Osiris Acquisition (NYSE:OSI)
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TAMPA, Florida, Jan. 8 /PRNewswire-FirstCall/ -- OSI Restaurant Partners, Inc. (NYSE:OSI) today reported that net income for the three months ended September 30, 2006 was $17,268,000, equal to $0.23 per share (diluted), compared with $29,472,000 or $0.38 per share (diluted) for the same period in 2005. Revenues for the quarter increased by 8.9% to $950,636,000 compared with $872,871,000 during the same quarter last year. Comparative unaudited information provided for all periods has been adjusted to reflect the Company's restatement of previously issued consolidated financial statements as discussed herein.
Quarterly Results and Other Information:
-- On November 6, 2006 the Company announced that it would be restating
its consolidated financial statements to correct for errors in its
liability for unearned revenue for unredeemed gift cards and
certificates as well as for certain other errors. The Company has
filed an amended Form 10-K for 2005 which describes the effects of the
restatement and the Company expects to file amended Forms 10-Q for
first and second quarter 2006 as soon as practicable.
-- For the three months ended September 30, 2006, adjusting for the
conversion costs related to the implementation of the Company's new
Partner Equity Program, diluted earnings per share on an adjusted basis
were $0.29. Adjusted third quarter 2006 diluted earnings per share
does not eliminate what the Company considers to be the ongoing
expenses resulting from the implementation of the new Partner Equity
Program nor does it eliminate stock-based compensation expenses
resulting from the first quarter implementation of a new accounting
standard. For the three months ended September 30, 2005, diluted
earnings per share on a restated and adjusted basis were $0.34, after
adjusting for certain impairment charges and including expenses for the
ongoing costs of the Partner Equity Program as if it had been in place
and stock-based compensation charges as if the new stock-based
compensation rules had been in effect in 2005. This comparison of
adjusted results is intended to provide comparability between the
periods and a reconciliation of reported and adjusted results is
included in the accompanying tables.
-- The Company adopted a new accounting standard titled SFAS No. 123
(Revised), "Share-Based Payment" during the first quarter of 2006.
SFAS No. 123R requires the fair value measurement of all stock-based
payments to employees, including grants of employee stock options, and
recognition of those expenses in the statement of operations.
-- During the first quarter of 2006, all managing partners were given an
opportunity to elect participation in a new Partner Equity Program
("PEP" or the "Plan"), more fully described in the Company's 2005 Form
10-K/A. This new Plan became effective for approximately 96% of all
managing partners in current employment agreements and for all new
managing partner employment agreements signed after March 1, 2006. The
PEP replaces the issuance of stock options with a deferred compensation
program.
-- Early termination of the waiting period under the Hart-Scott-Rodino Act
of 1976 with respect to the merger announced on November 6, 2006 has
been granted.
Third Quarter -- Comparable Store Sales
Comparable store sales and average unit volumes for the Company's
significant restaurant brands for the quarter ended September 30, 2006
compared to the same quarter in 2005 changed by approximately:
Franchise
and
development
Company- joint System-
owned venture wide
Quarter ended September 30, 2006
Domestic comparable store sales
(stores open 18 months or more)
Outback Steakhouses -2.4 % -3.6 % -2.5 %
Carrabba's Italian Grills -2.6 % n/a -2.6 %
Bonefish Grills 0.0 % -5.1 % -0.4 %
Fleming's Prime Steakhouse and Wine Bars 2.8 % n/a 2.8 %
Roy's -1.0 % n/a -1.0 %
Domestic average unit volumes
Outback Steakhouses -2.2 % -3.5 % -2.4 %
Carrabba's Italian Grills -5.1 % n/a -5.1 %
Bonefish Grills -0.4 % -15.8 % -1.3 %
Fleming's Prime Steakhouse and Wine Bars -0.8 % n/a -0.8 %
Roy's -2.2 % n/a -2.2 %
Changes in comparable store sales and average unit volumes for domestic,
Company-owned restaurants for the quarter include year-to-year menu price
changes of approximately:
Company-owned menu
Quarter ended September 30, 2006 price changes (1)
Outback Steakhouses 0.8 %
Carrabba's Italian Grills 0.8 %
Bonefish Grills 1.1 %
(1) Reflects nominal amounts of menu price changes, prior to any change in
product mix because of price increases, and may not reflect amounts
effectively paid by the customer. Menu price increases are not
provided for Fleming's and Roy's as a significant portion of their
sales come from specials, which fluctuate daily.
