-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GABqL6pCVd7O1opuhASJpEMlMlOSSSvdBinVCJBYtvOjYtP6gNHItvOY0IRW/H8D iHo6x1SI/h04+Izx9OkkZg== /in/edgar/work/20000814/0000899243-00-001968/0000899243-00-001968.txt : 20000921 0000899243-00-001968.hdr.sgml : 20000921 ACCESSION NUMBER: 0000899243-00-001968 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LANDRYS SEAFOOD RESTAURANTS INC CENTRAL INDEX KEY: 0000908652 STANDARD INDUSTRIAL CLASSIFICATION: [5812 ] IRS NUMBER: 740405386 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-15531 FILM NUMBER: 699438 BUSINESS ADDRESS: STREET 1: 1400 POST OAK BLVD STREET 2: STE 1010 CITY: HOUSTON STATE: TX ZIP: 77056 BUSINESS PHONE: 7138501010 10-Q 1 0001.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2000. Commission file number 000-22150 LANDRY'S SEAFOOD RESTAURANTS, INC. ---------------------------------------------------------- (Exact name of the registrant as specified in its charter) Delaware 74-0405386 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1400 Post Oak Blvd., Suite 1010, Houston, Texas 77056 (Address of principal executive offices) (713) 850-1010 (Registrant's telephone number) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. As of August 12, 2000 there were 22,283,921 shares of $0.01 par value common stock outstanding. LANDRY'S SEAFOOD RESTAURANTS, INC. INDEX
PAGE PART I. FINANCIAL INFORMATION NUMBER - ----------------------------------------------------------------------------------------------- Item 1. Financial Statements 2 Unaudited Consolidated Balance Sheets at June 30, 2000 and December 31, 1999 3 Unaudited Consolidated Statements of Income for the Three and Six Months Ended June 30, 2000 and June 30, 1999 4 Condensed Unaudited Consolidated Statement of Stockholders' Equity for the Six Months Ended June 30, 2000 5 Condensed Unaudited Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2000 and June 30, 1999 6 Notes to Condensed Unaudited Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Item 3. Quantitative and Qualitative Disclosures About Market Risk 16 - ----------------------------------------------------------------------------------------------- PART II. OTHER INFORMATION - ----------------------------------------------------------------------------------------------- Item 1. Legal Proceedings 17 Item 2. Changes in Securities 17 Item 3. Defaults upon Senior Securities 17 Item 4. Submission of Matters to a Vote of Security Holders 17 Item 5. Other Information 17 Item 6. Exhibits and Reports on Form 8-K 17 - ----------------------------------------------------------------------------------------------- Signatures 18 - -----------------------------------------------------------------------------------------------
1 LANDRY'S SEAFOOD RESTAURANTS, INC. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS The accompanying condensed unaudited consolidated financial statements have been prepared by Landry's Seafood Restaurants, Inc. (the "Company") pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of the Company, all adjustments (consisting only of normal recurring entries) necessary for fair presentation of the Company's results of operations, financial position and changes therein for the periods presented have been included. This report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which are intended to be covered by safe harbors created thereby. Stockholders are cautioned that all forward-looking statements involve risks and uncertainty, including without limitation, the ability of the Company to continue its expansion strategy, ability to make projected capital expenditures, as well as general market conditions, competition, and pricing. All statements, other than statements of historical facts, included or incorporated by reference in this report that address activities, events or developments that the Company expects or anticipates will or may occur in the future, including such things as future capital expenditures (including the amount and nature thereof), business strategy and measures to implement such strategy, competitive strengths, goals, expansion and growth of the Company's business and operations, plans, references to future success as well as other statements which include words such as "anticipate," "believe," "plan," "estimate," "expect," and "intend" and other similar expressions constitute forward-looking statements. Although the Company believes that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved. Stockholders are referred to the full discussion of risks and uncertainties associated with forward-looking statements contained in the Company's Form 10-K filed with the Securities and Exchange Commission for the fiscal year ended December 31, 1999. 2 LANDRY'S SEAFOOD RESTAURANTS, INC. UNAUDITED CONSOLIDATED BALANCE SHEETS
