<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:
MARCH 31, 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 APRIL 30, 1996, THERE
WERE 47,731,921 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 the 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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<PAGE> 3
OUTBACK STEAKHOUSE, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
ASSETS 1996 1995
-------- ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents............... $ 15,810 $ 27,089
Short-term investment securities........ 1,049 1,176
Inventories............................. 6,692 6,474
Other current assets.................... 10,008 12,984
-------- --------
Total current assets................ 33,559 47,723
PROPERTY, FIXTURES AND EQUIPMENT, NET..... 308,124 290,630
INVESTMENTS IN AND ADVANCES TO
UNCONSOLIDATED AFFILIATES.............. 17,491 17,250
OTHER ASSETS.............................. 15,573 13,668
-------- --------
$374,747 $369,271
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable....................... $ 16,212 $ 20,285
Sales taxes payable.................... 5,392 4,358
Accrued expenses....................... 18,946 18,331
Unearned revenue....................... 9,485 17,632
Current portion of long-term debt...... 821 3,000
-------- --------
Total current liabilities........... 50,856 63,606
DEFERRED INCOME TAXES..................... 1,284 1,298
LONG-TERM DEBT............................ 40,904 37,905
INTEREST OF MINORITY PARTNERS IN CONSOLIDATED
PARTNERSHIPS.......................... 2,484 2,698
-------- --------
Total liabilities................... 95,528 105,507
-------- --------
STOCKHOLDERS' EQUITY
Common stock, $0.01 par value, 100,000 shares
authorized; 47,679 and 47,503 shares
issued and outstanding as of March 31,
1996 and December 31, 1995, respectively 477 475
Additional paid-in capital............. 103,480 104,884
Retained earnings...................... 175,262 158,405
-------- --------
Total stockholders' equity.......... 279,219 263,764
-------- --------
$374,747 $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
MARCH 31,
1996 1995
---------- -----------
<S> <C> <C>
REVENUES.................................... $216,102 $162,623
-------- --------
COSTS AND EXPENSES:
Cost of revenues........................... 83,190 62,918
Labor and other related.................... 48,782 35,809
Other restaurant operating................. 45,285 34,089
General & administrative................... 7,332 6,042
(Income) from operations of
unconsolidated affiliates................ (219) (192)
-------- --------
184,370 138,666
-------- --------
INCOME FROM OPERATIONS 31,732 23,957
INTEREST EXPENSE, NET....................... (435) (171)
-------- --------
INCOME BEFORE ELIMINATION OF MINORITY
PARTNERS'INTEREST AND INCOME TAXES 31,297 23,786
ELIMINATION OF MINORITY
PARTNERS'INTEREST.... ..................... 4,751 3,706
-------- --------
INCOME BEFORE PROVISION
FOR INCOME TAXES........................... 26,546 20,080
PROVISION FOR INCOME TAXES ................. 9,689 6,797
-------- --------
NET INCOME ................................. $ 16,857 $ 13,283
======== ========
EARNINGS PER COMMON SHARE................... $ 0.34 $ 0.28
======== ========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING.................. 49,993 48,177
======== ========
PRO FORMA:
PROVISION FOR INCOME TAXES 7,410
--------
NET INCOME $ 12,670
========
EARNINGS PER COMMON SHARE $ 0.26
========
</TABLE>
See notes to consolidated financial statements.
