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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Year Ended: DECEMBER 31, 1997 Commission File Number: 0-19334
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OUTBACK STEAKHOUSE, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 59-3061413
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(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
550 NORTH REO STREET, SUITE 200, TAMPA, FLORIDA 33609
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(Address of principal executive offices) (Zip Code)
(813) 282-1225
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
NONE
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Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.01 PAR VALUE.
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(Title of class)
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in Definitive Proxy or Information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
As of March 18, 1998, the aggregate market value of the voting stock
held by nonaffiliates of the Registrant was $1,427,993,964.
As of March 18, 1998, the number of shares outstanding of the
Registrant's Common Stock, $.01 par value was 48,559,385.
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for the year ended
December 31, 1997 are incorporated by reference in Part II, hereof.
Portions of the Registrant's Proxy Statement of Outback Steakhouse, Inc. ("the
Proxy Statement") dated March 13, 1998 for the Annual Meeting of Shareholders to
be held on April 15, 1998 are incorporated by reference in Parts I and III,
hereof.
PART I
ITEM 1. BUSINESS
GENERAL
The Company was incorporated in October 1987 as Multi-Venture Partners,
Inc., a Florida corporation, and in January 1990 the Company changed its name to
Outback Steakhouse, Inc. ("Outback Florida"). Outback Steakhouse, Inc., a
Delaware corporation ("Outback Delaware"), was formed in April 1991 as part of a
corporate reorganization completed in June 1991 in connection with the Company's
initial public offering, as a result of which Outback Delaware became a holding
company for Outback Florida. Carrabba's Italian Grill, Inc. ("CIGI"), a Florida
corporation, was formed in January 1995. Unless the context requires otherwise,
references to the "Company" mean Outback Delaware, its wholly owned subsidiaries
Outback Florida, CIGI and each of the limited partnerships and joint ventures
controlled by the Company.
In April 1993, the Company purchased a 50% interest in the cash flows of two
Carrabba's Italian Grill restaurants located in Houston, Texas (the "Original
Restaurants"), and entered into a 50-50 joint venture with the founders of
Carrabba's to develop additional Carrabba's Italian Grill restaurants
("Carrabba's"). In January 1995, the founders obtained sole ownership of the
Original Restaurants ("Carrabba's"), and the Company obtained sole ownership of
the Carrabba's concept and the four restaurants in Florida. The original 50-50
joint venture continues to develop restaurants in the State of Texas. The
Company has sole ownership of restaurants outside of Texas, and continues to
develop Carrabba's Italian Grills outside of Texas as Company owned restaurants,
and will pay royalties to the founders ranging from 1.0% to 1.5% of sales of
Carrabba's restaurants opened after 1994.
In the fourth quarter of 1997, the Company recorded a pre-tax charge to earnings
of $26,001,000 which included approximately $23,113,000 for the write down of
certain impaired assets and $2,888,000 related to restaurant closings, severance
and other costs. The write down primarily related to Carrabba's restaurant
properties, nine of which were closed during the fourth quarter of 1997. The
charge is presented in the Company's Consolidated Statements of Income in the
line item "Provision for impaired assets and restaurant closings."
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CONCEPTS AND STRATEGIES
As of December 31, 1997, the Company's restaurant system included 459
full-service restaurants operated under the name Outback Steakhouse, 72 of which
were franchised to unaffiliated domestic franchisees and 14 of which were
franchised to unaffiliated international franchisees. The system also included
60 full-service restaurants operated under the name Carrabba's Italian Grill, 49
of which were Company owned and eleven of which were operated as development
joint ventures. The majority of Outback restaurants serve dinner only and
feature a limited menu of high quality, uniquely seasoned steaks, prime rib,
chops, ribs, chicken, fish and pasta. Outback also offers specialty appetizers,
including the signature "Bloomin' Onion," desserts and full liquor service. The
majority of Carrabba's restaurants serve dinner only and feature a limited menu
of high quality Italian cuisine including a variety of pastas, chicken, seafood,
veal and wood-fired pizza. Carrabba's also offers specialty appetizers,
desserts, coffees and full liquor service. The Company believes that it
differentiates its Outback Steakhouse and Carrabba's restaurants by:
- emphasizing consistently high quality ingredients and
preparation of a limited number of menu items that appeal to a
broad array of tastes;
- featuring generous portions at moderate prices;
- attracting a diverse mix of customers through a casual dining
atmosphere emphasizing highly attentive service;
- hiring and retaining experienced restaurant management by
providing general managers the opportunity to purchase a 10%
interest in the restaurants they manage; and
- limiting service to dinner for the majority of its locations,
(generally from 4:30 p.m. to 11:00 p.m.), which reduces the
hours of restaurant management and employees.
OUTBACK STEAKHOUSE:
Menu. The Outback Steakhouse menu includes several cuts of freshly
prepared, uniquely seasoned and seared steaks, plus prime rib, barbecued ribs,
pork chops, chicken, seafood and pasta. The menu is designed to have a limited
number of selections to permit the greatest attention to quality while offering
sufficient breadth to appeal to all taste preferences. The Company tests new
menu items to replace slower-selling items and regularly upgrades ingredients
and cooking methods to improve quality and consistency of its food offerings.
The menu also includes several specialty appetizers and desserts, together with
full bar service featuring Australian beer and wine. Liquor service accounts for
approximately 14% of Outback Steakhouses' revenues. The price range of
appetizers is $1.99 to $6.99 and the price range of entrees is $8.79 to $21.99.
The average check per person was $16.76 during 1997. Outback Steakhouses also
offer a low-priced
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children's menu, and certain Outback Steakhouses also offer a separate menu
offering larger portions of prime beef with prices ranging from $16.99 to
$23.99.
Casual Atmosphere. Outback Steakhouses feature a casual dining
atmosphere with a decor suggestive of the rustic atmosphere of the Australian
outback. The decor includes blond woods, large booths and tables and Australian
memorabilia such as boomerangs, surfboards, maps and flags.