June 30, December 31, ASSETS 2000 1999 - ------ ---------- ------------ (Unaudited) CURRENT ASSETS: Cash and cash equivalents $ 10,737,100 $ 22,977,666 Accounts receivable--trade and other 11,297,997 7,065,298 Inventory 19,621,696 18,409,523 Other current assets 7,631,687 10,258,086 ------------ ------------ Total current assets 49,288,480 58,710,573 ------------ ------------ PROPERTY AND EQUIPMENT, net 462,460,077 431,378,855 GOODWILL, net of amortization of $1,454,372 and $1,385,959, respectively 2,639,575 2,707,988 OTHER ASSETS, net 6,107,199 3,928,436 ------------ ------------ Total assets $520,495,331 $496,725,852 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ CURRENT LIABILITIES: Accounts payable $ 23,485,700 $ 21,416,112 Accrued liabilities 26,904,795 19,772,136 Current portion of long-term notes and other obligations 98,423 68,092,714 ------------ ------------ Total current liabilities 50,488,918 109,280,962 LONG-TERM NOTES AND OTHER OBLIGATIONS 83,009,454 60,166 DEFERRED INCOME TAXES AND OTHER LIABILITIES 11,625,826 10,036,686 ------------ ------------ Total liabilities 145,124,198 119,377,814 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Common stock, $0.01 par value, 60,000,000 shares authorized, 23,533,625 and 24,823,125 issued and outstanding, net of treasury shares, respectively 235,336 248,231 Additional paid-in capital 313,576,673 322,605,100 Retained earnings 61,559,124 54,494,707 ------------ ------------ Total stockholders' equity 375,371,133 377,348,038 ------------ ------------ Total liabilities and stockholders' equity $520,495,331 $496,725,852 ============ ============
The accompanying notes are an integral part of these condensed unaudited consolidated financial statements. 3 LANDRY'S SEAFOOD RESTAURANTS, INC. UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Six Months Ended June 30, June 30, ---------------------------- ---------------------------- 2000 1999 2000 1999 ------------ ------------ ------------ ------------ REVENUES $134,041,989 $123,607,013 $244,993,267 $224,872,683 OPERATING COSTS AND EXPENSES: Cost of sales 40,994,880 38,697,215 75,276,661 70,389,942 Restaurant labor 36,553,345 34,756,632 68,236,372 64,918,070 Other restaurant operating expenses 30,416,118 27,799,256 56,596,484 52,129,676 Depreciation and amortization 6,246,613 5,467,598 12,592,389 10,709,623 General and administrative expenses 6,003,354 5,905,486 11,644,293 10,545,287 Pre-opening expenses 817,606 765,334 1,770,497 1,806,746 Special charge (credit) 2,000,000 (730,000) 2,000,000 2,945,000 ------------ ------------ ------------ ------------ Total operating costs and expenses 123,031,916 112,661,521 228,116,696 213,444,344 ------------ ------------ ------------ ------------ OPERATING INCOME 11,010,073 10,945,492 16,876,571 11,428,339 OTHER (INCOME) EXPENSE: Interest (income) expense, net 1,117,076 482,298 2,376,828 440,177 Other, net 308,758 (310,488) 301,119 (149,951) ------------ ------------ ------------ ------------ Total other (income) expense 1,425,834 171,810 2,677,947 290,226 ------------ ------------ ------------ ------------ INCOME BEFORE INCOME TAXES 9,584,239 10,773,682 14,198,624 11,138,113 PROVISION FOR INCOME TAXES 3,306,562 3,705,570 4,898,525 3,831,299 ------------ ------------ ------------ ------------ NET INCOME $ 6,277,677 $ 7,068,112 $ 9,300,099 $ 7,306,814 ============ ============ ============ ============ EARNINGS PER SHARE INFORMATION: BASIC-- Net income per common share $0.26 $0.26 $0.38 $0.26 Weighted average number of common shares outstanding 24,100,000 27,600,000 24,500,000 28,650,000 DILUTED-- Net income per common share $0.26 $0.26 $0.38 $0.25 Weighted average number of common share equivalents outstanding 24,300,000 27,700,000 24,650,000 28,750,000
The accompanying notes are an integral part of these condensed unaudited consolidated financial statements. 4 LANDRY'S SEAFOOD RESTAURANTS, INC. CONDENSED UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Common Stock Additional -------------------------- Paid-In Retained Shares Amount Capital Earnings Total -------------------------- ------------- -------------- ------------ Balance, January 1, 2000 24,823,125 $248,231 $322,605,100 $54,494,707 $377,348,038 Net income ---- ---- ---- 9,300,099 9,300,099 Dividends paid ---- ---- ---- (620,559) (620,559) Purchase of common stock, held for treasury (1,289,500) (12,895) (9,028,427) (1,615,123) (10,656,445) ---------- -------- ------------ ----------- ------------ Balance, June 30, 2000 23,533,625 $235,336 $313,576,673 $61,559,124 $375,371,133 ========== ======== ============ =========== ============
