<PAGE>
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 June 30, 2000.
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 August 12, 2000 there were
22,283,921 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
Unaudited Consolidated Balance Sheets at June 30, 2000 and December
31, 1999 3
Unaudited Consolidated Statements of Income for the Three and Six
Months Ended June 30, 2000 and June 30, 1999 4
Condensed Unaudited Consolidated Statement of Stockholders' Equity
for the Six Months Ended June 30, 2000 5
Condensed Unaudited Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 2000 and June 30, 1999 6
Notes to Condensed Unaudited Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk 16
-----------------------------------------------------------------------------------------------
PART II. OTHER INFORMATION
-----------------------------------------------------------------------------------------------
Item 1. Legal Proceedings 17
Item 2. Changes in Securities 17
Item 3. Defaults upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
-----------------------------------------------------------------------------------------------
Signatures 18
-----------------------------------------------------------------------------------------------
</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 Landry's Seafood Restaurants, 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 fair presentation of the Company's results of
operations, financial position and changes therein for the periods presented
have been included.
This 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 safe harbors created thereby. Stockholders are cautioned that all
forward-looking statements involve risks and uncertainty, including without
limitation, the ability of the Company to continue its expansion strategy,
ability to make projected capital expenditures, as well as general market
conditions, competition, and pricing. All statements, other than statements of
historical facts, included or incorporated by reference in this report that
address activities, events or developments that the Company expects or
anticipates will or may occur in the future, including such things as future
capital expenditures (including the amount and nature thereof), business
strategy and measures to implement such strategy, competitive strengths, goals,
expansion and growth of the Company's business and operations, plans, references
to future success as well as other statements which include words such as
"anticipate," "believe," "plan," "estimate," "expect," and "intend" and other
similar expressions constitute forward-looking statements. 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. Stockholders are referred to the full discussion of risks and
uncertainties associated with forward-looking statements contained in the
Company's Form 10-K filed with the Securities and Exchange Commission for the
fiscal year ended December 31, 1999.
2
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 2000 1999
------ ---------- ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 10,737,100 $ 22,977,666
Accounts receivable--trade and other 11,297,997 7,065,298
Inventory 19,621,696 18,409,523
Other current assets 7,631,687 10,258,086
------------ ------------
Total current assets 49,288,480 58,710,573
------------ ------------
PROPERTY AND EQUIPMENT, net 462,460,077 431,378,855
GOODWILL, net of amortization of $1,454,372 and $1,385,959, respectively 2,639,575 2,707,988
OTHER ASSETS, net 6,107,199 3,928,436
------------ ------------
Total assets $520,495,331 $496,725,852
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 23,485,700 $ 21,416,112
Accrued liabilities 26,904,795 19,772,136
Current portion of long-term notes and other obligations 98,423 68,092,714
------------ ------------
Total current liabilities 50,488,918 109,280,962
LONG-TERM NOTES AND OTHER OBLIGATIONS 83,009,454 60,166
DEFERRED INCOME TAXES AND OTHER LIABILITIES 11,625,826 10,036,686
------------ ------------
Total liabilities 145,124,198 119,377,814
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value, 60,000,000 shares authorized,
23,533,625 and 24,823,125 issued and outstanding, net of
treasury shares, respectively 235,336 248,231
Additional paid-in capital 313,576,673 322,605,100
Retained earnings 61,559,124 54,494,707
------------ ------------
Total stockholders' equity 375,371,133 377,348,038
------------ ------------
Total liabilities and stockholders' equity $520,495,331 $496,725,852
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed unaudited
consolidated financial statements.
