UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2001
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________________ to
______________________
Commission File Number: 1-15935
OUTBACK STEAKHOUSE, INC.(R)
(Exact name of registrant as specified in its charter)
_______________
DELAWARE 59-3061413
---------------- ----------------
(State or other (IRS Employer
jurisdiction of Identification No.)
incorporation or
organization)
2202 NORTH WESTSHORE BOULEVARD, 5TH 33607
FLOOR, TAMPA, FLORIDA
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(813) 282-1225
-------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
------ -----
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date. As of November 9, 2001, there were approximately
76,524,690 shares of Common Stock, $.01 par value outstanding.
1 of 28
OUTBACK STEAKHOUSE, INC.(R)
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
The accompanying unaudited consolidated financial
statements have been prepared by Outback Steakhouse, Inc.(R) 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.
2 of 28
OUTBACK STEAKHOUSE, INC.(R)
CONSOLIDATED BALANCE SHEETS
(in thousands)
September 30, December 31,
2001 2000
ASSETS (unaudited)
CURRENT ASSETS --------------- ---------------
Cash and cash equivalents... $ 67,513 $ 131,604
Inventories................. 31,716 27,871
Other current assets........ 27,565 22,572
--------------- ---------------
Total current assets........ 126,794 182,047
PROPERTY, FIXTURES AND EQUIPMENT, NET 776,298 693,975
INVESTMENTS IN AND ADVANCES TO
UNCONSOLIDATED AFFILIATES, NET 41,666 29,655
OTHER ASSETS........................ 150,009 116,858
--------------- ---------------
$1,094,767 $1,022,535
LIABILITIES AND STOCKHOLDERS' EQUITY =============== ===============
CURRENT LIABILITIES
Accounts payable............ $ 30,804 $ 37,162
Sales taxes payable......... 10,979 11,580
Accrued expenses............ 56,693 46,266
Unearned revenue............ 9,227 54,458
Income taxes payable........ 13,621
Current portion of
long-term debt............ 10,993 4,958
--------------- ---------------
Total current liabilities... 118,696 168,045
DEFERRED INCOME TAXES............... 15,504 14,382
LONG-TERM DEBT...................... 12,826 11,678
OTHER LONG-TERM LIABILITIES......... 24,875 4,000
--------------- ---------------
Total liabilities........... 171,901 198,105
INTEREST OF MINORITY PARTNERS IN --------------- ---------------
CONSOLIDATED PARTNERSHIPS... 19,251 16,840
STOCKHOLDERS' EQUITY --------------- ---------------
Common stock, $0.01 par value,
200,000 shares authorized; 78,514
and 78,514 shares issued; and 76,610
and 76,632 outstanding as of
September 30, 2001 and
December 31, 2000, respectively 785 785
Additional paid-in capital.. 218,124 214,541
Retained earnings........... 731,658 638,383
--------------- ---------------
950,567 853,709
Less treasury stock, 1,904 shares
and 1,882 shares at September 30,
2001 and December 31, 2000,
respectively, at cost....... (46,952) (46,119)
--------------- ---------------
Total stockholders' equity.. 903,615 807,590
--------------- ---------------
$ 1,094,767 $ 1,022,535
=============== ===============
See notes to unaudited consolidated financial statements.
3 of 28
OUTBACK STEAKHOUSE, INC.(R)
CONSOLIDATED STATEMENTS OF INCOME
(in thousands except per share data, unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2001 2000 2001 2000
REVENUES ---------- --------- ---------- ----------
Restaurant sales................ $ 524,360 $ 480,239 $1,575,323 $1,418,630
Other revenues.................. 4,685 4,863 13,819 12,889
--------- --------- ---------- ----------
TOTAL REVENUES .................. 529,045 485,102 1,589,142 1,431,519
COSTS AND EXPENSES: --------- --------- ---------- ----------
Cost of sales.................. 205,339 184,918 605,807 535,389
Labor & other related.......... 127,114 115,570 378,014 335,953
Other restaurant operating..... 107,122 91,986 313,813 268,987
Depreciation & amortization.... 17,529 14,436 50,318 42,463
General & administrative....... 18,835 18,306 58,575 56,439
Provision for impaired assets
and restaurant closings..... 2,047 2,047
Contribution for "Dine Out for
America".................... 7,000 7,000
Income from operations of
unconsolidated affiliates.. (1,108) (697) (3,086) (1,766)
--------- --------- ---------- ----------
Total costs and expenses. 483,878 424,519 1,412,488 1,237,465
INCOME FROM OPERATIONS........... 45,167 60,583 176,654 194,054
OTHER INCOME (EXPENSE), NET...... (608) 631 (1,568) 4
INTEREST INCOME (EXPENSE), NET... 885 1,223 2,879 3,523
INCOME BEFORE ELIMINATION OF --------- --------- ---------- ----------
MINORITY PARTNERS' INTEREST
AND INCOME TAXES......... 45,444 62,437 177,965 197,581
ELIMINATION OF MINORITY PARTNERS'
INTEREST................. 6,246 7,933 23,902 27,350
--------- --------- ---------- ----------
INCOME BEFORE PROVISION FOR INCOME
TAXES.................... 39,198 54,504 154,063 170,231
PROVISION FOR INCOME TAXES....... 13,798 19,121 54,230 60,784
--------- --------- ---------- ----------
NET INCOME....................... $ 25,400 $ 35,383 $ 99,833 $ 109,447
========= ========= ========== ==========
BASIC EARNINGS PER COMMON SHARE.. $ 0.33 $ 0.46 $ 1.30 $ 1.41
BASIC WEIGHTED AVERAGE NUMBER OF ========= ========= ========== ==========
COMMON SHARES OUTSTANDING 76,786 77,629 76,622 77,743
========= ========= ========== ==========
DILUTED EARNINGS PER COMMON SHARE $ 0.32 $ 0.45 $ 1.28 $ 1.38
DILUTED WEIGHTED AVERAGE NUMBER OF ========= ========= ========== ==========
COMMON SHARES OUTSTANDING 78,524 79,036 78,182 79,593
========= ========= ========== ==========
See notes to unaudited consolidated financial statements.