The accompanying notes are an integral part of these condensed unaudited consolidated financial statements. 5 LANDRY'S SEAFOOD RESTAURANTS, INC. CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, ------------------------- 2000 1999 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 9,300,099 $ 7,306,814 Adjustments to reconcile net income to net cash provided by operating activities- Special charge (credit) --- (730,000) Depreciation and amortization 12,592,389 10,709,623 Change in assets and liabilities-net and other 5,406,516 12,460,845 ------------ ------------ Total adjustments 17,998,905 22,440,468 ------------ ------------ Net cash provided by operating activities 27,299,004 29,747,282 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Property and equipment additions (43,217,563) (27,272,936) Other assets, including goodwill ---- (49,859) ------------ ------------ Net cash used in investing activities (43,217,563) (27,322,795) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds (payments) on notes payable and other long-term obligations 14,954,997 39,959,993 Repurchase of common stock for treasury (10,656,445) (46,029,292) Dividends paid (620,559) ---- Proceeds from exercise of stock options ---- 5,400,000 ------------ ------------ Net cash provided by (used in) financing activities 3,677,993 (669,299) ------------ ------------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (12,240,566) 1,755,188 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 22,977,666 35,183,405 ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 10,737,100 $ 36,938,593 ============ ============ SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash payments during the period for-- Income taxes $ 1,565,000 $ 431,000 Interest $ 3,094,000 $ 961,000
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 6 LANDRY'S SEAFOOD RESTAURANTS, INC. NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Presentation The consolidated financial statements included herein have been prepared by the Company without audit, except for the consolidated balance sheet as of December 31, 1999. The financial statements include all adjustments, consisting of normal, recurring adjustments and accruals, which the Company considers necessary for fair presentation of its financial position and results of operations. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. This information is contained in the Company's December 31, 1999, consolidated financial statements filed with the Securities and Exchange Commission on Form 10-K. Earnings Per Share Net income per common share has been computed in accordance with Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share." Basic Earnings Per Share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted Earnings Per Share is computed using the average share price for the period in all cases when applying the treasury stock method to potentially dilutive outstanding options. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results may differ from those estimates. Pre-opening Costs Pre-opening costs, primarily training related costs, incurred in connection with the commencement of each restaurant's operations, are expensed as incurred. 7 LANDRY'S SEAFOOD RESTAURANTS, INC. NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 2. Accrued Liabilities Accrued liabilities are comprised of the following: June 30, 2000 December 31, 1999 ------------- ----------------- Payroll and related costs $ 5,817,981 $ 4,145,220 Taxes, other than payroll and income taxes 7,321,620 6,294,954 Store closings and special charges 1,177,497 1,705,027 Deferred and state income taxes 2,470,593 1,198,998 Other 10,117,104 6,427,937 ----------- ----------- $26,904,795 $19,772,136 =========== =========== 3. Debt The Company has a $200.0 million credit facility from a syndicate of banks which was renewed and increased in June 2000 and matures in June 2003, and is available for expansion, acquisitions, and other general corporate purposes. Interest on the credit facility is generally payable quarterly at LIBOR or the bank's base rate plus a financing spread (aggregating 9.02% at June 30, 2000). The credit facility is governed by certain financial covenants, including minimum tangible net worth, a maximum leverage ratio and a minimum fixed charge coverage ratio, and is secured by the common stock of the Company's wholly owned subsidiaries. The Company's financing spread is presently 2.25% for Libor, and 0.50% for base rate borrowings, and may be decreased or increased by 25 basis points as the Company's leverage ratio decreases or increases over pre- determined percentages. 4. Stockholders' Equity In April 2000, the Company's Board of Directors authorized a renewal of the Company's open market stock buy back program for $36 million. The costs associated with the purchase of treasury stock are recorded in the stockholders' equity accounts on a pro-rata basis. The Company authorized a $0.10 per share annual dividend for 2000 to be declared and payable quarterly to stockholders. In February 2000, the Company announced the signing of a definitive merger agreement to acquire another restaurant company. The merger agreement was subsequently cancelled in April 2000, and the associated costs were expensed in the second quarter of 2000 as a special charge. 8 LANDRY'S SEAFOOD RESTAURANTS, INC. NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS A reconciliation of the amounts used to compute net income per common share - diluted is as follows:
Three Months Ended June 30, Six Months Ended June 30, --------------------------- ------------------------- 2000 1999 2000 1999 ----------- ----------- ----------- ----------- Net Income $ 6,277,677 $ 7,068,112 $ 9,300,099 $ 7,306,814 =========== =========== =========== =========== Weighted Average Common Shares Outstanding 24,100,000 27,600,000 24,500,000 28,650,000 Dilutive Common Stock Equivalents -- Stock Options 200,000 100,000 150,000 100,000 ----------- ----------- ----------- ----------- Weighted Average Common and Common Equivalent Shares Outstanding -- Diluted 24,300,000 27,700,000 24,650,000 28,750,000 =========== =========== =========== =========== Net Income Per Share -- Diluted $ 0.26 $ 0.26 $ 0.38 $ 0.25 =========== =========== =========== =========== Net Income Per Share, Before Special Charge $ 0.31 $ 0.24 $ 0.43 $ 0.32 =========== =========== =========== ===========
5. Contingencies Class Action Litigation Class action lawsuits were filed in June and July of 1999 in the United States District Court for the Southern District of Texas, Houston Division against the Company and its executive officers, directors, and underwriters that participated in the Company's offering of Common Stock in March 1998. The plaintiffs in these actions seek unspecified monetary damages. Although the ultimate outcome of this matter cannot be determined at this time, the Company believes these claims are without merit and intends to defend these claims vigorously. General Litigation The Company is subject to other legal proceedings and claims that arise in the ordinary course of business. Management does not believe that the outcome of any of those matters will have a material adverse effect on the Company's financial position, results of operations or cash flows. 9 LANDRY'S SEAFOOD RESTAURANTS, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Introduction The Company owns and operates full-service, casual dining seafood restaurants. As of June 30, 2000, the Company operated 160 restaurants. In addition, the Company operates three limited-menu take-out service units. In February 2000, the Company announced it had entered into a merger agreement to acquire all of the outstanding shares of Rainforest Cafe, Inc. The merger agreement was subsequently cancelled in April 2000, and the associated costs were expensed in the second quarter of 2000 as a special charge. The Company's operations may be impacted by changes in federal and state taxes and other federal and state governmental policies which include many possible factors such as the level of minimum wages, the deductibility of business and entertainment expenses, levels of disposable income and national and regional economic growth. The restaurant industry is intensely competitive and is affected by changes in consumer tastes and by national, regional, and local economic conditions and demographic trends. The performance of individual restaurants, including new restaurants the Company may open or acquire, may be affected by factors such as traffic patterns, demographic considerations, weather conditions, and the type, number, and location of competing restaurants. The Company has many well- established competitors with greater financial resources and longer histories of operation than the Company, including competitors already established in regions where the Company is planning to expand, as well as competitors planning to expand in the same regions or into regions where the Company currently operates. The Company faces significant competition from mid-priced, full-service, casual dining restaurants offering seafood and other types and varieties of cuisine. The Company's competitors include national, regional, and local chains as well as local owner-operated restaurants. The Company also competes with other restaurants and retail establishments for restaurant sites. 10 LANDRY'S SEAFOOD RESTAURANTS, INC. This report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which are intended to be covered by safe harbors created thereby. Stockholders are cautioned that all forward- looking statements involve risks and uncertainty, including without limitation, the ability of the Company to continue its expansion strategy, ability to make projected capital expenditures, as well as general market conditions, competition, and pricing. All statements, other than statements of historical facts, included or incorporated by reference in this report that address activities, events or developments that the Company expects or anticipates will or may occur in the future, including such things as future capital expenditures (including the amount and nature thereof), business strategy and measures to implement such strategy, competitive strengths, goals, expansion and growth of the Company's business and operations, plans, references to future success as well as other statements which include words such as "anticipate," "believe," "plan," "estimate," "expect," and "intend" and other similar expressions constitute forward-looking statements. Although the Company believes that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved. Stockholders are referred to the full discussion of risks and uncertainties associated with forward-looking statements contained in the Company's Form 10-K filed with the Securities and Exchange Commission for the fiscal year ended December 31, 1999. 