3
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- ----------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES $134,041,989 $123,607,013 $244,993,267 $224,872,683
OPERATING COSTS AND EXPENSES:
Cost of sales 40,994,880 38,697,215 75,276,661 70,389,942
Restaurant labor 36,553,345 34,756,632 68,236,372 64,918,070
Other restaurant operating expenses 30,416,118 27,799,256 56,596,484 52,129,676
Depreciation and amortization 6,246,613 5,467,598 12,592,389 10,709,623
General and administrative expenses 6,003,354 5,905,486 11,644,293 10,545,287
Pre-opening expenses 817,606 765,334 1,770,497 1,806,746
Special charge (credit) 2,000,000 (730,000) 2,000,000 2,945,000
------------ ------------ ------------ ------------
Total operating costs and expenses 123,031,916 112,661,521 228,116,696 213,444,344
------------ ------------ ------------ ------------
OPERATING INCOME 11,010,073 10,945,492 16,876,571 11,428,339
OTHER (INCOME) EXPENSE:
Interest (income) expense, net 1,117,076 482,298 2,376,828 440,177
Other, net 308,758 (310,488) 301,119 (149,951)
------------ ------------ ------------ ------------
Total other (income) expense 1,425,834 171,810 2,677,947 290,226
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES 9,584,239 10,773,682 14,198,624 11,138,113
PROVISION FOR INCOME TAXES 3,306,562 3,705,570 4,898,525 3,831,299
------------ ------------ ------------ ------------
NET INCOME $ 6,277,677 $ 7,068,112 $ 9,300,099 $ 7,306,814
============ ============ ============ ============
EARNINGS PER SHARE INFORMATION:
BASIC--
Net income per common share $0.26 $0.26 $0.38 $0.26
Weighted average number of common shares
outstanding 24,100,000 27,600,000 24,500,000 28,650,000
DILUTED--
Net income per common share $0.26 $0.26 $0.38 $0.25
Weighted average number of common share
equivalents outstanding 24,300,000 27,700,000 24,650,000 28,750,000
</TABLE>
The accompanying notes are an integral part of these condensed unaudited
consolidated 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, January 1, 2000 24,823,125 $248,231 $322,605,100 $54,494,707 $377,348,038
Net income ---- ---- ---- 9,300,099 9,300,099
Dividends paid ---- ---- ---- (620,559) (620,559)
Purchase of common stock,
held for treasury (1,289,500) (12,895) (9,028,427) (1,615,123) (10,656,445)
---------- -------- ------------ ----------- ------------
Balance, June 30, 2000 23,533,625 $235,336 $313,576,673 $61,559,124 $375,371,133
========== ======== ============ =========== ============
</TABLE>
The accompanying notes are an integral part of these condensed unaudited
consolidated financial statements.
5
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
<S> <C> <C>
2000 1999
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 9,300,099 $ 7,306,814
Adjustments to reconcile net income to net cash
provided by operating activities-
Special charge (credit) --- (730,000)
Depreciation and amortization 12,592,389 10,709,623
Change in assets and liabilities-net and other 5,406,516 12,460,845
------------ ------------
Total adjustments 17,998,905 22,440,468
------------ ------------
Net cash provided by operating activities 27,299,004 29,747,282
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment additions (43,217,563) (27,272,936)
Other assets, including goodwill ---- (49,859)
------------ ------------
Net cash used in investing activities (43,217,563) (27,322,795)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds (payments) on notes payable and other
long-term obligations 14,954,997 39,959,993
Repurchase of common stock for treasury (10,656,445) (46,029,292)
Dividends paid (620,559) ----
Proceeds from exercise of stock options ---- 5,400,000
------------ ------------
Net cash provided by (used in) financing activities 3,677,993 (669,299)
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (12,240,566) 1,755,188
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 22,977,666 35,183,405
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 10,737,100 $ 36,938,593
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash payments during the period for--
Income taxes $ 1,565,000 $ 431,000
Interest $ 3,094,000 $ 961,000
</TABLE>
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
6
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The consolidated financial statements included herein have been prepared by
the Company without audit, except for the consolidated balance sheet as of
December 31, 1999. 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, 1999, consolidated financial statements filed with the
Securities and Exchange Commission on Form 10-K.
Earnings Per Share
Net income per common share has been computed in accordance with Statement
of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share." Basic
Earnings Per Share is computed by dividing net income by the weighted average
number of shares of common stock outstanding during the year. Diluted Earnings
Per Share is computed using the average share price for the period in all cases
when applying the treasury stock method to potentially dilutive outstanding
options.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results may differ from those estimates.
Pre-opening Costs
Pre-opening costs, primarily training related costs, incurred in connection
with the commencement of each restaurant's operations, are expensed as incurred.
