10-Q 1 d10q.txt FORM 10-Q -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------- FORM 10-Q [X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2002. Commission file number 000-22150 LANDRY'S RESTAURANTS, INC. (Exact name of the registrant as specified in its charter) DELAWARE 74-00405386 (State or other jurisdiction of (I.R.S. Employer incorporation of organization) Identification No.) 1510 West Loop South, Houston, TX 77027 (Address of principal executive offices) (713) 850-1010 (Registrant's telephone number) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_] APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. AS OF MAY 2, 2002 THERE WERE 27,836,166 SHARES OF $0.01 PAR VALUE COMMON STOCK OUTSTANDING -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- LANDRY'S RESTAURANTS, INC. INDEX
Page Number ------ PART I. FINANCIAL INFORMATION Item 1 Financial Statements............................................ 2 Condensed Unaudited Consolidated Balance Sheets at March 31, 2002 and December 31, 2001.............................................. 3 Condensed Unaudited Consolidated Statements of Income for the Three Months Ended March 31, 2002 and March 31, 2001..................... 4 Condensed Unaudited Consolidated Statement of Stockholders' Equity for the Three Months Ended March 31, 2002.......................... 5 Condensed Unaudited Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2002 and March 31, 2001............... 6 Notes to Condensed Unaudited Consolidated Financial Statements...... 7 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations................................................. 10 PART II. OTHER INFORMATION Item 1 Legal Proceedings............................................... 13 Signatures............................................................. 14
LANDRY'S RESTAURANTS, INC. PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements The accompanying condensed unaudited consolidated financial statements have been prepared by Landry's 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. In this report, we have made forward-looking statements. Our forward-looking statements are subject to risks and uncertainty, including without limitation, our ability to continue our expansion strategy, our ability to make projected capital expenditures, as well as general market conditions, competition, and pricing. Forward-looking statements include statements regarding: . future capital expenditures (including the amount and nature thereof); . business strategy and measures to implement such strategy; . competitive strengths; . expansion and growth of our 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. Although we believe that the assumptions underlying our forward-looking statements are reasonable, any of the assumptions could be inaccurate and, therefore, we cannot assure you 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 us or any other person that the objectives and plans will be achieved. 2 LANDRY'S RESTAURANTS, INC. CONDENSED UNAUDITED CONSOLIDATED BALANCE SHEETS
March 31, December 31, 2002 2001 ------------ ------------ ASSETS (Unaudited) CURRENT ASSETS: Cash and cash equivalents.......................... $ 20,081,449 $ 31,081,008 Accounts receivable--trade and other............... 16,439,254 13,518,828 Inventories........................................ 31,292,314 33,562,608 Deferred taxes..................................... 5,621,459 5,621,459 Other current assets............................... 10,503,443 10,336,996 ------------ ------------ Total current assets............................. 83,937,919 94,120,899 ------------ ------------ PROPERTY AND EQUIPMENT, net.......................... 629,033,066 587,828,723 GOODWILL, net........................................ 2,434,547 2,438,996 OTHER ASSETS, net.................................... 7,576,726 5,782,578 ------------ ------------ Total assets..................................... $722,982,258 $690,171,196 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable................................... $ 45,945,933 $ 45,027,820 Accrued liabilities................................ 65,468,706 55,109,685 Current portion of long-term debt.................. 50,000 -- ------------ ------------ Total current liabilities........................ 111,464,639 100,137,505 ------------ ------------ LONG-TERM DEBT, NET OF CURRENT PORTION............... 186,204,200 175,000,000 DEFERRED TAXES....................................... 5,404,979 4,126,948 OTHER LIABILITIES.................................... 17,484,001 17,236,120 ------------ ------------ Total liabilities................................ 320,557,819 296,500,573 ------------ ------------ COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Common stock, $0.01 par value, 60,000,000 shares authorized, 22,271,245 and 21,996,369, issued and outstanding, respectively......................... 222,712 219,964 Additional paid-in capital......................... 308,716,255 305,598,659 Retained earnings.................................. 93,485,472 87,852,000 ------------ ------------ Total stockholders' equity....................... 402,424,439 393,670,623 ------------ ------------ Total liabilities and stockholders' equity....... $722,982,258 $690,171,196 ============ ============