Five-week Period Ended September 30, 2006 -- Comparable Store Sales
Comparable store sales and average unit volumes for the Company's
significant restaurant brands for the five-week period ended September 30,
2006 compared with the same five-week period in 2005 changed by
approximately:
Franchise
and
development
Company- joint System-
owned venture wide
Five weeks ended September 30, 2006
Domestic comparable store sales
(stores open 18 months or more)
Outback Steakhouses 0.8 % -2.4 % 0.4 %
Carrabba's Italian Grills -0.3 % n/a -0.3 %
Bonefish Grills 1.0 % -2.4 % 0.8 %
Fleming's Prime Steakhouse and Wine Bars 2.7 % n/a 2.7 %
Roy's -3.1 % n/a -3.1 %
Domestic average unit volumes
Outback Steakhouses 0.6 % -2.3 % 0.2 %
Carrabba's Italian Grills -2.5 % n/a -2.5 %
Bonefish Grills -1.2 % -11.6 % -1.8 %
Fleming's Prime Steakhouse and Wine Bars -0.8 % n/a -0.8 %
Roy's -3.6 % n/a -3.6 %
Changes in comparable store sales and average unit volumes for domestic,
Company-owned restaurants for the five-week period include year-to-year
menu price changes of approximately:
Company-owned menu
Five weeks ended September 30, 2006 price changes (1)
Outback Steakhouses 0.8 %
Carrabba's Italian Grills 1.1 %
Bonefish Grills 1.2 %
(1) Reflects nominal amounts of menu price changes, prior to any change in
product mix because of price increases, and may not reflect amounts
effectively paid by the customer. Menu price increases are not
provided for Fleming's and Roy's as a significant portion of their
sales come from specials, which fluctuate daily.
Four-week Periods Ended October 28, 2006 and November 25, 2006 --
Comparable Store Sales
Comparable store sales and average unit volumes for the Company's
significant restaurant brands for the four-week periods ended October 28,
2006 and November 25, 2006 compared with the same four-week periods in
2005 changed by approximately:
Franchise
and
development
Company- joint System-
owned venture wide
Four weeks ended October 28, 2006
Domestic comparable store sales
(stores open 18 months or more)
Outback Steakhouses 0.3 % -2.7 % -0.1 %
Carrabba's Italian Grills -3.5 % n/a -3.5 %
Bonefish Grills 1.0 % -5.7 % 0.5 %
Fleming's Prime Steakhouse and Wine Bars 3.7 % n/a 3.7 %
Roy's 1.4 % n/a 1.4 %
Domestic average unit volumes
Outback Steakhouses 0.4 % -3.3 % -0.1 %
Carrabba's Italian Grills -5.4 % n/a -5.4 %
Bonefish Grills -3.0 % -15.7 % -3.8 %
Fleming's Prime Steakhouse and Wine Bars -0.5 % n/a -0.5 %
Roy's -1.0 % n/a -1.0 %
Four weeks ended November 25, 2006
Domestic comparable store sales
(stores open 18 months or more)
Outback Steakhouses 0.3 % -3.6 % -0.2 %
Carrabba's Italian Grills -2.6 % n/a -2.6 %
Bonefish Grills -0.9 % -5.8 % -1.2 %
Fleming's Prime Steakhouse and Wine Bars 1.9 % n/a 1.9 %
Roy's -3.4 % n/a -3.4 %
Domestic average unit volumes
Outback Steakhouses 0.6 % -3.6 % 0.0 %
Carrabba's Italian Grills -4.0 % n/a -4.0 %
Bonefish Grills -4.2 % -15.4 % -4.9 %
Fleming's Prime Steakhouse and Wine Bars -3.1 % n/a -3.1 %
Roy's -5.7 % n/a -5.7 %
Changes in comparable store sales and average unit volumes for domestic,
Company-owned restaurants for the four-week periods ended October 28, 2006
and November 25, 2006 include year to year menu price changes of
approximately:
Company-owned menu
Four weeks ended October 28, 2006 price changes (1)
Outback Steakhouses 0.8 %
Carrabba's Italian Grills 1.4 %
Bonefish Grills 1.2 %
Four weeks ended November 25, 2006
Outback Steakhouses 0.8 %
Carrabba's Italian Grills 1.4 %
Bonefish Grills 1.1 %
(1) Reflects nominal amounts of menu price changes, prior to any change in
product mix because of price increases, and may not reflect amounts
effectively paid by the customer. Menu price increases are not
provided for Fleming's and Roy's as a significant portion of their
sales come from specials, which fluctuate daily.
