<PAGE> 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:
SEPTEMBER 30,1996 0-19334
- ----------------- -------
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)
550 NORTH REO STREET, SUITE 200
TAMPA, FL 33609
---------------------------------------------------
(Address of principal executive offices) (Zip Code)
(813) 282-1225
----------------------------------------------------
(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 NOVEMBER 07, 1996,
THERE WERE 47,989,888 SHARES OF COMMON STOCK, $.01 PAR VALUE OUTSTANDING.
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<PAGE> 2
OUTBACK STEAKHOUSE, INC.
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.
2 of 17
<PAGE> 3
OUTBACK STEAKHOUSE, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents............. $ 23,108 $ 27,089
Short-term investment securities...... 553 1,176
Inventories........................... 9,805 6,474
Other current assets.................. 8,881 12,984
-------- --------
Total current assets............ 42,347 47,723
PROPERTY, FIXTURES AND EQUIPMENT, NET.... 350,809 290,630
INVESTMENTS IN AND ADVANCES TO
UNCONSOLIDATED AFFILIATES.............. 14,981 17,250
OTHER ASSETS............................. 13,587 13,668
-------- --------
$421,724 $369,271
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable...................... $ 10,883 $ 20,285
Sales taxes payable................... 5,135 4,358
Accrued expenses...................... 19,611 18,331
Unearned revenue...................... 7,025 17,632
Current portion of long-term debt..... 800 3,000
-------- --------
Total current liabilities........ 43,454 63,606
DEFERRED INCOME TAXES.................... 1,602 1,298
LONG-TERM DEBT........................... 47,766 37,905
INTEREST OF MINORITY PARTNERS IN CONSOLIDATED
PARTNERSHIPS.......................... 2,823 2,698
OTHER LONG TERM LIABILITIES.............. 6,000
-------- --------
Total liabilities................. 101,645 105,507
-------- --------
STOCKHOLDERS' EQUITY
Common stock, $0.01 par value, 100,000 shares
authorized; 47,950 and 47,503, issued
and outstanding as of September 30, 1996 and
December 31, 1995, respectively... 480 475
Additional paid-in capital............ 108,389 104,884
Retained earnings..................... 211,210 158,405
-------- --------
Total stockholders' equity........ 320,079 263,764
-------- --------
$421,724 $369,271
======== ========
</TABLE>
See notes to consolidated financial statements.
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<PAGE> 4
OUTBACK STEAKHOUSE, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT PER SHARE DATA, UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
-------------------- -------------------
<S> <C> <C> <C> <C>
REVENUES................ $236,730 $191,259 $689,313 $536,605
-------- -------- -------- --------
COSTS AND EXPENSES:
Cost of revenues...... 92,801 76,004 267,695 211,071
Labor & other
related.............. 54,385 43,092 156,954 119,179
Other restaurant
operating............ 49,266 39,733 144,237 111,127
General & administrative 8,792 6,888 23,607 18,698
Loss (income) from
operations of uncon-
solidated affiliates. 135 6 (11) (312)
-------- -------- -------- --------
205,379 165,723 592,482 459,763
-------- -------- -------- --------
INCOME FROM OPERATIONS 31,351 25,536 96,831 76,842
INTEREST EXPENSE, NET... (67) (330) (592) (1,158)
-------- -------- -------- --------
INCOME BEFORE ELIMINATION OF
MINORITY PARTNERS' INTEREST
AND INCOME TAXES...... 31,284 25,206 96,239 75,684
ELIMINATION OF MINORITY
PARTNERS' INTEREST.... 4,042 3,351 13,732 10,905
-------- -------- -------- --------
INCOME BEFORE PROVISION
FOR INCOME TAXES...... 27,242 21,855 82,507 64,779
PROVISION FOR INCOME
TAXES................. 9,530 7,139 29,702 21,490
-------- -------- -------- --------
NET INCOME.............. $ 17,712 $ 14,716 $ 52,805 $ 43,289
======== ======== ======== ========
EARNINGS PER COMMON
SHARE................ $ 0.36 $ 0.30 $ 1.07 $ 0.89
======== ======== ======== ========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES
OUTSTANDING.......... 49,200 48,876 49,500 48,410
======== ======== ======== ========
PRO FORMA:
PROVISION FOR INCOME TAXES 7,722 23,580
-------- --------
NET INCOME $ 14,133 $ 41,199
======== ========
EARNINGS PER COMMON SHARE $ 0.29 $ 0.85
======== ========
</TABLE>
See notes to consolidated financial statements.
