<TABLE>
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, 2000 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)
2202 N. Westshore Blvd., 5th Floor
Tampa, FL 33607
---------------------------------------------------
(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 May 8, 2000, there
were 77,968,422 shares of Common Stock, $.01 par value outstanding.
1
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
The accompanying unaudited consolidated financial statements have been
prepared by Outback Steakhouse, Inc. and Affiliates (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.
The Consolidated Statements of Income and Cash Flow for the three months
ending March 31, 1999 have been restated to reflect the Company's merger with
its New England franchisee. The merger was accounted for using the pooling of
interests method of accounting; and accordingly, all the historical
information has been restated to reflect the merger.
2
OUTBACK STEAKHOUSE, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands) March 31, December 31,
2000 1999
ASSETS (unaudited)
CURRENT ASSETS --------- -----------
Cash and cash equivalents.............. $108,319 $ 92,623
Inventories............................ 24,446 26,088
Other current assets................... 24,648 24,500
-------- --------
Total current assets................ 157,413 143,211
PROPERTY, FIXTURES AND EQUIPMENT, NET.... 620,020 607,028
INVESTMENTS IN AND ADVANCES TO
UNCONSOLIDATED AFFILIATES, NET........ 21,108 21,272
OTHER ASSETS............................. 88,493 80,771
-------- --------
$887,034 $852,282
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable....................... $ 26,058 $ 33,974
Sales taxes payable.................... 10,783 10,354
Accrued expenses....................... 46,513 29,628
Unearned revenue....................... 21,165 45,188
Income taxes payable................... 18,436 10,166
Current portion of long-term debt...... 4,602 1,625
-------- --------
Total current liabilities........... 127,557 130,935
DEFERRED INCOME TAXES..................... 3,049 4,659
LONG-TERM DEBT............................ 1,433 1,519
OTHER LONG-TERM LIABILITIES 4,500 4,500
-------- --------
Total liabilities................... 136,539 141,613
INTEREST OF MINORITY PARTNERS IN -------- --------
CONSOLIDATED PARTNERSHIPS............. 17,131 17,704
-------- --------
STOCKHOLDERS' EQUITY
Common stock, $0.01 par value, 200,000
shares authorized; 77,767 and 77,519
shares issued; and 77,767 and 77,404
outstanding as of March 31, 2000 and
December 31, 1999, respectively....... 778 775
Additional paid-in capital............. 198,662 194,251
Retained earnings...................... 533,924 501,384
-------- --------
733,364 696,410
Less treasury stock, 115 shares at
December 31, 1999, at cost............ (3,445)
-------- --------
Total stockholders' equity........... 733,364 692,965
-------- --------
$887,034 $852,282
======== ========
See notes to unaudited consolidated financial statements.
3
OUTBACK STEAKHOUSE, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data, unaudited)
Three Months Ended
March 31,
----------------------
2000 1999
-------- --------
REVENUES
Restaurant sales................. $460,974 $389,093
Other revenues................... 3,823 2,803
-------- --------
TOTAL REVENUES.................... $464,797 $391,896
COSTS AND EXPENSES: -------- --------
Cost of sales.................... 171,699 149,263
Labor and other related.......... 107,689 91,919
Other restaurant operating....... 100,892 83,301
General & administrative......... 19,614 14,750
Income from operations of
unconsolidated affiliates....... (367) (235)
-------- --------
399,527 338,998
-------- --------
INCOME FROM OPERATIONS 65,270 52,898
OTHER INCOME (EXPENSE), NET (593) (503)
INTEREST INCOME (EXPENSE)......... 823 202
INCOME BEFORE ELIMINATION OF ------ --------
MINORITY PARTNERS'INTEREST
AND INCOME TAXES................. 65,500 52,597
ELIMINATION OF MINORITY
PARTNERS'INTEREST................ 9,877 7,332
INCOME BEFORE PROVISION -------- --------
FOR INCOME TAXES................. 55,623 45,265
PROVISION FOR INCOME TAXES ....... 19,857 16,069
-------- --------
NET INCOME........................ $ 35,766 $ 29,196
======== ========
BASIC EARNINGS PER COMMON SHARE... $ 0.46 $ 0.38
======== ========
BASIC WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING........ 77,622 76,510
======== ========
DILUTED EARNINGS PER COMMON SHARE. $ 0.45 $ 0.37
======== ========
DILUTED WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING........ 79,345 78,686
======== ========
PRO FORMA (see Note 1):
PROVISION FOR INCOME TAXES........ 16,522
--------
NET INCOME........................ $ 28,743
========
BASIC EARNINGS PER COMMON SHARE... $ 0.38
========
DILUTED EARNINGS PER COMMON SHARE. $ 0.37
========
See notes to unaudited consolidated financial statements.