The accompanying notes are an integral part of these condensed unaudited consolidated financial statements. 3 LANDRY'S RESTAURANTS, INC. CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended March 31, -------------------------- 2002 2001 ------------ ------------ REVENUES............................................ $192,169,998 $175,954,964 OPERATING COSTS AND EXPENSES: Cost of revenues.................................. 55,400,794 52,054,649 Restaurant labor.................................. 55,281,845 51,692,170 Other restaurant operating expenses............... 49,910,439 45,302,304 General and administrative expenses............... 9,521,685 9,034,984 Depreciation and amortization..................... 9,885,157 8,602,074 Restaurant pre-opening expenses................... 1,282,237 1,081,776 ------------ ------------ Total operating costs and expenses.............. 181,282,157 167,767,957 ------------ ------------ OPERATING INCOME.................................... 10,887,841 8,187,007 OTHER EXPENSE (INCOME): Interest expense (income), net.................... 2,088,598 2,785,020 Other, net........................................ (162,146) 39,609 ------------ ------------ Total other expense............................. 1,926,452 2,824,629 ------------ ------------ INCOME BEFORE INCOME TAXES.......................... 8,961,389 5,362,378 PROVISION FOR INCOME TAXES.......................... 2,778,030 1,662,337 ------------ ------------ NET INCOME.......................................... $ 6,183,359 $ 3,700,041 ============ ============ EARNINGS PER SHARE INFORMATION: BASIC-- Net income........................................ $ 0.28 $ 0.17 Weighted average number of common shares outstanding...................................... 22,150,000 21,500,000 DILUTED-- Net income........................................ $ 0.27 $ 0.17 Weighted average number of common share equivalents outstanding.......................... 23,200,000 22,040,000
The accompanying notes are an integral part of these condensed unaudited consolidated financial statements. 4 LANDRY'S RESTAURANTS, INC. CONDENSED UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Common Stock Additional ------------------- Paid-In Retained Shares Amount Capital Earnings Total ---------- -------- ------------ ----------- ------------ Balance, December 31, 2001................... 21,996,369 $219,964 $305,598,659 $87,852,000 $393,670,623 Net income.............. -- -- -- 6,183,359 6,183,359 Dividends paid.......... -- -- -- (549,887) (549,887) Exercise of stock options and income tax benefit................ 274,876 2,748 3,117,596 -- 3,120,344 ---------- -------- ------------ ----------- ------------ Balance, March 31, 2002................... 22,271,245 $222,712 $308,716,255 $93,485,472 $402,424,439 ========== ======== ============ =========== ============
The accompanying notes are an integral part of these condensed unaudited consolidated financial statements. 5 LANDRY'S RESTAURANTS, INC. CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, -------------------------- 2002 2001 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income....................................... $ 6,183,359 $ 3,700,041 Adjustments to reconcile net income to net cash provided by operating activities-- Depreciation and amortization.................. 9,885,157 8,602,074 Change in assets and liabilities-net and other......................................... 5,018,608 (2,020,293) ------------ ------------ Total adjustments.............................. 14,903,765 6,581,781 ------------ ------------ Net cash provided by operating activities.... 21,087,124 10,281,822 CASH FLOWS FROM INVESTING ACTIVITIES: Property and equipment additions................. (15,789,796) (19,595,846) Payment of acquisition integration liabilities... (1,391,242) (18,541,242) Purchase of Muer Seafood Restaurants, net of cash acquired........................................ (27,652,773) -- ------------ ------------ Net cash used in investing activities.......... (44,833,811) (38,137,088) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from exercise of stock options.......... 2,297,015 588,541 Borrowings (payments) under credit line, net..... 11,000,000 17,975,016 Dividends paid................................... (549,887) (537,435) ------------ ------------ Net cash provided by (used in) financing activities.................................... 12,747,128 18,026,122 ------------ ------------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS....................................... (10,999,559) (9,829,144) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD... 31,081,008 26,159,525 ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD......... $ 20,081,449 $ 16,330,381 ============ ============ SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash payments during the period for-- Income taxes................................... $ 165,801 $ 180,000 ============ ============ Interest....................................... $ 2,514,110 $ 2,605,000 ============ ============
