<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996.
Commission file number 000-22150
LANDRY'S SEAFOOD RESTAURANTS, INC.
----------------------------------------------------------
(Exact name of the registrant as specified in its charter)
Delaware 74-0405386
- ------------------------------- --------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1400 Post Oak Blvd., Suite 1010, Houston, Texas 77056
-------------------------------------------------------------
(Address of principal executive offices)
(713) 850-1010
------------------------------------------------------------
(Registrant's telephone number)
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
APPLICABLE ONLY TO CORPORATE ISSUERS:
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 10, 1996 there were
18,214,160 shares of $0.01 par value
common stock outstanding.
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
INDEX
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PAGE
PART I. FINANCIAL INFORMATION NUMBER
- --------------------------------------------------------------------------------
<S> <C> <C>
Item 1. Financial Statements 2
Condensed Unaudited Consolidated
Balance Sheets at March 31, 1996
and December 31, 1995 3
Condensed Unaudited Consolidated
Statements of Income for the Three
Months Ended March 31, 1996 and
March 31, 1995 4
Condensed Unaudited Consolidated
Statements of Stockholders' Equity
for the Three Months Ended March
31, 1996 5
Condensed Unaudited Consolidated
Statements of Cash Flows for the
Three Months Ended March 31, 1996
and March 31, 1995 6
Notes to Condensed Unaudited
Consolidated Financial Statements 7-9
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations 10-14
- --------------------------------------------------------------------------------
PART II. OTHER INFORMATION
- --------------------------------------------------------------------------------
Item 1. Legal Proceedings Not Applicable
Item 2. Changes in Securities Not Applicable
Item 3. Defaults upon Senior Securities Not Applicable
Item 4. Submission of Matters to a Vote of
Security Holders Not Applicable
Item 5. Other Information Not Applicable
Item 6. Exhibits and Reports on Form 8-K 15
- --------------------------------------------------------------------------------
Signatures 16
- --------------------------------------------------------------------------------
</TABLE>
1
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The accompanying condensed unaudited consolidated financial statements have
been prepared by 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 fair
presentation of the Company's results of operations, financial position and
changes therein for the periods presented have been included.
2
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
CONDENSED UNAUDITED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1996 1995
------ -------------- ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 10,218,831 $ 16,628,704
Accounts receivable--trade and other 1,616,666 1,162,099
Inventory 2,519,234 2,780,931
Other current assets 2,620,902 3,146,626
------------ ------------
Total current assets 16,975,633 23,718,360
PROPERTY AND EQUIPMENT, net 120,281,093 111,569,804
GOODWILL, net of amortization of $883,000 and $849,000, respectively 3,171,308 3,205,094
OTHER ASSETS, net 1,783,870 1,508,105
------------ ------------
Total assets $142,211,904 $140,001,363
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 6,278,024 $ 11,176,551
Accrued liabilities 4,777,175 3,721,325
Income taxes payable 1,323,829 --
Current portion of long-term notes and other obligations 264,502 299,222
------------ ------------
Total current liabilities 12,643,530 15,197,098
LONG-TERM NOTES AND OTHER OBLIGATIONS, NON-CURRENT 317,080 368,349
DEFERRED INCOME TAXES & OTHER LIABILITIES 2,226,046 2,226,046
------------ ------------
Total liabilities 15,186,656 17,791,493
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value, 2,000,000 shares authorized,
none outstanding -- --
Common stock, $0.01 par value, 30,000,000 shares authorized,
18,204,220 and 18,050,520 issued and outstanding, respectively 182,042 180,505
Additional paid-in capital 107,921,211 106,242,850
Retained earnings 18,921,995 15,786,515
------------ ------------
Total stockholders' equity 127,025,248 122,209,870
------------ ------------
Total liabilities and stockholders' equity $142,211,904 $140,001,363
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed unaudited
financial statements.