Certain statements in this news release are forward-looking statements. Forward-looking statements are based on current expectations and are subject to risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements, including, but not limited to, price and availability of commodities, such as beef, chicken, shrimp, pork, seafood, dairy, potatoes, onions and energy supplies, which are subject to fluctuation and could increase or decrease more than the Company expects; inflation; increased labor and insurance costs; changes in consumer tastes and the level of acceptance of the Company's restaurant concepts (including consumer acceptance of price increases); consumer perception of food safety; local, regional, national and international economic conditions; the seasonality of the Company's business; demographic trends; the cost of advertising and media; and government actions and policies. Forward-looking statements regarding guidance for 2006, stock-based compensation and the Partner Equity Program include estimates and assumptions, including but not limited to, restaurant operating performance and outstanding share calculations which may differ materially from actual results. Additionally, statements made concerning the proposed merger transaction are based on current expectations of management and there are risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. In particular, (1) the Company may be unable to obtain shareholder approval required for the transaction, (2) conditions to the closing of the transaction may not be satisfied, (3) the transaction may involve unexpected costs, unexpected liabilities or unexpected delays, (4) the businesses of the Company may suffer as a result of uncertainty surrounding the transaction, and (5) the financing required to complete the transaction may be delayed or may not be available. Further information on potential factors that could affect the financial results of OSI Restaurant Partners, Inc. is included in its 2005 Annual Report on Form 10-K/A, current reports on Form 8-K and other filings with the Securities and Exchange Commission. The Company assumes no obligation to update the information in this press release.
The Company's restaurant system operates in 50 states and 21 countries internationally.
STATEMENTS OF INCOME
(in thousands, except for per share data)
Three months ended Nine months ended
September 30, September 30,
2006 2005 2006 2005
(restated) (restated)
Revenues
Restaurant sales $945,779 $867,851 $2,919,110 $2,674,657
Other revenues 4,857 5,020 15,911 15,770
Total revenues 950,636 872,871 2,935,021 2,690,427
Costs and expenses
Cost of sales 343,243 318,523 1,059,341 981,309
Labor and other related 266,568 228,028 812,639 691,292
Other restaurant operating 210,241 196,528 652,031 569,971
Depreciation and
amortization 38,484 32,539 110,936 93,166
General and administrative 54,945 46,470 167,804 147,620
Hurricane property and
inventory losses - 1,412 - 1,412
Provision for impaired
assets and restaurant
closings 10,513 1,396 13,547 10,026
Contribution for "Dine Out
for Hurricane Relief" - 1,000 - 1,000
(Income) loss from operations
of unconsolidated
affiliates 270 (766) 145 (665)
924,264 825,130 2,816,443 2,495,131
Income from operations 26,372 47,741 118,578 195,296
Other income (expense), net - (75) 5,165 (1,098)
Interest income 761 658 2,122 1,476
Interest expense (3,870) (1,848) (9,452) (4,519)
Income before provision for
income taxes and elimination
of minority interest 23,263 46,476 116,413 191,155
Provision for income taxes 6,219 15,874 32,881 64,328
Income before elimination of
minority interest 17,044 30,602 83,532 126,827
Elimination of minority
interest (224) 1,130 5,201 7,470
Net income $17,268 $29,472 $78,331 $119,357
Basic earnings per share $0.23 $0.40 $1.06 $1.61
Basic weighted average shares
outstanding 73,554 74,167 73,903 73,991
Diluted earnings per share $0.23 $0.38 $1.02 $1.55
Diluted weighted average
shares outstanding 75,179 76,832 76,424 76,794
SUPPLEMENTAL BALANCE SHEET
INFORMATION (in millions): As of September 30, 2006
Cash $45
Working capital deficit (188)
Current portion of long-term debt 69
Long-term debt (1) 274
(1) Long-term debt in the Company's Consolidated Balance Sheet includes:
(i) $31.9 million of debt owed by a consolidated franchisee-
affiliated entity for which the Company provides a guarantee, and
(ii) a $2.5 million fair value debt guarantee on amounts owed by an
unconsolidated affiliate of the Company (and for which the Company
provides a total guarantee of $17.6 million).
