UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of
Report (Date of earliest event reported) February 18, 2009
OSI
RESTAURANT PARTNERS, LLC
(Exact
name of registrant as specified in its charter)
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Delaware
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1-15935
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59-3061413
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(State
or other jurisdiction of incorporation)
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(Commission
File Number)
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(I.R.S.
Employer
Identification
No.)
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2202
North West Shore Boulevard, Suite 500, Tampa, Florida 33607
(Address
of principal executive offices) (Zip Code)
Registrant's
telephone number, including area code (813) 282-1225
N/A
(Former
name or former address, if changed since last report)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
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o
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Written communications pursuant
to Rule 425 under the Securities Act (17 CFR
230.425)
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o
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Soliciting material pursuant to Rule 14a-12
under the Exchange Act (17 CFR
240.14a-12)
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o
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Pre-commencement communications
pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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o
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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Item
2.02 RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
Basis of
Presentation
The
information furnished in this Current Report on Form 8-K provides preliminary,
unaudited information regarding selected results of OSI Restaurant Partners, LLC
(the “Company”) for the quarter ended December 31, 2008.
Generally
accepted accounting principles in the United States (“U.S. GAAP”) require
management to make estimates and assumptions that affect the amounts reported in
the financial statements. Actual results may vary materially from
these estimates and assumptions. The selected financial results
included in this Form 8-K are based on preliminary, unaudited
numbers. Upon completion of the audit of the Company’s fiscal year
ended December 31, 2008, the final reported results may reflect changes from the
information presented in this Form 8-K and such changes could be
material.
The
Company plans to file a Current Report on Form 8-K on Monday, February 23, 2009
that will contain additional information regarding the Company’s results for the
fourth quarter and year ended December 31, 2008. Certain of this
information will be discussed in the Company’s conference call being held on
February 23, 2009 at 11:00 a.m. EST.
The
Company’s portfolio of brands consists of Outback Steakhouse, Carrabba’s Italian
Grill, Bonefish Grill, Fleming’s Prime Steakhouse and Wine Bar, Roy’s and
Cheeseburger in Paradise restaurants. The Company’s restaurant system
operates in 49 states and 20 countries internationally.
Overview of Preliminary
Fourth Quarter 2008 Results
Comparable
store sales for the Company’s significant restaurant brands for the quarter
ended December 31, 2008 compared to the same quarter in 2007 changed by
approximately:
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Quarter
ended December 31, 2008
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Company
- owned
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Franchise
and development joint venture (1)
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System-wide
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Domestic
comparable store sales (stores open 18 months or more)
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Outback
Steakhouses
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-9.1%
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-12.3%
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-9.5%
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Carrabba’s
Italian Grills
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-7.4%
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n/a
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-7.4%
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Bonefish
Grills
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-13.8%
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-18.3%
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-14.0%
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Fleming’s
Prime Steakhouse and Wine Bars
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-19.6%
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n/a
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-19.6%
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_________________
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(1)
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These
sales do not represent sales of OSI Restaurant Partners, LLC and are
presented only as an indicator of changes in the Company’s restaurant
system, which management believes is important information about the
Company’s restaurant brands.
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Revenues
for the quarter ended December 31, 2008 decreased by
10.2% to $928,332,000 compared with $1,033,954,000 during the same quarter
last year.
The
Company is not aware of any items that would cause it not to be
in compliance with its financial covenants related to the Credit
Agreement at December 31, 2008.
Overview of Preliminary
Fourth Quarter 2008 Results (continued)
As a
result of poor overall economic conditions, declining sales at Company-owned
restaurants, reductions in the Company’s projected results for future periods
and a challenging environment for the restaurant industry, the Company assessed
the recoverability of its goodwill and other indefinite-lived intangible assets
and expects to record an aggregate impairment charge of $480,000,000 to
$540,000,000 for its domestic and international Outback
Steakhouse, Carrabba’s Italian Grill, Bonefish Grill, and Fleming’s Prime
Steakhouse and Wine Bar concepts for the quarter ended December 31,
2008. This preliminary and unaudited impairment loss is subject to
further review and may change materially.