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 6 LANDRY'S RESTAURANTS, INC. NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 1. NATURE OF BUSINESS Landry's Restaurants, Inc. (the "Company") owns and operates seafood restaurants primarily under the trade names Landry's Seafood House, Joe's Crab Shack, The Crab House and Charley's Crab. In addition, the Company owns and operates domestic and licenses international rainforest themed restaurants under the trade name Rainforest Cafe. The Company is also the developer and operator of the Kemah Boardwalk, located near Houston, Texas. The Kemah Boardwalk is a thirty acre waterfront restaurant development including seven restaurants, a boutique hotel, retail shops, amusement attractions, and a marina. In February 2002, the Company acquired C.A. Muer Seafood Restaurants, Inc. ("Muer Acquisition"), the owner and operator of 16 seafood restaurants for approximately $28.0 million. Principles of Consolidation The accompanying financial statements include the consolidated accounts of Landry's Restaurants, Inc., a Delaware holding company and its wholly and majority owned subsidiaries and partnership. 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, 2001. 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, 2001, consolidated financial statements filed with the Securities and Exchange Commission on Form 10-K. Two recent financial accounting standards were issued addressing accounting for business combinations, goodwill and other intangible assets. Management does not believe either pronouncement has a material effect on the Company's financial statements. 2. ACCRUED LIABILITIES Accrued liabilities are comprised of the following:
March 31, December 2002 31, 2001 ----------- ----------- Payroll and related costs............................. $16,406,892 $14,137,640 Rent, insurance and taxes, other than payroll and income taxes......................................... 27,405,498 24,845,811 Acquisition accruals (Rainforest Cafe and Muer)....... 4,132,091 3,569,111 Other................................................. 17,524,225 12,557,123 ----------- ----------- $65,468,706 $55,109,685 =========== ===========
7 LANDRY'S RESTAURANTS, INC. NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) During the three months ended March 31, 2002, accrued Rainforest Cafe acquisition costs were reduced by cash payments aggregating $845,000. In connection with the preliminary purchase price allocation for the Muer Acquisition, the Company recorded $1,856,000 in acquisition integration liabilities, of which $546,000 was paid during the three months ended March 31, 2002. 3. DEBT The Company has a $205.0 million credit line from a syndicate of banks. The credit line may be increased to $220.0 million at the request of the Company, subject to the addition of participating banks. The credit line matures in July 2004, and is available for expansion, acquisitions, share repurchases, and other general corporate purposes. Interest on the credit line is payable monthly or quarterly at Libor or the banks' base rate plus a financing spread (aggregating 4.5% at March 31, 2002). The credit line is governed by certain financial covenants. 4. CONTINGENCIES Class Action Litigation Class action lawsuits were filed in 1999 against the Company in the United States District Court for the Southern District of Texas. These actions name as defendants the Company along with others that participated in the Company's offering of common stock in March 1998. Such lawsuits allege that the defendants violated certain Federal securities laws. The plaintiffs in these actions seek unspecified monetary damages. The Company believes these claims are without merit. The parties to these lawsuits have reached a settlement, subject to judicial review and other procedural activities before it becomes final. Dissenters Rights Litigation Eighty-one former shareholders (holding 4,406,655 shares) of Rainforest Cafe, Inc. dissented to the merger between the Company and Rainforest Cafe. On February 13, 2001, Rainforest Cafe sent each of the 81 dissenting shareholders, Rainforest Cafe's estimate of fair value per share, along with a check in the amount of $3.25 per share, which was the original acquisition price per share. Subsequently, 78 of the dissenting shareholders have made a demand for supplemental payment based on their belief that the fair value per share of common stock of the former Rainforest Cafe was greater than $3.25 per share. The Company believes that its estimate of fair value is correct, and that the dissenting shareholders' estimate of fair value is inflated. The Company is vigorously pursuing its determination of fair value in an appraisal proceeding in a Minnesota District Court. 