. (3,397) 9,398
Increase in income taxes payable ....................................... 7,692 8,270
Decrease in unearned revenue ........................................... (32,577) (24,023)
Increase (decrease) in deferred income taxes ........................... 117 (1,610)
--------- ---------
Net cash provided by operating activities .............................. 20,010 43,539
Cash flows used in investing activities: ................................. --------- ---------
Capital expenditures ................................................... (42,189) (25,448)
Change in investments in and advances to unconsolidated affiliates ..... (9,440) 531
--------- ---------
Net cash used in investing activities .................................. (51,629) (24,917)
--------- ---------
Cash flows used in financing activities:
Proceeds from issuance of common stock ................................. 4,414
Proceeds from issuance of long-term debt ............................... 1,218 2,891
Proceeds from minority partners' contributions ......................... 325 300
Distributions to minority partners ..................................... (9,660) (10,750)
Payments for purchase of treasury stock ................................ (15,054)
Proceeds from reissuance of treasury stock ............................. 2,120 219
--------- ---------
Net cash used in financing activities .................................. (21,051) (2,926)
--------- ---------
Net (decrease) increase in cash
and cash equivalents ................................................... (52,670) 15,696
Cash and cash equivalents at beginning of period ......................... 131,604 92,623
--------- ---------
Cash and cash equivalents at end of period .............................. $ 78,934 $ 108,319
========= =========
Supplemental disclosure of cash flow information:
Cash paid for interest ............................................... $ 179
Cash paid for income taxes ........................................... $ 12,796 $ 871
Supplemental disclosure of non-cash items:
Assets/liabilities of businesses transferred under
contractual arrangements ........................................... $ 22,000
See notes to unaudited consolidated financial statements.
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OUTBACK STEAKHOUSE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared by Outback Steakhouse, Inc. (the "Company") pursuant to the rules and
regulations of the Securities and Exchange Commission. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of the
Company, all adjustments (consisting only of normal recurring entries) necessary
for the fair presentation of the Company's results of operations, financial
position and cash flows for the periods presented have been included.
Certain amounts shown in the 2000 consolidated financial statements
have been reclassified to conform to the 2001 presentation. These
reclassifications did not have an effect on total assets, total liabilities,
stockholders' equity or net income.
The results of operations for the interim periods are not necessarily
indicative of the results to be expected for the full year.
The December 31, 2000 balance sheet has been derived from the audited
consolidated financial statements but does not include all of the disclosures
required by generally accepted accounting principles. It is suggested that these
financial statements be read in conjunction with the financial statements and
financial notes thereto included in the Company's 2000 Annual Report.
2. Other Current Assets
Other current assets consisted of the following (in thousands):
March 31, December 31,
2001 2000
-------- ------------
Deposits ............................... $ 2,001 $ 1,543
Accounts receivable .................... 7,461 5,549
Accounts receivable franchisees ........ 5,517 5,100
Prepaid expenses ....................... 11,573 8,315
Other current assets ................... 3,467 2,065
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$30,019 $22,572
======= =======
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3. Property, Fixtures and Equipment
Property, fixtures and equipment consisted of the following (in
thousands):
March 31, December 31,
2001 2000
-------- ----------
Land ............................................................ $145,024 $135,710
Buildings & building improvements ............................... 330,171 322,078
Furniture & fixtures ............................................ 86,086 82,347
Equipment ....................................................... 207,862 212,713
Leasehold improvements .......................................... 155,149 139,426
Construction in progress ........................................ 26,723 32,360
