-----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, OCGSU/MfL99NnHXQEEyn2YaYEO95rcH5eifBDqhl1xVLSy0CiYJmfxj8CkTVxp/P cbXAb6YAODKZlZojBx7uQA== 0000899243-98-000977.txt : 19980518 0000899243-98-000977.hdr.sgml : 19980518 ACCESSION NUMBER: 0000899243-98-000977 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: LANDRYS SEAFOOD RESTAURANTS INC CENTRAL INDEX KEY: 0000908652 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 740405386 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-22150 FILM NUMBER: 98622090 BUSINESS ADDRESS: STREET 1: 1400 POST OAK BLVD STREET 2: STE 1010 CITY: HOUSTON STATE: TX ZIP: 77056 BUSINESS PHONE: 7138501010 10-Q 1 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, 1998. 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 April 28, 1998 there were 30,339,182 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 Condensed Unaudited Consolidated Balance Sheets at March 31, 1998 and December 31, 1997 3 Condensed Unaudited Consolidated Statements of Income for the Three Months ended March 31, 1998 and March 31, 1997 4 Condensed Unaudited Consolidated Statements of Stockholders' Equity for the Three Months Ended March 31, 1998 5 Condensed Unaudited Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1998 and March 31, 1997 6 Notes to Condensed Unaudited Consolidated Financial Statements 7-9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10-14 - ------------------------------------------------------------------------------------------------- PART II. OTHER INFORMATION - ------------------------------------------------------------------------------------------------- Item 1. Legal Proceedings 15 Item 2. Changes in Securities 15 Item 3. Defaults upon Senior Securities 15 Item 4. Submission of Matters to a Vote of Security Holders 15 Item 5. Other Information 15 Item 6. Exhibits and Reports on Form 8-K 15 - ------------------------------------------------------------------------------------------------- Signatures 16 - -------------------------------------------------------------------------------------------------
1 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS The accompanying condensed unaudited consolidated financial statements have been prepared by 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. 2 CONDENSED UNAUDITED CONSOLIDATED BALANCE SHEETS
March 31, December 31, ASSETS 1998 1997 ------ ------------- ------------ (Unaudited) CURRENT ASSETS: Cash and cash equivalents $ 87,078,213 $ 17,234,130 Accounts receivable--trade and other 9,830,768 8,381,965 Inventory 23,613,934 28,224,551 Other current assets 8,158,373 8,361,755 ----------- ----------- Total current assets 128,681,288 62,202,401 PROPERTY AND EQUIPMENT, net 342,610,612 313,341,200 GOODWILL, net of amortization of $1,153,000 and $1,120,000, respectively 2,941,046 2,933,590 OTHER ASSETS, net 3,921,680 3,804,294 ----------- ----------- Total assets $478,154,626 $382,281,485 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 15,640,788 $ 18,050,183 Accrued liabilities 11,383,464 9,022,274 Income taxes payable 1,385,214 --- Current portion of long-term notes and other obligations 74,178 71,819 ----------- ----------- Total current liabilities 28,483,644 27,144,276 LONG-TERM NOTES AND OTHER OBLIGATIONS, NON-CURRENT 25,715,123 50,234,528 DEFERRED INCOME TAXES & OTHER LIABILITIES 7,511,255 8,164,954 ----------- ----------- Total liabilities 61,710,022 85,543,758 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Preferred stock, $0.01 par value, 2,000,000 shares authorized, 2,702 issued and outstanding 27 27 Common stock, $0.01 par value, 60,000,000 shares authorized, 30,339,182 and 26,004,449 issued and outstanding, respectively 303,391 260,044 Additional paid-in capital 362,848,421 250,935,805 Retained earnings 53,292,765 45,541,851 ----------- ----------- Total stockholders' equity 416,444,604 296,737,727 ----------- ----------- Total liabilities and stockholders' equity $478,154,626 $382,281,485 =========== ===========
The accompanying notes are an integral part of these condensed unaudited consolidated financial statements. 3 CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended March 31, ----------------------------------- 1998 1997 ------------- -------------- REVENUES $90,044,954 $64,300,777 OPERATING COSTS AND EXPENSES: Cost of sales 27,488,230 19,655,180 Restaurant labor 22,917,819 16,444,821 Other restaurant operating expenses 19,285,812 13,937,725 Depreciation and amortization 6,203,360 3,383,298 General and administrative expenses 2,802,447 2,302,172 ----------- ----------- Total operating costs and expenses 78,697,668 55,723,196 ----------- ----------- OPERATING INCOME 11,347,286 8,577,581 OTHER (INCOME) EXPENSE: Interest (income) expense, net (207,525) (491,800) Other, net (278,332) 16,116 ----------- ----------- Total other (income) expense (485,857) (475,684) ----------- ----------- INCOME BEFORE INCOME TAXES 11,833,143 9,053,265 PROVISION FOR INCOME TAXES 4,082,229 3,259,175 ----------- ----------- NET INCOME $ 7,750,914 $ 5,794,090 =========== =========== NET INCOME PER COMMON SHARE- BASIC $0.29 $0.23 =========== =========== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-BASIC 26,700,000 25,300,000 =========== =========== NET INCOME PER COMMON SHARE-DILUTED $0.28 $0.22 =========== =========== WEIGHTED AVERAGE NUMBER OF COMMON SHARES AND COMMON SHARE EQUIVALENTS OUTSTANDING-DILUTED 27,700,000 26,000,000 =========== ===========