4
OUTBACK STEAKHOUSE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
Three Months Ended
March 31,
2000 1999
Cash flows from operating activities: ---------- --------
Net income.................................. $ 35,766 $ 29,196
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation.............................. 13,286 10,624
Amortization.............................. 1,271 623
Minority partners' interest in
consolidated partnerships' income........ 9,877 7,332
Income from unconsolidated affiliates..... (367) (235)
Change in assets and liabilities:
Decrease in inventories................... 1,642 2,802
Increase in other current assets.......... (148) (511)
Increase in other assets.................. (8,993) (1,734)
Increase (decrease) in accounts payable,
sales taxes payable, and accrued expenses 9,398 (7,354)
Increase in income taxes payable.......... 8,270 8,242
Decrease in unearned revenue.............. (24,023) (22,442)
(Decrease) increase in deferred income taxes (1,610) 1,398
------- -------
Net cash provided by operating activities. 44,369 27,941
Cash flows used in investing activities: ------- -------
Capital expenditures....................... (26,278) (17,150)
Payments from unconsolidated affiliates.... 114 54
Change in investments in and advances to
unconsolidated affiliates................. 417 (5,126)
------- -------
Net cash used in investing activities...... (25,747) (22,222)
------- -------
Cash flows used in financing activities:
Adjustments from stock transactions........ 4,414 4,840
Proceeds from issuance of long-term debt 2,891
Proceeds from minority partners'
contributions............................. 300 300
Distributions to minority partners
and shareholders.......................... (10,750) (10,941)
Repayments of long-term debt............... (34,472)
Proceeds from reissuance of treasury stock 219 9,911
------- -------
Net cash used in financing activities...... (2,926) (30,362)
------- -------
Net increase (decrease) in cash
and cash equivalents....................... 15,696 (24,643)
Cash and cash equivalents at beginning
of period.................................. 92,623 84,035
------- -------
Cash and cash equivalents at end of period.. $108,319 $ 59,392
======== ========
Supplemental disclosure of cash flow information:
Cash paid for interest.................. $ 417
Cash paid for income taxes.............. $ 871 696
See notes to unaudited consolidated financial statements.
5
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.
The Consolidated Statements of Income and Cash Flow for the three months
ending March 31, 1999 have been restated to reflect the Company's merger with
its New England franchisee that was completed on November 30, 1999. The
merger was accounted for using the pooling of interests method of
accounting; and accordingly, all the historical information has been restated
to reflect the merger. The pro forma income tax provision and pro forma net
income amounts presented for 1999 reflect the anticipated income tax as if
the New England franchisee had not elected to be taxed under Subchapter S of
the Internal Revenue Code.
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, 1999 balance sheet has been derived from the audited
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 1999 Annual Report.
2. Other Current Assets
Other current assets consisted of the following (in thousands):
March 31, December 31,
2000 1999
----------- -----------
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Deposits........................... $ 1,347 $ 1,253
Accounts receivable................ 6,266 6,116
Accounts receivable franchisees 5,258 6,291
Prepaid expenses................... 10,319 9,444
Other current assets............... 1,458 1,396
-------- --------
$ 24,648 $ 24,500
======== ========
6
3. Property, Fixtures and Equipment
Property, fixtures and equipment consisted of the following (in
thousands):
March 31, December 31,
2000 1999
------------ -----------
Land.............................. $123,383 $120,978
Buildings & building improvements. 290,312 289,261
Furniture & fixtures.............. 74,578 72,452
Equipment......................... 170,687 168,705
Leasehold improvements............ 119,098 115,340
Construction in progress.......... 34,451 19,495
Accumulated depreciation.......... (192,489) (179,203)
-------- --------
$620,020 $607,028
======== ========
4. Other Assets
Other assets consisted of the following (in thousands):
March 31, December 31,
2000 1999
----------- -----------
Intangible assets, net(including liquor
licenses)...................... $ 70,138 $ 61,508
Other assets...................... 18,355 19,263
-------- -------
$ 88,493 $ 80,771
======== ========
5. Long-term Debt
Long-term debt consisted of the following (in thousands):
March 31, December 31,
2000 1999
---------- ------------
Notes payable to banks, collateralized
by property, fixtures and equipment,
interest at rates ranging from 8.02%
to 9.9% at March 31, 2000 and
December 31, 1999....................... $ 4,017 $ 647
Note payable to corporation, collateralized
by real estate, interest at 9.0%........ 64 119
Other notes payable, uncollateralized, interest
rates ranging from 5.63% to 7.99%....... 1,954 2,378
------ ------
6,035 3,144
Less current portion 4,602 1,625
------ ------
Long-term debt $ 1,433 $ 1,519
======= =======
7
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 120 day London Interbank Offered Rate ("LIBOR") (6.13% to
6.53% at March 31, 2000 and 5.82% to 6.13% at December 31, 1999). At March
31, 2000 and December 31, 1999, the unused portion of the revolving line of
credit was $125,000,000. The line matures in December 2002.