4 of 28
OUTBACK STEAKHOUSE, INC.(R)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
Nine Months Ended
September 30,
2001 2000
Cash flows from operating activities: -------- --------
Net income............................. $ 99,833 $ 109,447
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation......................... 45,528 38,745
Amortization......................... 4,790 3,718
Provision for impaired assets and
restaurant closings.................. 2,047
Minority partners' interest in
consolidated partnerships' income. 23,902 27,350
Income from unconsolidated affiliates (3,086) (1,766)
Change in assets and liabilities:
(Increase) decrease in inventories (3,845) 3,931
(Increase) decrease in other
current assets.................. (3,493) 132
Decrease (increase) in other assets 1,288 (19,638)
Increase in accounts payable,
sales taxes payable, and accrued
expenses........................ 2,647 8,116
Decrease in unearned revenue...... (45,231) (35,468)
(Decrease) increase in income
taxes payable................... (13,621) 3,769
Increase in deferred income taxes. 1,122 5,780
Decrease in other long-term
liabilities..................... (1,125) (500)
-------- --------
Net cash provided by operating
activities..................... 110,756 143,616
-------- --------
Cash flows used in investing activities:
Capital expenditures................ (143,645) (96,762)
Change in investments in and advances to
unconsolidated affiliates........ (8,925) (7,858)
-------- --------
Net cash used in investing
activities..................... (152,570) (104,620)
Cash flows from financing activities: -------- --------
Proceeds from issuance of common stock 9,944
Proceeds from issuance of long-term debt 16,758 10,000
Proceeds from minority partners'
contributions..................... 5,781 1,000
Distributions to minority partners.. (27,272) (28,755)
Repayments of long-term debt........ (9,575) (1,579)
Payments for purchase of treasury
stock............................. (23,313) (34,107)
Proceeds from reissuance of treasury
stock............................. 15,344 219
-------- --------
Net cash used in financing
activities..................... (22,277) (43,278)
-------- --------
Net (decrease) in cash and cash
equivalents......................... (64,091) (4,282)
Cash and cash equivalents at beginning
of period........................... 131,604 92,623
-------- --------
Cash and cash equivalents at end of
period.............................. $ 67,513 $ 88,341
======= =======
Supplemental disclosures of cash flow
information:
Cash paid for interest.............. $ 582 $ 30
Cash paid for income taxes.......... $ 69,598 $ 45,548
Supplemental disclosures of non-cash
items:
Assets/liabilities of businesses
transferred under
contractual arrangements.......... $ 22,000
Purchase of minority partners'
interest.......................... $ 4,161 $ 3,760
See notes to unaudited consolidated financial statements.
5 of 28
OUTBACK STEAKHOUSE, INC.(R)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Basis of Presentation
The accompanying unaudited consolidated financial
statements have been prepared by Outback Steakhouse, Inc.(R)
(the "Company") pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, they do not
include all 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.
Certain amounts shown in the 2000 consolidated financial
statements have been reclassified to conform to the 2001
presentation. These reclassifications did not have an effect on
total assets, total liabilities, stockholders' equity or net
income.
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, 2000 consolidated balance sheet has been
derived from the audited consolidated 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
2000 Annual Report.
2. Other Current Assets
Other current assets consisted of the following (in thousands):
September 30, December 31,
2001 2000
(unaudited)
--------- ----------
Deposits (including income tax
deposits)....................... $ 4,452 $ 1,543
Accounts receivable............... 5,889 5,549
Accounts receivable franchisees... 4,479 5,100
Prepaid expenses.................. 9,832 8,315
Other current assets.............. 2,913 2,065
----------- ----------
$ 27,565 $ 22,572
======= =========
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OUTBACK STEAKHOUSE, INC.(R)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3. Property, Fixtures and Equipment, Net
Property, fixtures and equipment consisted of the
following (in thousands):
September 30, December 31,
2001 2000
(unaudited)
---------- ------------
Land...................... $ 153,533 $ 135,710
Buildings & building
improvements............ 362,639 322,078
Furniture & fixtures...... 94,273 82,347
Equipment................. 224,210 212,713
Leasehold improvements.... 175,856 139,426
Construction in progress.. 38,691 32,360
Accumulated depreciation.. (272,904) (230,659)
---------- -------------
$ 776,298 $ 693,975
======= =======
4. Other Assets
Other assets consisted of the following (in thousands):
September 30, December 31,
2001 2000
(unaudited)
------------ ----------
Intangible assets, net (including
liquor licenses)............... $ 81,702 $ 77,329
Other assets..................... 33,432 39,529
Assets of business transferred under
contractual arrangement........ 15,500
Deferred license fee............. 19,375
--------- --------
$ 150,009 $116,858
======= =======
In January 2001, the Company entered into a ten year licensing
agreement with an entity owned by minority interest owners of
certain non-restaurant operations (referred to in some Company
literature as Outback Sports). The licensing agreement
transferred the right and license to use certain assets of these
non-restaurant operations. License fees payable over the term of
the agreement total approximately $22,000,000, of which
$20,875,000 is outstanding and consists of $19,375,000 included
in "Other Assets" and the current portion of $1,500,000 included
in "Other Current Assets". The net book value of these assets
was approximately $15,500,000 and was reclassified from the line
item entitled "Property, Fixtures and Equipment" to "Other
Assets". The corresponding long-term liability is included in
the line item entitled "Other Long Term Liabilities". The
Company has deferred the gain associated with the transaction
until such time as the amounts due under the licensing agreement
are realized. See Note 7 of Notes to Unaudited Consolidated
Financial Statements. 7 of 28
OUTBACK STEAKHOUSE, INC.(R)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
5. Long-term Debt
Long-term debt consisted of the following (in thousands):
September 30, December 31,
2001 2000
(unaudited)
------------ ----------
Revolving line of credit, interest at
3.67% and 7.16% at September 30, 2001
and December 31, 2000, respectively.... $ 10,000 $ 10,000
Other notes payable, uncollateralized,
Interest rates ranging from 5.63% to
7.99%.................................. 13,819 6,623
Notes payable to corporation,
collateralized
by real estate, interest at 9.0%....... 13
--------- ----------
23,819 16,636
Less current portion..................... 10,993 4,958
--------- ----------
Long-term debt........................... $ 12,826 $ 11,678
======= ======
The Company has an uncollateralized revolving line of
credit that permits borrowing up to a maximum of $125,000,000 at
rates ranging from 57.5 to 95.0 basis points over the 30, 60, 90
or 180 day London Interbank Offered Rate ("LIBOR") (2.55% to
2.66% at September 30, 2001 and 6.20% to 6.56% at December 31,
2000). At September 30, 2001 and December 31, 2000 the unused
portion of the revolving line of credit was $115,000,000. The
line matures in December 2004.
