OSI
Restaurant Partners, Inc.
COMPANY-WIDE
CALL/WEBCAST
Welcome
to the OSI Partners update. On today’s call we have Bill Allen your CEO and
Chris Sullivan founder and chairman.
I
will
now turn the call over to Bill Allen.
Thank
you!
Good
afternoon everyone, I have with me here in Tampa the founders of Outback
as well
as Paul Avery and I wanted to thank all of you for taking the time to dial
in
and to listen to what we think is a very important Company-wide conference
call.
We
are
very excited about an announcement that we made here today. But before
I get
started, I want to remind everyone that the statements that we make on
this call
are actually not historical facts they are forward-looking statements within
the
meaning of the Private Securities Litigation Reform Act of 1995. Actual
results
could differ materially from those stated or implied in the forward-looking
statements, as a result of factors that are detailed in this morning’s press
release and in our filings with the Securities and Exchange Commission.
OSI
makes no commitment to update any forward-looking statements based on new
information, future events or otherwise, except to the extent required
by law
and that was for our attorneys.
By
now
you should have seen our email or heard the announcement that the Board
of
Directors of OSI, based on a unanimous recommendation of a Special Committee
of
the Board, has approved the acquisition of OSI from its public stockholders
by
an investor group comprised of our founders and the Bain Capital Partners
and
Catterton Partners - two leading private equity firms that have significant
restaurant industry experience.
As
I said
we are very excited and we believe that this transaction represents a very
positive and great opportunity for our Company and I want to take a few
minutes
to explain what it means for our businesses and for you as valued members
of our
team.
OSI
was
at one time a private company as you know, and this transaction will result
in
OSI again becoming private with the founders continuing to have their ownership
roles as well as Chris and Bob continuing in their roles on the Board of
Directors.
Let
me
state at the outset, that while this transaction represents a change in
ownership for the Company, we do not believe that it will impact the day-to-day
activities or operations of our business or the relationship that we have
with
you, our team members. It also doesn’t change our fundamental commitment to our
Principles and Beliefs, especially our commitment to people and quality.
In
fact, the founders and management selected Bain and
Catterton as our partners because not only did they offer to pay a significant
premium to our shareholders, but they support our Principles and Beliefs.
And as
we move forward with this transaction I assure you that we will work with
our
founders to ensure that those fundamental aspects of how we do business
at OSI
that have led us to our success stay in place.
Our
business is an important point in its history. The core Outback brand is
still
the leader in casual steakhouses by a margin of three-to-one and if we
are going
to stay #1 we need to continue to make progress the same progress that
we are
making under Paul’s outstanding leadership today. In addition, we plan to
continue to grow our concepts and Bain and Catterton are supportive of
these
efforts.
We
believe it will be much easier to implement our long range plans as a private
company where we can fully focus our efforts on our plan, free from the
distractions that go with being a public company. We also have the benefit
of
assistance from a team of experienced professionals from Bain
and
Catterton, who have had a great record of assisting other restaurant companies
in which they have investments. Like all of you, Bain
and
Catterton believe that OSI has significant growth potential.
The
Special Committee, together with its advisors, will spend the next 50 days
actively soliciting the marketplace to confirm that this is the most compelling
offer for OSI’s shareholders, after that we will ask our shareholders to vote on
the transaction at a special meeting being held for that purpose.
Separate
and apart from our announcement with respect to going private that’s been given
to the Company, the Company also announced that it will need
to restate its consolidated financial statements to correct for a
previously announced understatement in its liability for unearned revenue
for unredeemed gift cards and certificates and for other less significant
errors in its financial statements, including deferred rent, minority interests
in consolidated entities and additional paid in capital, identified since
that announcement. The previously announced preliminary estimate of the
understatement in the Company's liability for unearned revenue for unredeemed
gift cards and certificates of approximately $20,000,000 to $40,000,000
was
based on an accounting method under which the Company would recognize income
in
proportion to redemptions as they occur for an estimate of the gift cards
and
certificates that will never be redeemed. As part of the restatement, the
Company has determined that it will recognize income for those cards and
certificates that will never be redeemed at any time at which their redemption
becomes remote, which is generally three years after their sale. The use
of this
method of revenue recognition (in contrast to the method of ratably recognizing
revenue) changes the Company’s original estimate and is expected to result in an
adjustment to its unearned revenue liability of approximately $50,000,000
to
$70,000,000 as of September 30, 2006. The actual amount of the understatement,
the periods affected and the related income tax effects are still being
determined. As a result of these errors, management and
the Company's Audit Committee have determined that the Company’s
previously issued financial statements should no longer be relied
on.
We
intend
to file our Quarterly Report on Form 10-Q for the third quarter of 2006
as soon
as possible, although we are currently expecting that we will be late in
making
that filing and that was for the accountants.
We
will
be sure to inform you, back again to the announcement with respect to going
private, we will be sure to inform you of all the important developments
over
the months ahead but we ask for your continued focus and effort in supporting
our guests and our businesses. We
will
continue to keep you posted of all relevant developments and will do our
best to
answer any questions in a timely manner. If you have any questions, please
raise
them with your immediate supervisor or feel free to email us at mythoughts@outback.com.
We will
do our best to respond to them in a timely manner.
Through
this transition period we need everyone in the field and home office to
continue
to focus on delivering an excellent customer experience in each one of
our
restaurants each and every day. Paul Avery and I appreciate your continued
efforts on this and we’re very proud of what you’ve accomplished this year in
moving all of our concepts forward.
I
thank you for listening and I would like to turn it over to
Chris.
Thanks,
Bill. As Bill mentioned, we started out as a private company when we founded
Outback. We made the decision to become a public company 15 years ago because
it
was the best way to help us achieve our objectives at that time, but now
we feel
we can better accomplish our goals today as a private company. Speaking
on
behalf of all the founders, we are very excited about this change and the
partners we have found in Bain
Capital
and Catterton. Bain Capital and Catterton share our philosophies of how
to run a
restaurant company and we are cofident that they will help us accelerate
progress while eliminating the distractions of being a public company during
this period of change at OSI. Bob Basham and I, along with Tim and Trudy,
will
continue in our current roles and Bob and I will serve on the Board of
Directors
of the continuing Company and we will continue with our ownership interests
in
the Company and ensure that we maintain our commitment to our principles
and
beliefs, especially our commitment to people and quality and our focus
of
putting people first.
OSI
has
had a very successful history, but I truly believe our best days are still
ahead
and Bob, Bill, Paul and I look forward to working with you to make this
a
reality.
Thank
you
for all your efforts and keep up the great work.