System-wide Sales
System-wide sales grew by 7.9% for the quarter compared with the
respective period in 2005. System-wide sales is a non-GAAP financial
measure that includes sales of all restaurants operating under the
Company's brand names, whether the Company owns them or not. The two
components of system-wide sales -- sales of OSI Restaurant Partners, Inc.
and sales of franchisees and unconsolidated development joint ventures --
are provided in the following supplemental tables.
Three months ended Nine months ended
September 30, September 30,
OSI RESTAURANT PARTNERS, INC.
RESTAURANT SALES 2006 2005 2006 2005
(in millions):
(restated) (restated)
Outback Steakhouse restaurants
Domestic $540 $536 $1,694 $1,683
International 78 64 226 193
Total 618 600 1,920 1,876
Carrabba's Italian Grills 156 143 481 428
Bonefish Grills 78 55 231 162
Fleming's Prime Steakhouse and
Wine Bars 42 33 134 106
Other restaurants 52 37 153 103
Total Company-owned restaurant
sales $946 $868 $2,919 $2,675
The following information presents sales for franchised and unconsolidated
development joint venture restaurants. These are restaurants that are not
owned by the Company and from which the Company only receives a franchise
royalty or a portion of their total income. Management believes that
franchise and unconsolidated development joint venture sales information
is useful in analyzing Company revenues because franchisees and affiliates
pay service fees and/or royalties that generally are based on a percent of
sales. Management also uses this information to make decisions about
future plans for the development of additional restaurants and new
concepts as well as evaluation of current operations.
These sales do not represent sales of OSI Restaurant Partners, Inc., and
are presented only as an indicator of the changes in the restaurant
system, which management believes is important information regarding the
health of the Company's restaurant brands.
Three months ended Nine months ended
September 30, September 30,
FRANCHISE AND DEVELOPMENT JOINT 2006 2005 2006 2005
VENTURE SALES (in millions):
Outback Steakhouse restaurants
Domestic $87 $88 $271 $270
International 28 28 77 84
Total 115 116 348 354
Bonefish Grills 4 3 12 9
Total franchise and development
joint venture sales (1) $119 $119 $360 $363
Income from franchise and
development joint ventures (2) $6 $6 $16 $15
(1) Franchise and development joint venture sales are not included in
Company revenues as reported in the Consolidated Statements of Income.
(2) Represents the franchise royalty and portion of total income included
in the Consolidated Statements of Income in the line items Other
revenues or Income from operations of unconsolidated affiliates.