Accumulated depreciation ........................................ (243,858) (230,659)
-------- --------
$707,157 $693,975
======== ========
4. Other Assets
Other assets consisted of the following (in thousands):
March 31, December 31,
2001 2000
--------- ------------
Intangible assets, net (including liquor licenses) .............. $ 76,884 $ 77,329
Other assets .................................................... 39,667 39,529
Assets of business transferred under contractual arrangement .... 15,500
Deferred license fee ............................................ 20,500
-------- --------
$152,551 $116,858
======== ========
In January 2001, the Company entered into a ten year licensing agreement with an
entity owned by minority interest owners of certain non-restaurant operations
(referred to in some Company literature as Outback Sports). The licensing
agreement transferred the right and license to use certain assets of these
non-restaurant operations. License fees payable over the term of the agreement
total approximately $22,000,000 of which $20,500,000 is included in "Other
Assets" and the current portion of $1,500,000 is included in "Other Current
Assets". The net book value of these assets was approximately $15,500,000 and
was reclassified from the line item entitled "Property, Fixtures and Equipment"
to "Other Assets". The corresponding long-term liability is included in the line
item entitled "Other Long Term Liabilities". The Company has deferred the gain
associated with the transaction until such time as the amounts due under the
licensing agreement are realized. See Note 7 of Notes to Unaudited Consolidated
Financial Statements
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5. Long-term Debt
Long-term debt consisted of the following (in thousands):
March 31, December 31,
2001 2000
-------- ------------
Revolving line of credit, interest at 5.61% and 7.16% at
March 31, 2001 and December 31, 2000, respectively ........................... $ 10,000 $ 10,000
Other notes payable, uncollateralized,
interest at rates ranging from 4.49% to 9.50% ................................ 7,841 6,623
Notes payable to corporation, collateralized by real estate, interest at 9.0% .. 13 13
-------- --------
17,854 16,636
Less current portion ........................................................... 5,553 4,958
-------- --------
Long-term debt ................................................................. $ 12,301 $ 11,678
======== ========
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The Company has an uncollateralized revolving line of credit which
permits borrowing up to a maximum of $125,000,000 at 57.5 basis points over the
30, 60, 90 or 180 day London Interbank Offered Rate ("LIBOR") (4.71% to 5.08% at
March 31, 2001 and 6.20% to 6.56% at December 31, 2000). At March 31, 2001 and
December 31, 2000, the unused portion of the revolving line of credit was
$115,000,000. The line matures in December 2004.
The Company has a $7,500,000 uncollateralized line of credit bearing
interest at rates ranging from 50 to 75 basis points over LIBOR. Approximately
$716,000 of the line of credit is committed for the issuance of letters of
credit, $616,000 of which is to collateralize loans made by the bank to certain
franchisees.
The Company has a $15,000,000 uncollateralized line of credit bearing
interest at rates ranging from 57.5 to 95 basis points over LIBOR. Approximately
$4,610,000 of the line of credit is committed for the issuance of letters of
credit at March 31, 2001.
The Company has a $10,000,000 uncollateralized line of credit to
support the Company's international operations bearing interest at rates 75
basis points above the three month CD rate. At March 31, 2001 and December 31,
2000, the outstanding balance was approximately $4,596,000 and $4,323,000,
respectively.
The Company is guarantor of an uncollateralized line of credit that
permits borrowing of up to $35,000,000, maturing March 2002, for one of its
franchisees. At March 31, 2001 and December 31, 2000 the outstanding balance was
approximately $23,304,000 and $22,470,000 respectively.
The Company is guarantor of an uncollateralized line of credit that
permits borrowing of up to a maximum of $12,000,000, maturing December 2003, for
one of its joint venture partners. At March 31, 2001 and December 31, 2000, the
outstanding balance was approximately $6,586,000 and $6,552,000, respectively.
The Company is guarantor of approximately $9,445,000 of a $68,000,000
note for an unconsolidated affiliate in which the Company has a 22.22% equity
interest. At March 31, 2001 and December 31, 2000, the outstanding balance was
approximately $65,000,000.