The Company has a $15,000,000 uncollateralized line of
credit bearing interest at rates ranging from 57.5 to 95.0 basis
points over LIBOR. Approximately $4,350,000 and $3,110,000 of the
line of credit was committed for the issuance of letters of credit at
September 30, 2001 and December 31, 2000, respectively. The
remaining $10,650,000 is available to the Company.
The Company has a $10,000,000 uncollateralized line of
credit to support the Company's international operations. As of
September 30, 2001 and December 31, 2000, the outstanding
balance was approximately $9,640,000 and $4,323,000,
respectively.
The Company is the guarantor of an uncollateralized line of
credit, maturing in December 2004, that permits borrowing of up
to a maximum of $35,000,000 for one of its franchisees. At
September 30, 2001 and December 31, 2000, the balance on the
line of credit was approximately $24,754,000 and $22,470,000,
respectively.
The Company is the guarantor of an uncollateralized line of
credit, maturing December 2003, that permits borrowing of up to
a maximum of $12,000,000 for one of its joint venture partners.
At September 30, 2001 and December 31, 2000, the outstanding
balance was approximately $12,000,000 and $6,552,000,
respectively.
The Company is the guarantor of bank loans made to certain
franchisees. At September 30, 2001 and December 31, 2000, the
outstanding balance on the loans was approximately $491,000 and
$670,000, respectively.
8 of 28
OUTBACK STEAKHOUSE, INC.(R)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
5. Long-term Debt (continued)
The Company is the guarantor of up to approximately
$9,445,000 of a $68,000,000 note for an unconsolidated affiliate
in which the Company has a 22.22% equity interest. At September
30, 2001 and December 31, 2000, the outstanding balance on the
note was approximately $68,000,000 and $65,000,000,
respectively.
See "Liquidity and Capital Resources" in Item 2,
"Management's Discussion and Analysis of Financial Condition and
Results of Operations."
6. Accrued Expenses
Accrued expenses consisted of the following (in thousands):
September 30, December 31,
2001 2000
(unaudited)
--------- --------
Accrued payroll and other
compensation.............. $ 15,587 $ 15,722
Accrued insurance........... 12,203 11,012
Accrued property taxes...... 8,334 6,129
Other accrued expenses...... 20,569 13,403
------ -------
$ 56,693 $ 46,266
====== =======
7. Other Long Term Liabilities
Other long term liabilities consisted of the following (in thousands):
September 30, December 31,
2001 2000
(unaudited)
---------------- --------------
Accrued insurance......... $ 4,000 $ 4,000
Other deferred liability.. 20,875
----------- -----------
$ 24,875 $ 4,000
======= =======
In January 2001, the Company entered into a ten year
licensing agreement with an entity owned by minority interest
owners of certain non-restaurant operations. The licensing
agreement transferred the right and license to use certain
assets of these non-restaurant operations. License fees payable
over the term of the agreement total approximately $22,000,000
of which $20,875,000 is outstanding. The Company has deferred
the gain associated with the transaction until such time as the
amounts due under the licensing agreement are realized. The
corresponding long-term asset is included in the line item
entitled "Other Assets". See Note 4 of Notes to Unaudited
Consolidated Financial Statements.
9 of 28
OUTBACK STEAKHOUSE, INC.(R)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
8. Recently Issued Financial Accounting Standards
"Business Combinations" and "Goodwill and Other Intangible Assets"
On June 30, 2001, the Financial Accounting Standards Board
finalized FAS 141, "Business Combinations", and FAS 142,
"Goodwill and Other Intangible Assets". FAS 141 requires all
business combinations initiated after June 30, 2001, to be
accounted for using the purchase method of accounting. With the
adoption of FAS 142 effective January 1, 2002, goodwill is no
longer subject to amortization. Rather, goodwill will be subject
to at least an annual assessment for impairment by applying a
fair-value-based test. Under the new rules, an acquired
intangible asset should be separately recognized if the benefit
of the intangible asset is obtained through contractual or other
legal rights, or if the intangible asset can be sold,
transferred, licensed, rented, or exchanged regardless of the
acquirer's intent to do so. These intangible assets will be
required to be amortized over their useful lives.
As of September 30, 2001, the Company had approximately
$74,000,000 of goodwill, of which is net of accumulated
amortization of $14,400,000. Adoption of FAS 142 effective
January 1, 2002 is estimated to result in the elimination of approximately
$5,000,000 to $5,500,000 of annual amortization, subject to the
identification of separately recognized intangibles which would
continue to be amortized under the new rules. The Company is
beginning the process of performing the initial impairment
testing of all goodwill and has not yet quantified any initial
impairment charge that might result upon adoption of FAS 142.
9. Subsequent Events
On September 26, 2001, the Company announced that it was
participating in a fund raising event on October 11, 2001, with
100% of that day's sales proceeds benefiting the victims and
families of the victims of the terrorist attacks of September
11, 2001. On October 11, 2001, the Company participated in the
"Dine Out for America" event and the Company's sales for that
day were approximately $7,000,000. The Company has recorded a
pretax charge to earnings of $7,000,000 for the three and nine
month periods ended September 30, 2001.
Subsequent to September 30, 2001, the Company entered into
an agreement to develop and operate Bonefish Grill restaurants.
Under the terms of the Bonefish Grill agreement, the Company
purchased the system for approximately $1,500,000. In addition,
the interest in three existing Bonefish Grills is being
contributed to the partnership and in exchange the Company will
contribute the first $7,500,000 of future development costs.