Restaurant Management and Employees. The general manager of each
Outback is provided the opportunity to purchase a 10% interest in the restaurant
he or she manages for $25,000, and is required to enter into a five-year
employment agreement. By requiring this level of commitment and by providing the
general manager with a significant stake in the success of the restaurant, the
Company believes that it is able to attract and retain experienced and highly
motivated managers. In addition, since the Company's restaurants are generally
open for dinner only, the Company believes that it has an advantage in
attracting and retaining servers, food preparers and other employees who find
the shorter hours an attractive life-style alternative to restaurants serving
both lunch and dinner.
CARRABBA'S ITALIAN GRILL:
Menu. The Carrabba's Italian Grill menu includes several types of
uniquely prepared Italian dishes including pastas, chicken, seafood, wood-fired
pizza and veal. The menu is designed to have a limited number of selections to
permit the greatest attention to quality while offering sufficient breadth to
appeal to all taste preferences. The Company tests new menu items to replace
slower-selling items and regularly upgrades ingredients and cooking methods to
improve quality and consistency of its food offerings. The menu also includes
several specialty appetizers, desserts, and coffees, together with full bar
service featuring Italian wines and specialty drinks. Liquor service accounts
for approximately 16.7% of Carrabba's revenues. The price range of appetizers is
$2.29 to $8.99 and the price range of entrees is $6.99 to $15.99. The average
check per person was $17.14 during 1997.
Casual Atmosphere. Carrabba's Italian Grills feature a casual dining
atmosphere with a decor suggestive of a traditional Italian exhibition kitchen
where customers can watch their meals prepared. The decor includes dark woods,
large booths and tables and Italian memorabilia featuring Carrabba's family
photos, authentic Italian pottery and cooking utensils.
Restaurant Management and Employees. The general manager of each
Carrabba's Italian Grill is provided the opportunity to purchase a 10% interest
in the restaurant he or she manages for $25,000 and is required to enter into a
five-year employment agreement. By requiring this level of commitment and by
providing the general manager with a significant stake in the success of the
restaurant, the Company believes that it is able to attract and retain
experienced and highly motivated managers. In addition, since the Company's
restaurants are generally open for dinner only, the Company believes that it has
an advantage in attracting and retaining
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servers, food preparers and other employees who find the shorter hours an
attractive life-style alternative to restaurants serving both lunch and dinner.
EXPANSION STRATEGY
During the year ended December 31, 1997, 86 Outback Steakhouses and 21
Carrabba's Italian Grills were added to the Company's restaurant system. In the
fourth quarter of 1997, the Company closed nine of its Carrabba's locations in
markets that did not respond positively to increased advertising and other
strategies implemented to stimulate sales. In 1998 and 1999, the Company expects
to develop eight to ten Carrabba's restaurants, the majority of which will be
Company owned, in existing markets where it has demonstrated success. The
Company expects to open 80 to 95 Outback Steakhouse restaurants in 1998 and 1999
of which 50 to 55 are expected to be Company owned, 15 to 20 of which are
expected to be operated by domestic franchisees, and 15 to 20 of which are
expected to be operated by international franchisees. During 1998, the Company
expects to develop new Outbacks in its existing markets and in select new
domestic and international markets including locations in Hawaii, Cayman
Islands, Bahamas, Argentina, Peru, Mexico, Dominican Republic, Philippines and
Germany.
The above statements regarding the Company's expansion plans constitute
forward looking statements. The Company notes that a variety of factors could
cause the actual results and experience to differ from the anticipated results
referred to above. The Company's development schedule for new restaurant
openings is subject to a number of risk factors that could cause actual results
to differ, including:
(i) Ability to secure appropriate real estate sites at acceptable
prices;
(ii) Ability to obtain all required governmental permits including
zoning approvals and liquor licenses on a timely basis;
(iii) Impact of government moratoriums or approval processes which
could result in significant delays;
(iv) Ability to secure all necessary contractors and sub-
contractors;
(v) Union activities such as picketing and hand billing which
could delay construction;
(vi) Weather and acts of God beyond the Company's control resulting
in construction delays.
The Company utilizes controlled partnerships, in which the Company owns
51% to 90%, for the development of restaurants in order to attract experienced
restaurant operators and to provide them with the incentive to actively
supervise the development and operation of several restaurants in a particular
market.
The Company also utilizes development joint ventures, in which the
Company owns 50% and its joint venture partner owns 50%, for select Carrabba's
Italian Grills located in Florida and Texas.
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Site Selection. The Company currently leases approximately 45% of its
restaurant sites. In the future, the Company expects to construct a significant
number of free standing restaurants on owned or leased sites. The Company's
leased sites are generally located in strip shopping centers. The Company
expects 80% to 90% of new restaurants to be free standing locations. The Company
considers the location of a restaurant to be critical to its long-term success
and devotes significant effort to the investigation and evaluation of potential
sites. The site selection process focuses on trade area demographics, such as
visibility, accessibility and traffic volume. The Company also reviews potential
competition and the profitability of national chain restaurants operating in the
area. Senior management inspects and approves each restaurant site. It takes
approximately 90 to 180 days to complete construction and open a new restaurant.
The Company designs the interior of its restaurants in-house and utilizes
outside architects when necessary. A typical Outback Steakhouse is approximately
6,200 square feet and features a dining room and an island, full-service liquor
bar. The dining area of a typical Outback consists of 35 to 38 tables and seats
approximately 210 people. The bar area consists of six to nine tables and has
seating capacity for approximately 35 people. Appetizers and complete dinners
are served in the bar area.
A typical Carrabba's Italian Grill is approximately 6,200 square feet
and features a dining room, pasta bar and an island, full service liquor bar.
