Basis of Presentation - Outback Steakhouse, Inc. and Affiliates (the "Company") develops and operates casual dining restaurants primarily in the United States. The Company's restaurants are generally organized as partnerships, with the Company as the general partner.

   Profits and losses of each partnership are shared based on respective partnership interest percentages, as are cash distributions and capital contributions with exceptions defined in the management agreement.

   Additional Outback Steakhouse restaurants in which the Company has no direct investment are operated under franchise agreements.

   The Company completed its merger with its New England franchisee ("Tedesco") on November 30, 1999. This merger was accounted for under the pooling of interests method of accounting; and accordingly, all historical information has been restated to reflect the merger.

   Principles of Consolidation - The consolidated financial statements include the accounts and operations of the Company and affiliated partnerships in which the Company is a general partner and owns more than a 50% interest. All material balances and transactions between the consolidated entities have been eliminated.

   The unconsolidated affiliates are accounted for using the equity method.

   Reclassification - Certain amounts shown in the 1998 and 1999 consolidated financial statements have been reclassified to conform with the 2000 presentation. These reclassifications did not have any effect on total assets, total liabilities, stockholders' equity or net income.

   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 disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimated.

   Cash and Cash Equivalents - Cash equivalents consist of investments which are readily convertible to cash with an original maturity date of three months or less.

   Inventories - Inventories consist of food and beverages, and are stated at the lower of cost (first-in, first-out) or market. The Company will periodically make advance purchases of various inventory items to ensure adequate supply or to obtain favorable pricing. At December 31, 2000 and 1999, inventories included advance purchases of approximately $10,699,000 and $7,692,000, respectively.

   Preopening costs - Prior to the adoption of Statement of Position 98-5 ("SOP 98-5"), "Reporting on the Costs of Start-up Activities" during 1998 which requires that preopening and other start-up costs be expensed as incurred rather than capitalized, preopening costs, consisting of training costs and other direct costs related to new restaurant openings, were amortized primarily over twelve months. Accordingly, since the adoption of SOP 98-5, all further preopening costs have been expensed in the period incurred.

   Goodwill - Goodwill is included in the line item entitled "Other Assets" in the Company's Consolidated Balance Sheets and is amortized using the straight line method from 5 to 20 years. On an annual basis, the Company reviews the recoverability of goodwill based primarily upon an analysis of undiscounted cash flows of the related investment asset as compared to the carrying value.

   Unearned Revenue - Unearned revenues primarily represent the Company's liability for gift certificates, which have been sold but not yet redeemed, recorded at the anticipated redemption value. When gift certificates are redeemed, the Company recognizes restaurant sales and reduces the related deferred liability.

   Property, Fixtures and Equipment - Property, fixtures and equipment are stated at cost, net of accumulated depreciation. Depreciation is computed on the straight-line method over the following estimated useful lives:

   Buildings and building
     improvements..............................       20 to 31.5 years
   Furniture and fixtures......................                7 years
   Equipment...................................          2 to 15 years
   Leasehold improvements......................          5 to 20 years

   Periodically, the Company evaluates the recoverability of the net carrying value of its property, fixtures and equipment by estimating its fair value which is generally measured by discounting expected future cash flows. The Company estimates fair value based on the best information available making the appropriate estimates, judgements and projections that are considered necessary. The fair value is compared to the carrying amount in the consolidated financial statements. A deficiency in fair value relative to the carrying amount is an indication of the need to reduce the carrying value of the assets. If the total of future undiscounted cash flows were less than the carrying amount of the property, fixtures and equipment, the carrying amount is written down to the estimated fair value, and a loss resulting from value impairment is recognized by a charge to earnings.

   Construction in Progress - The Company capitalizes all direct costs incurred to construct its restaurants. Upon opening, these costs are depreciated and charged to expense based upon their property classification. The amount of interest capitalized in connection with restaurant construction was approximately $215,000, $0 and $850,000 in 2000, 1999 and 1998, respectively.

   Revenue Recognition - The Company records revenues from normal recurring sales upon the performance of services. Revenue from the sales of franchises are recognized as income when the Company has substantially performed all of its material obligations under the franchise agreement. Continuing royalties, which are a percentage of net sales of franchised restaurants, are accrued as income when earned.

   Advertising Costs - The Company's policy is to report advertising costs as expenses in the periods in which the costs are incurred. The total amounts charged to advertising expense were approximately $68,993,000, $54,320,000 and $49,540,000 in 2000, 1999 and 1998, respectively.

   Income Taxes - The Company uses the asset and liability method which recognizes the amount of current and deferred taxes payable or refundable at the date of the financial statements as a result of all events that have been recognized in the consolidated financial statements as measured by the provisions of enacted tax laws.

   The minority partners' interest in affiliated partnerships includes no provision or liability for income taxes as any tax liability related thereto is the responsibility of the individual minority partners.

   Stock Based Compensation - The Company accounts for stock based compensation under the intrinsic value method of accounting for stock based compensation and has disclosed pro forma net income and earnings per share amounts using the fair value based method prescribed by SFAS No. 123, "Accounting for Stock Based Compensation."

   Earnings Per Common Share - Earnings per common share are computed in accordance with SFAS No.128 "Earnings Per Share," which requires companies to present basic earnings per share and diluted earnings per share. Basic earnings per share are computed by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share are computed by dividing net income by the weighted average number of shares of common stock outstanding and dilutive options outstanding during the year. All applicable share and per share data have been restated to reflect the retroactive effect of a three-for-two stock split effective on March 2, 1999.

   Recently Issued Financial Accounting Standard - In June 2000, the FASB issued Statement No. 138, "Accounting for Certain Hedging Activities," which amended Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities." Statement No. 138 must be adopted concurrently with the adoption of Statement 133. The Company expects to adopt these new Statements effective January 1, 2001.

   These Statements will require the Company to recognize all derivatives on the balance sheet at fair value. The Company does not anticipate that the adoption of these Statements will have a significant effect on its results of operations or financial position. As of December 31, 2000 the Company does not have any derivative instruments as defined in SFAS No. 133.