4 of 17
<PAGE> 5
OUTBACK STEAKHOUSE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1996 1995
-------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income................................ $ 52,805 $ 43,289
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation............................. 16,841 11,755
Amortization............................. 8,906 6,797
Gain on sale of investment securities.... 125
Outside partners' interest in
consolidated partnerships' income...... 13,732 10,905
(Income) from unconsolidated affiliates.. (11) (312)
Change in assets and liabilities:
Increase in inventories.................. (3,331) (1,369)
Decrease in other current assets......... 4,103 3,408
Increase in other assets................. (8,825) (7,973)
(Decrease) increase in accounts payable,
sales tax payable, and accrued expenses. (7,345) 9,127
Decrease in unearned revenue............. (10,607) (8,571)
Increase in deferred income taxes........ 304 512
Increase in other long term liabilities.. 6,000
-------- ---------
Net cash provided by operating activities 72,572 67,693
-------- ---------
Cash flows used in investing activities:
Sales of investment securities........... 623 4,599
Capital expenditures..................... (77,020) (88,791)
Payments from unconsolidated affiliates.. 572
Change in investments in and advances to
unconsolidated affiliates............... 2,280 ( 4,469)
-------- ---------
Net cash used in investing activities.. (74,117) (88,089)
-------- ---------
Cash flows from financing activities:
Proceeds from stock transactions......... 3,510 12,297
Proceeds from issuance of long-term debt. 47,844 33,281
Proceeds from minority partners' contributions 1,550 1,925
Distributions to minority partners
and shareholders........................ (15,157) (12,973)
Repayments of long-term debt............. (40,183) (14,132)
-------- ---------
Net cash (used in) provided by financing
activities........................... (2,436) 20,398
-------- ---------
Net (decrease) increase in cash and
cash equivalents....................... (3,981) 2
Cash and cash equivalents at beginning
of period.............................. 27,089 21,372
-------- ---------
Cash and cash equivalents at end of period $ 23,108 $ 21,374
======== =========
Supplemental disclosures of cash flow information:
Cash paid for interest................. $ 1,005 $ 1,408
Cash paid for income taxes............. 19,000 24,415
</TABLE>
See notes to consolidated financial statements.
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<PAGE> 6
OUTBACK STEAKHOUSE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
In 1996, the Company issued approximately 2,348,000 shares of its
Common Stock to the shareholders of four of its franchisees in exchange for all
of their outstanding interests in 28 Outback Steakhouses in Ohio, Kentucky,
Virginia, Illinois, Missouri, and Tennessee. The franchise groups include
Garob, Inc., FBS Enterprises, Inc., the Fore Management Group and the Brenica
Restaurant Group, Inc.
The mergers discussed above have been accounted for by the pooling of
interest method using historical amounts and the financial statements presented
herein have been restated to give retroactive effect to the mergers for the
applicable periods presented.
For comparative purposes, pro forma earnings and earnings per share
information are presented within this report for the three and nine month
periods ended September 30, 1995. In the opinion of management, this
information is necessary for the fair presentation of the operating results for
the respective periods. The pro forma adjustments properly reflect the pro
forma increase in the provision for income taxes of the Company as a result of
the mergers described above. Since the Company is not liable for the payment
of income taxes attributable to the merging companies, no adjustments to the
balance sheets have been made except for the deferred taxes which will be paid
by the Company in future periods.