Third Quarter Comparative Store Information
RESTAURANTS IN OPERATION AS OF SEPTEMBER 30: 2006 2005
Outback Steakhouses
Company-owned - domestic 683 661
Company-owned - international 117 87
Franchised and development joint venture - domestic 107 105
Franchised and development joint venture - international 44 51
Total 951 904
Carrabba's Italian Grills
Company-owned 217 189
Bonefish Grills
Company-owned 106 78
Franchised 7 4
Total 113 82
Fleming's Prime Steakhouse and Wine Bars
Company-owned 43 34
Roy's
Company-owned 22 19
Cheeseburger in Paradise
Company-owned 36 21
Lee Roy Selmon's
Company-owned 5 3
Blue Coral Seafood and Spirits
Company-owned 1 -
Paul Lee's Chinese Kitchens
Company-owned - 4
System-wide total 1,388 1,256
Store Information for October 31, 2006 and November 30, 2006
Restaurants Restaurants
opened/ opened/
(closed) (closed)
during the Restaurants during Restaurants
month open the month open
ended as of ended as of
October October November November
31, 2006 31, 2006 30, 2006 30, 2006
Outback Steakhouses
Company-owned - domestic (1) (4) 679 - 679
Company-owned -
international - 117 1 118
Franchised and development
joint venture - domestic - 107 - 107
Franchised and development
joint venture -
international 1 45 - 45
Total (3) 948 1 949
Carrabba's Italian Grills
Company-owned 8 225 2 227
Bonefish Grills
Company-owned 3 109 3 112
Franchised - 7 - 7
Total 3 116 3 119
Fleming's Prime Steakhouse
and Wine Bars
Company-owned 2 45 - 45
Roy's
Company-owned - 22 1 23
Cheeseburger in Paradise
Company-owned - 36 2 38
Lee Roy Selmon's
Company-owned - 5 - 5
Blue Coral Seafood and
Spirits
Company-owned - 1 - 1
System-wide total 10 1,398 9 1,407
(1) One restaurant closing is included in the month of November.
Reconciliation of Adjusted Results
The following table sets forth a reconciliation of the Company's results
reported in accordance with generally accepted accounting principles
("GAAP") to the adjusted results, which include non-GAAP financial
measures. Although management encourages readers to rely on the Company's
results reported in accordance with GAAP, management believes that
adjusted results may be useful to investors' understanding of the
Company's core operations and the comparability of financial information
from period to period. The following table presents reported net income
as adjusted for the following after-tax items for the three and nine
months ended September 30, 2006 and 2005 (in thousands):
Three months Nine months
ended ended
September 30, September 30,
2006 2005 2006 2005
(restated) (restated)
Net income, as reported $17,268 $29,472 $78,331 $119,357
Stock-based compensation,
net of taxes
PEP conversion costs (1) 2,593 - 13,000 -
Options / 123R (2) - (1,662) - (4,767)
Restricted stock (3) - (605) - (1,277)
Partner equity program (PEP) (4) - (2,466) - (7,558)
2,593 (4,733) 13,000 (13,602)
Special items, net of taxes
Gain on restaurant disposal (5) - - (3,151) -
Provision for impaired assets,
net (6) 2,197 - 2,197 4,617
Hurricane-related items (7) - 1,469 - 1,469
2,197 1,469 (954) 6,086
Adjusted net income $22,058 $26,208 $90,377 $111,841
Adjusted diluted earnings per share $0.29 $0.34 $1.18 $1.46
(1) The PEP "conversion costs" represent a portion of the costs of the PEP
that would have been recorded in prior years if the Company had to
expense all stock-based compensation and the new program had been in
place at the inception of all existing manager partner contracts.
(2) Effect on earnings had existing Company management and managing
partner employment grants of stock options been expensed in 2005.
Stock options were not required to be expensed under accounting
guidance in 2005 but are expensed beginning in 2006 upon adoption of a
new accounting standard.
(3) Incremental expense for 2005 grants of restricted stock to the
Company's Chief Executive Officer, Chief Financial Officer and Senior
Vice President of Real Estate and Development to reflect an
annualized expense as if these grants were outstanding the entire
year.
(4) Estimation of PEP expenses had the Plan been in place in 2005.
(5) Net gain included in Other income in the Consolidated Income
Statement on closing an Outback Steakhouse in accordance with a lease
termination agreement.
(6) Net impairment charges include the closing of two restaurants as a
result of a landlord prematurely terminating the leases and a write-
off of a note receivable in the third quarter of 2006 and an
impairment charge recorded against a deferred license fee receivable
related to certain non-restaurant operations in the second quarter of
2005. Ordinarily, impairment charges for closed stores or impaired
restaurant assets are not considered special items as those charges
occur from time to time in normal restaurant operations.