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<PAGE> 5
OUTBACK STEAKHOUSE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------
1996 1995
----------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income..................................... $ 16,857 $ 13,283
Adjustments to reconcile net
income to cash provided by
operating activities:
Depreciation................................. 4,990 3,463
Amortization................................. 2,851 2,406
Outside partners' interest in
consolidated partnerships' income........... 4,751 3,706
(Income) from unconsolidated
affiliates.................................. (219) (192)
Change in assets and liabilities:
Increase in inventories....................... (218) (2,188)
Decrease in other current assets.............. 2,976 7,578
Increase in other assets...................... (4,753) (5,186)
Decrease in accounts payable, sales taxes
payable, and accrued expenses................ (2,424) (1,198)
Decrease in unearned revenue.................. (8,147) (5,913)
Decrease in deferred income
taxes....................................... (14) (489)
-------- --------
Net cash provided by operating activities 16,650 15,270
-------- --------
Cash flows used in investing activities:
Sales of investment securities................ 127 147
Capital expenditures.......................... (22,487) (23,407)
Payments from unconsolidated affiliates....... 1,080 754
Distribution to unconsolidated affiliates..... (312) (210)
Changes in investments in and advances to
unconsolidated affiliates.................... (790) 830
-------- --------
Net cash used in investing activities........ (22,382) (21,886)
-------- --------
Cash flows provided by (used in) financing activities:
Adjustments resulting from mergers (See Note 1) (1,402) 267
Proceeds from issuance of long-term debt...... 15,724 9,369
Proceeds from minority partners'
contributions............................... 300 400
Distributions to minority partners
and shareholders............................. (5,265) (4,083)
Repayments of long-term debt.................. (14,904) (2,373)
-------- --------
Net cash provided by (used in) financing
activities.................................. (5,547) 3,580
-------- --------
</TABLE>
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<PAGE> 6
<TABLE>
<S> <C> <C>
Net decrease in cash and cash
equivalents................................ (11,279) (3,036)
Cash and cash equivalents at beginning
of period.................................. 27,089 21,372
------- -------
Cash and cash equivalents at end of period.. $15,810 $18,336
======= =======
Supplemental disclosure of cash flow information:
Cash paid for interest.................. $ 460 $ 487
Cash paid for income taxes.............. 2,589 3,300
</TABLE>
See notes to consolidated financial statements.
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<PAGE> 7
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 Enterpirses, 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 month period ended
March 31, 1995. In the opinion of management, this information is necessary
for the fair presentation of the operating results for the period. 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 deferred taxes which will be paid by the Company in future periods.
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<PAGE> 8
2. OTHER CURRENT ASSETS
Other current assets consisted of the following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---------- ------------
<S> <C> <C>
Deposits........................... $ 429 $ 6,310
Accounts receivable................ 2,505 1,667
Prepaid expenses................... 4,185 3,100
Other current assets............... 2,889 1,907
------- -------
$10,008 $12,984
======= =======
</TABLE>
3. PROPERTY, FIXTURES AND EQUIPMENT
Property, fixtures and equipment consisted of the following (in
thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---------- ------------
<S> <C> <C>
Land............................... $ 61,730 $ 56,923
Buildings & building improvements.. 96,924 91,386
Furniture & fixtures............... 24,541 22,592
Equipment.......................... 71,939 67,345
Leasehold improvements............. 83,000 80,522
Construction in progress........... 13,950 11,248
Accumulated depreciation........... (43,960) (39,386)
-------- --------
$308,124 $290,630
======== ========
</TABLE>
4. OTHER ASSETS
Other assets consisted of the following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---------- ------------
<S> <C> <C>
Preopening costs................... $ 6,205 $ 5,134
Intangible assets.................. 3,547 3,009
Other assets....................... 5,821 5,525
------- -------
$15,573 $13,668
======= =======
</TABLE>
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<PAGE> 9
5. LONG-TERM DEBT
Long-term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
--------- ------------
<S> <C> <C>
Notes payable to banks, collateralized by
various items including stock, investment
securities, property fixtures and equipment,
interest at rates ranging from the prime
rate to prime plus 1.5% (8.5% to 10% at
March 31, 1996).......................... $ 2,028 $11,174
Notes payable to banks collateralized by
various items including stock, investment
securities, property, fixtures and equipment,
interest fixed at rates ranging from 6.85%
to 9.9%.................................. 2,255 3,919
Notes payable to leasing companies, collater-
alized by equipment, interest at rates
ranging from 8% to 13.2%................. 341 409
Other notes payable, unsecured, interest
rates ranging from 5.36% to 7.05%........ 657 1,003
Revolving line of credit, (see below)...... 36,444 24,400
------- -------
41,725 40,905
Less current portion 821 3,000
------- -------
Long-term debt $40,904 $37,905
======= =======
</TABLE>
Approximately $4,283,000 and $15,093,000 of the notes payable
outstanding at March 31, 1996 and December 31, 1995, respectively, were assumed
by the Company in connection with the mergers discussed in Note 1. The Company
repaid approximately $10,882,000 of these notes in the first quarter of 1996
through advances on the revolving line of credit.
The Company has a $7,500,000 unsecured line of credit bearing interest
of 80 basis points over the London Interbank Offered Rate (LIBOR).
Approximately $1,257,000 of the line of credit is committed for the issuance of
letters of credit, $763,000 of which is to secure loans made by the bank to
certain franchisees.