The dining area of a typical Carrabba's Italian Grill consists of 34 to 36
tables and seats approximately 160 people. The liquor bar area includes eight
tables and seating capacity for approximately 52 people, and the pasta bar has
seating capacity for approximately 12 people. Appetizers and complete dinners
are served in both the pasta bar and liquor bar.
RESTAURANT LOCATIONS
The following table sets forth the location of each existing Outback
Steakhouse as of December 31, 1997:
UNAFFILIATED UNAFFILIATED
COMPANY OWNED DOMESTIC FRANCHISED INTERNATIONAL
RESTAURANTS RESTAURANTS FRANCHISED RESTAURANTS
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Arizona (5) Nebraska (3) Alabama (9) Alberta, Canada (1)
Arkansas (3) Nevada (7) Alaska (1) Aruba (1)
Colorado (11) New Jersey (10) California (30) Cancun, Mexico (1)
Delaware (1) New Mexico (2) Connecticut(3) Guam (1)
Florida (54) New York (14) Florida (1) Hawaii (1)
Georgia (21) North Carolina (19) Idaho (1) Ontario, Canada (4)
Illinois (14) Ohio (21) Massachusetts (6) Philipinnes (1)
Indiana (13) Oklahoma (7) Mississippi (5) Puerto Rico (1)
Iowa (4) Pennsylvania (10) New Hampshire (1) Rio de Janeiro, Brazil(1)
Kansas (4) South Carolina (11) Oregon (2) Seoul, Korea (2)
Kentucky (7) Tennessee(11) Rhode Island (1)
Louisiana (11) Texas (37) Tennessee (2)
Maryland (11) Utah (3) Washington (10)
Michigan (16) Virginia (23)
Minnesota (3) West Virginia (6)
Missouri (9) Wisconsin (2)
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The following table sets forth the location of each existing Carrabba's
Italian Grill as of December 31, 1997:
COMPANY OWNED DEVELOPMENT JOINT
RESTAURANTS VENTURE RESTAURANTS
- ---------------- -------------------
Arizona (2) Florida (2)
Colorado (6) Texas (9)
Georgia (5)
Florida (23)
Maryland (2)
New Jersey (3)
New Mexico (2)
North Carolina (4)
Pennsylvania (1)
Virginia (1)
RESTAURANT OPERATIONS
Management and Employees. The management staff of a typical Outback
Steakhouse or Carrabba's Italian Grill consists of one general manager, one
assistant manager and one kitchen manager. Each restaurant also employs
approximately 50 to 70 hourly employees, many of whom work part-time. The
general manager of each restaurant has primary responsibility for the day-to-day
operation of his or her restaurant and is required to abide by Company
established operating standards.
Purchasing. The Company's management negotiates directly with suppliers
for most food and beverage products to ensure uniform quality and adequate
supplies and to obtain competitive prices. The Company and its franchisees
purchase substantially all food and beverage products from authorized local or
national suppliers and the Company will periodically make advance purchases of
various inventory items to ensure adequate supply or obtain favorable pricing.
The Company currently purchases substantially all of its beef from three
suppliers. The Company believes that beef of comparable quality, as well as all
other essential food and beverage products are available, or upon short notice
can be made available from alternative qualified suppliers.
Supervision and Training. The Company requires its area operating
partners and restaurant general managers to have significant experience in the
full-service restaurant industry. In addition, the Company has developed a
comprehensive 12-week training course which all operating partners and general
managers are required to complete. The program emphasizes the Company's
operating strategy, procedures and standards. The Company's senior management
meets quarterly with the Company's operating partners to discuss
business-related issues and share ideas. In addition, members of senior
management regularly visit the restaurants to ensure that the Company's concept,
strategy and standards of quality are being adhered to in all aspects of
restaurant operations.
The restaurant general manager and area operating partners, together
with the Company's President, Regional Vice Presidents, Vice President of
Training and Director of Training, are responsible for selecting and training
the employees for each new restaurant. The training period for new employees
lasts approximately one week and is characterized by on-the-job supervision by
an experienced employee. Ongoing employee training remains the responsibility of
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the restaurant manager. Written tests and observation in the work place are used
to evaluate each employee's performance. Special emphasis is placed on the
consistency and quality of food preparation and service which is monitored
through monthly meetings between kitchen managers and senior management.
Advertising and Marketing. The Company uses radio and television
advertising in selected markets where it is cost-effective. The Company's goal
is to develop a sufficient number of restaurants in each market it serves to
permit the cost-effective use of radio and television advertising. In addition,
the Company engages in a variety of promotional activities, such as contributing
goods, time and money to charitable, civic and cultural programs, in order to
increase public awareness of the Company's restaurants.
GENERAL MANAGER PROGRAM
The general manager of each Company owned restaurant is required, as a
condition of employment, to sign a five-year employment agreement and is given
the opportunity to purchase a 10% interest in the restaurant he or she is
employed to manage. The Company requires each new unaffiliated franchisee to
provide the same opportunity to the general manager of each new restaurant
opened by that franchisee. To date, the purchase price for the 10% interest has
been fixed at $25,000. During the five-year employment term, each general
manager is prohibited from selling or otherwise transferring his 10% interest,
and after the five-year term of employment, any sale or transfer of that
interest is subject to certain rights of first refusal. In addition, each
general manager is required to sell his 10% interest to his employer or its
general partners upon termination of employment on terms set forth in his
employment agreement. The Company intends to continue the general manager
investment program.
OWNERSHIP STRUCTURES
The Company's ownership interests in Outback Steakhouse restaurants and
Carrabba's Italian Grills are divided into two basic categories: (i) Company
owned restaurants which are owned directly by the Company, by limited
partnerships or by controlled joint ventures, and (ii) development joint
ventures. The results of operations of Company owned restaurants are included in
the Company's Consolidated Statements of Income, and the results of operations
of restaurants owned by development joint ventures are accounted for using the
equity method of accounting.