10 of 28
OUTBACK STEAKHOUSE, INC.(R)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The following table sets forth, for the periods indicated,
(i) the percentages which the items in the Company's
Consolidated Statements of Income bear to total revenues, or
restaurant sales as indicated, and (ii) selected operating data:
Three Months Nine Months
Ended Ended
September 30, September 30,
-------------- --------------
2001 2000 2001 2000
REVENUES ------ ----- ------ ------
Restaurant sales............ 99.1% 99.0% 99.1% 99.1%
Other revenues.............. 0.9 1.0 0.9 0.9
----- ------ ----- ------
TOTAL REVENUES.............. 100.0 100.0 100.0 100.0
COSTS AND EXPENSES:
Cost of sales (1)........... 39.2 38.5 38.5 37.7
Labor & other related (1). 24.2 24.1 24.0 23.7
Other restaurant operating (1) 20.4 19.2 19.9 19.0
Depreciation & amortization 3.3 3.0 3.2 3.0
General & administrative.. 3.6 3.8 3.7 3.9
Provision for impaired assets
and restaurant closings. 0.4 0.1
Contribution for "Dine Out
for America"............ 1.3 0.4
Income from operations of
unconsolidated affiliates (0.2) (0.1) (0.2) (0.1)
Total costs and expenses 91.5 87.5 88.9 86.4
----- ------ ----- ------
INCOME FROM OPERATIONS...... 8.5 12.5 11.1 13.6
OTHER INCOME (EXPENSE), NET. (0.1) 0.1 (0.1) *
INTEREST INCOME............. 0.2 0.3 0.2 0.2
----- ------ ----- ------
INCOME BEFORE ELIMINATION OF
MINORITY PARTNERS' INTEREST
AND INCOME TAXES.......... 8.6 12.9 11.2 13.8
ELIMINATION OF MINORITY
PARTNERS' INTEREST......... 1.2 1.6 1.5 1.9
----- ------ ----- ------
INCOME BEFORE PROVISION FOR
INCOME TAXES.............. 7.4 11.2 9.7 11.9
PROVISION FOR INCOME TAXES.. 2.6 3.9 3.4 4.3
----- ------ ----- ------
NET INCOME.................. 4.8% 7.3% 6.3% 7.6%
===== ====== ===== ======
(*)Percentages are less than 1/10 of one percent of total revenues.
(1) As a percentage of restaurant sales.
11 of 28
Results of Operations (continued)
Three Months Nine Months
Ended Ended
September 30, September 30,
-------------- --------------
2001 2000 2001 2000
------ ------ ------ ------
System-wide sales (millions of dollars):
Outback Steakhouse restaurants
Company owned and consolidated
affiliates............... $461 $432 $1,390 $1,278
Domestic franchised and joint
venture.................. 91 81 272 239
International franchised and
joint venture............ 21 19 61 54
------ ------ ------ ------
Total...................... 573 532 1,723 1,571
------ ------ ------ ------
Carrabba's Italian Grills
Company owned and consolidated
affiliates............... 51 42 149 127
Joint venture.............. 18 13 52 35
------ ------ ------ ------
Total...................... 69 55 201 162
------ ------ ------ ------
Other restaurants
Company owned and consolidated
affiliates............... 12 6 36 13
Joint venture.............. 1 1
------ ------ ------ ------
Total...................... 13 6 37 13
------ ------ ------ ------
System-wide total............ $655 $593 $1,961 $1,746
====== ====== ====== ======
12 of 28
Results of Operations (continued)
September 30,
------------
2001 2000
---- ------
Number of restaurants (at end of the period):
Outback Steakhouses
Company owned and consolidated affiliates.. 556 508
Domestic franchised and joint venture...... 111 101
International franchised and joint venture. 47 37
--- ---
Total...................................... 714 646
--- ---
Carrabba's Italian Grills
Company owned and consolidated affiliates.. 70 60
Joint venture.............................. 24 18
--- ---
Total...................................... 94 78
Fleming's Prime Steakhouse and Wine Bars --- ---
Company owned and consolidated affiliates.. 7 3
Roy's --- ---
Company owned and consolidated affiliates.. 8 2
Joint venture.............................. 1
--- ---
Total...................................... 9 2
Zazarac --- ---
Company owned.............................. 1
Lee Roy Selmon's --- ---
Company owned.............................. 1
--- ---
System-wide total............................ 825 730
=== ===
13 of 28
Three months ended September 30, 2001 and 2000
Revenues. Total revenues increased by 9.1% to $529,045,000
during the third quarter of 2001 as compared with $485,102,000
in the same period in 2000. The increase was attributable to the
opening of new restaurants after September 30, 2000, menu price
increases at Outback Steakhouse and Carrabba's Italian Grills
after September 2000, and per store revenue increase during the
quarter of 5.6% at Carrabba's Italian Grills, partially offset by
per store revenue decrease of 0.7% at Outback Steakhouse. The following
table depicts additional activities that influenced the period
to period changes in revenues:
Three Months Ended
September 30,
----------------
2001 2000
--------- ---------
Average unit volumes (weekly):
Outback Steakhouses............. $63,946 $64,488
Carrabba's Italian Grills....... 57,771 54,700
Per person check averages:
Outback Steakhouses............. $18.30 $17.93
Carrabba's Italian Grills....... 19.88 19.49
Year to year percentage change:
Same-store sales:
Outback Steakhouses........... (0.7)% 7.0%
Carrabba's Italian Grills..... 5.6% 10.5%
Same-store customer counts:
Outback Steakhouses........... (2.3)% 3.9%
Carrabba's Italian Grills..... 3.6% 5.3%
Costs and expenses. Costs of sales, consisting of food and
beverage costs, as a percentage of restaurant sales, increased
in the third quarter of 2001 to 39.2% of restaurant sales as
compared with 38.5% in the same period in 2000. The increase was
attributable to commodity cost increases in produce and dairy,
particularly butter, partially offset by higher menu prices and
favorable alcoholic beverage costs.
Labor and other related expenses include all direct and
indirect labor costs incurred in restaurant operations. Labor
expenses increased as a percentage of restaurant sales by 0.1%
to 24.2% in the third quarter of 2001 as compared with 24.1% in
the same period in 2000. The increase resulted from higher
hourly wage rates, a new hourly employee bonus program and
enhanced employee health insurance benefits. The increase was
partially offset by higher average unit volumes at Carrabba's
Italian Grills.