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<PAGE> 7
OUTBACK STEAKHOUSE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2. OTHER CURRENT ASSETS
Other current assets consisted of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
<S> <C> <C>
Deposits (including income tax
deposits)........................ $ 1,501 $ 6,310
Accounts receivable............... 1,363 1,667
Prepaid expenses.................. 3,559 3,100
Other current assets.............. 2,458 1,907
-------- --------
$ 8,881 $ 12,984
======== ========
</TABLE>
3. PROPERTY, FIXTURES AND EQUIPMENT, NET
Property, fixtures and equipment consisted of the following (in
thousands, adjusted to conform to current period presentation):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
<S> <C> <C>
Land.............................. $ 80,163 $ 64,923
Buildings and building improvements 106,721 83,386
Furniture and fixtures............ 35,118 22,592
Equipment......................... 84,377 67,345
Leasehold improvements............ 85,620 80,522
Construction in progress.......... 15,037 11,248
Accumulated depreciation.......... (56,227) (39,386)
-------- --------
$350,809 $290,630
======== ========
</TABLE>
4. OTHER ASSETS
Other assets consisted of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
<S> <C> <C>
Preopening costs, net............. $ 4,579 $ 5,134
Intangible assets (including liquor
licenses)........................ 4,208 3,009
Other assets...................... 4,800 5,525
-------- --------
$ 13,587 $ 13,668
======== ========
</TABLE>
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<PAGE> 8
OUTBACK STEAKHOUSE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
5. LONG-TERM DEBT
Long-term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
<S> <C> <C>
Notes payable to banks collateralized by
various items including stock, investment
securities, property, fixtures and equipment,
fixed and variable interest rates ranging
from 8.5% to 9.9%.......................... $ 1,625 $15,093
Notes payable to leasing companies, collater-
alized by equipment, interest at rates
ranging from 8% to 13.2%................... 198 409
Other notes payable, unsecured, interest
rates ranging from 5.35% to 7.05%........... 1,325 1,003
Revolving line of credit, (see below)......... 45,418 24,400
------- -------
48,566 40,905
Less current portion 800 3,000
------- -------
Long-term debt $47,766 $37,905
======= =======
</TABLE>
Approximately $1,625,000 and $15,093,000 of the notes payable
outstanding at September 30, 1996 and December 31, 1995, respectively, were
assumed by the Company in connection with the mergers discussed in Note 1. The
Company repaid approximately $13,468,000 of these notes in the first nine
months of 1996.
The Company has an unsecured revolving line of credit which permits
borrowing up to a maximum of $75,000,000 at a rate of .75% over the 30,60, 90
or 180 day London Interbank Offered Rate (LIBOR) (6.25% to 6.44% at September
30, 1996). At September 30, 1996 the unused portion of the revolving line of
credit was $29,582,000. The line matures in June 1999.
The Company has a $7,500,000 unsecured line of credit bearing interest
of 75 basis points over the LIBOR. Approximately $2,039,000 of the line of
credit is committed for the issuance of letters of credit, $782,000 of which is
to secure loans made by the bank to certain franchisees.
8 of 17
<PAGE> 9
OUTBACK STEAKHOUSE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
6. ACCRUED EXPENSES
Accrued expenses consisted of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
<S> <C> <C>
Accrued payroll................... $ 5,307 $ 3,423
Accrued advertising............... 3,009 1,517
Accrued rent...................... 1,363 1,490
Accrued insurance................. 4,331 7,090
Accrued property taxes............ 2,737 1,375
Other accrued expenses............ 2,864 3,436
------- -------
$19,611 $18,331
======= =======
</TABLE>
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<PAGE> 10
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:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------- -----------------
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
REVENUES 100.0% 100.0% 100.0% 100.0%
COSTS AND EXPENSES:
Cost of sales (1) 39.5 39.9 39.1 39.5
Labor & other related (1) 23.1 22.6 22.9 22.3
Other restaurant operating (1) 21.0 20.9 21.1 20.8
General & administrative 3.7 3.6 3.4 3.5
Loss (income) from operations of
unconsolidated affiliates 0.1 (0.1)
Total costs and expenses 86.8 86.7 86.0 85.7
------ ------ ------ ------
INCOME FROM OPERATIONS 13.2 13.4 14.1 14.3
INTEREST EXPENSE, NET (0.2) (0.1) (0.2)
------ ------ ------ ------
INCOME BEFORE ELIMINATION OF
MINORITY PARTNERS' INTEREST
AND INCOME TAXES 13.2 13.2 14.0 14.1
ELIMINATION OF MINORITY PARTNERS'
INTEREST 1.7 1.8 2.0 2.0
------ ------ ------ ------
INCOME BEFORE PROVISION FOR
INCOME TAXES 11.5 11.4 12.0 12.1
PROVISION FOR INCOME TAXES (2) 4.0 4.0 4.3 4.4
------ ------ ------ ------
NET INCOME (2) 7.5% 7.4% 7.7% 7.7%
====== ====== ====== ======
System-wide sales (millions of dollars):
Outback Steakhouses
Company owned restaurants $225.3 $186.8 $659.7 $525.9
Franchised and joint venture
restaurants 32.3 22.7 87.0 57.2
------ ------ ------ ------
Total 257.6 209.5 746.7 583.1
------ ------ ------ ------
Carrabba's Italian Grills
Company owned restaurants 9.6 3.8 25.0 8.6
Joint venture restaurants 5.2 4.0 15.6 10.4
------ ------ ------ ------
Total 14.8 7.8 40.6 19.0
------ ------ ------ ------
System-wide total $272.4 $217.3 $787.3 $602.1
====== ====== ====== ======
</TABLE>
(1) As a percentage of restaurant sales.