3
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
------------------------------
March 31,
1996 1995
------------------------------
<S> <C> <C>
REVENUES $34,819,597 $20,612,615
OPERATING COSTS AND EXPENSES:
Cost of sales 10,476,060 6,373,332
Restaurant labor 8,873,733 5,260,776
Other restaurant operating expenses 7,265,003 4,421,083
Depreciation and amortization 2,132,901 1,041,648
General and administrative expenses 1,272,663 880,694
----------- -----------
Total operating costs and
expenses 30,020,360 17,977,533
----------- -----------
OPERATING INCOME 4,799,237 2,635,082
OTHER (INCOME) EXPENSE:
Interest (income) expense, net (158,104) (176,288)
Other, net 58,154 16,683
----------- -----------
Total other (income) expense (99,950) (159,605)
----------- -----------
INCOME BEFORE INCOME TAXES 4,899,187 2,794,687
PROVISION FOR INCOME TAXES 1,763,707 992,115
----------- -----------
NET INCOME $ 3,135,480 $ 1,802,572
=========== ===========
NET INCOME PER SHARE $0.17 $0.12
===== =====
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES AND COMMON SHARE EQUIVALENTS
OUTSTANDING 19,000,000 14,850,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed unaudited
financial statements.
4
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
CONDENSED UNAUDITED CONSOLIDATED STATEMENT OF
STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Additional
------------------- Paid-In Retained
Shares Amount Capital Earnings Total
---------- -------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995 18,050,520 $180,505 $106,242,850 $15,786,515 $122,209,870
Net income --- --- --- 3,135,480 3,135,480
Exercise of stock options and
income tax benefit 153,700 1,537 1,678,361 --- 1,679,898
Balance, March 31, 1996 ---------- -------- ------------ ----------- ------------
18,204,220 $182,042 $107,921,211 $18,921,995 $127,025,248
========== ======== ============ =========== ============
</TABLE>
The accompanying notes are an integral part of these condensed unaudited
financial statements.
5
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS,INC.
CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
----------------------------
March 31
1996 1995
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 3,135,480 $ 1,802,572
Adjustments to reconcile net
income to net cash provided
by operating activities--
Depreciation and amortization 2,132,901 1,041,648
Change in assets and
liabilities-net (2,332,921) 2,394,106
------------ ------------
Total adjustments (200,020) 3,435,754
------------ ------------
Net cash provided by
(used in) operating
activities 2,935,460 5,238,326
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment additions (10,205,119) (12,629,291)
Other assets (306,655) (18,228)
------------ ------------
Net cash used in investing
activities (10,511,774) (12,647,519)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable and
other long-term obligations (85,989) (125,280)
Proceeds from exercise of stock
options 1,252,430 501,000
---------- -----------
Net cash provided by
(used in) financing
activities 1,166,441 375,720
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (6,409,873) (7,033,473)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 16,628,704 19,502,075
------------ ------------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 10,218,831 $ 12,468,602
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash payments during the period
for--
Income taxes $17,800 $ 1,246,000
Interest 15,700 20,400
</TABLE>
The accompanying notes are an integral part of these unaudited condensed
financial statements.
6
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The financial statements included herein have been prepared by the Company
without audit, except for the consolidated balance sheet as of December 31,
1995. The financial statements include all adjustments, consisting of normal,
recurring adjustments and accruals, which the Company considers necessary for
fair presentation of its financial position and results of operations. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. This information is contained in the Company's December
31, 1995, consolidated financial statements filed with the Securities and
Exchange Commission on Form 10-K.
Cash and Cash Equivalents
For purposes of the condensed statements of cash flows, the Company
considers all highly liquid investments with original maturities of three months
or less to be cash equivalents.
Goodwill and Non-Compete Agreements
Goodwill and non-compete agreements are amortized over 30 years and 15
years (or the life of the related agreement), respectively.
Earnings per Share
Net income per share has been computed by dividing net income by the
weighted average common and common share equivalents outstanding, if material.
Common stock equivalent shares, which relate to stock options, are included in
the weighted average using the treasury stock method, when the effect is
material and dilutive.
New Accounting Principles
In October 1995, SFAS No. 123 "Accounting for Stock-Based Compensation" was
issued. This statement establishes a fair value based method of accounting for
stock-based compensation plans. The Company currently accounts for its stock-
based compensation plans under Accounting Principles Board (APB) Opinion No. 25,
"Accounting for Stock Issued to Employees." Pursuant to the new standard, the
Company will provide certain pro forma disclosures related to its stock based
compensation in the notes to its financial statements for the year ending
December 31, 1996.