14 of 28
Other restaurant operating expenses include all other unit-
level operating costs, the major components of which are
operating supplies, rent, repairs and maintenance, advertising
expenses, utilities, pre-opening costs, and other occupancy
costs. A substantial portion of these expenses are fixed or
indirectly variable. These costs increased by 1.2% of restaurant
sales to 20.4% in the third quarter of 2001, as compared with
19.2% in the same period in 2000. The increase was attributable
to higher utility and natural gas prices, expenses associated
with opening new restaurant formats and liability insurance
costs. The increase was also attributable to an increase in the
proportion of new format restaurants (Fleming's, Roy's and
Selmon's) and international Outback Steakhouses in operation
which have higher average restaurant operating expenses than
domestic Outback Steakhouses and Carrabba's Italian Grills. The
increase was partially offset by lower advertising expense and
higher average unit volumes for Carrabba's Italian Grills which
reduced the fixed and indirectly variable costs as a percentage
of restaurant sales.
Depreciation and amortization costs increased by 0.3% of
total revenues to 3.3% in the third quarter of 2001, as compared
with 3.0% in the same period in 2000. The increase resulted
primarily from additional depreciation related to new unit
development, "Take-away" room additions, new restaurant formats
which have higher average construction costs than Outback
Steakhouse and Carrabba's Italian Grills and additional
amortization of goodwill associated with the purchase of
ownership interests from certain minority partners, primarily
area operating partners.
General and administrative costs increased by $529,000 to
$18,835,000 in the third quarter of 2001 compared with
$18,306,000 during the same period in 2000. This increase
resulted from an increase in overall administrative costs
associated with operating additional domestic and international
Outback Steakhouses, Carrabba's Italian Grills, Fleming's Prime
Steakhouses and Roy's as well as costs associated with the
development of new restaurant formats and other affiliated
businesses.
Provision for impaired assets and restaurant closings. In
the third quarter of 2001, the Company recorded a pretax charge
to earnings of $2,047,000 which is primarily related to the
costs associated with the closing of the Company's two Zazarac
restaurants.
Contribution for "Dine Out for America". This line item
represents the Company's commitment, announced on September 26,
2001, to contribute 100% of it sales proceeds from Thursday
October 11, 2001 to the victims and families of the victims of
the terrorist attacks of September 11, 2001. The Company's
sales on October 11, 2001 for the "Dine Out for America" fund
raising event totaled approximately $7,000,000 and accordingly
the Company has recorded a pretax charge to earnings of
$7,000,000 during three months ended September 30, 2001.
Income from operations of unconsolidated affiliates
represents the Company's portion of the income from Outback
Steakhouses and Carrabba's Italian Grills operated as
development joint ventures. Income from the development joint
ventures was $1,108,000 during the third quarter of 2001 as
compared with income of $697,000 during the same period in 2000.
This increase was attributable to additional stores operating as
development joint ventures in the third quarter of 2001 and to
an increase in average unit volumes.
15 of 28
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 decreased by $15,416,000, to $45,167,000,
in the third quarter of 2001 as compared with $60,583,000 in the
same period in 2000.
Other income (expense), net. Other income (expense)
includes the net of revenues and expenses from non-restaurant
operations. Net other expense was $608,000 during the third
quarter of 2001 as compared with net other income of $631,000 in
the same period in 2000. The increase in other expense resulted
from the elimination of the Company's interest in Outback Sports
(see Notes 4 and 7 of Notes to Consolidated Financial
Statements) and increased costs associated with other non-
restaurant operations during the third quarter of 2001.
Interest income (expense), net. Interest income was
$885,000 during the third quarter of 2001 as compared with
interest income of $1,223,000 in the same period in 2000. The
period to period change in interest income resulted from lower
average cash balances and lower interest rates on short term
investments during the third quarter of 2001 compared with the
same period in 2000.
Elimination of minority partners' interests. The allocation
of minority partners' income included in this line item
represents the 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 and the ownership interests in certain
other restaurants in which the Company is the majority owner.
As a percentage of revenues, these allocations were 1.2% and
1.6% during the quarters ended September 30, 2001 and 2000
respectively. The decrease in the ratio is the result of the
purchase of minority interests in 43 restaurants from area
operating partners after September 30, 2000, the decrease in
overall restaurant operating margins and the effect of the
performance of the new restaurant formats.
Provision for income taxes. The provision for income taxes
in the third quarter of both 2001 and 2000 reflected the
expected income taxes due at federal statutory rates and state
income tax rates, net of the federal benefit. The effective
income tax rate was 35.2% during the third quarter of 2001
and was 35.1% during the third quarter of 2000.
Net income and earnings per share. Net income for the third
quarter of 2001 was $25,400,000 as compared with $35,383,000 in
the same period in 2000. Basic earnings per share decreased to
$0.33 during the third quarter of 2001 as compared with $0.46
for the same period in 2000. Diluted earnings per share
decreased to $0.32 during the third quarter of 2001 as compared
with $0.45 for the same period in 2000.
16 of 28
Nine months ended September 30, 2001 and 2000
Revenues. Total revenues increased by 11.0% to
$1,589,142,000 during the first nine months of 2001 as compared
with $1,431,519,000 in the same period in 2000. The increase was
primarily attributable to the opening of new restaurants after
September 30, 2000, menu price increases at Outback Steakhouse
and Carrabba's Italian Grills and same store revenue increases
during the first nine months of 2001 of 0.7% and 6.9% for Outback
Steakhouse and Carrabba's Italian Grills, respectively. The following
table depicts additional activities that influenced the period to
period changes in revenues:
Nine Months Ended
September 30,
----------------
2001 2000
------- -------
Average unit volumes(weekly):
Outback Steakhouses............ $65,887 $65,250
Carrabba's Italian Grills...... 60,326 55,521
Per person check averages:
Outback Steakhouses............ $18.42 $17.81
Carrabba's Italian Grills...... 19.70 19.33
Year to year percentage change:
Same-store sales:
Outback Steakhouses......... 0.7% 7.0%
Carrabba's Italian Grills... 6.9% 11.6%
Same-store customer counts:
Outback Steakhouses......... (2.1)% 3.7%
Carrabba's Italian Grills... 5.2% 7.0%
Costs and expenses. Cost of sales as a percentage of
restaurant sales, increased by 0.8% to 38.5% in the first nine
months of 2001 as compared with 37.7% in the same period in
2000. The increase was attributable to increases in beef and
dairy costs, particularly butter, partially offset by higher
menu prices.