7
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
2. Accrued Liabilities
Accrued liabilities are comprised of the following:
June 30, 2000 December 31, 1999
------------- -----------------
Payroll and related costs $ 5,817,981 $ 4,145,220
Taxes, other than payroll and income taxes 7,321,620 6,294,954
Store closings and special charges 1,177,497 1,705,027
Deferred and state income taxes 2,470,593 1,198,998
Other 10,117,104 6,427,937
----------- -----------
$26,904,795 $19,772,136
=========== ===========
3. Debt
The Company has a $200.0 million credit facility from a syndicate of banks
which was renewed and increased in June 2000 and matures in June 2003, and is
available for expansion, acquisitions, and other general corporate purposes.
Interest on the credit facility is generally payable quarterly at LIBOR or the
bank's base rate plus a financing spread (aggregating 9.02% at June 30, 2000).
The credit facility is governed by certain financial covenants, including
minimum tangible net worth, a maximum leverage ratio and a minimum fixed charge
coverage ratio, and is secured by the common stock of the Company's wholly owned
subsidiaries. The Company's financing spread is presently 2.25% for Libor, and
0.50% for base rate borrowings, and may be decreased or increased by 25
basis points as the Company's leverage ratio decreases or increases over pre-
determined percentages.
4. Stockholders' Equity
In April 2000, the Company's Board of Directors authorized a renewal of
the Company's open market stock buy back program for $36 million. The costs
associated with the purchase of treasury stock are recorded in the
stockholders' equity accounts on a pro-rata basis.
The Company authorized a $0.10 per share annual dividend for 2000 to be
declared and payable quarterly to stockholders.
In February 2000, the Company announced the signing of a definitive merger
agreement to acquire another restaurant company. The merger agreement was
subsequently cancelled in April 2000, and the associated costs were expensed in
the second quarter of 2000 as a special charge.
8
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
A reconciliation of the amounts used to compute net income per common
share - diluted is as follows:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
<S> <C> <C> <C> <C>
2000 1999 2000 1999
----------- ----------- ----------- -----------
Net Income $ 6,277,677 $ 7,068,112 $ 9,300,099 $ 7,306,814
=========== =========== =========== ===========
Weighted Average Common Shares Outstanding 24,100,000 27,600,000 24,500,000 28,650,000
Dilutive Common Stock Equivalents -- Stock Options 200,000 100,000 150,000 100,000
----------- ----------- ----------- -----------
Weighted Average Common and Common Equivalent
Shares Outstanding -- Diluted 24,300,000 27,700,000 24,650,000 28,750,000
=========== =========== =========== ===========
Net Income Per Share -- Diluted $ 0.26 $ 0.26 $ 0.38 $ 0.25
=========== =========== =========== ===========
Net Income Per Share, Before Special Charge $ 0.31 $ 0.24 $ 0.43 $ 0.32
=========== =========== =========== ===========
</TABLE>
5. Contingencies
Class Action Litigation
Class action lawsuits were filed in June and July of 1999 in the United
States District Court for the Southern District of Texas, Houston Division
against the Company and its executive officers, directors, and underwriters that
participated in the Company's offering of Common Stock in March 1998. The
plaintiffs in these actions seek unspecified monetary damages. Although the
ultimate outcome of this matter cannot be determined at this time, the Company
believes these claims are without merit and intends to defend these claims
vigorously.
General Litigation
The Company is subject to other legal proceedings and claims that arise in
the ordinary course of business. Management does not believe that the outcome of
any of those matters will have a material adverse effect on the Company's
financial position, results of operations or cash flows.
9
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Introduction
The Company owns and operates full-service, casual dining seafood
restaurants. As of June 30, 2000, the Company operated 160 restaurants. In
addition, the Company operates three limited-menu take-out service units.
In February 2000, the Company announced it had entered into a merger
agreement to acquire all of the outstanding shares of Rainforest Cafe, Inc. The
merger agreement was subsequently cancelled in April 2000, and the associated
costs were expensed in the second quarter of 2000 as a special charge.
The Company's operations may be impacted by changes in federal and state
taxes and other federal and state governmental policies which include many
possible factors such as the level of minimum wages, the deductibility of
business and entertainment expenses, levels of disposable income and national
and regional economic growth.