7
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
2. Accrued Liabilities
Accrued liabilities are comprised of the following:
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
------------------ -------------------
<S> <C> <C>
Payroll and related costs $1,644,051 $ 813,747
Deferred income taxes 200,000 200,000
Taxes, other than payroll and income
taxes 1,639,055 1,298,875
Other 1,294,069 1,408,703
---------- ----------
$4,777,175 $3,721,325
========== ==========
</TABLE>
3. Debt
The Company has a $25 million unsecured line of credit from a bank which
matures in May 1997, and is available for expansion and other general corporate
purposes. The terms of the line of credit require periodic or monthly interest
payments; interest on borrowings at the bank's reference rate, as defined, or an
Offshore Rate plus 3/4%, as defined; and, for the Company to maintain tangible
net worth, as defined, of $90 million. Moreover, the terms prohibit the Company
from incurring losses in two consecutive quarters.
4. Contingencies
The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. Management believes, based on discussions with
its legal counsel and in consideration of reserves recorded, that the outcome of
all legal actions will not have a material adverse effect upon the consolidated
financial position and results of operations of the Company.
5. Recent Developments
On April 18, 1996, the Company entered into an Agreement and Plan of Merger
(the "Merger Agreement") pursuant to which a wholly-owned subsidiary of the
Company would merge with and into Bayport Restaurant Group, Inc. ("Bayport")
("PORT"/NASDAQ), resulting in Bayport becoming a wholly-owned subsidiary of the
Company (the "Merger"). Bayport operates 17 full-service casual dining seafood
restaurants under the name "The Crab House" and has four Crab House restaurants
under construction. Bayport's Crab House restaurants are located primarily in
8
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Florida, with additional locations in several other mainly southeastern states.
Prior to the Merger, the Company has agreed to loan Bayport up to $11 million to
be used by Bayport to continue construction of these four Crab House
restaurants. Funding by the Company of the Bayport construction loan will be
from available capital under the Company's existing credit lines, and is not
expected to impact the Company's own development and expansion plans in any
manner.
Under the terms of the Merger Agreement, the Company will issue an aggregate
number of shares of Landry's Common Stock which is equal to .2105 (the "Exchange
Ratio"), subject to adjustment, multiplied by the number of outstanding shares
of Bayport Common Stock. Based on 9,655,599 shares of Bayport Common Stock
issued and outstanding on May 6, 1996, the Company will issue approximately
2,032,503 shares of Landry's Common Stock for the merger, subject to
adjustments, including an equivalent share price collar adjustment above $22.00
and below $15.00 per share of Landry's Common Stock for the average of the daily
closing prices for a specified number of trading days. Shares of outstanding
Bayport Preferred Stock, aggregating 2,136,499 shares as of May 6, 1996, will be
exchanged for approximately 112,433 shares of the Company's newly issued
Preferred Stock, subject to equivalent adjustments. Landry's Preferred Stock
will have essentially the same rights as the Bayport Preferred Stock, among
which will be conversion rights into Landry's Common Stock, on a one-for-one
basis, after the merger and exchange. In addition, the Exchange Ratio is
subject to a downward adjustment (i.e. providing for issuance of fewer Landry's
shares) in the event that Bayport's costs of construction of four
restaurants presently under construction exceed $13 million and/or if pre-
opening costs relating to these four restaurants exceed $1.65 million. The
Merger is expected to close in the Company's third quarter, ending on September
30, 1996. Costs and charges related to the Merger are expected to be
significant and are currently estimated to approximate $8 to $10 million; such
costs and charges will be expensed in the quarter in which the Merger is
consummated or abandoned.
On April 30, 1996, the Company filed a registration statement for the aggregate
sale of 4,500,000 shares of the Company's Common Stock by the Company and a
selling stockholder. Net proceeds of the Company's common stock offering will be
used to fund the Company's existing planned expansion and development programs
of Landry's Seafood House and Joe's Crab Shack restaurants and general corporate
purposes, and if the Merger is consummated, to fund expansion of Crab House
restaurants and repayment of Bayport related outstanding debt and merger costs.