(7) Impact of hurricane property and inventory losses and the Company's
contribution for "Dine Out for Hurricane Relief."
2006 OUTLOOK
The following information updates the Company's previously reported expectations for the full year 2006. The Company anticipates 2006 diluted earnings per share will range from $1.25 to $1.30. After adjusting for certain stock-based compensation and impairment charges in 2006 and 2005 and hurricane losses in 2005, diluted earnings per share for 2006 is expected to range from -19% to -22% compared to 2005, or $1.43 to $1.48 per share in 2006 compared to $1.83 per share in 2005. This estimate is based upon current economic conditions, current and anticipated commodity markets, planned restaurant development schedules, the implementation of the Partner Equity Program ("PEP") and the recognition of additional stock-based compensation expense from the adoption of a new accounting standard and assumes a constant number of shares outstanding. This estimate also excludes any costs associated with the transactions contemplated by the definitive agreement announced on November 6, 2006 for OSI Restaurant Partners, Inc. to be acquired by an investor group led by Bain Capital LLC, Catterton Partners and the Company's founders, Chris Sullivan, Bob Basham and Tim Gannon.
The following tables are provided to compare the adjusted results of
operations for the year ended December 31, 2005 to the currently expected
results for 2006 (excluding the effect of transaction expenses) as
presented in the guidance above, adjusted for certain effects of the new
Partner Equity Program ("PEP"). This comparison primarily demonstrates
the expected incremental effect of new stock-based compensation costs as
the Company adopted a new accounting standard January 1, 2006 that
requires expensing of stock options and implemented the PEP in the first
quarter of 2006. This adjusted information includes non-GAAP financial
measures which the Company reconciles to the results reported in
accordance with GAAP. Management believes that the adjusted presentation
may be useful to investors to permit them to compare the Company's
expected results for 2006 to its adjusted results for 2005, using
consistent assumptions regarding stock-based compensation and the
implementation of the PEP for each period.
Years ended December 31,
2006 2005
Adjusted
Adjusted net income (in thousands): Low High (restated)
Net income (per guidance for 2006 /
reported in 2005) $95,879 $99,514 $146,746
Stock-based compensation,
net of taxes (1)
PEP conversion costs (2) 14,903 14,903 -
Options / 123R (3) - - (6,367)
Restricted stock (4) - - (1,948)
Partner equity program (PEP) (5) - - (10,090)
14,903 14,903 (18,405)
Special items, net of taxes
Hurricane property losses - - 2,498
Gain on restaurant disposal (6) (3,151) (3,151) -
Provision for impaired assets, net (7) 2,197 2,197 9,154
(954) (954) 11,652
Adjusted net income $109,828 $113,463 $139,993
% change vs. 2005 -22 % -19 %
Adjusted diluted earnings per share $1.43 $1.48 $1.83
% change vs. 2005 -22 % -19 %
Diluted weighted shares outstanding 76,541 76,541 76,541
(1) Stock-based expenses are primarily non-cash charges.
(2) The PEP "conversion costs" represent a portion of the costs of the PEP
that would have been recorded in prior years if the Company had to
expense all stock-based compensation and the new program had been in
place at the inception of all existing manager partner contracts. The
ongoing PEP expense is not adjusted out of guidance for 2006.
(3) Effect on earnings had existing Company management and managing
partner employment grants of stock options been expensed in 2005.
Stock options were not required to be expensed under accounting
guidance in 2005 but are expensed beginning in 2006 upon adoption of a
new accounting standard. Guidance for 2006 includes estimated
stock-based compensation expense for stock options, which could vary
based upon restaurant operating results, manager turnover and other
factors.
(4) Incremental expense for 2005 grants of restricted stock to the
Company's Chief Executive Officer, Chief Financial Officer and Senior
Vice President of Real Estate and Development to reflect an annualized
expense as if these grants were outstanding the entire year.