The accompanying notes are an integral part of these condensed unaudited consolidated financial statements. 4 CONDENSED UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Preferred Stock Common Stock Additional ------------------ --------------------- Paid-In Retained Shares Amount Shares Amount Capital Earnings Total ------- --------- --------- ---------- ------------ ----------- ----------- Balance, December 31, 1997 2,702 $27 26,004,449 $260,044 $250,935,805 $45,541,851 $296,737,727 Net income --- --- --- --- --- 7,750,914 7,750,914 Exercise of stock options and income tax benefit --- --- 523,783 5,237 9,519,254 --- 9,524,491 Issuance of common stock, net of offering costs --- --- 3,810,950 38,110 102,393,362 --- 102,431,472 ------- -------- ---------- --------- ------------ ----------- ----------- Balance, March 31, 1998 2,702 $27 30,339,182 $303,391 $362,848,421 $53,292,765 $416,444,604 ======= ======== ========== ========= ============ =========== ===========
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
Three Months Ended March 31, -------------------------------- 1998 1997 ---------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 7,750,914 $ 5,794,090 ---------- ----------- Adjustments to reconcile net income to net cash provided by operating activities-- Depreciation and amortization 6,203,360 3,383,298 Change in assets and liabilities-net and other 4,874,163 7,351,415 ---------- ----------- Total adjustments 11,077,523 10,734,713 ---------- ----------- Net cash provided by operating activities 18,828,437 16,528,803 ---------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Property and equipment additions (33,426,451) (36,630,748) Other assets, including goodwill (161,329) (139,569) ---------- ----------- Net cash used in investing activities (33,587,780) (36,770,317) ---------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Payments on notes payable and other long-term obligations (24,517,046) (78,745) Net proceeds from sale of common stock 102,431,472 --- Proceeds from exercise of stock options 6,689,000 712,760 ---------- ----------- Net cash provided by financing activities 84,603,426 634,015 ---------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 69,844,083 (19,607,499) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 17,234,130 57,267,986 ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 87,078,213 $ 37,660,487 ============ ============ SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash payments during the period for-- Income taxes $ 159,000 $ --- Interest $ 730,000 $ 14,500
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 financial statements included herein have been prepared by the Company without audit, except for the consolidated balance sheet as of December 31, 1997. 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, 1997, consolidated financial statements filed with the Securities and Exchange Commission on Form 10-K. Cash and Cash Equivalents For purposes of the condensed statements of cash flows, the Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Goodwill and Non-Compete Agreements Goodwill and non-compete agreements are amortized over 30 years and 15 years (or the life of the related agreement), respectively. 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." SFAS No. 128 revised the historical methodology used in computing earnings per share (EPS) such that the computations required for primary and fully diluted EPS were replaced with basic and diluted EPS. Basic EPS is computed by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted EPS is computed in the same manner as fully diluted EPS, except that, among other changes, the average share price for the period is used in all cases when applying the treasury stock method to potentially dilutive outstanding options. All earnings per share amounts presented herein have been restated to reflect the adoption of SFAS No. 128. 