Labor and other related expenses increased as a percentage
of restaurant sales by 0.3% to 24.0% in the first nine months of
2001 as compared with 23.7% in the same period in 2000. The
increase resulted from higher hourly wage rates resulting from a
competitive labor market, a new hourly employee bonus program
and enhanced employee health insurance benefits. The increase
was partially offset by higher unit volumes at Outback
Steakhouse and Carrabba's Italian Grills.
Other restaurant operating expenses increased by 0.9% of
restaurant sales to 19.9% in the first nine months of 2001 as
compared with 19.0% in the same period in 2000. The increase was
attributable to higher utility and natural gas prices and
expenses associated with opening new restaurant formats. The
increase was also attributable to an increase in the proportion
of new format restaurants (Fleming's, Roy's, and Selmon's) and
international Outback Steakhouses in operation, which have
higher average restaurant operating expenses than domestic
Outback Steakhouses and Carrabba's Italian Grills. The increase
was partially offset by lower advertising expense and higher
average unit volumes for both Outback Steakhouse and Carrabba's
Italian Grills, which reduced the fixed and indirectly variable
costs as a percentage of restaurant sales.
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Depreciation and amortization costs increased by 0.2% of
total revenues to 3.2% in the first nine months of 2001, as
compared with 3.0% in the same period in 2000. The increase
resulted primarily from additional depreciation related to new
unit development, "Take-away" room additions, new restaurant
formats, which have higher average construction costs than
Outback Steakhouse and Carrabba's Italian Grills and additional
amortization of goodwill associated with the purchase of
ownership interests from certain minority partners, primarily
area operating partners.
General and administrative costs increased by $2,136,000 to
$58,575,000 during the first nine months of 2001 as compared
with $56,439,000 during the same period in 2000. This increase
resulted from an increase in overall administrative costs
associated with operating additional domestic and international
Outback Steakhouses, Carrabba's Italian Grills, Fleming's Prime
Steakhouses and Roy's as well as costs associated with the
development of new restaurants and other affiliated businesses.
Provision for impaired assets and restaurant closings. In
the third quarter of 2001, the Company recorded a pretax charge
to earnings of $2,047,000 which is primarily related to the
costs associated with the closing of the Company's two Zazarac
restaurants.
Contribution for "Dine Out for America". This line item
represents the Company's commitment, announced on September 26,
2001, to contribute 100% of it sales proceeds from Thursday
October 11, 2001 to the victims and families of the victims of
the terrorist attacks of September 11, 2001. The Company's
sales on October 11, 2001 for the "Dine Out for America" fund
raising event totaled approximately $7,000,000 and accordingly
the Company has recorded a pretax charge to earnings of
$7,000,000 during the nine months ended September 30, 2001.
Income from operations of unconsolidated affiliates was
$3,086,000 in the first nine months of 2001 as compared with
income of $1,766,000 in the same period in 2000. This increase
was attributable to additional stores operating as development
joint ventures in the first nine months of 2001 and to an
increase in average unit volumes.
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 decreased by $17,400,000, to $176,654,000
in the first nine months of 2001 as compared with $194,054,000
in the same period in 2000.
Other income (expense), net. Other income (expense)
includes the net of revenues and expenses from non-restaurant
operations. Net other expense was $1,568,000 during the first
nine months of 2001 as compared with net other income of $4,000
in the same period in 2000. The increase in the net expense
resulted from the elimination of the Company's interest in
Outback Sports (see Notes 4 and 7 of Notes to Consolidated
Financial Statements) and increased expenses in the first nine
months associated with other non-restaurant operations.
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Interest income (expense), net. Interest income was
$2,879,000 during the first nine months of 2001 as compared with
interest income of $3,523,000 in the same period in 2000. The
decrease in interest income resulted from lower average cash
balances and lower interest rates on short term investments
during the first nine months of 2001 compared with the same
period in 2000.
Elimination of minority interests. As a percentage of
revenues, these allocations were 1.5% and 1.9% during the nine
months ended September 30, 2001 and 2000, respectively. The
decrease in this ratio is the result of the purchase of minority
interests in 43 restaurants from area operating partners after
September 30, 2000, the decrease in overall restaurant operating
margins and the effect of the performance at the new restaurant
formats.
Provision for income taxes. The provision for income taxes
in the first nine months of both 2001 and 2000 reflected the
expected income taxes due at federal statutory rates and state
income tax rates, net of the federal benefit. The effective
income tax rate was 35.2% during the first nine months of 2001
and the effective income tax rate was 35.7% during the first
nine months of 2000. The decrease in the effective tax rate
resulted from tax savings associated with changes in the
corporate state tax structure and an increase in FICA tip
credits the Company was able to utilize in the first nine months
of 2001.
Net income and earnings per common share. Net income for
the first nine months of 2001 was $99,833,000 as compared with
net income of $109,447,000 in the same period in 2000. Basic
earnings per share decreased to $1.30 during the first nine
months of 2001, as compared with $1.41 in the same period in
2000. Diluted earnings per share increased to $1.28 during the
first nine months of 2001, as compared with $1.38 in the same
period in 2000.
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Liquidity and Capital Resources
The following table presents a summary of the Company's
cash flows from operating, investing and financing activities
for the periods indicated (in thousands).
Year Ended Nine Months Ended
December September September
31, 30, 30,
2000 2001 2000
--------- --------- ---------
Net cash provided by
operating activities...... $239,546 $110,756 $143,616
Net cash used in investing
activities................ (145,819) (152,570) (104,620)
Net cash used in financing
activities................ (54,746) (22,277) (43,278)
------ -------- -------
Net increase (decrease) in
Cash and cash
equivalents.............. $ 38,981 $(64,091) $(4,282)
====== ======== =======
The Company requires capital principally for the
development of new Company owned and joint venture restaurants.
Capital expenditures totaled approximately $139,893,000 for year
ended December 31, 2000 and $143,645,000 and $96,762,000 during
the first nine months of 2001 and 2000, 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 open in
2001 will be free-standing units.