See "Liquidity and Capital Resources" in Item 2, "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
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6. Accrued Expenses
Accrued expenses consisted of the following (in thousands):
March 31, December 31,
2001 2000
--------- ------------
Accrued payroll and other compensation........................ $14,769 $15,722
Accrued insurance............................................. 10,199 11,012
Accrued property taxes........................................ 6,033 6,129
Other accrued expenses........................................ 18,737 13,403
------- -------
$49,738 $46,266
======= =======
7. Other Long Term Liabilities
Other long term liabilities consisted of the following (in thousands):
March 31, December 31,
2001 2000
--------- -----------
Accrued insurance............................................. $ 4,000 $4,000
Other deferred liability...................................... 22,000
------- -------
$26,000 $4,000
======= =======
In January 2001, the Company entered into a ten year licensing
agreement with an entity owned by minority interest owners of certain
non-restaurant operations. The licensing agreement transferred the right and
license to use certain assets of these non-restaurant operations. License fees
payable over the term of the agreement total approximately $22,000,000. The
Company has deferred the gain associated with the transaction until such time as
the amounts due under the licensing agreement are realized. The corresponding
long-term asset is included in the line item entitled "Other Assets". See Note 4
of Notes to Unaudited Consolidated Financial Statements.
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OUTBACK STEAKHOUSE, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
The following table sets forth, for the periods indicated, (i) the
percentages which the items in the Company's Consolidated Statements of Income
bear to total revenues or restaurant sales as indicated, and (ii) selected
operating data:
Three Months Ended
March 31,
-----------------------
2001 2000
-------- --------
REVENUES:
Restaurant sales .................................. 99.1% 99.2%
Other revenues .................................... 0.9 0.8
-------- --------
TOTAL REVENUES ..................................... 100.0 100.0
COSTS AND EXPENSES: ................................ -------- --------
Cost of sales (1) ................................. 37.8 37.2
Labor and other related (1) ....................... 23.8 23.4
Other operating (1) ............................... 19.6 19.2
Depreciation and amortization ..................... 3.1 3.0
General & administrative .......................... 3.8 4.0
Income from operations of
unconsolidated affiliates ........................ 0.2 0.1
Total costs and expenses ...................... 87.1 86.0
-------- --------
INCOME FROM OPERATIONS ............................. 12.9 14.0
OTHER INCOME (EXPENSE) ............................. (0.2) (0.1)
INTEREST INCOME (EXPENSE) .......................... 0.2 0.2
INCOME BEFORE ELIMINATION OF ....................... -------- --------
MINORITY PARTNERS' INTEREST AND INCOME
TAXES ............................................ 13.0 14.1
ELIMINATION OF MINORITY PARTNERS'
INTEREST ......................................... 1.7 2.1
-------- --------
INCOME BEFORE PROVISION FOR INCOME TAXES ........... 11.3 12.0
PROVISION FOR INCOME TAXES ......................... 4.0 4.3
-------- --------
NET INCOME ......................................... 7.3% 7.7%
======== ========
(1) As a percentage of restaurant sales.
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Results of Operations (continued)
Three Months Ended
March 31,
------------------
2001 2000
---- ----
System-wide sales (millions of dollars):
Outback Steakhouse restaurants
Company owned - domestic and international ..... $456 $416
Domestic franchised and joint venture .......... 87 77
International franchised and joint venture ..... 21 16
---- ----
Total ........................................ 564 509
---- ----
Carrabba's Italian Grills
Company owned .................................. 48 42
Joint venture .................................. 16 11
---- ----
Total ........................................ 64 53
---- ----
Other
Total ........................................ 13 3
---- ----
System-wide total ................................ $641 $565
==== ====
Number of restaurants (at end
of the period):
Outback Steakhouse
Company owned - domestic and international ..... 531 485
Domestic franchised and joint venture .......... 109 97
International franchised and joint venture ..... 42 32
---- ----
Total ........................................ 682 614
---- ----
Carrabba's Italian Grills
Company owned .................................. 60 56
Joint venture .................................. 21 16
---- ----
Total ........................................ 81 72
Fleming's Prime Steakhouse and Wine Bars
Company owned .................................. 3 3
Joint venture .................................. 2
---- ----
Total ........................................ 5 3
Roy's
Company owned .................................. 1
Joint venture .................................. 5
---- ----
Total ........................................ 6
Zazarac
Company owned .................................. 1
Lee Roy Selmon's
Company owned .................................. 1
---- ----
System-wide Total ............................ 776 689
==== ====
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Three months ended March 31, 2001 and 2000
Revenues. Total revenues increased by 12.1% to $521,253,000 during the
first quarter of 2001 as compared with $464,797,000 in the same period in 2000.