The restaurant industry is intensely competitive and is affected by changes
in consumer tastes and by national, regional, and local economic conditions and
demographic trends. The performance of individual restaurants, including new
restaurants the Company may open or acquire, may be affected by factors such as
traffic patterns, demographic considerations, weather conditions, and the type,
number, and location of competing restaurants. The Company has many well-
established competitors with greater financial resources and longer histories of
operation than the Company, including competitors already established in regions
where the Company is planning to expand, as well as competitors planning to
expand in the same regions or into regions where the Company currently operates.
The Company faces significant competition from mid-priced, full-service, casual
dining restaurants offering seafood and other types and varieties of cuisine.
The Company's competitors include national, regional, and local chains as well
as local owner-operated restaurants. The Company also competes with other
restaurants and retail establishments for restaurant sites.
10
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
This 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 safe harbors created thereby. Stockholders are cautioned that all forward-
looking statements involve risks and uncertainty, including without limitation,
the ability of the Company to continue its expansion strategy, ability to make
projected capital expenditures, as well as general market conditions,
competition, and pricing. All statements, other than statements of historical
facts, included or incorporated by reference in this report that address
activities, events or developments that the Company expects or anticipates will
or may occur in the future, including such things as future capital expenditures
(including the amount and nature thereof), business strategy and measures to
implement such strategy, competitive strengths, goals, expansion and growth of
the Company's business and operations, plans, references to future success as
well as other statements which include words such as "anticipate," "believe,"
"plan," "estimate," "expect," and "intend" and other similar expressions
constitute forward-looking statements. 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. Stockholders are
referred to the full discussion of risks and uncertainties associated with
forward-looking statements contained in the Company's Form 10-K filed with the
Securities and Exchange Commission for the fiscal year ended December 31, 1999.
11
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
RESULTS OF OPERATIONS
Restaurant Profitability
The following table sets forth the percentage relationship to revenues of
certain operating data for the periods indicated:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ------------------
2000 1999 2000 1999
----- ----- ----- -----
Revenues 100.0% 100.0% 100.0% 100.0%
Cost of sales 30.6 31.3 30.7 31.3
Restaurant labor 27.3 28.1 27.9 28.9
Other restaurant operating expenses 22.7 22.5 23.1 23.2
----- ----- ----- -----
Restaurant level profit /(1)/ 19.4% 18.1% 18.3% 16.6%
===== ===== ===== =====
------------
(1) Excludes depreciation, amortization and pre-opening expenses.
Three Months Ended June 30, 2000 Compared to the Three Months Ended June 30,
1999
Revenues increased $10,434,976, or 8.4%, from $123,607,013 to $134,041,989
for the three months ended June 30, 2000, compared to the three months ended
June 30, 1999. The increase in revenues was primarily attributable to revenues
from new restaurant openings. There was a nominal change in same store sales and
average weekly sales for the three months ended June 30, 2000, compared to the
same period in 1999.
As a primary result of increased revenues, cost of sales increased
$2,297,665, or 5.9%, from $38,697,215 to $40,994,880 in the three months ended
June 30, 2000, compared to the same period in the prior year. Cost of sales as
a percentage of revenues for the three months ended June 30, 2000 decreased to
30.6%, from 31.3% in 1999. The decrease in cost of sales as a percentage of
revenues reflects increased efficiencies and favorable product costs in 2000.
Restaurant labor expenses increased $1,796,713 or 5.2%, from $34,756,632 to
$36,553,345 in the three months ended June 30, 2000, compared to the same period
in the prior year. Restaurant labor expenses as a percentage of revenues for
the three months ended June 30, 2000 decreased to 27.3% from 28.1%. The
decrease in restaurant labor expenses is primarily the result of a decline in
hourly labor expenses.
12
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
Other restaurant operating expenses increased $2,616,862, or 9.4%, from
$27,799,256 to $30,416,118 in the three months ended June 30, 2000, compared to
the same period in the prior year, primarily as a result of increased revenues.
Such expenses increased as a percentage of revenues to 22.7% in 2000 from 22.5%
in 1999, primarily due to higher utility costs.
Depreciation and amortization expense increased $779,015, or 14.2%, from
$5,467,598 to $6,246,613 in the three months ended June 30, 2000, compared to
the same period in the prior year. The increases are primarily due to the
addition of new facilities.