(5) Estimation of PEP expenses had the Plan been in place in 2005.
Estimated PEP expenses for 2006 are included in 2006 guidance.
(6) Net gain included in Other income in the Consolidated Income Statement
on closing an Outback Steakhouse in accordance with a lease
termination agreement.
(7) Includes net impairment charges in 2005 of $4,537 for intangible and
other asset impairments related to the sale of Paul Lee's Chinese
Kitchen and $4,617 against a deferred license fee receivable related
to certain non-restaurant operations. Impairment charges for closed
stores or impaired restaurant assets are not adjusted as those charges
occur from time to time in normal restaurant operations. Includes net
impairment charges in 2006 of $1,768 related to a landlord dispute
which led to the premature exit of restaurant sites in Plantation,
Florida due to landlord failure to adequately maintain the mall site
and an impairment of $429 related to a write-off of a note receivable
from a hospitality venue in Memphis, Tennessee.
Full Year 2006 Guidance Update
The decrease in 2006 net income guidance noted above, compared to the guidance provided in the second quarter 2006 earnings release, was primarily due to the following (all amounts referenced are after-tax):
-- Impairment charges in the third quarter of 2006 of $6.4 million were
incurred for closed/underperforming restaurants and the write-off of an
investment in a hospitality venue. Of this total, $2.2 million of
impairments were considered to be special items and were reflected as
adjustments to net income (see footnote 7 above).
-- 2006 International net income is expected to decline by $4.3 million
compared to second quarter 2006 guidance due to revenue and profit in
Korean operations performing below expectations, driven by overall
restaurant segment traffic declines and the elimination of promotional
programs in 2006 that contributed revenue and profit in 2005.
-- Net expenses of $3.0 million are anticipated for 2006 due to the
financial restatement and related audit and consulting fees to correct
errors in accounting for unearned revenue for unredeemed gift cards and
certificates and certain other errors and to implement remediation
plans to address control environment weaknesses. The accounting errors
are described in more detail in The Company's third quarter 2006 10Q
and 2005 10K/A.
-- The Outback domestic and Fleming's concepts are expected to generate an
improvement in 2006 net income compared to second quarter 2006
guidance, driven primarily by sales increases. Those profit increases
are being largely offset by lower than expected profit performance
across all other domestic concepts compared to second quarter 2006
guidance.
Anticipated changes in domestic average unit volumes, comparable store
sales and pricing which will affect revenues in 2006 (as a percentage
change compared to actual 2005 results) are as follows:
Average Unit Comparable
Volumes Store Sales (1) Pricing (2)
Outback Steakhouses -2.0% to -1.5% -2.0% to -1.5% ~0.7 %
Carrabba's Italian Grills -4.0% to -3.5% -1.5% to -1.0% ~1.0 %
Bonefish Grills -1.5% to -1.0% 0.0% to 0.5% ~1.5 %
Fleming's Prime Steakhouse
and Wine Bars -0.5% to 0.0% 4.0% to 4.5% ~2.5 %
(1) Stores open 18 months or more.
(2) Price increases are presented as an average increase which may occur
over the year and could change periodically as competitive, economic
and commodity conditions dictate.
Anticipated changes in certain expenses that will also affect net income
in 2006 (presented as a percentage of sales increasing/(decreasing)
compared to actual 2005 results) are as follows:
Estimated Full Year 2006 Expense
Compared with 2005
Cost of goods sold (1) -0.5% to -0.6%
Labor and other related (1) (2) 1.9% to 2.0%
Other restaurant operating (1) 0.8% to 0.9%
Depreciation and amortization 0.3% to 0.4%
General and administrative (2) 0.3% to 0.4%
Elimination of minority interest 0.1% to 0.2%
(1) As a percentage of restaurant sales.
(2) Includes stock-based compensation expense.
DATASOURCE: OSI Restaurant Partners, Inc.
CONTACT: Dirk Montgomery or Lisa Hathcoat, +1-813-282-1225, both of OSI
Restaurant Partners, Inc.
Web site: http://www.osirestaurantpartners.com/