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 $3,754,000 of the line of credit is committed for the issuance
of letters of credit at March 31, 2000; of which $654,000 is to collateralize
loans made by the bank to certain franchisees.
The Company is the guarantor on an uncollateralized line of credit which
permits borrowing of up to $25,000,000, maturing in March 2002, for one of
its franchisees. At March 31, 2000 and December 31, 1999 the balance on the
line of credit was approximately $19,420,000 and $19,220,000, respectively.
The Company is the guarantor of $8,333,000 of a $60,000,000 note for an
unconsolidated affiliate in which the Company has an 18.5% equity interest.
At March 31, 2000 and December 31, 1999, the outstanding balance was
approximately $34,404,000 and $16,828,000, respectively.
6. Accrued Expenses
Accrued expenses consisted of the following (in thousands):
March 31, December 31,
2000 1999
--------- -----------
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Accrued payroll and other compensation $ 12,677 $11,132
Accrued advertising................... 8,765 1,149
Accrued rent.......................... 2,411 1,934
Accrued insurance..................... 11,010 7,837
Accrued ESOP contribution............. 1,984 1,484
Accrued property taxes................ 5,354 5,078
Other accrued expenses................ 4,312 1,014
------- -------
$ 46,513 $29,628
======= =======
8
OUTBACK STEAKHOUSE, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations (1)
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,
------------------
2000 1999
------- --------
REVENUES:
Restaurant sales....................... 99.2% 99.3%
Other revenues......................... 0.8 0.7
----- -----
TOTAL REVENUES.......................... 100.0 100.0
COSTS AND EXPENSES: ----- -----
Cost of sales (2)...................... 37.2 38.4
Labor and other related (2)............ 23.4 23.6
Other operating (2).................... 21.9 21.4
General & administrative............... 4.2 3.8
Income from operations of
unconsolidated affiliates............. (0.1) (0.1)
Total costs and expenses........... 86.0 86.5
----- -----
INCOME FROM OPERATIONS.................. 14.0 13.5
OTHER INCOME (EXPENSE).................. (0.1) (0.1)
INTEREST INCOME(EXPENSE)................ 0.2 0.1
INCOME BEFORE ELIMINATION OF ----- -----
MINORITY PARTNERS' INTEREST AND INCOME
TAXES AND CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE.................. 14.1 13.4
ELIMINATION OF MINORITY PARTNERS'
INTEREST.............................. 2.1 1.9
----- -----
INCOME BEFORE PROVISION FOR INCOME TAXES 12.0 11.6
PROVISION FOR INCOME TAXES (3).......... 4.3 4.2
----- -----
NET INCOME (3).......................... 7.7% 7.3%
===== =====
(1) Amounts for the three months ended March 31, 1999 have been restated to
reflect the merger discussed in Note 1 of Notes to Consolidated Financial
Statements.
(2) As a percentage of restaurant sales.
(3) Amounts for the three months ended March 31, 1999 are pro forma. See
Note 1 of Notes to Consolidated Financial Statements.