11 LANDRY'S SEAFOOD RESTAURANTS, INC. RESULTS OF OPERATIONS Restaurant Profitability The following table sets forth the percentage relationship to revenues of certain operating data for the periods indicated: THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ------------------ ------------------ 2000 1999 2000 1999 ----- ----- ----- ----- Revenues 100.0% 100.0% 100.0% 100.0% Cost of sales 30.6 31.3 30.7 31.3 Restaurant labor 27.3 28.1 27.9 28.9 Other restaurant operating expenses 22.7 22.5 23.1 23.2 ----- ----- ----- ----- Restaurant level profit /(1)/ 19.4% 18.1% 18.3% 16.6% ===== ===== ===== ===== - ------------ (1) Excludes depreciation, amortization and pre-opening expenses. Three Months Ended June 30, 2000 Compared to the Three Months Ended June 30, 1999 Revenues increased $10,434,976, or 8.4%, from $123,607,013 to $134,041,989 for the three months ended June 30, 2000, compared to the three months ended June 30, 1999. The increase in revenues was primarily attributable to revenues from new restaurant openings. There was a nominal change in same store sales and average weekly sales for the three months ended June 30, 2000, compared to the same period in 1999. As a primary result of increased revenues, cost of sales increased $2,297,665, or 5.9%, from $38,697,215 to $40,994,880 in the three months ended June 30, 2000, compared to the same period in the prior year. Cost of sales as a percentage of revenues for the three months ended June 30, 2000 decreased to 30.6%, from 31.3% in 1999. The decrease in cost of sales as a percentage of revenues reflects increased efficiencies and favorable product costs in 2000. Restaurant labor expenses increased $1,796,713 or 5.2%, from $34,756,632 to $36,553,345 in the three months ended June 30, 2000, compared to the same period in the prior year. Restaurant labor expenses as a percentage of revenues for the three months ended June 30, 2000 decreased to 27.3% from 28.1%. The decrease in restaurant labor expenses is primarily the result of a decline in hourly labor expenses. 12 LANDRY'S SEAFOOD RESTAURANTS, INC. Other restaurant operating expenses increased $2,616,862, or 9.4%, from $27,799,256 to $30,416,118 in the three months ended June 30, 2000, compared to the same period in the prior year, primarily as a result of increased revenues. Such expenses increased as a percentage of revenues to 22.7% in 2000 from 22.5% in 1999, primarily due to higher utility costs. Depreciation and amortization expense increased $779,015, or 14.2%, from $5,467,598 to $6,246,613 in the three months ended June 30, 2000, compared to the same period in the prior year. The increases are primarily due to the addition of new facilities. General and administrative expenses increased $97,868, or 1.7%, from $5,905,486 to $6,003,354 in the three months ended June 30, 2000, compared to the same period in the prior year, and decreased as a percentage of revenues to 4.5% from 4.8%. The dollar increase resulted primarily from increased personnel to support the Company's operations. Pre-opening expenses in the three months ended June 30, 2000 were $817,606 as compared to $765,334 in the three months ended June 30, 1999. The Company opened six units during the three months ended June 30, 2000. The special charge of $2,000,000 ($1,310,000 net of tax) for the three months ended June 30, 2000, was incurred in connection with the termination of a proposed acquisition. The special credit of $730,000 for the three months ended June 30, 1999 represented the reversal (income) of estimated costs related to favorably settling lease obligations of certain closed stores. The increase in net interest expense in the three months ended June 30, 2000 as compared to the same period in the prior year, is attributable to increased borrowings for capital expenditures, working capital and treasury stock purchases, and increases in the weighted average borrowing rates under the Company's credit facilities. The change in other income in the three months ended June 30, 2000, as compared to the same period in the prior year, is not deemed significant. Provision for income taxes decreased by $399,008 from $3,705,570 in 1999 to $3,306,562 in 2000 primarily due to the change in the Company's income. The provision for income taxes as a percentage of income before income taxes remained constant at 34.5%. 