The increase was primarily attributable to the opening of new restaurants after
March 31, 2000, increased same store customer counts and a menu price increases
of approximately 3.0% at Outback Steakhouse and 2.8% at Carrabba's Italian
Grills after March 2000. The following table depicts additional activities that
influenced the period to period changes in revenues:
Three Months Ended
March 31,
----------------------
2001 2000
-------- --------
Average unit volumes(weekly):
Outback Steakhouses ............. $ 67,735 $ 65,491
Carrabba's Italian Grills ....... $ 61,980 $ 57,043
Per person check averages:
Outback Steakhouses ............. $ 18.62 $ 17.99
Carrabba's Italian Grills ....... $ 19.64 $ 19.44
Year to year percentage change:
Same-store sales:
Outback Steakhouses ............. 2.3% 6.4%
Carrabba's Italian Grills ....... 8.6% 11.2%
Same store customer counts:
Outback Steakhouses ............. (0.9%) 3.9%
Carrabba's Italian Grills ....... 7.6% 9.2%
Costs and expenses. Cost of restaurant sales as a percentage of
restaurant sales, consisting of food and beverage costs, increased in the first
quarter of 2001 to 37.8% of restaurant sales as compared with 37.2% in the same
period in 2000. The increase was attributable to cost increases in beef and
butter and was partially offset by favorable fish and alcoholic beverage costs.
Labor and other related expenses include all direct and indirect labor
costs incurred in restaurant operations. Labor expenses increased in the first
quarter of 2001 to 23.8% of restaurant sales, as compared with 23.4% in the same
period in 2000. The increase resulted from higher hourly wage rates, a new
hourly employee bonus program, and enhanced employee health insurance benefits.
The increase was partially offset by higher average unit volumes at Outback and
Carrabba's.
Other operating expenses include all other unit-level operating costs,
the major components of which are operating supplies, rent, repairs and
maintenance, advertising expenses, utilities, preopening costs and other
occupancy costs. A substantial portion of these expenses are fixed or indirectly
variable. As a percentage of restaurant sales, these costs increased to 19.6% in
the first quarter of 2001 as compared to 19.2% in the same quarter of 2000. The
increase was attributable to higher natural gas prices and expenses associated
with opening new format restaurants. The increase was partially offset by lower
advertising expenditures and higher average unit volumes for both Outback and
Carrabba's which reduced the fixed and indirectly variable costs as a percentage
of sales.
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Depreciation and amortization costs increased by 0.1% of total revenues
to 3.1% in the first quarter of 2001, as compared with 3.0% in the same period
in 2000. The increase resulted primarily from additional depreciation related to
new unit development, "Take-away" room additions, new restaurant formats and
additional amortization of goodwill related to the purchase of ownership
interests from area operating partners.
General and administrative costs increased by $1,204,000 to $19,633,000
in the first quarter of 2001 as compared with $18,429,000 in the same period in
2000. This increase resulted from an increase in overall administrative costs
associated with operating additional domestic and international Outback
Steakhouses, Carrabba's Italian Grills, Fleming's Prime Steakhouses and Roy's as
well as costs associated with the development of new restaurant formats and
other affiliated businesses.