(2) Amounts for the periods ended September 30, 1995 are pro forma. See
Note 1 of Notes to Consolidated Financial Statements.
10 of 17
<PAGE> 11
RESULTS OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------
1996 1995
---- ----
<S> <C> <C>
Number of restaurants (at end
of the period):
Outback Steakhouses
Company owned restaurants 306 245
Franchised and joint venture restaurants 47 31
--- ---
Total 353 276
--- ---
Carrabba's Italian Grills
Company owned restaurants 26 8
Joint venture restaurants 11 8
--- ---
Total 37 16
--- ---
System-wide total 390 292
=== ===
</TABLE>
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<PAGE> 12
THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
Revenues. Total revenues increased by 23.8% to $236,730,000 during
the third quarter of 1996 as compared with $191,259,000 in the same period in
1995. This increase was attributable to the opening of new restaurants after
September 30, 1995, partially offset by a 1.8% decrease in same-store sales.
The decrease in same-store sales was attributable to lower customer check
averages, the impact of the Olympics in July and August, and to lost operating
days in September due to the onset of tropical storms in the Southeast.
Costs and expenses. Costs of restaurant sales, consisting of food and
beverage costs, decreased in the third quarter of 1996 to 39.5% of restaurant
sales as compared with 39.9% in the same period in 1995. 0.2% of the decrease,
as a percentage of restaurant sales, resulted from an increase in the
proportion of Company owned Carrabba's Italian Grills ("Carrabba's") in
operation which have lower average food costs than Outback Steakhouses. The
remaining decrease was the result of commodity cost decreases in shrimp and
produce, partially offset by cost increases in dairy products, meat, beer, and
wine in the third quarter of 1996.
Labor and other related expenses increased as a percentage of
restaurant sales by 0.5% to 23.1% in the third quarter of 1996 as compared with
22.6% in the same period in 1995. This increase was attributable to higher
labor costs in new markets, increased wage rates in certain markets, and an
increase in the proportion of Company owned Carrabba's in operation which
accounted for 0.3% of the increase, as a percentage of restaurant sales.
Other restaurant operating expenses include all other unit-level
operating costs, the major components of which are operating supplies, rent,
repairs and maintenance, advertising expenses, utilities, depreciation and
amortization and other occupancy costs. A substantial portion of these
expenses are fixed or indirectly variable. These costs increased by 0.1% of
restaurant sales to 21.0% in the third quarter of 1996, as compared with 20.9%
in the same period in 1995. This increase was attributable to an increase in
the proportion of Carrabba's in operation which increased other restaurant
operating expenses by 0.5% of restaurant sales. This increase was offset by
improved operating efficiencies achieved by more mature Outback Steakhouses.
General and administrative costs were 3.7% of revenues for the quarter
ended September 30, 1996 as compared with 3.6% in the same period in 1995.
This increase was attributable to additional staffing undertaken to manage
Carrabba's Italian Grills.