General and administrative expenses increased $97,868, or 1.7%, from
$5,905,486 to $6,003,354 in the three months ended June 30, 2000, compared to
the same period in the prior year, and decreased as a percentage of revenues to
4.5% from 4.8%. The dollar increase resulted primarily from increased
personnel to support the Company's operations.
Pre-opening expenses in the three months ended June 30, 2000 were $817,606
as compared to $765,334 in the three months ended June 30, 1999. The Company
opened six units during the three months ended June 30, 2000.
The special charge of $2,000,000 ($1,310,000 net of tax) for the three
months ended June 30, 2000, was incurred in connection with the termination of a
proposed acquisition. The special credit of $730,000 for the three months ended
June 30, 1999 represented the reversal (income) of estimated costs related to
favorably settling lease obligations of certain closed stores.
The increase in net interest expense in the three months ended June 30,
2000 as compared to the same period in the prior year, is attributable to
increased borrowings for capital expenditures, working capital and treasury
stock purchases, and increases in the weighted average borrowing rates under the
Company's credit facilities. The change in other income in the three months
ended June 30, 2000, as compared to the same period in the prior year, is not
deemed significant.
Provision for income taxes decreased by $399,008 from $3,705,570 in 1999 to
$3,306,562 in 2000 primarily due to the change in the Company's income. The
provision for income taxes as a percentage of income before income taxes
remained constant at 34.5%.
13
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
Six Months Ended June 30, 2000 Compared to the Six Months Ended June 30, 1999
Revenues increased $20,120,584, or 8.9%, from $224,872,683 to $244,993,267
for the six months ended June 30, 2000, compared to the six months ended June
30, 1999. The increase in revenues was primarily attributable to revenues from
new restaurant openings. There was a nominal change in same store sales and
average weekly sales for the six months ended June 30, 2000 compared to the same
period in 1999.
As a primary result of increased revenues, cost of sales increased
$4,886,719, or 6.9%, from $70,389,942 to $75,276,661 in the six months ended
June 30, 2000, compared to the same period in the prior year. Cost of sales as
a percentage of revenues for the six months ended June 30, 2000 decreased to
30.7%, from 31.3% in 1999. The decrease in cost of sales as a percentage of
revenue reflects increased efficiencies and favorable product costs in 2000.
Restaurant labor expenses increased $3,318,302, or 5.1%, from $64,918,070
to $68,236,372 in the six months ended June 30, 2000, compared to the same
period in the prior year. Restaurant labor expenses as a percentage of revenues
for the six months ended June 30, 2000 decreased to 27.9% from 28.9%. The
decrease in restaurant labor expenses is primarily the result of a decline in
hourly labor expenses.
Other restaurant operating expenses increased $4,466,808, or 8.6%, from
$52,129,676 to $56,596,484 in the six months ended June 30, 2000, compared to
the same period in the prior year, as a result of increased revenues. Such
expenses decreased as a percentage of revenues to 23.1% in 2000 from 23.2% in
1999 due to improved cost management offset by higher utility costs.
Depreciation and amortization expense increased $1,882,766, or 17.6%, from
$10,709,623 to $12,592,389 in the six months ended June 30, 2000, compared to
the same period in the prior year. The dollar increase was primarily due to the
addition of new facilities.
General and administrative expenses increased $1,099,006, or 10.4%, from
$10,545,287 to $11,644,293 in the six months ended June 30, 2000, compared to
the same period in the prior year. The dollar increase resulted primarily from
increased personnel to support the Company's operations.
Pre-opening expenses in 2000 were $1,770,497 as compared to $1,806,746 in
1999. The Company opened 11 units during the six months ended June 30, 2000.
14
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
The special charge of $2,000,000 ($1,310,000 net of tax) in 2000 was
incurred in connection with the termination of a proposed acquisition. The
special charge of $2,945,000 in 1999 represents the net of a $730,000 reversal
(income) of estimated costs related to favorably settling lease obligations of
certain closed stores recorded in the second quarter of 1999, and $3,675,000 of
expenses incurred related to an abandoned merger transaction during the first
quarter of 1999.