COMPETITION
The restaurant industry is intensely competitive with respect to price,
service, location and food quality, and there are many well-established
competitors with substantially greater financial and other resources than the
Company. Some of the Company's competitors have been in existence for a
substantially longer period than the Company and may be better established in
the markets where the Company's restaurants are or may be located. The
restaurant business is often affected by changes in consumer tastes, national,
regional or local economic conditions, demographic trends, traffic patterns and
the type, number and location of competing restaurants. In addition, factors
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such as inflation, increased food, labor and benefits costs and the availability
of experienced management and hourly employees may adversely affect the
restaurant industry in general and the Company's restaurants in particular.
UNAFFILIATED FRANCHISE PROGRAM
At December 31, 1997, there were 72 domestic franchised Outback
Steakhouses and 14 international franchised Outback Steakhouses. Each domestic
franchisee paid an initial franchise fee of $40,000 for each restaurant and pays
a continuing monthly royalty of 3% of gross restaurant sales and a monthly
marketing administration fee of 0.5% of gross restaurant sales. In addition,
until such time as the Company establishes a national advertising fund or a
regional advertising cooperative, all franchisees are required to expend, on a
monthly basis, a minimum of 3% of gross restaurant sales on local advertising.
Once the Company establishes a national advertising fund or a regional
advertising cooperative, covered domestic franchisees will be required to
contribute, on a monthly basis, 3.5% of gross restaurant sales to the fund or
cooperative in lieu of local advertising. Initial fees and royalties for
international franchisees vary by market. There were no agreements to franchise
Carrabba's Italian Grills at December 31, 1997.
All unaffiliated franchisees are required to operate their Outback
Steakhouse restaurants in compliance with the Company's methods, standards and
specifications regarding such matters as menu items, ingredients, materials,
supplies, services, fixtures, furnishings, decor and signs although the
franchisee has full discretion to determine the prices to be charged to
customers. In addition, all franchisees are required to purchase all food,
ingredients, supplies and materials from suppliers approved by the Company.
EMPLOYEES
The Company employs approximately 34,600 persons, 201 of whom are
corporate personnel employed by Outback Steakhouse, Carrabba's, and Outback
Steakhouses International franchising group. Approximately 1600 are restaurant
management personnel and the remainder are hourly restaurant personnel. Of the
201 corporate employees, 18 are in management and 182 are administrative or
office employees. None of the Company's employees is covered by a collective
bargaining agreement.
TRADEMARKS
The Company regards its Outback Steakhouse service mark, its Carrabba's
Italian Grill service mark and its "Bloomin' Onion" trademark as having
significant value and as being important factors in the marketing of its
restaurants. The Company has also obtained a trademark for several other of its
Outback menu items, and the "No Rules. Just Right." and "Aussie Mood. Awesome
Food." advertising slogans. The Company is aware of names and marks similar to
the service mark of the Company used by other persons in certain geographic
areas in which the Company has restaurants. However, the Company believes such
uses will not adversely affect the Company. The Company's policy is to pursue
registration of its marks whenever possible and to oppose vigorously any
infringement of its marks.
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GOVERNMENT REGULATION
The Company is subject to various federal, state and local laws
affecting its business. Each of the Company's restaurants is subject to
licensing and regulation by a number of governmental authorities, which may
include alcoholic beverage control, health and safety and fire agencies in the
state or municipality in which the restaurant is located. Difficulties in
obtaining or failures to obtain the required licenses or approvals could delay
or prevent the development of a new restaurant in a particular area.
Approximately 14.2% of the Company's revenues is attributable to the
sale of alcoholic beverages. Alcoholic beverage control regulations require each
of the Company's restaurants to apply to a state authority and, in certain
locations, county or municipal authorities for a license or permit to sell
alcoholic beverages on the premises and to provide service for extended hours
and on Sundays. Typically, licenses must be renewed annually and may be revoked
or suspended for cause at any time. Alcoholic beverage control regulations
relate to numerous aspects of daily operations of the Company's restaurants,
including minimum age of patrons and employees, hours of operation, advertising,
wholesale purchasing, inventory control and handling, storage and dispensing of
alcoholic beverages. The failure of a restaurant to obtain or retain liquor or
food service licenses would adversely affect the restaurant's operations.
The Company may be subject in certain states to "dram-shop" statutes,
which generally provide a person injured by an intoxicated person the right to
recover damages from an establishment which wrongfully served alcoholic
beverages to the intoxicated person. The Company carries liquor liability
coverage as part of its existing comprehensive general liability insurance and
has never been named as a defendant in a lawsuit involving "dram-shop" statutes.
The Company's restaurant operations are also subject to federal and
state minimum wage laws governing such matters as working conditions, overtime
and tip credits. Significant numbers of the Company's food service and
preparation personnel are paid at rates related to the federal minimum wage and,
accordingly, further increases in the minimum wage could increase the Company's
labor costs.
The Americans With Disabilities Act prohibits discrimination in
employment and public accommodations on the basis of disability. The Act became
effective in January 1992 with respect to public accommodation and July 1992
with respect to employment. Under the Act, the Company could be required to
expend funds to modify its restaurant to provide service to, or make reasonable
accommodations for the employment of, disabled persons.
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ITEM 2. PROPERTIES
Approximately 45% of the Company's restaurants are located in leased
space. In the future, the Company intends to continue to construct and own a
significant number of new restaurants on owned or leased land. Initial lease
expirations primarily range from five to ten years, with the majority of the
leases providing for an option to renew for at least one additional term. All of
the Company's leases provide for a minimum annual rent, and most leases call for
additional rent based on sales volume at the particular location over specified
minimum levels. Generally, the leases are net leases which require the Company
to pay the costs of insurance, taxes and a portion of lessors' operating costs.
See page 7 for listing of restaurant locations.