Income from operations of unconsolidated affiliates represents the
Company's portion of the income or loss from Outback Steakhouse and Carrabba's
Italian Grills operated as development joint ventures. Income from development
joint ventures was $1,001,000 in the first quarter of 2001 as compared with
income of $367,000 in the same period in 2000. This increase was attributable to
additional stores operating as development joint ventures in the first quarter
of 2001 and to an increase in average unit volumes.
Income from operations. As a result of the increase in revenues, the
changes in the relationship between revenues and expenses discussed above and
the opening of new restaurants, income from operations increased by $2,126,000
to $67,396,000, in the first quarter of 2001 as compared with $65,270,000 in the
same period in 2000.
Other income (expense), net. Other income (expense), net represents the
income and expense from non-restaurant businesses. Net other expenses increased
to $864,000 in the first quarter of 2001 compared with net other expenses of
$593,000 during the same period in 2000. The increase in the net expense is
related primarily to increases in administrative, promotional and development
costs associated with the growth of non-restaurant businesses.
Interest income. Interest income was $1,222,000 during the first
quarter of 2001 as compared with interest income of $823,000 in the same period
in 2000. The period-to-period change in interest income resulted from higher
average cash balances during the first quarter of 2001 compared with the same
period in 2000.
Elimination of minority partners' interests. The allocation of
minority partners' interest income included in this line item represents their
portion of income from operations included in consolidated operating results
attributable to the ownership interests of restaurant managers and area
operating partners in Company owned restaurants. As a percentage of revenues,
these allocations were 1.7% and 2.1%during the quarter ended March 31, 2001 and
2000, respectively. The decrease in this ratio is the result of the purchase of
minority interests in 52 restaurants from area operating partners after March
31, 2000.
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Provision for income taxes. The provision for income taxes in both
quarters reflected expected income taxes due at federal statutory rates and
state income tax rates, net of the federal benefit. The effective income tax
rate was 35.4% for the first quarter of 2001 and 35.7% for the first quarter of
2000. The decrease in the effective rate resulted from state tax savings from
changes in the corporate state tax structure, partially offset by the decrease
in FICA tip credits the Company was able to utilize in the current period.
Net income and earnings per share. Net income for the first quarter of
2001 was $37,887,000 as compared with net income of $35,766,000 in the same
period in 2000. Basic earnings per share increased to $0.50 during the first
quarter of 2001 as compared with basic earnings per share of $0.46 for the same
period in 2000. Diluted earnings per share increased to $0.49 during the first
quarter of 2001 as compared with diluted earnings per share of $0.45 for the
same period in 2000.
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Liquidity and Capital Resources
The following table presents a summary of the Company's cash flows and
capital expenditures for the periods indicated.
Year Ended Three Months Ended
December 31, March 31,
2000 2001 2000
--------- -------- --------
Net cash provided by
operating activities ................. $ 239,546 $ 20,010 $ 43,539
Net cash used in
investing activities ................. (145,819) (51,629) (24,917)
Net cash used in
financing activities ................. (54,746) (21,051) (2,926)
--------- -------- --------
Net increase(decrease) in cash
and cash equivalents ................. $ 38,981 $(52,670) $ 15,696
========= ======== ========
The Company requires capital principally for the development of new
Company owned and joint venture restaurants. Capital expenditures totaled
approximately $139,893,000 for the year ended December 31, 2000 and $42,189,000
and $25,448,000 during the first quarters of 2001 and 2000, respectively. The
Company either leases its restaurants under operating leases for periods ranging
from five to twenty years or purchases land and buildings where it is cost
effective. The Company anticipates that 80% to 90% of the Company owned
restaurants to be opened in 2001 will be free-standing units.
The Company has formed joint ventures to develop Outback Steakhouses in
Brazil and the Philippines. The Company has purchased three Outback Steakhouses
in Korea and will also develop future Company owned Outback Steakhouses in
Korea. The Company also has entered into agreements to develop and operate Roy's
Restaurants and Fleming's Prime Steakhouse and Wine Bars. Under the Fleming's
agreement, the Company has committed to the first $13,000,000 of future
development costs.