The Company has an unsecured revolving line of credit which permits
borrowing up to a maximum of $50,000,000 at an adjustable rate ranging from
0.8% to 1.0% over the LIBOR (6.44% at March 31, 1996). At March 31, 1996 the
unused portion of the revolving line of credit was $13,556,000. In April 1996,
the borrowing limit on the Company's line of credit was increased to
$75,000,000 from $50,000,000. The line matures in June 1999.
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<PAGE> 10
6. ACCRUED EXPENSES
Accrued expenses consisted of the following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
------------ ------------
<S> <C> <C>
Accrued payroll................... $ 4,191 $ 3,423
Accrued advertising............... 1,718 1,517
Accrued rent...................... 1,203 1,490
Accrued insurance................. 7,860 7,090
Accrued ESOP contribution......... 1,250 950
Accrued property taxes............ 1,513 1,375
Other accrued expenses............ 1,211 2,486
------- -------
$18,946 $18,331
======= =======
</TABLE>
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<PAGE> 11
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
-----------------------
MARCH 31,
-----------------------
1996 1995
-------- --------
<S> <C> <C>
REVENUES 100.0% 100.0%
COSTS AND EXPENSES:
Cost of sales (1) 38.7 38.9
Labor and other related (1) 22.7 22.1
Other restaurant operating (1) 21.1 21.1
General & administrative 3.4 3.7
(Income) from operations of
unconsolidated affiliates (0.1) (0.1)
Total costs and expenses 85.3 85.3
------ ------
INCOME FROM OPERATIONS 14.7 14.7
INTEREST EXPENSE, NET (0.2) (0.1)
------ ------
INCOME BEFORE ELIMINATION OF
MINORITY PARTNERS' INTEREST
AND INCOME TAXES 14.5 14.6
ELIMINATION OF MINORITY PARTNERS'
INTEREST 2.2 2.3
------ ------
INCOME BEFORE PROVISION FOR INCOME TAXES 12.3 12.3
PROVISION FOR INCOME TAXES (2) 4.5 4.5
------ ------
NET INCOME (2) 7.8% 7.8%
====== ======
System-wide sales (millions of dollars):
Outback Steakhouses
Company-owned restaurants $207.4 $159.3
Franchised and joint venture
restaurants 28.7 14.9
------ ------
Total 236.1 174.2
------ ------
Carrabba's Italian Grills
Company-owned restaurants 7.4 2.6
Joint venture restaurants 5.1 3.2
------ ------
Total 12.5 5.8
------ ------
System-wide total $248.6 $180.0
====== ======
</TABLE>
(1) As a percentage of restaurant sales.
(2) Amounts for the three month period ended March 31, 1995 are pro forma.
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<PAGE> 12
RESULTS OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
1996 1995
------- -------
<S> <C> <C>
Number of restaurants (at end
of the period):
Outback Steakhouses
Company owned restaurants
273 212
Franchised and joint venture restaurants 42 24
--- ---
Total 315 236
--- ---
Carrabba's Italian Grills
Company owned restaurants 14 4
Joint venture restaurants 10 6
--- ---
Total 24 10
--- ---
System-wide total 339 246
=== ===
</TABLE>
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<PAGE> 13
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
Revenues. Total revenues increased by 32.9% to $216,102,000 during
the first quarter of 1996 as compared with $162,623,000 in the same period in
1995. The increase was primarily attributable to the opening of new
restaurants after March 31, 1995, coupled with comparable store sales increases
of 1.0% in the first quarter of 1996. The increase in same-store sales was
attributable to a 1.2% menu price increase in September 1995.
Costs and expenses. Cost of restaurant sales, consisting of food and
beverage costs, decreased in the first quarter of 1996, to 38.7% of restaurant
sales as compared with 38.9% in the same period in 1995. This decrease was
primarily the result of decreases in meat and shrimp prices.
Labor and other related expenses include all direct and indirect labor
costs incurred in restaurant operations. Labor expenses increased in the first
quarter of 1996 to 22.7% of restaurant sales, as compared with 22.1% in the
same period in 1995. This increase was attributable to the cost of the
Company's new health insurance plan implemented in February 1995, higher labor
costs in new markets and increased wage rates in certain markets.
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. As a percentage of restaurants
sales, these costs were 21.1% in both the first quarters of 1996 and 1995.