The Company's executive offices are located in approximately 25,800
square feet of leased space in Tampa, Florida, under a lease expiring in 1999.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any litigation other than routine matters
which are incidental to the Company's business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
There were no matters submitted for vote of security holders during the
fourth quarter of 1997.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCK MATTERS
Filed herewith as Exhibit 13.03 and incorporated herein by reference.
DIVIDEND POLICY:
The Company has never paid a cash dividend on its Common Stock. The
Board of Directors intends to retain earnings of the Company to support
operations and to finance expansion and does not intend to pay cash dividends on
Common Stock for the foreseeable future. As a condition of the Company's
revolving line of credit, the Company is currently restricted from paying
dividends, other than in the form of partnership distributions, without the
consent of two-thirds of its lenders. The payment of cash dividends in the
future will depend upon such factors as earnings levels, capital requirements,
the Company's financial condition and other factors deemed relevant by the Board
of Directors.
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ITEM 6. SELECTED FINANCIAL DATA
Years Ended December 31,
----------------------------------------------------------------------
1997 1996 1995 1994 1993
---------- -------- -------- -------- --------
(Dollar amounts in thousands,
except per share data)
Statements of Income Data:
Revenues ............................... $1,151,637 $937,400 $733,692 $516,926 $336,885
---------- -------- -------- -------- --------
Cost of revenues ....................... 440,172 363,285 286,762 202,250 132,863
Labor and other related expenses ....... 272,199 214,038 163,747 110,787 72,122
Restaurant operating expenses .......... 251,959 195,229 150,409 108,952 72,253
General & administrative expenses ...... 43,763 33,829 26,175 18,996 13,328
Provision for impaired assets and
restaurant closings (1) .............. 26,001
Loss (income) from operations of
unconsolidated affiliates ............ 467 102 (442) (1,269) (333)
---------- -------- -------- -------- --------
Total costs and expenses ............... 1,034,561 806,483 626,651 439,716 290,233
---------- -------- -------- -------- --------
Income from operations ................. 117,076 130,917 107,041 77,210 46,652
Interest income (expense), net ......... (2,489) (1,096) (1,375) (302) 1,077
---------- -------- -------- -------- --------
Income before elimination of
minority partners' interest
and income taxes ..................... 114,587 129,821 105,666 76,908 47,729
Elimination of minority
partners' interest ................... 19,411 17,925 15,181 11,930 7,526
---------- -------- -------- -------- --------
Income before income taxes ............. 95,176 111,896 90,485 64,978 40,203
Provision for income taxes ............. 33,724 40,283 29,167 21,602 13,922
---------- -------- -------- -------- --------
Net income ............................. $ 61,452 $ 71,613 $ 61,318 $ 43,376 $ 26,281
========== ======== ======== ======== ========
Basic earnings per common share ........ $ 1.28 $ 1.50 $ 1.30 $ 0.94 $ 0.57
========== ======== ======== ======== ========
Diluted earnings per common share ...... $ 1.27 $ 1.45 $ 1.25 $ 0.91 $ 0.56
========== ======== ======== ======== ========
Pro forma net income (2) ............... $ 57,911 $ 41,196 $ 24,926
======== ======== ========
Pro forma basic earnings per common
share (2) ............................ $ 1.23 $ 0.89 $ 0.54
======== ======== ========
Pro forma diluted earnings per
common share (2) ..................... $ 1.19 $ 0.86 $ 0.53
======== ======== ========
Basic weighted average number of
common shares outstanding ............ 47,834 47,813 47,012 46,355 46,009
Diluted weighted average number of
common shares outstanding ............. 48,505 49,289 48,877 47,674 46,957
Balance Sheet Data:
Working capital (deficiency) ........... $ (539) $(31,745) $(10,883) $ 19,273 $ 18,947
Total assets ........................... 592,780 469,843 372,271 259,118 174,794
Long-term debt ......................... 68,276 47,595 37,905 20,699 11,718
Interest of minority partners in
consolidated partnerships ............ 4,497 1,569 2,698 2,477 1,576
Stockholders' equity ................... 434,717 342,439 266,764 186,697 135,059
(1) Amount includes approximately $23,113,000 for the write down of certain
impaired assets and $2,888,000 related to restaurant closings, severance and
other costs. The write down primarily related to Carrabba's restaurant
properties, nine of which were closed in the fourth quarter of 1997.
(2) In 1995 and 1996, the Company issued shares of its Common Stock to five of
its franchisees in exchange for all of their outstanding interests in Outback
Steakhouses located in Oklahoma, Nebraska, Arkansas, Kansas, Ohio, Kentucky,
Virginia, Illinois, Missouri and Tennessee. Pro forma amounts include an
adjustment to increase the provision for income taxes to reflect the anticipated
tax as if the merging Companies had not elected to be taxed under Subchapter S
of the Internal Revenue Code. See Notes 11 and 12 of Notes to Consolidated
Financial Statements of the Company's 1997 annual report to shareholders.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Filed as Exhibit 13.01 and incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Independent Auditors' Report and Consolidated Financial Statements
of the Company are filed herewith as Exhibit 13.02 and are incorporated herein
by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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14
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item concerning the Company's
executive officers and directors is incorporated herein by reference to the
information set forth under the section entitled "Election of Directors" and
"Beneficial Owners and Management" in the Company's Definitive Proxy Statement
dated March 13, 1998.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated herein by
reference to the information set forth under the section entitled "Executive
Compensation" in the Company's Definitive Proxy Statement dated March 13, 1998.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated herein by
reference to the information set forth under the section entitled "Beneficial
Owners and Management" in the Company's Definitive Proxy Statement dated March
13, 1998.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated herein by
reference to the information set forth under the section entitled "Compensation
Committee Interlocks and Insider Participation" in the Company's Definitive
Proxy Statement dated March 13, 1998.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K.