At March 31, 2001, the Company had three uncollateralized lines of
credit totaling $147,500,000. Approximately $5,326,000 is committed for the
issuance of letters of credit, some of which are to collateralize loans made by
the bank to certain franchisees. As of March 31, 2001, the Company had drawn
$10,000,000 on the revolving line of credit to finance the development of new
restaurants. The Company expects that its capital requirements through the end
of 2001 will be met by cash flows from operations and advances on its line of
credit. See Note 5 of Notes to Unaudited Consolidated Financial Statements.
The Company has a $10,000,000 uncollateralized line of credit to
support the Company's international operations. On March 31, 2001, the
outstanding balance was approximately $4,596,000.
The Company is guarantor of an uncollateralized line of credit that
permits borrowing of up to $35,000,000, maturing March 2002, for one of its
franchisees. At March 31, 2001 and December 31, 2000 the outstanding balance was
approximately $23,304,000 and $22,470,000 respectively.
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The Company is guarantor of an uncollateralized line of credit that
permits borrowing of up to a maximum of $12,000,000, maturing December 2003, for
one of its joint venture parnters. At March 31, 2001, the outstanding balance
was approximately $6,586,000.
The Company is guarantor of approximately $9,445,000 of a $68,000,000
note for an unconsolidated affiliate in which the Company has a 22.22% equity
interest. At March 31, 2001, the outstanding balance was approximately
$65,000,000. See Note 5 of Notes to Unaudited Consolidated Financial Statements.
OTHER
See Notes 4 and 7 of Notes to Unaudited Consolidated Financial
Statements for discussion of the Company's $22,000,000 licensing agreement for
use of the assets of some of its non-restaurant operations.
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OUTLOOK
The following discussion of the Company's future operating results and
expansion strategy and other statements in this report that are not historical
statements constitute forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Forward-looking statements
represent the Company's expectations or belief concerning future events and may
be identified by words such as "believes," "anticipates", "expects," "plans,"
"should" and similar expressions. The Company's forward-looking statements are
subject to risks and uncertainties that could cause actual results to differ
materially from those stated or implied in the forward-looking statement. We
have endeavored to identify the most significant factors that could cause actual
results to differ materially from those stated or implied in the forward-looking
statements in the section entitled "Cautionary Statement" below.
In the Outlook portion of Management's Discussion and Analysis of
Financial Condition and Results of Operations in its Annual Report to the
Securities and Exchange Commission on Form 10-K for the year ended December 31,
2000, the Company provided guidance on the outlook for its businesses in 2001
and factors which may affect the Company's financial results. During the quarter
ended March 31, 2001, the Company incurred higher Restaurant Operating Expenses
and Cost of Sales as a result of higher natural gas and dairy prices,
respectively, than paid during the comparable period in 2000 and than
anticipated in the Company's comments discussed above. To the extent to which
the prices of these commodities remain at current levels, the Company's
operating results may be affected for the remainder of 2001.
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Expansion Strategy.
The Company's goal is to add new restaurants to the Outback system
during the remainder of 2001. The following table presents a summary of the
expected restaurant openings for the full year 2001:
2001
--------
Outback Steakhouses - Domestic
Company owned................................... 40 to 45
Franchised or joint venture..................... 8 to 10
Outback Steakhouses - International
Company owned................................... 4 to 5
Franchised or joint venture..................... 18 to 20
Carrabba's Italian Grills
Company owned .................................. 6 to 8
Joint venture .................................. 10 to 12
Fleming's Prime Steakhouse and Wine Bars
Company owned .................................. 0
Joint venture .................................. 5 to 6
Roy's
Company owned .................................. 0
Joint venture .................................. 5 to 6
Zazarac
Company owned................................... 1
Selmon's
Company owned .................................. 0
Cheesburger in Paradise
Joint venture................................... 1
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CAUTIONARY STATEMENT
The foregoing Management's Discussion and Analysis of Financial
Condition and Results of Operations contains various "forward-looking
statements" within the meaning of Section 27A of the Securities Exchange Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Forward-looking statements represent the Company's expectations or
belief concerning future events, including the following: any statements
regarding future sales and gross profit percentages, any statements regarding
the continuation of historical trends, and any statements regarding the
sufficiency of the Company's cash balances and cash generated from operating and
financing activities for the Company's future liquidity and capital resource
needs. Without limiting the foregoing, the words "believes," "anticipates,"
"plans," "expects," "should" and similar expressions are intended to identify
forward-looking statements.