7 LANDRY'S SEAFOOD RESTAURANTS, INC. NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS New Accounting Principle In April 1998 the American Institute of Certified Public Accountants issued a new accounting standard under Statement of Position 98-5 "Reporting on the Costs of Start-Up Activities". When adopted, this new accounting standard will require entities to expense pre-opening costs as incurred and to expense previously capitalized pre-opening costs as a cumulative effect of a change in accounting principle. The Company is required to adopt this new accounting standard by the first quarter of 1999; however, the new accounting standard encourages earlier adoption. The Company has not determined when it will adopt the new accounting standard. The Company may adopt the new accounting standard in 1998, but will adopt no later than the first quarter of 1999. At March 31, 1998, unamortized pre-opening costs were $5,002,664, which balances at the date of adoption will be expensed. 2. Accrued Liabilities Accrued liabilities are comprised of the following: March 31, 1998 December 31, 1997 -------------- ----------------- Payroll and related costs $ 4,224,130 $2,166,035 Deferred and state income taxes 974,279 974,279 Taxes, other than payroll and income taxes 3,980,879 4,001,719 Other 2,204,176 1,880,241 ----------- ---------- $11,383,464 $9,022,274 =========== ========== 3. Debt The Company has a $125 million unsecured line of credit from a syndicate of banks which matures in June 2000, and is available for expansion, acquisitions, and other general corporate purposes. Interest on the credit facility is generally payable quarterly at the Eurodollar rate plus 0.6% or the bank's base rate. 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. At March 31, 1998 the Company had $25.5 million outstanding under this credit facility at an approximate interest rate of 6.6%. 4. Stockholders' Equity In March 1998, the Company completed a public offering of 3,810,950 shares of the Company's Common Stock. Net proceeds of the common stock offering of approximately $102,400,000, will be used to repay outstanding bank loans, finance expansion and for general corporate purposes. 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 March 31, --------------------------- 1998 1997 ----------- ----------- Net Income...................................................................... $ 7,750,914 $ 5,794,090 =========== =========== Weighted Average Common Shares Outstanding...................................... 26,700,000 25,300,000 Dilutive Common Stock Equivalents -- Stock Options.............................. 1,000,000 700,000 ----------- ----------- Weighted Average Common and Common Equivalent Shares Outstanding -- Diluted.................................................. 27,700,000 26,000,000 =========== =========== Net Income Per Share -- Diluted................................................. $ 0.28 $ 0.22 =========== ===========
5. Contingencies The Company is subject to legal proceedings and claims which arise in the ordinary course of its business. Management believes, based on discussions with its legal counsel and in consideration of reserves recorded, that the outcome of all legal actions will not have a material adverse effect upon the consolidated financial position and results of operations of the Company. 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 March 31, 1998 the Company operated approximately 126 restaurants. In addition, the Company operates three limited-menu take-out service units. The Company closed two restaurants during the three months ended March 31, 1998. A Houston area restaurant closed due to an electrical fire. The restaurant will be rebuilt and the costs of construction are covered by insurance. The proceeds from business interruption insurance will replace the restaurant's lost profits during the construction period. Additionally, the Company decided not to renew a lease for a Crab House restaurant located in a hotel in Key West, Florida. 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 enactment of staged increases to federally mandated minimum wage has increased the Company's labor costs. Effective October 1, 1996, the federal minimum wage increased from $4.25/hour to $4.75/hour, and further increased to $5.15/hour effective September 1, 1997. The new minimum wage increases affected primarily initial entry-level wages of the least skilled jobs in the Company's restaurant kitchens, as the federal law mandated an offsetting increase in the tip-credit amounts for tipped employees (i.e., waitstaff). However, the increases in minimum wage have increased pressure for further wage increases of the other restaurant staff. 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 may be affected by factors such as traffic patterns, demographic considerations, 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 into which the Company is planning to expand, as well as competitors planning to expand in the same regions. 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. 