Loss (income) from operations of unconsolidated affiliates represents
the Company's portion of the loss (income) from the Carrabba's Italian Grills
operated by the Texas joint venture and Outback Steakhouses operated as
development joint ventures. Loss from unconsolidated affiliates was $135,000
during the third quarter of 1996 as compared with $6,000 during the same period
12 of 17
<PAGE> 13
in 1995. This decrease was attributable to losses from Carrabba's Texas
operations, and to fewer Outback Steakhouses operating as development joint
ventures as a result of the restructuring of the Company's Nevada operations.
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 $5,815,000,
to $31,351,000, in the third quarter of 1996 as compared with $25,536,000 in
the same period in 1995.
Interest expense, net. Net interest expense was $67,000 during the
third quarter of 1996 as compared with net interest expense of $330,000 in the
same period in 1995. This change was attributable to a decrease in borrowings
during the third quarter of 1996 and a decrease in interest rates associated
with the Company's line of credit.
Elimination of minority interests. The costs included in this line
item represent the portion of income from operations included in consolidated
operating results attributable to the ownership interests of restaurant
managers and joint venture partners in Company owned restaurants. As a
percentage of revenues, these costs were 1.7% and 1.8% for the quarters ended
September 30, 1996 and 1995, respectively.
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
rates were 35.0% and 35.3% during the third quarters of 1996 and 1995,
respectively. The decrease in the effective tax rate in 1996 was attributable
to an increase in FICA tip credits.
Net income and earnings per common share. Net income for the third
quarter of 1996 was $17,712,000 as compared with pro forma net income of
$14,133,000 in the same period in 1995, an increase of 25.3%. Earnings per
share increased to $0.36 during the third quarter of 1996 as compared with pro
forma earnings per share of $0.29 for the same period in 1995.
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
Revenues. Total revenues increased by 28.5% to $689,313,000 during
the first nine months of 1996 as compared with $536,605,000 in the same period
in 1995. Most of the increase was attributable to the opening of new
restaurants after September 30, 1995 partially offset by a 0.5% decrease in
same store sales. The decrease in same store sales was the result of lower
customer check averages in the second and third quarters of 1996, the impact
of the Olympics in July and August, and to lost operating days in September due
to the onset of tropical storms in the Southeast.
13 of 17
<PAGE> 14
Costs and expenses. Cost of restaurant sales decreased by 0.4% to
39.1% in the first nine months of 1996 as compared with 39.5% in the same
period in 1995. 0.1% of the decrease, as a percentage of sales, resulted from
an increase in the proportion of Company owned Carrabba's in operation which
have lower average food costs than Outback Steakhouses. The remaining
decrease was the result of commodity cost decreases in shrimp and produce,
partially offset by cost increases in dairy products, beer, and wine.
Labor and other related expenses increased as a percentage of
restaurant sales by 0.6% to 22.9% in the first nine months of 1996 as compared
with 22.3% in the same period in 1995. This increase was attributable to
higher labor costs in new markets, an increase in wage rates in certain
markets, and an increase in the proportion of Carrabba's in operation which
accounted for 0.3% of the increase.
Other restaurant operating expenses increased by 0.3% of restaurant
sales to 21.1% in the first nine months of 1996 as compared with 20.8% in the
same period in 1995. This increase was attributable to an increase in the
proportion of Carrabba's in operation.
General and administrative costs decreased to 3.4% of revenues during
the first nine months of 1996 as compared to 3.5% of revenues in the same
period in 1995. This decrease was attributable to the opening of new
restaurants, partially offset by an increase in staffing undertaken to manage
Carrabba's.
Income from operations of unconsolidated affiliates represents the
Company's portion of the income from the Carrabba's Italian Grills operated by
the Texas joint venture and Outback Steakhouses operated as development joint
ventures. Income from unconsolidated affiliates was $11,000 in the first nine
months of 1996 as compared with $312,000 in the same period in 1995. This
decrease was attributable to losses from Carrabba's Texas operations, and to
fewer Outback Steakhouses operating as development joint ventures as a result
of the restructuring of the Company's Nevada operations.
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
$19,989,000, to $96,831,000 in the first nine months of 1996 as compared with
$76,842,000 in the same period in 1995.