The Company's actual results could differ materially from those stated
or implied in the forward-looking statements included in the discussion of
future operating results and expansion strategy and elsewhere in this report as
a result, among other things, of the following
(i) The restaurant industry is a highly competitive industry with many well
established competitors;
(ii) The Company's results can be impacted by changes in consumer tastes and
the level of consumer acceptance of the Company's restaurant concepts;
local, regional and national economic conditions; the seasonality of
the Company's business; demographic trends; traffic patterns; consumer
perception of food safety; employee availability; the cost of
advertising and media; government actions and policies; inflation; and
increases in various costs;
(iii) The Company's ability to expand is dependent upon various factors such
as the availability of attractive sites for new restaurants, ability to
obtain appropriate real estate sites at acceptable prices; ability to
obtain all governmental permits including zoning approvals and liquor
licenses on a timely basis, impact of government moratoriums or
approval processes which could result in significant delays, ability to
obtain all necessary contractors and subcontractors, union activities
such as picketing and hand billing which could delay construction, the
ability to generate or borrow funds, the ability to negotiate suitable
lease terms, and the ability to recruit and train skilled management
and restaurant employees;
(iv) Price and availability of commodities, including but not limited to
such items as beef, chicken, shrimp, pork, dairy, potatoes and onions
are subject to fluctuation and could increase or decrease more than the
Company expects; and/or
(v) Weather and acts of God could result in construction delays and also
adversely affect the results of one or more stores for an indeterminate
amount of time.
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk from changes in interest rates on
debt and changes in commodity prices.
The Company's exposure to interest rate risk relates to its
$147,500,000 revolving lines of credit with its banks. Borrowings under the
agreement bear interest at rates ranging from 50 to 95 basis points over the 30,
60, 90 or 180 London Interbank Offered Rate. At March 31, 2001 and December 31,
2000, the Company had a $10,000,000 outstanding balance on the lines of credit.
Many of the food products purchased by the Company and its franchisees
are affected by commodity pricing and are, therefore, subject to unpredictable
price volatility. These commodities are generally purchased based upon market
prices established with vendors. The purchase arrangement may contain
contractual features that limit the price paid by establishing certain floors
and caps. The Company does not use financial instruments to hedge commodity
prices because the Company's purchase arrangements help control the ultimate
cost paid. Extreme changes in commodity prices and/or long-term changes could
affect the Company adversely. However, any changes in commodity prices would
also affect the Company's competitors at about the same time as the Company. The
Company expects that in most cases increased commodity prices could be passed
through to its consumers via increases in menu prices. From time to time,
competitive circumstances could limit menu price flexibility, and in those cases
margins would be negatively impacted by increased commodity prices.
This market risk discussion contains forward-looking statements. Actual
results may differ materially from the discussion based upon general market
conditions and changes in domestic and global financial markets.
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OUTBACK STEAKHOUSE, INC.
PART II: OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
None
(b) Reports on Form 8-K
There were no reports filed on Form 8-K during the quarter ended
March 31, 2001.
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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 of the
undersigned thereunto duly authorized.
OUTBACK STEAKHOUSE, INC.
Date: April 30, 2001 By: /s/Robert S. Merritt
--------------------
Robert S. Merritt
Senior Vice President,
Finance (Principal Financial
and Accounting Officer)
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