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 the safe harbors created thereby. Investors are cautioned that all forward- looking statements involve risks and uncertainty, including without limitation, the 10 LANDRY'S SEAFOOD RESTAURANTS, INC. ability of the Company to continue its accelerated expansion strategy, changes in costs of food, labor, and employee benefits, the ability of the Company to continue to acquire prime locations at acceptable lease or purchase terms, as well as general market conditions, competition, and pricing. 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. Three Months Ended March 31, 1998 Compared to Three Months Ended March 31, 1997 Revenues increased $25,744,177, or 40.0%, from $64,300,777 to $90,044,954 in the three months ended March 31, 1998, compared to the three months ended March 31, 1997. The increase in revenues was primarily attributable to revenues from new restaurant openings. There was a nominal change in revenues from units opened prior to 1997. As a primary result of increased revenues, cost of sales increased $7,833,050, or 39.9%, from $19,655,180 to $27,488,230 in the three months ended March 31, 1998, compared to the same period in the prior year. Cost of sales as a percentage of revenues for the three months ended March 31, 1998, remained relatively flat, decreasing 0.1% to 30.5% from 30.6% in 1997. The decrease in cost of sales as a percentage of revenues reflects slightly lower product costs and better management cost controls in 1998. Product prices for shrimp, which are a very high use product, are expected to be higher in 1998 than in 1997. This cost increase may be partially offset by decreases in other product costs and management measures, but the overall effect may increase restaurant cost of sales as a percentage of revenues in 1998. Restaurant labor expenses increased $6,472,998, or 39.4%, from $16,444,821 to $22,917,819 in the three months ended March 31, 1998 compared to the same period in the prior year. Restaurant labor expenses as a percentage of revenues for the three months ended March 31, 1998 remained relatively flat, decreasing 0.1% to 25.5% from 25.6% in 1997. The Company continues to experience labor cost pressures attributable in part to recent increases in federally mandated minimum wages. Other restaurant operating expenses increased $5,348,087, or 38.4%, from $13,937,725 to $19,285,812 in the three months ended March 31, 1998, compared to the same period in the prior year, as a result of increased revenues and the opening of new restaurants since March 31, 1997. Such expenses decreased as a percentage of revenues to 21.4% from 21.7% primarily due to revenue growth of newly opened restaurants exceeding the increase in other restaurant operating expenses. 11 LANDRY'S SEAFOOD RESTAURANTS, INC. Depreciation and amortization expenses increased $2,820,062 or 83.4% from $3,383,298 to $6,203,360 in the three months ended March 31, 1998, compared to the same period in the prior year. The dollar increase was primarily due to the addition of new restaurants and purchases of new equipment. Depreciation and amortization as a percentage of revenues for the three months ended March 31, 1998 increased to 6.9% from 5.3% during the same period in 1997 primarily due to an increase in pre-opening amortization expense during the three months ended March 31, 1998. The increase in pre-opening amortization expense is attributable to an increase in the relative number of units subject to amortization and an increase in the per unit pre-opening expenses. General and administrative expenses increased $500,275, or 21.7%, from $2,302,172 to $2,802,447 in the three months ended March 31, 1998 compared to the same period of the prior year. General and administrative expenses decreased as a percentage of revenues to 3.1% from 3.6% primarily due to revenue growth of newly opened restaurants exceeding the increase in general and administrative expenses. The dollar increase resulted primarily from increased personnel, salaries and travel to support the Company's expansion plans. The decrease in net interest income of $284,275 and the change in other income of $294,448 in the three months ended March 31, 1998, as compared to the same period in the prior year was not deemed significant. The provision for income taxes increased $823,054 in the three months ended March 31, 1998 primarily due to a change in the Company's income. The provision for income taxes as a percentage of income before income taxes decreased to 34.5% from 36.0% due to the effect of FICA tax tip credits on reducing the Company's effective tax rate. Liquidity and Capital Resources For the three months ended March 31, 1998 the capital expenditures of the Company were approximately $33.4 million which were funded out of existing cash balances, cash flow from operations and borrowings. In March 1998, the Company completed a public offering of 3,810,950 shares of the Company's common stock. Net proceeds of the common stock offering of approximately $102,400,000 will be used to repay outstanding bank loans, finance expansion and for general corporate purposes. The Company has a $125 million line of credit from a syndicate of banks which expires in September 2000. The line of credit is available for expansion, acquisitions and general corporate purposes. At March 31, 1998, the Company had $25.5 million outstanding under this credit facility at an approximate interest rate of 6.6% and had cash balances aggregating approximately $87.1 million. These borrowings were used to fund capital expenditures and working capital. 