9
Results of Operations (continued)
Three Months Ended
March 31,
------------------
2000 1999
------- --------
System-wide sales (millions of dollars):
Outback Steakhouse restaurants
Company owned - domestic and international $ 416 $ 355
Domestic franchised and joint venture. 77 62
International franchised and joint venture 16 13
---- ----
Total............................... 509 430
---- ----
Carrabba's Italian Grills
Company owned ........................ 42 34
Joint venture ........................ 11 7
---- ----
Total............................... 53 41
---- ----
Fleming's Prime Steakhouse and Wine Bars
Company owned ........................ 3
---- ----
System-wide total....................... $ 565 $ 471
====== =====
Number of restaurants (at end
of the period):
Outback Steakhouse
Company owned - domestic and international 485 443
Domestic franchised and joint venture. 97 83
International franchised and joint venture 32 24
--- ---
Total............................... 614 550
=== ===
Carrabba's Italian Grills
Company owned ........................ 56 53
Joint venture ........................ 16 12
--- ---
Total............................... 72 65
--- ---
Fleming's Prime Steakhouse and Wine Bars
Company owned ........................ 3
--- ---
System-wide total....................... 689 615
=== ===
10
Three months ended March 31, 2000 and 1999
Revenues. Total revenues increased by 18.6% to $464,797,000 during the
first quarter of 2000 as compared with $391,896,000 in the same period in
1999. The increase was primarily attributable to the opening of new restaurants
after March 31, 1999, increased same store customer counts and a menu price
increase of approximately 2.5% at Outback Steakhouse in December 1999. The
following table depicts additional activities that influenced the period to
period changes in revenues:
Three Months Ended
March 31,
----------------
2000 1999
------ ------
Average unit volumes(weekly):
Outback Steakhouses.......... $ 65,491 $ 63,521
Carrabba's Italian Grills.... $ 57,043 $ 49,881
Per person check averages:
Outback Steakhouses.......... $ 17.99 $ 17.76
Carrabba's Italian Grills.... $ 19.44 $ 18.52
Year to year percentage change:
Same-store sales:
Outback Steakhouses.......... 6.4% 5.7%
Carrabba's Italian Grills.... 11.2% 5.5%
Same store customer counts:
Outback Steakhouses.......... 3.9% 2.1%
Carrabba's Italian Grills.... 9.2% (1.8)%
Costs and expenses. Cost of restaurant sales as a percentage of
restaurant sales, consisting of food and beverage costs, decreased in the
first quarter of 2000 to 37.2% of restaurant sales as compared with 38.4% in
the same period in 1999. The decrease was attributable to higher menu prices
and commodity cost decreases in produce and dairy products, particularly onions
and butter.
Labor and other related expenses include all direct and indirect
labor costs incurred in restaurant operations. Labor expenses decreased in
the first quarter of 2000 to 23.4% of restaurant sales, as compared with
23.6% in the same period in 1999. The decrease resulted from higher average
unit volumes at Outback and Carrabba's during the first quarter of 2000
partially offset by higher hourly wage rates resulting from a competitive
labor market.
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, depreciation, 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 21.9% in the first quarter of 2000 as compared to 21.4% in
the same quarter of 1999. The increase resulted primarily from higher
advertising spending related to Outback Steakhouse's national cable program,
increased liability insurance costs, and increased operating supplies expense
related to Outback's "Take-away" program. The increase was partially offset
by higher average unit volumes for both Outback and Carrabba's which reduced
the fixed and indirectly variable costs as a percentage of sales.
11
General and administrative costs increased by $4,864,000 to $19,614,000 in
the first quarter of 2000 as compared with $14,750,000 in the same period in
1999. This increase resulted from an increase in overall administrative costs
associated with operating additional domestic and international Outback
Steakhouses, Carrabba's Italian Grills and Fleming's Prime Steakhouses 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 $367,000 in the first quarter of 2000 as
compared with income of $235,000 in the same period in 1999. This increase
was attributable to additional stores operating as development joint ventures
in the first quarter of 2000 and to an increase in average unit volumes and
improved operating margins.
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
$12,372,000 to $65,270,000, in the first quarter of 2000 as compared with
$52,898,000 in the same period in 1999.
Other income (expense), net. Other income (expense), net represents
the income and expense from non-restaurant businesses. Net other expenses
increased to $593,000 in the first quarter of 2000 compared with net other
expenses of $503,000 during the same period in 1999. 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 $823,000 during the first
quarter of 2000 as compared with interest income of $202,000 in the same
period in 1999. The period to period change in interest income resulted from
higher average cash balances and higher interest rates on short term
investments during the first quarter of 2000 compared with the same period in
1999.