As
previously disclosed, during the second quarter of 2008, in connection with the
Company’s annual assessment for impairment of goodwill and other
indefinite-lived intangible assets, the Company recorded an aggregate goodwill
impairment loss of $161,589,000 for the international Outback Steakhouse,
Bonefish Grill and Fleming’s Prime Steakhouse and Wine Bar
concepts. The Company also recorded impairment charges of $3,037,000
for the Carrabba’s Italian Grill trade name and $3,462,000 for the Blue Coral
Seafood and Spirits trademark.
The
Company did not have any goodwill or other indefinite-lived intangible asset
impairment losses in 2007.
The
Company’s review of the recoverability of goodwill was based primarily upon an
analysis of the discounted cash flows of the related reporting units as compared
to the carrying values. The Company also used the discounted cash
flow method to determine the fair value of its intangible assets.
Recent Events and Other
Information
The
Company announced today the commencement of a cash tender offer to purchase the
maximum aggregate principal amount of the 10% Senior Notes due June 15, 2015
issued by the Company and OSI Co-Issuer, Inc., a wholly owned subsidiary of the
Company, that the Company can purchase for $73,000,000, excluding accrued
interest. The tender offer is being made upon the terms and conditions set forth
in the Offer to Purchase dated February 18, 2009 and the related Letter of
Transmittal and upon the terms and subject to the conditions described
therein. The press release announcing the tender offer is attached as
Exhibit 99.1 hereto. The purpose of the tender offer is to reduce the
principal amount of debt outstanding, reduce the related debt service
obligations and improve the Company’s financial covenant position under its
senior secured credit facilities.
Between
November 18, 2008 and November 21, 2008, the Company purchased and
extinguished $61,780,000 in aggregate principal amount of its senior notes
for $11,711,000 of principal, representing an average of 19.0% of face value,
and $2,729,000 of accrued interest. These purchases were made on the
open market. The Company recorded a gain from the extinguishment of
its debt of $48,409,000 for the three months ended December 31, 2008. The
gain was reduced by $1,660,000 for the pro rata portion of unamortized
deferred financing fees that related to the extinguished senior notes. The
principal balance of senior notes outstanding at December 31, 2008 and 2007 was
$488,220,000 and $550,000,000, respectively.
Recent Events and Other
Information (continued)
The
Company was the guarantor of an uncollateralized line of credit that matured
December 31, 2008 and permitted borrowing of up to $35,000,000 by a limited
liability company, T-Bird Nevada, LLC (“T-Bird”), owned by the principal of each
of the Company’s California franchisees of Outback Steakhouse
restaurants. T-Bird used proceeds from the line of credit for loans
to its affiliates (“T-Bird Loans”) that serve as general partner of 42
franchisee limited partnerships, which currently own and operate 41 Outback
Steakhouse restaurants. The funds were ultimately used for the purchase of real
estate and construction of buildings to be opened as Outback Steakhouse
restaurants and leased to the franchisees limited partnerships. In
January 2009, the Company received notice that an event of default had occurred
in connection with the line of credit, as T-Bird failed to pay the outstanding
balance of $33,283,000 due on the maturity date. In February 2009,
the Company purchased the note and all related rights from the lender for
$33,311,000, which included the principal balance due on maturity and accrued,
unpaid interest. The Company consolidates T-Bird and the related T-Bird
Loans and, given the circumstances surrounding the event of default, recorded a
$33,150,000 reserve for its T-Bird Loan receivables for the quarter ended
December 31, 2008. The Company intends to pursue all available remedies
against T-Bird and its affiliates.
The
Company was a partial guarantor of $68,000,000 in bonds issued by Kentucky
Speedway, LLC (“Speedway”). Speedway is an unconsolidated affiliate in
which the Company has a 22.5% equity interest and for which the Company operates
catering and concession facilities. At December 31, 2007, the outstanding
balance on the bonds was approximately $63,300,000, and the Company’s maximum
unconditional guarantee was $17,585,000, of which the Company recognized a
liability of $2,495,000 for the estimated fair value of the
guarantee.