The increase in net interest expense in the six months ended June 30, 2000,
as compared to the same period in the prior year, is primarily attributable to
increased borrowings for capital expenditures, working capital, and treasury
stock purchases, and increases in the weighted average borrowing rates under the
Company's credit facilities. The change in other income is not deemed
significant.
Provision for income taxes increased by $1,067,226 from $3,831,299 in 1999
to $4,898,525 in 2000 primarily due to the change in the Company's income. The
provision for income taxes as a percentage of income before income taxes
remained constant.
Liquidity and Capital Resources
For the six months ended June 30, 2000 the capital expenditures of the
Company were approximately $43.2 million, and the Company repurchased $10.6
million of common stock which were funded out of existing cash balances, cash
flow from operations and borrowings.
The Company has a $200.0 million credit facility from a syndicate of banks
which expires in June 2003, and is available for expansion, acquisitions and
general corporate purposes. At June 30, 2000, the Company had $83.0 million
outstanding under this credit facility at an interest rate of 9.02% and cash
equivalent balances approximating $10.7 million.
The Company's current development plans are to open 12 to 15 restaurants
during each of 2000 and 2001, eleven of which were open as of June 30, 2000. The
Company, from time to time, reviews opportunities for investment in the
hospitality, entertainment, food service management and other industries. The
Company's exercise of any such investment opportunity may impact the Company's
development plans and capital expenditures.
The Company is in the process of constructing a multi-story office building
for the Company's corporate headquarters, meeting and training facilities and a
research and development test kitchen. Capital expenditures related to the
office building are anticipated to be $15 million.
In April 2000, the Company's Board of Directors authorized a renewal of
the Company's stock buy back program for $36.0 million.
In April 2000, the Company declared its first quarterly dividend of
$0.025 payable to shareholders on May 3, 2000.
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LANDRY'S SEAFOOD RESTAURANTS, INC.
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. The Company
has and continues to open restaurants in highly seasonal tourist markets and has
further noted that the Joe's Crab Shack concept restaurants tend to experience
even greater seasonality and sensitivity to weather. The Company anticipates a
decline in revenues from the initial ("honeymoon") volumes of new units.
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 restaurant labor costs, including expected future
increases in federal minimum wages, interest rates, land and construction costs
could adversely affect the Company's profitability and ability to expand.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk primarily related to potential
adverse changes in interest rates as discussed below. Management is actively
involved in monitoring exposure to market risk and continues to develop and
utilize appropriate risk management techniques. The Company is not exposed to
any other significant risks from the use of derivative financial instruments.
Management does not use derivative financial instruments for trading or to
speculate on changes in interest rates or commodity prices.
Interest Rate Risk
Total debt at June 30, 2000, included $83,000,000 of floating-rate debt
attributed to bank credit facility borrowings at an average interest rate of
9.02%. As a result, the Company's annual interest cost in 2000 will fluctuate
based on short-term interest rates. The impact on annual cash flow of a ten
percent change in the floating rate (approximately 90 basis points) would be
approximately $750,000 annually based on the floating rate debt outstanding at
June 30, 2000.
At June 30, 2000, the Company's floating-rate debt had a book value and a
fair market value of $83,000,000. The floating-rate debt will mature in June
2003.
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LANDRY'S SEAFOOD RESTAURANTS, INC.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Class Action Litigation
Class action lawsuits were filed in June and July of 1999 against the
Company and its executive officers, directors and underwriters that participated
in the Company's offering of Common Stock in March 1998, in the United States
District Court for the Southern District of Texas, Houston Division. The
plaintiffs in these actions seek unspecified monetary damages. Although the
ultimate outcome of this matter cannot be determined at this time, the Company
believes these claims are without merit and intends to defend these claims
vigorously.
General Litigation
The Company is subject to other legal proceedings and claims that arise in
the ordinary course of business. Management does not believe that the outcome
of any of those matters will have a material adverse effect on the Company's
financial position, results of operations or cash flows.
<TABLE>
<S> <C> <C>
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
(A) EXHIBITS --27. FINANCIAL DATA SCHEDULE
(B) REPORTS ON FORM 8-K
. THE COMPANY FILED A FORM 8-K ON JULY 12, 2000, ANNOUNCING A $200
MILLION CREDIT LINE WITH A SYNDICATE OF BANKS.
</TABLE>
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto 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: August 14, 2000
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