9
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Introduction
The Company's operations may be impacted by changes in federal tax and
other governmental policies which affect the deductibility of business and
entertainment expenses and levels of disposable income. The Revenue
Reconciliation Act of 1993 included matters which could impact the restaurant
business and the Company's operations. These included a reduction in the
business tax deduction available for restaurant meals, as well as an increase in
the tax rate for individuals, with a greater increase for those persons who are
in the higher income bracket and, therefore, could reasonably be expected to eat
in the Company's restaurants on a more frequent basis. The Company can make no
prediction as to the ultimate effect of the Revenue Reconciliation Act of 1993
on the Company's business and operation; however, the Company does not believe
the Revenue Reconciliation Act of 1993 will significantly affect its on-going
business. Additionally, on-going proposals mandating medical and parental leave
benefits, requiring employers to provide health insurance to part-time employees
and increases in the federal or certain states' minimum wage will, if enacted,
increase the Company's employee costs.
If the Merger is consummated, the Company would recognize a one-time
charge that it believes will be approximately $8.0 million to $10.0 million.
This charge would be recorded in the quarter in which the Merger is consummated
(expected to be the third quarter of 1996). The actual expenses would be
significant for such quarter. In addition, the Company's restaurant base would
increase significantly through the acquisition of the Bayport restaurants
pursuant to the Merger. Such restaurants have materially different profit
margins, costs to construct, costs of sales as percentages of restaurants sales,
operating expenses, and other restaurant performance factors than the Company's
restaurants. The Company would attempt to reduce construction and operating
costs of the Bayport restaurants without reducing the quality of their service
or food. However, there can be no assurances that the Company would be able to
operate the Bayport restaurants in a manner that is different from the way such
restaurants are currently being constructed or operated. As a result, the
Company's profit margin, cost to construct, cost of sales as percentages of
restaurant sales, operating expenses and other restaurant performance factors
may be materially different than the Company's on a stand-alone basis.
The report contains certain forward-looking statements within the meaning
of Section 27A of the Securities Act, and Section 21E of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), which are intended to be covered
by the safe harbors created thereby. Investors are cautioned that all forward-
looking statements involve risks and uncertainty, including without limitation,
the ability of the Company to continue its accelerated expansion strategy
(including the consummation of the Merger), changes in costs of food, labor, and
employee benefits, the ability of the Company to continue to acquire prime
locations at acceptable lease or purchase terms, as well
10
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
as general market conditions, competition, and pricing. Although the Company
believes that the assumptions underlying the forward-looking statements
contained herein are reasonable, any of the assumptions could be inaccurate, and
therefore, there can be no assurance that the forward-looking statements
included in this report will prove to be accurate. In light of the significant
uncertainties inherent in the forward-looking statements included herein, the
inclusion of such information should not be regarded as a representation by the
Company or any other person that the objectives and plans of the Company will be
achieved.
Results of Operations
The following table sets forth the components of income from operations as
a percentage of revenues for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1996
-------------------
1996 1995
-------- --------
<S> <C> <C>
Revenues 100.0% 100.0%
Operating costs and expenses:
Cost of sales 30.1 30.9
Restaurant labor 25.5 25.5
Other restaurant operating expenses 20.9 21.4
Depreciation and amortization 6.1 5.1
General and administrative expenses 3.7 4.3
----- -----
Total operating costs and 86.3 87.2
expenses ----- -----
Operating income 13.7 12.8
Other (income) expense:
Interest (income) expense, net (0.5) (0.8)
Other, net 0.2 0.1
----- -----
Total other (income) expense,
net (0.3) (0.7)
----- -----
Income before income taxes
Provision for income taxes 14.0 13.5
5.0 4.8
Net income ----- -----
9.0% 8.7%
===== =====
</TABLE>
11
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
Three Months Ended March 31, 1996 Compared to Three Months Ended March 31, 1995
Revenues increased $14,206,982, or 68.9%, from $20,612,615 to $34,819,597
in the three months ended March 31, 1996, compared to the three months ended
March 31, 1995. The increase in revenue was attributable to revenues from new
restaurant openings. There was a nominal change in revenues from units opened
prior to 1995. Several of the Company's restaurants that opened during late 1994
and early 1995 opened at volumes in excess of the Company's average unit
volumes. Subsequently, however, the Company has experienced a moderation of
their initial unit volumes.
As a primary result of increased revenues, cost of sales increased
$4,102,728, or 64.4%, from $6,373,332 to $10,476,060 in the three months ended
March 31, 1996 compared to the same period in the prior year. Cost of sales as
a percentage of revenues for the three months ended March 31, 1996 decreased to
30.1% from 30.9% in 1995. The decrease in cost of sales as a percentage of
revenues reflects favorable product prices and better management cost controls
in 1996.