Interest expense, net. Net interest expense was $592,000 during the
first nine months of 1996 as compared with net interest expense of $1,158,000
in the same period in 1995. This change was primarily attributable to a
decrease in borrowings in the second and third quarters of 1996 and lower
interest rates associated with the Company's line of credit.
14 of 17
<PAGE> 15
Provision for income taxes. The effective income tax rates were 36.0%
and 36.4% during the nine month periods ended September 30, 1996 and 1995,
respectively. The decrease in the effective tax rate in 1996 is attributable
to an increase in FICA tip credits.
Net income and earnings per common share. Net income for the first
nine months of 1996 was $52,805,000 as compared with pro forma net income of
$41,199,000 in the same period in 1995, an increase of 28.2%. Earnings per
share increased to $1.07 during the first nine months of 1996 as compared with
pro forma earnings per share of $0.85 in the same period in 1995.
LIQUIDITY AND CAPITAL RESOURCES
The following table presents a summary of the Company's cash flows
from operating, investing and financing activities for the periods indicated
(in thousands).
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1995 1996 1995
------------ ----------------------------
<S> <C> <C> <C>
Net cash provided by
operating activities $103,325 $ 72,572 $ 67,693
Net cash used in investing
activities (119,410) (74,117) (88,089)
Net cash provided by (used
in) financing activities 21,602 (2,436) 20,398
-------- -------- --------
Net increase (decrease) in
cash and cash equivalents $ 5,517 ($ 3,981) $ 2
======== ======== ========
</TABLE>
The Company requires capital principally for the development of new
Company owned and joint venture restaurants. Capital expenditures totaled
approximately $121,725,000 for the year ended December 31, 1995 and $77,020,000
and $88,791,000 during the first nine months of 1996 and 1995, 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 has two unsecured lines of credit totaling $82,500,000.
Approximately $2,000,000 was committed for the issuance of letters of credit,
some of which are to secure loans made by banks to certain franchisees.
$45,418,000 has been drawn to cover capital expenditures and to repay certain
bank loans assumed in connection with the mergers discussed in Note 1 of Notes
to Consolidated Financial Statements. The Company expects that its capital
requirements through the end of 1996 will be met by cash flows from operations
and advances on its line of credit. See Note 5 of Notes to Consolidated
Financial Statements.
15 of 17
<PAGE> 16
ITEM 5. OTHER INFORMATION.
Periodically, the Company may communicate forward looking statements
relating to such matters as anticipated openings of new restaurants, projected
costs of food products and other commodities, and similar matters. The Private
Securities Litigation Reform Act of 1995 provides a safe harbor for forward
looking statements. In order to comply with the terms of the safe harbor, the
Company notes that a variety of factors could cause the Company's actual
results and experience to differ materially from the anticipated results or
other expectations expressed in the Company's forward looking statements. The
risks and uncertainties that may affect the operation's performance,
development and results of the Company's business, many of which are beyond the
control of the Company, include the following:
1. The Company's forward looking statements regarding its
development schedule for new restaurant openings is subject to
a number of risk factors including:
(i) Ability to secure appropriate real estate sites at
acceptable prices;
(ii) Ability to obtain all required governmental permits
including zoning approvals and liquor licenses on a
timely basis;
(iii) Impact of government moratoriums or approval
processes which could result in significant delays;
(iv) Ability to secure all necessary contractors and
sub-contractors;
(v) Union activities such as picketing and hand billing
which could delay construction;
(vi) Weather and acts of God beyond the Company's control
resulting in construction delays.
2. The Company's forward looking statements regarding prices and
availability for food products and other commodities are
subject to a number of risk factors including:
(i) General supply and demand for the commodity involved
and its impact on prices;
(ii) Weather and other acts of God affecting supply and
therefore prices.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
27- Financial Data Schedules (for SEC use only)
(b) Reports on Form 8-K
There were no reports filed on Form 8-K during the quarter
ended September 30, 1996.
16 of 17
<PAGE> 17
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.
------------------------
(Registrant)
Date: NOVEMBER 13, 1996 BY: /s/ ROBERT S. MERRITT
--------------------- ---------------------------
Robert S. Merritt
Senior Vice President,
Finance (Principal
Financial and Accounting
Officer)
17 of 17
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