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 these matters will have a material adverse effect on the Company's financial position, results of operations or cash flows. 5. STOCKHOLDERS' EQUITY In April 2002, the Company completed a public offering of 5,297,500 shares of the Company's common stock. Net proceeds of the offering were approximately $133.1 million and are to be used to repay outstanding borrowings, finance expansion, acquisitions, and for other corporate purposes. 8 LANDRY'S RESTAURANTS, INC. NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) A reconciliation of the amounts used to compute net income per common share- diluted is as follows:
Three Months Ended March 31, --------------------- 2002 2001 ---------- ---------- Net income.............................................. $6,183,359 $3,700,041 ---------- ---------- Weighted average common shares outstanding.............. 22,150,000 21,500,000 Dilutive common stock equivalents--stock options........ 1,050,000 540,000 ---------- ---------- Weighted average common and common equivalent shares outstanding--diluted................................... 23,200,000 22,040,000 ========== ========== Net income per share--diluted........................... $ 0.27 $ 0.17 ========== ==========
9 LANDRY'S RESTAURANTS, INC. ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Introduction We own and operate full-service, casual dining restaurants. As of March 31, 2002, we operated 213 restaurants. In February 2002, we added 16 seafood restaurants located primarily in Michigan and Florida from the Muer Acquisition. In this report, we have made forward-looking statements. Our forward-looking statements are subject to risks and uncertainty, including without limitation, our ability to continue our expansion strategy, our ability to make projected capital expenditures, as well as general market conditions, competition, and pricing. Forward-looking statements include statements regarding: . future capital expenditures (including the amount and nature thereof); . business strategy and measures to implement such strategy; . competitive strengths; . expansion and growth of our 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. Although we believe that the assumptions underlying our forward-looking statements are reasonable, any of the assumptions could be inaccurate and, therefore, we cannot assure you 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 us or any other person that the objectives and plans will be achieved. Results of Operations Restaurant Profitability The following table sets forth the percentage relationship to total restaurant revenues of certain restaurant operating data for the periods indicated:
Three Months Ended March 31, -------------------- 2002 2001 --------- --------- Revenues.................................................. 100.0% 100.0% Cost of revenues.......................................... 28.8 29.6 Restaurant labor.......................................... 28.8 29.4 Other restaurant operating expenses (1)................... 26.0 25.7 --------- --------- Restaurant level profit (1)............................... 16.4% 15.3% ========= =========
-------- (1) Excludes depreciation, amortization and pre-opening expenses. 10 Three Months Ended March 31, 2002 Compared to the Three Months Ended March 31, 2001 Revenues increased $16,215,034, or 9.2%, from $175,954,964 to $192,169,998 for the three months ended March 31, 2002, compared to the three months ended March 31, 2001. The increase in revenues was primarily attributable to revenues from new restaurant openings, a same store sales increase of 2.6% for the Company's seafood restaurants, and the inclusion of revenues from the Muer Acquisition. As a primary result of increased revenues, cost of revenues increased $3,346,145, or 6.4%, from $52,054,649 to $55,400,794 in the three months ended March 31, 2002, compared to the same period in the prior year. Cost of revenues as a percentage of revenues for the three months ended March 31, 2002, decreased to 28.8%, from 29.6% in 2001. The decrease in cost of revenues as a percentage of revenues primarily reflects menu changes and lower product costs in 2002 as compared to 2001. Restaurant labor expenses increased $3,589,675 or 6.9%, from $51,692,170 to $55,281,845 in the three months ended March 31, 2002, compared to the same period in the prior year, principally as a result of increased revenues. Restaurant labor expenses as a percentage of revenues