Refer to the financial statements of OutbackSteakhouse
1. Did Outback have more or fewer authorized shares of common stock than Landry's?
2. From the statement of stockholders' equity, what total amount of cash dividends did Outback declare during the current year? What was this on a pershare basis? Compared to Landry's, is Darden's policy on dividends better, worse, or just different?
3. How many shares of common stock had Outback issued as of December 31, 2005? How many shares were held in treasury at that time? Using this information, determine the number of shares outstanding at the end of the current year.
4. How has Outback's basic EPS changed over the past three years? Based on this trend, what do you predict will happen in the following year? Were the changes in EPS caused primarily by changes in Outback's Net income or average number of shares outstanding?
5. Calculate the ROE ratio for Outback in the current and prior year (express ROE as a
Req. 1
From the stockholders’ equity section of the balance sheet we see that Outback steakhouse has 200,000 authorized shares, which is 59,800,000 less than Landry’s 60,000,000 authorized shares.
Req. 2
From the statement of stockholders’ equity, Outback steakhouse has paid a total cash dividends of $38,455 (based on the Basic weighted average number of shares outstanding), this means it paid a cash dividend of $0.52 per share.
Outback steakhouse’s policy on dividends is not better or worse than Landry’s; both had declared and paid cash dividends.
Req. 3
From the stockholders’ equity section of the balance sheet we see that 78,750 are outstanding as of December, 31 2005 with 3,896 shares held in treasury. This means that the number of shares outstanding is (78,750 – 3,896) 74,854 shares.
Req. 4
From the EPS information section of the Income Statement, we see that EPS has been decreasing from $2.18 to $2.05, to $1.98 in 2003, 2004, and 2005, respectively, which means that it decreased by 5.96% from 2003 to 2004, and by 3.42% from 2004 to 2005. I would expect next year’s EPS to keep decreasing.
The changes in EPS is primarily caused by changes in Outback's Net income as Net Income has been decreasing for the same period while the number of shares outstanding have also been decreasing.
Req. 5
Return on Equity =

Net Income

Average Stockholders' Equity

Current Year



Prior Year

146,746



151,571

1,992,422



1,733,392









0.07365

or

7.37%


=

0.0874

or

8.74%

For calculations, I have not used the average stockholders’ equity figures since data for 2003 is not provided so it would have not been possible to use an average for the prior year.
Landry’s ROEs of 7.8% in 2005 is better than that of Outback Steakhouse, yet the ROE for 2004 of 8.6% is lower than that of Outback’s.
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