The Company has formed joint ventures to develop Outback
Steakhouses in Brazil and the Philippines. During the second
quarter of 2001, the Company purchased three Outback Steakhouses
in Puerto Rico and will also develop future Company owned
Outback Steakhouses in Puerto Rico. The Company is also
developing Company owned restaurants internationally in the
Philippines and Korea.
In 1999, the Company 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,
substantially all of which has been invested as of September 30,
2001.
At September 30, 2001, the Company had two uncollateralized
lines of credit totaling $140,000,000. Approximately $4,350,000
is committed for the issuance of letters of credit. The Company
also guarantees $491,000 in loans made by banks to certain
franchisees. As of September 30, 2001, the Company had drawn
$10,000,000 on the revolving line of credit to finance the
development of new restaurants. The Company expects that its
capital requirements through the end of 2001 will be met by cash
flows from operations and, to the extent needed, advances on its
line of credit. See Note 5 of Notes to Unaudited Consolidated
Financial Statements.
The Company has a $10,000,000 uncollateralized line of
credit to support the Company's international operations. As of
September 30, 2001, the outstanding balance was approximately
$9,640,000.
20 of 28
The Company is the guarantor of an uncollateralized line of
credit that permits borrowing of up to a maximum of $35,000,000,
maturing in December 2004, for one of its franchisees. At
September 30, 2001 and December 31, 2000, the balance on the
line of credit was approximately $24,754,000 and $22,470,000,
respectively. 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 a maximum of $12,000,000,
maturing December 2003, for one of its joint venture partners.
At September 30, 2001, the outstanding balance was approximately
$12,000,000.
The Company is the guarantor of up to approximately
$9,445,000 of a $68,000,000 note for an unconsolidated affiliate
in which the Company has a 22.2% equity interest. At September
30, 2001 the outstanding balance on the note was approximately
$68,000,000.
On July 26, 2000, the Company's Board of Directors
authorized a program to repurchase up to 4,000,000 shares of the
Company's Common Stock. The timing, price, quantity and manner
of the purchases will be made at the discretion of management
and will depend upon market conditions. In addition, the Board
of Directors also authorized a program to repurchase shares on a
regular basis to offset shares issued as a result of stock
option exercises. The Company will fund the repurchase program
with available cash and bank credit facilities. As of September
30, 2001, under these authorizations the Company has repurchased
approximately 2,914,000 shares of its Common Stock for
approximately $71,928,000.
OTHER
See Notes 4 and 7 of Notes to Unaudited Consolidated
Financial Statements for discussion of the Company's $22,000,000
licensing agreement for use of the assets of some of its non-
restaurant operations.
OUTLOOK
The following discussion of the Company's future operating
results and expansion strategy and other statements in this
report that are not historical statements constitute forward-
looking statements that represent the Company's expectations or
belief concerning future events and may be identified by words
such as "believes," "anticipates," "expects," "plans," "should"
and similar expressions. The Company's forward-looking
statements are subject to risks and uncertainties that could
cause actual results to differ materially from those stated or
implied in the forward-looking statement. We have endeavored to
identify the most significant factors that could cause actual
results to differ materially from those stated or implied in
forward-looking statements in the section entitled "Cautionary
Statement" below.
21 of 28
In the Outlook portion of Management's Discussion and
Analysis of Financial Condition and Results of Operations in its
Annual Report to the Securities and Exchange Commission on Form
10-K for the year ended December 31, 2000, the Company provided
guidance on the outlook for its businesses in 2001 and factors
that may affect the Company's financial results. During the
three months and nine months ended September 30, 2001, the
Company noted factors affecting revenue trends. The Company's
previous price increase guidance remains unchanged; however, due
to a weaker than expected economy and the effect of the
terrorist attacks on September 11, 2001, customer count trends
have weakened relative to trends noted in the Form 10-K. To the
extent to which customer count trends remain weak, the Company's
revenues and operating results may be affected for the remainder
of 2001. During the quarter ended and nine months ended
September 30, 2001, the Company incurred higher Restaurant
Operating Expenses and Cost of Sales as a result of higher
utility, natural gas and dairy prices, respectively, than paid
during the comparable period in 2000 and than anticipated in the
Company's comments discussed above. To the extent to which the
prices of these commodities remain at current levels, the
Company's operating results may be affected for the remainder of
2001.
Future Operating Results.
As of the date of this report substantial uncertainty
exists as to the strength of consumer spending as a result of
the economic downturn and the effects of the reduction in travel
and related expenditures following the terrorist attacks of
September 11, 2001. The Company's revenue growth expectations
summarized in the following paragraph assume that current
spending trends do not worsen in the fourth quarter of 2001 or
fiscal 2002. The Company's revenues and financial results in
2002 could vary significantly depending upon consumer and
business spending trends.
2002 Revenue. The Company plans to grow revenues in 2002 by
opening additional restaurants and increasing average unit
volumes in Carrabba's Italian Grills. The Company's expansion
plans are summarized in this section. Based upon current economic
conditions, the Company is currently planning for average unit volumes
for Outback Steakhouse to be flat during 2002 compared with 2001.
At present, the Company is not planning on any price increases during
2002 for Outback Steakhouse. However, the Company will reevaluate
Outback menu pricing periodically and may change prices as economic and
commodity conditions dictate. The Company is currently planning
for average unit volumes for Carrabba's Italian Grills to
increase by approximately 3% to 4% during 2002. The Company is
not planning any price increases during 2002 for Carrabba's
Italian Grills. However, the Company will reevaluate Carrabba's
menu pricing periodically and may change prices as economic and
commodity conditions dictate.
2002 Cost of Revenue. Unusual conditions in the dairy markets
during 2001 resulted in the Company incurring substantially
higher butter costs than the historical norm. The Company's
current financial plan does not anticipate a recurrence of these
extraordinary conditions that occurred in the dairy markets in
the second and third quarters of 2001. The Company is anticipating
slightly favorable beef pricing in the second half of 2002 based
on current discussions and negotiations with its beef suppliers.
Accordingly, the Company expects its costs of goods sold to
decrease as a percentage of sales in 2002 as compared with 2001.
Although the total decrease is subject to several factors, the
current expectation for the Company is for a decrease of
approximately 0.3% to 0.5% of sales for the full year.