for the three months ended March 31, 2002, decreased to 28.8% from 29.4% in 2001, as a result of increases in hourly labor productivity. Other restaurant operating expenses increased $4,608,135, or 10.2%, from $45,302,304 to $49,910,439 in the three months ended March 31, 2002, compared to the same period in the prior year, principally as a result of increased revenues. Such expenses increased as a percentage of revenues to 26.0% in 2002 from 25.7% in 2001, as a primary result of higher advertising and insurance costs. The Company anticipates that 2002 advertising and marketing expenses will increase as a percentage of revenues over the prior year. General and administrative expenses increased $486,701, or 5.4%, from $9,034,984 to $9,521,685 in the three months ended March 31, 2002, compared to the same period in the prior year, and decreased slightly as a percentage of revenues to 5.0% in 2002 from 5.1% in 2001. The dollar amount increase was a result of increased revenues and personnel required to support the Company's operations. Depreciation and amortization expense increased $1,283,083, or 14.9%, from $8,602,074 to $9,885,157 in the three months ended March 31, 2002, compared to the same period in the prior year. The increase for 2002 was primarily due to the addition of new restaurants and equipment, and an asset impairment charge of approximately $500,000. The decrease in net interest expense in the three months ended March 31, 2002, as compared to the prior year, is primarily due to the Company's lower borrowing rate. The Company's average borrowing rate declined by approximately 2.9% from March 31, 2001, to March 31, 2002. The change in other expense (income), net was not deemed material. Provision for income taxes increased by $1,115,693 to $2,778,030 in the three months ended March 31, 2002 from $1,662,337 in 2001 primarily due to changes in the Company's pre-tax income. Liquidity and Capital Resources In April 2002, we completed a public offering of 5,297,500 shares of common stock and raised approximately $133 million. These proceeds were initially used to pay down the majority of amounts outstanding on our credit line. Our $205 million line of credit from a syndicate of banks matures in July 2004, and is available for expansion, acquisitions, share repurchases and other general corporate purposes. At March 31, 2002, we had $186 million outstanding under this credit facility, which was substantially repaid in April 2002. For the three months ended March 31, 2002, we funded our capital expenditures of $15.8 million, out of existing cash balances, cash flow from operations and borrowings. In February 2002, we acquired 16 seafood restaurants in the Muer Acquisition for approximately $28 million. 11 We expect to spend between $90 and $100 million on capital expenditures in 2002 in addition to the $28 million Muer Acquisition. The capital expenditures include partial construction costs on an estimated sixteen new seafood restaurants, one new Rainforest Cafe restaurant, and a new Aquarium restaurant, which are expected to open in 2002 or early 2003, plus further land acquisition costs and other capital expenditures. We have entered into an agreement to construct and operate a convention center in the City of Galveston, Texas. The Galveston Convention Center's estimated construction costs of approximately $28 million and subsequent operating expenses will not be funded by us, but by governmental agency bonds issued by the City of Galveston and serviced by certain hotel occupancy taxes. In connection with the convention center development and related management contract, we are obligated to purchase and donate, with a reversionary interest, land required for use by the Galveston Convention Center. Under the agreement, we will have the right to one-half of any profits generated by the operation of the convention center. We have previously purchased property, including a multi-story building, adjacent to the new Houston professional baseball park and close to the Houston Convention Center. The property is also near the proposed new professional basketball arena and other major venues under development and construction in the downtown area of Houston, Texas. Subject to the availability of financing and certain tax abatements, we plan to renovate the existing building into a 200-room hotel. We expect renovation and construction costs to be approximately $25 million, which would be expended over the next three years. We plan to fund 2002 capital expenditures and any additional restaurant acquisitions out of proceeds from existing cash balances, cash flow from operations and availability under our existing credit facility. As a result of our tax carryforwards and deferred tax assets, including amounts attributable to the acquisition of Rainforest Cafe, we expect our cash flow from operations to be subject to reduced Federal income tax