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 2.1% and 1.9% during the quarter ended March
31, 2000 and 1999, respectively. The increase in this ratio reflected the
increase in overall restaurant operating margins.
12
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 35.7% for the first quarter of 2000 and the pro forma effective income
tax rate was 36.5% for the first quarter of 1999. The decrease in the
effective rate resulted from state tax savings from changes in the corporate
state tax structure implemented in the third quarter of 1999, partially
offset by the decrease in FICA tip credits the Company was able to utilize
in the current period.
Pro forma net income and earnings per share. Net income for the first quarter
of 2000 was $35,766,000 as compared with pro forma net income of $28,743,000
in the same period in 1999. Basic earnings per share increased to $0.46
during the first quarter of 2000 as compared with pro forma basic earnings
per share of $0.38 for the same period in 1999. Diluted earnings per share
increased to $0.45 during the first quarter of 2000 as compared with pro
forma diluted earnings per share of $0.37 for the same period in 1999.
13
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,
1999 2000 1999
Net cash provided by ----------- --------- --------
operating activities $192,662 $44,369 $27,941
Net cash used in
investing activities (127,700) (25,747) (22,222)
Net cash used in
financing activities (56,374) (2,926) (30,362)
Net increase(decrease) in cash -------- -------- --------
and cash equivalents $ 8,588 $ 15,696 $(24,643)
======== ======== ========
The Company requires capital principally for the development of new
Company owned and joint venture restaurants. Capital expenditures totaled
approximately $116,746,000 for the year ended December 31, 1999 and
$26,278,000 and $17,150,000 during the first quarters of 2000 and 1999,
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 2000 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, 2000, the Company had two uncollateralized lines of credit
totaling $132,500,000. Approximately $3,754,000 is committed for the issuance
of letters of credit, some of which are to collateralize loans made by the
bank to certain franchisees. The Company expects that its capital
requirements through the end of 2000 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 is the guarantor of an uncollateralized line of credit that
permits borrowing of up to $25,000,000 for one of its franchisees. At March
31, 2000, the borrowings totaled approximately $19,420,000. See Note 5 of
Notes to Unaudited Consolidated Financial Statements.
The Company is the guarantor of $8,333,000 of a $60,000,000 note for an
unconsolidated affiliate in which the Company has an 18.5% equity interest.
At March 31, 2000 the outstanding balance on the note was approximately
$34,404,000.
14
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 $125 million revolving line of credit with its bank.
Borrowings under the agreement bear interest at rates ranging from 57.5 to 95
basis points over the 30, 60, 90 or 180 London Interbank Offered Rate. At
March 31, 2000 and December 31, 1999, the Company did not have an outstanding
balance on the line 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. 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 expect that in most cases the Company
could pass increased commodity prices 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.
15
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," and similar expressions are
intended to identify forward-looking statements. The Company cautions that
these statements are further qualified by important economic and competitive
factors that could cause actual results to differ materially from those in
the forward-looking statements including, without limitation, risks of the
restaurant industry, including a highly competitive industry with many well-
established competitors with greater financial and other resources than the
Company, and the impact of changes in consumer tastes, local, regional and
national economic conditions, demographic trends, traffic patterns, employee
availability and cost increases. In addition, the Company's ability to expand
is dependent upon various factors, such as the availability of attractive
sites for new restaurants, the ability to negotiate suitable lease terms, the
ability to generate or borrow funds to develop new restaurants and obtain
various government permits and licenses and the recruitment and training of
skilled management and restaurant employees. Accordingly, such forward-
looking statements do not purport to be predictions of future events or
circumstances and may not be realized.
The Company notes that a variety of factors could cause the actual
results and experience to differ from the anticipated results referred to in
the previous paragraphs. The Company's forward looking statements regarding
its development schedule for new restaurant openings are subject to a number
of risk factors including:
(i) Ability to obtain 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 obtain 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.
16
OUTBACK STEAKHOUSE, INC.
PART II: OTHER INFORMATION
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 March 31, 2000.
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.
Date: May 15, 2000 By: /s/ Robert S. Merritt
Robert S. Merritt
Senior Vice President,
Finance (Principal Financial
and Accounting Officer)
18
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