(a)(1) LISTING OF FINANCIAL STATEMENTS
The following consolidated financial statements of the Registrant and
subsidiaries, included in the Registrant's Annual Report to
Shareholders, are incorporated by reference in Item 8:
Consolidated Balance Sheets -
December 31, 1997 and 1996
Consolidated Statements of Income -
Years ended December 31, 1997, 1996, and 1995
Consolidated Statements of Stockholders' Equity -
Years ended December 31, 1997, 1996, and 1995
Consolidated Statements of Cash Flows Years ended December 31,
1997, 1996, and 1995
Notes to Consolidated Financial Statements
(b) REPORTS ON FORM 8-K
The Company filed a report on Form 8-K with the Securities and Exchange
Commission dated November 17, 1997.
(c) FINANCIAL STATEMENT SCHEDULES
None.
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(d) EXHIBITS
The exhibits in response to this portion of Item 14 are listed below.
Number Description
- ------ -----------
3.01 Certificate of Incorporation of the Company (included as an exhibit to
Registrant's Registration Statement on Form S-1, No. 33-40255, and
incorporated herein by reference)
3.02 By-laws of the Company (included as an exhibit to Registrant's
Registration Statement on Form S-1, No. 33-40255, and incorporated
herein by reference)
4.01 Specimen Stock Certificate (included as an exhibit to Registrant's
Registration Statement on Form S-1, No. 33-40255, and incorporated
herein by reference)
4.02 Agreement and Plan of Reorganization dated December 18, 1991 among
Outback Delaware, Outback Florida, American Restaurants of South
Florida, Inc. ("ARSF") and the stockholders of ARSF (included as an
exhibit to Registrant's Registration Statement on Form S-1, No.33-
44452, and incorporated herein by reference)
4.03 Agreement and Plan of Reorganization dated July 1, 1992 among Outback
Delaware, Outback Florida, Stone Danker, Inc. ("SDI") and the
stockholders of SDI (included as an exhibit to Registrant's
Registration Statement on Form S-1, No. 33-49586 and incorporated
herein by reference)
4.04 Agreement and Plan of Reorganization dated March 1, 1993 among Outback
Delaware, Outback Florida, Florida Summit Corporation ("Summit") and
the stockholders of Summit (included as an exhibit to Registrant's
Annual Report on Form 10-K for the year ended December 31,1992 and
incorporated herein by reference)
4.05 Agreement and Plan of Reorganization dated March 1, 1993 among Outback
Delaware, Outback Florida, Grantham Group, Inc. (Grantham Group") and
the stockholders of Grantham Group (included as an exhibit to
Registrant's Annual Report on Form 10-K for the year ended December
31,1992 and incorporated herein by reference)
4.06 Agreement and Plan of Reorganization dated March 1, 1993 among Outback
Delaware, Outback Florida, F & B, Inc. ("F & B") FT & B
Enterprises/Ohio, Inc. ("FT & B"), Taste Buds, Inc. ("Taste Buds"),
Taste Buds of St. Matthews, Ltd., the stockholders of F & B, FT & B,
and Taste Buds, and the partners of Taste Buds of St. Matthews, Ltd
(included as an exhibit to Registrant's Annual Report on Form 10-K for
the year ended December 31,1992 and incorporated herein by reference)
4.07 Joint Venture Agreement dated March 31, 1993 between Outback/Carrabba,
Inc. and Mangia Beve, Inc. (included as an exhibit to Registrant's
Annual Report on Form 10-K for the year ended December 31,1993 and
incorporated herein by reference)
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4.08 Agreement and Plan of Reorganization Among Outback Steakhouse, Inc.,
Outback Steakhouse of Florida, Inc., Aussie Enterprises, Inc., Attinger
& Associates, Inc., Aussie of Louisiana, L.L.P., Aussie of Baton Rouge
No. 1901, L.L.C., Aussie of New Orleans No. 1911, L.L.C., Aussie of
Lafayette No. 1921, L.L.C., Aussie of Shreveport No. 1931, L.L.C.,
Aussie of Slidell No. 1912, L.L.C., Braxton I. Moody, IV and Bruce
Attinger (included as an exhibit to Registrant's Report on Form 10-Q
for the quarter ended March 31, 1994 and incorporated herein by
reference)
4.09 Agreement and Plan of Reorganization dated May 18, 1994 Among Outback
Steakhouse, Inc., Outback Steakhouse of Florida, Inc., Hugh Connerty,
Carl Sahlsten, Ridge Sink, Michael Coble, and the Partnerships and
their respective General Partners (included as an exhibit to
Registrant's Report on Form 10-Q/A for the quarter ended March 31, 1994
and incorporated herein by reference)
4.10 Royalty Agreement dated April 1995 among Carrabba's Italian Grill,
Inc., Outback Steakhouse, Inc., Mangia Beve, Inc., Carrabba, Inc.,
Carrabba Woodway, Inc., John C. Carrabba, III, Damian C. Mandola, and
John C. Carrabba, Jr. (included as an exhibit to Registrant's Report on
Form 10-Q for the quarter ended March 31, 1995 and incorporated herein
by reference)
4.11 Reorganization Agreement dated January 1, 1995 among Carrabba/Outback
Joint Venture, Outback/Carrabba, Inc., Outback Steakhouse, Inc., Mangia
Beve, Inc., Carrabba, Inc., Carrabba's of Woodway, Inc., John C.