Restaurant labor expenses increased $3,612,957, or 68.7%, from $5,260,776
to $8,873,733 in the three months ended March 31, 1996 compared to the same
period in the prior year. Restaurant labor expenses as a percentage of revenues
for three months ended March 31, 1996, remained flat at 25.5%.
Other restaurant operating expenses increased $2,843,920, or 64.3%, from
$4,421,083 to $7,265,003 in the three months ended March 31, 1996, compared to
the same period in the prior year, as a result of increased revenues and the
opening of new restaurants since March 31, 1995. Such expenses decreased as a
percentage of revenues to 20.9% from 21.4% primarily due to revenue growth
exceeding the increase in other restaurant operating expenses, and tighter
controls on various cost and expense categories.
Depreciation and amortization expenses increased $1,091,253 or 104.8% from
$1,041,648 to $2,132,901 in the three months ended March 31, 1996, compared to
the same period in the prior year. The increase was primarily due to the
addition of new restaurants and purchases of new equipment.
General and administrative expenses increased $391,969, or 44.5%, from
$880,694 to $1,272,663 compared to the same period of the prior year, and
decreased as a percentage of revenues to 3.7% from 4.3%. The dollar increase
resulted primarily from increased office personnel, salaries and travel to
support the Company's expansion plans. The percentage of revenues decrease was
attributable to particularly strong revenue growth exceeding the increase in
general and administrative expense for the comparable three month period.
12
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
The decrease in net interest income of $18,184 and change in other expense,
net of $41,471, are not deemed significant.
Provision for income taxes increased by $771,592 from $992,115 in 1995 to
$1,763,707 in 1996 primarily due to the change in the Company's income. The
effective income tax rates increased to approximately 36% from the 1995
effective tax rates due to a higher effective federal rate in 1996 as
compared to 1995, and as a result of higher state income taxes.
Liquidity and Capital Resources
The Company does not have significant receivables or inventory and receives
trade credit based upon negotiated terms in purchasing food and supplies. In
connection with its Initial Public Offering, the Company received $17,122,745 in
net proceeds in August 1993. In March 1994, the Company received $37,457,255
from a second common stock offering and the exercise of certain stock options,
and in April 1995, the Company received approximately $50,000,000 from a third
common stock offering. Historically, the Company has leased many of its
restaurant locations and pursued a strategy of controlled growth, financing its
expansion principally from proceeds from common stock offerings, operating cash
flow and to a lesser extent, borrowings. In 1994, 1995 and the three months
ended March 31, 1996, the Company spent $31,908,332, $71,332,802, and
$10,205,119 respectively, on capital expenditures, which was funded in part out
of cash flows from operations of $9,813,944, $18,719,141, and $2,935,460
respectively, plus borrowings in 1993 of $1,212,767 and from proceeds of the
common stock offerings. Payments on notes payable and other long-term
obligations amounted to $1,474,745, $320,109, and $85,989 in 1994, 1995 and the
three months ended March 31, 1996, respectively.
The Company originally planned to open approximately 26 restaurants during
1995 and 1996. Of the 26 Company restaurants planned for 1995 and 1996, as of
April 16, 1996, 26 had been opened. The Company's current development plan is to
operate a total of approximately 75 restaurants by December 31, 1997 (excluding
restaurants that may be acquired pursuant to the Merger). Six restaurants were
under construction as of April 16, 1996. If the Merger is not consummated the
Company anticipates further accelerating its expansion plans. Excluding real
estate costs and pre-opening expenses, the average cash investment to open the
Company's new restaurants in 1995 was approximately $2.6 million. However, the
average cash investment for the last seven restaurants opened by the Company was
$2.2 million. The Company expects that its average investments for units opened
in the future will be further reduced due primarily to an overall reduction of
the average unit size from those opened during 1995. However, individual unit
investment costs could vary from management's expectations due to a variety of
factors Moreover, average unit investment costs are dependent upon many factors
including competition for sites, location, construction costs, unit size and the
mix of conversions, build-to-suit and leased locations. The Company currently
anticipates that it will continue to purchase a portion
13
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
of its new restaurant locations, which are expected to be more costly than
leased locations. The Company believes that existing cash balances, the proceeds
from common stock offerings, cash generated from operations and potential
financing sources will be sufficient to satisfy the Company's working capital
and capital expenditure requirements through 1997, including working capital and
capital expenditure requirements resulting from the consummation of the Merger.