General and administrative costs decreased to 3.4% of revenues in the
first quarter of 1996 as compared to 3.7% of revenues in the same period in
1995. This decrease was attributable to the opening of new restaurants without
a corresponding increase in costs.
Income from operations of unconsolidated affiliates represents the
Company's portion of the income from Carrabba's Italian Grills operated by the
Texas joint venture and Outback Steakhouses operated as development joint
ventures. Income from development joint ventures was $219,000 in the first
quarter of 1996 as compared with $192,000 in the same period in 1995. This
increase was attributable to additional joint venture restaurants in operation.
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 $7,775,000,
to $31,732,000, in the first quarter of 1996 as compared with $23,957,000 in
the same period in 1995.
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<PAGE> 14
Interest expense, net. Net interest expense was $435,000 during the
first quarter of 1996 as compared with $171,000 in the same period in 1995.
This increase was attributable to a decrease in cash and cash equivalents and
investment securities earning interest, and to an increase in borrowings as
funds were expended to finance new restaurants.
Elimination of minority partners' 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 2.2% and 2.3% in the first
quarters of 1996 and 1995 respectively. The decrease in this ratio reflected
changes in overall restaurant operating margins combined with changes in
minority partners' ownership interests as a result of the restructuring of the
Company's Dallas and Houston joint ventures.
Pro forma 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 36.5% and 36.9% during the first quarters of 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 share. Net income for the first quarter
of 1996 was $16,857,000 as compared with pro forma net income of $12,670,000 in
the same period in 1995, an increase of 33.0%. Earnings per share increased to
$0.34 during the first quarter of 1996 as compared with pro forma earnings per
share of $0.26 for the same period in 1995.
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<PAGE> 15
LIQUIDITY AND CAPITAL RESOURCES
The following table presents a summary of the Company's cash flows and
capital expenditures for the periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED ------------------------
DECEMBER 31, MARCH 31, MARCH 31,
1995 1996 1995
----------- ---------- ----------
<S> <C> <C> <C>
Net cash provided by
operating activities $103,325 $ 16,650 $15,270
Net cash used in investing
activities (119,410) (22,382) (21,886)
Net cash provided by (used
in) financing activities 21,602 (5,547) 3,580
-------- -------- -------
Net increase (decrease) in
cash and cash equivalents $ 5,517 $(11,279) $(3,036)
======== ======== =======
</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 year ended December 31, 1995 and $22,487,000 and
$23,407,000 during the first quarter 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 anticipates that 40% to 50% of the Company owned
restaurants to be opened in 1996 will be free-standing units.
As of March 31, 1996, the Company had two unsecured lines of credit
totaling $57,500,000. Approximately $1,257,000 was committed for the issuance
of letters of credit, some of which are to secure loans made by the bank to
certain franchisees, and $36,444,000 has been drawn to cover capital
expenditures. In April 1996, the borrowing limit on the Company's unsecured
revolving line of credit was increased to $75,000,000 from $50,000,000. The
Company expects that its capital requirements through the end of 1996 will be
met by cash flows from operations and the unused portion of its line of credit.
See Note 5 of the notes to consolidated financial statements.
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<PAGE> 16
OUTBACK STEAKHOUSE, INC.
PART II: OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits -
27 - Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
The Company filed a report on Form 8-K with the Securities and
Exchange Commission dated December 31, 1995.
The Company filed a report on Form 8-K/A with the Securities and
Exchange Commission dated December 31, 1995.
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: MAY 13, 1996 By: /s/ ROBERT S. MERRITT
-------------------------- -----------------------------
Robert S. Merritt
Senior Vice President,
Finance (Principal Financial
and Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 15,810
<SECURITIES> 1,049
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 6,692
<CURRENT-ASSETS> 33,559
<PP&E> 352,084
<DEPRECIATION> 43,960
<TOTAL-ASSETS> 374,747
<CURRENT-LIABILITIES> 50,856
<BONDS> 40,904
0
0
<COMMON> 477
<OTHER-SE> 278,742
<TOTAL-LIABILITY-AND-EQUITY> 374,747
<SALES> 214,800
<TOTAL-REVENUES> 216,102
<CGS> 83,190
<TOTAL-COSTS> 177,257
<OTHER-EXPENSES> 11,864
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 435
<INCOME-PRETAX> 26,546
<INCOME-TAX> 9,689
<INCOME-CONTINUING> 16,857
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,857
<EPS-PRIMARY> .34
<EPS-DILUTED> .34
</TABLE>