12 LANDRY'S SEAFOOD RESTAURANTS, INC. The Company's current development plans are to open approximately 45-48 restaurants during 1998. During 1997 the Company commenced construction on a development plan for a waterfront area in South Houston (the "Kemah Development"). The Kemah Development includes up to eight restaurant sites, with additional light retail and hotel/motel facilities in a master planned development. The Company currently operates five restaurants in this development, and has not determined which portions of the remaining development it will operate or sublease. Further, the Company is evaluating the feasibility of building a multi-story office building for the Company's corporate headquarters. Due to the Company's rapid growth and increasing office needs, the Company has experienced difficulty in obtaining adequate office space within the desired immediate area of its existing office. To this end, in July 1997 the Company acquired a 4 acre undeveloped land parcel in Houston. Exclusive of any acquisitions or large real estate purchases, the Company currently expects to incur capital expenditures of up to $125 million in 1998 (based upon approximately 45 new restaurants), depending upon the actual number and timing of restaurant construction, the number of land purchases, the amount of expenditures spent on remodels, and the mix of leased, owned or conversion type locations. The Company expects that its average per unit investment, excluding real estate costs, capitalized interest costs and pre-opening expenses, to approximate $1.9 million. However, individual unit investment costs can vary from management's expectations due to a variety of factors. Moreover, average unit investment costs are dependent upon many factors, including competition for sites, location, construction costs, unit size and the mix of conversions, build-to-suit, leased and fee-owned locations. The Company currently anticipates that it will continue to purchase a portion of its new restaurant locations, which are expected to be more costly than leased locations. Separately, the Company may spend up to $12-$15 million on the Kemah Development and up to $10 million on the Corporate headquarters development, both of which will be spread over the next several fiscal years. The Company believes that existing cash balances, cash generated from operations and potential financing sources will be sufficient to satisfy the Company's working capital and planned capital expenditures through 1999. 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 an even greater seasonality and sensitivity to weather. The timing of unit openings can and will affect quarterly results. The Company anticipates some moderation in revenues from the initial volumes of new units. 13 LANDRY'S SEAFOOD RESTAURANTS, INC. 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 labor, land and construction costs could adversely affect the Company's ability to expand. 14 LANDRY'S SEAFOOD RESTARUANTS, INC. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS There are no material pending legal proceedings to which registrant is a party or of which any of the property of the registrant is the subject, except for claims in the ordinary course of business, none of which are considered material. 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 - NONE (B) REPORTS ON FORM 8-K -- NONE 15 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 thereunto 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: May 14, 1998 ------------- 16 EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS 3-MOS DEC-31-1998 DEC-31-1997 JAN-01-1998 JAN-01-1997 MAR-31-1998 MAR-31-1997 87,078,213 37,660,487 0 0 9,830,768 9,949,152 0 0 23,613,934 10,651,892 128,681,288 63,882,706 378,081,620 245,395,191 (35,471,008) (21,440,420) 478,154,626 293,761,549 28,483,644 26,579,649 0 0 0 0 27 284 303,391 253,286 416,141,186 263,212,793 478,154,626 293,761,549 90,044,954 64,300,777 90,044,954 64,300,777 27,488,230 19,655,180 78,697,668 55,723,196 (485,857) (475,684) 0 0 0 0 11,833,143 9,053,265 4,082,229 3,259,175 7,750,914 5,794,090 0 0 0 0 0 0 7,750,914 5,794,090 0.29 0.23 0.28 0.22
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