payments for the foreseeable future, and therefore provide additional cash flow for funding our business activities and debt service. We pay an annual $0.10 per share dividend, declared and paid in quarterly amounts. We, from time to time, review opportunities for restaurant acquisitions, and investments in the hospitality, entertainment, amusement, food service and facilities management and other industries. Our exercise of any such investment opportunity may impact our development plans and capital expenditures. We believe that adequate sources of capital are available to fund our business activities through December 31, 2002. Seasonality and Quarterly Results Our business is seasonal in nature. Our reduced winter volumes cause revenues and, to a greater degree, operating profits to be lower in the first and fourth quarters than in other quarters. We have and continue to open restaurants in highly seasonal tourist markets. We further note that the Joe's Crab Shack concept restaurants tend to experience even greater seasonality and sensitivity to weather than our other restaurant concepts. Periodically, our sales and profitability may be negatively affected by adverse weather. The timing of unit openings can and will affect quarterly results. We anticipate a decline in revenues from the initial ("honeymoon") volumes of new units, and a decline in 2002 revenues of certain of Rainforest Cafe restaurants. Impact of Inflation We do not believe that inflation has had a significant effect on our operations during the past several years. We believe we have historically been able to pass on increased costs through menu price increases, but there can be no assurance that we will be able to do so in the future. Future increases in restaurant labor costs, including expected future increases in federal minimum wages, land and construction costs could adversely affect our profitability and ability to expand. 12 Quantitative and Qualitative Disclosures Amount Market Risk We are exposed to market risk primarily related to potential adverse changes in interest rates as discussed below. We actively monitor exposure to market risk and continue to develop and utilize appropriate risk management techniques. We are not exposed to any other significant risks from the use of derivative financial instruments. We do not use derivative financial instruments for trading or to speculate on changes in interest rates or commodity prices. Interest Rate Risk Total debt at March 31, 2002, included $186.0 million of floating-rate debt attributed to a bank line of credit facility at an average interest rate of 4.5%. In April 2002, the amounts outstanding under the facility were substantially repaid. As a result, our annual interest cost in 2002 will fluctuate based on borrowings outstanding and short-term interest rates. PART II. OTHER INFORMATION ITEM 1. Legal Proceedings Dissenters Rights Litigation Eighty-one former shareholders (holding 4,406,655 shares) of Rainforest Cafe, Inc. dissented to the merger between the Company and Rainforest Cafe. On February 13, 2001, Rainforest Cafe sent each of the 81 dissenting shareholders, Rainforest Cafe's estimate of fair value per share, along with a check in the amount of $3.25 per share, which was the original acquisition price. Subsequently, 78 of the dissenting shareholders have made a demand for supplemental payment based on their belief that the fair value per share of common stock in the former Rainforest Cafe was greater than $3.25 per share. The Company believes that its estimate of fair value is correct, and that the dissenting shareholders' estimate of fair value is significantly inflated. The Company is vigorously pursuing its determination of fair value in an appraisal proceeding in a Minnesota District Court. Class Action Litigation Class action lawsuits were filed in 1999 against the Company in the United States District Court for the Southern District of Texas. These actions name as defendants the Company and others that participated in the Company's offering of common stock in March 1998. Such lawsuits allege that the defendants violated certain Federal securities laws. The plaintiffs seek unspecified monetary damages. The Company believes these claims are without merit. The parties to these lawsuits have reached a settlement, subject to judicial review and other procedural activities before it becomes final. 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. 13 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 RESTAURANTS, INC. (Registrant) /s/ Tilman J. Fertitta _____________________________________ Tilman J. Fertitta Chairman of the Board of Directors, President and Chief Executive Officer (Principal Executive Officer) /s/ Paul S. West _____________________________________ Paul S. West Vice President--Finance and Chief Financial Officer (Principal Financial and Accounting Officer) Dated: May 10, 2002 14