Carrabba, III, Damian C. Mandola, and John C. Carrabba, Jr. (included
as an exhibit to Registrant's Report on Form 10-Q for the quarter ended
March 31, 1995 and incorporated herein by reference)
4.12 Agreement and Plan of Reorganization dated March 24, 1995 among Outback
Steakhouse, Inc., Outback Steakhouse of Florida, Inc.,
Fioretti-Theisen, Inc., and Charles E. Fioretti (included as an exhibit
to Registrant's Registration Statement on Form S-3, No. 33-95498, and
incorporated herein by reference)
4.13 Agreement and Plan of Reorganization dated July 31, 1995 among Outback
Steakhouse, Inc., Outback Steakhouse of Florida, Inc., G'Day, Inc.,
Donald R. Everts, and Claire E. Everts (included as an exhibit to
Registrant's Registration Statement on Form S-3, No. 33-97166, and
incorporated herein by reference)
4.14 Agreement for Sale and Purchase of Partnership Interest among Outback
Steakhouse, Inc., Shlemon, Inc. and Steve Shlemon (included as an
exhibit to Registrant's Registration Statement on Form S-3,
No.333-00176, and incorporated herein by reference)
4.15 Agreement and Plan of Reorganization dated December 26, 1995 among
Outback Steakhouse, Inc., Outback Steakhouse of Florida, Inc., Hal W.
Smith, William E. Rosenthal, Geoff Alston, David M. Brauckmann, Don
Elliot, Joseph C. Penshorn, Waymon D. Williams, Williams J. Bishop, Dan
Trierweiler, OB-Little Rock, Inc., Lane Resources Trust (included as an
exhibit to Registrant's Report on Form 8-K dated December 31, 1995 and
incorporated herein by reference)
4.16 Agreement and Plan of Reorganization dated December 26, 1995 among
Outback Steakhouse, Inc., Outback Steakhouse of Florida, Inc., Michael
Duty, Robert Krug, Henry Harris, Kent Little (included as an exhibit to
Registrant's Report on
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Form 8-K dated December 31, 1995 and incorporated herein by reference)
4.17 Agreement and Plan of Reorganization dated December 26, 1995 among
Outback Steakhouse, Inc., Outback Steakhouse of Florida, Inc., Frank
Attinger, Kevin A. Rowell, F. Beaven Smith (included as an exhibit to
Registrant's Report on Form 8-K dated December 31, 1995 and
incorporated herein by reference)
4.18 Agreement and Plan of Reorganization dated February 2, 1996 among
Outback Steakhouse, Inc., Outback Steakhouse of Florida, Inc., Robert
Frey, Ronald Sock, David Ferry, Joseph Sumislawski, FMI Restaurants,
Inc., Fore Management West End, Inc., Fore Management, Inc. and Fore
Management Leasing , L.P. (included as an exhibit to Registrant's
Report on Form 8-K/A dated December 31, 1995 and incorporated herein by
reference)
4.19 Agreement and Plan of Reorganization dated February 2, 1996 among
Outback Steakhouse, Inc., Eric P. Bachelor, Brenica Restaurant Group,
Inc., First Four Group, Inc., and various partners (included as an
exhibit to Registrant's Registration Statement on Form S-3, No.
333-4674, and incorporated herein by reference)
4.20 Agreement and Plan of Reorganization, dated May 28, 1996, among Outback
Steakhouse, Inc., Outback Steakhouse of Florida, Inc., Nevada Summit
Corporation, and Anthony P. Grappo (included as Exhibit 2.2 to
Registration Statement on Form S-3, No. 333-14597, and incorporated
herein by reference)
4.21 Agreement and Plan of Reorganization among Outback Steakhouse, Inc.,
Outback Steakhouse of Florida, Inc. and Wibel& Associates (included as
Exhibit 2.1 to Registration Statement on Form S-3, No.333-38985, and
incorporated herein by reference)
4.22 Agreement and Plan of Reorganization among Outback Steakhouse Inc.,
Outback Steakhouse of Florida, Inc. and Novello and Associates, Inc.
(filed herewith)
4.23 Agreement and Plan of Reorganization among Outback Steakhouse Inc.,
Outback Steakhouse of Florida, Inc. and Songlines, Inc. (filed
herewith)
4.24 Agreement and Plan of Reorganization among Outback Steakhouse Inc.,
Outback Steakhouse of Florida, Inc. and Stone, Inc. (filed herewith)
4.25 Agreement and Plan of Reorganization among Outback Steakhouse Inc.,
Outback Steakhouse of Florida, Inc. and Hood & Associates, Inc. and
Dennis L. Hood (filed herewith)
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19
4.26 Agreement and Plan of Reorganization among Outback Steakhouse Inc.,
Outback Steakhouse of Florida, Inc. and Aaron Restaurant Group, Ltd.