13 LANDRY'S SEAFOOD RESTAURANTS, INC. Six Months Ended June 30, 2000 Compared to the Six Months Ended June 30, 1999 Revenues increased $20,120,584, or 8.9%, from $224,872,683 to $244,993,267 for the six months ended June 30, 2000, compared to the six months ended June 30, 1999. The increase in revenues was primarily attributable to revenues from new restaurant openings. There was a nominal change in same store sales and average weekly sales for the six months ended June 30, 2000 compared to the same period in 1999. As a primary result of increased revenues, cost of sales increased $4,886,719, or 6.9%, from $70,389,942 to $75,276,661 in the six months ended June 30, 2000, compared to the same period in the prior year. Cost of sales as a percentage of revenues for the six months ended June 30, 2000 decreased to 30.7%, from 31.3% in 1999. The decrease in cost of sales as a percentage of revenue reflects increased efficiencies and favorable product costs in 2000. Restaurant labor expenses increased $3,318,302, or 5.1%, from $64,918,070 to $68,236,372 in the six months ended June 30, 2000, compared to the same period in the prior year. Restaurant labor expenses as a percentage of revenues for the six months ended June 30, 2000 decreased to 27.9% from 28.9%. The decrease in restaurant labor expenses is primarily the result of a decline in hourly labor expenses. Other restaurant operating expenses increased $4,466,808, or 8.6%, from $52,129,676 to $56,596,484 in the six months ended June 30, 2000, compared to the same period in the prior year, as a result of increased revenues. Such expenses decreased as a percentage of revenues to 23.1% in 2000 from 23.2% in 1999 due to improved cost management offset by higher utility costs. Depreciation and amortization expense increased $1,882,766, or 17.6%, from $10,709,623 to $12,592,389 in the six months ended June 30, 2000, compared to the same period in the prior year. The dollar increase was primarily due to the addition of new facilities. General and administrative expenses increased $1,099,006, or 10.4%, from $10,545,287 to $11,644,293 in the six months ended June 30, 2000, compared to the same period in the prior year. The dollar increase resulted primarily from increased personnel to support the Company's operations. Pre-opening expenses in 2000 were $1,770,497 as compared to $1,806,746 in 1999. The Company opened 11 units during the six months ended June 30, 2000. 14 LANDRY'S SEAFOOD RESTAURANTS, INC. The special charge of $2,000,000 ($1,310,000 net of tax) in 2000 was incurred in connection with the termination of a proposed acquisition. The special charge of $2,945,000 in 1999 represents the net of a $730,000 reversal (income) of estimated costs related to favorably settling lease obligations of certain closed stores recorded in the second quarter of 1999, and $3,675,000 of expenses incurred related to an abandoned merger transaction during the first quarter of 1999. The increase in net interest expense in the six months ended June 30, 2000, as compared to the same period in the prior year, is primarily attributable to increased borrowings for capital expenditures, working capital, and treasury stock purchases, and increases in the weighted average borrowing rates under the Company's credit facilities. The change in other income is not deemed significant. Provision for income taxes increased by $1,067,226 from $3,831,299 in 1999 to $4,898,525 in 2000 primarily due to the change in the Company's income. The provision for income taxes as a percentage of income before income taxes remained constant. Liquidity and Capital Resources For the six months ended June 30, 2000 the capital expenditures of the Company were approximately $43.2 million, and the Company repurchased $10.6 million of common stock which were funded out of existing cash balances, cash flow from operations and borrowings. The Company has a $200.0 million credit facility from a syndicate of banks which expires in June 2003, and is available for expansion, acquisitions and general corporate purposes. At June 30, 2000, the Company had $83.0 million outstanding under this credit facility at an interest rate of 9.02% and cash equivalent balances approximating $10.7 million. The Company's current development plans are to open 12 to 15 restaurants during each of 2000 and 2001, eleven of which were open as of June 30, 2000. The Company, from time to time, reviews opportunities for investment in the hospitality, entertainment, food service management and other industries. The Company's exercise of any such investment opportunity may impact the Company's development plans and capital expenditures. The Company is in the process of constructing a multi-story office building for the Company's corporate headquarters, meeting and training facilities and a research and development test kitchen. Capital expenditures related to the office building are anticipated to be $15 million. In April 2000, the Company's Board of Directors authorized a renewal of the Company's stock buy back program for $36.0 million. In April 2000, the Company declared its first quarterly dividend of $0.025 payable to shareholders on May 3, 2000. 