The Company has a $25 million line of credit which is subject to renewal in
May 1997. The Company had no funds borrowed under the line of credit as of
March 31, 1996. However, up to $11 million of amounts available under the line
of credit may be utilized for construction loans to Bayport prior to the
consummation of the Merger.
On April 18, 1996, the Company entered into a loan agreement with Bayport
(the Bayport Loan Agreement) pursuant to which the Company agreed to loan to
Bayport up to $11 million to be used by Bayport to finance the continued
construction of four Crab House restaurants. The first advance under the
Bayport Loan Agreement in the aggregate amount of $1.5 million was made on
April 22, 1996. Subsequent advances in varying amounts, will be made on or
about the fifteenth day of each month beginning in May, subject to the
satisfaction of certain conditions contained in the loan agreement. As of May
10, 1996, the Company had funded $1.8 million of such Bayport loan. The Company
expects to borrow funds under its line of credit to fund the advances under the
Bayport Loan Agreement. The loan to Bayport is secured by certain collateral,
including certain existing restaurants of Bayport and certain restaurants
currently being constructed by Bayport. The Company has the right to convert
the loan to Bayport into ownership of such collateral, if the Merger is not
consummated under certain circumstances, by paying the remaining unfunded loan
balance.
Seasonality and Quarterly Results
The Company's business is seasonal in nature, with revenues and, to a
greater degree, operating profits being lower in the first and fourth quarters
than in other quarters due to the Company's reduced winter volumes. To a degree,
the Company anticipates some moderation in revenues from the initial volumes of
units opened in the first and fourth quarters. The timing of unit opening can
and will affect quarterly results.
Impact of Inflation
Management does not believe that inflation has had a significant effect on
the Company's operations during the past several years. Management believes the
Company has historically been able to pass on increased costs through menu price
increases, but there can be no assurance that it will be able to do so in the
future. Future increases in land and construction costs could adversely affect
the Company's ability to expand.
14
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
PART II. OTHER INFORMATION
<TABLE>
<CAPTION>
<S> <C> <C>
ITEM 1. LEGAL PROCEEDINGS Not Applicable
ITEM 2. CHANGES IN SECURITIES Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not Applicable
ITEM 5. OTHER INFORMATION Not Applicable
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) EXHIBITS - NONE
(B) REPORTS ON FORM 8-K - The Company filed a current report on Form 8-K
(reporting on Item 5.) on April 26, 1996, announcing the proposed acquisition
of the Bayport Restaurant Group, Inc.
15
<PAGE>
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 by the
undersigned thereunto duly authorized.
Landry's Seafood Restaurants, Inc.
(Registrant)
/s/ Tilman J. Fertitta
___________________________
Tilman J. Fertitta
Chairman of the Board of Directors
President and Chief Executive Officer
(Principal Executive Officer)
/s/ Paul S. West
___________________________
Paul S. West
Vice President-Finance and Chief Financial Officer
(Principal Financial and Accounting Officer)
Dated: May 15, 1996
------------------
16
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<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> MAR-31-1996 MAR-31-1995
<CASH> 10,218,831 16,628,704
<SECURITIES> 0 0
<RECEIVABLES> 1,616,666 1,162,099
<ALLOWANCES> 0 0
<INVENTORY> 2,519,234 2,780,931
<CURRENT-ASSETS> 16,975,633 23,718,360
<PP&E> 128,578,807 118,373,687
<DEPRECIATION> (8,297,714) (6,803,883)
<TOTAL-ASSETS> 142,211,904 140,001,363
<CURRENT-LIABILITIES> 12,643,530 15,197,098
<BONDS> 0 0
0 0
0 0
<COMMON> 182,042 180,505
<OTHER-SE> 126,843,206 122,029,365
<TOTAL-LIABILITY-AND-EQUITY> 142,211,904 140,001,363
<SALES> 34,819,597 20,612,615
<TOTAL-REVENUES> 34,819,597 20,612,615
<CGS> 10,476,060 6,373,332
<TOTAL-COSTS> 19,544,300 11,604,201
<OTHER-EXPENSES> (99,950) (159,605)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 4,899,187 2,794,687
<INCOME-TAX> 1,736,707 992,115
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<NET-INCOME> 3,135,480 1,802,572
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