As the
Company previously disclosed in its Quarterly Report on Form 10-Q filed with the
SEC on November 14, 2008, Speedway entered into an asset purchase agreement with
Speedway Motorsports, Inc., a Delaware corporation, in May 2008. The sale
of Speedway closed December 31, 2008. In accordance with the terms of the
Bond Purchase Agreement executed and effective December 31, 2008 upon the sale
of Speedway, the Company was released from its $17,585,000
guarantee. The Company recorded a $2,495,000 decrease to its
guarantee liability and recorded a corresponding decrease to its investment in
Speedway at December 31, 2008.
During
the fourth quarter of 2008 and the first quarter of 2009, the Company committed
an additional $16,395,000 of its working capital revolving credit facility for
the issuance of letters of credit. These include increases in the
amount of letters of credit for the insurance companies that underwrite the
Company’s workers’ compensation insurance, a letter of credit for the insurance
company that underwrites the Company’s bonds for liquor licenses, utilities,
liens and construction and letters of credit for energy providers. As
of the date of this report, the Company has total outstanding letters of credit
of $69,435,000, which is $5,565,000 below the maximum of $75,000,000 of letters
of credit permitted to be issued under the Company’s working capital revolving
credit facility.
On
December 29, 2008, an action was filed in the United States District Court for
the Southern District of Florida seeking confirmation of a purported November
26, 2008 arbitration award against Outback Steakhouse International, L.P.
(“Outback International”), an indirect wholly-owned subsidiary of the Company,
in the amount of $97,997,450, plus interest from August 7,
2006. American
Restaurants, Inc. v. Outback Steakhouse Int’l, L.P., Case No.
08-23557-CIV-HOEVELER (S.D. Fla.). The dispute that led to the
purported award involved Outback International’s alleged wrongful termination in
1998 of a Restaurant Franchise Agreement (the “Agreement”) entered into in 1996
concerning one restaurant in Argentina.
Recent Events and Other
Information (continued)
Outback
International believes that the purported arbitration award resulted from a
process that materially violated the terms of the Agreement, and that the
arbitrator who issued the purported award violated Outback International’s
rights to due process. On December 9, 2008, in accordance with the
procedure provided under Argentine law, Outback International filed with the
arbitrator a motion seeking leave to file an appeal to nullify the
purported award, which has the effect of staying enforcement of the award in
Argentina pending the arbitrator's action on the motion. Outback
International intends to contest vigorously in the courts of both Argentina and
the United States the validity and enforceability of the purported arbitration
award. Based in part on legal opinions Outback International
has received from Argentine counsel, the Company does not expect the
arbitration award or the petition seeking its confirmation to have a
material adverse effect on the Company’s results of operations, financial
condition or cash flows. However, litigation is inherently uncertain
and the ultimate resolution of this matter cannot be guaranteed.
Cautionary
Statement
This Form
8-K includes statements that do not directly or exclusively relate to historical
facts. Such statements are “forward-looking statements” within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. These forward-looking statements include statements
regarding the Company’s preliminary results, including a preliminary and
unaudited goodwill impairment loss, for the three months ended December 31,
2008. These statements are based on the current
expectations of management. The Company is subject to a number of
risks and uncertainties that could cause actual results to differ materially
from historical periods and from the forward-looking statements included in this
document, 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; interest rate changes, compliance with debt
covenants and the Company’s ability to make debt payments since it is
significantly leveraged as a result of the merger transaction on June 14, 2007;
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;
government actions and policies; and completion of the audit of the Company’s
financial statements for the fiscal year ended December 31,
2008. Further information on potential factors that could affect the
financial results of the Company is included in its Amendment No. 3 to its
Registration Statement on Form S-4 filed with the SEC on May 29, 2008 and in its
Quarterly Report on Form 10-Q filed with the SEC on November 14, 2008. The
Company assumes no obligation to update the information in this Form 8-K, except
as required by law.
Item 9.01 FINANCIAL STATEMENTS AND
EXHIBITS
(d) Exhibits
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99.1
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Press
release, dated February 18, 2009, announcing the Company’s commencement of
a tender offer for the 10% Senior Notes due 2015 issued by the Company and
OSI Co-Issuer, Inc.
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SIGNATURE
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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
hereunto duly authorized.
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OSI
RESTAURANT PARTNERS, LLC
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(Registrant)
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Date: February
18, 2009
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By:
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/s/ Dirk
A. Montgomery
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Dirk
A. Montgomery
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Chief
Financial Officer
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