15 LANDRY'S SEAFOOD RESTAURANTS, INC. Seasonality and Quarterly Results The Company's business is seasonal in nature, with revenues and, to a greater degree, operating profits being lower in the first and fourth quarters than in other quarters due to the Company's reduced winter volumes. The Company has and continues to open restaurants in highly seasonal tourist markets and has further noted that the Joe's Crab Shack concept restaurants tend to experience even greater seasonality and sensitivity to weather. The Company anticipates a decline in revenues from the initial ("honeymoon") volumes of new units. Impact of Inflation Management does not believe that inflation has had a significant effect on the Company's operations during the past several years. Management believes the Company has historically been able to pass on increased costs through menu price increases, but there can be no assurance that it will be able to do so in the future. Future increases in restaurant labor costs, including expected future increases in federal minimum wages, interest rates, land and construction costs could adversely affect the Company's profitability and ability to expand. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to market risk primarily related to potential adverse changes in interest rates as discussed below. Management is actively involved in monitoring exposure to market risk and continues to develop and utilize appropriate risk management techniques. The Company is not exposed to any other significant risks from the use of derivative financial instruments. Management does not use derivative financial instruments for trading or to speculate on changes in interest rates or commodity prices. Interest Rate Risk Total debt at June 30, 2000, included $83,000,000 of floating-rate debt attributed to bank credit facility borrowings at an average interest rate of 9.02%. As a result, the Company's annual interest cost in 2000 will fluctuate based on short-term interest rates. The impact on annual cash flow of a ten percent change in the floating rate (approximately 90 basis points) would be approximately $750,000 annually based on the floating rate debt outstanding at June 30, 2000. At June 30, 2000, the Company's floating-rate debt had a book value and a fair market value of $83,000,000. The floating-rate debt will mature in June 2003. 16 LANDRY'S SEAFOOD RESTAURANTS, INC. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Class Action Litigation Class action lawsuits were filed in June and July of 1999 against the Company and its executive officers, directors and underwriters that participated in the Company's offering of Common Stock in March 1998, in the United States District Court for the Southern District of Texas, Houston Division. The plaintiffs in these actions seek unspecified monetary damages. Although the ultimate outcome of this matter cannot be determined at this time, the Company believes these claims are without merit and intends to defend these claims vigorously. General Litigation The Company is subject to other legal proceedings and claims that arise in the ordinary course of business. Management does not believe that the outcome of any of those matters will have a material adverse effect on the Company's financial position, results of operations or cash flows. ITEM 2. CHANGES IN SECURITIES Not Applicable ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not Applicable ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not Applicable ITEM 5. OTHER INFORMATION Not Applicable ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (A) EXHIBITS --27. FINANCIAL DATA SCHEDULE (B) REPORTS ON FORM 8-K . THE COMPANY FILED A FORM 8-K ON JULY 12, 2000, ANNOUNCING A $200 MILLION CREDIT LINE WITH A SYNDICATE OF BANKS.
17 Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. LANDRY'S SEAFOOD RESTAURANTS, INC. (Registrant) /s/ Tilman J. Fertitta ---------------------------------------- Tilman J. Fertitta Chairman of the Board of Directors, President and Chief Executive Officer (Principal Executive Officer) /s/ Paul S. West ---------------------------------------- Paul S. West Vice President-Finance and Chief Financial Officer (Principal Financial and Accounting Officer) Dated: August 14, 2000 18 EX-27 2 0002.txt FINANCIAL DATA SCHEDULE
5 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 10,737,100 0 11,297,997 0 19,621,696 49,288,480 541,045,989 (78,585,912) 520,495,331 50,488,918 83,009,454 0 0 235,336 375,135,797 520,495,331 244,993,267 244,993,267 75,276,661 228,116,696 301,119 0 2,376,828 14,198,624 4,898,525 9,300,099 0 0 0 9,300,099 0.38 0.38
-----END PRIVACY-ENHANCED MESSAGE-----