22 of 28
2002 Labor Costs. During the last few years, the Company has
experienced significant wage pressure resulting from a tight
labor market. The Company expects the upward wage pressure to
continue during 2002 but at a lower rate than 2001. The Company
expects that as more of the new format restaurants (Roy's,
Fleming's and Selmon's) are opened, that labor costs as a
percentage of restaurant sales will increase because the labor
costs as a percentage of sales at the new restaurant formats run
at a higher rate than at Outback and Carrabba's Italian Grills.
In addition, the new hourly employee bonus program and enhanced
employee health insurance coverage will also continue the upward
pressure on labor costs as a percentage of restaurant sales. As
a result, the Company is currently planning for its labor costs
to increase by 0.3% to 0.4% of restaurant sales.
2002 Restaurant Operating Expenses. Other than new restaurant
format expenses, the Company does not plan to take any actions
that would result in material fluctuations in other restaurant
operating expense. The Company anticipates a decrease in
natural gas prices in 2002 as compared with 2001. Accordingly,
the Company is planning on a reduction in natural gas costs of
approximately 0.2% to 0.3% of restaurant sales. Costs incurred
prior to the opening of new restaurants are included in this
expense category. These preopening expenses total approximately
$150,000 for each Company owned and joint venture Outback
Steakhouse, approximately $195,000 for each Carrabba's Italian
Grill, and approximately $300,000 for each new Roy's and
Fleming's Prime Steakhouse and Wine Bar. Restaurant operating
expense ratios may vary materially from quarter to quarter
depending on when units open. As a result of the planned
openings of new restaurants, the preopening portion of
restaurant operating expenses may increase by in 2002 by 0.1% to
0.2% or restaurant sales.
2002 Depreciation and Amortization. The Company expects
depreciation to increase as it invests in new restaurants and
improves existing restaurants. The Company estimates that its
capital expenditures for the development of new restaurants will
be approximately $175,000,000 to $190,000,000 in 2002. The
Company estimates that the adoption of Statement of Financial
Accounting Standard No. 142 "Goodwill and Other Intangible
Assets" may result in the elimination of approximately
$5,000,000 to $5,500,000 of annual amortization, subject to the
identification of separately recognized intangibles which would
continue to be amortized under the new rules.
2002 General and Administrative Expenses. Based upon its
current plan, the Company expects that total general and
administrative costs will increase by approximately 12% to 13%
in 2002 compared with 2001.
23 of 28
Expansion Strategy.
The Company's goal is to add new restaurants to the Outback
system during the remainder of 2001. The following table
presents a summary of the expected restaurant openings during
the fourth quarter of 2001 and for the full year 2002:
4th Quarter Full Year
Outback Steakhouses - 2001 2002
Domestic
Company owned.......... 14 to 16 40 to 45
Franchised or joint
venture.............. 2 to 4 5 to 6
Outback Steakhouses -
International
Company owned.......... 2 to 3 10 to 15
Franchised or joint
venture.............. 1 to 2 1 to 2
Carrabba's Italian Grills
Company owned.......... 4 to 5 10 to 15
Joint venture.......... 4 to 5 5 to 10
Fleming's Prime Steakhouse
and Wine Bars
Company owned.......... 0 0
Joint venture.......... 4 4 to 5
Roy's
Company owned.......... 0 0
Joint venture.......... 2 to 3 3 to 4
Selmon's
Company owned.......... 0 1
Cheeseburger in Paradise
Joint venture.......... 0 1
Bonefish Grill
Joint venture.......... 1 3 to 4
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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's actual results could differ materially from
those stated or implied in the forward-looking statements
included in the discussion of future operating results and
expansion strategy and elsewhere in this report as a result,
among other things, of the following:
(i) The restaurant industry is a highly competitive industry
with many well established competitors;
(ii) The Company's results can be impacted by changes in
consumer tastes and the level of consumer acceptance of the
Company's restaurant concepts; local, regional and national
economic conditions; the seasonality of the Company's
business; demographic trends; traffic patterns; consumer
perception of food safety; employee availability; the cost
of advertising and media; government actions and policies;
inflation; and increases in various costs;
(iii) The Company's ability to expand is dependent upon
various factors such as the availability of attractive
sites for new restaurants, ability to obtain appropriate
real estate sites as acceptable prices; ability to obtain
all governmental permits including zoning approvals and
liquor licenses on a timely basis, impact of government
moratoriums or approval processes, which could result in
significant delays, ability to obtain all necessary
contractors and subcontractors, union activities such as
picketing and hand billing that could delay construction,
the ability to generate or borrow funds, the ability to
negotiate suitable lease terms, and the ability to recruit
and train skilled management and restaurant employees;
(iv) Price and availability of commodities, including, but not
limited to, such items as beef, chicken, shrimp, pork,
dairy, potatoes and onions are subject to fluctuation and
could increase or decrease more than the Company expects;
and/or
(v) Weather and acts of God could result in construction delays
and also adversely affect the results of one or more stores
for an indeterminate amount of time.
25 of 28
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
$140,000,000 revolving lines of credit with its banks.
Borrowings under the agreement bear interest at rates ranging
from 50 to 95 basis points over the 30, 60, 90 or 180 London
Interbank Offered Rate. At September 30, 2001 and December 31,
2000, the Company had a $10,000,000 outstanding balance on the
lines 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. These
commodities are generally purchased based upon market prices
established with vendors. The purchase arrangement may contain
contractual features that limit the price paid by establishing
certain floors and caps. The Company does not use financial
instruments to hedge commodity prices because the Company's
purchase arrangements help control the ultimate cost paid.
Extreme changes in commodity prices and/or long-term changes
could affect the Company adversely. The Company expects that in
most cases increased commodity prices could be passed 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.
This market risk discussion contains forward-looking
statements. Actual results may differ materially from the
discussion based upon general market conditions and changes in
domestic and global financial markets.
26 of 28
OUTBACK STEAKHOUSE, INC.(R)
PART II: OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
None
(b) Reports on Form 8-K
The Company filed reports on Form 8-K with the
Securities and Exchange Commission dated August 27,
2001, September 26, 2001 and October 16, 2001.
27 of 28
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. (R)
Date: November 14, 2001. (Registrant)
By: /s/ Robert S. Merritt
Robert S. Merritt
Senior Vice President,
Finance (Principal Financial
and Accounting Officer
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