Revenue growth was achieved through continued growth in same-store sales of 5.8% and 11.8% for Outback Steakhouse and Carrabba's Italian Grills, respectively and through domestic and international unit growth. During the year, a total of 53 new Outbacks were opened, 14 of which were opened in international markets. As of December 31, 2000, there were 664 Outback Steakhouses operating in 49 domestic states and 16 countries. Carrabba's opened a total of 11 new restaurants during the year, bringing the total to 81 domestic restaurants in operation.

   We are extremely pleased to note the success of the Carrabba's repositioning. Average volumes for Carrabba's grew to approximately $2.9 million in 2000. The growth in average volumes was the result of strong same-store sales gains combined with better than system average new unit opening volumes - about $3.4 million during 2000. As a result, in 2001 we will reaccelerate Carrabba's expansion.

   In addition to the growth in our two core formats, our new upscale casual formats grew as well. Three Roy's were added (one of which was purchased from a former franchisee) and two additional Fleming's Prime Steakhouse and Wine Bar's were opened during the year. We are excited about the prospects for these formats and we believe that the investments made in 2000 will provide worthwhile returns in future years.

   Curbside Take-Away initiatives also added to revenue growth in 2000. This channel of reaching the consumer was put in place to address changing demand and family living patterns. To date, the results have greatly exceeded our expectations. Without any broadbased marketing support, sales grew to over 6% of sales for the Outback Steakhouse format by the end of the year. We think that this will continue to grow in 2001.

   The year 2000 was not without its challenges. Although commodity costs were favorable during the first half of the year, escalating beef costs caused margin contraction during the last two quarters. A competitive labor market also added to the growth in restaurant labor costs during the year. As a result, restaurant operating margins for the company declined by approximately 0.4 percent of revenues. One-time start up costs associated with the new upscale casual formats also contributed to this decline. These pressures were partially offset by margin expansion in the Carrabba's format resulting from continued average store volume growth and volume purchasing efficiencies.

   Looking ahead, we think that we are well positioned to take advantage of evolving consumer tastes. In addition to the rollout of Roy's and Fleming's Prime Steakhouse and Wine Bar, we are working on a third entry into the upscale casual market. The first Zazarac, a format based upon sophisticated southern Louisiana cuisine, opened in Tampa this year. We will add a second unit in Orlando in 2001. We are also proud of the addition of our first Lee Roy Selmon's in Tampa. This casual restaurant, which features 'Southern Fare With a Flair' is off to an excellent start. We will look for other opportunities to add additional stores in the Tampa Bay region.

   In 2001, we expect to continue the expansion of our core formats as well as our newer ones. Domestic and international Outback Steakhouse additions should total 70-80, and we anticipate opening 16-20 new Carrabba's. Roy's and Fleming's should each add another five to six stores in 2001.

   We have also entered into a partnership agreement with entertainer Jimmy Buffett to develop a casual theme restaurant called Cheeseburger in Paradise. The first unit should open in late 2001 or early 2002.

   Outback Steakhouse, Inc. was formed on the principal of partnerships and sharing. From the restaurant managing partners and area joint venture partners, to the concept development partners for Carrabba's, Roy's and Fleming's. Our success is the result of these partnerships. Recently we asked ourselves if it works for management, why not restaurant staff. This question resulted in a new sharing undertaking to be rolled-out in all Outback Steakhouses during 2001. Dubbed "Stars," it will result in the sharing of year to year profit growth with all hourly restaurant Outbackers equally. We view this as one of the most important steps we have taken to ensure expectation exceeding execution and financial performance since the inception of the Company.

   We are proud of all of our partners and the results that have been achieved. We are committed to the continued evolution of the Company and its restaurants to address these challenges. With our partners, we are confident that we can manage the challenges ahead.

Chris T. Sullivan
Chairman of the Board and Chief Executive Officer