(filed herewith)
10.01 Lease for the Company's executive offices (included as and exhibit to
Registrant's Registration Statement on Form S-1, No. 33-44452, and
incorporated herein by reference)
10.02 Service and Non-Competition Agreement dated January 2, 1990, between
Outback Florida and Chris T. Sullivan (included as and exhibit to
Registrant's Registration Statement on Form S-1, No. 33- 40255, and
incorporated herein by reference)
10.03 Service and Non-Competition Agreement dated January 2, 1990, between
Outback Florida and Robert D. Basham (included as and exhibit to
Registrant's Registration Statement on Form S-1, No. 33-40255, and
incorporated herein by reference)
10.04 Service and Non-Competition Agreement dated January 2, 1990, between
Outback Florida and John Timothy Gannon (included as and exhibit to
Registrant's Registration Statement on Form S-1, No. 33-40255, and
incorporated herein by reference)
10.05 Employment Agreement dated February 2, 1988, between Outback Florida
and John Timothy Gannon (included as and exhibit to Registrant's
Registration Statement on Form S-1, No. 33-40255, and incorporated
herein by reference)
10.06 Employment Agreement dated January 2, 1990, between Outback Florida and
Robert Merritt (included as and exhibit to Registrant's Registration
Statement on Form S-1, No. 33-40255, and incorporated herein by
reference)
10.07 Stock Option Agreement dated January 2, 1990, between Outback Florida
and Robert Merritt (included as and exhibit to Registrant's
Registration Statement on Form S-1, No. 33-40255, and incorporated
herein by reference)
10.08 Stock Option Plan (included as and exhibit to Registrant's Registration
Statement on Form S-1, No. 33-40255, and incorporated herein by
reference)
10.09 Loan Agreement dated September 14, 1994 between Outback Steakhouse,
Inc. and Barnett Bank of Tampa (included as an exhibit to Registrant's
Annual Report on Form 10-K for the year ended December 31, 1994 and
incorporated herein by reference)
10.10 Employment Agreement dated October, 1990 between Paul Avery and Outback
Florida (included as an exhibit to Registrant's Annual Report on Form
10-K for the year ended December 31, 1994 and incorporated herein by
reference)
10.11 Stock Option Agreement dated November 30, 1990 between Outback Florida
and Paul Avery (included as an exhibit to Registrant's Annual Report on
Form 10-K for the year ended December 31, 1994 and incorporated herein
by reference)
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20
10.12 Employment Agreement dated March, 1994 between Outback Florida and
Joseph J. Kadow (included as an exhibit to Registrant's Annual Report
on Form 10-K for the year ended December 31, 1994 and incorporated
herein by reference)
10.13 Stock Option Agreement dated April 1, 1994 between Outback Florida and
Joseph J. Kadow (included as an exhibit to Registrant's Annual Report
on Form 10-K for the year ended December 31, 1994 and incorporated
herein by reference)
10.14 Amendment to Lease for the Company's executive offices dates June 10,
1994 (included as an exhibit to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1994 and incorporated herein by
reference)
10.15 Amendment to Lease for the Company's executive office dated December
17, 1995 (included as an exhibit to Registrant's Annual Report on Form
10-K for the year ended December 31, 1995 and incorporated herein by
reference)
10.16 Stock Purchase Agreement dated July 18, 1995 among Outback Steakhouse,
Inc., Robert D. Basham, J. Timothy Gannon, and Bommerang Air, Inc.
(included as an exhibit to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1995 and incorporated herein by reference)
10.17 First Amendment to Loan Agreement dated August 14, 1995 between Outback
Steakhouse, Inc. and Barnett Bank of Tampa (included as an exhibit to
Registrant's Annual Report on Form 10-K for the year ended December 31,
1995 and incorporated herein by reference)
10.18 Amended and Restated Revolving Promissory Noted dated August 14, 1995
between Outback Steakhouse, Inc. and Barnett Bank of Tampa (included as
an exhibit to Registrant's Annual Report on Form 10- K for the year
ended December 31, 1995 and incorporated herein by reference)
10.19 Second Amendment to Loan Agreement dated May 30, 1996 between Outback
Steakhouse, Inc. and Barnett Bank of Tampa (included as an exhibit to
Registrant's Annual Report on Form 10-K for the year ended December 31,
1996 and incorporated herein by reference)
10.20 Amended and Restated Revolving Promissory Note dated May 30, 1996
between Outback Steakhouse, Inc. and Barnett Bank of Tampa (included
as an exhibit to Registrant's Annual Report on Form 10-K for the year
ended December 31, 1996 and incorporated herein by reference)
10.21 First Amendment to Second Amended and Restated Loan Agreement dated May
30, 1996 between Outback Steakhouse, Inc. and Barnett Bank of Tampa
(included as an exhibit to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1996 and incorporated herein by reference)
10.22 Amended and Restated Commercial Promissory Note dated May 30, 1996
between Outback Steakhouse, Inc. and Barnett Bank of Tampa (included
as an exhibit to Registrant's Annual Report on Form 10-K for the
year ended December 31, 1996 and incorporated herein by reference)
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10.23 Credit Agreement dated as of August 22, 1997 among Outback Steakhouse,
Inc., as Borrower, Outback Steakhouse of Florida, Inc., and Carrabba's
Italian Grill, Inc., as Guarantors, The Lenders Identified Herein, as
Lenders and Barnett Bank, N.A., as Agent (filed herewith)
13.01 Management's Discussion and Analysis (filed herewith)
13.02 Independent Auditors' Report and Consolidated Financial Statements
(filed herewith)
13.03 Market for the Registrant's Common Stock and Related Stock Matters
(filed herewith)
21.01 List of Subsidiaries (filed herewith)
23.01 Independent Auditors' Consent (filed herewith)
27.01 Financial Data Schedule (filed herewith)(for SEC use only)
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SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
OUTBACK STEAKHOUSE, INC.
By /s/ Chris T. Sullivan
------------------------------
Chris T. Sullivan, Chairman
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934,
THIS REPORT HAS BEEN SIGNED BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT
AND IN THE CAPACITIES AND ON THE DATES INDICATED.
/s/ Chris T. Sullivan Chairman, Chief Executive March 27, 1998
- ----------------------------------- Officer and Director
Chris T. Sullivan (Principal Executive
Officer)
/s/ Robert S. Merritt Senior Vice President, March 27, 1998
- ----------------------------------- Chief Financial Officer,
Robert S. Merritt Treasurer and Director
(Principal Financial Officer
and Principal Accounting
Officer)
/s/ Robert D. Basham President, Chief Operating March 27, 1998
- ----------------------------------- Officer and Director
Robert D. Basham
Senior Vice President and March , 1998
- ----------------------------------- Director
J. Timothy Gannon
Director March , 1998
- -----------------------------------
John A. Brabson, Jr.
/s/ Charles H. Bridges Director March 27, 1998
- -----------------------------------
Charles H. Bridges
Director March , 1998
- -----------------------------------
W.R. Carey, Jr.
/s/ Edward L. Flom Director March 27, 1998
- -----------------------------------
Edward L. Flom
/s/ Debbi Fields Rose Director March 27, 1998
- -----------------------------------
Debbi Fields Rose
/s/ Nancy Schneid Director March 27, 1998
- -----------------------------------
Nancy Schneid
/s/ Lee Roy Selmon Director March 27, 1998
- -----------------------------------
Lee Roy Selmon
/s/ Toby S. Wilt Director March 27, 1998
- -----------------------------------
Toby S. Wilt
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